Case Name: Rogers and others vs. Morton and others, assignees of H. B. Gwathmey
Court: New York Supreme Court of Judicature
Jurisdiction: New York
Decision Date: 1834-10
Citations: 12 Wend. 484
Docket Number: 
Parties: Rogers and others vs. Morton and others, assignees of H. B. Gwathmey.
Judges: 
Reporter: Wendell's Reports
Volume: 12
Pages: 484–488

Head Matter:
Rogers and others vs. Morton and others, assignees of H. B. Gwathmey.
Where, on the settlement of an account, a debtor gave to his creditor several securities in payment of an assumed balance, and amongst others a promissory note payable to a third person, and an action was subsequently brought upon the note by the assignees of the payee, who had been discharged as an insolvent; it was held, on the debtor showing that the true balance was greatly less than the assumed balance, that the onus probandi of showing how the payee came-, to the possession of the note, or rather the consideration given by him for it, was cast upon the plaintiffs; and omitting to do so, that the defendant was entitled to a deduction to the amount claimed as having been allowed on the settlement to the creditor, beyond the amount actually due.
Error from the superior court of the city of New-York. Morton and others, assignees of H. B. Gwathmey. an insolvent debtor, declared upon a note bearing date 2d January, 1828, for $2000, given by the defendants, payable to Gwath-mey, with interest from the 26th of the preceding October. On the trial of the cause, the making of the note and the appointment of the plaintiffs as assignees were admitted. The defendants proved that the note in question was given on a settlement with one John Grimshaw of an account which he presented against them, exhibiting a balance in his favor of $5337 61 cts, and that one item in such account against the defendants was their draft on one J. Richards, of New-Orleans, for $2000, bearing date 10th November, 1826, payable at 90 days to N. Rogers, and endorsed by him to Jeremiah Thompson, which draft was returned protested; that there was a payment made on account of such balance of two acceptances amounting together to $2550, and the note in question was made and delivered. The acceptances, which were subsequently transferred by Grimshaw to a third person, were duly paid. Thompson purchased of the defendants the draft on Richards, and after it was returned protested, Grimshaw offered him $1700 for it, and he agreed to sell the draft to him for that sum, and would have delivered it to him, had he paid according to the agreement, which he did not do. Thompson kept the draft for Grimshaw until after Grimshaw’s failure, which took place in the latter part of October, 1827. Grim-«haw never was the holder of the draft. On the 20th January, 1828, Thompson sold the draft to Samuel Bell, and the defendants subsequently paid Bell the amount thereof. The defendants after proving that ten days before the trial of the cause, they gave notice to the plaintiffs that on the trial they would prove that the note in question was obtained from them without legal or sufficient consideration, and by undue means, and that they would require the plaintiffs to prove the consideration given by Gwathmey for the note, and the time when he bee,ame the holder thereof, insisted that from the facts in the case, it was manifest that at the date of the note in question, Grimshaw was not the holder of the draft on Richards, and consequently the balance due to him at the time of the settlement was only $3276,31 ; that after deducting from that sum the acceptances received by Grimshaw, he was entitled only to the balance, with the interest thereof since 26th October, 1827, which now amounted to $822,24, for which sum they conceded they were liable to have a verdict pass against him; but that as to $1177,71, the residue of the note in question, either fraud or want of consideration had been shown — either of which was sufficient to cast the burden upon the plaintiffs to prove a consideration from Gwathmey to Grimshaw; and that the plaintiffs haying failed to prove such consideration, Gwathmey ought to be considered as the trustee or agent of Grimshaw, and then the same defence was admissible as though the note had been made payable to the latter, and the suit brought in his name ; and they prayed the court to instruct the jury accordingly. The court instructed the jury that the plaintiffs were entitled to a verdict for the whole amount of the note, and the jury found accordingly; upon which verdict judgment was entered. The defendants having excepted to the charge of the court, obtained a bill of exceptions to be sealed, and sued out a writ of error.
