The opinion of the Court was delivered by
Kennedy, J.
Each of the errors assigned in this case, may be considered as being embraced in one or other of the following questions, and either sustained or disaffirmed by the answers which shall be given to them. First; had, the plaintiffs, from any thing that appeared in evidence, a right to claim of the jury to be placed [38]*38upon a more favourable footing than the obligee himself, had he been the plaintiff seeking to recover the amount of the bond in suit 1 Second; if the defendants, being the obligors in the bond, owed, at the time the land or house and lot were sold from them under the mortgage existing against it when they bought, a sufficient portion of the purchase-money, which they were to pay for the land, to have satisfied and extinguished the mortgage, so as to have prevented the land from being sold from them, and refused or neglected to apply such portion of the purchase-money owing by them to the discharge of the mortgage, can they set up the sale or loss of the land, as a defence to the payment of the bond 'l Third; was the evidence given by the defendants to show the value and the nature of the improvements made by them on the land after they purchased it, admissible 1
As to the first question, it does not appear that there was even a spark or tittle of evidence given, which tended. to establish any good reason why the defendants should not have the advantage of every equity against the plaintiffs, as the representatives of the assignee of the bond, that they would have been entitled to, had the suit been brought by the obligee himself for his own'use. It was not shown, yior was any evidence given, tending to prove it, that the defendants were present making no objection to the assignment of the bond; or knew any thing whatever in regard to it until after it was made. It cannot, therefore, be said with any propriety, that they either expressly or tacitly induced or encouraged the assignee to purchase their bond as one that was good; and thus preclude themselves from showing that the consideration of it had failed, or been taken from them by reason of any delinquency or want of integrity on the part of the obligee. The interest on the bond was payable, by its terms, semi-annually, but the principal was not to become so until eight years after its execution; and the circumstance of the defendants having paid the first half-year’s interest thereon to the obligee, before he assigned the bond, and the second half-year’s interest afterwards to the first assignee, and the same being endorsed on the bond in the hand writing of one of the defendants, would, at most, only warrant the conclusion that the defendants, at that time, did not apprehend or suppose that they were likely to incur any loss by paying the interest, and therefore did not object to doing so; but it would be going too far, and would certainly be unreasonable to hold, that because they paid the interest on the bond at that time, under an apprehension that they would be safe in doing so, they should therefore be concluded forever after-wards from objecting to the payment of any future interest or principal when the times respectively at which they were made payable, had come around, and it was made to appear clearly that they could not have the benefit of this purchase. And although the mortgage of indemnity, as it is called, taken of Warner, the obligee [39]*39in the bond, on the 7th of November, 1818, had it been good and sufficient to have indemnified the defendants against all injury or loss that could have arisen from paying their bonds, or to have enabled them to have paid off the mortgage of the Pennsylvania Bank, they might have been, bound after taking it to have paid the interest and principal- upon the bonds according to their tenor, yet if they could have shown that it was worthless and good for nothing, as it turned out to be, there would seem to be no good reason why they should be deprived of any equity that they might otherwise have been entitled to claim or to lay hold of in order to protect them against the payment of the bonds. It is incontrovertibly settled by our decisions on the subject, that, notwithstanding the legal assignability of bonds given for the payment of money to the obligee, Ms order or assigns, under our act of assembly, the obligor is still entitled to avail himself of any legal or equitable defence, in the hands of the assignee, which he had a right to claim before the assignment, against the obligee himself. If the assignee does not wish to run any risk, on this account, in taking, an .assignment of the bond, he ought, before he takes it, to call upon the obligor, let him know that he is about to purchase and take an assignment of it; and at the same time inquire of him whether he has any objection to make against the payment of it. By doing so, he imposes the duty upon the obligor of either making known whatever objection the latter may think he has to paying the whole or any part of the bond; or otherwise if he declines mentioning any, he will be estopped from doing so after the assignment and will thereby render himself liable to pay the amount of the bónd to such person upon his becoming the assignee thereof. The law abhors fraud and will not tolerate or sanction it in any form; but to permit the obligor to set up a defence against the bond, in the hands of the assignee, which he concealed when called on by the assignee to make it known, would be a palpable fraud upon the latter; or to permit the obligor, after being so called on, by the assignee, before the latter purchased and took a transferjjof the bond, to set up thereafter any defence which then existed, or might subsequently arise out of the transaction, which produced the bond, though the obligor knew or could know nothing of it, when so called on, would be to throw the loss or injury upon the innocent assignee, and to relieve the obligor therefrom, who may with propriety be said to have caused it: because he knowing the nature of the transaction which gave birth to the bond, must be taken to have known also whether it was possible that such defence as he offers to make thereafter would arise or not; and if it could, it may be said to have been his duty to have made it known to the assignee: so that the rule of law which declares that if one of two innocent persons must suffer a loss, it shall fall upon the one who has been the occasion of it, would seem to throw the loss in such case upon the obligor. If [40]*40then the assignee, before becoming such, does not use the precaution of advising the obligor of his intention to take an assignment of the bond, he is to be considered as having taken it altogether at his own risk, and as subject to all equity, and every objection which the obligor may or could have set up against the obligee, had he not parted with it. This doctrine is either established or plainly deducible from many cases. s
The propriety of not taking an assignment of a bond,' as here suggested, without the privity of the obligor's, so that it may be known first, whether any thing is legally and equitably due upon it, and if so, what amount is due, has been mentioned by Mr. Sugdon in his treatise on the Law of Vendors, 2 vol.
