Case Name: K. and E. Townsend against Bush
Court: Connecticut Supreme Court
Jurisdiction: Connecticut
Decision Date: 1814-11
Citations: 1 Conn. 260
Docket Number: 
Parties: K. and E. Townsend against Bush.
Judges: 
Reporter: Connecticut Reports
Volume: 1
Pages: 260–279

Head Matter:
K. and E. Townsend against Bush.
THIS was an action of assumpsit against Bush as acceptor of a bill of exchange drawn by Ebenezer and Atwater Townsend, and payable to the plaintiffs or order. There was also a count for money paid, laid out and expended for the defendant’s use. The cause was tried at New-Haven, August term 1814, before Swift, Brainard and Baldwin, Js. On the trial, the defendant admitted the drawing and acceptance of the bill, as stated in the declaration. His defence was usury under the following circumstances. E. and A. Townsend applied to W. Leffingwell in New-York for the loan of a sum of money. Leffingwell agreed to loan them the money at twelve per cent. interest, upon their giving him a bill of exchange for the amount, drawn by themselves on the defendant and accepted by him, payable to the plaintiffs K. and E. Townsend, and by them indorsed. These terms were complied with ; the defendant at the time of accepting the bill, and the plaintiffs at the time of indorsing it, having no notice of the corrupt agreement. Leffingwell indorsed the bill to the Derby Bank, and there procured it to be discounted. When it became payable, the Derby Bank gave due notice to the several parties to the bill ; and afterwards commenced a suit against the plaintiffs on their indorsement in the state of New-York, and by the judgment of the supreme court of that state recovered the amount of the bill with interest and costs, which the plaintiffs accordingly paid. The defendant accepted the bill for the honour of the drawers, having no effects of the drawers in his hands. To prove these facts, the defendant offered the individuals com posing the firm of E. and A. Townsend as witnesses ; offering also, at the same time, to shew, that they had no interest in this suit, being discharged from all liability on the bill under an act of insolvency in the state of New-York. The plaintiffs objected to the admission of these witnesses, on the ground that having drawn the bill, and thereby given credit to it, they were incompetent to shew that it was invalid on account of usury; and also on the ground that any proof of said corrupt agreement would be irrelevant on this trial. The court excluded the witnesses, and directed the jury to find a verdict for the plaintiffs ; which being accordingly done, the defendant moved for a new trial. This motion was reserved for the consideration of all the Judges.
A party to a negotiable instrument, who is divested of his interest, is a competent witness to prove it usurious in its creation.
Where the security given in pursuance of a usurious agreement was a bill drawn upon and accepted by A., payable to and indorsed by B., without notice of the usury ; it was held that B., who had paid the amount of the bill to an indorsee, could not recover gainst A. either in an action upon the bill, or in a count for money paid to the defendant’s use.
New-Haven,
November, 1814.
N. Smith and R. M. Sherman in support of the motion.
1. The drawers of this bill, not having any interest in the cause, were competent witnesses. This point is to be considered here as res integra ; for though some judges may have expressed an opinion upon it, no case has come up which required a decision upon it. In England, its history begins with Walton v. Shelley, 1 Term Rep. 296. in 1786, and ends with Jordaine v. Lashbrooke, 7 Term Rep. 597. in 1798. In the first case, the decision was against the competency of the witness generally. The rule was then limited and qualified by various decisions at nisi prius, and by extrajudicial opinions in banco. Bent v. Baker, 3 Term Rep. 32, 36. in 1789. Charrington v. Milner, Peake’s Ca.6. in 1790. Humphrey v. Moxon, Peake’s Ca. 52. in 1791. In Adams v. Lingard, Peake’s Ca. 117. in 1792, Lord Kenyon gave an explicit opinion that the indorser of a bill is a competent witness to invalidate it. He expressed the same opinion in Rich v. Topping, 1 Esp. 176. in 1794. Then came up Jordaine v. Lashbrooke, before the King’s Bench, in which, after full consideration, the doctrine of Walton v. Shelley was wholly exploded. The question has not been heard of since in the English courts. In that country Jordaine v. Lashbrooke is now as good law as Bent v. Baker. But if we lay authorities out of the question, and resort to the principles of the common law, it is difficult to perceive why these witnesses should not have been admitted. They were not incompetent from want of understanding, or from disbelief in the obligation of an oath ; they were not interested ; and had not been convicted of any infamous crime. The common law knows of no other disqualification of a witness. The rule of the civil law, by which the decision in Walton v. Shelley was professedly governed, is applicable only to a party. It is every day’s practice in public prosecutions to admit a particeps criminis as a witness. Further, in the present case, no turpitude is imputable to the witnesses offered. They were the borrowers, not the lenders of money at usurious interest. The law considers them as innocent ; its object is to protect them ; and it rather invites them to make complaint, than stops their mouths.
