Court Opinion

ID: 6231355
Source: CourtListenerOpinion
Date Created: 2022-02-17 20:22:44.880021+00
Date Added: 2024-06-11T08:57:52.858643
License: Public Domain

The opinion of the court was delivered, by
Strong, J.
The rule laid down by Lord Mansfield in Walton v. Shelly, was an attempt to introduce a new exception to the principle that infamy and interest are the tests of a witness’s incompeteney. The attempt proved a failure. The new rule was short-lived in the country of its birth, and Jordaine v. Lashbrook, 7 Term R. 601, denied it altogether. But though early repudiated in England, it was adopted here, and it still exists as a rule of our law, though judges have said that it is not to be extended, and though the later decisions have very much restricted its operation. As it exists now with us, it extends only to negotiable paper, actually negotiated, before maturity, in the usual course of business, and in the hands of an innocent holder, who took it without any previous notice of any original defect in it, and it excludes only those parties whose names were on the paper when it was transferred to the holder. Thus it was stated in Wilt v. Snyder, 5 Harris 77, and substantially in Harding v. Mott, 8 Id. 469.
Was then the note upon which this suit was brought negotiated in the usual course of business, and was the plaintiff an innocent holder without any previous notice of any original defect in it ?
• The note was assigned to the plaintiff, not endorsed, and the assignment was accompanied with a general warranty, made by the assignor and a third party. We are not prepared to affirm that this was a negotiation in the usual course of business. It was not the mode in which promissory notes and bills of exchange *499are commonly transferred. When payable to order, they usually pass by endorsement, and without any superadded guarantee. There is a clear distinction between a transfer by endorsement and one by assignment. The statute of Anne recognises, and indeed makes a distinction: Lyons v. Divelbis, 10 Harris 185. The holder of a promissory note by either mode of transfer may bring suit in his own name, but he does not acquire the same rights against his assignor which he has against his endorse^, Over the name of the former he can write no order upon the maker in the nature of a bill of exchange. His assignor has assumed no other engagement to him than the restricted one, that the note is genuine. It may well be doubted, therefore, whether an assignment is a negotiation in the usual course of business, and more especially when it is coupled with a guarantee of a third party.
Waiving this, however, we think there was sufficient evidence in this case that the plaintiff was not an innocent holder, without notice of any stain upon the note, to justify the admission of the payee as a witness for the defendant. Before the testimony of the payee was offered, it had been proved by other witnesses that the plaintiff admitted on one occasion, when speaking of his having obtained the note, that he did not want to take it, that he thought there was something wrong with it, unless Barclay would guaranty it, and that Barclay would not do it for a long time for fear it would cause hard feelings between him and the defendant. On another occasion he said he was satisfied they were wronging Cree. And again he said, “they had a good deal of coaxing before they could get Barclay to guaranty it.” To whatever period he may have referred, when he said he was satisfied they were wronging the defendant, it cannot be doubted that his admission of a conviction that there was something wrong with the note, referred to his belief at the time when he took an assignment of it. It was because he thought so then that he demanded a guarantee — not a guarantee of the solvency of the maker, but a general guarantee. And can one who has taken a transfer of a promissory note, tainted by fraud in its inception, be said to be an innocent holder, if, at the time of the transfer to him, he thought there was something wrong with it ? If such were his convictions then, there must have been some basis for them, some knowledge of facts which awakened his misgivings. There was something which, in his mind, cast a shade over the original transaction. That should have put him upon inquiry, and if he neglected it, and chose rather a collateral guarantee, he took the note with all its antecedent equities upon it. This case was not, therefore, within the rule of Walton v. Shelly, as restricted in this state, and the deposition of Levi Clark was properly admitted.
*500The other assignments of error require hut brief notice. The conversation between Dean and Clark, though not immediately in the presence of the defendant, was a part of the history of the fraud, and one of the means made use of to accomplish it. The testimony, if believed, proved that they were conspirators, and what was said or done by either in carrying out their common design, was admissible in evidence.
The offer of the plaintiff to show that Dean got credit for the payment of another note due to Hawkins, in a settlement between himself, Barclay, and Sharpneck, was wholly inadmissible. It did not tend to prove that the plaintiff had paid a valuable consideration for the note in suit: even if it did, it was of no importance. If the note in suit was obtained by fraud, and the plaintiff knew it, or ought to have known it, at the time when he became the holder, he cannot recover, even though he paid value for it; and on the other hand, if it was not obtained by fraud, or if the plaintiff was an innocent holder, without notice of the fraud, he was entitled to recover, without proof of value paid, in the absence of any notice to make such proof. So the case was submitted to the jury, and it was left to them to find whether there was fraud, and whether the plaintiff had notice of it. Such was, in effect, the answer of the court to the defendant’s first and fourth points, and we think it was entirely correct.
The judgment is affirmed.