Skilding & Haight v. Warren — 15 Johns. 270

Majority

p. 270

Skilding and Haight against Warren.

Headnote

a note was en-defendant for cMionCCofmithe makers, who were then in good credit atingretheenote ¡usoiventCand then Erected part1 with it, which they promised. They after-wards passed it to the plaintiffs, with full notice of all the S’csSKfiwtion from them5 to whiciFmvered part of the th>in°te’from the ^plaintiffs cash. The plaintiffs brought an action on the note against the endorser. Held, that the plaintiffs were not Iona fide holders of the note, and could not, under the circumstances, support the action ♦ and that as the defence rested on matters arising subsequent to the execution of the note, one of the makers of it was a competent witness to defeat the recovery; and that, without a release, he being indifferent between the parties. ^

^ A party to a negotiable instrument is inadmissible, as a witness, to show it void at the time of 'Its execution \ but he is competent to testify as to facts subsequently arising.

THIS was an action of assumpsit brought by the plaintiffs, as endorsees of a promissory note, dated May 23d, 1815, for 500 dollars, payable in six months, to Moses Warren, the defendant, made by Gilchrist and Warren, and endorsed by the de- * %> * v fendant, Moses Warren, and by Benjamin Smith.

At the trial, before Mr. J. Spencer, at the Rensselaer circuit, in December, 1817, the counsel for the defendant admitted all the facts requisite, in the first instance, to supP01^ *he plaintiff’s action, and then offered Jonathan Warren, one of the makers of the note, as a witness in relation to 7 the origin and transfer of it. He was objected to by the ° , v counsel for the plaintiffs on the ground that a party to a ne- , . . A r ^ J gotiable instrument is an incompetent witness to impeach it: but the objection was overruled, and the witness admitted, who stated the following circumstances. The note in questian was an accommodation note, endorsed by the defendanf without consideration, to enable the makers, who were Partiers in trade at Troy, to pay their debts, and carry on their business. money from one Wiswall, who not being at home when the They expected to he able to obtain the

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note was made, which was in the latter part of April, or the beginning of May, 1315, the date of it was left blank, and the makers had permission to fill it up whenever they should obtain the money. Disappointed in procuring it from Wis- ■mall, and in want of money, they filled up the date on the 23d of May, and procured the endorsement of Smith, and endeavoured to negotiate the note, but were unsuccessful. In the latter part of Jane, Gilchrist and Warren, who had until then been in good credit, failed, and became insolvent, and soon after, the defendant inquired of J. Warren, the witness, what had been done with the note, and being told that it was still in their possession, expressed his satisfaction, and directed them not to part with it, which the witness promised. Gilchrist and Warren were indebted to the plaintiffs in about 250 dollars, 70 dollars of which were borrowed money, and the residue was on a note not then due; and soon after their failure, the plaintiff, Haight, Galled on them for payment of the 70 dollars, which they said they wére unable to pay. Haight then proposed taking the note in question, and after deducting the amount of the account of the plaintiffs, to pay them the balance. The witness told Haight that they could not part with the note, and stated to. him that the note was endorsed by the defendant, without consideration, for their accommodation, when they were in good credit; that, since their failure, the defendant had directed them not to part with it, which they had promised, and that they were insolvent and unable to pay the note, or to indemnify tire defendant. Upon this Haight proposed not only to pay the balance of 250 dollars, but to wait two years for the payment of the note, and also to sign a letter of license, giving them two years for the payment of their debts, and to exert the influence of the plaintiffs with their other creditors to obtain their signatures to the same; and if they could not pay the note at the end of two years, to give them further indulgence, if there was a prospect of their being able to pay it within a reasonable time. Two or three conferences subsequently took place, in relation to the subject, and, finally, about the third of July, Gilchrist and Warren delivered the note to the plaintiffs, who, a few days after, paid them the balance. The witness understood the agreement of the plain tiff-

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to wait for payment, to extend to the endorsers of the note.

Upon this evidence the jury, in conformity to the charge of the judge, found a verdict for the defendant, which the plaintiffs now moved to set aside, and for a new trial.

Huntington, for the plaintiffs, contended,

that Warren was an incompetent witness ; that no person whose name is on a negotiable instrument is competent to prove it void in its inception; or, at the time he put his name on it, and gave it currency. (Mann v. Swan, 14 Johns. Rep. 270 . Walton v. Shelly, 1 Term Rep. 296. Winton v. Saidler, 3 Johns. Cas. 185 . Baker v. Arnold, 1 Caines’ Rep. 258 . Stille v. Lynch, 2 Dallas, 194. Jordain v. Lasbroke, 7 Term Rep. 601. Bent v. Baker, 3 Term Rep. 34. Peake’s Cas. 40. 118. 1 Esp. Rep. 298.) The date of the note, in this case, was immaterial. It took effect only from its delivery, (Lansing v. Gaine & Ten Eyck, 2 Johns. Rep. 300 . 3 Esp. N. P. Rep. 108.) or from the time of its transfer, by endorsement to the plaintiffs. Though made and executed, it had no legal existence until it was endorsed ; and the witness was called to prove a fact which destroyed the note to which he had given currency, and was, therefore, inadmissible, on the ground of interest.

This case is distinguishable, from that of Woodhull v. Holmes, ( 10 Johns. Rep. 231 .) There the note was drawn and delivered to the payee, and by him endorsed to a third person, for a particular purpose, who fraudulently put it in the hands of a broker. (1 Day’s Rep. 17. 3 Mass. Rep. 27 . 365. 4 Mass. Rep. 156 . 6 Mass. Rep. 449 .)

