45 Ind. App. 458 | Ind. Ct. App. | 1910
Appellant sued appellee on a promissory note, averring that said note was executed by appellee to one Doremus, at the Noble County Bank, Kendallville, Indiana; that before maturity Doremus assigned the note by indorsement to one Freeman, who, before maturity, assigned it by indorsement to appellant. To this complaint appellee answered in four paragraphs: (1) General denial; (2) plea of no consideration with knowledge of appellant; (3) failure of consideration and assignment to appellant after maturity; (4) fraud in the procurement of the note and appellant’s knowledge thereof. Demurrers were overruled to the second, third and fourth paragraphs of answer. These rulings are assigned as error. It is urged that the second paragraph of answer is insufficient, for the reason that it does not aver that the first indorsee was not a hona fide holder of the paper.
The reason for the rule is well 'stated in the case of Bassett v. Avery, supra. In that case Bassett was a second indorsee, one Barrett being his immediate indorser, and it was contended that, notwithstanding Barrett had no notice of the defense, since Bassett had, the defense was available. The court held to the contrary, and in passing upon the question, said: “The reason why notice lets in a defense, in eases in which, without notice, it could not be set up, is the bad faith involved in the purchase. But if a party holds a negotiable instrument discharged of defenses which may have existed between the antecedent parties, no reason is perceived why his right of sale should be any more restricted than his right to collect. The liability of the maker is then fixed. It is not increased by a subsequent sale or gift of the note to another; and it would be inconsistent that the law should recognize a perfect title in a party, and yet limit his power of disposition in the manner claimed. Nor do we perceive the principle upon which a knowledge of the prior infirmity can be made the ground of imputing bad faith to a purchaser in no way responsible for the wrong in obtaining the paper, or putting it in circulation. Notwithstanding its formér invalidity he knows that it has now become valid. Payment alone, by the maker, will dis
The cases cited apply the rule to the right to recover for
Judgment reversed and cause remanded, with instructions to sustain the demurrer to the second and third paragraphs of answer and further proceedings not inconsistent with this opinion.