Majority
p. 286Franklin H. Delano, Plaintiff and Respondent, v. La Q. Rawson, (who was impleaded with David J. Cory et al.,) Defendant and Appellant. Heard, February 10, 1863; decided, February 28, 1863.
Headnote
1. The failure of goods sold to correspond with a description or warranty of them, in the contract of sale, does not constitute a defense, either as a failure of consideration or breach of warranty, to the liability of a third party upon a promissory note given by him and accepted as payment of the the price of such goods. Any remedy for such misrepresentation or breach of warranty is confined solely to the purchaser by action against the seller, (Before Bosworth, Oh. J., and Moncrief and Robertson, J. J.)This was an appeal from a judgment entered in favor of the plaintiff, upon a verdict recovered on a trial before Mr. Justice Mororibf and a Jury, on the 21st May, 1862..
In this action, La Q. Eawson, David J. Cory and Squire Carlin, were originally named as defendants, but the sum
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rnons was served only upon the defendant, Eawson, and no proceedings were taken against the other defendants.
The action was brought on three promissory notes, which were made by the defendant, Eawson, payable to the order of the defendant Gory, at a bank in New York. They were indorsed specially, “Pay to the Cumberland and Pennsylvania Eailroad Company,” which indorsement was subscribed by defendants, Carlin and Cory, the former first. Then followed another special indorsement thereon, “Pay Mt. Savage Iron Company or order,” which was subscribed “ C. Stark, Superintendent O. & P. E. E. Co.,” and a third indorsement, “Mt. Savage Iron Co.,” subscribed by “ Jno. A. Graham, President.”
The defendant, Eawson, set up in his answer that he, Cory and Carlin, being officers and directors of the Fremont and Indiana Eailroad Company, by and on behalf of said company, executed and delivered the notes in question to the Columbia and Pennsylvania Eailroad Company, which notes were, as they matured, to be paid by the corporation on whose behalf the defendants made them; and that the notes were given upon the purchase, by their corporation, of two locomotive engines from the Cumberland and Pennsylvania Eailroad Company, to be of good materials and workmanship, in good repair and working order. That such notes were delivered before the engines were, “ as payment for the same,” and upon condition that the latter should be delivered as before described: that the latter company failed to deliver such engines for two months, and thereby caused gTeat expense to the former company for other engines, and when delivered they were not of good materials and workmanship, or in good repair or working order, and were worth much less than their cost, which the vendors well knew, by reason whereof the former company suffered damage exceeding the amount of such notes and interest. That the plaintiff took such notes with full knowledge of the consideration of the notes, the partial failure of such consideration, the agreement for the sale of the engines,
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the original delivery of the notes, and the small value of such engines.
On the trial, the counsel for the defendant, Cory, offered to prove the sale of the two locomotive engines to the Fremont and Indiana Railroad Company, for a certain sum, payable by - the notes in suit, and a statement or representation, at the time of such sale, of the condition of such engines, affecting their value; the delivery of such engines to the purchasers; the transfer of such notes to the Mount Savage Iron Company, before maturity, and by them to the plaintiff, for value; also the knowledge by the plaintiff, at the time of taking the same, of the original sale, and of complaints made by the purchásers of the engines that the representations in regard to them were untrue, and their claim to set up, by way of recoupment or offset, the difference between their value and the price paid. He also offered to prove injury sustained by his company by the delay in delivering thé engines, and knowledge thereof by the plaintiff. He also offered to prove that the plaintiff was a director both in the Cumberland Railroad Company and in the Mount Savage Iron Company, and knowledge by him of a partial failure of consideration.
To all such evidence the plaintiff objected, and it was excluded, to which ruling the defendants’ counsel excepted.
On the trial, two motions were made by the defendants’ counsel to. amend the answer, and were denied. The first was to allege knowledge on the part of the Mount Savagó Iron Company of the facts stated in the answer, as to the sale of the engines, the origin of the notes and defense set up in the answer. The second was to allege fraudulent representations by the Cumberland Railroad Company, on which the sales of the engines were made.
The Court charged the Jury that the defendants had offered to prove a failure of consideration which he had excluded, and that, as there was no disputed question of fact to be submitted, the plaintiff was entitled to a verdict.
To this charge the counsel for the defendant excepted. The Jury rendered a verdict for the plaintiff for $6,671.30.
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Edward Fitch, for defendant, appellant;—
I. If the plaintiff took the notes, with notice of the facts impeaching their validity, he was not entitled to recover upon them as a bona fide holder. (Edw. on Bills, 312; Cone v. Baldwin, 12 Pick., 545 ; Rumsey v. Leek, 5 Wend., 20 ; Hall v. Hale, 8 Conn. R., 336; Skelding v. Warner, 15 Johns., 270 ; Small v. Smith, 1 Denio, 583 .)
The Court erred, therefore, in rejecting the testimony offered to establish these facts, and the plaintiff’s knowledge of them.
II. Graham, the indorser to the plaintiff, was the same person who made the representations and statements of which the defendant complains. It cannot, therefore, be claimed that the plaintiff received the notes from a bona fide holder; and the defendant was entitled, upon proving notice to the plaintiff, to establish any defense to the notes in his hands which he could maintain against the original holder.
The Court, therefore, erred in directing a verdict for the plaintiff.
James F. Lyman, for plaintiff, respondent.
