Case ID: va_43/html/0332-01.html
Source: Caselaw Access Project
Author: {"author": "By the Court.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

*Caldwell’s Ex’ors v. M’Cortney & als.
    July Term, 1845,
    LewisbUrg.
    (Absent Cabell, P.)
    • Witness — Guarantor of Bond — Usury.—A person who is a guarantor, without consideration, of a bond, is a competent witness for the obligors, to prove that it was given on a usurious consideration.
    This was an action of debt, brought in the Circuit Superior Court of Law and Chancery for the county of Ohio, by Caldwell’s executors against M’Cortney, and three others, obligors in a bond for 2000 dollars, executed by them to James Caldwell in his lifetime, bearing date the 2d day of July 1837, and payable twelve months after date. The defendants appeared, and filed four specal pleas of usury in the bond; and upon the trial of the issues on these pleas, the jury found a verdict for the defendants.
    On the trial of the cause, the defendants offered in evidence, to sustain the defence of usury, the deposition of Thomas Jones, the agent in negotiating the loan for M’Cortney, for which said bond was given, which was objected to by the plaintiffs, on the ground that the witness was interested in the result of the cause. The interest of the witness was put upon two grounds: 1st. That he was the guarantor of the bond to Caldwell; and to prove this, they offered in evidence an endorsement on the bond, as follows: “I do hereby bind myself, and my heirs, to James Caldwell, and his assigns, to guarantee the payment of the within bond, according to the tenor and effect thereof; Witness my hand and seal, this 11th day of July 1837.
    Thomas Jones, [L. S.]” And they referred to the deposition of Jones to shew, that although the dates of the bond and the endorsement are different, his name was put upon the bond at *the same time that the bond was executed, at the request of Caldwell, and without consideration. The second ground of objection was, that Jones was a member of the firm of M’Cortney & Ried; and that the money borrowed from Caldwell, though borrowed by M’Cortney, was put into the partnership funds, and was a debt of the partnership: and to prove these facts, they introduced a witness who stated: that both Jones and M’Cortne3 informed him Jones was a partner: they also introduced a deed from M’Cortney & Ried to trustees for the sale of their effects, and the payment of their debts; in which this debt to Caldwell is recognized as a debt of the firm, and is directed to be paid: they also proved by a witness, the following entry on the books of the firm in the handwriting of Ried: “Oct. 17th, 1836, John M’Cortney Dr. to bills payable, for note assumed to James Caldwell, and preferred in assignment, 2000 dollars;” though it appeared that this entry was made by Ried after the assignment of their effects to trustees. They also introduced another witness who wrote the assignment of M’Cortney &Ried, who said, that when about to write that assignment, he enquired of them if Jones was a partner, and they • both said he ■ was not; that M’Cortney had first carried on business alone, for some time, and Jones was his clerk, or manager of it, on the terms of receiving a certain portion of the profits as compensation for his services; that after-wards M’Cortney & Ried formed their partnership, and Jones continued on in their service.; but nothing whatever was said about the terms on which he did so. That Jones was wholly insolvent before and at the time he was so in their service. Witness farther said, that at the time of the assignment, Ried objected to the debt of Caldwell receiving the preference given it therein, and said it was an individual debt of M’Cortney’s; but M’Cortney said it had gone into the funds of the company, and that they had got the benefit of it. *And they introduced another witness, who testified, that both Ried and Jones informed him that Jones was taken into the firm of M’Cortne3 & Ried; and that witness advised both of them that to avoid embarrassing the business of the firm, Jones ought not to be an ostensible partner; he having failed shortly previous. Jones, as witness understood, was to receive, as compensation for his services, a portion of the profits of the house; and witness advised them that it did constitute him a partner.
    On the other hand, the defendants proved by a witness who had examined the books of M’Cortney & Ried, that there was nothing in them to shew that Jones was a partner.
    After hearing the testimony, the Court overruled the plaintiffs’ objection to the competency of the witness, and admitted the deposition as evidence; and the plaintiffs excepted; and the Court having rendered a judgment on the verdict of the jury, in favour of the defendants, the plaintiffs obtained an appeal to this Court.
    Patton, for the appellants.
    The evidence proves that the endorsement of Jones was cotemporaneous with the execution of the bond; and was made as a collateral security, without consideration. In effect, and according to the obvious intent of the parties, he was to occupy the same relation to the debt, as an assignor of a bond who had received no value for his endorsement or assignment.
    Now, where a party for value, and by an independent contract, covenants that a particular debt due b3 other parties shall be punctually paid, it may be true, that it is not necessary to shew that ineffectual efforts have been made to recover from the original debtor; nor is it of any importance whether the original debt was founded on gaming, usury, or other illegal consideration, or whether it originated in fraud. But where a surety or guarantor ^without value, undertakes to pay the debt of another, he may shew in de-fence, that the debt was invalid, for any reason which would protect the principal from his obligation; and it is indispensable that the plaintiff should shew he has used proper diligence to demand payment from the principal. Mech. Pire Ins. Co. v. Ogden, 1 Wend. 137; Douglass & ais. v. Reynolds, Byrne & Co., 7 Peters’ R. 113.
