Case Name: Carroll v. Doster
Court: Supreme Court of Pennsylvania
Jurisdiction: Pennsylvania
Decision Date: 1889-02-04
Citations: 1 Monag. 161
Docket Number: No. 216
Parties: Carroll v. Doster.
Judges: 
Reporter: Cases in the Supreme Court of Pennsylvania; being those cases not designated to be reported
Volume: 1
Pages: 161–167

Head Matter:
Carroll v. Doster.
In an action of assumpsit by Doster, who was the third endorser on & promissory note dated June 1,1883, payable two years after date, against Carroll, who was the payee and first endorser, the note was given in evidence and .also protest of the same for non-payment. Evidence was given on the part of the defendant, to the effect that this note had been discounted by a bank on March 31, 1885, for Barber, who was the second endorser, and who received the proceeds of the discount. Doster’s endorsement was not on the note when discounted but was there on June 4,1885, when it was protested for non-payment. Defendant, Carroll, claimed that his signature was procured in consideration of a promise by Barber not to prosecute Kramer, the maker of the note, for embezzlement. On cross-examination, Carroll testified that Barber did not prosecute the payee of the note; that he, Carrol], did not “ believe that any embezzlement had been committed, never did believe it, but Barber said it was so. I did not know but what ho could convict him, although I believed him innocent. I would not have signed if T thought he committed the embezzlement. I signed the note because I thought he would pay me and because Barber made a promise not to prosecute-him.” Kramer testified that he never embezzled anything from Barber and that he did not owe him any money. Doster, the plaintiff, being called by the-defendant, testified that he had paid for the note after it was protested. On cross-examination, under defendant’s objection and exception, he testified that he purchased the note in suit about four weeks before it became due. Defendant further-testified that he had notified the plaintiff of the defense before the note came due; but it did not appear that this was before the plaintiff had purchased it. No evidence was given to show that an embezzlement had in fact been committed. The court directed the jury to find for the plaintiff under objection and exception by defendant. Yerdict and judgment for plaintiff. On writ of error, assigning the above action of the court as error, the judgment was affirmed by an equal division.
Query, if the court was divided on the question whether or not it is a good defense, in an action on a promissory note, that it was given in consideration of a promise not to prosecute a third party for embezzlement, where there is no evidence that the crime was committed.
Jan. 25, 1889.
Error, No. 216, July T. 1888, to C. P. No. 2, Philadelphia Co., to review a judgment on a verdict for the plaintiff in an action of assumpsit upon a promissory note, at Sept. T. 1885, No. 308. Green, J., absent.
The following was printed in the paper book of plaintiff iix error, as the evidence given on the trial before Mitchell, J.:
Plaintiff offered in evidence the following note:
“ $616.56. Philadelphia, June 1, 1883.
“ Two years after date I promise to pay to the order of Thomas J. Carroll, six hundred and forty-six dollars and fifty-six cents, with interest from date without defalcation, value received.
[Signed] “R. A. KRAMER.”
Endorsed : “ Thomas J. Carroll, P. M. Barber, E. L. Poster. Due June 1, 1885.”
Also, protest of said note for non-payment, in the ordinary form; and rested.
Defendant then called George W. Schooler, who, being sworn, said: “ I am the note clerk of the Spring Garden National Bank,” Note in suit handed to witness. “ This note was discounted by the Spring Garden Bank on the 31st day of March, 1885. It was discounted for P. M. Barber. It was not paid at .maturity and was protested. The endorsement of Doster was not on note when discounted, but was when protested. The Bank was the holder of the note when it vras protested. Doster could not have endorsed it without the consent of the Bank. The note was taken up and paid for on the 9th day of June, 1885. It was paid for five days after protest. It was not endorsed for the purpose of security. Barber received proceeds of note. Bank was holder of the note.”
Thomas J. Carroll was then sworn. Plaintiff’s counsel called on defendant to state what he proposed to prove. Defendant replied that he proposed to prove by witness that he received no consideration for his signature; that his signature, as endorser, was procured by fraudulent means, misrepresentations made by Barber; and that the consideration between Barber and Kramer and Carroll was illegal — to compound a felony. Plaintiff objected unless it is followed by proof or admission of felony committed.
