2 Doug. 230 | Mich. | 1846
delivered the opinion of the Court.
This was an action of assumpsit, upon the following bill of exchange, endorsed by the defendant, and accepted by Obed P. Lacey:
Six months after date, please pay to the order of David Lacey, at the City Bank, New York, three thousand, eight hundred and forty two dollars, and charge the same to the acc’t of Your ob’t. serv’t.,
To Obed P. Lacey, Esq. Elijah Lacey.”
It was admitted on the trial,- that the action was brought for the benefit of the Branch of the Indiana State Bank, at Michigan City, the real holders of the bill.
After the evidence on the part of the plaintiff had been closed, the defendant offered Elijah Lacey, the drawer of the bill, as a witness: he was objected to by the plaintiff, as incompetent; but the objection was overruled, and he thereupon proceeded'to testify, in substance, that the bill on which this action wms brought, was drawn and endorsed for the accommodation of the acceptor, Obed P. Lacey, to be used for the renewal of the balance due on two other bills of the' following tenor:
“$3,000.00. Niles, Michigan, Feb. 1, 1840.
Five months after date, please pay to the order of Wm. B. Beeson Sf Co., three thousand dollars at the Bank of America, New York City, and charge the same to the acc’t. of
Your ob’t. serv’t.,
To Elijah Lacey, Esq: O. P. Lacey.”
The other bill was like the above, except that it wras dated the 14th April, 1840, was for $2,000, and was payable ninety days after date. Both bills wrere endorsed by the payees, and accepted by Elijah Lacey. The witness further testified that they were' accepted, and endorsed, for the sole benefit of Obed P. Lacey, for the purpose of enabling him, by procuring them to be discounted in the ordinary manner, to raise money to stock a mill which he was then carrying on.
The deposition of D. G. Collamer, was then read in evidence, by which it was shown that he was the cashier
Obed P. Lacey, was then introduced as a witness, (having been released by the defendant,) and was objected to by the plaintiff on the ground of incompetency: the objection was overruled by the court, and the witness was then sworn, and testified in substance, that the Michigan City Branch Bank negotiated for him the bill dated 1st February, 1840 ; that he received the sum of $3000, less the discount of 6 per cent, in the bills of various Branches of the State Bank of Indiana: that he afterwards negotiated the bill dated April 14, 1S40, at the same Branch, and received therefor the like funds, after deducting six per cent. The witness further stated that after the bills were protested, he gave to the Bank a draft of $1500, upon Eli Hart & Co., of New York, which was paid on the 15th Aug. 1840 : The witness here introduced a letter dated July 31st, 1840, from A. P. Andrews, cashier, to him, in which Andrews proposed, in behalf of the board of directors, that by his renewing the balance due on the bills, including exchange, after deducting the $1500, no damages- would be charged on them.
Another letter from the cashier to the witness, was then produced, dated Sept. 10, 1840, as follows : “ Yours of the 6th instant is received, and has been laid before the board. They have authorized me to say to you that the time you ask (6 months) will be extended to you, by your giving your acceptance, with your two brothers, one as drawer, and the other as endorser, payable at New York, your paying or including in said bill the damages on the
John H. Porter, a witness on behalf of the defendant, testified that the bills of the Branches of the State Bank of Indiana, were, in 1840, at a discount of from eight to ten per cent., and that the difference of exchange between Niles, Michigan, and New York, was from eight to ten per cent.: he testified, further, that Indiana money was then at par in business transactions, and, that some preferred Indiana to Michigan funds.
Ezekiel Morrison testified that, in the spring of 1840, he paid five per cent., as the difference between specie and Indiana notes, and that the common rate was six per cent.: that the Indiana Banks suspended specie payment in July 1840, and that their notes were at a discount of from eight to ten per cent, until March 1841, but were at par in ordinary business transactions, and constituted the principal circulating medium of the country. The witness further testified that he was, in the spring of 1840, a director of the Michigan City Branch Bank, and never knew the Branch to pay out or receive Indiana Bank notes at a discount.
The laws of New York, and Indiana, as well as the charter of the Bank, were by stipulation admitted as part of the evidence in the cause.
