Case Name: Wade et al. Appellants, v. Staunton, Buckner & Co.
Court: High Court of Errors and Appeals of Mississippi
Jurisdiction: Mississippi
Decision Date: 1841-01
Citations: 5 Howard 631
Docket Number: 
Parties: Wade et al. Appellants, v. Staunton, Buckner & Co.
Judges: 
Reporter: Mississippi Reports
Volume: 6
Pages: 631–636

Head Matter:
Wade et al. Appellants, v. Staunton, Buckner & Co.
It has been frequently decided that under the statute of this state, the maker of a note hy pleading to the action, admits the execution of it.
The maker of a note, who is a joint defendant, cannot he called as a witness.
Taking a bill of exchange from the principal, as a collateral security, with an agreement to apply the proceeds, when collected, to the extinguishment of the original debt, is not giving time in a manner which binds the parties, arid does not therefore discharge the sureties.
APPEAL from the circuit court of Adams county.
This was an action of assumpsit against the appellants, as the makers and endorsers of a promissory note. Judgment by default was entered against Falconer and Jemison, and a general verdict against W. C. Wade' and F. Walker. The defendant, Samuel Cotton, filed the general issue, and a special plea, which alledged in substance that after the maturity of the note on which he was sued as endorser in this case, the plaintiffs received a bill of exchange drawn by Wade on Grenot & Page, in favor of Gillett & Leonard, for five thousand and five hundred dollars, and which was endorsed by them, and payable twelve months after date. The bill was delivered to the plaintiffs by Wade, - who took a receipt which stated that the bill was to be collected by them and the proceeds applied to the credit of the note sued on. That this arrangement was made without any consultation with Cotton. The plea avérred also that this bill was taken in payment of said note.
On the trial, Cotton offered a witness by the name of Lane, to prove that Jemison who subscribed the name of the firm of Cotton & Jemison to the endorsement of the note, was not authorized to do so, and that the firm was dissolved prior to said endorsement, and that the plaintiffs knew that fact, and that the endorsement, was for the sole accommodation of W. C. Wade, and was done without the knowledge or consent of Cotton. But the court refused to receive his testimony. Wade was also offered as a wit ness, but was likewise rejected on the ground that he was a joint defendant to the action, and therefore interested in the verdict. On the issues as to Cotton, the jury found a special verdict which contained in substance the facts stated in the special plea as to the delivery of the bill of exchange, except the fact that the bill was not received by the plaintiffs as a payment of the note, but only as collateral security. That the note sued on was the only consideration of the bill, and that it did not appear what has since become of the bill, nor what steps were taken by the plaintiffs to collect it. On this verdict the court gave j udgment for the plaintiffs.
Winchester, for appellant.
Two questions of law arise on this verdict:
1. Upon the facts. Was not time given to Wade, the drawer of the note and bill of exchange, by taking his bill of exchange as collateral security for the note, payable a year after the note was due, and agreeing to collect and apply the proceeds of the bill to payment of the note. 8 East, 576. 2 .Bos. & Pul. 61.
2. Staunton, Buckner & Co. having failed to account for the bill of exchange, have they not thereby made the bill a payment of the note, or in the absence of any proof on their part, that they took the necessary steps to collect the bill, or that the bill has not been paid or passed away, which they might have proved by the production of the bill, does not the law as well as the sense of the contract, make, it a payment. Canudge v Allenby, 6 Barnwell & Cresswell, 373. 18 Eng. Com. Law. Rep. 203.
Montgomery, contra.
As a general rule, it is not denied, that giving indulgence to the maker of a promissory note, on a valid contract for valuable consideration, without the consent of the endorsers, will discharge them from liability. But it must be a valid and binding contract. No indulgence from liberality, or a spirit of accommodation, will operate a discharge of the liability of an endorser. Chitty on Bills, 441-4, see the notes. Merely taking a new bill or note without an express agreement to give indulgence, will be considered as collateral security; and the taking such security does not discharge the endorsers. 1 Barn, and Cress. 14. 8 Eng. Com. Law Rep. 10-1. Collateral security may be sued on concurrent with the principal liability. Chitty, 84, 85.
The evidence of Lane was rightly rejected; because Cotton had not denied the partnership of Cotton and Jemison, as charged in the declaration, by plea sustained by affidavit, as is required by statute. Howard and Hutch. 595. Besides, Cotton had plead the general issue; which admits the character in which he was sued, viz. as a partner of Jemison at the time the note was endorsed. 3 Howard’s Rep. 105, 120-1.
Wade was also properly rejected. He was a joint defendant, and was on trial with the other defendant, who had him called. Besides, the fact he was called on to prove was a full defence to the action against himself, as well as the other defendant. He was not only interested in the verdict, but his testimony was to operate directly in his favor. He could have rendered himself a competent witness by confessing judgment. If Wade had been called to prove facts which could not have affected his interests we admit he would have been competent.
Boyd, on the same side.

Opinion:
Mr. Justice Tbottee
delivered the opinion of the court.
