themselves,152 and to bank bills.153 But the burden is on the defendant, who sets up want of original consideration or other defense against a purchaser after maturity.154 Failure of consideration is, however, admissible as a defense in such case, although the maker has already filed a bill in equity against the payee to have the note canceled.155 The fact that a note was given for the payee's accommodation is no defense against a purchaser after maturity, who had no notice of that fact,156 unless the proceeds were diverted by the payee from the purpose originally agreed on with the accommodation maker.157 In like manner, a breach of condition for another surety may be set up against one who takes the note after maturity and for collection only.158 So, a contemporaneous agreement for indemnity as a condition to the maker's liability may be set up against a purchaser after maturity; or a condition for a return of the note to the accommodation maker.160 § 1880. .159 A purchaser after maturity is, in like manner, subject to the defense that the paper was given for an illegal consideration,161 or was usurious,162 or had been paid, in whole or part,1 or was procured by fraud; or that it had been satisfied and was 164 7 Wall. 700; Texas v. Hardenberg, 10 Wall. 68; Greenwell v. Haydon, 78 Ky. 333. 152 Hinckley v. Bank, 131 Mass. 147. Especially where they are not in form negotiable. Evertson v. Bank, 66 N. Y. 14, reversing 4 Hun (N. Y.) 692. 153 Burroughs v. Bank, 70 N. C. 283. 154 Lipsmeier v. Vehslage, 29 Fed. 175. 155 Wiltsie v. Northam, 3 Bosw. (N. Y.) 162. 156 Renwick v. Williams, 2 Md. 356. And see § 677, supra. 157 Long v. Rhawn, 75 Pa. St. 128. 158 Stricklin v. Cunningham, 58 Ill. 293. 159 Youngs v. Little, 15 N. J. Law, 1. Baucom v. Smith, 66 N. C. 537. 160 Kellogg v. Barton, 12 Allen (Mass.) 527. 161 Bissell v. Gowdy, 31 Conn. 47; 162 Tufts v. Shepherd, 49 Me. 312; 163 Walton v. Young, 26 La. Ann. 164; Cromwell v. Arrott, 1 Serg. & R. (Pa.) 180. So, where it was indorsed after maturity "without recourse." Reichert v. Koerner, 54 Ill. 306. So, payment of a copy forged by the plaintiff's indorser before transfer to him. Leach v. Funk, 97 Iowa, 576, 66 N. W. 768. 164 Greenwell v. Haydon, 78 Ky. 333; Melendy v. Keen, 89 Ill. 395; Clarke v. Dederick, 31 Md. 148; Tucker v. Smith, 4 Me. 415; Barlow v. Scott's Adm'rs, 12 Iowa, 63; Northampton Nat. Bank v. Kidder, 106 N. Y. 221, 12 N. E. 577. And see §§ 674, 676, supra. RAND.C.P.-165 (2625) 169 to be canceled, but was fraudulently negotiated by the payee many years afterwards; 165 or that it was accommodation paper, and had been fraudulently diverted by the payee; 166 or that it was fraudulently negotiated, and the proceeds misappropriated by the maker's agent,167 or by his attorney for collection,168 or by a depositor with whom it was left for a special purpose.1 So, the maker may show, as against such holder, that it was accommodation paper, and had been fraudulently diverted by the payee from the agreed purpose.170 So, a purchaser after maturity for value from a thief takes the instrument subject to the defense of payment made at maturity.171 So, where one purchases a lost note two years after its maturity in payment of a debt, he cannot be protected against the owner in an action of trover.1 172 In like manner, a purchaser after maturity takes subject to the defense of an accord and satisfaction,173 or of a prior release by the payee, or an agreement to release collateral on a part payment.1 175 Set-Off against Purchaser after Maturity. § 1881. A purchaser after maturity takes subject to set-offs existing against the payee 176 before the transfer of the paper. 17 165 Cross v. Herr, 96 Ind. 96. 166 Wheeler v. Barret, 20 Mo. 573; Atkins v. Knight, 46 Ala. 539. 167 Maples v. Browne, 48 Pa. St. 458. 168 Eggan v. Briggs, 23 Kan. 710; McCormick v. Williams, 54 Iowa, 50, 6 N. W. 138; Henderson v. Case, 31 La. Ann. 215; Reed v. Warner, 5 Paige (N. Y.) 650. 169 Goodson v. Johnson, 35 Tex. 622. 170 Coghlin v. May, 17 Cal. 515; Hoffman v. Foster, 43 Pa. St. 137. : 171 Arents v. Com., 18 Grat. (Va.) 750. 172 Easley v. Crockford, 3 Moore & S. 700, 10 Bing. 243. 173 Lord v. Favorite, 29 Ill. 149. 174 Crossley v. Ham, 13 East, 498. 175 Howard v. Gresham, 27 Ga. 347. And see § 678, supra. 