Point Involved: Is a note to be considered as overdue to affect a purchaser with the equities thereof from the fact that interest thereon is overdue and unpaid.

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COLE, J.: "Can the plaintiff, under the circumstances, claim the protection which the law affords a bona fide purchaser of commercial paper for value, before maturity? [Here the Court reviews certain former Wisconsin decisions] we deem it our duty to adhere to the rule, that a purchaser for value of unmatured, commercial paper, with interest overdue, is not, from that fact alone, affected with notice of prior equities or infirmities in the title."

Question 488: State the facts, the question presented and the Court's decision in this case.

Case 489. Vinton v. King, 86 Mass. 562.

Facts: Action on a note dated April 26, 1858, as follows:

"Two years after date, by installments of $53 in every six months after this date, until fully paid, I promise to pay Peter Bruyett, or bearer, the sum of two hundred and twelve dollars with interest in manner above stated. "John King."

This note was acquired by the plaintiff about three months after the first installment was overdue and unpaid.

Defense: That the note was acquired by the payee by duress.

Point Involved: Whether a note payable in installments is to be considered as overdue so as to subject a purchaser to the defenses against his transferror, from the fact that one of the installments is overdue and unpaid.

METCALF, J.: it being admitted law, that he who takes a note after it is due takes it subject to all objections and equities to which it was liable in the hands of him from whom he takes it, and to the same defenses, in a suit against the maker, which the maker might set up

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in an action against him by the payee; that the circumstances that a note is overdue makes it incumbent on the party receiving it to satisfy himself that it is a good one, and that if he omit so to do, he must stand in the situation of him who was holder at the time it was due. But the ground assumed by the plaintiff is, that in this case the note had not, within the rule of law on this subject, come to maturity, and was not overdue and dishonored before it was transferred to him, because the time for payment of the last three installments had not then come. The ground is not maintainable. As to the first installment of $53 in six months, and interest on $212, the note had come to maturity and was overdue and dishonored when the plaintiff took it; and as to the amount of that installment, it is not to be doubted that the defendant may make the same defense against the plaintiff, which he might have made against the payee. And we are of the opinion that he may make the same defense to the whole note. The note is a single contract to pay $212 in four half-yearly installments, and the plaintiff took it with notice on its face that, as to the first installment, the defendant might have a justifiable cause for withholding payment, whatever that cause might be; whether a cause which affected that installment only-as a release thereof by the payee, or a legal set-off against him to the amount thereof-or a cause which, between him and the payee, vitiated the whole note, as want or failure of consideration, unlawful consideration, fraud or duress. And if the payee had sued for the recovery of the first installment, before the second was made payable, the defendant might have defeated the action, by showing that the note was wholly void and a judgment for him, on such ground of defense, would have been conclusive against the maintenance, by the payee, of a subsequent action to recover the other installments. Black River Savings Bank v. Edwards, 10 Gray, 387."

Question 489: Is a note to be considered overdue from the standpoint of one who claims to be a holder in due course, if an installment is to his knowledge overdue?

Case 490. Gillette v. Hodge, 170 Federal, 313.
Facts: See the opinion.

'Point Involved: Whether a note which provides that if interest is not paid when due the whole note shall become due is to be considered as overdue, so as to affect a purchaser, from the fact that the interest is overdue and unpaid.

AMIDON, D. J.: "This was an action brought by Hodge Bros., the defendants in error, against the plaintiffs in error, on three promissory notes, dated April 13, 1903, payable to Robert Burgess & Son, or order, respectively, July 1, 1904, 1905 and 1906, with interest payable annually. The notes contained a provision that default in the payment of interest should cause the whole note to become immediately due. The plaintiffs are private bankers, who discounted the notes at the rate of 10 per cent. on June 2, 1904, passing the proceeds to the credit of the payee, who afterwards drew the same in full. The answer interposes two defenses: First, that the notes were given as the purchase price of a stallion, and that the horse failed to comply with the warranties made by the vendors; second, that the notes were handed to the payees by the defendants upon an express agreement that they should not be treated as delivered until the signature of four other persons named in the answer should be obtained, and that, unless such signatures should be obtained, the notes should be of no effect. To make these defenses available, the defendants first sought to show that the notes were dishonored at the time they were acquired by the plaintiffs. Their main reliance for establishing this fact is the provision in the notes that they should become immediately due if there was default in the payment of interest. The first year's interest was due April 13, 1904. This installment of interest was, therefore, past due on June 2d, when plaintiffs acquired the notes; and it is urged that this fact, when combined with the clause of the note just referred to, caused the notes to mature April 13th and that they were, therefore,

