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72 Am. Dec. 461; Craig v. Silbett, 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; Bouman v. Van Kuren, 29 Wis. 218; 9 Am. Rep. 554; Sulton 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 sums 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 hainper 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 Archi. bald 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. — Failare 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 indossee 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 III. 569; 19 Am. St. Rep. 51. Compare Sulton v. Beckwith, 68 Mich. 303; 13 Am. St. Rep. 344, and note; Kulenkamp v. Groff, 71 Mich. 675; 16 Am. Ste Rep. 283, and note 287, 288
POLLASKY V. MINCHENER.
(81 MICHIGAN, 280.) LABEL - PRIVILEGED COMMUNICATIONS. – In actions for libel, qualified pris.
i lege extends to all communications made bona fide upon any subjectmatter in which the party communicating has an interest, or in refer. ence 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 privi. leged. 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 communica
tions protected by a qualified privilege. LIBRL BY MERCANTILE AGENCY. — False publications respocting the char.
acter 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. LIBRL 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 stand. ing 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.
CRAMPLIN, 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. Pollaeky 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 u pon 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 Balary, 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 foun. dation 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 im. perfect 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 subscribors 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. taining the name or identity of the person reporting the standing of business men in that community.
The secret and inquisitorial agencies ramify every part of the United States and the Dominion of Canada, and possess the power of destroying with falsehood or calumny the credit of any business man in the country, and of bringing him to bankruptcy and ruin. To hold such vast secret inquisitions exempt from liability for false publications respecting the character and standing of a business man would be to sanction the highest injustice. The business man's integrity, his reputation for fair and honest dealing, his prosperity in the transaction of his business, are of the utmost importance to him, and are oftentimes his best capital with which to carry on his business.
Commercial credit is based upon confidence, and all know upon how frail foundation commercial confidence is builded. A breath of suspicion may destroy it. Confidence is withdrawn, and the party is ruined. And so in a broader field, a breath of suspicion is directed against the public credit, suspicion gives place to rumors of disaster, rumors disseminated undermine the general confidence, and a panic is the result. On the other hand, these same commercial agencies, which always have their fingers upon the business pulse of the country, are a most potent factor in keeping up public confidence. They issue their manifestoes of encouragement, and scatter them broadcast over the land. They are read by the business men of the country. The newspapers assist the circulation among all classes of people, and public confidence is strengthened, or, at least, fears of disaster are allayed. In this they exert a strong influence for good, and are recognized institutions in carrying on the business of the country. But they are also potent for evil to the individual. They send out their notification-sheets containing a false statement respecting a particular person, and he is undone, - no one will trust him, and all claims are pressed for immediate payment. His business character is sullied, confidence is withdrawn, and his business career has received a blow which it will require a long time to repair.
The notification-sheet containing the false statement respecting the acts of Pollasky Brothers was not alone sent to those who were dealing with them and extending them credit, but to between six and seven hundred subscribers in Michigan, and others residing out of the state, from some of whom they might wish