It has been attempted to support the rule which we oppose on the ground of policy ; which requires, it is said, that no man, after having given credit to a bill by placing his name upon it, should be permitted to come into a court of justice, and impeach it. But a party who is sued upon a bill which he has given credit to by his signature, may impeach it by a plea of usury. Does not the policy in question bear as hard upon a party as upon a witness ? In another point of view the ground of policy may be taken successfully. If the only witnesses to a usurious transaction may be excluded by getting their names upon the security, it will in effect repeal the statute. The policy of the law has hitherto been to suppress usury, not to encourage it.
2. The evidence offered was relevant, because it went to establish the defence of usury. The bill in question was given as a security for the payment of money lent whereby more than lawful interest reserved. If the bill was usurious in its inception, no subsequent transfer of it could make it valid. An indorsee for a valuable consideration, without notice of the usury, can maintain no action upon it. Lowe v. Waller, Doug. 736. Nor does it make any difference that in this case neither of the parties was a party to the usury. The transaction was really a loan of money by Leffingwell to E. and A. Townsend, secured to Leffingwell by this bill, drawn by E. and A. Townsend, accepted by the defendant, and indorsed by the plaintiffs. It was a part of the original corrupt agreement that such a bill, so drawn, accepted and indorsed, should be procured and delivered to Leffingwell as security for the money lent. The drawers had no effects in the hands of the drawee, and owed nothing to the payees. There was no delivery of the bill, and of course it did not exist as a bill, until it came into the hands of Leffingwell. This being the substance of the transaction, the bill is void within the statute as much as though it were a promissory note given by E. and A. Townsend directly to Leffingwell. Fields v. French, 4 Day's Ca. 251. Wilkie v. Roosevelt, 3 Johns. Ca. 66.
This case is very distinguishable from a class of cases where the security was given upon a new consideration growing out of a transaction originally usurious ; as Cuthbert v. Haley, 8 Term Rep. 390., Turner v. Hulme, 4 Esp. 11., Bearce v. Barstow, 9 Mass. Rep. 45. [Some of the Judges intimated an opinion that Turner v. Holme was not law.] It is not, however, necessary to controvert the authority of that case. The present case is within the qualification of Lord Kenyon's opinion ; as the form of this transaction was a colourable shift to evade the statute, devised when the money was lent.
As to the money count, it is only necessary to observe, that the sole ground of claim against the defendant arises from his acceptance of the bill. If that was void, he cannot be liable in any way.
Staples and Denison, contra.
1. E. and A. Townsend were inadmissible witnesses to prove usury in this bill. The case of Walton v. Shelley is the first reported case in which the question was discussed ; but the judges do not there consider themselves as establishing a new rule. They speak of it as at that time “ a settled principle." The court, consisting of Lord Mansfield Ch. J. and Willes, Ashhurst and Buller, Js., were unanimous in the decision. The rule was afterwards repeatedly recognized, or admitted, by different judges, at Nisi Prius. Charrington v. Milner, Humphrey v. Moxon, Adams v. Lingard, in Peake's Cases. Hart v. M‘Intosh, 1 Esp. 298. In the case last cited, Justice Buller declared explicitly, that he would adhere to the rule ; and Justice Le Blanc, then at the bar, said, that Chief Justice Eyre was of the same opinion. At length, Jordaine v. Lashbrooke was decided by the opinions of Lord Kenyon, Ch. J. and Grose and Lawrence, Js. against the opinion of Ashhurst, J. The question, then, stands thus upon the authority of the judges in Westminster-Hall : against, the competency of the witness, Lord Mansfield, Chief Justice Eyre, and Willes, Ashhurst and Butter, Js. ; for admitting the witness, the three judges who decided Jordaine v. Lashbrooke.
In this country, the decisions have been uniformly against the competency of the witness. The superior court of Connecticut have repeatedly decided thus on the circuits. In Allen v. Holkins, 1 Day’s Ca. 17. the question was discussed before the supreme court of errors ; they recognized the doctrine of Walton v. Shelley, and decided the case on that ground. [Smith, J. I think I recollect Mr. Ellsworth’s expressing the opinion stated by the reporter.] That the case might have been decided as it was on other grounds does not destroy its authority. In Webb v. Danforth, 1 Day’s Ca. 301. before the same court, the doctrine was admitted. In Massachusetts, New-York and Pennsylvania, it is settled law. Warren v. Merry, 3 Mass. Rep. 27. Parker v. Lovejoy, 3 Mass. Rep. 565. Churchill v. Suter, 4 Mass. Rep. 156, Widgery v. Munroe & al. 6 Mass. Rep. 449. Winton v. Saidler, 3 Johns. Ca. 185. Coleman v. Wise, 2 Johns. Rep. 165. Stille v. Lynch, 2 Dall. 194. The great principle of public policy on which the rule is founded, ought to be preserved inviolate in a commercial state.