176 Sherwood v. Barton, 36 Barb. (N. Y.) 284; Thompson v. McClelland, 29 Pa. St. 475; Lighty v. Brenner, 14 Serg. & R. (Pa.) 127; Sargent v. Southgate, 5 Pick. (Mass.) 312; Bowen v. Thrall, 28 Vt. 382; Eich v. Greeley, 112 Cal. 171, 44 Pac. 483; Thompson v. Lowe, 111 Ind. 272, 12 N. E. 476; Wyman 177 Shirley v. Todd, 9 Me. 83; Burnham v. Tucker, 18 Me. 179; First Nat. Bank of Rapid City v. Security Nat. Bank of Sioux City, 34 Neb. 71, 51 N. W. 305. And, if the payee repurchases a note after maturity without knowledge of a set-off against his indorser, he will still take subject to it.178 Under the statute in Massachusetts, a purchaser after maturity is subject to a set-off against the payee or indorser held or acquired by the defendant before notice of transfer.1 179 And such set-off may be shown under the general issue.180 And such holder is subject to a set-off held or acquired before notice of transfer against the payee or any intermediate indorser.181 And this is provided expressly by statute in some other states.182 But in other states, even against a purchaser after maturity, only such set-offs are admissible as existed against the original payee.183 The rule in England and some of the United States, in like manner, excludes as against such purchaser all set-offs arising out of other transactions.184 But in other states any v. Robbins, 51 Ohio St. 98, 37 N. E. 264; Davis v. Noll, 38 W. Va. 66, 17 S. E. 791; Norton v. Foster, 12 Kan. 44. So, as to demand note transferred four months after date. La Due v. Bank, 31 Minn. 33, 16 N. W. 426. And see §§ 674, 679, supra. So, by statute, in TEXAS (Rev. St. art. 265). But not to exceed the note sued on. Reese v. Teagarden, 31 Tex. 642. 178 Martin v. Richardson, 68 N. C. 255. 179 Sargent v. Southgate, 5 Pick. 312; Baxter v. Little, 6 Metc. 7. 180 Stockbridge v. Damon, 5 Pick. (Mass.) 223. Id. 1. And see Peabody v. Peters, 181 Bond v. Fitzpatrick, 4 Gray (Mass.) 89. But not where the set-off claimed was the maker's liability as surety for the intermediate indorser, which he had not discharged except by giving his own nonnegotiable note for it. Judah v. Potter, 18 Ind. 224. 182 NEW YORK (Code Civ. Proc. § 502); ILLINOIS (Hurd's Rev. St. c. 98, $ 12); INDIANA (Horner's Rev. St. § 5504). So, in MISSOURI (Munday v. Clements, 58 Mo. 577); and MINNESOTA (Tuttle v. Wilson, 33 Minn. 422, 23 N. W. 864; Gen. St. § 499); and WISCONSIN (St. § 2606). The New York statute has been held not to apply to an indorsee before maturity. Binghamton Trust Co. v. Clark (Sup.) 52 N. Y. Supp. 941. In Indiana a set-off existing before notice of transfer against an intermediate party is available against a nonnegotiable note, Huston v. Bank, 85 Ind. 21; Cox v. Bank (Ind. App.) 47 N. E. 841; but only where the defendant was not otherwise indebted to such intermediate party beyond the amount claimed for set-off, Meeker v. Shanks, 112 Ind. 207, 13 N. E. 712. 183 Nixon v. English, 3 McCord (S. C.) 549; Perry v. Mays, 2 Bailey (S. C.) 354; Kennedy v. Manship, 1 Ala. 43; McKenzie v. Hunt, 32 Ala. 494; Savage v. Bank, 62 Miss. 586; Ryan v. Chew, 13 Iowa, 589. And formerly in Illinois, Root v. Irwin, 18 Ill. 147; Favorite v. Lord, 35 Ill. 142. 184 Benj. Chalm. Dig. art. 134; 2 Daniel, Neg. Inst. 442, 1 Edw. Bills & N. set-off, although arising out of other matters existing against the payee at the time of transfer, is available against a purchaser after maturity,185 Statutes as to Set-Off. § 1882. In some states it is provided by statute that any set-off against the payee is available against indorsees or assignees until notice of transfer, with the exception of negotiable paper,186 or with the exception of bona fide holders of negotiable paper before maturity.18 And such exception may be implied from the statute putting inland bills and notes on the footing of foreign bills.188 In Massachusetts the statute allows all set-offs against the original holder of a demand note acquired before notice of transfer.189 In Missis § 379; 2 Pars. Notes & B. 603; Borrough v. Moss, 10 Barn. & C. 558; Holmes v. Kidd, 3 Hurl. & N. 891; Hughes v. Large, 2 Pa. St. 103; Haley v. Congdon, 56 Vt. 65; Annan v. Houck, 4 Gill (Md.) 325; Arnot v. Woodburn, 35 Mo. 99; Cutler v. Cook, 77 Mo. 388; Barnes v. McMullins, 78 Mo. 260; Davis v. Noll, 38 W. Va. 66, 17 S. E. 791; Bates v. Kemp, 13 Iowa, 223; Robertson v. Breedlove, 7 Port. (Ala.) 541; Hankins v. Shoup, 2 Ind. 342; Armstrong v. Noble, 55 Vt. 428. And see §§ 678, 679, supra. 