Henderson v. Anderson — 44 U.S. 73

Majority — DANIEL J.

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William Henderson, Plaintiff in error, v. John Anderson.

Syllabus

This court adheres to the rule laid down in Walton v. Shelly, i T. it. 296, sustained as it has been by tire decisions of this court'in The Bank'of the United States v. Bunn, 6 Peters, 57; The Bank of the Metropolis v. Jones, 8 Peters, 12, and Scott r. Lloyd, viz., that a party to a negotiable paper, having given, 'it value _and currency by the sanction of his name, shall not afterwards invalidate it by showing, upon his own testimóny, that' the consideration on which it was executed Was illegal.

This case was brought up by writ of error from thé,Circuit Court of the 'United States in and for the- eastern district of Louisiana.

Anderson was a citizen of Kentucky, and William Henderson, of •Louisiana. • Henderson was. a partner, in the commercial house of John Henderson,and Co., carrying on business in the town of War-renton, Warren county, Mississippi.

On the 3d of February, 1537, Thomas J. Green drew thefollow-iiig inland bill:'

“ Warrenton, February 3d,' 1837.

“ Exchange for $3795 -00.

,Twelve months after date of this tfiy first of exchange, (second of the same tenor and date unpaid,-).pay to the order of Messrs. John Henderson & Co-, thirty-seven hundred and ninety-five dollars, value received, and charge the'same to.account of

^ • “ Your obedient servant, . - Thqs. J. GREEN.

“ To Messrs. Briggs, Lacoste, & ,Co., Natchez.”

It was endorsed by John Henderson, & Co. and D. G. Barlpw & Co., and passed into the hands of Anderson. Being protested for non-acceptance and non-payment, Anderson .instituted suit against William Henderson, the partner, by way of petition, according to •the practice in Louisiana, as-follows:

“ That the petitioner is holder and owner of a certain bill of exchange, for the sum of thirty-seveii hundred and ninety-five dollars, .drawn by Thomas J. Green, endorsed and directed "to Messrs. Briggs, Lacoste & Co., Natchez, which said bill was drawn tó the order, and was endorsed by John Henderson & Co., dated at War-renton, in the state of Mississippi, on the 3d February, 1837,- payable twelve months after dace, which said bill of exchange, on the 8th. of February, 1837, was protested for non-acceptance, and on the 6th day of February, 1838, the. day of maturity, was duly protested for non-payment by James B. Cook,'a notary public, in. the Sof Natchez^ duly commissioned and • qualified, and that said n Henderson & Co. was, by said notary, duly notified of said protest for non-acceptance, and for non-payment by, all of .which will appear by reference of said bill of exchange and protest thereof, apd' said bill of exchange annexed is made a part thereof.

“At the. time-said-bill was endorsed, petitioner avers that said William Henderson-was a member of the late Commercial' firm of

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Johii Henderson & Co., formerly doing business at Warrenton,. under the said style ¿nd firm of John Henderson '& Co., and as a member of the said firm, he is now liable in solido to pay to. petitioner the amount of said bill of exchange, with, interest, cost, and .damages, and by the laws of the' state of Mississippi petitioner is entitled to five per cent, damages on the amount of said bill.

“ Petitioner alleges further, that the ..said William Henderson, ' though amicably requested, has neglected to pay the amount or any part thereof, for which he is indebted as' aforesaid.”

' This petition was answered' as follows:

.. “ Now comes the defendant in the above entitled cause, and, by way of exception, says: that he is not bound to answer, thereto; because he has not received, nor been served with/a true and exact copy of the petition, which by law he is entitled to, and that he-has riot been legally cited to appear and answer herein. Wherefore he. prays judgment, to be dismissed hence .with his costs, &c. •