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The opinion of the Court was delivered by
Kennedy, J.
Each of the errors assigned in this case, may be considered as being embraced in one or other of the following questions, and either sustained or disaffirmed by the answers which shall be given to them. First; had, the plaintiffs, from any thing that appeared in evidence, a right to claim of the jury to be placed [38]*38upon a more favourable footing than the obligee himself, had he been the plaintiff seeking to recover the amount of the bond in suit 1 Second; if the defendants, being the obligors in the bond, owed, at the time the land or house and lot were sold from them under the mortgage existing against it when they bought, a sufficient portion of the purchase-money, which they were to pay for the land, to have satisfied and extinguished the mortgage, so as to have prevented the land from being sold from them, and refused or neglected to apply such portion of the purchase-money owing by them to the discharge of the mortgage, can they set up the sale or loss of the land, as a defence to the payment of the bond 'l Third; was the evidence given by the defendants to show the value and the nature of the improvements made by them on the land after they purchased it, admissible 1
As to the first question, it does not appear that there was even a spark or tittle of evidence given, which tended. to establish any good reason why the defendants should not have the advantage of every equity against the plaintiffs, as the representatives of the assignee of the bond, that they would have been entitled to, had the suit been brought by the obligee himself for his own'use. It was not shown, yior was any evidence given, tending to prove it, that the defendants were present making no objection to the assignment of the bond; or knew any thing whatever in regard to it until after it was made. It cannot, therefore, be said with any propriety, that they either expressly or tacitly induced or encouraged the assignee to purchase their bond as one that was good; and thus preclude themselves from showing that the consideration of it had failed, or been taken from them by reason of any delinquency or want of integrity on the part of the obligee. The interest on the bond was payable, by its terms, semi-annually, but the principal was not to become so until eight years after its execution; and the circumstance of the defendants having paid the first half-year’s interest thereon to the obligee, before he assigned the bond, and the second half-year’s interest afterwards to the first assignee, and the same being endorsed on the bond in the hand writing of one of the defendants, would, at most, only warrant the conclusion that the defendants, at that time, did not apprehend or suppose that they were likely to incur any loss by paying the interest, and therefore did not object to doing so; but it would be going too far, and would certainly be unreasonable to hold, that because they paid the interest on the bond at that time, under an apprehension that they would be safe in doing so, they should therefore be concluded forever after-wards from objecting to the payment of any future interest or principal when the times respectively at which they were made payable, had come around, and it was made to appear clearly that they could not have the benefit of this purchase. And although the mortgage of indemnity, as it is called, taken of Warner, the obligee [39]*39in the bond, on the 7th of November, 1818, had it been good and sufficient to have indemnified the defendants against all injury or loss that could have arisen from paying their bonds, or to have enabled them to have paid off the mortgage of the Pennsylvania Bank, they might have been, bound after taking it to have paid the interest and principal- upon the bonds according to their tenor, yet if they could have shown that it was worthless and good for nothing, as it turned out to be, there would seem to be no good reason why they should be deprived of any equity that they might otherwise have been entitled to claim or to lay hold of in order to protect them against the payment of the bonds. It is incontrovertibly settled by our decisions on the subject, that, notwithstanding the legal assignability of bonds given for the payment of money to the obligee, Ms order or assigns, under our act of assembly, the obligor is still entitled to avail himself of any legal or equitable defence, in the hands of the assignee, which he had a right to claim before the assignment, against the obligee himself. If the assignee does not wish to run any risk, on this account, in taking, an .assignment of the bond, he ought, before he takes it, to call upon the obligor, let him know that he is about to purchase and take an assignment of it; and at the same time inquire of him whether he has any objection to make against the payment of it. By doing so, he imposes the duty upon the obligor of either making known whatever objection the latter may think he has to paying the whole or any part of the bond; or otherwise if he declines mentioning any, he will be estopped from doing so after the assignment and will thereby render himself liable to pay the amount of the bónd to such person upon his becoming the assignee thereof. The law abhors fraud and will not tolerate or sanction it in any form; but to permit the obligor to set up a defence against the bond, in the hands of the assignee, which he concealed when called on by the assignee to make it known, would be a palpable fraud upon the latter; or to permit the obligor, after being so called on, by the assignee, before the latter purchased and took a transferjjof the bond, to set up thereafter any defence which then existed, or might subsequently arise out of the transaction, which produced the