Court Opinion

ID: 8046771
Source: CourtListenerOpinion
Date Created: 2022-09-09 04:00:14.258375+00
Date Added: 2024-06-11T16:37:31.777638
License: Public Domain

Nesmith, J.
The note in suit was drawn payable to the plaintiff, or order, but was never indorsed by her. The plaintiff in interest (Mrs. Frink) paid a valuable consideration therefor, and claims to collect it of the defendant, the original signer, in the plaintiff’s name. The note was payable on time, and before it became due it was purchased by Mrs. Frink, the present holder. It was an accommodation note, delivered to young Smith, the original holder, as the defendant contends, under the restriction that the payee (Mrs. Boody) was to let Smith have the money, if she thought he needed it; and if he did not get the money of her, the note was to be returned to the defendant. The case finds "that Smith did not get the money of Mrs. Boody, and that soon after he made the attempt, he promised to restore the note to the defendant, but failed to do it.
It is not denied by the defendant that, if Mrs. Boody had advanced the money on the note to Smith, he would be held to pay it, because he gave the note to Smith, for the express purpose of enabling him to obtain the proceeds thereof from Mrs. Boody, as she might determine upon his wants. Thus the contract would have *561been perfected, binding the defendant, by Mrs. Boody’s election to advance the money to Smith, and the consequent delivery of the note by Smith to the plaintiff as payee.
The plaintiff in interest (Mrs. Frink) claims to hold the defendant liable, not on the ground that she is an innocent indorsee of the note, but as assignee or bond fide holder for a valuable consideration, and without notice of the condition or limitation to the negotiability of the note.
That a drawer of a note of this kind has a right to make a condition to his note, and defend against it, if it is attempted to be enforced, there can not be a doubt. If a bill or check has been given even on a verbal condition, which the drawer finds is to be broken or eluded, he has a right to stop the payment, and may defend an action thereon. Ch. on Bills 87; Wienholt v. Spitta, 3 Camp. 376. Evidence that a note was delivered as an escrow, and that it was fraudulently put in circulation, is admissible; and when the fact is shown, the holder will be bound to show that he came fairly by the note, and paid value for it before it became due. Vallette v. Parker, 6 Wend. 615. If bills or notes were accepted, or made for a special or particular purpose, then no third person, aware of that object, can, by obtaining the instruments, or their proceeds, apply the same to a different purpose. Delauney v. Mitchel, 1 Stark. 439.
The party in interest here can not set up the ground, which is, material to her right of recovery, that she is a subsequent holder of the note in question. Mrs. Boody, being the intended payee or holder, had she indorsed the note before it became due, and put it in circulation, and had Mrs. Frink then become the subsequent bond fide holder under her without notice, then this defense could not have been interposed. But the fact that the note was made payable to Mrs. Boody, and was not indorsed by *562her, was one that should have put Mrs. Frink, or any purchaser, upon diligent inquiry, whether it would be consistent, in the due and ordinary course of business, to advance money on negotiable paper, payable to another, and never indorsed by such payee.
The law holds parties to the exercise of due caution and proper diligence, in cases of this character. Here were circumstances necessarily calculated to excite suspicion, and affording reasons to Mrs. Frink, before she purchased the note of Smith, to inquire of her neighbor why she had not advanced the money to Smith, and whether every thing was right in the premises, or whether there were conditions or existing restrictions to the note. Would not a prudent purchaser of the note have previously exacted the indorsement of Mrs. Boody’s name, before advancing the money on it?
Again, here was a manifest breach of trust by Smith, in parting with the note, contrary to his agreement with the maker, to surrender it to him, after his failure to get the money of Mrs. Boody. There was, then, no such delivery to Mrs. Frink of the note as the law can sanction as legal. The defendant’s assent to such delivery can not be fairly presumed. The making the note payable to Mrs. Boody was intended by the defendant as a reasonable protection to himself, under the circumstances, of which the law will permit him to avail himself. The transfer to the plaintiff must be regarded as irregular, and in violation of his original contract with the holder at that time.
It is said by the plaintiff that the object of the note being to raise money as an accommodation note, the note, by being negotiated in this way, has only accomplished its original design, and, therefore, should be binding on the defendant; and authorities in our reports, including Bank of Newbury v. Rand, 38 N. H. 166, and Elliot v. Abbot, 12 N. H. 549, and other similar cases, are cited by the plaintiff' to sustain this doctrine.
*563Upon an examination of these authorities, however, it will be found that they assume the ground that the notes that constitute the cause of action, in each case, were originally signed and issued without condition or restriction, on the part of the signers. Hence it was a matter of indifference with them from what source the holder was enabled to raise the money; and, therefore, no breach of contract existed as between them and the purchaser or assignees of the notes. These notes were not, therefore, obnoxious to the present defense.
"We, therefore, think it not unreasonable to hold that the rule, applicable to notes purchased when overdue, should be made to apply to this note, and that the plaintiff in interest should be presumed to have taken it under such circumstances as to subject her to all such objections arising from want of consideration, or other' illegality or equities affecting the instrument itself, to which it would be liable, if in the hands of Smith, from whom she received it. Davis v. Lane, 8 N. H. 224.
Upon these considerations, therefore, we think there should be

Judgment for the defendant.