185 Robinson v. Perry, 73 Me. 168; Johnston v. Humphrey, 91 Wis. 76, 64 N. W. 317. And see § 1852 et seq., supra. 186 ALABAMA (Code, §§ 1765, 2684). So, in KENTUCKY (Ky. St. § 474), whether the set-off is against the payee or an intermediate indorser. And notes payable at, and discounted by, an incorporated bank, are on the footing of foreign bills. Id. § 483; Prather v. Weissiger, 10 Bush (Ky.) 117. And the Kentucky statute has been held to be constitutional. Bank v. Wood, 142 Mass. 563, 8 N. E. 753. Under the Alabama statute such set-off is available against a nonnegotiable note, Brown v. Scott, 87 Ala. 453, 6 South. 384; or a negotiable note transferred before maturity without indorsement, Vann v. Marbury, 100 Ala. 438, 14 South. 273. And see note to this case in 23 Lawy. Rep. Ann. 325. 187 CALIFORNIA (Code Civ. Proc. § 368); COLORADO (Code Civ. Proc. § 4); IOWA (Code, § 3461); NEBRASKA (Comp. St. § 5620); SOUTH CAROLINA • (Code Civ. Proc. § 133); WISCONSIN (Sanb. & B. Ann. St. § 2606). And see OREGON (Code Civ. Proc. § 72); Drexler v. Smith, 30 Fed. 754. But the pledgee of an insolvent corporation (payee) is subject to set-off. Exch. Bank v. Fuldner, 92 Wis. 415, 66 N. W. 691. Merchants' 188 NEW JERSEY (2 Gen. St. p. 2591, § 340; Id. p. 2604, §§ 1, 2); INDIANA (Horner's Rev. St. § 5504). 189 MASSACHUSETTS (Pub. St. c. 77, § 14). The provision for set-off against debts in general, whenever it may be applicable to bills and notes gov sippi indorsed notes and bills are subject to set-off acquired before notice of transfer.190 In Minnesota a purchaser after maturity may cut off all equities accruing after purchase by giving the maker notice of the transfer.191 Set-Off after Transfer and Notice. § 1883. In some states the maker may set off any demand existing against the payee before notice of transfer.192 But such set-off is not admissible against the holder of a note payable to bearer, unless the maker gives the purchaser notice of it." 193 A set-off acquired against the payee after he had transferred the note is not generally admissible, even against a purchaser after maturity.194 So, a judgment rendered against the payee after notice of transfer is not available as a set-off against an indorsee, who purchased the note before maturity, but did not obtain an indorsement of it until after.195 And where a note is transferred before maturity erned by the law merchant, excludes set-offs for unliquidated damages (with some exceptions, Pub. St. c. 168, § 3), and all set-offs acquired after notice of transfer (§ 10) or commencement of suit (§ 5). 190 MISSISSIPPI (Ann. Code, § 3503; Phipps v. Shegogg, 30 Miss. 241); including instruments negotiable by common law, or by statute, Brown v. Bank, 62 Miss. 754; but not including any set-off except those held by the defendant against the party with whom he had contracted directly and immediately, Savage v. Bank, 62 Miss. 586. And see § 1885, infra. 191 Linn v. Rugg, 19 Minn. 181 (Gil. 145); Gen. St. § 5157. 192 Martin v. Trobridge, 1 Vt. 477; McGowan v. Budlong, 79 Pa. St. 470. Although acquired after the payee's death, King v. Conn, 25 Ind. 425. So, formerly, in Virginia, Stewart v. Anderson, 6 Cranch, 203; the burden being on the defendant to show that it was acquired before notice, Ritchie v. Moore, 5 Munf. (Va.) 388. 193 Parker v. Kendall, 3 Vt. 540. 194 Furniss v. Gilchrist, 1 Sandf. (N. Y.) 53. Whether without notice of the transfer, Davis v. Miller, 14 Grat. (Va.) 1; or after notice, Linn v. Rugg, 19 Minn. 181 (Gil. 145). And although it arose out of a prior transaction, Davis v. Neligh, 7 Neb. 84; or was acquired by actual transfer after transfer of the note under a prior agreement for its purchase, Weader v. Bank, 126 Ind. 111, 25 N. E. 887. And although the notice was not given by the assignee. Johnson v. Amana Lodge, 92 Ind. 150. So, a set-off which arose after notice of transfer, and after action brought by the assignee. Wood v. Brush, 72 Cal. 224, 13 Pac. 627; Code Civ. Proc. § 438. 195 Follett v. Buyer, 4 Ohio St. 586. So, in WASHINGTON, other set-off ac |