Smyth v. Strader et al.

in 1831, five or six years before the notes purport to be made. Other evidence shows clearly that they were received not in payment and extinguishment of the preceding debt, but for collection, the proceeds to be credited when received. This brings it within the case of De la Chaumette v. The Bank of England, 9 Barn. & Cressw. 208, where, under similar circumstances, the property of a note was held in fact to be in the assignor, and to be affected, in the hands of the assignee, with all the equities which existed against the assignor. On the strength of this admission by the plaintiff, we had prepared to submit an argument to the court almost exclusively on this point; not by any means because this was the only ground on which a conclusive defence could be made, but because the other grounds were too obvious to require comment.

But it now appears, on examining the original record, that 1831 is a misprint for 1836. The plaintiff has made no admission that the notes were received for a preexisting debt, and though the evidence on that point is abundant, yet, the fact not being admitted by the plaintiff, it should have been submitted to a jury, and passed that ordeal, before it can properly be urged upon the consideration of this court. We are compelled, therefore, at this late moment, to abandon our brief, and employ the few moments allowed us, at the close of the session, in commenting on the two points made by the plaintiff's counsel; 1st, the admissibility of Strader's testimony; 2d, the charge of the judge.

1

First. Strader is worth nothing, and resides in the State of Ohio. Under these circumstances, the great anxiety manifested by plaintiff, as admitted by his counsel, and disclosed by the numerous writs on the record, to make him a party to the suit, could have been stimulated by no motive but to deprive the defendant of the benefit of his testimony. Not having succeeded in that object, he now contends that his testimony was inadmissible.

Again,

1st. On the ground that he was one of the makers, and no man can be admitted to impeach his own name. To which it is replied, that he was in no sense a maker. The paper was, in fact, forged by one of the partners, after the partnership was dissolved. it is replied, that Strader is not introduced for the purpose of discrediting the paper against the actual members of the firm at the date of the notes, but to show that Perrine had previously retired, and was in no respect liable.

2d. A second ground of objection to Strader's testimony is, that he was a partner in the firm of Strader, Perrine, & Co., and that "one partner cannot be admitted as a witness for or against his firm."

That is certainly the general rule; but one of the exceptions is where, as in this case, it is proved by other witnesses, that the transaction is by one of the partners, without the knowledge of the partnership, on his individual account, and the copartners are

Smyth. Strader et al.

not liable, as among themselves, to contribution, then they may be witnesses for the firm. Story on Part. 386; Phil. Ev. (3d ed.) 55; Ridley v. Taylor, 13 East, 175; Le Roy et al. v. Johnson, 2 Peters, 198.

Besides, Strader was not a copartner of Perrine (the sole defendant) at any time during any part of this transaction. The rule is, that instantly, on the dissolution of a firm, the copartners become witnesses, the one for the other, like other persons. Gow on

Part. 202.

Although, after the withdrawal of Perrine, the name continued the same, yet, by that act, the partnership was dissolved, and subsubsequently a new partnership, under the same name, was formed. Strader, Perrine, & Co. represented very different firms in November, 1835, and in March, 1836.

But the great question which decides the competency of witnesses in our days is, "Has he an interest in the event?" To ascertain this, the test universally applied is, "Can the judgment be used in any other case for or against the witness?" Willings et al. v. Consequa, Peters's C. C. Rep. 322; Chitty on Bills, 669; Gow on Part. 80.

Suppose Smyth fails in this suit. It is no bar to another suit against Strader, nor can it be given in evidence by either party in any possible way. On the other hand, suppose Smyth gains this suit, Perrine has to pay the money. There is no principle which will enable Perrine to recover of Strader, or of any member of the firm of Strader, Perrine, & Co. He cannot make them contribute for they are not his partners; nor is there any privity between them. It is as if his house were burnt down; it is his misfortune, and he cannot divide it with his neighbours. He cannot make them pay the whole, for the recovery is had against him, if at all, on account of his laches, in not publishing his withdrawal to the world, — a matter with which his quondam partners have nothing whatever to do. But granting that Perrine, if compelled to pay the note, can recover of the firm, it can only be on the ground of its being a genuine note, which they would have been bound to pay to Smyth. They cannot, by an ex parte proceeding, be placed in a worse condition than they were. The constitution guaranties them a hearing, and the real parties would be deprived of this right in this case, not having been parties to the original suit brought by Smyth, if not allowed to make the same defences against the note in the hands of Perrine, as they could have made in the hands of Smyth. These elementary principles forbid the judgment obtained against Perrine from being used by him against the firm, or any member of it.