Upon the evidence the court charged the jury as follows :
1st.' That the contract declared on and proved, was to be governed by the laws of Michigan, and that if they found it usurious^ they must render a verdict for the plaintiff for the whole amount of principal and interest due on the bill, less three times the excessive interest:
2d. That if the jury believed from the evidence, that O. P. Lacey applied to the bank for a loan of money on the bills of the date of 1st February, and April 14, 1840, and that said bills were made for the purpose of discount merely, and had no real existence prior to their negotiation at,the Bank, and that the Bank discounted said bills
A verdict was rendered for the plaintiff for the sum of $4,313,60; from which, as was stated upon the argument, it was clear that the jury found the contract declared on usurious, and gave a verdict for the whole amount of principal and interest, less three times the excessive interest, according to the laws of this State.
A motion was made for a new trial, by the defendant, on the alleged grounds:
1st. That the court erred in admitting Obed P. Lacey to be sworn as a witness in the case; and
2d. That the contract declared on, is governed by the laws of New York, or Indiana, which declare all contracts infected with usury, absolutely void, and that, therefore, the charge of the court, which declares that the contract was to be governed by the laws of Michigan, was erroneous.
Befoz-e entering- upon the discussion of the first question, it becomes necessary to recur to the facts, in order that there may be no misapprehension as to the extent or application of the rule to be laid down, respecting the admissibility as a witness, of a party to a negotiable instrument. From the evidence before us, it appears that the present action is by the Bank^ the endorsee of the bill, against the drawer ; and that the acceptor of the bill, for whose benefit the bills of February 1st, and April 14th, 1840, were discounted, was the person introduced as a wit
If that part of the charge of the court which asserts that the contract declared on, was a Michigan contract and governed by the laws of Michigan, be correct, it is not perceived that any legal objection to the competency of O. P. Lacey as a witness could be taken, inasmuch as by the laws of Michigan, the contract could not be void, although tainted with usury. But as we entertain an opinion upon this point different from that expressed by the court below, and have come to the conclusion, that if the contract was founded upon a usurious consideration, it was originally void, we are necessarily led to consider the question, whether in this view of the case, O. P. Lacey was a competent witness. It is to be observed, also, that the bill in question was not negotiated, until actually delivered by' O. P. Lacey, the acceptor, to Brown, who was the agent of the Bank; and the same remark will apply to the bills of February 1st, and April 14th, which were never actually negotiated,until delivered by O. P. Lacey to the Bank, for the purpose of discount. The question, then, upon which we are to pronounce a judgment, may in short, be thus stated : In an action on a bill of exchange, brought by the first endorsee, against the drawer, is the acceptor a competent witness to show it void ; the bill having been originally negotiated by the acceptor, and for his sole benefit, by delivering it to the endorsee for the purpose of discount? The general question, respecting the competency of a party to a negotiable instrument, to be admitted as a witness to prove it void at its inception, has been discussed with great ability both in England and in this country, and has been the subject of careful examination and repeated decision by many of the ablest judges who have adorned the bench at home and abroad. These decisions show that
It is not to be expected that all the cases upon this vexed question will be noticed. I shall content myself with an examination of such as have come under my observation, and which develope, most fully, the reasoning adopted by judges in favor of and against the admission of a witness under the circumstances, and for the purpose stated.
The first case to be found in the English reports, and that to which almost all others refer, is that of Walton and others, Assignees of Sutton v. Shelley, 1 T. R. 296. That was an action on a bond given by the defendant to Sutton, to which there was a plea of non est factum, and another of the statute of usury. It was proved by one witness for the defendant, that the bond was given in consideration of the delivery up of two promissory notes made by a Mrs. Perry, payable to one Birch or order: the one endorsed by Birch and Davenport Sedley, the other by Birch, Corbin and Davenport Sedley, to Sutton. Davenport Sedley was then called by the defendant to prove that the consideration of the notes was usurious. But the evidence was objected to on two grounds; 1st. That he was called to invalidate a security which he had given ; and that an endorser of a note, independently of any question of interest, could not be permitted to. prove a note void, that he himself had endorsed: 2dly. That he was interested in the question which was meant to be put to him. Mr. Justice Butter, before whom the cause was tried rejected the witness, and upon a motion to set aside the verdict and grant a new trial, Lord Mansfield,
This decision was subsequently reviewed in the King’s Bench, in the case of Jordaine v. Lashbrooke, 7 T. R. 599; and although the question was argued with distinguished ability by eminent counsel, who invoked the great name of Lord Mansfield in support of the doctrine laid down in the case of Walton v. Shelley, the court nevertheless overruled the authority of that case, and decided, that, in an action by an endorsee of a bill of exchange, against the acceptor, the latter may call the payee as a witness to prove that the bill was void in its creation.
