Saxton v. Dodge

57 Barb. 84, 1870 N.Y. App. Div. LEXIS 58

Opinion

’ By the Court, Johnson, J.

I am clearly of the opinion that the learned judge at special term was in error in sustaining the demurrer to the second defense set up in the answer. The note on which the action is brought is payable to the order of “ Ball, Baff & Saxton.”

The complaint alleges that the payees duly “ indorsed, assigned and transferred” the same to the plaintiff. This is not denied by the second answer, and must be taken to he admitted, so far as is necessary to constitute the plaintiff the sole and exclusive owner and holder of the note for value. The answer in question, in substance and effect, though not in direct terms, alleges that the plaintiff is one of the payees of the note. The learned judge at special term admits that this is fairly to be implied from the averments in the answer. The demurrer to the answer must be taken to admit this fact as true. Thus we have the fact incontrovertibly established, for all the purposes of this issue of law, that the plaintiff is the same person who is one of the joint payees of the note, and that the transfer to him was by himself with the other payees. In other words, that he, by such transfer, acquired the interest only of his associate payees in the note. The answer then sets up a total want of consideration for the note in question, in matter and manner conceded to be sufficient to defeat the note, had the action been brought in the name of the payees. But the answer was held to be defective in this, that it did not allege that the plaintiff, at the time he became the sole and exclusive owner and holder, knew the facts which rendered the consideration of the note worthless. It was held that the plaintiff, although one of the payees, was entitled to protection as any other purchaser for value. Is this so ? I think not. It is not disputed that had the action been in the name of all the payees, the allegation of notice or knowledge, of the entire worthlessness of the consideration, would not have- been necessary. I think it is equally unnecessary where all the other joint payees transfer their interest to one of their number and the action is brought by him. I can conceive no good reason why he does not stand upon the same footing in this respect that he did before. I do not think it is in the power of several joint payees of a note to escape a just defense to it by such a contrivance. If a payee of a note indorses it over to himself, as the plaintiff has here, he does not in any respect change his position. Obviously, it may be defended, as against Mm, upon the same principle after the indorsement as before. I do not find this precise point anywhere adjudged, but, upon general principles, 1 think it must be so. He does not stand upon the footing of a bona fide indorsee and holder in the usual course of business. He could have no remedy by action against his indorsers, because he is one of them, and no man can be both plaintiff and defendant in the same action. This is well settled by numerous authorities. (1 Pars, on Notes and Bills, 137. Chitty on Bills, 70, 71, 72. Smith v. Lusher, 5 Cowen, 688. Pitcher v. Barrows, 17 Pick. 361. Mainwaring v. Newman, 2 B. & P. 120. Neale v. Terton, 4 Bing. 194. Teague v. Hubbard, 8 B. & C. 345.) If the note passed to him by indorsement, as the pleadings here admit, the plaintiff was necessarily one of the indorsers to himself. This question, it is true, affects only the remedy between indorsee and indorser, and would not affect a third person deriving title bona fide from such an indorsee. But it serves, in some degree, to show, I think, that such a transfer as we have here, is out of the usual course of business. But the real point is, that the action is brought by one of the payees, and as to a payee, no notice, of the want or failure of the consideration, is necessary to constitute it a defense. It is very clear, I think, that the plaintiff is not to be regarded a bona fide holder, the same as though he had not been one of the original payees.

The defendants are not estopped from setting up this defense against these notes. It appears from the answer, that the note in question was given for the amount claimed to be due, under and by virtue of a certain contract between the defendants and the payees of the .note. The said payees claimed to have a patent, which gave them the exclusive right to make and vend reapers and mowers, with certain specified improvements, and gave a license to the defendants to make and vend such reapers and mowers, and also to sell territory for a certain specified considera tion, called license fees, which the defendants agreed to pay. The note was given for these fees. The defense is, that this patent was void, and conferred no exclusive right whatever upon the payees of the note. So far as the question of estoppel is concerned, the case stands upon the same footing that it would had the action been to recover the fees. If the payees of the note had no such exclusive right, the defendants acquired nothing by the license. They merely obtained a license to do what they had the same right to do without any license. The license conferred ho right, for the licensors had none to confer. I do not see, therefore, why the defendants may not set up this want of consideration in this case as well as in any other arising upon contract. It is not like the case of a landlord and tenant, where the latter gets possession of premises, and has the benefit of the use and occupation, and the rents and profits. Here the defendants received nothing visible or tangible. They obtained only a pretended exclusive privilege, which the licensors did not own or possess, and could bestow upon no one. Under such circumstances, I can see no justice in precluding the defendants from asserting the truth. The true rule, I think, is, that where a party gets nothing by the contract sought to be enforced against him—neither title nor possession of property—he is not estopped from setting up his defense. The case of Hayne v. Maltby (3 D. & 3. 438) is an illustration of this principle. There A., claiming to have a right to a patent machine, covenanted with B. that he might use it in a particular manner, in consideration whereof, B. covenanted that he would not use it in any other. In an action brought by A., against B., for a breach of this covenant, it was held that B. was not estopped from showing that the invention was not new, and that the patent was therefore void.

