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on which this action was brought; (2) that the note tendered as set-off was one of five notes given for a bill of lumber of which a sufficient amount was never delivered, and said note was not assigned until after the 16th day of June, 1893, and not until after the other four notes had been assigned and delivered to one certain Edward P. Hines, so that the consideration upon which the note was given has failed to the extent of $1693.57, etc.; (3) that the note tendered as set-off was one of five notes given for a bill of lumber of which a sufficient amount was never delivered, and said note was assigned to de. fendant without the payment of any consideration therefor, so that the consideration upon which the note was given has failed to the extent of $1693.57, etc.; (4) that the note tendered as set-off was one of five notes given for a bill of lumber of which a sufficient amount was never delivered, and said note was assigned to the defendant without payment of any consideration therefor, and not until after the other four notes above mentioned had been assigned and delivered to a certain Edward P. Hines, so that the consideration upon which the note was given has failed to the extent of $1693.57, etc.; (5) that the note tendered as set-off was one of five notes given for a bill of lumber of which a sufficient amount was never delivered, and said note was not assigned to the defendant until after the 16th day of June, 1893, so that the consideration upon which the note was given has failed to the extent of $1693.57, etc.
The defendant was given leave to file an additional plea instanter, which plea made a tender to the plaintiff of $1293, which plaintiff refused to accept. The defendant then filed three rejoinders to said replication, the first of which was, that the defendant received the note described in the plea of set-off without notice of the assignment by Barker to the Union National Bank of the note described in the declaration. The second, that the note described in the pleas of set-off was endorsed and deliv.
ered by McElwee & Carney to the defendant on the day of its date, for value, and without notice to the defendant of any of the matters set up in the replications. The third of which was, that the purchase price of the lumber for which the notes were given, and which was not delivered, was, prior to the assignment of the note to the Union National Bank, by agreement between Barker and •McElwee, applied upon an account owing by Barker to McElwee & Carney, other than on the notes mentioned in the replications, and that the consideration for none of the notes failed. The plaintiff filed rebutters to the defendant's rejoinders; that as to the plea of tender the plaintiff did not refuse to accept the tender, but did accept it and credited the amount paid on the causes of action, and to that extent they are satisfied, and filed a similiter to the other rejoinders.
TENNEY, MCCONNELL, COFFEEN & HARDING, for plaintiff in error:
Barth having obtained the Barker note while the bank held his note, and with knowledge of its rights, as admitted by the pleadings to the first count, cannot use the Barker note as a set-off to the prejudice of the bank. Chicago Title and Trust Co. v. Smith, 159 Ill. 417.
The title of the bank to the Barth note, even if, owing to the omission of the endorsement, only an equitable one, is such a title as a court of law will enforce and protect. And it being admitted that the amount of the note is justly due, Barth cannot, as against the bank, discharge his debt with a note of Barker's, purchased for that purpose after the bank's rights had attached. Prins v. Lumber Co. 20 Ill. App. 236; Avery v. Swords, 28 id. 202; 1 Parsons on Notes and Bills, 278, 279; 2 id. 45; Chickering v. Raymond, 15 Ill. 362; Mobley v. Ryan, 14 id. 51; Weber v. Rosenheim, 37 Ill. App. 72; 2 Randolph on Com. Paper, sec. 792; Bank v. Taylor, 100 Mass. 18; Boas v. Hetfron, 40 Ill. App. 652; Baxter v. Little, 6 Metc. 7; Packer v. Roberts,
140 Ill. 9; Rothschild v. Bruscke, 131 id. 265; Engs v. Matson, 11 Ill. App. 639.
Barth is not entitled to set off the Barker note for more than he paid for it, without allowing the amount for which the consideration of it failed. Hodson v. Glass Co. 156 Ill. 397; Sturges v. Bank, 49 id. 220; Olds v. Cummings, 31 id. 188.
MORAN, MAYER & MEYER, for defendant in error:
The replications to which a demurrer was sustained were bad, but, even if good, the same issues were presented by other pleadings, so that the error, if any, was harmless. Dunham v. Dunham, 162 111. 589; Mayer v. Lawrence, 58 Ill. App. 194; Warner v. Crane, 20 Ill. 148.
The instrument sued on was a non-negotiable chose in action. Van Zandt v. Hopkins, 151 Ill. 218; 1 Parsons on Bills and Notes, 517, 534, 536, 539, 542; Prins v. Lumber Co. 20 Ill. App. 236; Weber v. Rosenheim, 37 id. 72; Kingsbury v. Wall, 68 Ill. 311; Bank v. Blanchard, 7 Allen, 333; Bank v. McCord, 139 Pa. St. 52; Hines v. Bank, 69 Ill. App. 518; 177 Ill. 417.
