Court Opinion

ID: 6410613
Source: CourtListenerOpinion
Date Created: 2022-06-25 11:52:24.863384+00
Date Added: 2024-06-11T15:51:21.650665
License: Public Domain

Dewey, J.
The note in suit having been transferred to the plaintiff long after it was overdue, is of course subject to any equitable defence. It was open therefore to the defendant to show payment to any one who was holder of the note at any time after it became due, or any equitable set-off against such prior holder. In this state of the case, and as a part of the evidence to establish the defence, the mortgage given to secure this note, and the various assignments of the note and mortgage, were rightly admitted in evidence. Upon a careful examination of the facts in the case, especially the assignment from the Springfield Institution for Savings to Doherty, and the subsequent assignment from Doherty to E. W. Bond, which last assignment *92is not absolute, but in the form of a mortgage, leaving in Doherty an equity of redemption in the property assigned by him to said Bond, the court are of opinion that the note and mortgage were transferred to Doherty in his own right, and that on the 1st of October 1850 he acquired all the interest of the institution for savings in the note and mortgage.
The next inquiry is as to the effect of these transactions on the rights of the plaintiff, as subsequent holder of this overdue note. The law on this point is well settled, and is aptly stated in the case of Baxter v. Little, 6 Met. 10, that the indorsee of a note overdue takes it with notice on its face that it is discredited, and therefore subject to all payments, and offsets in the nature of the payments. He takes the note subject to all the equities between the prior parties. Sargent v. Southgate, 5 Pick. 312.
There are many cases in the books in which the declarations or admissions of the payee of a note have been admitted in evidence to defeat a recovery upon the note by one to whom it was indorsed when overdue; but they appear to have been admissions made by the party while he held the note. Sylvester v. Crapo, 15 Pick. 92. Harris v. Brooks, 21 Pick. 195. Pocock v. Billing, 2 Bing. 269. The principle, upon which such evidence has been deemed competent, seems to be that they are admissions in relation to the title to property which the party then held. The cases are apparently departures from the general rule that the declarations of one who is a competent witness in the case are not admissible in evidence to affect a third person, as they are not the best evidence that the nature of the case affords. Hatch v. Dennis, 1 Fairf. 247. The declarations of Doherty, made before the 1st of October 1850, when he first became the holder of the note, were therefore properly rejected.
But the admissions made by Doherty during the period that elapsed between the transfer to him and his transfer to E. W. Bond, should have been admitted in defence of the action generally, . under the authorities above referred to. And it was competent for the defendant to show that, while the note was *93holden by Doherty, there was a good defence to its collection by him, arising from his having in his hands money paid to him to take up the note, and which ought to have been applied by him to that purpose. This opens the question whether he had, through the avails of rents from pews, or by donations for the purpose, funds to meet this note, when it came into his hands. If possessed of such funds for such purpose, he was bound so to apply them, and his omission so to do would constitute one of those equities between a prior holder of the note and the maker, that might be set up as a defence against a subsequent purchaser of the note, and to this extent the evidence should have been admitted.
Any acts of Doherty after the transfer of the note to E. W. Bond are not to prejudice the rights of the plaintiff to the extent of the interest he had in the note. Nor are the admissions or declarations of Doherty competent, as evidence of the nature and extent of the interest of the plaintiff, or to limit the same. In reference to this, they are to be wholly excluded.
But if, from other and competent sources, it appears that the interest of the plaintiff in the note was a limited one, and that a less sum than the amount of the note in suit will fully discharge all his just claims thereon, and that in fact he held a portion of the note in trust for Doherty, it would be competent for the jury to reduce the damages tq the amount of the plaintiff’s interest, and exclude the balance, if in truth Doherty had received such balance of the note, or there existed, as against him, any equitable set-off as to that balance.
The more general doctrine of the divisibility of a promissory note, and a recovery of so much as rested upon a good consideration, was settled by the case of Parish v. Stone, 14 Pick. 208. Bxit the cases more directly in point are those of Chicopee Bank v. Chapin, 8 Met. 40, and Stoddard v. Kimball, 6 Cush. 469. In the first of these cases it was held, that what would not constitute a good defence against the plaintiff to the extent of his interest, or the amount for which the note was held as collateral security, might so operate as tó a third person who was to be benefited -by the recovery of the amount of the note beyond the *94sum for which it was held as security; and that, as to such part of the note, it might be shown that the party interested was chargeable with knowledge of want of consideration, or a constructive fraud; and such fact being shown, the sum to be recovered would be limited to the amount of the interest of the bona fide holder. In the case of Stoddard v. Kimball, 6 Cush. 469, where the plaintiff had bona fide taken a promissory note of a third person to secure a debt of less amount than the note, it was held, that, upon its being shown that it was an accommodation note improperly put in circulation by the party who thus transferred it as security, the plaintiff was only entitled to recover to the extent of the debt to secure which it was received. The case of Jones v. Hibbert, 2 Stark. R. 304, is to the like effect.
The only further inquiry is as to the mode of proof that maj be resorted to for the purpose of showing that the surplus beyond the amount of the interest of the plaintiff should not be recovered in the present action. And the court are of. opinion, that, as the assignment of the note and mortgage from Doherty to E. W. Bond was made upon the condition that it should be void upon the payment of $1,000 within one year, the equitable interest in the surplus continued in Doherty ; and therefore his declarations subsequent to this assignment, or any payment made to him after that time, though not competent evidence to defeat a recovery by E. W. Bond, or by the plaintiff claiming under him, to the extent of the interest of E. W. Bond in the note, still might be competent evidence to defeat the recovery of any balance of the note that was held in trust for Doherty.

New trial ordered