A. G. Rogers & J. W. Gerard, for the plaintiffs in error,
insisted that as Gwathmey was the payee, and not the endorsee of. the note, the right to impeach the consideration was unquestionable ; but if Gwathmey was to be regarded as an endorsee, the facts shown by the defendants, and the notice given requiring the proof of consideration, cast the onus probandi on the plaintiffs ,to show that a consideration passed from Gwath-mey to Grimshaw for the note in question. Chitty on Bills, 400. 4 Taunt. 114. 1 Camb. 100. ' 2 id. 574. 2 Carr. & Payne, 606. Again, if Gwathmey should be considered as an endorsee, they insisted that it was evident that he had advanced nothing on the faith of the note; that if there was a debt due to him from Grimshaw, it must have been an antecedent debt; and if so-, he took the note subject to all equities existing between the defendants and Grimshaw, 20 Johns. R, 627; 9 Wendell, 170; 10 id. 85; that the plaintiffs having failed to show any consideration from Gwathmey to Grim-shaw, the former, it was contended, must be considered as the trustee agent of the latter; and if so, the same defence was admissible as if Grimshaw had been the payee of the note and the plaintiff in the suit; and '■that the facts disclosed showed either fraud or a partial failure of consideration — and either constituted a defence to the extent claimed by the defendants. 8 Cowen, 31. 13 Johns. R. 302. 15 id. 230. 17 id. 301. 2 Wendell, 431. 6 id. 615.
D. B. Tallmadge, for the defendants in error,
contended that no such fraud on the part of Grimshaw had been shown as invalidated the note; that his representation that he was the creditor of the defendants below,, was of such a character as would not have sustained an action for deceit, as it was in the power of the defendants to ascertain the truth, by requiring the production of the draff, of which he claimed to be the ownei\ 4- Starkie’s Ev. 471. 2 Johns. R. 50. That the representation, however, if untrue, subjected Grimshaw to an action of assumpit; and being liable to such action, there was no failure of consideration. That if fraud existed in the case, or there was a failure of consideration, the. defendants had no right to ask that the whole subject of defence should be applied to this note ; the other sureties given to Grimshaw being equally affected by such defence; an apportionment' among which could be made only in a court of equity. But the counsel insisted that Gwathmey was a bona fide holder of the note upon good consideration, and without notice of fraud or want of consideration; and that sufficient had not been shown to cast upon him the burden of proving the consideration upon which he received the note. That the notice given by the defendants, calling upon him for proof, imposed no additional duty upon him, as its only effect was to give the defendants an advantage against their adversaries in submitting the case to a jury.

Opinion:
By the Court,
Nelson, J.
I am of opinion that the facts disclosed by the bill of exceptions were sufficient to throw the burden upon the plaintiffs, of showing that Gwathmey was a bona fide holder for value. A promissory note imports a valuable consideration upon its face, and possession is presumptive evidence of property rightfully acquired ; but when the maker shows that it was obtained - from him and put into circulation by force or fraud, all the above intendments of law are rebutted, and proof becomes necessary. The cases are full on this point. Chitty on Bills. 32, 68, 400, 1. 13 East, 134, n. 1 Wheat. Selw. 265. 2 Carr. & Payne, 606. 6 Wendell, 615. 5 Pick. 412. 2 Campb. 596. 22 Com. Law. R. 78. 10 Johns. R. 232. 3 Johns. Cas. 260, 263. Now it is clear, from the evidence, that a fraud was committed upon the makers at the time the note was given; and to the extent of the fraud, it would constitute a good defence against Grimshaw. The note was given to him in the name of Gwathmey, whether in trust for himself or for value does not appear ; if for the latter, it seems to me it should have been shown. Grimshaw used the name of Gwathmey as an original party to the note, and, for aught appearing, without his privity or assent; and if there was nothing else in the case, it would obviously stand upon the same footing as if the note had been taken payable to himself. The only facts that can be relied on to vary the case are, that the suit is brought in the names of the assignees of Gwathmey, and the note is in their possession •, but this inference of property, I think, is fairly rebutted by the rest of the case. .Unless Grimshaw .procured the endorsment of Gwathmey, he could not collect the note himself in any other way than in his name or in that of his assignees. The fact, therefore, of the suit being in the names of the assignees, is not incompatible with the continuance of the title and property of the note in Grimshaw. I may add, that as Gwathmey is an original party to the note, the onus lay on him to show the case an exception to the general rule» that the consideration may be inquired into between the original parties. Upon these grounds, I think, the defence offered should have been admitted to prevail, and that the judgment must therefore be reversed.
J udgment reversed.