## Facts

- Smith signed sealed promissory notes as the price for an exclusive Indiana right to make, use, and sell a patented “improvement in the lamp” for the patent term.
- The patent right traced through multiple transfers; the notes were made payable to Artemis Wood and were later assigned through intermediaries to Hardesty.
- Hardesty, as assignee and holder of the notes, sued Smith in an action of debt on the sealed notes to collect the amounts due.
- Smith filed two affirmative pleas:
  - A failure-of-consideration plea alleging the sole consideration was the patent right and that the supposed improvement “was, at the time, and still is, of no value whatever.”
  - A fraud-in-the-inducement plea alleging Isham and Wood falsely and fraudulently represented (among other things) the lamp’s burn time and cost of construction.
- Hardesty filed a general demurrer to both pleas, arguing neither stated a legally sufficient defense.
- The trial court sustained the demurrer to the fraud plea but overruled the demurrer to the failure-of-consideration plea, then entered final judgment for Smith based on that plea.
- Hardesty sought review in the Supreme Court of Indiana, challenging the ruling that the first plea was a valid defense.

## Issues

1. Whether a plea that the patented improvement sold to the maker of sealed notes was “of no value whatever,” without more, is a sufficient plea of want or failure of consideration on general demurrer.
2. Whether the pleaded allegations of fraudulent misrepresentation about the lamp’s performance and cost were sufficient, as pleaded, to defeat the action on the notes on general demurrer.

## Decision

- The Supreme Court of Indiana held that Smith’s pleas were insufficient on general demurrer.
- The court concluded the trial court erred in overruling Hardesty’s demurrer to the first (failure-of-consideration) plea.
- Because judgment for Smith rested on a defective plea, the judgment could not stand.
- The court reversed and remanded for further proceedings consistent with its ruling.

## Legal Principles

- A general demurrer admits well-pleaded facts but tests whether the plea states a legally sufficient defense; conclusory assertions do not suffice.
- In an action on sealed promissory notes given for the transfer of a patent right, a bare allegation that the invention or improvement is “of no value” does not, by itself, plead a total failure of consideration.
- To plead failure of consideration in this setting, the defendant must allege facts showing that the promised right was not transferred, did not exist, was legally void in a way that defeats the bargain, or otherwise that the defendant received no consideration recognized by law.
- Fraud used as a defense must be pleaded with sufficient specificity to show actionable misrepresentation and its legal effect; vague or defective pleading will not bar recovery on the obligation.

## Conclusion

Hardesty v. Smith holds that, on general demurrer, defenses to sealed notes based merely on the claimed worthlessness of the patented improvement, or on inadequately pleaded fraud, are not enough to defeat the holder’s action; the Indiana Supreme Court therefore reversed the judgment for the maker and remanded for further proceedings.


Hardesty v. Smith, 3 Ind. 39 (1851)