Case ID: mass_47/html/0212-01.html
Source: Caselaw Access Project
Author: {"author": "Hubbard, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

George Higginson & another vs. William Gray & another.
    A promissory note, given by the maker in exchange for a note given to him by the payee/ is on a valid consideration.
    Where A. makes a usurious loan to B. and takes B.'s note for the money lent, and also takes, as collateral security therefor, a note of C. for a larger sum, given to B., and by him indorsed, C. cannot defeat an action thereon against him by A. by showing the usury in the loan to B.: Nor can the creditors of C., who has made an assignment under St. 1836, c. 238, successfully object to A.'s proving his claim against C., and taking a dividend thereon, to the amount -of the money lent to B.: Nor can such creditors defeat the claim of A. on C. by showing that A. has altered B.'s note to him for the money lent, so as to render it void, if A. has recovered a judgment thereon, which is unreversed 3 nor by showing that such judgment is reversed on a writ of review, by an agreement between A. and B. before trial on the review, if B., for a valuable consideration, agreed that upon the reversal of the judgment, the debt, on his note for the money lent, should remain good against him personally.
    This was a bill in equity, brought by the plaintiffs, in behalf of themselves and the other creditors of Rogers, Devens & Co., against the assignees, under St. 1836, c. 238, of said Rogers, Devens &. Co., insolvent debtors. The bill alleged that the plaintiffs and other creditors had become parties to said insolvent debtors’ assignment, and had proved their claims ; that two dividends had been declared, which the plaintiffs had demanded of the defendants; and that the defendants, although they had in their hands a balance of the trust fund, belonging to the plaintiffs and other creditors, had refused, though requested, to distribute said balance among the creditors, on the alleged ground that certain claims were made on the estate of said Rogers, Devens & Co., which the defendants could not allow and pay pro rata, without the aid and direction of the court. The prayer of the bill was, that the defendants should make answer on oath ; that they might be decreed to pay and distribute said balance to said creditors, and to such other creditors as should prove their claims on or before a day certain to be fixed by the court; and that the plaintiffs and other creditors, parties to the assignment aforesaid, might have such other relief as their case might require.
    The defendants filed an answer, acknowledging that there was in their hands a balance of said trust fund, and they set forth (among many things not necessary to be here stated) the facts, according to their information and belief, concerning a certain check and note, hereinafter mentioned, the amount of which was claimed by the holders thereof as debts due from said Rogers, Devens & Co., and which were disputed by the defendants. They therefore prayed that the plaintiffs and the holders of said'check and note might “ be decreed to interplead touching their several claims, and settle and adjust their demands between themselves,” and that the defendants might be ordered to pay over and distribute said balance in such way as to the court might seem meet.
    The court thereupon ordered that the cause be referred to a master, to ascertain the amount of trust property in the defendants’ hands, remaining for distribution, and the parties entitled to the same, and the amount which they are respectively entitled to receive; and, for this purpose, to cause notice to be given to all persons concerned, to come in and prove their claims before said master, by a day to be by him named, on pain of being excluded from any share of said trust fund; and that the master make report of his doings.
    The final report of the master, on the matters which were now brought before the court for revision, was as follows :
    
