Court Opinion

ID: 7129538
Source: CourtListenerOpinion
Date Created: 2022-07-24 15:17:16.630173+00
Date Added: 2024-06-11T16:14:25.149684
License: Public Domain

Judge Simpson
delivered the opinion of the court:
The only question presented in this case is, whether the maker of a note, who induced the arsignee thereof to purchase it, by stating, in answer to an inquiry on the subject made by his agent before the assignment, that the note was all right, and would be paid at maturity, shall, in an action thereon by the assignee, be permitted to set up and rely upon the failure of the consideration upon which the note was executed, if he were ignorant of such failure at the time of the assignment.
An o b 1 i gor who is principal in a note encourages an assignee to purchase his note, by assuring him that it is all right and will be paid at maturity, can not afterwards avoid its payment to the assignee by relying upon a failure of consideration.
It appears that the assignor of the note offered it to the assignee for a buggy and harness that belonged to the latter; that the maker of the note was informed of the proposition, and inquired of in relation to the debt; that in answer to that inquiry he made the foregoing response — that the note was all right and would be paid at maturity ; and thereupon the proposition was accepted, and the sale made.
It is evident, therefore, that the assignee of the note parted with his property on the faith of the representation made to his agent by the obligor in the note. He had a right to rely upon that representation, as it was made by the person who was most interested in the matter, and who must have been acquainted with the origin of the debt, and the consideration upon which it was founded. If the maker of the note did not then know the condition of the property for which the note was executed, he should have so stated, and not have misled the assignee by an unqualified statement of the goodness of the debt. His ignorance of the fact that the consideration had failed will not relieve him from the attitude he has placed himself in. His want of information on the subject would have furnished him with a good reason for expressing a doubt as to the validity of the note, but certainly it did not j'ustify him in stating, as he did, that the debt was good and would be punctually paid. As between him and the assignee, every principle oí justice requires that the loss, if there be one, shall devolve upon him, and not upon the assignee. Pie has by his conduct extinguished that equity against the payment of the note, which might otherwise have followed it into the hands of the assignee. By inducing an innocent assignee to part with his property in the purchase of a note, the maker thereof, so far as the assignee is concerned, waives every equity, unknown as well as known, that he has against its payment.
The case of Clay vs. McClanahan, 5 B. Monroe, 242, decides no principle inconsistent with this doctrine. *172There the promises of payment were made after the assignment, and all the reasoning of the court is directed to that state of case, and has no application to a case where the promises or representations are made previous to the assignment.
Nor does the decision in the case of Honore vs. Dougherty, &c. 4 Bibb, 280, conflict in any respect with the principles of this opinion. The decision in that case was, that the surety in a note, to whom the assignee thei’eof applied for information before he took the assignment, did not deprive himself of the right to rely upon any equitable defense, afterwards set up by the principal, by the information he gave to the assignee, that the note was good. The person applied to for information was only the surety in the note, and that fact appeared on the face of the note itself. He could not, by his conduct, deprive his principal of the right to set up any defense he might have against the payment of the note. The assignee should have applied to the principal, and not to the surety, for information on the subject. He had no right to purchase the note upon the faith of representations made by a person who was merely a suret3r, and who might not have known even the consideration upon which the note was executed. The reasons given by the court for the decision in that case have no application to a case like the present.
The conclusion at which we have arrived in this case is in exact conformity with numerous decisions of the same question, in which, however, no attempt seems to have been made to discriminate between those cases where the equity attempted to.be relied upon by the maker of the note was unknown to him at the time he induced the assignee to take the assignment, and those in which it was known to him. We think, however, there is no foundation for any such distinction, and that hoth cases.must be considered as placed upon the same footing.
Wherefore, the judgment is affirmed.