Case ID: mass_10/html/0489-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Per Curiam.\n    ", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Margaret Manning, Executrix, versus Richard Wheatland.
    The endorser of a negotiable promissory note is not a competent witness, in an action between the endorsee and the maker, to prove usury in the transfer of the note by him.
    Case upon a promissory note for 550 dollars, payable to Samue1. C. Ward, or order, in eight months from the date, signed by the defendant, and endorsed by the said Ward to Richard Manning, the plaintiff’s testator.
    At the trial, which was had before Sewall, J., upon the general issue, April term, 1812, the plaintiff gave in evidence the note declared on, dated the 24th of May, 1809, the signatures of the defendant and of Ward, the endorser, being admitted.
    * The defence was, that the note had been unfairly sold [ * 503 ] by Ward, and that he negotiated it upon a usurious consideration and bargain with the said Richard Manning. To prove this defence the defendant offered Ward asm witness; and the plaintiff’s objection to his competency as a witness in this cause was overruled.
    
      Ward testified that, some time before the note was payable, according to the tenor of it, he sold it to the said Richard Manning, and received for it a considerable sum less than the face of the note ; that the discount allowed in the sale of the note was not less than twelve per cent., or one per cent, per month upon the time the note had to run. Ward himself negotiated the sale with the said Richard Manning. Ward, further testified that he had taken the note for a premium of insurance upon a policy effected for the defendant, and in trust for the underwriters upon that policy, by whom the witness was employed as an insurance broker, and that he had applied the proceeds of the sale to his own use.
    The usurious negotiation of the note was the defence chiefly insisted on; and the jury found a verdict for the defendant. Whether the said Ward was a competent witness in this cause, was reserved as a question of law for the consideration of the Court.
    The cause was argued at the last November term in this county by Dane for the plaintiff, and Nichols for the defendant.
    
      Dane
    
    insisted that Ward, being a party to the note, and to the usury, was an incompetent witness, and he relied on the decision of this Court in the case of Churchill vs. Suter, 
       and the cases there cited. He also contended that none but the party to the usurious contract can avail himself of that defence.
    
      Nichols
    
    (after observing that the defendant disputed payment of the plaintiff’s demand merely for the benefit of the underwriters, to whom the money was justly due, and who had been defrauded of it in the manner stated by the witness on the trial) con- [ * 504 ] tended, — 1. That it was a good * defence in an action by the endorsee against the maker of a negotiable promissory note, that the transfer to the endorsee was for a usurious consideration; and, 2. That the endorser was a competent witness to prove the usury.
    1. By the statute of usury,  all bonds, contracts, &c., whereby there shall be reserved or taken above the rate of six pounds in the hundred, shall be utterly void. The endorsement by Ward to It. Manning was a usurious contract, and is therefore void. It may be said that, if the usury avoids the endorsement, any subsequent holder will be prevented from recovering upon it. But the usury being merely between Ward and Maiming, a subsequent bona fide holder may sue as the immediate endorsee of Ward, without any reference to the contract between him and Manning. Although, in general, a subsequent illegal contract taking place on the endorse ment of a note or bill, and not in its inception, will not invalidate the same in the hands of a bona fide holder; in the present case, the plaintiff is not a bona ñde holder. 
    
    
      2. Ward, the endorser of a note, was a competent witness to prove the usurious endorsement.
    The cases decided in this Court, in which parties to negotiable securities have been held to be incompetent witnesses to prove the securities void for usury, all go on the principle that the party shall not be permitted to prove the note originally void, because this would be a fraud upon the public; but a party to the note, when disinterested, may testify to any subsequent facts, which admit the legality of the instrument in its original form.  The case of Churchill vs. Suter goes no further than this. In Barker vs. Prentiss, the testimony of the witness, who endorsed the note, went to control the effect of his own endorsement, but not to invalidate the original consideration of the note. The Court decided that he was a competent witness.
    So, in the case at bar, the testimony of Ward does not go to prove the note originally void; but merely that the transfer to the plaintiff’s testator was illegal. To admit him for * that purpose will not operate as a fraud on the public, [ * 505 ] but merely defeat the claim of the present holder, who represents the party to the usury. The plaintiff’s testator, before the note was due, might have transferred it to a third person bond fide, who might have recovered upon it, notwithstanding the usury between Manning and Ward.
    
    The cause stood over for advisement to this term, and being now further continued nisi, was decided at the following March term in Suffolk.
    
    
      
       4 Mass. Rep. 156. — 1 D. & E. 296, Walton vs. Shelly. — 3 Mass. Rep. 27. — Ibid. 31. — Brown vs. Babcock, 2 Dallas, 194. — 1 Day's Rep. 17. — 1 Caines's Rep. 258.
    