      “ Henry Randall presented the note, a copy of which is sub joined, and claimed the dividend payable thereon, according to its tenor. ‘ Boston, February 2d 1836. Six months from date, for value received, we promise to pay to the order of Joseph A. Veazie twelve hundred and forty two dollars and fifty six cents. Rogers, Devens & Co.’ (Indorsed by J. A. Veazie.) The claim of Randall was opposed by the assignees; and having heard the parties on the testimony adduced by them, I found the following facts material to their case:
    “Rogers, Devens & Co. became insolvent, and made an assignment of their property, under Si. 1836, c. 238- On the same day, the property of said Veazie was attached, and he stopped payment. He was indebted to Rogers, Devens & Co., at that time, and' so continued until, as an insolvent debtor, he was discharged from his debts, under St. 1838, c. 163, on his own petition.
    “From January 11th to June 3d 1836, there were mutua, dealings between Veazie and Rogers, Devens & Co. The note of $ 1242-56, on which Randall makes his claim, was given to Veazie by Rogers, Devens &. Co., in exchange for a note of Veazie’s, (signed by him, dated April 8th 1836,) payable to Rogers, Devens & Co. for $ 1180-61, which note was used and discounted by Rogers, Devens & Co. On the 28th of May 1836, Henry Randall, the claimant, (by his agent and brother, Otis G. Randall,) lent $400 to Veazie, and received from Vea-zie a check or due-bill, of the following tenor : c $400. Boston, May 28th 1836. Borrowed and received of Otis G. Randall four hundred dollars, to be paid on demand to said O. G. Randall, or order, on the  June next. Joseph A. Veazie.’ This instrument was indorsed ‘ Otis G. Randall.’ At this time, (May 28th 1836,) the note of $1242-56 was in Otis G. Randall’s possession, having been delivered to him by Veazie, to be discounted ; and when the $400 was lent, it was agreed between them, that the note of $ 1242-56 should be retained as collat-erak security for the loan; and it was so retained by Otis G. Randall.
    “ On the 3d of June 1836, an action was brought, (on the procurement of Otis G. Randall,) by Henry Randall, against Veazie, on the check of $400, and certain gum, belonging to Veazie, was attached. The action was entered, and judgment recovered, on the check, for $417 damage, and $13-75 costs of suit, at the July term 1836, of the court of common pleas for the county of Suffolk. Execution issued, dated October 1st 1836, and levy of it was commenced, and stayed by a writ of supersedeas from the supreme judicial court; whereupon the execution was returned, in no part satisfied. The gum that was attached by Randall was subsequently attached by one Winchester; and on the execution in his suit, Winchester demanded of the officer the proceeds of the gum. The officer refused to pay over the whole proceeds, because of Henry Randall’s prior suit; and Winchester then gave the officer a bond of indemnity, and received from him the proceeds of the gum.
    “ At the November term of the supreme judicial court, 1836, Veazie filed a petition for a review of the action brought against him, in the court of common pleas, by Randall. On this petition, a stay or supersedeas of Randall’s execution (above stated^) was ordered, on security given by the petitioner, pursuant to the Rev. Sts. c. 99, <§> 22, and a review was granted. Before the trial on the review came on, Randall and Veazie compromised their case, agreeing that as the judgment in Randall’s favor, m the court of common pleas, was vacated and null, all proceedings in the supreme court should cease; that the bond, given by Winchester to the officer, should be restored to Winchester, so that he could hold the gum, and the debt on the check of $400 remain good against Veazie personally.
    “The petitioner for a review, in his action in the supreme court, depended on two grounds; 1st, that the action in the court of common pleas, on the $400 check, was prematurely brought; the days of grace not having expired; 2d, on a fraud ulent and material alteration of the check. The defendants in review denied the latter, and admitted the former ground; and that was concurred in, as the cause for discontinuing further proceedings.
    “ In fulfilment of the terms of compromise, the bond was returned to Winchester, and the counsel for the petitioner in review went to the clerk’s office, and requested that the entry of ‘ ne ther party ’ might be made in the action. The clerk told him that was not the proper entry, but that the entry should be ‘judgment, by agreement, for reversal of the judgment of the court of common pleas; ’ and the counsel, presuming the clerk to be correct, assented, and that entry was made.
    “ No notice of the compromise between Veazie and Randall was given to the assignees of Rogers, Devens & Co.
    
      “ After the check of $ 400 was given to Randall by Veaziej (and previously to the arrangement and compromise of the action of review,) it was altered by altering the time, on which it was originally made payable, to the 1st of June, from some later day in that month. Such alteration is visible on the face of the check, and was not shown, by Henry Randall, to have been made otherwise than by him, or with his assent. It was made without the assent or knowledge of Yeazie, and was alleged by him to have been made, in the compromise referred to.
    
      “ Interest, at the rate of two per cent, per month, was reserved on the check, and paid in advance.
    “ The assignees of Rogers, Devens & Co. have paid a dividend on the note of $ 1180-61, given by Veazie to Rogers, Devens & Co. in exchange for the note of $ 1242-60.
    “ And thereupon I ruled, that said Henry Randall was entitled to demand and receive of said assignees the sum of $400, and interest thereon from the 8th of June 1836.”
    The master returned, with the above report, a statement of the testimony given by the witnesses, on the hearing before him.
    Exceptions were taken to the report, both by the defendants, (the assignees,) and by Randall.
    
