Case Name: M'Fadden against E. Maxwell
Court: New York Supreme Court of Judicature
Jurisdiction: New York
Decision Date: 1819-10
Citations: 17 Johns. 188
Docket Number: 
Parties: *M’Fadden against E. Maxwell.
Judges: 
Reporter: Johnson's Reports
Volume: 17
Pages: 157–160

Head Matter:
*M’Fadden against E. Maxwell.
A promissory note for 600 dollars, payable 6 months, was given by agreement be-{¡^¾. fendant did not ^ls 0fCr^n the note was to and IT. on the same ⅞’knowledge of *e defend-tile’note u»*» plaintiff, to sc-2i3doiiare and ⅛ plaintiff ofC<the same date, pro-“⅛f ⅜ lars> ⅛ six “ot!f was pakf and if not, then ¿⅞0™™-the defendant s|“™w »ot fake ⅛fotenótbe-⅛ ⅛® brought “a¡nsl t¿clj¿n ⅛,⅛, ⅛ ⅛ dobor,’’was^a ««npeteat wit-defendant, to cou‘ which the note was given, and o Í its having failed, and that the plaintiff was informed, at the lime of the endorsement to him, of those facts : First, because, by the ./agreement between M. and the plaintiff, the whole transaction was void, on the note not being paid, and wnieh ought to have been returned to M.; and, secondly, because M. was not called to prove the note void at its inception, but to show that it became so, by the subsequent determination of the defendant not to take the goods, and that the plaintiff had notice of the condition on which the note was given.
TIMS was an action of assumpsit, tried at the Rensselaer circuit, in December, 1818, before Mr. Justice Spencer.
The action was on a promissory note, dated August 10th, ]8Hi, made by the defendant for 600 dollars, payable six months after date, to Anthony L. Maxwell, or bearer, and by him endorsed to the plaintiff. At the trial, the defendant olfered A. L. Maxwell, the payee and endorsor, as a witness to prove that the note was given to him by the defendant, upon condition that, if the defendant should take a quantity of merchandise from the said A. L. Maxwell, then the note was to be valid, otlierwi.se it was to be void and to be returned to the maker ; and that the plaintiff, at the time lie received the note for A. L. Maxwell, was informed of the condition on which the note was given ; but this evidence being objected ió by the plaintiff, the witness was, at first, rejected by the judge ; but he was admitted, afterwards, on its appearing from evidence, subsequently produced, that the plaintiff held the note as a trustee for him. The defendant then called the subscribing witness to the note, who stated that the defendant had been in treaty with A. L. Maxwell, for the purchase of all the goods in his store, and that the note in question, and two other notes, each for the same amount, were made by the defendant, and delivered to A. L. Maxwell, upon condition that if the defendant should, after consulting his father, con-elude not to take the goods, then the notes were to be null and void, and returned to the defendant. The defendant, also, gave in evidence the following receipt; “ Six months after date, for value received, I promise to pay A. L. Maxwell, or order, one hundred and eighty-seven dollars, if the note of his in my hand, endorsed #by him is paid me ; and if not, to be valid and of no use as an agreement, as witness my hand the 10th day oí August, 1816. Michael
The plaintiff then offered to prove that the note on which -this action was brought was endorsed to him by A. L Maxwell, to secure the payment of 213 dollars, owing to the plaintiff from A. lb Maxwell, and that he gave the receipt, or note above mentioned, for 187 dollars, for the excess of the note endorsed, beyond the debt due to him, and as a memorandum that A. L. Maxwell was interested in the note to that amount, and no more. This evidence was objected to, on the ground that it would contradict the receipt, and it was excluded by 1 J the judge, who then stated that the defendant having shown, by the receipt above mentioned, that the plaintiff held the note in question as a trustee for the endorsor, A. L. Maxwell might-be admitted as a witness to show the consideration upon which the note was given. The witness was then called, though objected to by the plaintiff, and stated the terms and conditions on which the note in question, and the other two notes, were given, as before testified by the subscribing witness ; and that the defendant, after consulting with his father, gave notice to the witness, a few days after the execution of the note, that he declined taking the goods ; that the same were not removed from the store of the witness, and that the defendant never received them, nor any other consideration for the note. The witness returned the other two notes; but did not inform the defendant what he had done with the note in question. That at the time he endorsed the note in question to the plaintiff, and took the receipt from him for 187 dollars, as evidence of the balance which would be due to the witness, if the note was paid, he informed the plaintiff of the condition on which the note was given.
