Dillingham v. Blood

Peters, J.

The note sued in this case was given for intoxicating liquors sold in violation of law.

By B. S., c. 27, § 50, in the hands of the payee, no action could be maintained upon it. But it wras discounted by a bank, in good faith, before its maturity, for a valuable consideration and without notice of any illegality. By such a party an action could be maintained upon it. The bank afterwards sold the note on the day it became due, to the plaintiff, who had been notified of the illegality before that time. One of the defendants took an exception at the trial to the ruling, that the plaintiff succeeded to all the rights of the bank in the paper when he purchased of them notwithstanding he had notice of the illegality at the time.

The ruling was right. The section cited declares that its provisions shall not “extend to” negotiable paper in the hands of a party situated as the bank was. Such a provision certainly should not affect the paper after it has passed beyond such hands. The inhibition of the statute would in some degree extend to and injuriously affect an innocent holder, if he could not enjoy the same privileges respecting the use or collection of the note as he would have as owner of any ordinary piece of negotiable paper. The defendants are not injured by the transfer. It is immaterial to them whether the note is enforced in the name of A. or B. The holder of the note in this case must stand upon the same footing as a purchaser of paper does who has notice that a note was fraudulently obtained by a payee, but who buys it of a prior holder against whom no such defense can be set up ; as in the case of Roberts v. Lane, 64 Maine, 108, and in cases cited in that case. See Field v. Tibbetts, 57 Maine, 358.

It is contended that, if this construction is a correct one, the original payee, who has fraudulently put the note upon the market, could himself buy and sue it in his own name. But that is not so. He is, however, the only person who could not by purchase succeed to the rights of the first innocent holder. And he would be excluded, not upon the ground of notice, but entirely upon another principle applying to his case; and that is, because he was privy to the original illegality and fraud. He could purchase the note, but would be estopped by his own fraud and wrong from enforcing it. See on this point the discussion in Bailey v. Bailey, 61 Maine, 361. Exceptions overruled.

Appleton, C. J., Walton, Diceeeson, Babbows and Yibgin, JJ., concurred.