      W. Gray, for the defendants.
    If Yeazie were now the holder of the note, he could recover nothing. Does Randall so stand, that he can sustain his claim on the note ? He received it as collateral security for a due-bill of Veazie for $400, which was fraudulently altered, and thereby rendered void. And it does not appear that Randall did not himself alter it. This alteration avoided the due-bill. Bayley on Bills, (2d Amer. ed.) 92, 98, 99. Davis v. Jenney, 1 Met. 221. It also avoided the debt. Wheelock v. Freeman, 13 Pick. 165. Martendale v. Follet, 1 N. Hamp. 95. Mills v. Starr, 2 Bailey, 359. There is but one debt, and whatever discharges that discharges the collateral security for it.
    The due-bill was usurious ; Dunscomh v. BunTcer, 2 Met. 8 ; Chit, on Bills, (6th ed.) 89 ; Harrison v. Hannel, 5 Taunt. 780; and if the claim is to be allowed, deduction siould be made of threefold* the usurious interest Rev. Sts. c 35, <§> 2 
      Brigham v. Marean, 7 Pick. 40. Parker v. Biglow, 14 Pick. 436. Sumner v. Williams, 1 Met. 398.
    The dividend, if any, should be on the $400 only; all the rest being accommodation paper.
    It will probably be contended, that we are concluded, as to the claim on the due-bill, by the judgment recovered thereon in the court of common pleas. That judgment, however, was vacated by the review; Rev. Sts. c. 99, <§><§> 9, 10, 25 ; Hicks v. Atkins, 4 Mass. 103; White v. Starr, 13 Pick. 381; and the reversal made the judgment reversed of no effect. It is not too late to have the judgment made up in the review case. Wells v. Dench, 1 Mass. 232.
    The collateral security was discharged by the giving up of the review bond, which was the legal effect of the compromise. Baker v. Briggs, 8 Pick. 122.
    
      Paine, for Randall.
    The inquiry, by the master, as to the alteration of the due-bill, was barred by the judgment of the court of common pleas, which is valid until reversed; and it was not reversed by the action of review. No judgment has been entered in that action, and the parties agreed that proceedings therein should cease. The proper entry may yet be made in that action. Pruden v. Alden, Whitney v. Sprague, and Suydam v. Huggeford, 23 Pick. 187, 198, 472. Rule 36th of this court. 24 Pick. 396. The matter of alteration was waived by the agreement of the parties as to the action of review.
    The exchange note was not mere accommodation paper, but was on good consideration. Ward v. Allen, 2 Met. 53. Cowley v. Dunlop, 7 T. R. 565. Cardwell v. Martin, 9 East, 190. Buckler v. Buttivant, 3 East, 72. And if it were accommodation paper, still the holder might recover what he paid for it. If Veazie could have avoided the due-bill, and had done so, and had reclaimed it, an offset might have been made. But the maker cannot overturn what has been done between indorser and indorsee. Bayley on Bills, (2d Amer. ed.) 545, 547, 551. Knights v. Putnam, 3 Pick. 184. Ranger v. Cary, and Mack v. Clark, 1 Met. 374, 423.
    Admitting that the due-bill was altered, and that it is rightly so found by the master, still the debt remains good. The doctrine contended for, as to alterations, originated in the matter of deeds, which, if altered, are void ; but the matter behind the deed is not thereby affected. Pigofs case, 11 Co. 27. 4 T. R. 345 Hatch v. Hatch, 9 Mass. 311, 312. Chessman v. Whit-temore, 23 Pick. 231. To allow the alteration of the due-bill to avo:d the debt, would be to exercise criminal jurisdiction in a civil case. See White v. Franklin Bank, 22 Pick. 185. Thayer v. Mann, 19 Pick. 535. The case of Wheelock v. Freeman, 13 Pick. 165, cited on the other side, was a sale of land, and there was no debt behind the deed. Here there was a loan of money.
    But even if the debt were annulled, Randall has a right to hold the note passed to him as collateral security. It passed by the indorsement, and he can hold it till the money is paid, notwithstanding the usury. Jarvis v. Rogers, 13 Mass. 105. Bridge v. Hubbard, 15 Mass. 103. Sumner v. Williams, 1 Met. 398.
    
      
       The figure here inserted was defaced by an alteration. See post, p. 236.
    
   The opinion of the court was given March 18th 1844.

Hubbard, J.