Defendant then supplemented his offer to prove an agreement not to prosecute. Witness then testified as follows: “ I am a real estate agent and broker. I know both Kramer and Barber. My signature as endorser was signed at Barber’s place of business, 1205 Market street. He dealt in builders’ supplies. Q. What was the consideration given or received for your signature, upon that note. A. I did not receive any consideration except the promise not to prosecute my friend Kramer. Barber came to my house the day before.”
Objected to by plaintiff as there is no evidence of Doster’s knowledge of how the note was given. Defendant answered': “ That is to follow.”
“ Barber came to my house and said Kramer had suggested me as a person for security for money due for goods he had embezzled. I said Kramer had talked to me about it, but I had refused. He, Barber, said Kramer had embezzled and he was going to put him in the penitentiary, and had engaged Messrs. Earle & White, the attorneys, to put him there. I had been at Messrs. Earle & White’s office a day or two before and had met Barber and Mr. Williams there, they brought out a bond and warrant of attorney for me to sign. I refused to sign them and left. I refused to give a note and told Barber so. He came to my house before 8 o’clock in the morning. He said he would lose half if I would give a note for half. He, Barber, said he had affidavits as to the facts of embezzlement and he should prove them and send him to jail, but if I would sign the notes he would not prosecute him, but would continue him in his employ and give him a chance to establish himself again and no one would know about this charge. I said under the circumstances that he refrain from prosecuting Kramer, I would sign. Met him, Barber, and Kramer, then at Barber’s, and we talked over it again. I hesitated again about signing the notes and Barber said it was the last chance and he would send him, Kramer, to jail. He would turn the whole matter over to Earle & White. I said, well then I’ll sign and you will refrain from prosecuting him, and he said be would. I signed two notes of $646.56 eaeli. The first note came due and Kramer was out of employment. He had been retained by Barber five or six months and was then discharged. I got notice from the Bank of the note falling due and I saw Kramer, and in consequence of what he said, I paid the note. Kramer refused to defend against the note and I could not, so I paid it. He would not defend, as he was out of employment and was afraid the exposure would hurt him and prevent him from getting a situation, and I would not defend alone. I paid it. Before the present note came due, Doster called on me several times and asked me what I intended to do ? Said I had better pay. I told him why I had paid the first note and said I was sorry I done it. I had objected to paying interest, but now Kramer was not afraid of Barber any more and now we would defend against this note. That Kramer had a situation and Barber could not injure him. I had a long talk with him about the whole circumstances attending the giving of the note, how it came to be given. Just what I have said here.”
On cross-examination witness said: “ The consideration was that Barber was not to prosecute Kramer. He did not prosecute him. I paid the first note with the knowledge of all I know now; but Mr. Kramer was out of a situation and he would not defend then for fear he might not get employment if this thing was made public. I do not believe now that any embezzlement was committed, never did believe it, but Barber said it was so. I did not know but what be could convict him, although I believed him innocent. Innocent men have been convicted. I did not know what Barber would have done. Kramer had recently been married and the prosecution would have hurt him. I would not have signed if I thought he committed the embezzlement. Yes, sir, I signed the notes because I thought Kramer would pay me; his name is on the note. I signed it too because Barber agreed not to prosecute Kramer. He said if I would sign the notes nobody would know anything about the charge.”
Defendant then called Richard A. Kramer, who, being sworn said:, “Went into Barber’s employ in 1881. There six months as salesman and then he put me in charge of slate mantel department. The agreement between us was in writing. That is the agreement. Mr. Carroll received no consideration for signing that note.