. “Arid if the foregoing exception be overruled, he pleads the general denial. He denies that he is in any manner liable to pay the bill of exchange sued on. He avers, specially, that he neither signed and endorsed said bill himself, nor in any way authorized . the name of said firm' of John Henderson & Co. to be. signed arid endorsed on the same; that it was so signed and endorsed as aforesaid by one John Henderson, without the • knowledge and consent of defendant, and without any authority whatever;. that such endorsement was made néither for the benefit, nor for any debt or liability, of the defendant or of said firm, nor was it made within the. scope of the partnership powers, of on account of said firin; ’ but .without any .due. authority,' and without the knowledge and consent of the defendant, the said bill was signed and- -endorsed as - aforesaid by said John Henderson, purely for the benefit and accommodation of. the' drawer, the .said Thomas J. Green: of all which the parties to said bill, and the holders thereof, before and after maturity, had due notice. Defendant requires strict proof of every allegation' in the petition.

“Wherefore he prays judgment, with his costs, &c.”

After sundry proceedings, a commission was issued to take the testimony-of John Henderson, the acting partner and endorser of the bill, and the cause came on for trial in February, 1842. At the trial, the court excluded the evidence thus taken, and there was a judgment for the plaintiff; but the following'bill of exceptions being taken to .the ruling of.-the court, the decision, came up for' review. , . -

, . “Re it remembered, that on the trial of the above entitled cause, the defendant’s counsel, in order to prove the allegations set- forth by the defendant in his answer, offered in. evidence the deposition of one John Henderson, who, at the time of the drawing and endorsement of the- bill of exchange sued on, was a' copartner with

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defendant, the firm doing business under the name and style.of John Henderson & Co.; and especially in order to prove that said John ■ Henderson endorsed upon said bill the partnership name, without any authority whatever, without the knowledge or consent of defends ant, and contrary to their articles of co-partnership, and the course of dealing of said firm.; that it was so. endorsed in the presence of ■ the plaintiff, purely for .the accommodation of the drawer, Thomas J. Green, in discharge of a promissory* note held by the plaintiff against said Green; that said bill was not endorsed as aforesaid, for the accommodation, or on account of the said firm of John Henderson & Co., nor in any manner for the benefit of said firm of John Henderson & Co., norm any matter in which said firm was interested ; and that the plaintiff, when said bill was so drawn, and endorsed, and delivered to him, was fully cognisant of all the above facts. The plaintiff’s counsel objected to the reception of said deposition, on the ground that the said John Henderson was incompetent.to testify to any fact tending to invalidate the said bill, policy for the protection of commerce and the public morals. requiring the rejection of such evidénce.' The court, after taking time to consider, sustained tire objection, and rejected the deposition, T>n the ground.taken, as aforesaid, by the plaintiff’s counsel.

“To this decision of the court, the defendant, takes this his bill of exceptions,.and prays that the same be allowed and signed by the court.”

Conrad, for the plaintiff in error.

This is an action by the holder of a bill.of exchange against one of the members of a commercial firm by which it purports to have been endorsed.

The endorsement is admitted., but the defence is, that it was made by one member of the firm, without the knowledge or consent of his copartner, ’the defendant, solely for the accommodation .of the drawer, and in a matter in which 'the partnership had no interest or concern whatever.

To prove these facts, the partner who made the endorsement of the firm on the bill was examined under a commission, and his deposition, to be found at page 17 of the record, does fully establish them.

This deposition, however, was objected to on the ground that, being a party to the bill, he mould not impeach it by his testimony. The objection was sustained by the- court, and the deposition excluded. To this decision a bill of exceptions was taken, page 13 of the record, and the only question presented is as to the correctness of this decision.

As Henderson had no interest in the event of the suit, his-general competency is not denied; .but it is said, on the authority of filie doctrine first distinctly laid down in Walton v. Shelly, that his tes-

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timpny is inadmissible so far as it goes to establish that the endorsement made by him was not binding on his copartners.

. Apart from the sanction which the doctrine, that a witness Will not be permitted to impeach his own acts, derives from judicial deci- • sions, it is difficult to perceive on what rational grounds it .can rest. In either a moral or a legal point of view it seems equally untenable. In a moral aspect, to confess aifault, is in. some degree to atone for it; and what is under all circumstances a merit; becomes an.imperative duty, when the concealment of a fault by the one who had committed it would involve an innocent person in its consequences.

