King v. Lindsay, 38 N.C. 77, 3 Ired. Eq. 77 (1843)

Dec. 1843 · Supreme Court of North Carolina

38 N.C. 77, 3 Ired. Eq. 77

JOHN KING vs. WILLIAM P. LINDSAY & AL.

Where A. covenanted to deliver to B. a quantity of corn, and B., in consideration thereof, by a separate covenant, executed at the same time, contracted to deliver to A. a quantity of bacon, and A. having failed to perform his covenant, sued B. at law upon his (B’s) covenant — Held that the two covenants growing out of the same contract, and executed at the same time, are to he taken together and regarded as one instrument; and B. not being able to defend himself at law was entitled to relief against his covenant in Equity.

Held further, that one who had purchased B’s covenant and taken an assignment of it from A., without notice of B’s equitable defence, was still bound by the same equities to which A. was subject.

It is the duty of the assignee of an unnegotiable paper to make enquiries of the obligor, and, if he does not, he takes it subject to all the equities against the assignor.

If the obligor, upon such enquiry being made, misinform the assignee, or if he acquiesce in the assignment, and delay for a long time to bring forward his equity, such conduct might relieve the assignee from such equity.

The cases of Welch v Watkins, 1 Hay. 369, and Moody v Sitton, 2 Ired. Eq. 381, cited and approved.

Appeal from an interlocutory o-der of the Court of Equity for Guilford county, at Pall Term, 1843, his Honor Judge Manly presiding.

The bill in this case, which was filed in September, 1841, sets forth, that on the 21st of February, 1840, the defendant Lindsay contracted with the plaintiff to sell him 400 bushels of corn, to be delivered the next day, for 1280 pounds of bacon, to be delivered by the plaintiff on the 15th of April following; that the plaintiff then gave his covenant to Lindsay lor the delivery of that quantity of bacon on the day mentioned, and, at the same time, Lindsay executed to the plaintiff a covenant for the delivery of the corn; that this occurred in Guilford, where the plaintiff resides ; Ljnc¡say a]so gave pla¡nt¡ff a letter to a person, in whose care he alleged he had corn, directing him to deliver 400 bushels to the plaintiff. The bill further states, that, immediately thereafter, Lindsay went to Madison, in Rocking-ham county, where the defendant Black resided, and there, in satisfaction of a previous debt of $75 and for the further sum of $55 then advanced, he sold to Black the covenant given by the plaintiff and delivered it to him — that Lindsay’s agent did not deliver to the plaintiff any corn; but informed him, when he applied for the corn, (and such was the fact,) that, whatever there was, it had been seized by attachments agninst Lindsay, who did not return to Guilford, but, being insolvent, immediately absconded. The bill further stated, that, when the plaintiff’s covenant fell due, Black caused a suit to be instituted in the name of Lindsay, and recovered judgment for the value of the bacon, interest and costs; and the plaintiff prayed for an injunction and relief.

In the answers of the defendants the agreements stated in the bill are admitted, and it is alleged that the plaintiff did receive some corn from Lindsay’s agent; but no quantity is mentioned ; and the defendants further state, that, by diligence, the plaintiff might have obtained the whole quantity contracted for, before the levy of the attachments. Black also answers that he had no knowledge of the consideration, on which the plaintiff gave his covenant, which expressed no consideration nor condition, but is absolute on its face, for the delivery of the bacon ; and that on the faith thereof he purchased it for a full price — and he insists, that, being a purchaser for a valuable consideration, and without any knowledge or supicion of an equity on the part of the plaintiff, he has a right to raise the money on the judgment to his use.

Upon the answers the defendants moved to dissolve the injunction; but the Court refused the motion and continued the injunction to the hearing; from which the defendant Black appealed.

Graham for the plaintiff.

Morehead for the defendant.

Rufrin, C. J.

In the view of this Court the two covenants, growing out of the same contract and executed at one and the same time, are to be taken together and regarded as one instrument; and although at law, from the forms of pleading, the present plaintiff could not avail himself of the default ofLindsay in not performing the agreement on his part, but was'obliged to submit to a judgment for the value of the articles, which he contracted to deliver, yet there is no principle of equity better settled, than that a person shall not insist upon the execution of a contract by another, when he, himself, has failed and is unable to fulfil the stipulations on his part, which formed the inducement to the other party to enter into the contract. It is a case in which the consid eration wholly fails; but as that cannot be shewn at law when the contract is in the form of independent covenants in separate instruments, the plaintiff is under the necessity op coming here to restrain the. other party from the nuconscientious use of that legal advantage. There is a clear equity in favor of the plaintiff against Lindsay, who cannot be allowed to make the plaintiff pay for what he never got and cannot get. That equity, indeed, was but feebly questioned at the bar; but the case was put on another point.

It was said, that an equal or superior equity arises in favor of the other defendant, Black, as a purchaser for value and without notice of the plaintiff’s equity. But that is contrary to settled principles. For the advantage of trade and the credit of negotiable paper, the assignees of such instruments, before their dishonor, held them as absolute owners both at law and in equity, without any regard to the state of the dealings between the original parties, unless the assignee have notice that his assignor ought not to pass off the paper. That is by force of the law merchant, or the statutes which. and encourage the negotiation of those instruments> aQd, consequently, should protectthose whoinnocently take them. But for that reason, it is clear that an assjgnee COuld have only the rights of the assignor; since the latter can pass no more than he has. And such, therefore, is the rule of equity in respect to the assignment of dioses in action or instruments not legally negotiable. The rule has been often laid down and never disputed. In Coles v Jones, 2 Ver. 692 it is said, that the assignee, though, he comes in upon full and valuable consideration, takes a bond (not negotiable) subject to the same equity, as it was in the obligee’s hands. In Tuston v Benson, 2 Vern. 764, jt is again said, that the assignment to the creditors did not alter the case: a bond, being assignable only in equity, is still liable to and attended with the same equity, as if remaining with the obligee. And in the same case, as reported in 1 Pr. Wms. 496, the doctrine and the reasons for it are yet more fully stated. It is there declared, that the assignee is in no better condition than the assignor; for suppose one should assign over a satisfied bond as a security for a just debt, the assignee could not set it up in equity, as it receives no new force from the assignment. And it was laid down, that it was incumbent on any one, who took an assignment of a bond, to be informed by the obligor concerning the quantum due upon it; which if he neglected to do, it was his own fault, and he should not take advantage of his own ladies. In truth, the assignee of a chose in action gets no title to it, properly speaking, and cannot be said to be a purchaser without .notice. He gets only the right to use the assignor’s name to enforce the claim, and therefore to recover what the assignor might; and the very nature of the subject warns him of the necessity of enquiring respecting the obligor’s equity, and, therefore, amounts to notice of such equity. If, upon enquiry, the obligor misinform him, or if the obligor acquiesce in the assignment, and delay for a long time to bring forward his equity, such conduct might vary the rule, and give the assignee rights, which the assignment itself would not. The general principle has also been long recognized in this State; Welch v Watkins, 1 Hay. 389, and was recently acted on by this Court in Moody v Sitton, 2 Ired. Eq. 381. The present plaintiff has by no conduct of'his impaired his equity, as between him and Black ; and, therefore, the latter stands merely in the place of Lindsay, and the plaintiff has a right to have deducted from the judgment against him the value of such part of the corn as he did not receive and the interest thereon. What that was will, of course, be the subject of enquiry in a future stage of the cause, and in the meantime the injunction was properly continued.

It will therefore be certified to the Court of Equity that there is no error in the decree appealed from; and the appellant must pay the costs of this Court.

Per Curiam, Ordered accordingly.