“ Barber accused me of embezzling and threatened to prosecute me. There was an agreement made between him and Carroll, not to prosecute me and in consequence of that there was no prosecution. He accused me of taking money from the department and he made a statement amounting to $2500 ; he said I was short. I denied ever having taken one cent. He said there were moneys I collected I had not turned over. I asked for proof of any one case. He said he had heard I had been doing it. He said he had affidavits to show that I had been doing it. He said he would take an inventory to see how it stood. An inventory was taken, it was taken by a man named Feigel whom I used to have in my employ in the slate department and discharged him and he got another man named McCarty. I objected to the way the inventory was taken. They did not put down everything and I left. He said he found shortage of $2500. I said it was not so and said the inventory was not taken right, if it was taken right it would show a profit. He said I must get security or he would have me arrested; that I had been embezzling and he had the proof of it. He said if I wasn’t guilty I was that much short and he would have me arrested; that he would place the matter in the hands of his attorneys, Earle & "White. He said he had placed it in their hands; the affidavits he placed in their hands, he said. I got worked up and went to Carroll and told him what Barber said. I don’t owe Barber a cent and I never did owe him one cent.”
On cross-examination, witness said: “ I did not embezzle anything from Barber; I never took a cent and was perfectly innocent when I gave these notes; I induced Carroll to endorse them. He knowing I was innocent.”
Defendant then offei-ed in evidence the agreement of June 8, 1881, of which the following is a copy:
“Philadelphia, June 8, 1881.
“R. A. Kramer,
“Dear Sir: — In consideration of your taking charge of my mantle department and devoting your whole time and attention to said department, I will allow you as compensation for your services, one-half of all the net profits resulting from carrying on said department. By net profits is meant the amount cleared after all bills are paid, all expenses of carrying on said business also paid, also all depreciation of stock deducted, &c. Meaning net balance that is made from books, all doubtful accounts having been charged to profit and loss.
“ I will also agree at the end of two months to take stock and strike balance and then advance to you two-thirds of what bookkeeper shall decide is due you from balance, that and this shall be done each succeeding two months if I am not satisfied to make such advances as you may desire. This arrangement is to continue for one year unless I see you are not conducting business profitably and to the advantage of the house. But your place is not to be given to any one else for the year unless it be that it appears that nothing is being made or that your business habits are not to the advantage of the house.
“P. M. BARBER, [seal]
“ Witness present,
“W. H. Tucker.” [seal]
The defendant then called Doster, who, being sworn, said: “ I am the plaintiff in this case; I paid the note after it was protested; I paid the note five days after it was protested.”
On cross-examination, witness was asked: “When did. you purchase this note?” Objected to by defendant. Objection overruled and exception noted.
“About four or five weeks before it came due I lifted it with my own money; I paid it in cash; I notified the president of the bank that I had purchased it; went to the bank and told Mr. Kennedy I had purchased the note and if it was not paid I would pay it; I endorsed it at his desk.”
Re-examined. “I had bought it; had not paid for it yet.” Defendant then closed.
The court directed the jury to render a verdict for the plaintiff for the whole amount of the claim.
The ruling and direction was objected to by defendant, and an exception noted.
Yerdict for plaintiff for $823.93 and judgment thereon.
The assignments of error were as follows:
“ 1. Because the learned judge erred in permitting the plaintiff to be asked on cross-examination the following question: "When did you purchase the note ?
“ 2. Because the learned judge erred in directing the jury to render a verdict for the plaintiff for the whole amount of the plaintiff’s claim.”
William Hopple, Jr., for plaintiff in error.
Under the evidence, Doster cannot claim protection against the defenses that might be set up against Barber for the following reasons: 1. He did not pay anything for the note until five days after it was protested. 2. He did not take it regularly, in the usual course of business, before maturity. 3. Carroll’s undisputed testimony was that he had informed Doster before the maturity of the note and before he, Doster, paid his money, of all the circumstances under which the note and endorsement had been made. 4. The question should have been submitted to the jury to determine whether Doster was an honest holder, without notice of the equities existing.
The note was discounted by the bank some time before maturity and, by the discount, the title and ownership vested in the bank. Bouv. L. Diet., title, Discount; Fleckner v. U. S. Bank, 8 Wheat. 338. No title was ever in Doster until after maturity and he, therefore, took subject to the previous equities.
The facts of this case, to wit, a threatened prosecution and an agreement not to prosecute, etc., are similar to those in National Bank v. Kirk, 90 Pa. 49, approved in Swope v. Ins. Co., 93 Pa. 251. The latter case was simply a threat to prosecute, without any agreement, and without any evidence of a crime, and subsequent failure to prosecute from which the jury might infer an agreement not to prosecute. In Bank v. Kirk there was in fact no crime committed, the son having signed the father’s name with the latter’# consent.