We conclude, therefore, that the judgment in this case, whichever party may succeed, cannot be used by plaintiff or defendant against the witness Strader.

To illustrate this point still further. It is believed to be settled

Smyth v. Strader et al.

law, in this country, that one against whom a forgery is perpetrated is a competent witness to prove it, in any suit in which he is not interested in the event. Commonwealth v. Snell, 3 Mass. R. 82; The People v. Howell, 4 Johns. R. 296, 302; Pope & Hickman v. Nance & Co., 1 Alab. (old series) 299.

The facts proved on trial make a case of forgery. It is precisely analagous to the case supposed by Lord Coke, in 3 Inst. 169. "It is forgery to make a deed of feoffment to A, and then make another of prior date to B, which, at the time, he had no power

to make."

We cordially unite with the learned counsel for the plaintiff in soliciting the court to give full instructions to the inferior tribunal, with respect to the admissibility of Strader's testimony, in the possible event of a new trial. We do not anticipate such a decision, nor comprehend upon what principles of law it can be made. But it is prudent in all cases to be prepared for the worst. In that spirit it is, that we ask the court, should they be induced by any technical view of the case to send it back for a new trial, to give minute directions as to the availability of notes received merely as contingent payment of a precedent debt.

The evidence in this case shows the notes were not transferred to the plaintiff in payment and extinguishment of any thing, and that no credit, no new consideration was given for them, but that they were in fact deposited with the plaintiff for collection, the amount to become payment on the double contingency, 1. that the notes should be collected by the plaintiff; 2. that in the mean time the original debt should not be paid. But this evidence not having been distinctly admitted by the plaintiff, or submitted to the jury, cannot be brought to the attention of this court, except in reference to the possibility of a new trial.

In all cases where notes are given in payment, but not extinguishment of a preceding debt, that is, where they are to become payment only in case of collection, the assignee is the mere agent of the assignor, and they continue his property, and at his risk, and subject to all equities against him, as much as if in his actual possession.

I am aware of the decisions in Riley & Van Amringe v. Anderson, 2 McLean, 589, and Swift v. Tyson, 16 Peters, 1. Both these decisions are in strict conformity with the principle. In the first case it was distinctly left to the jury to say whether the notes were received in payment or not; they returned that they were, and the court held, that though it was an old debt, yet the assignee, having received them in payment, held them for value. The same doctrine is held in Swift v. Tyson, which was an undisputed case of absolute payment of an old debt. All that is decided by those two cases is, that it is immaterial whether the note is given at the inception of a transaction, or subsequently, if it is given in

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52

II

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absolute payment. In that case, the assignee holds it for value. It is true that there are some dicta thrown out in the case of Swift v. Tyson, which require explanation and perhaps limitation; for example, at page 20, it is said, "We are prepared to say that receiving a note in payment of, or as security for, a preexisting debt is according to the known usual course of trade and business." This certainly cannot be intended to mean that if the note is received, not in payment, not in pursuance of an original arrangement, and not for any new consideration, it can be held against the true owner. The court certainly do not intend to overrule the doctrine of Chief Justice Marshall in the case of Coolidge v. Payson, 2 Wheat. 66, which is quoted and relied upon in the per curiam opinion in this very case of Swift v. Tyson. That memorable judge says, that although a note may be taken for a preexisting debt, yet in all such cases the person who receives such a bill in payment of a debt will be prevented thereby from taking other means to obtain the money due him." That is, the payment must be an extinguishment of so much of the preëxisting debt. So in the case of Brush v. Scribner, 11 Conn. R. 388, another case on which this court relies for their doctrine in Swift v. Tyson. Extinguishment as well as payment is considered essential to give validity to the transfer of a note assigned for a preexisting debt. The dictum therefore, in Swift . Tyson is not to be understood as conflicting with the doctrine of these two cases.

