
    Hunt vs. Sandford and Cook.
    Whenever the endorsee takes a promissory note under circumstances which might reasonably create suspicion that the note was not good, ha takes it at his peril, and' the maker will be let into his defence whether the note were due or not due at the time of the transfer to the endorsee.
    When the note was on a solvent man for three hundred and thirty-three dollars thirty-three and a third cents, with less than a year to run, and the holder offered to sell, and did sell the note for the sum of ona hundred and twenty-five dollars, — Held, that the inadequacy of price itself for which the note was offered by the holder, was such as would reasonably create suspicion that it was not good, and would entitle the maker to set up any equity or defence that he might have to the note, although it was not due when transferred, and that this conclusion could not be avoided because the payee or endorsee was hard pressed for money.
    When the holder of a bill or note acquires it fairly in the usual course of trade, he cannot be affected with the equities existing between the original parties. sf
    This is a bill filed for an injunction in the chancery court. The complainant, who is solvent, purchased four hundred acres of land from the defendant, Cook, for which he agreed to pay one thousand dollars in one, two and three years. He received Cook’s bond for a title, and executed his three notes to Cook for three hundred and thirty-three dollars thirty-three and a third cents each. Complainant was deceived and defrauded by Cook, who pretended to have title to the land and authority to sell, when, in fact, he had neither. In a few days after this contract, Cook sold the note first due, to the defendant, Sandford, for one hundred and twenty-five dollars cash, in hand, and twenty-five dollars to be paid if collected without suit. Defendant, Sandford, denies notice of Hunt’s equity, claims to be an innocent pur~ chaser of the note in the usual course of trade before it was due, and insists that he has nothing to do with the transaction between the original parties. The Chancellor decreed the two notes last due and untransferred to be delivered up to be cancelled, and granted a perpetual injunction as to all of the note transferred to Sandford, except one hundred and twenty-five dollars. From this decree the defendants appealed to this court.
    
      W. Stoddart and M. Brown for complainants.
    In no other description of contract but those which are negotiable, can a party to it be deprived of his equity by the act of the person with whom he is dealing, without his own consent.
    The rule of protecting the holder of negotiable paper was established-for the convenience of commerce to give currency to such kind of paper. But to claim this protection, the paper must be received in due course of trade, and if the holder pays nothing he is not protected; he is then in privity with the first holder or payee. Chitty on Bills, 69: 1 Bos. and Pul. 651 ^ The transfer, and in some cases, bare possession gives the legal title, but it is the payment of money or property which gives the equity.
    If enquiry can be made as to whether the holder paid any thing for the bill or note, (as the case in 1 Bos. and Pul. 651, proves it can,) why can it not be made as to the amount the holder paid? Suppose the note to be for four hundred dollars, and the holder had paid but one hundred to the payee, which he was to -collect out of the note and pay over the balance to the payee, would not the equity of the maker be let in? How differs the present case, except that Sandford was to have all. If Sandford has any equity what is it? Only to the amount he paid. What is the intention of the rule? It is to protect bona fide holders to the extent of their equity. Shall a rule established to protect a man to the extent which he has paid, and intended merely as a shield, by construction be converted into a sword? Shall a principle designed to secure a man in his own property, be so used in its application, as to enable him to take, without paying an equivalent, the property of another?
    The cases cited on the other side have no application. They are where the holder of the note paid full value, or where the note was valid between the original parties. The maker in these cases could have no cause of complaint, and if the payee did not complain, why should he? No matter whether the note was shaved or what consideration passed between the holder and payee it could be nothing to him.
    But in this case had Sandford sued Cook, he could only have recovered what he paid. 7 John. Rep. 360: 13 John. Rep. 52: 15 John. Rep. 44. Why could he, by suing Hunt, recover the full amount of the note? Only on the ground that Hunt had received value for the note from Cook, and having Cook’s transfer, he, Sandford, would be allowed to stand in his shoes. But as Cook could not recover why should Sandford? If the reason of allowing Sandford to recover is because the note was valid between the said parties, if in fact it was not valid, he ought not to recover, except on the ground of having paid his money and being an innocent purchaser. If that is his ground, it also fixes the amount he would be enti-tied to recover, viz. the money and interest which he paid.
    A broker receiving an exorbitant brokerage on 'the discount of a note will not affect its validity in the hands of a bona fide holder. Chitty on Bills, 81: 11 East, 43. From this authority, does it not follow the note would be affected in his hands.
    Sandford ought not to recover even the amount which he paid. If an endorsee takes paper under circumstances which might reasonably create suspicions that it was not good, he takes it at his peril. S Kent, 53. If the note is overdue, he takes it subject to the equity of the maker. This is a common application of this rule. If he take it heedlessly without due caution, and under circumstances which should have excited the suspicions of a prudent and careful man, the maker is let in to his defence. 3 Kent, 53. If this rule is made for the case of stolen or lost notes, why should application of it not be made to the present case. Was Sandford’s act any better than open handed swindling?
    
