§ 406. Purchase-price notes-Acceptor.-If an article is unconditionally sold by the payee to the drawer with a warranty superadded, want or failure of consideration is not available as a defense in an action for the purchase-price. The remedy is for a breach of the warranty or by way of recoupment or counterclaim, so that a breach of warranty can not be set up by the acceptor as a defense to an action against him, upon his acceptance of the purchase-price draft.26 But where the purchaser accepts a draft on him by the vendor before the goods arrive and on arrival receives and retains the goods, he is obligated to pay, even though the goods are not merchantable or in accord with contract.27 In an action by the payee, who was the holder of a draft against the drawee, who was the acceptor, it constitutes a good defense that the draft was drawn and accepted in payment of good sound merchantable goods, which the drawer, through his agent, sold and had agreed to deliver, but that said goods were not all delivered and those which were delivered were worthless and unmerchantable.28 § 407. Purchase-price notes-Guarantors.-A breach of warranty by the principal in a transaction can not be set up by a guarantor when sued on his contract of guaranty, and this rule applies where the defenses interposed do not arise upon a failure of the consideration of the contract on which the plaintiff's action is founded, but are to be regarded as the setting off of distinct causes of action one against the other; and the nonperformance of the plaintiff's engagement to the makers of the note is not to be regarded as a failure of consideration, but as an independent cause of action which the makers of the note and they only can assert.2 And where, before the note is delivered or accepted by the payee, the payment of the purchase-price note is guaranteed by the guarantor in writing, the consideration to the makers would support the guaranty. And even if the guaranty was given in accordance with the contract between the vendor and vendee reserving title in the vendor until payment of the note, there would exist a sufficient consideration to support it.30 But the writing of a guaranty for 26 Marsh v. Low, 55 Ind. 271. 149. 29 28 French v. Gordon, 10 Kans. 370. the payment of the mortgage only, upon the mortgage only and not upon the notes, is not an indorsement of the notes. And if the guaranty were written upon the notes themselves the guaranty would not be negotiable, and there is no consideration for such a guaranty as that first stated, and the guaranty not being a negotiable contract the guarantor could set up against a bona fide purchaser a want of consideration for the guaranty.31 § 408. Purchase-price notes-Bona fide holder or assignee. -The defense of want or failure of consideration is not available against one who is, within the rule as to essentials, a bona fide holder of a purchase-price note.32 And where a vendor of land took several negotiable notes for the payment of the purchasemoney, one of which was negotiated in the usual course of trade and the others were not; it was held that, although the holder of the note so negotiated was not subject to an equity existing against the but findings show that the plaintiff was an innocent purchaser of the note for value before maturity"); Whittaker v. Kuhn, 52 Iowa 315, 3 N. W. 127 (note here was given for amount of assessment of capital stock subscribed); Stedman v. Rochester Loan & Banking Co., 42 Nebr. 641, 60 N. W. 890 (note given for stock in milling corporation); Coakley v. Christie, 20 Nebr. 509, 31 N. W. 73 (note for purchase-price of personal property, and claim of non-compliance with warranty); Western Cottage Organ Co. v. Boyle, 10 Nebr. 406, 6 N. W. 473 (proof of worthless character of property as defense was not permitted); Green v. Bickford, 60 N. H. 159 (a note given for a worthless patent or for an article not patented is good in the hands of a bona fide indorsee for value, without knowledge or notice of such facts or of any infirmity in the note); Blackmer v. Phillips, 67 N. Car. 340 (failure; purchase-money negotiable notes in hands of bona fide indorsee before maturity are taken free from all equities or drawbacks except indorser's payments); Bank