First National Bank v. Gerli

Opinion by Mr. Justice Brown, Plaintiff’s right to recover depends upon the testimony of [260] E. F. Carpenter, and on this appeal the controlling question is his competency to testify to the facts about to be stated. He and Ratti, for some time prior to the latter’s death in-. October, 1906, had been friends and associates in business. In the spring of that year, as Ratti was about to start on a trip to Italy, he endorsed the note in suit for the benefit of Carpenter, the maker, who was then the cashier of the bank. When Ratti delivered the note to Carpenter the date in it was left blank, to be inserted whenever Carpenter might need the money. On August 7, 1906, the note, with that date inserted, was discounted by the bank and the proceeds credited to Carpenter. When Ratti indorsed the note he authorized Carpenter to attach to it a waiver of protest, as it might fall due before his return from Italy. This waiver was identical in form with others which Ratti had left with Carpenter for the purpose of avoiding protest of notes upon which he was indorser, if they should mature during his absence. When the note was discounted Carpenter fastened the waiver of protest to it. At the time of the trial — February 8, 1909 — Carpenter had no connection with the bank. A year before he had resigned as cashier and disposed of all his stock in the institution. He was, therefore, not incompetent as a witness on the ground of having any interest in the judgment that the bank might recover against Ratti’s estate; but was he competent under clause e, sec. 5, of the Act of May 23, 1887, P. L. 158, which provides that where any party to a thing or contract in action is dead and his right thereto or therein has passed either by his own act or by the act of the law to a party on the record who represents his interest in the subject in controversy, no surviving or remaining party to such thing or contract, or any other person whose interest shall be adverse to the said right of such deceased, shall be a competent witness to anything occurring before the death of said party? This clause does not render one incompetent who may be a surviving or remaining party to a thing or contract unless his interest is adverse to the right of the deceased. “The disqualification is made to depend not only on the fact of being a ‘remaining [261] party/ but having an ‘adverse interest:’ ” Dickson v. McGraw Bros., 151 Pa. 98. Adverse interest existing at the time a witness is called to testify is the test of his competency, for by sec. 6 of the act one incompetent under clause e of sec. 5 may become competent by a release or extinguishment in good faith of his interest. It is the adverse interest of the witness, and not his adverse testimony, that disqualifies him: Horne & Co. v. Petty, 192 Pa. 32. From the note itself it is clear that Ratti’s indorsement was not for the accommodation of Carpenter. Under the words “credit the drawer,” appearing on its face, the indorser’s signature is omitted, and the instrument, without parol testimony to vary it, is an absolute promise of Carpenter to pay Ratti $5,000 for value received. At the time he says Ratti delivered the note to him Carpenter was the cashier of the bank, and the presumption would be that when the note was discounted it was for the benefit of Ratti, and that the proceeds ought to have gone to his credit. The effect of Carpenter’s testimony is to wipe out his obligation to pay Ratti and turn it into a paper bearing the accommodation indorsement of the payee for his benefit. If the judgment on this verdict, procured on his testimony, is to stand, he will be permitted to retain the proceeds of the note, which, from the face of it, he ought not to have received, and, though Ratti’s estate may recover from him the amount of the judgment against it in this suit it will still sustain a loss of $5,000, if the indorsement was not for the accommodation of Carpenter, for it will not be able to recover the proceeds of the note either from the bank or him. As his testimony made the indorsement one for his accommodation and relieved him from liability to pay Ratti’s estate $5,000, which he promised to pay, for value received, he was, at the time of the trial, a witness having an interest adverse to the right of the deceased. If it were conceded by the appellant that Ratti’s indorsement was for Carpenter’s accommodation, or that the proceeds of the note had been credited or paid to Ratti, Carpenter would not be a witness having an interest adverse to a right of the deceased, for, though fixing the liability of his indorser’s estate by his [262] testimony, he would at the same time admit his own to the estate, if it should be compelled to pay the note. The first assignment of error is sustained and the judgment reversed with a venire facias de novo.