The cases in 13 Wend. 505, 12 Wend. 593, 10 Wend. 85, and other cases in the New York courts, are considered by this court, in Swift v. Tyson, as maintaining the doctrine, that notes transferred in payment of preexisting debts were not valid in the hands of the holder. This, I apprehend, is not the doctrine they support. They must be taken in connection with the doctrine preëstablished in the Court of Errors, Murray v. Gouverneur et al., 2 Johns. Cases, 441; "that a bill shall not be a discharge of a precedent debt, unless so expressly agreed between the parties." Taken in this connection, the doctrine they decide is, that payment without extinguishment is not available to the holder against the equitable owner, which is precisely the doctrine of Marshall, in Coolidge v. Payson. The dispute is nothing but a revival of the old question. What is pay ment? that is, what is payment and extinguishment? and what is merely contingent payment? And the New York courts have taken Lord Holt's side of the question. In the case of Ward . Evans, 2 Ld. Raym. 930, that eminent judge remarked, —“ Taking a note is sometimes payment when a part of the original transac tion, but paper is no payment when a precedent debt. I am of opinion and always was (notwithstanding the noise and cry that it is the use of Lombard Street, as if the contrary opinion would blow up Lombard Street), that the acceptance of such a note is not actual payment; for when such a note is given in payment it is al

v.

Smyth v. Strader et al.

ways intended to be taken on this condition, to be payment if the money be paid thereon in convenient time.”

The dictum under consideration not only says receiving a note in payment, but "as security for a preëxisting debt, is according to the known usual course of trade and business." The court here must mean to restrict the receiving it as security to the cases, 1. where it is a part of the original agreement; 2. where some new consideration is given.

The peculiar province of this species of paper is, to facilitate the exchanges of value from place to place, and from person to person; to be deposited as collateral, though a possible, is not an appropriate or natural function of bills of exchange, any more than it is of money. Bay v. Coddington, 5 Johns. Ch. 54; Collins v. Martin, 1 Bos. & Pul. 648; Coggs v. Bernard, 2 Ld. Raym. 917; Harrisburg Bank v. Meyer, 6 Serg. & Rawle, 537; Evans v. Smith, 4 Binn. 366.

Whether money or bills of exchange are deposited as collateral security, the transaction is not governed by the laws which govern the payment of money, or the negotiation of bills, but by the ordinary laws which govern pledges or pawns. Story on Bailments, p. 198, § 290. Assigns of Horseman v. Eden, 1 Bos. & Pul. 398. Three principles of that law apply : —

1. The depositer or pledger can pledge no more or greater interest than he has in the property pledged. Code Lib. 8, tit. 16, 1. 6; Hoare v. Parker, 2 T. R. 376; 1 Dane's Abr., ch. 17, art. 4, § 7; Story on Bailments, p. 214, § 22; ibid. p. 215, § 324. [Bills of exchange are said to be an exception to this rule. The exception is believed to relate to the power, not the right, of transferring the property.]

2. The absolute legal title is not changed, the pledger receiving nothing but a special property, amounting to a lien for his advance, together with a right of possession. Story on Bailments, p. 197, 287.

An advance bonâ fide made upon property improperly pledged may be required to be returned. Cortelyou v. Lansing, 2 Caines's Cas. Err. 200; South Sea Co. v. Duncomb, 2 Stra. 919; 2 Kent's Comm. 450; 1 Dane's Abr., ch. 17, art. 4, § 9. But if no consideration be advanced, none can be required.

3. The contract of pledge is a distinct and substantive contract, and requires a legal motive or consideration to support it, as much as any other.

The conclusion is that the court, by the word payment in the dictum, in Swift v. Tyson, before referred to, mean payment and extinguishment, not contingent payment; and the expression "may be received as security," must be qualified by adding, but it cannot be held against the equitable owner unless it was part of the original contract or induced by some new consideration.