A., taking an overdue and paid note from B., who is not a party to it, is deemed to have taken it upon the credit of B., and subject to the defences which the signers could make against B., and cannot compel some of the signers (who were sureties in fact) to pay it a second time on the ground that, after it was due and paid by them and B., they authorized B. to hold and use it as a valid note against W., another signer and sole principal, and B., in violation of his trust and without authority, transferred it to A.
FOSTER, J.
"Wherever one of two innocent persons must suffer by the acts of a third, he who has enabled such third person to occasion the loss must sustain it." This principle is declared, by ASHURST, J. (Lickbarrow v. Mason, 2 Term 63, 70), to be "broad and general;" but it is not without exception, and is always to be applied with great circumspection and caution. Broom's Leg. Max. 562. 563; N. Y. Iron Mine v. Negaunee Bank, 39 Mich. 644, 653-657.
The purchaser of a negotiable note, dishonored or overdue, takes it subject to all the legal defences which might have been made to it in the hands of the original holder.
The parties to this transaction, if equally innocent in a moral sense, cannot be regarded as in equali jure. However careless may have been the conduct of the innocent sureties in permitting Stainborn to take possession of the note after they had received it from the officers of the bank, without first erasing their names, and notwithstanding the fact that their negligence enabled Stainborn to practice a fraud upon the plaintiff, the latter cannot be regarded as equally innocent with the sureties, because he was, legally speaking, more negligent. He was very distinctly put upon inquiry concerning the possible or probable defences of the makers of the note. The obvious fact that the note was overdue was an advertisement of probable defects in the title, affecting the purchaser with notice of all existing defences. As against Kittridge and Aldrich, the plaintiff cannot be considered an innocent holder, and he cannot invoke against them the aid of the rule, that where one of two innocent persons must suffer by the act of a third he who has enabled such third person to occasion the loss must sustain it. N. Y. Iron Mine v. Negaunee Bank, before cited.
Judgment on the verdict.
STANLEY, J., did not sit.