So in the case of Bliss v. Negus, (8 Mass. R. 46.) In that case, in áddition to the assignment of the patent for which the note was given, the plaintiff furnished the defendant with certain samples, and some paint to be used in the art. He also sent a man and boy to labor in the art two days, in the presence of the defendant, by way of instruction, which was part of the agreement. And yet the court held that the defendant was not precluded from showing that the patent was void. The court say: “ The assignor lost nothing, nor did the assignee acquire anything.” As to what was furnished, the court say that as it pertained to the pretended right, and the art, it was neither useful nor valuable to the defendant, and did not affect the principle. In Dickinson v. Hall, (14 Pick. 217,) the action was upon a note given in consideration of the assignment by the plaintiff to the defendant, of a limited right to the use of a patented machine for breaking and dressing hemp. The plaintiff covenanted with the defendant that he had a good right, and lawful authority to sell and convey the right, and undertook to warrant and defend the same to the defendant. The plaintiff believed he had a valid and useful right. The defense was that the patent was Void; that it was neither a new nor a useful invention. The jury found for the defendant. On motion for a new trial, the court held that the defense was maintainable, and that the defendant, having received no value, his promise was nudum pactum. Indeed, it would be quite absurd to hold that an estoppel could be predicated upon a nudum pactum.

It does not appear in this case, either by the complaint or the answer in question, that it was part of the agreement that the defendants should not dispute the^plaintiff’s right and title, and would not set up any defense against the validity of the patent in any action against them, to enforce their promises made in consideration of the license. It does appear 'in another action between some of these parties that such was part of the defendant’s agreement. But we cannot go outside of the pleadings in this action, to determine the issue of law raised. It may be remarked, however, that if the whole arrangement was nudum pactum, this stipulation by the, defendants would be as void as any other part, and could not estop.

There is no force in the plaintiff’s objection that this court has no jurisdiction to try the question of want of consideration, because it would necessarily involve an inquiry into the validity of the patent. If the issue was patent or no patent, or right or no right under it, so that the judgment would determine that question, one way or the other, the objection would be well taken. (Dudley v. Mayhew, 3 N. Y. Rep. 9.) But that is not the issue here. The action is upon the note, and the defense is a total want of consideration. The issue therefore is, consideration or no consideration, of a promissory note. The inquiry into the validity of the patent, or of the license, comes in collaterally only, by way of evidence. In such cases the court may inquire into the validity of a patent as well as anything else,, for the purpose of determining the question of consideration. Cases involving just'such defenses as this, are very common in our State courts. In addition to the cases cited on the other point, I refer to the cases in our own court, of Cross v. Huntly, (13 Wend. 385;) Head v. Stevens, (19 id. 411;) and Snow v. Judson, (38 Barb. 210.)

The true test, I apprehend, in all such cases is, whether the judgment upon the issue, allowing the court to have jurisdiction, would affect or determine the right claimed under the patent. All which the judgment in this action could determine would be, whether the note was a valid promise. Indeed, it is plain enough that no United States court would have jurisdiction to try this action, all the parties residing in this State. (Brooks v. Stolley, 3 McLean, 523. Burr v. Gregory, 3 Paine, 426.)

The third answer, clearly, does not state facts sufficient to constitute the defense of fraud. It alleges, generally, that the plaintiff made false representations, knowing them to be so; but does not allege that the defendants relied upon such statements, and entered into the bargain supposing and believing them to be true. The fourth answer is also equally defective, and neither, taken separately, constitutes any defense to the note.

[Monroe General Term, March 7, 1870.

'The demurrers to the third and fourth answers are, therefore, well taken, and the order sustaining the demurrers to those answers should be affirmed.

The order, so far as it sustains the demurrer to the second answer, should be reversed, and an order entered overruling the demurrer to that answer and ordering judgment for the defendants thereon, with leave, however, to the plaintiff to notice his action for trial, and try that issue.

Johnson, D. D, Smith and Dwight, Justices.]