2. Admitting the competency of the witnesses, still the facts offered to be proved were irrelevant, as they constitute no defence to the action. All persons claiming under Leffingwell, however innocent or meritorious, are affected by the usury ; but these parties, from the relation in which one stands to the other, are not affected. The contract between the acceptor and the indorsers had no usury in it. A bill accepted in the hands of an innocent holder, although affected with usury in its creation, is good as between the acceptor and such holder. Ord on Usury 109. Hussey v. Jacob, Holt 328. S.C.1 Ld. Raym. 87. S.C.Com. Rep. 6.
Further, the plaintiffs have been compelled to pay the amount of the bill by the decision of a competent tribunal upon the very point before the Court. If the plaintiffs were legally liable to the Derby Bank, it necessarily follows that the defendant is liable to the plaintiffs. The defendant being the party ultimately liable, the money paid by the plaintiffs was money paid for his use.
In the same case, p. 34. Lord Kenyon is reported to have recognized the rule as limited to negotiable paper ; but in Rich v. Topping, 1 Esp. 177. he denies having used the words imputed to him.
Vide Stat. tit. 170. s. 2.

Opinion:
Trumbull,
The principal question in this case is, Whether Ebenezer and Atwater Townsend, the drawers of the bill in question, are admissible witnesses in an action by the plaintiffs as payees of the bill against the defendant as acceptor, to prove that it was executed on an usurious contract, and therefore is void in law.
The rule that no person can be permitted to give testimony to invalidate any instrument to which he has made himself a party by affixing his signature, in cases wherein he has no interest in the event of the suit on trial, was first adopted in the case of Walton v. Shelley, 1 Durnford & East 296., by Lord Mansfield, and the other judges of the King's Bench. He states that "the rule is founded in public policy ; that there is a sound reason for it ; because every man, who is a party to an instrument gives a credit to it ; that it is of consequence to mankind, that no person should hang out false colours to deceive them, by first affixing his signature to a paper, and then afterwards giving testimony to invalidate it ; that it is emphatically right in case of notes, because in consequence of different statutes, two very hard cases have arisen ; first, with respect to a gaming note, which, though in possession of a bona fide purchaser without notice, is void ; and in the case of usury, a note given for an usurious consideration, though in the hands of a fair indorsee, is equally void ; and therefore, whenever a man signs these instruments, he is always understood to say, that to his knowledge there is no legal objection to them whatever." He then quotes the maxim of the civil law, nemo suam allegans turpitudinem est audiendus, and applies it as conclusive on the present point. The other judges concurred, and established this as a general rule of law.
The English courts soon found the principle was laid down on too broad a scale, and narrowed it in its application, to negotiable instruments only. No new or additional reasons were ever adduced in its support. It was adhered to on the grounds stated by Lord Mansfield, and the authority of the decision in that case. But at length, the rule was exploded in the King's Bench, and such a witness determined to be admissible, unless interested in the event of the suit on trial. See Jordaine v. Lashbrooke, 7 Durnf. & East 601.
As the decisions of the highest court and ablest judges at Westminster-Hall have been thus directly contradictory, and as their principle (notwithstanding the dicta of several of the judges in Allen v. Holkins, 1 Day's Cases in Error, p.18. adopting the rule as sound law, and the decision in Webb v. Danforth, p.301. denying its application as to facts subsequent to the execution of the instrument) has never till now come directly in question before the highest courts in this state, it is our duty to decide it according to the general rules and principles of law respecting admissibility of testimony ; and if the grounds and reasons in Walton v. Shelley are found to be fallacious, we cannot consider the case and its authority conclusive.
The first ground Lard Mansfield takes, is, that every person who signs an instrument, thereby gives it a credit, and can never be admitted to dispute its validity. Before we adopt this principle of universal exclusion and estoppel, we must enquire what credit each several party, by putting his signature upon a negotiable instrument, thereby gives to it, and what obligation he thereby incurs ; for each signer stands on a different ground.
The drawer of a bill or negotiable note, acknowledges himself indebted to the payee to the amount of the sum it contains, and engages to pay the damages, in case the bill shall be dishonoured, or the note uncollected, without the fault of the payee, or of those to whom it may be indorsed.
The indorser of a bill or note acknowledges his receipt of a valuable consideration, and contracts to pay the sum, in case it cannot be obtained of the drawer.
The acceptor acknowledges it to be duly drawn ; he is not admitted to deny the hand-writing of the drawer ; and he contracts to pay the sum according to its contents to the legal holder.
These are the rules and principles of common law, as adopted and sanctioned by the courts in this state.
