Metropolitan Nat. Bank v. Jansen

THAYER, Circuit Judge, after stating the case as above, delivered the opinion of the court. The special findings of fact by the jury as above detailed have the same weight and must he given the same effect as like special findings by the court if a jury had been waived; and as the bill of exceptions does not state affirmatively that it contains all the testimony, font does disclose the fact that some evidence which was introduced on the trial below has been omitted and is not contained in the bill, the findings cannot be challenged in this court. It must accordingly be presumed that they rest upon sufficient evidence which was intro574 (iuced at the trial. E. H. Rollins & Sons v. Gunnison Co. Com’rs, 49 U. S. App. 399, 26 C. C. A. 91, 80 Fed. 692; Taylor-Craig Corp. v. Hage, 16 C. C. A. 339, 69 Fed. 581. It is to be further observed that no errors are assigned to the admission or exclusion of any items of testimony, except a general assignment that the court erred in permitting Peter Jansen, one of the makers of the note, and Charles I>. Oongdon, one of the indorsers of the same, to give evidence tending .to impeach the consideration upon which the note was founded. A further claim is made in behalf of the plaintiff in error that the trial court erred in its instructions in assuming that the note in suit, because the same was payable in the state of Illinois, was an Illinois contract, and subject to the provisions of the statute of that state with reference to option or wager contracts. Rev. St. Ill. c. 38, §§ 130, 131.' Rut, owing to the view that we have been compelled to adopt, it is wholly unnecessary to decide whether the trial court’s opinion upon that point was right or wrong. The special findings by the jury disclose a state of facts which would render the note uncollectible as between the original parties on general principles of law as understood and enforced at the present time. They further show that the plaintiff bank stands in the place of the payee, in that it acquired the note with full knowledge of the consideration upon which it was founded, and with knowledge of the defenses existing against it as between the makers and the payee. The special findings disclose that as between Oongdon & Co. and the parties with whom they dealt in Chicago, and as between Peter Jansen and Congdon & Co., and as between him and the persons in Chicago from whom his agents made purchases or to whom they made sales, it was understood and agreed that no grain was to be delivered in fulfillment of the contracts of sale, but that such contracts were merely colorable, and were entered into simply as a device for laying wagers on the market price of wheat at a future day. Such contracts are generally held to be illegal and void in the United States, even in the absence of an express statute declaring them to be invalid. No court, we apprehend, would in these days enforce such contracts when their character is fully disclosed. Irwin v. Williar, 110 U. S. 499, 508, 509, 4 Sup. Ct. 160, 28 L. Ed. 225; Embrey v. Jemison, 131 U. S. 336, 344, 345, 9 Sup. Ct. 776, 33 L. Ed. 172; 2 Benj. Sales (6th Am. Ed.) p. 717. The only question, therefore, which arises upon the record, which we need to determine, is whether one of the makers of the note in suit and the indorser thereof were competent witnesses by whom to prove facts tending to show that the note was founded upon an illegal consideration. In support of the contention that these witnesses were not competent, by virtue of their names being on the paper, to show that the consideration was illegal, learned counsel for the plaintiff below cite certain federal cases in which it has been held that a party to commercial paper cannot testify to an agreement made in connection therewith by which he was to assume a liability thereon different from that evidenced by the note or bill or no liability whatsoever. For example, they cite Bank of U. S. v. Dunn, 6 Pet. 51, 8 L. Ed. [575] .310, where it was held that it could not be shown by an indorser that it was understood that his indorsement was a mere matter of form, and that lie would incur no responsibility by indorsing the note upon which he had been sued; also the case of Bank of Metropolis v. Jones, 8 Pet. 12, 8 L. Ed. 850, where a similar ruling was made; also the case of Saltmarsh v. Tuthill, 13 How. 229, 14 L. Ed. 124, where it was held that in a suit between an indorsee and indorser of a bill the drawer could not be used as a witness to prove facts which, taken in connection with other facts, would invalidate the paper. But in a later case (Davis v. Brown, 94 U. S. 423, 24 L. Ed. 201) the supreme court clearly overruled certain broad statements contained in the earlier cases, last cited, which had approved the doctrine originally announced in Walton v. Shelley, 1 Term B. 296 (a case that has been overruled in England for more than 100 years), holding' in the case then under consideration (that is, Davis v. Brown) that as between immediate parties to a note or bill — that is, between maker and payee, indorser and his immediate indorsee — an agreement may be shown which will exonerate one from a liability which he plainly assumed by drawing or indorsing the note or bill. In that case the court said, inter alia: “The general tendency of decisions here Is to disregard all objections to. the competency of witnesses, and to allow their position and character to affect only tlieir credibility. * * * The holders of commercial paper who «ínter into agreements or transactions with the makers or indorsers affecting its validity or negotiability cannot invoke protection against the infirmity which they have aided to create. There are no considerations of commercial policy which can exclude the parties in suc-li cases from testifying to the facts.” Mr. Daniel, also, in his work on Negotiable Instruments (volume 2, § 121.7), declares that: “The better opinion is that negotiable instruments enjoy no immunity from the general doctrines of evidence, and iliat any party to a written contract, negotiable or otherwise, is competent to testify as to its invalidity.” In the ease at bar the defendants wished to show, in accordance with their plea, that the note was founded upon an illegal consideration. Usually, when such a defense is made, it can only be established by some party to the instrument, and to deny the right of such persons to testify would in some, and perhaps many, cases, lead to the collection of notes and bills which are founded upon an illegal or an immoral consideration. Moreover, in the present case, the jury found that the plaintiff hank was not a bona fide holder of the paper, in that it did not acquire it before maturity, and in that it took it with knowledge of the defenses existing against it in the hands of the payee. This placed the plaintiff bank in the position occupied by the original payee. We are of opinion, therefore, that both Jansen and Congdon were competent witnesses to establish illegality of consideration, and that no- error was committed in permitting them fo testify to facts which tended to establish that defense. The judgment below is accordingly affirmed.