In a legal point of view, the. doctrine appears equally-Unsound. The civil law maxim nemo allegans turpitudinem mam est audi-endus, invoked by Lord Mansfield in its support, is manifestly mis- . applied. Its proper application is to parties to the suit, not to witnesses. Its meaning is, that no man shall allege his own .turpitude , as the foundation of a claim or a right. It is equivalent to another axiom in that system, ex turpi causa non nasdtur actio, and is analogous to the common law principle thatNno- one shell take ad- •' vantage of his own wrong.”

In fact, in all other' cáses courts of justice have adopted the opposite principle. The general rule’ is,' not only that á man may confess his own turpitude, but that he is bound to do so, whenever his confession will not subject him to a criminal prosecution; and even this exception, being established solely for the protection of the wit- ’ ness, may be waived by him. In criminal trials witnesses are every day allowed to prove crimes in the commission of which they aided and abetted. In chancery, (which ha's borrowed the practice from the civil law,) even parties may be compelled to disclose acts of fraud and moral turpitude.

•It was no doubt a conviction, on the part of the .English courts that the rule was erroneous in principle _ and inconvenient in practice, that induced them first to limit its application to negotiable instruments, and finally.to abandon it-altogether. Jordaine v. Lash-brook, 7 Term Rep. 601.

In this country, in some of the states the rule has never been followed. In others, where it had been originally adopted, the courts have been gradually receding from it.' Stafford v. Rice, 5 Cowen, 23; Powell v. Waters, 8 Cowen, 673; Williams v. Walbridge, 3 Wendell, 415.,

The rule is now universally, held to apply only to negotiable paper.

This limitation of the rules is a virtual abandonment of the ground on which it wras originally founded, inasmuch as the impropriety or indecency of allowing a man to contradict his own acts, can in no manner depend on the form or character; of the instrument thus sought to be impeached.

The rule thus-restricted must rest, therefore, on another principle, to wit, the public policy of protecting negotiable paper. Now on

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this point, I will observe, first, that if the holder received the paper in good faith, he is sufficiently secured by the principle' which protects such paper in the hands of a bond fide holder against all equities that may exist between the original parties. If, on the contrary, he took the paper mala fide, there can be no good, reason why he should be protected, In the first hypothesis, the evidence would. be irrelevant; in the second, the reason for its exclusion does not exist.

There aré, it is true, two exceptions to this remark, to wit, where the defence set up is that the note or bill originated .in a gaming or usurious consideration. In these cases the instrument, even in the hands of a bond fide holder, is tainted with the illegality of itsorigin. But is not this exception founded on considerations of public .policy? If so, how can a rule which excludes the" evidence of the facts be also founded on public policy? How can it be at the same time politic to allow the- consideration of negotiable paper to be inquired •into in these cases, and at the same time impolitic to prevent the introduction of the only evidence by which,-in'the great majority of cases, the facts can be established ?

. At all events, if the object of the rule be to .protect negotiable paper in the hands of bond fide holders for a valuable consideration, (and we apprehend it can hardly be desirable to protect any other,) tiren the rule itself should be co-extensive with the object sought fo Be attained. As the only cases, therefore, where the consideration can in such cases be inquired into are those in which’usury or gaming is set up as a defence,, it would be sufficient for all tire public policy of the rule to say, that a.party to a negotiable instrument should-not be permitted-to prove that it originated in a gambling or usurious conside'ration.

I have ventured on these general remarks in relation to the origin of this rule, because the rule itself is of recent origin, and the jurisprudence in regard to it, both in England and.in this country, is sa fluctuating, that I do not consider it as- firmly established.

But we contend that the rule, even when carried as far as it has ever been by this court, does not-apply to the present case.'

1. In the first place, for it to be applicable, the paper sought to be attacked must, not only be negotiable, but have been actually negotiated. U. S. v. Dunn, 5 Peters, 51; Same v. Liffler, 11 Peters, 91; Blagg v. Phcenix Ins. Co., 3 Wash. C. C. R. 7; Baird n; Cochrane, 4 Serg. .& Rawle, 397 .'