The assignment of the note was not complete as to Barth until he was given notice thereof. 1 Am. & Eng. Ency. of Law, 840; 1 Daniel on Neg. Inst. sec. 742; Morris v. Cheney, 51 Ill. 451; Himrod v. Baugh, 85 id. 435; Chapman v. Shattuck, 3 Gilm. 49.
Barth is entitled to set off the full amount of the Barker note. 22 Am. & Eng. Ency. of Law, 284; Smith v. Warner, 16 Mich. 389.
Notice was necessary to cut off set-offs. Burford v. Fergus, 165 Pa. St. 310; Hines v. Bank, 69 Ill. App. 518; 177 Ill. 417; Loomis v. Loomis, 26 Vt. 198; Rider v. Johnson, 20 Pa. St. 190; Express Co. v. Colby, 7 Col. 300.
Mr. JUSTICE RICKS delivered the opinion of the court:
The main question in this case is, could Barth set off the note given by Barker to McElwee & Carney of $1573.94, bought by him for $750, against his note for
$5000, and interest, sued on by Barker for the use of the Union National Bank of Chicago, and if so, whether for the full amount or the amount paid for the note sought to be set off.
The bank received the Barth note from Barker as early as May 29, 1893, as a pledge for moneys previously obtained, without endorsement. This note was taken by Mr. Odell, president of the Union National Bank, with other paper, the other paper being endorsed. This note was not endorsed, and there was no agreement that it should not be endorsed and no express agreement that it should be. Barth bought the Barker note June 5 or 6, 1893, for $750. He had no notice of the bank having the Barth note until after May 4, 1895. The Barker note was dated March 16, 1893, due June 16, 1893. Suit was brought May 16, 1895. As the bank only took an equitable title to the Barth note, it was its duty to give notice to Barth to protect itself against payment or after-acquired crossdemands against Barker, and having failed in this, Barth was entitled to his set-off.
Plaintiff in error insists that defendant was not entitled to credit on account of the Barker note in excess of $750,—the amount paid by Barth for the note. The holder of a note regularly endorsed is presumed, in law, prima facie a holder for value, and this presumption continues until fraud is shown in the procurement of the signature or execution of the note. Then a purchase for value must be proven.
Barth is shown to have given value for the note. There is no evidence showing the note was obtained from the maker by fraud, or that he had any defense to it had it been sued upon by the payees. It is true, a plea of partial failure of consideration was insisted upon; but the trial and Appellate Courts found adversely to the plaintiff as to that, and we must accept the finding. "Negotiable securities once put in circula. tion for value may be transferred for less than their face, but the maker and those claiming under him cannot limit
the right of a subsequent holder to a recovery of what he may have paid therefor.” Wade v. Chicago, Springfield and St. Louis Railroad Co. 149 U. S. 327.
Barth purchased this note before maturity, for value and without notice of the equities of the plaintiff, and is entitled to the benefit of his bargain. The bank having taken the note by mere delivery, and without any agreement that it should be endorsed, it could have no equity superior to that of Barth until he had notice that the bank had and claimed to own the note.
This suit was brought May 16, 1895, and while pending, in June, 1896, a chancery suit was brought by the bank against Barth relative to the stock that was as. signed as collateral to the note held by the bank, pray. ing for a sale of the stock pledged to pay the note sued on here. Plaintiff then moved to dismiss this suit and urged the pendency of the chancery suit brought by the bank as ground therefor. A plea of set-off had been filed by defendant and the court properly overruled the motion to dismiss.
It is insisted by the plaintiff that this case should be reversed because the court sustained a demurrer to two replications to defendant's plea of set-off to the first count of the declaration. The declaration did not count upon an endorsed note within the statute, but upon an assigned note or chose in action, as at common law. The language used is, “assigned, transferred and delivered the same to said Union National Bank.” If the note had been endorsed the declaration would have so alleged, and the suit would have run in the name of the bank, as plaintiff. Upon the face of the declaration, then, this note was subject to equities and defenses between the original parties existing at the time of the assignment, or arising after the assignment and before Barth had notice of the assignment. Barth pleaded as set-off the note of Barker obtained by him by endorsement for value before the bringing of the suit. Plaintiff replied, first, that defend