v. Anderson, 32 S. Car. 538, 11 S. E. 379 (innocent indorsee and holder of purchase-price note takes free from any defense of the maker against the payee); Brockway v. Mason, 29 Vt. 519. See Keith v. Thisler, 9 Kans. App. 888, 61 Pac. 758 (note was for horses warranted to be sound, but it was not). But see: Hawley v. Hirsch, 2 Woodw. Dec. (Pa.) 158 (a purchase-price note for real estate, and misrepresentations of the vendor were allowed against the indorsee upon the ground that where a case of fraud is made out between the original parties, the assignee or indorsee is put upon proof that he is an innocent purchaser for value). vendor, such equity could be enforced against the holders of the other notes and that the vendor could not be required to apportion the loss.33 The general rule especially applies, where the maker has been fully indemnified against loss by the payee ;34 or where some consideration, no matter what the sum,35 or a valuable one at the time of the transfer is shown;36 or where the maker had knowledge at the time of purchase of the character and condition of the vendor's title and of the facts alleged in defense;37 or where the vendee had knowledge of the transfer of the note to the holder and of the facts relied on as a failure of consideration.38 Again, if a note is written for value received, negotiable and payable without defalcation, it is no defense against a bona fide holder, that it was without consideration.39 Nor is it a defense to a purchaseprice note for land, having a lawful consideration, that the property was estimated in a depreciated or unlawful currency, or that a previous holder was willing to take an unlawful currency in payment.40 An assignee, however, even though a bona fide purchaser without notice, has been held subject to such a defense,11 especially where the law governing mercantile paper has no application;42 or where the circumstances are such that he was obligated to use such precaution and make such inquiry as would be expected from men of ordinary prudence. 43 But an assignee for value has, nevertheless, been brought within the general rule. Under the Civil Code of Georgia the assignee or holder of a note given for the purchasemoney of land, may, in appropriate proceedings, subject the land to the payment of his debt; so that in a suit brought on a promissory note of such a character and payable to named persons or bearer, 33 Andrews & Bros. v. McCoy, 8 Ala. 920, 42 Am. Dec. 669. 34 Myers v. Hettinger, 94 Fed. 370 (note was given in payment of stock; defense of failure of consideration not allowed). 35 Howe v. Potter, 61 Barb. (N. Y.) 356. 36 Rees v. Sessions, 41 Ohio St. 234. 37 Green v. McDonald, 21 Miss. (13 Smedes & M.) 445. See also Myers v. Hettinger, 94 Fed. 370. 38 Wiggins v. McGimpsey, 21 Miss. (13 Smedes & M.) 532. 44 39 Smith v. Giegrich, 36 Mo. 369 (under Rev. Code 1855, pp. 320-3; Rev. Stats. 1919, § 843). 40 Grosby v. Tucker, 21 La. Ann. 512. See Conwell v. Pumphrey, 9 Ind. 135, 68 Am. Dec. 611 (depreciated bank bills). 41 Lucas v. Kernoddle, 2 Ala. 199. 42 Linville v. Savage, 58 Mo. 248. 43 Sims v. Bice, 67 Ill. 88. 44 Dye v. Grover, 17 Ky. L. 685, 32 S. W. 294; Peoples Bank v. Trudeau, 38 La. Ann. 898. it is not a good defense that title to the notes (since the act of 1894 codified as above) has been transferred without indorsement to other persons; and an amendment to a plea seeking to set up this defense, and claiming that the alleged owners of the notes would not, in a suit against the defendant, be entitled to a lien upon the land for the purchase-money of which the notes were given was properly allowed.45 In a Connecticut case a defense to an action on a note was that the note was delivered to the payee on an express condition that its payment should be contingent on the acceptance of certain engines, which it had delivered to defendant, with a warranty that they should work satisfactorily-and they had proved unsatisfactory. Certain machinery was furnished and guaranteed but was found not to work satisfactorily; subsequently there was a compromise agreement whereby a certain amount of money and a note were to be given and certain new parts of the machinery were to be furnished, and the note in suit was given but with a