It is objected by the plaintiffs, that the note upon which a dividend is demanded is accommodation paper, and that Randall therefore stands in no better situation than Yeazie himself would, if he were now the claimant. But even if it were an accommodation note, the validity of the objection would depend upon the circumstances under which Randall received the note; for though, as between the payee and maker, such a note may be without consideration, yet the bona fide holder of accommodation paper, received while it is running to maturity, has the same just claim on the maker, as though the note was given for value. In the present case, it appears that Rogers, Devens & Co. were in the habit of exchanging notes with Veazie, and that the paper now in question was an exchange note. But it is well settled that exchange notes, though made for the accommodation of the parties, are not what is known and recognized as accommodation paper. There is a mutuality in the one case which does not exist in the other, and the exchange is in law a negotiation which makes a good consideration between the parties, each for the other. Rolfe v. Caslon, 2 H. B. 570. Cardwell v. Martin, 9 East, 190. Chit. on Bills, (6th ed.) 443.

Veazie negotiated the note to Randall, and the makers may oe responsible to him, notwithstanding Veazie’s liability to them; for the issue is not, as the plaintiffs would contend, between Veazie and Rogers, Devens &. Co., but between Randall and them. This note was indorsed by Veazie to Randall, as collateral security for a loan of $400, made by Randall May 28th 1836, and for which a memorandum check was given, payable in June. This check, the plaintiffs allege, has been fraudulently altered, and the debt thereby discharged; and by reason of it, Randall has no claim to recover any thing upon the collateral security. The fact of such fraudulent alteration is denied on the part of Randall. Yet he contends that, if the fact were so, and if he could not recover on the check itself, still he coma maintain an action for the money actually lent. But this position is untenable, and for good reason. Where the party has made an express contract, he cannot resort to an implied one; and if no action can be maintained on the express contract, by reason of the fraud of the plaintiff himself, he is without remedy. Otherwise, notes and bills might often be tampered with, both as to their amounts and times of payment, if, on detection of the fraud, the party could avail himself of an implied assumpsit to recover his demand.

On the facts, however, as they appear in the master’s report, the case does not turn on this point. The check given by Vea-zie to Randall was put in suit in the court of common pleas, and judgment was rendered in favor of Randall. Afterwards a writ of review was sued out of the supreme judicial court, and two errors were assigned as the, grounds for reversing the judgment: 1st, that the check was substantially a promissory note, and therefore entitled to grace ; and 2d, that there was a fraudulent alteration of the time of payment of the check. But before a trial took place, the parties came to an agreement, either that the writ should be dismissed, and the judgment of the common pleas remain in force, or that the judgment should be reversed, and the original contract or check be confirmed and held good, as between them. There is conflicting evidence as to which was the agreement. It is unnecessary, however, to delay the cause to ascertain the fact; for if the judgment is in force, then it is binding on the parties; but if the agreement was, to have the judgment reversed, and the original contract confirmed, and the objection to any alteration in it waived, then there was a good consideration for such agreement, in the relinquishment of the bond given for seeming the original judgment, in case it should not be reversed. And we think that, as between these parties, Randall may show the agreement; and we are of opinion that his collateral security in the note is not affected by relinquishing the bond given by Yeazie, on his obtaining a super-sedeas of the execution. As between Randall and Yeazie, then, a good demand exists for the $400 and interest, and the creditors of Rogers, Devens & Co. cannot interpose a defence which Veazie would not be permitted to make.

Another objection has been taken to the allowance of the full amount of the $ 400, on the ground that usurious interest was taken by Randall at the time of the loan. If Veazie had been the insolvent assignor in this case, and the claim was made upon his assignee, the objection, unless barred by the agreement, might prevail. But here the claim is upon the assignees of Rogers, Devens & Co., on the note given by them for a valuable consideration, and which came lawfully into the possession of Randall. The note upon which the dividend is demanded was not made to secure the loan of $400, nor was it in any way originally connected with the usurious contract; and, that contract not being void, the creditors of Rogers, Devens & Co. cannot raise the objection, there being no usury taken or reserved in their note now held by Randall.

A dividend is claimed by Randall on the full amount of the note of $ 1242-56 ; but, it appearing by the report, that the note was made over to Randall to secure a debt of $400 only and interest, and that, if he should recover a larger amount than that, he would be accountable to Veazie, or his assignee, for the surplus, we think there is an equity existing here, of which the creditors of Rogers, Devens & Co. can avail themselves ; as Veazie is indebted to that firm on the balance of their accounts, arising in great measure out of their exchange paper. In conformity with these views, Randall is to be allowed his dividend on the note, provided the same does not exceed his debt of $400 and interest, to which amount he is limited; and the case is to be remitted to the master, to make the allowance accordingly.