Lincoln v. Fitch

Tenney, C. J. The suit is upon an instrument purporting by its terms to be an acceptance drawn by A. E. Smith & Co. for the sum of §10,000, to be paid in two months from date, which is March 14, 1854, to the order of A. E.. Smith, upon the defendants; accepted by them, and indorsed by A. E. Smith, with the written waiver of demand and notice, as drawers and indorsers, signed A. E. Smith & Co. and A. E. Smith upon the same paper. In the specifications of defence, filed in the same case, it is alleged, that the promise contained in the acceptance, was without any legal or valuable consideration; that the defendants signed an acceptance in blank, without date, and sent the same to Asa E. Smith, in Boston, to be used if it should be necessary, to raise funds to the amount of about twenty-five hundred dollars, to meet payments to be made by them, and for no other purpose; that it was not used for that purpose, because said Smith was able to provide the amount necessary, without using the acceptance, and it remained in Ms hands some weeks, when an arrangement was made between him and the Cochituate Bank, through its president, Stephen M. Allen, that said Smith should fill up the blank acceptance, for the sum of §10,000, dated March 14, 1854, and permit said Allen to take it for the benefit of the bank, and without the knowledge or consent of the defendants, and without receiving any consideration therefor; and they deny that they had any knowledge of the transaction until after the failure of the bank, and that these plaintiffs have no other rights than those which the bank had at the time of its failure ; and that the bank, by its president, well knew that said — 466 — blank acceptance was never placed in the bands of said Smith to be filled up and used for such a purpose as that for which it was used, but for other and different purposes. . The plaintiffs introduced the acceptance declared on in the writ. Also evidence tending to show, that it came into the possession of the bank, by being negotiated in the course of business, and for a good and valuable consideration. The deposition of said Asa E. Smith, having been introduced by the defendants, and it appearing therefrom that he was the indorser of the acceptance, the plaintiffs objected to the reading of the answer to the second question propounded to him by the defeüdants; but the Judge overruled the objection, and the answer was read; but in the charge, at the request of the defendants’ counsel, made in the argument, the Judge instructed the jury, that the answer to the question could only be received, for the purpose of showing so far as it had that tendency, that the acceptance was accommodation paper; that it was not admissible in evidence, to prove any fraud, in the inception of the draft, or that it was fraudulently put into circulation; and that for any other purpose, they must disregard it, and lay it out of the case. The question was, “Did Fitch, Hodgdon & Co. receive any thing, to your knowledge, for or on account of said draft ?” Answer. — “ They did not to my knowledge.” If the defence relied upon was, that the draft was made by authority of the defendants, for the accommodation of the bank, no action in its favor could be maintained against them, inasmuch as the bank must have known for what purpose it was received. But this constitutes no part of the defence, under the specifications; and the proofs introduced, cannot be contradictory to the allegations made by the defendants, if objected to. They deny that they were ever parties to the paper, for the accommodation of this bank, or any other, or for any purpose whatever; that it was made, and indorsed, and put into the bank in fraud of their rights, without any consideration, consent or privity, on their part. The rule of law relied upon by the plaintiffs, to exclude — 467 — this answer, is, that an indorser of negotiable paper, who has indorsed it and put it into circulation, with a view to give it currency as negotiable security, is incompetent as a witness, to show that it was void at its inception, when it was indorsed before maturity. This is the principle of the case of Walton v. Shelly, 1 Term R. 296; and the reason given is, that no man is admitted to allege his own turpitude, when the allegation will tend to encourage and support fraud and illegality. The principle of this case was adopted by the Court in Churchill v. Suter, 4 Mass. 156, as having been sustained in practice in that commonwealth uniformly for a long series of years. Since that decision, it has been treated as authority in Massachusetts, and this State, notwithstanding it has been explained and restricted by subsequent decisions, to narrower limits, than were erroneously supposed by some to have been designed by the Court which gave it; and, notwithstanding, it has not been treated as the true doctrine in England, and in some of the United States. Thayer v. Crossman, 1 Met. 416, and note to page 418. The purpose for which the answer in controversy was allowed to be considered by the jury, not having been indicated as a ground of defence, but substantially denied, touching the paper, as the acceptance of the defendants, evidence having such tendency, was incompetent, if objected to. A defendant cannot offer evidence in support of an issue which he has not presented. The answer in Smith’s deposition, was from the person charged in the specifications with having filled up the blank check, and negotiated, indorsed and delivered the same, to be put into circulation, with a view to give