U.S. Supreme Court Young v. Grundy, 11 U.S. 7 Cranch 548 548 (1813)
Young v. Grundy
11 U.S. 548
APPEAL FROM THE CIRCUIT COURT FOR
THE DISTRICT OF COLUMBIA AT ALEXANDRIA
Although the consideration of a promissory note fail by reason of the failure of the payee to perform his part of the agreement upon which it was given, yet if a new agreement, as a substitute for the old one, be entered into between the original parties to the note, the failure of the original consideration creates no equity in favor of the maker of the note against the endorsee, even in Virginia.
Young brought a bill in equity against Grundy to be relieved from a judgment at law obtained by Grundy against him on a promissory note given by him in Virginia to one William Chambers, from whom it passed by several intermediate endorsements to Grundy. It was given in 1795 for part of the purchase money of a large tract of land in Virginia which Chambers and others contracted to sell and convey to Young. It was afterwards discovered that Chambers and others had been imposed upon and that they had title only to a very small part of the land they had sold to Young, whereupon a new agreement was entered into on 6 September, 1798, between Chambers and others and Young, by which the original contract was rescinded and compensation made to Young for the injury he had sustained by their breach of contract, and provision was made to reimburse him the monies he had paid and to take up paper of his equivalent to that which was then outstanding and which he had issued for the original purchase money.
Young in his bill contended that Chambers and others had not complied with this new agreement, but that they owed him more than enough to cover this note.
In the court below the injunction was dissolved, and upon final hearing the bill was dismissed. Young appealed to this Court.
LIVINGSTON, J. delivered the opinion of the Court as follows:
Whatever equity the complainant may once have had against the payee or holder of the note for Ĺ 433 15s which was assigned to George Grundy in consequence of the nonperformance of the agreement of 15 May, 1795, this Court is of opinion that all such equity was done away by the contract of 6 September, 1798. This last contract was made for the express purpose of making the complainants a compensation for the loss they had sustained, by the nonperformance of the other, and was evidently received as an equivalent or substitute therefor. By this latter contract, then, they were placed, as it respected the holders of all their notes, precisely in the same situation as if there had been no want or failure of consideration of the agreement made in 1795. Whether the agreement of 1798 has been complied with it is not material to inquire, because, previous thereto, this note was held by Grundy, who cannot be affected by any claim which the complainant may have against the other Defendants in consequence of any subsequent transactions between the parties.
The Court is of opinion that the decree of the circuit court be
Affirmed with costs.