' I. Leave to amend was properly refused, (Code, §§ 169, 171, 173; Fagen v. Davison, 2 Duer, 153 ; Hunt v. Hudson River Fire Ins. Co., 2 Id., 481; N. Y. Marbled Iron Works v. Smith, 4 Id., 362; Grosvenor v. Atlantic Fire Ins. Co., 1 Bosw., 469 ;) and the refusal, resting in discretion, cannot be now reviewed. (St. John v. West, 3 Code Rep., 85 ; Ford v. David, 1 Bosw., 570 ; Travis v. Barger, 24 Barb., 614 ; Phincle v. Vaughan, 12 Id., 215; N. Y. Marbled Iron Works v. Smith, 4 Duer, 362 ; Hendricks v. Decker, 35 Barb., 298 .)
II. Evidence of a breach of warranty was properly rejected.
1. No Express warranty was alleged in the answer.
2. The sale was of two specific engines already in existence, and, therefore, none was implied. (Milburn v. Belloni, 22 How. Pr., 19 ; Keates v. Cadogan, 2 Eng. L. & Eq., 320.)
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III. The sale having been made without any warranty, express or implied, if the engines turned out to be worth less than was expected, the loss must be borne by the pur chaser. (Per Woodworth, J., Swett v. Colgate, 20 Johns., 203 .)
IV. There having been no false representation, and no warranty, evidence that the engines turned out after the sale to be worth less than was expected, or that they were not delivered in time, did not show bad faith in the purchase of the notes in the parties through whom they came to the plaintiff, and in the plaintiff, and was properly rejected. (Mickles v. Colvin, 4 Barb., 304 .)
V. Evidence, as offered, that the notes were originally given under a particular agreement with the Cumberland and Pennsylvania, Railroad Company for the sale and delivery of certain engines, and of a breach of that agreement, constituting a partial failure in the consideration of the notes, and of knowledge by the plaintiff of such partial failure, was properly rejected.
VI. The notes having been indorsed by Cory, in blank,, passed by delivery to the Mount Savage Iron Company, and the possession of them by that company before maturity, was evidence of its title to them, and, no knowledge by it of any defense to them having been alleged in the answer, that title, whatever may have been the title of the Cumberland and Pennsylvania Railroad Company, was not affected by any breach in the agreement under which the notes were originally given, nor by any failure in the. consideration of them, if there was any. (Per Denio, J., Davis v. McCready, 17 N. Y. R., [3 Smith,] 230; Watervliet Bank v. White, 1 Den., 608 ; Chitty on Bills, 79; Smith v. Knox, 3 Esp., 46; Charles v. Marsden, 1 Taunt., 224; Brown v. Mott, 7 Johns., 361 ; Mottram v. Mills, 1 Sandf., 37 ; Hargous v. Lahens, 3 Id., 213; Manhattan Co. v. Reynolds, 2 Hill, 140 ; Baker v. Arnold, 3 Cai., 279 ; Shell v. Telford, 4 N. Y. Leg. Obs., 307 .)
. VII. The transfer of the notes for value before maturity, by the Mount Savage Iron Company to the plaintiff,
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either by its indorsement, through its proper representative, or by the delivery of them, indorsed by Cory, in blank, was sufficient.
VIII. The rights of the plaintiff are the same with those of the Mount Savage Iron Company, by whom the notes were transferred to him, and his action is subject to no defense, which did not exist against that company. (Chitty on Bills, 79; Goddard v. Lyman, 14 Pick., 268 ; 3 Kent [5th ed.] 92; Britton v. Hall, 1 Hilt., 528.)
Ho consideration seems to have passed between the maker of the notes in question and the first indorser and payee, Cory, notwithstanding the special indorsement by the latter, making it payable to the Cumberland and Pennsylvania railroad alone, and not to their order, it was still negotiable in their hands. (Leavitt v. Putnam, 3 Comst., 494.) If there had been any defense, therefore, as between the maker and such special payee, it would not have been available against any subsequent transferee of- the note, without notice thereof to each purchaser through whose hands it passed.
The defendant, Rawson, however, is alleged to have lent his responsibility, as maker of the note, to the Fremont and Indiana Railroad Company, to pay the purchase-money of two locomotive engines bought by that company of the Cumberland and Pennsylvania Railroad Company, the indorsees. Such notes Were received in payment, and the purchasers of the engines were discharged from all liability to pay for them. Ho damage ensued to the maker of these notes, by the failure of the engines to correspond with any description, representation or warranty of them. If the maker had paid them he could not recover back the sum paid by reason of. any deficiency in the engines: He is in no better position than the maker of any other note belonging to the Fremont Railroad Company, which they held for value. He is in no better or worse position than if he had originally lent the money
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to the company with which to pay for the engines. The time the notes had to run was a mere postponement of the day of payment on such loan. The remedy of the defendant is against the company, to be indemnified for the money he has to pay, at their request. The remedy of the company against the vendors of the engines, is by action for fraud, failure of consideration, or breach of warranty. There is no contract outstanding between those two companies, in which the purchaser can avail himself of any failure of consideration.
It is hardly necessary to add, that even if the defendant were only a surety, but by a separate contract, he could not avail himself of any matter which could form the subject of a separate action by his principal, since he could not bind that principal by his elect! jn to employ it as a defense. This is fully settled in the Court of Appeals, in the recent case of Gillespie v. Torrance, (25 N. Y. R., 306; S. C., below, in 4 Bosw., 36 .) For these reasons I think the exclusion of the testimony offered was proper and the charge of the Judge correct.
The judgment entered should be affirmed, with costs.