bond, though the obligor knew or could know nothing of it, when so called on, would be to throw the loss or injury upon the innocent assignee, and to relieve the obligor therefrom, who may with propriety be said to have caused it: because he knowing the nature of the transaction which gave birth to the bond, must be taken to have known also whether it was possible that such defence as he offers to make thereafter would arise or not; and if it could, it may be said to have been his duty to have made it known to the assignee: so that the rule of law which declares that if one of two innocent persons must suffer a loss, it shall fall upon the one who has been the occasion of it, would seem to throw the loss in such case upon the obligor. If [40]*40then the assignee, before becoming such, does not use the precaution of advising the obligor of his intention to take an assignment of the bond, he is to be considered as having taken it altogether at his own risk, and as subject to all equity, and every objection which the obligor may or could have set up against the obligee, had he not parted with it. This doctrine is either established or plainly deducible from many cases. s
The propriety of not taking an assignment of a bond,' as here suggested, without the privity of the obligor's, so that it may be known first, whether any thing is legally and equitably due upon it, and if so, what amount is due, has been mentioned by Mr. Sugdon in his treatise on the Law of Vendors, 2 vol. 221, as to taking assignment of mortgages; when he says, “ that an assignment should not in any case be taken of a mortgage without the privity of the mortgagor, as to the sum really due; for although it undoubtedly is not necessary to give notice to the mortgagor that the mortgage has been assigned, yet the assignee takes subject to the account between the mortgagor and mortgagee, although no receipt be endorsed on the mortgage deed for any part of the mortgage money, which has been actually paid off.” The Court below seem to have entertained a correct notion of the law relative to all the matters growing out of the answer to this first question; and the exceptions arising thereout consequently are not sustained.
We come now to the second question, which embraces the answers of the Court to the third and fourth points submitted by the plaintiffs’ counsel on the trial below; and the third, fourth and ninth errors assigned here. The failure of the consideration, that is the loss of the land, for which the bond in suit was given, is relied on as a defence against the payment of it: this defence, it must be observed, is merely equitable, and to entitle the defendants to avail themselves of it, they ought to have shown that they had no means of preventing it, without being the losers or giving up that which of right belonged to themselves, for the purpose of satisfying the mortgage debt owing to the Pennsylvania Bank, which occasioned the sale and the loss of the land to them. But in May, 1826, the time when the land was sold to pay this mortgage debt, then amounting to twenty-six hundred and twelve dollars thirty-six cents, beside interest thereon from the first of June, 1823, the defendants owed upon their bonds, outstanding and unpaid, twenty-five hundred dollars of the principal of the purchase-money of the land; two thousand dollars whereof, with a large amount of interest for many years back upon the whole of it, had become payable, making a sum more than sufficient to have satisfied the mortgage debt of the-bank. The money, thus owing by them upon their bonds, may with great propriety he considered as money in their hands belong-to the obligee, whose debt to the bank incumbered the land, which they might have applied, and would have been perfectly justified [41]*41therein, to the discharge of the bank debt, so as to have prevented the land from being sold on account of it. Had they done this, they would then have had and held the land discharged from all incumbrances, and would have been entitled to a credit upon their bonds equal to the amount so paid. And this would have protected them completely from all loss, either by means of the land being sold from them, or having had to pay money, which properly speaking, could have been regarded as paid out of their own pockets. If the amount of the money, owing by them at that time, was not sufficient to have paid off both the mortgage debt to the bank, and the amount of the bond in suit, they ought to have applied as much of it, as would have either discharged the one or the other; and then admitting that they had the right to elect to which it should be so appropriated, which seems to be conceding to them the most that they can ask in this respect, but not having applied it to the discharge of the bank debt, it is no more than fair to intend that they elected to pay it in discharge of their bonds, and have therefore precluded themselves from setting- up the defence that was relied on at the trial of the cause. It is probable however,' and indeed believed, that upon a strictly accurate calculation of the amount of principal and interest, actually payable upon the bonds at the time of the sale of the land for the bank debt, it will be found amply sufficient to have satisfied that debt, and likewise the bond in suit; which will still be making the case more clear against the defendants, though possibly not any stronger: because if it were sufficient to satisfy the first, they seem to be without any right founded upon either principles of law or equity to retain the money. This view of the case does not seem to have been met by any position or argument advanced on the trial of the cause below or on the argument here, excepting that it would seem to have been claimed for the defendants, that they, at the time the land was sold on account