The record presents two questions for the examination of this court. 1st. Whether the court erred in rejecting the testimony of the witnesses, Lane and Wade. 2. And secondly, whether the facts found in the special verdict are sufficient to discharge Cotton's liability as endorser.
The witness, Lane, was offered to prove that the name of Cotton was placed upon the note as endorser without any lawful authority. By pleading in chief to the merits, Cotton was precluded from denying the character in which he was sued. The thirty-second section of the act in relation to pleadings and practice, How. & Hutch. Dig. p. 595, provides, " that all pleas to the action shall be deemed and adjudged as admitting the parties, and the character of the parties suing, and in no case shall the plaintiff be required to prove any written signature, identity of persons, description of character, or the persons comprised in any partnership which may be set forth in their respective bills, declarations, writs or pleadings, either as plaintiffs, or the parties through whom the plaintiff or plaintiffs may claim, unless the signature, person, partnership or description of character be denied by plea, and its truth attested on oath." The pleas in this case being to the action, this statute, is considered as affording a full and satisfactory answer to the objection raised against excluding the evidence of this witness. Wade was equally incompetent. Being the maker of the note, and a joint defendant to the action, he could not be called as a witness to prove any fact which would exonerate himself And such was most clearly the effect of the proof he was called on to make. If the bill of exchange which he delivered to the plaintiffs was taken in payment of the note, he was as certainly discharged as Cotton, the endorser. He was therefore directly interested in the verdict. This being the state of the case, we are not required to decide how far a party to a negotiable security can be permitted to repudiate it by his testimony. That question in one shape has proved a source of much embarrassment to courts of justice, and they have decided it in different ways at different times, and in different countries. But with these decisions, we are not necessarily concerned in the case at bar, and shall therefore offer no observations upon them. They do not apply to the -present question.
The remaining question for our determination is, whether the facts found by the jury in the special verdict, entitle Cotton, the endorser, to a discharge from his contract. We think they do not. The defence which is set up under this proof is two-fold: 1. That, by the agreement with Wade at the time of taking the bill on Grenot & Page, by the plaintiff, enlarged the time of payment of the original debt, which discharged the sureties. 2. And secondly, that the bill was so taken as fresh security and in payment of the note. The doctrine which embraces the first ground of the defence was very fully examined by this court at a former term, in the case of Newell & Pierce v. Hamer et al. And after a very careful review of the cases, we came to the conclusion, that to admit a defence of this character it was necessary that there should be a positive and binding agreement to indulge the debtor^ based upon a valuable consideration, sufficient to tie up and restrain the creditor during the period of the new credit.' This is held to be the true rule, we believe, both in England and in this country. 3 Mer. R. 272; 10 J. R. 591; 2 Ves. jr. 540; 1 Leigh, 436; 4 Leigh, 626. In this case the verdict finds no agreement to indulge the debtor. The only stipulation which looks that way is the promise contained in the receipt for the bill, to apply its proceeds, when collected, to the credit of the note. This has been insisted to be an implied promise to indulge the makers of the note until the maturity of the bill. But we think that this inference is entirely answered by the other facts in the verdict, for 'it is found also by the jury that this bill was taken as collateral security merely, which shows that the agreement to apply its proceeds to the payment of the note was not understood by the parties as giving the debtor any claim to indulgence.
On the second ground, it might be sufficient perhaps to remark that the verdict expressly negatives the fact insisted on, that the bill was taken in payment of the note. This verdict puts the case therefore entirely beyond the influence of the rule relied upon by the counsel for Cotton. The rule as to negotiable instruments appears to be, that if they are taken in payment of a pre-existing debt, they operate as a discharge of that debt, unless the party who holds the instrument does all that the law requires of him to obtain payment. 6 Barn. & Creswell, 373.
The case in 3 Cranch, 311, which was much relied on by the plaintiff in error, does not apply to the present question, since that as well as the case in 6 Barn. & Creswell, was where the note was taken in payment. The decision in Harris v. Johnson, 3 Craneh, went upon the ground that the note was taken in payment, and was subsequently passed away by endorsement, which act of itself implied a valuable and full consideration, and that to permit a suit after that upon the original consideration, was to allow the plaintiff a double satisfaction. This last case was decided on the principle of the case of Kearslake v. Morgan, 5 Tenn. Rep. 513. That these cases do not establish any doctrine repugnant to the rights of Staunton, Buckner & Co. in this action, appears evident not only from the difference in the circumstances attending them, but likewise more evidently from the determination of the court in the case of Clark v. Young, 1 Cranch, 181. There the note was taken as conditional payment, and it was held not to bar a suit on the original contract, and moreover that it was not necessary to enable the plaintiffs to recover to show an offer to return the note.
The case of Pring v. Clarkson, 1 Barn, and Cress. 14, is however an authority in point; for it was there held, that the taking a collateral security is not giving time to the acceptor, for the creditor is not thereby prevented from suing upon the original contract. These views are also fully sustained by Judge Story in the case of Wallace v. Agry et al. 4 Mason's C. C. Rep. 336.
We are therefore of opinion that the judgment ought to be affirmed.