Sutherland, contra.

The only objection at the trial was, that Warren was an incompetent witness, because his name was on the note, not on the ground of interest.

The general doctrine of the case of Walton v. Shelly has not been considered as law in England, since the case of Jordain v. Lashbroke, and the judges there, at N. P. have uniformly received persons whose names were on negotiable paper, to impeach it, unless interested. (Jones v. Brooke, 4 Taunt. Rep. 464. 1 Esp. Rep. 176. Peake’s Rep. 117. 5 Esp. Rep. 119. 13 East, 175. Phillip’s Ev. 32, 33.)

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The principle of the case of Walton v. Shelly has, it is true, been adopted in this court, and in the supreme court of Massachusetts, but with some qualification. Though the party to a negotiable instrument is incompetent to prove it void, in its inception; yet for any other purpose, as to prove facts subsequent to making the instrument, he may be a witness, if not interested. The rule in Walton v. Shelly is founded in public policy, and it is against public policy to give currency to instruments executed mala fide, or in violation of law. All the cases, except that of Stille v. Lynch, ( 2 Dall. 194 .) in which the principle has been applied, arose out of gaming or usury.

In Jackson, ex dem. Mapes, v. Frost, ( 6 Johns. Rep. 135 .) the grantor of a deed was admitted as a witness to prove it fraudulent, his interest having been released. In Hill v. Peyson, ( 3 Mass. Rep. 559 .) the supreme court of Massachusetts held, that the grantee of a deed was a competent witness to prove it fraudulent. So in Baring v. Shippen (2 Binney‘s Rep. 154.) the assignee of a bond was admitted as a witness to prove that it was fraudulently obtained by him. In an action of debt on the statute against bribery, the party bribed is a competent witness to prove it. (Sayer, 289. Comp. 197.) The guilt of the witness is no objection to his competency, but goes only to his credit. (Phillips’ Law of Ev. 33.) Accomplices are competent witnesses. The doctrine of the case of Walton v. Shelly is strictly confined to negotiable paper, and the reason of it is founded in commercial policy.

The proof offered must be such as goes to show the note void in its inception, or original creation, and to destroy it totally. The case of Woodhull v. Holmes, ( 10 Johns. Rep. 231 .) is analogous and in point. ( 6 Mass. Rep. 430 . 7 Mass. Rep. 470 .) A party to a negotiable paper, it was there held, may be a witness to prove facts subsequent to its creation, and which go to show that the holder has no right to recover.

delivered the opinion of the court. It cannot be useful or necessary to review all the cases, upon the question whether a party whose name is on a negotiable

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paper, can be admitted as a witness to impeach it¿ by testifyt° facts arising subsequent to the execution of the note.

We have decided, that from principles of public policy, a man whose name is on such paper, cannot be admitted to show it void for usury, or for any other cause, at the time of its execution; but that as to facts subsequently arising, he may be admitted to testify, if he stands disinterested. I cannot perceive any essential difference between this case and that of Woodhull v. Holmes, ( 10 Johns. Rep. 231 .) It was decided in that case, that the endorser was a competent witness to prove, that after the note was made and endorsed, it was delivered to a third person to be presented to a bank for discount, who, instead of offering it, fraudulently put it into the hands of a broker. The evidence of the endorser in that case, had he made out the facts, would have defeated a recovery, unless the holder had shown that he came fairly by the note. The evidence went to show that the note was an accommodation note ; that no consideration had passed between the immediate parties to it, and that the plaintiff had come unfairly into .the possession of the note, and this the court held, the endorser might prove, notwithstanding the rule in Winton v. Saidler, and Walton v. Shelly.

The facts proved by the endorser in this case, make out a case precisely similar in principle to that of Woodhull v. Holmes. Here the note was endorsed by the defendant as an accommodation note to enable the maker to borrow money. No value was received, and the act of endorsing was gratuitous. The makers of the note were solvent when the defendant lent his endorsement; they had become insolvent when the plain tills received the note. After the insolvency of the makers, they had promised the defendant not to negotiate the note. With a knowledge of these facts, and to secure about-250 dollars due the plaintiffs, they took this note, in a manner entirely out of the usual course of business. They held out to the makers of the note, encouragement to aid them in getting a letter of license from their creditors; they advanced a part of the money, and promised to wait two years before payment was exacted.

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It cannot be doubted that the plaintiffs are mala fide holders of the note, and that they took it with a view to charge a person, who from mere motives of friendship, had endorsed it to aid men who were in good circumstances, but who had become insolvent. The plaintiffs were warned that the note was functus officio, and yet they took it.

It was strenuously contended at the trial, and on the argument of the case, that the facts to which the endorser testified, were not facts arising subsequent to the execution of the note, but facts contemporaneous with the note, on this ground, that the note had no legal efficacy until it was endorsed.

The same objection existed to the testimony of the endorser in the case of Woodhull v. Holmes, for there the note was not efficacious until it came into the hands of a bona fide holder; for as between the immediate parties, there was no liability to each other until then ; and yet the testimony of the endorser, was admitted as to the facts subsequent to the making of the note; and by the terms, execution of the note, the court meant its signature.

I repeat it, there is no difference in principle between this case and that of Woodhull v. Holmes.

A point has been taken, that Jonathan Warren, the maker was interested, and ought to have been released ; it has been decisively answered, that the only objection made to his admission at the trial was the one already considered, and it may be added that he stood indifferent between the parties.

The other points subjoined to the case were not urged on the argument, and are not tenable.

Motion denied.