Darling v. March

The opinion of the Court was drawn up by Shepley J. — It may be proper to consider in the first place, whether Lincoln and Patten were competent witnesses. Lincoln, as one of the makers of the note, was liable to pay it in any event. If the defendant is obliged to pay it, he must repay him ; and if not, he must pay to the plaintiff. And if the amount, which the plaintiff should recover in this suit, be reduced by Ms testimony, he will still be liable for the whole balance to the plaintiff. He is not therefore interested in the event of this suit beyond the costs, from which he has been released. Freeman’s Bank v. Rollin, 1 Shepl. 202. It is objected, that he was not competent to testify, that it was an [188] usurious loan. This rule does not apply to a case, where the note becomes first a valid contract in the hands of the plaintiff, with whom the usurious loan was contracted. Van Schaack v. Stafford, 12 Pick. 565. Moses Patten, Jr. knew, that the indorsement of the name of Willis Patten & Co. was made for the accommodation of the makers, if he did not make it, and made a written waiver of demand and notice upon it; and is therefore legally liable to pay it. If the defendant is compelled to pay it, he will be relieved from the payment of one sixth part of it, and will lose one eighth part only as a legatee of Amos Patten. Having been released from the costs, he is interested against the party, who called him. The next question is, whether Amos Patten was bound by the indorsement of the name of the firm made on this note by one of the other partners as surety for the makers. There is no direct and positive testimony to prove, that he knew, that it was thus used. And there is testimony to prove, that the plaintiff knew it. Under such circumstances it is, according to the decisions in this country, incumbent on the plaintiff to rebut the presumption created by law, that he received the firm name as surety for another in fraud of the partnership. This may be done, and the consent of Amos Patten to such a use of the firm name may be inferred, from the habit and course of business. And when, from this course of business, it appears that the firm has received a valuable consideration for the use of the firm name on accommodation paper, by receiving the indorsement of another firm for its accommodation, the presumption of fraud will be effectually rebutted; unless it can be concluded, that one member of the firm, both made and received such indorsements, without the knowledge of the other partners. When such interchanges have been frequent and have been continued for sometime, it cannot be supposed, that a single member of the firm only had knowledge of it without charging the other members with gross neglect. And in such case they could have little cause to complain, that their own culpable negligence had occasioned losses. It would be [189] more reasonable to conclude, that they knew for what purposes thfe firm name had been used, than it would, that they were for a long time so inattentive to their own business as to be ignorant of the condition of their negotiable paper. It has accordingly been held, that such a course or habit of business is evidence of authority from all the members of the firm for such use of it. Duncan v. Lowndes, 3 Campb. 478; Gansevoort v. Williams, 14 Wend. 133. In the latter case, Nelson (3. J. says, “ But if it should appear, that a house was in the habit of indorsing at the bank or elsewhere for another, such general course of dealing, would be sufficient evidence of authority from all the members of the firm, and such use of it would bind all.” It appears from the testimony in this case, that the firm name was used for the accommodation of the makers of the note in procuring the original loan in September, 1836, and again on the renewal of that note in March, 1837, and again on two notes to pay that in November, 1837. And Lincoln says, “at the time the original loan was made the two firms were not regular indorsers for each other, but indorsed for each other whenever asked occasionally, but not often ; when the present note was given the firms indorsed for each other only to renew.” The fair conclusion from this testimony is, that this indorsement was not a singular or unusual transaction; that the firms were in the habit of making and of receiving such indorsements; that the practice had been continued for more than a year, and for renewals of like paper after this note was made for what would have been considered a renewal. Such a habit of using the firm name could not have existed for such a length of time without the knowledge of each partner, without supposing that they kept no account of their liabilities, and that they were ignorant of the condition of their negotiable paper. It is but a just inference, that the testator knew and consented, that the name of the firm should be used for the accommodation of the makers occasionally, as they might desire it, and that this note originated from that use of the name. The next question is, whether one member of the firm could [190] bind the other members, after its dissolution, by a waiver of demand and notice on paper existing before the dissolution. The dissolution operates as a revocation of all authority for making new contracts. It does not revoke the authority to arrange, liquidate, settle, and pay, those before created. For these purposes, each member has the same power as before the dissolution. If an account, existing before the dissolution, be presented to one of the former partners, he may decide, whether it should be paid or not, even though it be a disputed claim. He may decide, whether due notice 'had been given on negotiable paper, and may make or refuse payment accordingly. The waiver of demand and notice is but the modification of an existing liability, by dispensing with certain testimony, which would otherwise be required. If one of the former partners could not dispense with the proofs, which might be required at the time of the dissolution, he could not liquidate the accounts and agree upon balances. To waive demand and notice, and to settle accounts, is but to arrange the terms upon which an existing liability shall become perfect without further proof. In doing this he does not make a new contract, but acts within the, scope of a continuing authority. Another question submitted is, whether this must be considered an usurious contract. ■ There can be no doubt, that the note for $>3000, bearing date on the fifth of March, 1837, included a considerable amount of illegal interest. And that note, or one made in renewal of it, was paid by the note now in suit for $¡2000, and by a note for $¡1000, which has been paid. There is no indication, that the illegal interest was separated from the principal and wholly included in either of these last notes. It would seem, therefore, that the note in suit must include two thirds of it. And there is proof, that interest at the rate of twelve per cent, per annum, has been paid upon this note. By the law of. this State the illegal interest reserved in the note, and taken upon it, is to be deducted from the amount of it. The plaintiff' will be entitled to recover the amount after deducting such interest, without costs; and the defendant will recover his costs against the plaintiff.