dishonored at the time of the indorsement. The difficulty with this contention is that the provision of the notes upon which it is based is not self-executory. It simply gave to the holder an option to declare the notes due for default in the payment of interest. There is some conflict in judicial decisions as to the effect of such a provision (Hodge Bros. v. Wallace, 129 Wis. 84, 108 N. W. 212, 116 Am. St. Rep. 938); but it was expressly ruled by the Supreme Court of the United States in the case of Chicago Railroad Equipment Co. v. Merchants' National Bank, 136 U. S. 268, 10 Sup. Ct. 999, 34 L. Ed. 349, that a similar provision did not of itself cause the notes to mature upon default in the payment of interest. See, also, Keene Five Cent Savings Bank v. Reid, 123 Fed. 221, 224, 59 C. C. A. 225; Crissey v. Morrill, 125 Fed. 878, 884, 60 C. C. A. 460. There being no statute in the state of Minnesota, where the notes were given and payable, affecting the subject, the decision of the Supreme Court is controlling in federal courts, as the question relates to a matter of general commercial law.

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"On quite elementary principles, the judgment in this case was right, and should be affirmed."

Question 490: Upon what in this case did the maker of the note contend that it was overdue. What did the Court hold in that regard?

(4) Overdue Paper Sold in Breach of Trust.

Case 491. Justice v. Stonecipher and others, 267 Illinois Reports, 448; 108 N. E. Rep., 722.

Facts: Justice contemplating a somewhat extended absence from his home entrusted to one Stonecipher certain promissory notes held by him as payee and executed by various parties, all of which Justice, as payee, indorsed in blank. Stonecipher borrowed $3,080 from Bridgeport State Bank and pledged these notes as collateral. They were past due when so pledged. Justice

sues Stonecipher and the Bank claiming the bank has no right to these notes as against him. The Bank had no notice of any fraud or breach of trust on Stonecipher's part.

Point Involved: If negotiable paper, so indorsed as to be payable to bearer, is entrusted to a person for keeping, and such person in breach of trust and without authority transfers it for value to an innocent purchaser (or pledgee) does the fact that such paper is overdue when so transferred prevent the purchaser (or pledgee) from obtaining good title thereto?

In this case plaintiff

MR. JUSTICE COOKE: 66* in error (Justice) testified that at Stonecipher's request he indorsed the notes in order to put the title in Stonecipher that he might show anyone coming in to make payments that he had title to them. The plaintiff in error therefore deliberately vested Stonecipher with all the indicia of ownership. the negotiability of commercial paper does not cease with its maturity but it can still be negotiated by indorsement. mere fact that the notes were past due did not constitute constructive notice to the bank that Stonecipher held them for a special purpose or that there was any defect in the title." (Held: Bank has title to the notes superior to that of Justice.)

the

Question 491: Suppose in this case these notes had not been indorsed by Justice, and Stonecipher had indorsed Justice's name, would the bank thereby secure good title? Suppose that the makers of these notes had paid them before they were transferred to the bank and the bank acquiring them after maturity should sue the makers, could their defense of payment be made against the bank?

(Note: This decision is undoubtedly correct. A purchaser after maturity is not a holder in due course, and is therefore subject to defenses that were good against his predecessor in title. But there were no defenses against this predecessor in title. The notes were due and owing. No defenses are raised.