    Here, the witness had a direct interest in the event of the cause. He was a mere surety, introduced to prove that the debt for which he was surety was not due; and that the obligation to which he was a party was wholly void. There can be no doubt that if a bond is vicious in its origin, a security or collateral guarantor cannot be made to pay whilst the principal debtor is discharged. The terms of the statute of usury, which avoids all securities given for payment of an usurious debt, must leave no doubt upon the question. The case of Gilliam v. Clay, 3 Leigh 590, is a direct authority against the competency of this witness.
    2. Jones was a partner in the firm of M’Cortney & Ried; and this loan from Caldwell was a debt for which that firm was liable. The testimony on both these points is conclusive. And we have the case of a party bound in equity to contribute to the reimbursement of the debt, if recovered of the defendants, introduced as a witness to prevent the recovery. And, moreover, we have the case of a partner in a concern, whose effects have been assigned to pay a debt, offered as a witness to defeat its recovery ; and thus relieve the property in which he is interested as owner, from its payment.
    Price and Jacob, for the appellees.
    A comparison of the date of the bond with the date of the guarantee, will shew that the endorsement of the witness was not co-temporaneous with the execution of the bond.
    ''■'The interest which will disqualify a witness, is an interest in the event of the cause, or the record; not in the fact to which he is called to testify. 1 Stark. Ev. 88; 2 Id. 744; G-reenleaf on Ev. 'i 389, p. 434; Van Nuyse v. Terhune, 3 Johns. Cas. 82; 2 Mete. R. 179.
    In this case, it was the interest of Jones that the plaintiffs should recover-; as that would at once have relieved him from all liability on his guaranty. But if the verdict is for the defendants, the plaintiffs may sue him on that guaranty; and the verdict and judgment in this case cannot be used by him, because they have been induced by his evidence. Baring v. Reeder, Roane, J., 1 Hen. & Munf. 16S.
    As a general proposition, it is now well ’established, that an endorser is a competent witness for the defendant, to prove that the note is void. Tuthill v. Davis, 20 Johns. R. 28S; Taylor v. Beck, 3 Rand. 316; Jordan v. Lashbrook, 7 T. R. 601; Bent v. Baker, 3 T. R. 27. In this case, the contract of Jones is a guaranty as well of the validity of the bond sued on, as of the solvency of the defendants; and in such case, his liability exists, though the plaintiffs shall be defeated in this action on the ground of usury. Mann v. Eckford’s ex’or, 15 Wend. 502; Bristol v. Dann, 12 Wend. 142; Allen v. Rightmere, 20 Johns. R. 365. Indeed, to enable the plaintiffs to maintain an action on the guaranty against Jones, they are not obliged to shew that the - obligors have been sued. Morris v. Wardsworth, 11 Wend. 100; S. C. 17 Wend. 103; Bank of New York v. Livingston, 2 Johns. Cas. 409. By consequence, they are not, as in the case of an assignor of a bond, under the necessity of bringing in the record of the action against the parties primarily liable.
    But further, Jones was the agent in the transaction of this business between Caldwell and M’Cortney; and these defendants had an interest in his testimony, of which they cannot be divested by any act of Jones and *Caldwell, 1 Stark. Ev. 128-9; Jackson v. Rumsey, 3 John. Cas. 234; Greenleaf on Ev. § 418, p. 462 ; 3 Camp. R. 381; Long v. Bailie, 4 Serg. & R. 222; Eastman v. Winchip, 14 Pick. 44; Phelps v. Riley, 3 Conn. R. 266; Rex v. Pox, 1 Strange 652; Barlow v. Vowell, Skin. 586; Burgess v. Lane, 3 Greenl. R. 165; Bent v. Baker, 3 T. R. 27; Cowen’s Notes to Philips on Ev. note 273, p. 272.
    2. There is no proper evidence shewing that Jones was a partner in the firm of M’Cortney & Ried. But if there was, there is no evidence which shews that this debt to Caldwell was, or is, the proper debt of M’Cortne3 & Ried. All that is said on the subject, is entirel3.,consistept.with-.the .faqt„ that the money received from Caldwell,' was put into the concern as a part of the capital stock of M’Cortnej'; for which, therefore, the firm was not liable. Gow on Part. 309; Parkin v. Carruthers, 3 Esp. R. 248; Cary on Part. 9.
    But if Jones is to be considered a partner of M’Cortney & Ried, it is still his interest that the plaintiffs should recover in this action. He is thereby relieved from his guarantj' to Caldwell; and he cannot, as partner, be held responsible for the debt, or if he can be held responsible at all, it can only be for his proportion of it.
   By the Court.

Affirm the judgment.