A witness for the plaintiff, who was present when the note was endorsed by A. L. M. to the plaintiff, stated, that he heard nothing said of any condition on which the note was given; and that the defendant was a brother of A. L. M. Another witness testified, that A. L. M., in conversation, said, that he did not inform the plaintiff, at the time of indorsing the note to him, of the condition on which it was given.
A verdict was taken, by consent, for the plaintiff, for the 213 dollars, with interest, subject to the opinion of the court on the question, as to the competency of A. L. M., the witness, to prove the facts testified by him as to the note; and it was agreed, that if the court should be of opinion, that he was not competent, then judgment was to be entered for the plaintiff, on the verdict,; but if the court should be of opinion, that he was a competent witness, then a judgment of nonsuit was to be entered.
The case was submitted to the court, on the points stated by the counsel, without argument.

Opinion:
Spencer, Ch, J.,
delivered the opinion of the court. This case presents the sole question, whether A. L. Maxwell was a competent witness, under the circumstances of the case, to prove, that the note in question was given on a consideration which failed, and that the plaintiff was informed of that fact when he took it, the witness having endorsed the note to the plaintiff.
The objection now, also, taken, that he was interested, as regards the costs of the suit, ought not to be discussed, for that objection was not made at the trial; if it had been, it would, undoubtedly, have been obviated by a release of any claim to costs.
It is clear, that the witness stood indifferent between the parties. If the plaintiff recovered, he would have been answerable to the defendant for the amount; if the plaintiff failed, he remained answerable to him for the amount claimed in this suit. The objection, then, is confined to the mere circumstance of his being an endorsor, called upon to invalidate a note to which he had given currency, by showing that it was without consideration, and that the plaintiff was apprized of that fact when he took it.
It struck me, at the trial, that the promissory receipt given by the plaintiff, on the 10th of August, 1816, showed, that the plaintiff received the defendant's note as a collateral security, and that the plaintiff was a mere trustee for the witness. *It is evident that he was so to the amount of 187 dollars.
The note in question, and the written stipulation given by the plaintiff to the witness, bear the same date. The note was payable in six months, and the engagement made by the plaintiff to the witness, is to pay the 187 dollars to the witness in six months, if the note was paid to the plaintiff; if not, then the agreement was to be void, though the paper states that it was to be valid, and of no use as an agreement, but evidently meaning, that it was to be void. If the agreement was to be void, as regarded the witness, the whole transaction was to be annulled, and the plaintiff would be bound to re-deliver the note; for what right had the plaintiff to retain the note, if he was not to be answerable to refund to the witness the surplus of 187 dollars beyond what was due from the witness? I now consider the agreement, after full consideration, as avoiding the whole transaction. The substance of the transaction is this: the witness, being indebted to the plaintiff, lodged this note in his hands as a collateral security, on condition that, if the note was duly paid, the witness should receive 187 dollars of the money, but if not, then the whole agreement was to be null; and, as a necessary consequence, the witness was to have the note re-delivered to him. If this is a just exposition of the agreement, then the retaining the note by the plaintiff, and attempting to enforce it, was a violation of the agreement; but, in another view of the case, I am satisfied that Maxwell was a competent witness. The note was to take effect, or not, by the agreement or disagreement of the defendant to perfect the contract for the witness's goods in his store. The witness was not testifying to any fact which showed that the note was void in its inceplion, but that it became so by the determination of the defendant, not to take the, goods; and this fact being communicated to the plaintiff, he took the note subject to that condition. In the case of Skelding and Haight v. Warren, (15 Johns. Rep. 270.) we decided, that a party to a negotiable note might testify as to any facts subsequent to its execution, that is, to the signature of the note. The plaintiff did not take this note in the usual course of business; he retained his pre-existing demand #against the payee ; he took it only as a collateral security for part of the amount.
Judgment of nonsuit,
Vide Powell v. Waters, ante, p. 176, and p. 179, note.