    
      
      
        Stat. 1783, c. 55.
    
    
      
      
        See Bayley on Bills, 67. — Chitty, 71, 72. — 1 Esp. Rep. 274, Daniel vs. Cartony. — 1 Burr. 458, Miller vs. Race. — 3 Burr. 1523, Grant vs. Vaughan. — 1 East, 92, Parr vs. Eliason.
      
    
    
      
       3 Mass. Rep. 27, Warren vs. Merry. — Ibid. 31, Brown & Al. vs. Babcock & Al. — 6 Mass. Rep. 434, Barker vs. Prentiss.
      
    
   Per Curiam.

The only question necessary to be decided in this case is, whether Ward, the promisee in the note, and the endorser of it to the plaintiff’s testator, is a competent witness to prove usury between him and his endorsee in the transfer; and we are clearly of opinion that he is not.

It having been decided, in the case of Churchill vs. Suter, which was cited in the argument, that a party, who has by his signature given credit and currency to a negotiable instrument, shall not be admitted as a witness to impeach that instrument on the ground of fraud or other illegality, we refer to that case for the reasons on which the decision was founded. They were ably and succinctly stated by the late Chief Justice Parsons. He took occasion to compare the conflicting opinions upon this question in the English decisions, and to state the law in this commonwealth in a manner perfectly clear and satisfactory.

That case has ever since been resorted to, as furnishing the rule of evidence on subjects of this nature ; and it can be distinguished from the case at bar only as that was a case of usury in the origin of the note, and this in the transfer. This circumstance probably occasioned the doubt in the mind of the judge who tried this cause, and induced him to save the question. There the endorsee was presented as a witness, and rejected upon the ground of public policy, and the antecedent usage of this state. Here it is the endorser who is offered to prove the usury ; and he must be rejected on similar grounds. The verdict is set aside, and a new trial is ordered.

ADDITIONAL NOTE.

[In an action by the endorsee, against the payee and accommodation endorser of a note, the maker, being released by the defendant, is a competent witness to 'prove usury between the parties to the suit. — Van Schaack vs. Stafford, 12 Pick. 565.

A party to a negotiable note is not a witness to prove usury, though the maker-of an accommodation note, and though the note has been delivered up to the real debtor, on his giving a recognizance to the creditor for the amount. The rule applies, also, not only to the case of an innocent endorsee, but where the usurer himself is a party. — Chandler vs. Morton, 5 Greenl. 374.

Action by the assignee against the maker of a note. Held, the payee, called as a witness by the defendant, was privileged from answering -questions, asked for the purpose of proving any agreement respecting the note or its consideration, or any payment to him; the defendant having avowed that his defence was usury, taken by the witness. — Burns vs. Kempshall, 24 Wend. 360.

See American, &c., vs. Jenness, 2 Metc. 288. — Thayer vs. Crossman, 1 Metc. 416. —- Aaams vs. Carver, 6 Greenl. 390. — Jackson vs. Packard, 6 Wend. 415. — Harrisburg, &c., vs. Forster, 8 Watts, 304. — F. H.] 
      
      
         [In Knights vs. Putnam, (3 Pick. 384,) it was held that usury between the endorser and endorsee was no defence in a suit by the endorsee against the maker And this case was so far overruled. But in Lowes Al. vs. Mazzaredo Al., (1 Stark. R. 385,) it was held by the Court of King's Bench, that tile endorsement in a like case was rendered utterly void by the statute; and that, as it could not be dismissed for one purpose and retained for another, a bond fide holder making title through it could not recover. So, also, it has been held in Connecticut. See Lloyd vs. Leach, 2 Conn. Rep. 175, where the subject is learnedly discussed, and the authorise* there referred to. — Ed.]
     
      
       [See Widgery vs. Munroe & Al. 6 Mass. Rep. 449. — Jones vs. Cooledge, 7 Mass. Rep. 199. — President, &c., Hartford Bank vs. Barry, 17 Mass. Rep. 94.— Packard vs. Richardson & Al. 17 Mass. Rep. 122. — Fox & Al. vs. Whitney, 16 Mass. Rep. 118 — The rule in England is clearly settled otherwise. — Jordanie vs. Lashbroke, 7 T. R. 601. — Rich vs. Topping & Al. Peake, N. P. R. 224. — 1 Esp. N. P. C. 176. — Brand vs. Ackerman, 5 Esp. 119. — Kent vs. Lowden, 1 Camp. 177.— And see the elementary writers. — Chitty, 6th ed. 413. — Peake, Ev. 4th ed. 255. — 2 Stark. Ev. 298 Phil. Ev. 7th ed. vol. ii. p. 20. — Ed.]