115 Ind. 15 | Ind. | 1888
This suit is prosecuted upon three promissory notes and a mortgage securing them. The controversy has already been before this court, but in a somewhat different form, Proctor v. Cole, 104 Ind. 373.
The present appeal brings the case to us upon the following special finding: “That, on the 31st day of January, 1880, the defendant William Proctor executed the notes sued on, and on the same day he and his wife, the defendant Frances Proetor, executed the mortgage set out with the complaint, to secure the said notes, which mortgage was executed in due form of law and duly recorded; that the notes were made payable, with six per cent, interest and attorney’s fees, to the order of Henderson Cole, at St. Joseph Valley Bank, Elkhart, Indiana, in eighteen and twenty-four months after date respectively; that, afterwards, on the 23d day of February, 1880, and before the maturity of either of the notes, Henderson Cole assigned the notes to Erastus B. Cole, by a written assignment, and afterwards, on the 26th day of February, 1880, he endorsed them in blank; that, on the 23d day of February, 1880, at the time when the notes in suit were assigned by Henderson Cole to Erastus B. Cole, they were in the hands of Baker & Mitchell, the attorneys of Henderson Cole, for safe-keeping; that, on said 23d day
The law is with the appellee on the facts, and the judgment of the trial court-is right. We do not deem it necessary to discuss in detail the propositions stated, by the appellee’s counsel in support of the judgment, nor do we find it
In Proctor v. Cole, supra, we fully examined the nature of the appellants’ claim and found that they had actually paid for it a merely nominal consideration, the trifling sum of one dollar. We do not believe that such a claim can in justice or equity be allowed to defeat the claim of an endorsee who purchased in good faith and yielded a valuable consideration. The appellee acted in good faith; he agreed to pay value for the notes he bought, and he did pay by the execution of negotiable instruments. He certainly is in a much better situation than the appellants, even if it be conceded that the title of his endorser, Erastus B. Cole, was infirm; but, according to the judgment of the court in a former action, there was no infirmity in the title of Erastus B. Cole. It would seem, therefore, that the question of title was adjudicated. Granting, however, that there was no adjudication in favor of Erastus B. Cole, still the facts found show that he had such a title as would defeat a set-off. Conceding still further that his title was infirm, yet, as against a set-off such as that asserted by the appellants, the title of the appellee is superior. He not only bought the notes in good faith and executed negotiable instruments for the consideration, but, prior to notice of the appellants’ asserted set-off, he had actually paid the sum of fifteen hundred dollars.
Appellants’ counsel assumes that a set-off is the same as a defence growing out of the transaction in which the notes were executed, and upon this assumption builds his argument. This assumption is not valid, and with it the entire argument falls. The set-off asserted is not a defence originating in the transaction out of which the notes sprang, but is an independent and distinct defence originating subsequent to
There is a clear and well defined distinction between a defence originating after the execution of a note, and growing ■out of an independent transaction, and a defence growing out of the transaction in which the note was executed. Beard v. Dedolph, 29 Wis. 136; Ranger v. Cary, 1 Met. 369 Baker v. Arnold, 3 Caines, 279.
The distinction between an independent defence, such as a set-off, and a defence arising out of the transaction in which the note was executed, has long been recognized. It is expressly recognized in Hankins v. Shoup, supra, and a recent writer says: “ But a set-off arising out of a different transaction between the maker or acceptor and the payee can not be used as a defence against a purchaser for value after maturity.” 2 Randolph Com. Paper, section 679.
The cases of Dresser v. Missouri, etc., Co., 93 U. S. 92, and Crandall v. Vickery, 45 Barb. 156, are not in point, for ■in those cases the defence was fraud in procuring the execution of the note. But in the case before us we need not go so far as any of the authorities we have cited, for the title of the appellants to their asserted set-off is not of such a nature as to entitle them to defeat even the equitable holder of a promissory note. Proctor v. Cole, supra, and authorities cited. If it were granted that Cole’s title is not perfect, still it is in every respect stronger and better than that of the appellants to their set-off, and should prevail against it. Tinly v. Martin, 80 Ky. 463. It is assuming much more than the law justifies to assume that the appellants are bona fide holders, and as such entitled to defeat the appellee. The total sum invested by them is a nominal one, and the investment of such a sum does not clothe a party with the rights of a bona fide purchaser. It is of the very essence of the claim to hold bona fides, that the party should have parted with value.
Counsel argues that as the appellee had only paid fifteen
It is said that it is plain that Erastus B. Cole was not a bona fide purchaser, “ because he took the legal title by endorsement after notice of the injunction, and he thereby became a lis pendens purchaser and was bound by the final judgment making the injunction perpetual.” It need only be said in answer to this argument, that the special finding states that, in an action brought by William Proctor, it was adjudged that Cole was the equitable owner of the notes in suit on the 23d day of February, 1880.
Judgment affirmed.
Mitchell, J., did not take any part in the decision of this case.