reservation as to the machinery complying with requirements, but the note was a direct tender in payment for certain of the machines and the reservation was not put forward as a qualification of the tender but of the manner in which the note was to be held or used, the tender remained unqualified and unconditional. It was made to pay the debt and if accepted the debt would be extinguished and was in fulfillment of a contract duty, so that the defense would be unavailing even if the vendor could be considered as having, by accepting the note, assented to the proposed modification of the contract. The note was indorsed by the plaintiff before maturity to a bank and deposited with it for collection. It was protested and then returned to plaintiff. The bank received the title for the sole benefit of the plaintiff. When it returned the note protested, the plaintiff became an indorsee in possession and invested with the rights belonging to all holders of commercial paper and one of these was to cancel the indorsement which it had made, whether it exercised this right or not was immaterial. Its mere possession of the note was sufficient evidence of ownership to support a suit, and in an action by the indorsee against the maker a judgment was rendered for the plaintiff.46 If one purchases a note and it is assigned to him he ac 45 Ray v. Anderson, 119 Ga. 926, 47 S. E. 205. 46 New Haven Mfg. Co. v. New Haven Pulp & Board Co., 76 Conn. 126, 55 Atl. 604. 47 quires the right to enforce the vendor's lien against the land for the balance of the purchase-money by a suit in his own name. But if he purchases the note after its maturity he takes it subject to every legal or equitable defense that it was subject to in the hands of the payee. Again, where the maker, when first applied to, refused to acknowledge the validity of the note, alleging that there was some difficulty about the consideration, but subsequently declared that the difficulty was removed and the note would be paid, he was held to have waived his right to set up failure of consideration against an assignee who had purchased the paper upon the faith of such assurance.48 And the transferee, by indorsement in blank of a note in part payment of a conditional sales note, is held to be a holder for value, notwithstanding the seller subsequently retakes possession of the property under the conditional sales contract. 49 § 409. Purchase-price notes-Property useless or of no value.50-It has been asserted as a rule that if the consideration utterly fails by reason of the thing for which the note is given being useless, or because the note is based upon a void consideration, such failure of consideration may be availed of as a defense in an action upon the note.51 The consideration of a contract is 47 Williams v. Baker, 100 Mo. App. 284, 73 S. W. 339. 48 Land V. Lacoste, 5 Miss. (6 How.) 471 (a purchase-money note). 49 Allen-Wright Furniture Co. v. Spoor, 33 Idaho 411, 195 Pac. 632. 50 See $$ 352, 353 herein. 51 Tilson v. Gatling, 60 Ark. 114, 29 S. W. 35; Sand & H. Dig., § 492, case was reversed and remanded because of error in excluding evidence which tended to show a total want of consideration, etc. Hodge v. Mason, 21 D. C. 181; Bailey v. Cromwell, 3 Scam. (Ill.) 71; Kinzie v. Chicago, 2 Scam. (II.) 187, 33 Am. Dec. 443 (in this case a lease was null and void and a plea setting up such facts was held good); New v. Walker, 108 Ind. 365, 9 N. E. 386, 58 Am. Rep. 40 (void as to a purchaser with notice unless he shows that his indorser was a good purchaser in good faith); Mullikin v. Latchem, 7 Blackf. (Ind.) 136; Higgins v. Strong, 4 Blackf. (Ind.) 182; First Nat. Bank v. Peck, 8 Kans. 660; Aldrich v. Stockwell, 9 Allen (Mass.) 45; Bierce V. Stocking, 11 Gray (Mass.) 174; Dickinson v. Hall, 14 Pick (Mass.) 217, 25 Am. Dec. 390; Slater v. Foster, 62 Minn. 150, 64 N. W. 160; Harker v. Brown, 81 Mo. 68 (consideration had wholly failed); Fenwick v. Bowling, 50 Mo. App. 516 (but chattel must be worthless for all purposes); Joliffe v. Collins, 21 Mo. 338; Rowe v. Blanchard, 18 Wis. 441, 86 Am. Dec. 783; Schroeder v. Nielson, 39 Nebr. 335, 57 N. W. 993; Green v. Bickford, 60 N. H. 159 (defense of want of consideration or that the article purchased was worthless-a |