      A. B. Bradford, for defendants.
    Defendant, Sand-ford, insists that he is the legal as well as equitable owner of the writing obligatory, by endorsement before it became due, for a valuable consideration in the usual course of trade, without notice of fraud on the maker, or want or failure of consideration, and is entitled to the full amount called for therein.
    1st. As to the right of a third person, the holder of the bill. In the hands of a third person bills of exchange or promissory notes carry.with them the same presumption of consideration as a bond. It is not owing to the form or to its being reduced to writing, that the law gives it effect, but to strengthen and facilitate commercial intercourse, which is carried on through this medium of security. Chitty on Bills, 14, 15: see also same 69, 70, and the authorities to which he refers. For the purpose of rendering bills of exchange negotiable, the right of property passes with the bills; every holder with the bills takes the property and his title is stamped on the face of the bills. 1 Bos. and Puller: 2 Term Rep. 71, Barrow vs. Mason.
    Lord Mansfield in Peacock vs. Rhodes, (Douglass, 636,) says, the law is settled that a holder coming fairly by a bill or note, has nothing to do with the transaction between the original parties. Where one has done a mercantile act he subjects himself to mercantile law, was the language of Lord Chancellor Baron Gilbert. See further on this subject, 3 Kent’s Com. 61, 52, 53: 6 Serg. and Rawle, 537: Campbell vs. Read and Gray, Martin and Yerger’s Rep. 394, 395.
    2d. As to what is a valuable consideration or fair consideration. Lord Hardwicke lays it down in Haly vs. Lane, (2 Atkyns, 182,) that where there is a negotiable note and it comes into the bands of a third or fourth en-dorsee, and he gives money for it, it is a good note as to him, unless there should be some fraud or equity against him appearing in the case. See also Collins vs. Martin, 1 Bos. and Puller, 651, opinion of Eyre, Ch. J.: Chittyon Bills, 69, (note:) Morris vs. Lee, 1 Esp. Rep. 118: 20 John. Rep. 645, Coddington vs. Bay: 1 Salk. 126, Anonymous: 5 John. Ch. Rep. 59.
    A person receiving negotiable paper in the usual course of trade, for a fair and valuable consideration, from an agent or factor, who has no authority or right to transfer them, but without any knowledge of the fact or notice of fraud, may hold them against the true owner. 5 John. Ch. Rep. 56, Bay vs. Coddington. The Chancellor also explains what is considered by the term, usual course of trade. See the same case in error, 20 John. Rep. 645, 649, 650.
    3d. As to the purchase of notes at a discount. A man may bom fide purchase any security for the payment of money at the lowest rate he can without incurring the penalties of usury. Wycoff vs. Longhead, 2 Dallas, 92. In a suit by the endorsee against the maker of the note, it would not lie in his mouth to say the plaintiff purchased it at a discount. Braman vs. Hess, 13 John. Rep. 52: Campbell vs. Read and Gray, Martin and Yerger’s Rep. 394, 395.
    Where a bill or note is valid between the drawer or maker and the payee, so that the latter can maintain an action on it against the former, it is valid in the hands of the endorsee, who has discounted it at usurious interest, and he may recover the full amount of the note from the maker or acceptor. Mann vs. Commission Company, 15 John. Rep. 44: and see Powell vs. Waters, 17 John. Rep. 176.
   Green, J.

delivered the opinion of the court.