of the mortgage debt owing to the Pennsylvania Bank, had a right to rescind their contract for the purchase of the land, so far at least, as to give it up to be sold for the debt, and to claim to be released from the payment of any more of the purchase-money, than what they had previously thereto paid of it. This ground does not appear to have been repudiated by the Court below; but rather to have been submitted to the jury as tenable, in connection with the evidence of the value of the improvements made on the property by the defendants; which could only have been admitted with a view to make the impression upon the minds of the jury, that the defendants were great losers instead of gainers, by giving up the property and suffering it to be sold; and therefore it would not only be hard, but cruel as well as unjust, to require them to pay any portion of the residue of the purchase-money. This ground however is a mistaken one, and wholly untenable. If there was any time, after the contract for the purchase was carried into execution, when the defendants [42]*42could, with any degree of plausibility, have claimed to be released from their purchase, it was when they were first told of the incum-brance in favour of the Pennsylvania Bank. But it is clear that the vendor might have removed all colour for such claim then, by an immediate discharge of the incumbrance: and even if he had declined to do this, the defendants could not have insisted upon a rescisión of their purchase, without reconveying or offering to reconvey the property to their vendor, upon their being reimbursed by him any expenses necessarily incurred on account of the purchase. Instead however of claiming to have the purchase rescinded, or taking any step to bring about such an event, the defendants go on to ratify and confirm it to the fullest extent of their power, by taking security of the vendor to indemnify them against the incumbrance, and from time to time, as they were able, by paying the principal and interest upon, some of their bonds, given to .secure the payment of the purchase-money, and in the meantime holding on to and enjoying the property; so that at no time did the defendants ever intimate by either word or deed that they had even the slightest wish, upon their part, to give up the purchase, before the sale of the property under the incumbrance in 1826.- But then it was entirely too late and out of al[ time to attempt such a thing. The defendants had thus been in the full, free and .uninterrupted enjoyment of the property, until they had become delinquent in paying a portion of the purchase-money more than sufficient to have met and paid off the incumbrance. This, as has been shown above, they might have done with perfect safety to themselves; and considering it as the money of the vendor, it was inequitable in them to withhold it. If then they have sustained a damage or loss by suffering the property to be sold from them, they have no right to claim redress. It must be considered damnum sine injuria; for the maxim of law in such cáse is, volenti non fit injuria. We therefore are of opinion, that the Court below erred in' their direction to the jury, on the points involved in this second question.
We also think that the Court erred in admitting the evidence to which the third question has relation. It was wholly irrelevant to the issue. The amount of labour performed, or the amount of money expended by the defendants, in improving or altering the property, to answer their purposes, had nothing whatever to do with the matters in issue between the parties. It was not competent for the defendants, nor does it appear that they expressly pretended to assert a right, to claim compensation for the loss of the property by the sheriff’s sale. We have shown above, that they had many years before that, put it out of their power to give up or annul the purchase, by affirming and confirming it immediately after they were first apprised of the incumbrance, which in fairness ought to have been disclosed to them by the vendor at the time of the sale, and before it was concluded: not only did the defendants ratify and [43]*43confirm the sale made to them of the property, after they were made acquainted with the incumbrance of the Pennsylvania Bank, and before they had paid a cent of the purchase-money, but ever afterwards held on to it, enjoying it as their own, and paying from time to time more or less of the purchase-money, as they found it convenient to do so: but still retaining a sufficiency of the purchase-money in their hands to have satisfied that incumbrance, they ought therewith to have discharged it, and by this means have prevented the loss occasioned, as they allege, by the sale of the property under it. This however they neglected or refused to do, and have consequently not only been the cause of the loss of the property to themselves, but likewise to the vendor and every other concerned; and moreover,-if the evidence was given for any substantial purpose, they would not only seem to insist upon being cut loose from their obligation and being permitted to retain the residue of the purchase-money, but also upon being reimbursed the money paid and laid out on account thereof, that they may be completely indemnified. But even if it were so, that they had a right to claim an indemnity for any loss they may have sustained by reason of the incumbrance of the Pennsylvania Bank not having been paid without a sale of the property for that purpose, still it is perfectly obvious that the estate of the plaintiffs’ testator cannot be made liable for it; and hence again the total impertinency of the evidence admitted in opposition to the objection of the plaintiffs’ counsel.
The judgment must be reversed, and a venire de novo awarded.
Judgment reversed and a venire de novo awarded.