The notes in controversy, given by the defendant in 1877, were the property of Mrs. Titus when the plaintiff received them from Williams as security for her loan to him. They had been deposited by Mrs. Titus with Williams for safe keeping merely. Being payable to Mrs. Titus or bearer, they would pass without endorsement to a bona, fide holder, before *Page 286 maturity, without notice of any defect in Williams's title. The plaintiff received them in 1887, more than eight years after the first and more than three years after the last note became due. The interest, payable annually, had not been paid since 1882. All the notes having been long discredited, were therefore subject to any defence which might have been set up by the defendant against Mrs. Titus, the payee. It is not claimed that as against the payee the defendant held any defence. The plaintiff took the notes for an adequate consideration, without notice of any defect in the title of Williams, as the referee has found; and the question is which party, as between the plaintiff and the executor of the will of the payee, has the better title. However the law may be held in some other jurisdictions — and the authorities are numerous and conflicting — the question cannot be regarded as a doubtful one in New Hampshire. A bona fide holder of a promissory note payable to bearer, or indorsed in blank, taken after it becomes discredited, takes it subject not only to any equities in favor of the maker against the payee, but also subject to any defect in the title of the person from whom he receives it.
Emerson v. Crocker, 5 N.H. 159, decided in 1830, is exactly in point. Emerson being the owner of two promissory notes payable on demand, deposited them with one Pratt for collection after they had become discredited. Pratt delivered the notes to Crocker in payment of his indebtedness to him, who collected the notes of the maker. In a suit by Emerson against Crocker for the recovery of the amount of the notes, it was held that Crocker was not entitled to retain the money as against Emerson. The court said that "the rule that whenever one of two innocent persons must suffer by the act of a third, he who has enabled such third person to occasion the loss must sustain it . . . . holds only in cases of innocent holders into whose hands the note came in the regular course of business, before it became payable. If the note be overdue at the time the agent so transfers it, the person who takes it must stand in the situation of the agent." And it was further said, that the rule, that if a note is negotiated after it is over due, notice of its infirmities is to be presumed from that circumstance, may be applied with equal propriety in other cases as well as against the maker.
In Farnham v. Fox, 62 N.H. 673, 675, the doctrine of Emerson v. Crocker is approved. In that case an overdue note of the plaintiff entrusted to her husband was fraudulently transferred by him to the defendant Fox. This court said, — "Taking the note dishonored, he took it subject to any claims or defences existing while it was in the hands of a prior holder, and he was put on inquiry as to any such defences and equities in favor of a prior holder, and as to any want or defect of title in the person from whom he received it. He took no greater or better title *Page 287 than the plaintiff's husband had. To have acquired a better title he must have become possessed of it before it was overdue, or received it from one who became a bona fide holder for value before it was due." See 1 Dan. Neg. Ins., ss. 724, 782; 2 Pars. Notes and Bills 279, notes, and cases cited; Foley v. Smith, 6 Wall. 492; Wetherell v. Smith, 9 Texas 622[9 Tex. 622]; Farrington v. Bank, 39 Barb. 645; Osborn v. McClelland, 43 Ohio St. 284; Towner v. McClelland, 110 Ill. 542; Greenwell v. Haydon, 78 Ky. 332; Chase v. Whitmore, 68 Cal. 545; Clark v. Sigourney, 17 Conn. 511.
Clement v. Leverett, 12 N.H. 317, and Tucker v. Bank, 58 N.H. 83, are not in conflict with Emerson v. Crocker and Farnham v. Fox, but, on the contrary, confirm the doctrine of those cases. In the first case the bills of exchange entrusted to Burley, and in the second the bond entrusted to Cogswell, had not matured when negotiated by them in fraud of the respective owners, and of course the purchasers, having no notice of the want of title in Burley and Cogswell, and taking the securities in the due course of business, were entitled to hold them against the real owners under the law as recognized everywhere.
In this case Williams was a mere naked depositary of the notes, holding them merely for safe keeping. The plaintiff taking them long after they had become discredited, although, as the referee finds, without any notice of the infirmity in Williams's title, was put upon inquiry, and if she had inquired either of Stoddard or of Mrs. Titus, she would have discovered Williams's entire want of title to the notes. She acquired under the settled law of this state no greater title than he had, and as he had none, she acquired none as against the payee.
Whatever considerations may have led to the adoption of a different rule in some other jurisdictions, no sufficient reason has been shown for departing from the law as it has been established in this state for more than sixty years, and which has worked practical justice to its inhabitants.
Judgment for the defendant.
CLARK, J., did not sit: the others concurred.