Now the draft in the present case is still in the hands of a party to the original transaction. ’ In point of form, it is true that the present-holder is the assignee of the payee and endorser, but iii point, of fact he was a party to the transaction in which it originated, and had full knowledge of the purposes for which it was executed. It was only a mode whereby the endorsers undertook to become sureties for a debt due by the drawers to the plaintiff. Powell v. Waters, 8 Cowen,,698’.

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2. Even supposing that the draft can be considered in a technical sense as having been negotiated, the endorsee certainly took it mala fide, and with a full knowledge that Henderson, in endorsing on it the signature of his firm, was committing a fraud on his copartners. Now, it is well settled that the rule does not apply to cases of fraud or misconduct to which the holder was a party. Peterson v. Willing, 3 Dallas, 506; Langer v. Felton, 1 Rawle, 141 ; McPherson v. Powers, 1 Serg. & Rawle, 102 .

3. The draft was drawn and payable in the state of Mississippi. Its nature and effect must, therefore, be tested by the laws of that state. Now, the law of that state provides, in substance, that in all cases where a promissory note or other obligation in writing has been assigned, the defendant shall be allowed the benefit of all want of lawful consideration, failure of consideration, payments, .discounts, and set-offs made, had, or possessed’against the same, previous to notice of the assignment, any law,-usage, or custom in any wise to the contrary notwithstanding, in the same manner as if the same had been sued and prosecuted by the obligee or payee therein. Law of June 25, 1822, sect. 12. See Howard & Hutchinson’s Dig. p. 372.

By this law negotiable instruments are. placed precisely on the same footing with all other, securities, and, .therefore, the distinction on which alone the principle which prevents a party to an instrument from impeaching it by his testimony rests, is unknown in that state. The defence, in the present case, is want of consideration. Had the suit been brought by the assignee of an instrument not negotiable, the witness would unquestionably have been competent to prove this fact. But by the laws of Mississippi the assignee of a note or bill of exchange has no other or greater rights than the assignee of a bond or other instrument not negotiable in its character. "The-witness is, therefore, as/competent in the one as in the other. The case is similar to that of Baring v. Shippen, 2 Binney, 165.

4. The lex fori must regulate the competency of witnesses, Story’s Conflict of Laws, 526, sect. 635; and by the law of Louisiana the witness was competent. Louisiana Code, art. 2260.

delivered the opinion of the court.

Upon a writ of error- to the Circuit Court of the -United States for the eastern district of Louisiana.

This was an action instituted at law in the Circuit Court-for the eastern district in the state above mentioned, by petition, according to the modes of proceeding in the courts of that state, in the name of. the defendant in error, as endorsee and holder of a bill of exchange for $3795, against the plaintiff in error, as an endorser of that bill.

The petition sets forth the facts following': That the petitioner is the holder and owner of the bill in question, which was drawn by one Thomas J. Green, at Warrenton, Mississippi, on the 3d of Feb

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ruary., 1837, directed to Briggs, Lacoste, & Co., at Natchez, payable, twelve months after date, to John Henderson & Co., by whom it was endorsed. That on the 8th day of February, 1837, this bill was protested for non-acceptance, and on'the 6th day of February, 1838,. was duly protested for non-payment in Hie city pf Natchez, and that John- Henderson & Co. were regularly notified óf said protests for non-acceptance and non-payment. That at the time at which thesaid.Jbill was so endorsed, the-pjaintiff in error was a member of the firm of John Henderson & Co., then doing business at Warrenton in Mississippi, and as a member of that firm is liable to the petitioner for the amount of the bill of exchange, with interest, costs, and damages. That the petitioner is a citizen and resident of the state of Kentucky, and the said William Henderson, a citizen and inhabitant of the parish of Carroll, in the state of Louisiana. Upon the aforegoing petition the plaintiff below prayed judgment, With his costs, &c.