It is certainly true as a general principle, that when the holder of a note or bill acquires it fairly in the usual course of trade, he has nothing to do with the original parties. But in any case in which the endorsee takes the paper under circumstances which might reasonably create suspicion that it was not good, he takes it at his peril. 3 Kent’s Com. 53. This rule is usually applied to the case of notes overdue, but the principle is of general application. 3 Kent’s Com. 53: 4 Mass. Reports, 370. These commercial regulations were first established among commercial men, with whom credit is every thing. Among such men it is not to be presumed that a note or bill would remain unpaid after it was due; consequently, if it be assigned after it is due, the assignee has reasonable ground to suspect that it is not good, and therefore he takes it at his peril. Now, as this is only a case in illustration of the rule, that circumstances which might reasonably create suspicions that a note is not good, shall deprive the assignee of the protection of the law and let in the maker to his defence, it follows that however the case may be varied, yet if circumstances which might reasonably create suspicions that the note was not good, exist, the principle must be applied, and the maker let in to his defence. Thus the purchaser of a bill or note must have exercised due caution and enquiry as to whether the party from whom he received it was the real owner; and if there were circumstances which would reasonably create suspicions that he was not, the. purchaser would take it at his peril. 3 Kent’s Com. 53: 3 Barn. and Cress. 466.

Now what is this case? The defendant, Cook, comes"**' to the defendant, Sandford, and offers to sell a note on a solvent man for three hundred and thirty-three dollars thirty-three and a third cents, which has less than a year to run, for the sum of one hundred and twenty-five dollars, an inadequacy so great, as according to some of the authorities, sufficient to shock the conscience, and amount to evidence of fraud. 1 Mad. Ch. 268. To say the least, the inadequacy of price for which Cook offered the note, was such as would reasonably create a suspicion that it was not good. It will not do to avoid this conclusion, by saying that Cook was hard pressed for money. If he had known that the note was good, and that Hunt would pay it, he would have valued it much higher, and however he might be pressed for money he could have obtained for it much more than was given. In the application of our-observation and practical knowledge upon this subject, it must be seen, that were an individual to offer to trade one note on a solvent man which was overdue, for which he would demand a full consideration, and another on the same individual having less than a year to run, for which he would demand but little more than one third of its amount, all men would, from these circumstances, regard the latter as much the most suspicious note. And yet it is agreed on all hands, that as to the former, reasonable suspicions would exist that it was not good, and the assignee would take it at his peril; but as to the latter it is contended no such suspicions exist, and the assignee takes it discharged of any equity against the payee. Such a decision would shock the common sense of an intelligent and practical community like ours. It would be considered as the result of the application of unintelligible, legal subtleties, having no sensible application to the transactions of men. But such is not the law. The circumstances here were such as reasonably might have created suspicions that all was not right, and whether the defendant, Sandford, actually entertained -these suspicions or not, nevertheless, as he took the note heedlessly, and without due caution, under circumstances which would have made a prudent man suspicious, the maker is entitled to his defence. 3 Kent’s Com. 53. But Sandford did entertain these suspicions, as we may fairly infer from the transaction. He says it was stipulated, that if the note were collected without suit, then '“he was to pay twenty-five dollars more. Now this proves he contemplated and expected a suit, consequently did not expect the note to be paid when due. If, when a note is assigned after due, there are suspicions that all is not right, from that circumstance only, does it not follow that if it be anticipated beforehand that the note will not be paid when due, such expectation must be founded upon suspicions that the note is not good, and that there are reasons for resisting the payment. So that, in either point of view, this is such a case as will authorize the maker to set up against the assignee any defence he could have had against the payee. It is admitted there was no consideration for the note passing from Cook to Hunt, consequently Hunt is entitled to an injunction for the whole amount. The decree will therefore be reversed and a decree entered in pursuance of this opinion.

Decree reversed.  