Court Opinion

ID: 6408278
Source: CourtListenerOpinion
Date Created: 2022-06-25 11:50:39.306916+00
Date Added: 2024-06-11T15:51:17.112283
License: Public Domain

Shaw, C. J.
The question for the consideration of the court is, whether the evidence offered by the defendant was properly rejected. It appears that the plaintiffs received the note in question for value, having taken it of Rice, as collateral security for his note of $350, which they discounted. The suit is against Chapin, the indorser. The defence offered was, that Chapin indorsed the note for the accommodation of Eager, the promisor; that it was entrusted by Chapin to Eager, for a special purpose ; that in violation of that trust, it was negotiated to Rice; that Rice knew that it was so fraudulently used by Eager; and that Rice gave no value for it.
There is no doubt that these facts, if proved, would be a good defence against any suit which could have been brought by Rice; not. because it was an accommodation note, and that *43known to the indorsee ; for that would have been no ground of defence; but because it was fraudulently misapplied by Eager, and that known to Rice; and because Rice, in the case supposed, would have given no value for it. And so, if the same facts had been known to the agents of the bank, when they took it, they could not hold and recover; not because it was an accommodation indorsement, but because they would not be bond fide holders. See Lincoln v. Stevens, 7 Met. 529.
In the testimony of the cashier and of Rice, we see nothing to show that the agents of the bank had any notice that the note had been fraudulently applied, by Eager, to a purpose different from that for which it was entrusted to him, and that Rice had not paid value for it. Their refusal to discount it was placed on other grounds, not implying any such notice.
The argument on the part of the defendant is, that one taking a note by indorsement can take no better title than that which the indorser himself had; and if such indorser could not re cover, on account of having obtained the note by fraud, though regularly indorsed, the indorsee could not recover. But this is not a just conclusion. To secure the circulation of negotiable notes not overdue, nor apparently dishonored, proof of the making and .indorsement makes a good prima facie legal title to the holder; and an indorsee taking for value, and without knowledge of any fraud, may recover, though the fraud might be one which would prevent his indorser from recovering. Wheeler v. Guild, 20 Pick. 545. The same rule holds in regard to real estate. A. knowing, when he takes his conveyance, of a prior unrecorded deed to B., cannot hold against the prior grantee ; but one taking a conveyance from A., without knowing of the prior unrecorded deed, will hold against B. and his assigns. In such case A., who holds a defeasible title, can, by his deed, convey an indefeasible one. Trull v. Bigelow, 16 Mass. 406.
In the present case, the evidence offered went no farther than to show the fact, that the indorsement had been fraudulently misapplied by Eager, and that this was known to Rice, and that Rice took without giving value for it; but it did not propose to *44show that this was actually or constructively known to the plaintiff’s. We are of opinion, therefore, that the evidence offered would have been irrelevant, and that the rejection of it was right.
But the court are also of opinion, that the plaintiffs can maintain this ground only so far as they were holders for value— that is, to the amount of the note, for which they took the note in suit as collateral security. So far as they would recover beyond that, they would recover to the use of the indorser. But if the facts were proved, which the evidence that was offered tended to prove, they could not recover for his use, because it would show that he was not a bond fide holder. Such a division of the damages recoverable by an indorsee is well warranted, we think, on principle and on the authorities. Jones v. Hibbert, 2 Stark. R. 304. Wiffen v. Roberts, 1 Esp. R. 261. Parish v. Stone, 14 Pick. 208.
If the plaintiffs will release so much of the verdict, as to reduce the amount to that of the note discounted by them, it may be sc done, and judgment rendered for the reduced sum; otherwise the verdict must be set aside, and a new trial granted, in order to let in, on the question of damages, the evidence which was rejected.