Opinion
October 2, 1923.
November 21, 1923.
Promissory notes — Assignments of nonnegotiable instruments — Rights of assignee.
The holder of a nonnegotiable promissory note stands in the place of the assignor, exposed to the defenses which might be set up against the assignor before he has given notice of the assignment. Any contract which the assignor made with the payee, the original creditor, by which the debt was extinguished, either in whole or in part, is binding and valid against the assignee. Payment by the maker to the payee before notice of assignment is good.
Where the holder of a nonnegotiable note has assigned the same, but failed to give notice to the maker, and the latter subsequently settles with the payee, the assignee cannot recover for the value of the note.
Appeal, No. 98, Oct. T., 1923, by defendant, from judgment of C.P. Lebanon Co., Sept. T., 1919, No. 73, on verdict for plaintiff in the case of A.J. Hoverter, now for the use of Adam Fry, v. Joseph J. Consedine.
Before ORLADY, P.J., PORTER, HENDERSON, TREXLER, KELLER, LINN and GAWTHROP, JJ. Reversed.
Assumpsit on nonnegotiable instrument. Before HENRY, P.J.
The facts are stated in the opinion of the Superior Court.
The court directed a verdict in favor of the plaintiff in the sum of $221.85, and judgment was entered thereon. Defendant appealed.
Errors assigned were in directing a verdict and refusing defendant's motion for judgment non obstante veredicto.
Harry J. Schools, for appellant. — The assignee of a nonnegotiable note cannot recover against a maker who has paid the payee named in the note after its maturity but before notice of the assignment: Bury v. Hartman, 4 S. R. 175; Gaullagher v. Caldwell, 22 Pa. 300; Henry v. Brothers, 48 Pa. 70; Horstman v. Gerker, 49 Pa. 282; Foster v. Carson, 159 Pa. 477; Miller v. Bomberger, 76 Pa. 78; Rider v. Johnson, 20 Pa. 190.
E.E. McCurdy, for appellee.
Argued October 2, 1923.
Defendant appeals from a judgment entered on a directed verdict for plaintiff. The suit was in assumpsit by the assignee of a promissory note against the maker. The note contained an authorization to confess judgment before maturity. This made it nonnegotiable: National Bank v. Beaver, 25 Pa. Super. 494. It became the duty of the assignee to give notice of the assignment if he would protect himself against subsequent payments to the assignor. He purchased but an equity and stands in the place of his assignor exposed to the defenses which might be set up against the assignor before he has given notice of the assignment. Down to the moment of notice the debtor might do whatever he could legally have done if no assignment had been made. Any contract which he made with the payee, the original creditor, by which the debt was extinguished, either in whole or in part, was binding and valid against the assignee. Payment by the maker to the payee before notice of assignment is good. This rule is so well settled and the reason therefor has been stated so many times by our Supreme Court that discussion is unnecessary. It is sufficient to cite Bury v. Hartman, 4 S. R. 175; Gaullagher v. Caldwell, 22 Pa. 300; Henry v. Brothers, 48 Pa. 70; Rider v. Johnson, 20 Pa. 190. The only witnesses called at the trial were plaintiff and defendant. There was evidence to justify the jury in finding the facts, of which the following is a statement: Hoverter, the payee of the note, was a life insurance agent. He sold defendant, Consedine, two life insurance policies with the understanding that Hoverter would purchase from Consedine, who was a jeweler, goods from time to time which were to be set off against the premiums on the policies. As the premiums became due, Consedine gave Hoverter, from time to time, his nonnegotiable notes in payment thereof, and one of these notes, the note in suit, came into the possession of plaintiff by purchase on or about the date of the note, of which fact Consedine had no knowledge. About a year later Hoverter came to Consedine and demanded a settlement of their respective accounts and notes. Hoverter calculated all of the premiums on the insurance policies, including the premium for which the note in suit had been given, deducted a book account held by Consedine against Hoverter and a note outstanding, and claimed a balance of $355.20, for which Consedine gave him a new note, which note was subsequently paid. At the time of the settlement, Hoverter stated that the note in suit had been paid by him at the bank and that he could not produce it because it had been lost in the mails. About fifteen months later plaintiff, through his attorney, notified Consedine of his possession of the note in suit and demanded payment. This was the first notice the maker had of any assignment of the note. Plaintiff admitted that he did not give defendant notice of the assignment until that time. In the light of evidence to establish these facts, plaintiff was not entitled to a directed verdict. The learned court below, in dismissing defendant's motion for judgment n.o.v., recognized the rule that the assignee of a non negotiable note stands in the shoes of the payee. But he seems to have had in mind that the evidence established, as a matter of law, that defendant knew the note had been assigned before he paid the debt, which was the consideration for the note. We are quite clear that the evidence was not even sufficient to submit to the jury on the question of notice. Plaintiff admitted that he never gave notice. Defendant said that the payee accounted for the nonproduction of the note by stating that it had been lost. This evidence was entirely insufficient to put defendant on further inquiry before he settled with the payee, if he did settle. Whether defendant did pay Hoverter the consideration for which the note had been given depends upon oral testimony, which had to go to the jury, and this was the only fact for that tribunal. Defendant was entitled to an instruction that the verdict should be in his favor, if they believed it to be a fact as testified by him that he paid Hoverter the consideration for which the note in suit had been given.
The first and third assignments of error are sustained, the judgment is reversed and a venire facias de novo awarded.