Kramer’s denial of guilt did not establish his innocence, while Barber’s declaration of guilt should have sent the case to the jury to determine whether the crime had been committed and Barber knew it.
Tbe rule is, a man who stipulates for iniquity does so at his peril. Collins v. Blantern, 2 Wils. 350; Bank v. Matthewson, 5 Hill, 253.
Even if the agreement was to become surety for the debt, it was also an agreement not to prosecute; and where there are two considerations to an agreement, if either of them be unlawful, the agreement is void. Barton et al. v. P. J. & U. F. Plank Road Co., 17 Barb. 397; Rose v. Traux, 21 Id. 361; Filson v. Himes, 5 Pa. 452; 11 Wheat. 258; 4 Comst. 449.
All contracts against public policy are void. Ormerod v. Dearman, 100 Pa. 561; Bell v. Leggett, 7 N. Y. 176; Hatzfield v. Gulden, 7 Watts, 152; Clippinger v. Hepbaugh, 5 W. & S. 321; Bredin’s Ap., 92 Pa. 246; Ham v. Smith, 87 Pa. 63; Coal Co. v. Coal Co., 68 Pa. 181; Bank v. Mathewson, supra.
It is corrupt intent and not accomplishment which controls. Porter v. Havens, 37 Barb. 343-349 ; 4 T. R. 466; 5 T. R. 592.
A note given to secure the payment of damages arising from the tort of a stranger, without other consideration, is nudum pactum. Conmey v. Macfarlane, 97 Pa. 361. An agreement, founded upon a false conception, is a nullity, in respect to the party who misconceived, because he assented to it, not absolutely, but on a condition not verified by the event. Frevall v. Fitch, 5 Wh. 325; Riddle v. Hall, 99 Pa. 116.
Henry T. King, for defendant in error.
This case cannot be distinguished from Swope v. Ins. Co. The testimony offered in that case was rejected because it had no tendency to prove the guilt of the accused. In this case, all the testimony offered proved that Kramer was innocent. In Bank of Oxford v. Kirk it was proved by the father, whose name had been forged by his son, that the forgery had been committed.
Carroll was not induced to endorse, this note by any misrepresentations. He testified that he never believed that any embezzlement had been committed. Baseless threats cannot be a defense. Griffith v. Sitgreaves, 90 Pa. 161.
The discount of the note was a purchase only by way of discount. Fleckner v. U. S. Bank, 8 Wheat. 338. The bank only held the note as a pledge. 2 Bouvier’s Diet. 341.
Nothing but clear evidence of knowledge can impeach the prima facie title of a holder of negotiable paper taken before maturity. Moorehead v. Gilmore, 77 Pa. 118. There is no evidence that the defendant called upon the plaintiff and explained the transaction before the latter had purchased the note.
Feb. 4, 1889.

Opinion:
Per Curiam,
This case is affirmed by an equal division.
Feb. 13, 1889. Motion for re-argument before a full Bench.
The following reasons were assigned in support of the motion: 1. The affirmance by an equal division, having been occasioned by the absence of one of the Judges, and the sitting of the Judge who tried the case in the court below, has deprived petitioner of his right to writ of error. 2. The affirmance was reached by considering, first, the arguments in the paper books or at the hearing, or, second, some principle not suggested by counsel. 3. The facts proved at the trial demonstrate, first, either an attempt to defeat the law for punishing offenders, or, second, the procuring of a promissory note by false, immoral and illegal means, and without consideration. 4. The law points raised remain unsettled. 5. The plaintiff in error, being an accommodation endorser, without consideration, which was known to defendant in error, is entitled to a full hearing by all the judges. If he pays the judgment it will be on a mere legal technicality. 6. The questions involved are of great interest to the commercial public.
Per Curiam. — Feb. 18, 1889. — Motion denied.
W. M. S., Jr.
Cf. Fulton v. Hood, 34 Pa. 365, commented on in National Bank of Oxford v. Kirk, 90 Pa. 51. See, also, Swope v. Ins. Co., 93 Pa. 251.