- The defendant below, in the first place, took an exception to the petition on the ground that he had not been served with a true copy thereof, according to law, nor had been legally cited to appear, and therefore prayed to be dismissed; secondly, he interposed what is there styled “the general denial,” corresponding with the general issue ; and thirdly, he averred specially, that he neither signed nor endorsed the said bill himself, nór in any way authorized die name, of (the: firm of John Henderson & Co. to be signed and endorsed on the same; that it was so signed and endorsed % one John Henderson without the. knowledge and consent of the defendant, and without any authority whatsoever; and that such endorsement was made neither for the benefit, nor for any debt or liability of the defendant, nor of the said firm; nor was it made within-'the scopé of the partnership powers, or .on account of the firm; but that without any due authority, and without the knowledge and consent of the defendant, the bill was signed and endorsed by said John Henderson purely for the benefit of the saidN’homas J. Green, the drawer, of all which the parties to the- said bill, and the holders thereof, before and after •the maturity thereof, had notice.

. At a subsequent day the exception first taken for the alleged want of regular service of tire petition, was waived bjf the defendant, and the cause was continued; afterwards, upon the trial thereof,^ the defendant, in order to prove the allegations in hi? answer to the petition, offered in evidence , the deposition of John Henderson, who, at the time of. the drawing and endorsement of the bill of exchange sued on, was a copartner with the defendant in the firm, doing business under the name- and style of John Henderson & Co.: this evidence being designed to. show that John Henderson endorsed the partnership name upon the bill without authority, without the knowledge or consent of the defendant, and contrary to their articles of copartnership and to the course of their dealings; and that it was so

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.endorsed, in the presence of the plaintiff, purely for the accommodation of the drawer, Thomas J. Green, and not for the accommodation, nor on account of, nór in any manner for the benefit of the firm .of John Henderson & Co. The reception of this deposition was objected to on the ground that John Henderson, as'a member' of the firm ■ by whom and at the time the endorsement wras made, was incompetent to testify to facts tending to invalidate the bill; the court sustained this objection, and rejected the deposition of John Henderson. • To. the ruling of the coúrt on this .point the-defendant took an exception, which was reserved to him.

The exception thus taken presents the whole controversy in this-case, which, controlled by principles heretofore ruled by this court, •would seem to be limited within a véry narrow compass. The inquiry how far a party'to a negotiable instrument maybe heard in a° court of law to impeaéh or invalidate that' instrument "in the hands of another, is one which, has led to considerable dispussion and-to different. conclusions in the courts both of England and in this country.In -tire case of Walton, assignee, &c., v. Shelly, 1 T. R. 296, the'Court of King’s Bench decided, that a party to a negotiable paper, having given it value and currency by the sanction of his name, shall not afterwards-invalidate it by showing,'upon his own testimony, that the consideration on which it was executed was illegal-. Subsequently, by the same court, this rule was so far relaxed or abrogated as to permit the impeachment of such an instrument by persons standing in the same relation to it. Vide Jordaine v. Lashbrook, 7 T. R. 601. Amongst the different states of.our union the decisions' of tire -Court of King’s Bénch on either side of this question have been adopted. In this court' the . rule laid down in the case of Walton v. Shelly has been admitted and adhered to with a uniformity which establishes it as the law of the court. Thus, in the case of the Bank of the United States v. Dunn, 6 Peters, 51, it was enforced -in an action by the holder of a note against an endorser, in which an attempt was made to impeach the note upon the testimony of a subsequent endorser; in tire case of the Bank of the Metropolis v. Jones, 8 Peters, 12, in which the maker of a note was deemed -an incompetent witness, in an action by the holder, to testify to facts in discharge of the liability of the endorser; and in the case of Scott v. Lloyd, the decision of this court, though not directly, upon the samé point, may. be regarded as approving the rule established by the cases -previously adjudicated. The judgment of the Circuit Court for the éastern district of Louisiana now under review'being fully sustained by these authorities, that judgment is hereby affirmed.