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Rouse v. United States Case Brief

Summary of Rouse v. United States
U S Ct of App DC [1954]

Delegation of Duties

Relevant Facts: Winston gave Associated a promissory note of $1008, payable in mo installments, for a heating unit in her house. Pl, US guaranteed the note.  Assoc then endorsed the note for value to the lending bank Union Trust.  Winston sold the house to Df Rouse.  In the K, Rouse agreed, “to assume payment of $850 for heating plant payable $28 per mo.”  Nothing was said about the note. Winston defaulted on the note and the US paid the bank, took assignment of the note and demanded payment from Rouse.

Legal Issue(s): Whether the DF purchaser can set up defense of vendor's fraudulent misrepresentation of condition of heating plant, where a vendor who paid for heating unit in house with a note, guaranteed by F.H.A., and then sold the house to the DF purchaser, who promised to assume liability for heating unit’s cost?

Court’s Holding: Yes

Procedure: D Ct struck Df's defenses, Summary pl, Df purchaser appealed; Ct of App Reversed and remanded w/ instructions to reinstate first defense.

Law or Rule(s): If a party did not sign a promissory note he is not liable on it, unless a K makes him so.

Court Rationale: Unless the contract between Winston and Rouse makes Rouse liable for payment he is not liable to the U S. The K says the parties to it are not bound by any terms, conditions, statements, or warranties not contained in it. IT does not mean that fraud cannot be set up asa defense to a suit on the K.

One who promises to make a payment to the promisee’s creditor can assert against the creditor any defense that the promisor could assert against the promisee.  If Rouse had been sued by the corporation, he would have been entitled to show fraud on the pat of Winston. He is equally entitled to do so in this suit by an assignee of the corporation’s claim.

Plaintiff’s Argument: Df signed the K and assumed the payments on the note when he signed the K for the house.

Defendant’s Argument: Winston fraudulently misrepresented the condition of the heating plant and therefor the Df is not liable for the note he did not sign or had knowledge of.

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