The indorsee or holder of a negotiable security has nothing to do with the transaction between the original parties. See Jordaine v. Lashbrooke. Nor has the drawer or acceptor any thing more to do with the contracts between subsequent indorsers and indorsees. Each party is bound only so far as his own obligation extends, and cannot be precluded from denying any fact not acknowledged by his signature. All these contracts are separate and independent. No party by his signature warrants the validity of any contract but his own, or gives any farther credit to the security, or is interested in the event of any suit on the several contracts of other parties, whose names may appear on the instrument. He warrants nothing farther with respect to the validity of the draft, he hangs out no false colours, and is not estopped by his signature from testifying to any facts respecting the instrument, or any legal objections within his knowledge.
The only fundamental principle of the common law, applicable to the present question, is this, that no man can be a witness in his own cause ; and this rule hath ever been considered as applicable to every case in which he is a party, or is interested, and to no others. It was formerly holden as well in the English courts as our own, that an interest in the question was a sufficient ground for excluding a witness. It is now settled law in both, that an interest in the event of the suit is the only ground on which he can be rejected ; and, that a mere interest in the question does not affect his competency, but his credit with the jury only. But this distinction was not fully settled at the time the case of Walton v. Shelley was tried. Justice Buller, though he concurred in the principle that no man can invalidate his own security, relied much in his argument on the fact that the witness was interested in the question, because the question put to him was upon the validity of the notes he had indorsed ; although he clearly was not interested in the event of the suit on trial, as it must be uncertain whether he would ever be subjected to a subsequent action on the instrument, was already liable on his signature, and could never give the verdict in evidence in his favour.
The maxim of the civil law, that no man is to be heard who alleges his own turpitude or crime, was never by any court or judge, before Lord Mansfield, applied to the inadmissibility of a witness, but only to the rights of the parties in a suit or action. No suitor ran support a claim, in which the ground or consideration is an unlawful act of his own ; nor can any defendant be heard on a defence, grounded on his own unlawful act. But an accomplice in a crime, a fraud, or any illegal transaction, was always an admissible, witness, unless immediately interested in the suit. I may further observe, that the term, " turpitude," can with no propriety be applied to an act, not malum in se, but only malum prohibitum, by force of some statute, making it penal in some particular country, or jurisdiction.
In Jordaine v. Lashbrooke, Lord Kenyon says, " The rule contended for is this, whatever fraud may have been committed, if the party to the fraud can get on the instrument the name of the person, who may be the only witness to the transaction, he will stand entrenched within the forms of law, and impose silence on that only witness, though he be a person of unimpeachable character, and not interested in the cause." This he denies to be law. Grose, Justice, says, "Let the plaintiff in this case resort to his indorser to recover back the consideration he gave for the bill."
Indeed, if a man sell and indorse a note executed by an infant, or feme covert, and void at common law, or void by statute as being usurious, unstamped or a forgery, I see no legal defence he can set up against an action of assumpsit by the indorser, for the money paid on a consideration which has wholly failed. For that is not an action on the bill or note, but rests entirely on the ground that the note is void in law. If such an action can be supported, there is no hardship in the case of an innocent purchaser ; he has his remedy. If in any case he is deprived of every legal remedy, no court can have a right, in compassion to the hardship of his situation, to assist him in evading the law by excluding such witnesses, or evidence, as is admissible in all other cases.
The hardship upon the innocent indorsee, which seems so strongly to have influenced the mind of Lord Mansfield, is indeed no more than this ;—by the statutes to which he refers, all bills or notes, where the consideration is money lent on usury or for gaming, are declared void to all intents and purposes whatever ; and consequently, the indorsee, whenever he brings his suit on the note or bill itself, against the drawer, promissor, or acceptor, must fail of a recovery in that action. But he is not without remedy for, if a fair and bona fide purchaser without notice, he may recover of the indorser oil his indorsement. Bowyer v. Brampton, 2 Stra. 155.
In the case of Lowe and others against Waller, Doug. 708. in which all the former cases are well considered, Lord Mansfield, himself says, " It is better that the law should be as it is with respect to bills and notes, than other securities ; because they are generally payable in a short time, so that the indorsee has an early opportunity of recurring to the indorser, if he cannot recover on the bill."
I am therefore of opinion that the witnesses offered are admissible, notwithstanding they have put their signature upon the bill.
But it is farther urged, that their testimony is irrelevant, and was properly rejected on that ground.
This depends entirely on the point, whether an innocent indorsee can recover in an action brought on an usurious bill, against the acceptor. This was the sole point in the case of Lowe and others against Waller ; in which case, after taking time to consider, the court unanimously decided, that a bill of exchange given upon an usurious consideration is void, even in the hands of an indorsee for valuable consideration without notice of the usury. And I hold this decision to be sound law, notwithstanding the extrajudicial opinions cited at the bar from Holt, Lord Raymond and Comyns.
On these grounds, I advise a new trial.