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was made as claimed by the defendants, plaintiff was fully aware of it at the time. No question is made that the mares were not served with the horse in the proper season. Defendants claim to have become satisfied that the mares were not with foal in the spring or summer following. The plaintiff denied that the sale was with the warranty claimed by defendants.

The first question to be decided is, whether, conceding there was a warranty, it can be set up in recoupment of damages against the note in plaintiff's hand. Restating the facts for the purposes of this question, it presents a case where no fact exists which impugns the title of the holder, nor the honesty, good faith, or validity of the original transaction, of which the note was a part. There was simply a warranty on the sale that the mares were with foal, and if they proved to be so, the purchaser was to pay sixteen dollars more for the service of the horse. The purchase of the note was for full value, with a knowledge of the warranty, but without knowledge of its breach, before the note matured, and before it was known that there would be a breach. The promise of the defendants was not conditional; neither was there fraud nor imposition connected with the inception of the note. The plaintiff, having paid value before maturity, held the note by an independent title.

It was said by this court in Nichols v. Sober, 38 Mich. 681, that "the law has always been solicitous to exclude any rules calculated to hinder the free circulation of mercantile paper having legitimate inception, as in this case; and it is settled in this state that à transferee cannot be deprived of his right as a bona fide holder in this class of cases, except upon evidence sufficient to show his participation in the fraud, or equivalent misconduct of the party who transfers to him."

It is laid down in 1 Parsons on Bills and Notes, 261, that "knowledge on the part of the holder, at the time he took the note, that it was not to be paid on a specified contingency, is not sufficient to defeat his right to recover, although the contingency had then happened, if he was ignorant of this fact"; citing Adams v. Smith, 35 Me. 324; Ferdon v. Jones, 2 E. D. Smith, 106; Davis v. McCready, 4 E. D. Smith, 565; see also Kelso v. Frye, 4 Bibb, 493; Dow v. Tuttle, 4 Mass. 414; 3 Am. Dec. 226; State Nat. Bank v. Cason, 39 La. Ann. 865; Patten v. Gleason, 106 Mass. 439; Davis v. McCready, 17 N. Y. 230;

72 Am. Dec. 461; Craig v. Sibbett, 15 Pa. St. 238; Bond v. Wiltse, 12 Wis. 611.

From the foregoing authorities, and upon reason, the correct doctrine appears to be, that it is not a good ground of defense against a bona fide holder for value that he was informed that the note was made in consideration of an executory contract, unless he was also informed of its breach. If he had knowledge. of the breach, the defense may be interposed: Wagner v. Diedrich, 50 Mo. 484; Coffman v. Wilson, 2 Met. (Ky.) 542; Bowman v. Van Kuren, 29 Wis. 218; 9 Am. Rep. 554; Sutton v. Beckwith, 68 Mich. 303; 13 Am. St. Rep. 344.

The note in question being valid in its inception, and not subject to any condition, a collateral agreement to warrant the mares to be with foal cannot be set up as a defense to the action in this case, where the plaintiff purchased in good faith for value, and without any notice or knowledge of any breach of the warranty. A mere collateral agreement or warranty made at the time the note was given does not affect the validity or negotiability of the note, although the purchaser before maturity may know of such agreement. It is common knowledge that in many executory contracts, involving large sumis of money, such as drafts drawn against bills of lading, and also such as the purchase of real estate, lumbering contracts, construction of buildings and roads, and other business dealings, notes are given, and often negotiated to those familiar with the terms of the contracts; and it would unnecessarily hamper the transfer of such paper, and affect its value injuriously, to hold that the purchaser before breach of such contract, although he had notice of the contract under which it was given, takes such paper subject to any damages that may arise to the maker from failure of the payee to perform such contract. There is neither reason nor necessity for so holding. Indeed, the defendants in this case set up in their notice of defense the warranty and its breach, and that plaintiff purchased the note with knowledge of such warranty and its breach before he so purchased.

The jury found, in answer to a special question, that the plaintiff, George Miller, bought the note in question of Archibald Carmichael before his death; and it was in proof that he died January 6, 1888. This is an end of the case. The defense is not made out, and it is immaterial if testimony tending to show a warranty by Carmichael was erroneously ruled out. Under the special finding, which has the force of

a special verdict, no other general verdict could have been rendered by the jury than the one they did.

The judgment must be affirmed.

NEGOTIABLE INSTRUMENTS-PROMISSORY NOTES-DEFENSES. — Failure of consideration as a defense to a note must be proved by him who alleges it, and he must also show that the plaintiff, who received the note before maturity, had notice of such defense at the time he received it: Mitchell v. Deeds, 49 Ill. 416; 95 Am. Dec. 621. Defect or failure of the consideration of a note may be given in evidence against the payee, or even the indorsee with notice: Le Blanc v. Sanglair, 12 Mart. (La.) 402; 13 Am. Dec. 377, and note 378, 379. Where a note recites the consideration upon which it rests, an indorsee taking it before maturity is chargeable with notice of such recital. The recital is not, however, sufficient of itself to advise him that there was or necessarily would be a failure of consideration; still, if at the time of the indorsement the consideration had in fact failed, the recital might be sufficient to put him upon inquiry: Siegel v. Chicago etc. Bank, 131 IL 569; 19 Am. St. Rep. 51. Compare Sutton v. Beckwith, 68 Mich. 303; 13 Am. St. Rep. 344, and note; Kulenkamp v. Groff, 71 Mich. 675; 15 Am. St. Rep. 283, and note 287, 288,

POLLASKY V. MINCHENER.

