Morse v. . Crofoot

Ruggles, J. The case seems to depend on the question whether Thayer is a competent witness in the suit in chancery, which is now in this court on appeal from the decree of the courts below, by which the bill was dismissed. If his testimony be rejected there is no proof of usury, and no ground for coming into the court of chancery to settle the controversy. If the objection to Thayer’s examination, as a witness upon the trial at law, rested solely on the technical ground that he was a party to the record, he would seem to be admissible here where that objection does not exist. But if he would have been excluded there on the ground of an interest in the event of the suit, he must be excluded here also. That objection is as fatal here as m a court of law. If the decree in this case should be made in favor of the com- *120 [120] plainants, on Thayer’s evidence, it would put an end to the action at law without any trial of the issue pending therein, between the plaintiff and Thayer. The defence by one or more of the defendants on the ground of usury is a defence for all. The action is joint and the plaintiff can have no verdict against Thayer, unless he has also a verdict against the sureties. Thayer therefore by his evidence, if it be admitted, defeats the action not only as against his sureties but against himself also. In this respect the present case differs from that of Butcher v. Forman (6 Hill, 583.) In that case the bankrupt was discharged from any liability in the action, by a nolle prosequi as to him. He not only ceased to be a party, but he ceased to have any interest by reason of being a party. Such also, was the situation of the witness in the case of Aflalo v. Fourdrinier, (6 Bing. 306.) He had no remaining interest in the event arising out of the fact that he was originally a defendant; and having relinquished his interest in the surplus of his estate in the hands of his assignee, he was held competent. But Thayer is an incompetent witness by reason of the effect which the decree in this cause may have upon his own direct interest in the action at law in which he is a defendant. This objection does not rest merely on the technical ground that Thayer is a party to that suit, but on the ground of his interest in the event of that suit, which is dependent on the event of this. According to the case of Butcher v. Forman (6 Hill, 583,) Thayer is incompetent by reason of his interest in the surplus of his estate in the hands of his assignee in bankruptcy. In that case Miller, a bankrupt, was rejected under like circumstances, on the ground that by defeating the recovery he would diminish the claims upon his property, and thus increase the surplus, if any, which might arise in winding up the estate. But it is contended that Thayer’s interest in the surplus is contingent and uncertain, and therefore does not disqualify him. The rule, however, appears to be otherwise established; (1 Greenl. Ev. § 392, cmd note 2; 6 Bing. 306;) and upon good reason, for if the party objecting to the witness on this ground, were obliged to show that there would be a surplus after paying *121 the bankrupt’s debts, the court might be compelled to [121] take an account of the bankrupt’s debts and effects, and to receive evidence of fraudulent concealment of his property, fur the purpose of ascertaining whether he was competent or not. His evidence will at all times be received to diminish the surplus ; and when offered to increase it, the offer should be accompanied by a release. It is also contended that the decree in this cause, be it either way, can never be used in any proceeding between the holder of the note and the assignee in relation to the fund, and therefore the interest of the witness in the surplus, is an interest in the question, but not in the event of the suit. But I apprehend this is not correct. The third section of the bankrupt act, (Owen on Bankruptcy, App. p. 52,) provides that all suits at law or in equity, pending at the time of the decree in bankruptcy in which the bankrupt is a party, may be prosecuted and defended by such assignee to their final conclusion, in the same way and to the same effect as they might have been by such bankrupt. The action at law upon the note in controversy, was pending, when the decree in bankruptcy was made on Thayer’s petition; and his assignee became by force of the statute, privy to that suit, and in effect a party to it, so far as regards the binding effect of the judgment as evidence against the bankrupt’s estate in his hands. Although he did not actually apply to be made a party on the record, he might have done so. The statute gave him an interest in the event of the suit, and it was his duty to have defended it, if he intended ever to contest the validity of the note. A judgment in that suit against the sureties, would therefore, in my opinion, be conclusive against the assignee to prevent his setting up usury against the claim of the sureties for a dividend thereon. Thayer’s evidence, therefore, may have the effect of discharging the fund from the payment of the debt in controversy, which otherwise will become a charge upon it; and he is therefore incompetent. The assignment by Thayer in October, 1837, to the complainants, of property for the payment of this and other debts, does not alter the case. If the complainants succeed in [122] *122 avoiding the note on the ground of usury, it will be their duty to refuse payment thereof out of the property in their hands, and the surplus of that fund goes into the hands of the assignee in bankruptcy. It is made a point for the appellants, that-Thayer’s testimony was read on the hearing before the vice chancellor, no motion being there made to suppress it; and that the question of his competency therefore, was not before the supreme court for review, and is not now before this court. The 85th rule of the court of chancery authorizes a motion to suppress the deposition of an incompetent witness, but it does not require such motion to be made except for the purpose of preventing the recovery of the costs of evidence improperly taken. If the competency of the witness be duly objected to before the examiner, his testimony may be objected to at the hearing, without a motion to suppress. The question of Thayer’s competency was therefore open for discussion before the vice chancellor, and the bill may very probably have been dismissed on the ground of its inadmissibility. That question was properly before the supreme court, and is an open question here. Decree affirmed.