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holders for value.10 In the case of Valentine vs. Lunt," the Court said on this point:

It is not suggested in any way that the defendant Austin has been guilty of any fraud, or unfair practice, or want of care leading to the commission of fraud by Richardt; on the contrary, both Mrs. Austin and Mrs. Lunt are declared to be wholly innocent in the matter; yet the general claim of the respondent is that, inasmuch as the deed to Richardt should be declared invalid, because of the advantage taken by him, as if it concerned himself alone, the subsequent conveyance to Austin, and her mortgage to Lunt, must be canceled. All this seems contrary to natural justice and reason, and it is opposed, we think, to those rules and principles of established equity by which courts are governed in cases of this nature. It certainly is not a matter of course for a court of equity to set aside and declare a conveyance 80 obtained to be void, and transactions depending upon it invalid. When its jurisdiction is invoked for that purpose it applies the maxim that he who seeks equity must do equity. In the case before us the money was loaned by Mrs. Lunt on the faith and credit of a title, ownership, and possession which the grantor had conferred upon the mortgagor. As against the defendant, therefore, an innocent and bona fide mortgagee, she is estopped from denying that the apparent title was not the real and true title. The mortgage is good upon its face. The records and the possession of the property by the mortgagor show that she had a right to execute it, and that is enough in the first instance to establish its validity. To show its invalidity the plaintiff sets up collateral 1 Simpson vs. De Hoyo. 94 N. Y., * 115 N. Y, 498; 2 N. E, 2. matter nowhere appearing of record, or to have been brought to the attention of the mortgagee. It is unavailing. The deed from the plaintiff's ancestor conveyed an estate in fee-simple to her grantee, and when recorded, it was, to all persons acquiring rights under it, clothed with all the guaranties which the law can bestow. It was transferable by deed, and the purchaser acquired all the rights of an owner. He might again sell or mortgage it, and, to one receiving it as purchaser, or as security without knowledge of any secret fraud, it was free from any taint which, as between the original parties, might have infected their transaction. Whatever might be their guilt or condition, a court of equity will not visit its consequences upon him. ‘The law,' says Chief Justice Kent, 'has always had a regard to derivative titles when fairly procured, and though it may be true, as an abstract principle, that a derivative title cannot be better than that from which it was derived, yet there are many necessary exceptions to the operation of this principle.' Jackson vs. Henry, 10 Johns, 184. In the case of fraudulent conveyances which the statute declares to be 'utterly void,' it has been well settled 'that a purchaser for a valuable consideration, without notice, has a good title, though he purchases from one who has obtained his title by fraud. Id. He may not only convey the property, but he may deal with it as owner, and may mortgage it, and whoever purchases the property, or takes a mortgage thereon from him, or under him, in good faith, for value, or deals with him in good faith in reference thereto, will be protected against the claims of the defrauded vendor.' In Miller vs. Zeimer, 111 N. Y., 441; 18 N. E. Rep., 716, cited by the respondent, the purchaser of a mortgage was allowed to recover the amount actually paid by him, although the mortgage was, as between the parties, usurious, and therefore, by the statute, absolutely void. But the purchaser had taken the security on the representations of the mortgagor as to its validity, and he was held to be estopped from setting up the defense. So far as this case has any application, it favors the defendant, for it shows that one acting in good faith will be protected, although the mortgage is, by the literal terms of the statute, invalid.

"The other cases cited by the learned counsel for the plaintiff do not require a different judgment in this case. So far as they are from the courts of this state, and are at all pertinent, they are Riggs vs. Society, 84 N. Y., 330; 95 N. Y., 503; Fisher vs. Bishop, 108 N. Y., 25; 15 N. E. Rep., 331; Van Deusen vs. Sweet, 51 N. Y., 382. In Riggs vs. Society, upon each presentation it was brought before the court by the defendant, who had induced a gift or contract from one known to be under a delusion. In Fisher vs. Bishop, the action was in equity to cancel a bond and mortgage procured by fraud and undue influence practiced by the defendant, who had induced the plaintiff, by its execution, to secure a debt due from another person,

but for which the mortgagor was in sense responsible. The plaintiff succeeded at special term (36 Hun., 112), but upon appeal the judgment was modified by requiring the plaintiff to repay to the defendant the sum of one dollar, which it appeared had been actually paid by him as a consideration. Van Deusen vs. Sweet was an action to recover possession of real property, both parties claiming under a common source of title—the plaintiff under

no

his father's will; the defendant as tenant of the plaintiff's brother, who claimed under a deed from the same father. No equitable relief was sought, and the terms on which such relief might, if at all, be given, was not the subject of the consideration. Some other cases have been cited involving the rights of an assignee of a non-negotiable chose in action, as Barry vs. Assurance Co., 59 N. Y., 587; Loomis vs. Ruck, 56 N. Y., 462. They have no application. Such an assignee stands in the place of his assignor, and is in no better position; he is put upon inquiry, and is affected by all the rights and equities of the original owner, and, indeed, he must always abide the case of the person from whom he buys. In the case before us, if it be assumed that, as between Richardt and the plaintiff, the deed of Mrs. Valentine was void, because obtained by some undue influence, or fraud, or by advantage taken of her condition, the title of Mrs. Austin to the property would be still good. If there be any concealed defect arising from the conduct of those who had held the property before she acquired it, of which she had no notice, that defect cannot prevail against her. Simpson vs. Del Hoyo, 94 N. Y., 193. She is conceded to have been a purchaser for a valuable and full consideration, without notice of any fraud vitiating the title of Richardt, and it necessarily follows that the defendant Lunt, who in perfect good faith, in actual ignorance of any fraud or circumstances tending to show fraud on the part of anyone connected with the title, advanced her money in reliance upon the record title, and possession corresponding to that title, should not be required to give up her mortgage security except upon payment. This the plaintiff does not propose to make. If the deed to Richardt is, as the plaintiff contends, absolutely void, this action was unnecessary. If it was necessary, then the plaintiff must submit to rules by which courts of equity are guided. The judgments of the special and general terms do not conform to them. They should therefore be reversed, and the demurrer overruled, with costs in all courts to the defendant Lunt. All concur."

What will constitute fraud and duress has already been discussed under the subjects of contracts and torts,' and the same principles will apply in determining whether a bill or note has been obtained by fraud or duress.

SECTION 49. FAILURE OF CONSIDERATION.

A negotiable instrument, like all other contracts, requires a consideration to support it. A consideration is presumed in the case of a negotiable instrument, but such presumption may be rebutted. Want, failure, or illegality of considerations are defenses between immediate parties, and a partial failure of consideration is a defense against an action brought by a bona fide holder for value.14

SECTION 50. PAYMENT AND DISCHARGE OF INSTRU

MENT. The payment of a negotiable instrument will always be a good defense between the immediate parties; before maturity, however, it will not be a defense against a purchaser for value who takes without notice of such payment. A payment of a note by an indorser will not extinguish the debt of the maker, u Vol. III, Sub. 6.

* Davis vs. McCready, 17 N. Y. u Vol. IV, Bub. 8.

230.

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