it currency as negotiable security, against the defendants, as acceptors, and without any authority from them. The answer of the deponent, was full in support of the allegation in the specifications, that the defendants received no consideration for the acceptance, notwithstanding the qualification, that they received nothing for or on account thereof, to his knowledge. When the want of consideration might be treated as made — 468 — out, if the deponent was believed by the jury, for the purpose for which it was allowed, it might be somewhat difficult for the jury to disregard this fact, if it constituted an element of importance, in proving the fraud alleged to have been practiced in the inception of the acceptance. Its introduction for one purpose, was suited to mislead the jury in their consideration of other matters before them, wherein it was stated by the Judge to be inadmissible. The want of all consideration for the liability, purporting upon the acceptance to have been assumed by the defendants, was an important fact, in showing a defence on the grounds alleged; it was among the specifications filed. If they had received an equivalent, for their names being upon the paper as acceptors, the transaction might have been that for which they gave Smith authority to use the blank acceptance, although, at the time, they might have been ignorant thereof, and the defence would fail. A disqualification to testify, at the instance of the defendants, existed in the deponent, in making out the ground relied upon to defeat the action. No distinction could be made between one question and another, in this respect, when each and every fact, attempted to be shown thereby, was important in exhibiting the fraud in which he was charged with having participated. All the facts alleged in defence, were deemed important by the defendants, in making out the fraud of the deponent; and they were so interwoven with each other, that he could not be allowed to testify to one, when he was totally incompetent to testify to another. The Judge was requested by the plaintiffs’ counsel, to instruct the jury, that if they believed the acceptance was given to Smith in blank, and he agreed that it should go into the possession of the bank, to be exhibited as the property of the same, and it was so exhibited, the defendants are, through Smith, parties to the fraud on the public; and if any persons became creditors to the bank, after such exhibition, the defendants cannot set up such fraud, as a defence, and the plaintiffs are entitled to recover. — 469 — The requested instruction is predicated upon the ground that the bank did not pay from its funds any consideration for the draft; but that it was received for the purpose of exhibiting indirectly to the public, a condition better than that which in truth existed, and that this fraud was perpetrated by the procurement of the defendants’ agent, in the use of the blank draft, which he had been authorized to fill for another purpose. The plaintiffs are not to be treated as holders of the draft, having paid consideration therefor, without any knowledge of the fraud, or reason to suspect it. They represent the bank, for the purpose of closing its concerns, and for no other. They parted with nothing when they entered upon the discharge of their duties, and they have no rights superior to those which the bank would have had if the management of its affairs had continued with its directors; and the liabilities of the defendants are not increased or changed by their appointment. The fact, that persons became creditors to the bank, after the draft came into its possession, and was exhibited as its property, can have no effect upon the defendants’ liability. These creditors had no property in the draft; and even if they had knowledge that it was in the bank, and exhibited as its property, of which there is no suggestion, they are not to be more favored in the mode contemplated in the instruction requested, than they would be in a like transaction, in which an individual was the debtor. The case of the Agricultural Bank v. Robinson, 24 Maine, 274, is in point, and decisive of this question. The second instruction requested, is upon the assumption, that the draft was filled in the manner, and for the purpose alleged in the defendants’ specifications, they having received no consideration therefor; with the additional fact, that it was discounted, and the money paid therefor, by the bank, coupled with the other fact, assumed in the first instruction requested, that the draft was entered upon the books, and exhibited as a part of the assets of the bank, to the bank commissioners, — 470 — and the bank continued after that to pay its bills and to receive deposits. And upon such finding, it was requested, that the jury be told that the plaintiffs could recover. The facts assumed in the request, may all be satisfactorily proved, and the bank have had full knowledge of the manner in which the draft was obtained, in the transaction between the president of the bank and Smith, at the time when the draft came to its possession; and by a well settled principle of law, the bank can stand in no better condition than the one who obtained the draft from Smith. And the plaintiffs cannot, on the facts supposed in the request, be more able to maintain this suit, than they would have been if it had not been assumed, that the draft was in fact discounted, and the money paid therefor by the bank. Exceptions sustained, verdict set aside, and new trial granted. Rice, Hathaway and Cutting, J. J., concurred.