(81 MICHIGAN, 280.]

LIBEL-PRIVILEGED COMMUNICATIONS. — In actions for libel, qualified privilege extends to all communications made bona fide upon any subjectmatter in which the party communicating has an interest, or in reference to which he has a duty, to a person having a corresponding interest or duty, and embraces cases where the duty is not a legal one, but is of a moral or social character of imperfect obligation.

MERCANTILE AGENCY PRIVILEGED COMMUNICATION. A mercantile agency does not stand in such relation either of interest or duty with its subscribers that communications from it to them generally are privileged. Exceptions exist in relation to those persons who are interested in obtaining the particular information and to whom it is furnished upon special request. To this extent, and no further, are such communications protected by a qualified privilege.

LIBEL BY MERCANTILE AGENCY. - False publications respecting the character and financial standing of a business man, furnished by a mercantile agency to its subscribers generally, without request, is libelous, and not privileged, though made in good faith.

LIBEL BY AGENT OF MERCANTILE AGENCY. —A general agent and district business manager for a mercantile agency who furnishes, or causes to be furnished, through his chief clerk, to its subscribers generally, without request, false publications respecting the character and financial standing of a business man, is liable in an action for libel therefor, as such communications are not privileged.

Henry M. Duffield, for the appellants.

Dickinson, Thurber, and Stevenson, for the respondents.

CHAMPLIN, C.J. The plaintiffs sued Minchener and Robert G. Dun to recover damages for a libel published by the R. G. Dun & Co. Mercantile Agency, of which Minchener was the general manager of a district in Michigan, of and concerning the plaintiffs.

Max E. Pollasky and Frank E. Pollasky composed the firm of Pollasky Brothers, carrying on mercantile business at the village of Alma, Gratiot County, Michigan. They had been engaged in business at that place since 1882. They were in good credit, and had never filed or placed a chattel mortgage upon their property, and in carrying on their business bought mostly upon credit, and had established a business reputation for prompt payment of their bills.

R. G. Dun & Co. is a mercantile agency well known in the mercantile community, and have a clientage throughout the United States estimated at twenty-five thousand subscribers, and in the state of Michigan of about six hundred.

The alleged libel consists in R. G. Dun & Co. sending from their Detroit office to their subscribers what is known as a "notification-sheet," under date of February 23, 1887, which, under the head of "Items of Record," "Michigan," among other items, contained the following:

"Alma Pollasky Bros. Chat. mort., $10,000. D. G., clothing, and B. & S."

This item was wholly false. R. G. Dun & Co. were nonresidents, as also was Robert G. Dun, and no service of process was had upon him in this suit, and he did not appear to the action.

Minchener was general manager of a district of the Michigan business, and was located at Detroit. He was paid a salary, and a further compensation for his services, depending upon the amount of business done in Michigan. He had authority to employ clerks and to discharge them. Notification-sheets were sent direct to subscribers from the Detroit office. Reports were made to, and all letters containing information affecting the credit of tradesmen were mailed to, his address individually in Detroit. He had a chief clerk, who opened these letters and noted their contents. Minchener based his defense upon two grounds: 1. That the communication was privileged; 2. That the libel, if libel it was, was published by R. G. Dun & Co.; that he was not a member of that company, and had no proprietary interest therein, and was not responsible for its publication.

The trial court took the case from the jury, and directed a verdict for defendant, upon the ground that Minchener was not liable.

1. Was the notification-sheet, which was sent to all subscribers, a privileged communication?

In Bacon v. Michigan Cent. R. R. Co., 66 Mich. 166, I discussed the subject of privilege in actions for libel, and shall not go over the ground again. I adhere to what I there said, both as to absolute and qualified privilege. There is no foundation for the claim that the libel set forth in the declaration is absolutely privileged. The question is, Do the facts of this case bring the publication within the class of communications which are qualifiedly privileged? Qualified privilege extends to all communications made bona fide upon any subject-matter in which the party communicating has an interest, or in reference to which he has a duty, to a person having a corresponding interest or duty; and embraces cases where the duty is not a legal one, but is of a moral or social character, of imperfect obligation: Bacon v. Michigan Cent. R. R. Co., 66 Mich. 170, and cases cited.

The mercantile agency does not stand in such relation, either of interest or duty, with its subscribers generally, that communications from it to them generally are privileged. Exceptions exist in relation to those persons who are interested in obtaining the particular information, and to whom it is furnished upon special request. To this extent, and no further, are such communications protected by a qualified privi. lege.

Consider for a moment the relation of the mercantile agency to its subscribers. It undertakes to furnish them, for a consideration paid in advance, such information relative to the responsibility and credit of merchants and others as it obtains from its subagents, servants, and correspondents, without guaranteeing the accuracy, reliability, or correctness of such information, or being responsible for any loss caused by the neglect of its agents and servants, or for their want of verity. It expressly stipulates that it will not reveal to such subscribers the sources of its information, nor the names of the persons from whom it received it, and requires a pledge from the subscribers that they will never, under any circumstances, communicate to the persons reported the information received concerning them from the mercantile agency. It also adopts measures to prevent the particular communities from ascer

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