This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
Notice to an agent of the holder of defenses,1 such as want of consideration,2 is notice to the principal if within the scope of the agent's authority. Thus if a mortgagor sells the mortgaged property as agent of the mortgagee, and makes false statements about such property to the vendee to induce him to buy, the mortgagee, when taking a check for such property indorsed over by the mort-gagor, does not take without notice.3
947; Stevens v. Venema, 202 Mich. 232, L. R. A. 1918F, 1145, 168 N. W. 631; Madison Trust Co. v. Stahlman, 134 Tenn. 402, 183 S. W. 1012.
8 Neill v. Central National Bank, - Ala. - . 78 So. 73; Citizens' Trust & Savings Bank v. Stackhouse, 01 S. Car. 455, 40 L. R. A. (N.S.) 454, 74 S. E. 077; Scandinavian American Bank v. Johnston, 63 Wash. 187, 115 Pac. 102.
9 Idaho. Vaughn v. Johnson, 20 Ida. 660, 37 L. R. A. (N.S.) 816, 119 Pac. 879.
Minnesota. Pennington County Bank v. First State Bank, 110 Minn. 263, 26 L. R. A. (N.S.) 849, 125 N. W. 119.
Oklahoma. Keisel v. Baldock, 55 Okla. 487, L. R. A. 1916D, 632, 154 Pac. 1194.
South Dakota. Mee v. Carlson, 22 S. D. 365, 29 L. R. A. (N.S.) 351, 117 N. W. 1033.
Vermont. Pierson v. Huntington, 82 Vt. 482, 29 L. R. A. (N.S.) 695, 74 Atl.
88. "As we have seen, a party who takes a note procured by fraud from the maker must not only show that he is a purchaser for value before maturity, without notice, but that he purchased it in good faith. If, therefore, there were circumstances connected with the transaction which would arouse the suspicion of an ordinarily prudent man, and he failed to make the investigation suggested by these suspicions, he cannot be said to be a purchaser in good faith." Kirby v. Berguin, 15 S. D. 444, 90 N. W. 856 [quoted in Mee v. Carlson, 22 S. D. 365, 29 L. R. A. (N.S.) 351, 117 N. W. 1033].
10 Mee v. Carlson, 22 S. D. 365, 29 L. R. A. (N.S.) 351, 117 N. W. 1033.
1 Shedden v. Heard, 110 Ga. 461, 35 S. E. 707; Roberts v. Tavenner, 48 W. Va. 632, 37 8. E. 576.
2 Morris v. Banking Co., 109 Ga. 12, 46 L. R. A. 506, 34 S. E. 378.
Whether the knowledge of an officer is to be imputed to a corporation, or the knowledge of the corporation is to be imputed to an officer, so that notice to one may prevent the other from being a bona fide holder of a negotiable instrument, depends in part upon the general rules of constructive notice as between a corporation and its officers. If, by the application of the general rules on the subject of constructive notice, one is charged with the knowledge of the other, such knowledge may prevent the holder from being a bona fide holder of a negotiable instrument.4 The president of a corporation or managing officer may be charged with the knowledge of the corporation concerning a negotiable instrument which he purchases from such corporation,5 even if he does not take an active part in the management thereof.6If two corporations are under the same general management, the notice of one may prevent the other from being a bona fide holder of a negotiable instrument.7 If, on the other hand, the officer has an interest in the transaction adverse to that of the corporation, the corporation is not charged with the knowledge of such officer,8and such knowledge will not, accordingly, be imputed to the corporation so as to prevent it from being a bona fide holder.9
3 National Citizens' Bank v. Ertz, 83 Minn. 12, 85 Am. St. Rep. 438, 53 L. R. A. 174, 85 N. W. 821.
4 McCarty v. Kepreta, 24 N. D. 395, 48 L. R. A. (N.S.) 139 N. W. 992; Hardin v. Dale, 45 Okla. 694, L. R. A. 1915D, 1099, 146 Pac. 717.
5 Denver Suburban Homes & Water Co. v. Fugate, - Colo. - , 168 Pac. 33; McCarty v. Kepreta, 24 N D. 395, 48 L. R. A. (N.S.) 65, 139 N. W. 992.
6 McCarty v. Kepreta, 24 N. D. 395, 48 L. R. A. (N.S.) 65, 139 N. W. 992.
7 Madison Trust Co. v. Stahlman, 134 Tenn. 402, 183 S. W. 1012.
8 First National Bank v. Fairfield Auto Co., 91 Conn. 260, 99 Atl. 577; Arlington Brewing Co. v. Bluethen-thai, 36 D. C. App. 209, L. R. A. 1918C,
901; Security Trust & Savings Bank v. Gleichmann, 50 Okla. 441, L. R. A. 1915F, 1203, 150 Pac. 908, Rusmissell v. White Oak Stave Co., 80 W. Va. 400, 92 S. E. 672 [sub nomine, Rusmiasell v. White Oak Stave Co.. L. R. A. 1917F, 453].
9 First National Bank v. Fairfield Auto Co., 91 Conn. 260, 99 AM. 577; Arlington Brewing Co. v. Bluethenthal, 36 D. C. App. 209, L. R. A. 1918C, 901; Security Trust & Savings Bank v. Gleichmann, 50 Okla. 441, L. R. A. 1915F, 1203, 150 Pac. 908; Rusmissell v. White Oak Stave Co., 80 W. Va. 400, 92 S. E. 672 [sub nomine, Rus-misell v. White Oak Stave Co., L. R A. 1917F, 453].
Notice by publication in a newspaper is not notice to one who is not shown to have actually known thereof.10