
    Rawlings v. Fisher.
    Promissoby Note. — A sued B upon a promissory note given by him to O, and transferred by delivery to A. Answer, that B, desiring to purchase a certain tract of land of JD, who was unfriendly to him, procured O to make the purchase in his own name, while B went upon the notes given for the purchase money, ostensibly as the surety of C. In execution of the agreement, C conveyed the land to B, the latter executing his notes, corresponding to the notes already given by O to D, upon which B was surety, it being at the time agreed that G should deliver B’s notes to JD, and take up those originally given; that G, in violation of the agreement, had assigned the notes of B to the plaintiff for his own debt, while B had been compelled to pay the notes given to JD, upon -which be Was surety.
    
      Held, that as the note sued on was not payable in a bank in this state, it was subject to whatever defense, or set-off, the maker had, before notice of assignment, against the payee.
    
      Held, also, that the agreement set up in the answer did not vary the terms of the written contract, but went to the consideration of the note, and to show the relation of the joint makers to D, the payee, which might be done by parol evidence, even if the legal effect of the writing was changed thereby.
    
      Held, also, that in this class of cases circumstances, tending to show knowledge, in the absence of fraud, are not equivalent to notice of assignment. The burden of showing notice is on the plaintiff.
    APPEAL from the Howard Common Pleas.
   Gregory, J.

Fisher commenced an action against Rawlings, and one John D. Kirkman, on the following promissory note:

Kokomo, Ind., December 4th, 1862.
“ On or before the 29th day of November, 1863, for value received, I promise to pay John D. Kirkman, or order, the sum of one hundred dollars, without relief from valuation laws. [Signed]
“William H. S. Rawlings.”

The complaint avers that the payee assigned the note to the plaintiff, by delivery.

The appellant answered in two paragraphs.

1. That he gave the note, and another note of the same date, payable on the 29th day of November, 1864, for $65, to defendant Kirkman, to secure the purchase money of the undivided one-seventh of certain real estate, describing it; that on the day of the date of the note, Kirkman conveyed the land to Rawlings, by quit claim deed; that prior thereto, to-wit, on, &e., the defendant Kirkman, purchased the land of one Sarah Small, for the same consideration, secured by two notes given to said Sarah by Kirk-man, with Raiolings as his surety — the one for $100 of date November 29th, 1862, payable twelve months after date, and the other for $65, of same date, and payable two years after date; that at the time Rawlings purchased the land of defendant Kirkman, and at the time of receiving a conveyance therefoubnd the giving of the notes, it was agreed, and a part oftne consideration of the purchase, that Kirk-man should deliver the notes of Rawlings to the said Sarah, and lift from her and cancel, the note so given to her by Kirkman, with Rawlings as surety, and that the note sued on was executed under that agreement; that at or about the maturity of the note for $100, given to Small, a copy of which is filed, the defendant Rawlings fully paid the sum therein secured, to Small, and that Kirkman wholly failed and refused to perform his contract to substitute the notes so given him by defendant Rawlings, for those so given to said Sarah, but, on the contrary, transferred the same -to the plaintiff, by way of secuiity for money advanced to him by the plaintiff*. "Wherefore the defendant Rawlings answers, by way of set-off to the note sued on, &c., the payment by him of said $100 to Small.

The note referred to in the answer, is as follows:

November 29th, 1862.
“Twelve months after date, for value received, we or either of us, promise to pay Sarah Small, one hundred dollars, without relief from valuation or appraisement laws.
“[Signed] “John D. Kirkman,
W. II. S. Rawlings.”

2. That in November, 1862, the defendant Rawlings and Sarah Small not being on friendly terms, and, as he learned, she being unwilling to sell him the land described in the first paragraph of the answer, and the defendant Rawlings being anxious to acquire title to the land, retained and employed the defendant Kirkman to purchase of Small the land for him; it being further agreed between Rawlings and Kirkman, that the title therefor should be made to Kirkman, that Small might not know that defendant Raiolings wras really the purchaser, and that the notes to be given to Small for the deferred payments — as Kirkman’s notes alone for the deferred purchase money; might not be acceptable to and received by Small — should be execute^ by Rawlings along with Kirkman, ostensibly as Kirkman-S surety; that in pursuance of the agreement, Kirkman, on, &c., purchased the land of Small for $265, paying her $100 in hand, and for the deferred payments executed to her his two notes, with Rawlings ostensibly as surety, the one for $100, payable twelve months after date, the other for $65, payable two years after date, and received from Small a deed for the premises; that a few days thereafter, to-wit, on, &c., in pursuance of the previous agreement, Kirkman conveyed the land to Rawlings; that Rawlings paid Kirkman the $100 so paid by Kirkman to Small, $20 for his services in purchasing the land, and gave him his two notes of like amounts, and payable at the same times as those given to Small, upon and with the express agreement that Kirkman should transfer and deliver them over to Small, for those then held by her, which Kirkman was to lift and cancel; that Kirkman failed to substitute the notes so given by Rawlings to him, for the notes so held by Small, and failed to lift the same from her, but, on the contrary, transferred the notes so given to him by Rawlings to the plaintiff, as collateral security for money advanced by the plaintiff to him, and that thereafter, at the maturity of the note so given by Kirkman and Rawlings to Small, for §100, a copy of which is appended to the first paragraph of the answer, the defendant Rawlings was compelled to, and did, pay the note for §100 to. Small, Kirkman being wholly insolvent and unable to pay the same or any part thereof, wherefore the consideration of the note sued on has wholly failed.

The appellee filed a demurrer to each paragraph of the answer, the court sustained the demurrers, and the appellant excepted.

The plaintiff dismissed the action as to defendant Kirk-man, and the court rendered final judgment against Rawlings for the amount secured by the note.

The rulings of the court below, on the demurrers to the answer, present the questions for our determination.

This note, not being payable to order or bearer, in a bank in this state, is not negotiable as inland bills of exchange, but whatever defense or set-off the maker had, before notice of assignment, against the assignor, the original payee, he has against his assignee. 2 G. & H. §§ 3, 6, p. 658.

The failure of Kirkman to comply with his agreement with Rawlings, to substitute the notes of the latter for those of Kirkman and Rawlings to Small, gave Rawlings a right of action against Kirlcman. It is true that Rawlings could recover only nominal damages, until payment of the note to Small, but such payment only affected the measure’ of damages, the right of action being the violation of the agreement made at the date of the note.

It should be stated that this is a case not within the rule, that the terms of a written agreement can not be varied by parol evidence. The agreement of substitution in no way affected the terms of the note; it went to its consideration, and to explain the relation of the joint makers of the note to Small, which may be done by parol evidence, even if such proof change the legal effect of the writing. Rockhill v. Spraggs et. al., 9 Ind. 30.

Linsday and 'Lewis, for appellant.

R. Vaile, for appellee.

The assignment of this note was by delivery only, which vested in the holder an equitable interest therein, and gave him a right to sue in his own name, by making the payee a party defendant, to answer to his interest. In such case, the fight of the maker to the defense set up is the same as in the ease of an assignment by written indorsement. 2 G. & H., § 6, pp. 38, 39, 40.

In this class of cases, circumstances tending to show 'knowledge, in the absence of fraud, are not equivalent to ■notice of assignment. The burden of showing notice is on the plaintiff. Jackson v. Adamson, 7 Blackf. 597. If Rawlings had notice of the assignment to the plaintiff before payment to Small, it was for the plaintiff to show it.

The judgment is reversed, and the cause remanded to said court, with directions to overrule the demurrer to the second paragraph of the answer, and for further proceedings in accordance with this opinion. Costs against appellee.  