In the case of the Bank of the United States v. Dunn, 6 Peters 51, the Supreme Court of the United States affirmed the doctrine laid down in the case of Walton v. Shelley. Mr. Justice McLean, in delivering the opinion of the court remarked that, it was a well settled principle, “ that no man who was a party to a negotiable instrument, shall be permitted, by his own testimony, to'invalidate it. Having given it the sanction of his name, and thereby added to the value of the instrument, by giving it currency, he shall not be permitted to testify that the note was given for a gambling consideration, or under any other circumstances which would destroy its validity. This doctrine is clearly laid down in the case of Walton v. Shelley, and is still held to he law?' ■ In the case of the Bank of the Metropolis v. Jones, 8 Peters, 12, the rule laid down
The next case in order is that of U. S. v. Leffler, 11 Peters 86. It was there determined that the principle settled in the case of the Bank U. S. v. Dunn, “ does not extend to any other case, to which the reasoning does not apply j” and the decision of the Circuit Court of the United States foi the eastern district of Virginia, admitting the principal in the bond declared upon to prove that one of the co-obligors had executed the bond on condition that others would execute it, wasaffirmed by the supreme court.-
The next and last case involving the question under consideration, is that of Scott v. Lloyd, 12 Peters 145. The supreme court of the United States in that case, held, that where the grantor of an annuity by deed, has conveyed all his interest in the property charged with the annuity, and an allegation of usury in the granting of the annuity is afterwards made, he may be a witness to prove usury.-
In Churchill v. Suter, 4 Mass. R. 156, the facts were,that the defendant made a note payable to o-ne Charles Copeland or order, which Copeland endorsed in blank- ;• and which, to raise money, they delivered to one Bartlett, a broker, to negotiate in the market; who also endorsed it in blank, and sold it to the plaintiff. The question arose as to whether the endorsers were competent witnesses to prove an usurious consideration, under the facts above stated, and the further fact, that Bartlett did not inform the plaintiff that the note was made to sell in the market,- and that the whole bargain consisted in a simple offer and acceptance of ninety four per cent, for the note. Chief Justice Parsons, in giving the opinion of the court, remarked, after a review of the English cases in respect to the admission-
The supreme court of New York, in the case of Winter v. Saidler, 3 John. Cas. 185, held, thal a person is not a competent witness, to impeach the validity of a negotiable note, or instrument, which he has made or endorsed, though he is not interested in the event of the suit. It is worthy of remark, however, that the rule there established was in opposition to the opinions of Kent and Radcliffe, justices. The former, after a critical and able review of the English cases on the subject, rejects the authority of the case of Walton v. Shelley. The case of Winter v. Saidler was subsequently called in question, and finally overthrown, by a series of decisions in the supreme court of New York : (See Stafford v. Rice, 5 Cowen 23; Bank of Utica v. Hilliard, Id. 153; Williams v. Walbridge, 3 Wend. 415.)
The supreme court of New Hampshire, after a careful examination of all the reported cases, were of opinion “ that the rule must be limited to cases, where the party to a negotiable instrument is called to testify facts which render the note void, even in the hands of a bona fide endorsee, for a vahiable consideration, without notice.” Bryant v. Ritterbush, 2 N. H. Rep. 212. The authority of the case of Walton v. Shelley is confirmed in the case of Deering
It would also seem that the rule as established in Massachusetts, Maine and New Hampshire, has been sustained by the courts of Pennsylvania, Louisiana and Mississippi. In Vermont the decisions have vacillated. The case of Jordaine v. Lashbrooke was followed in Nichols v. Holgate, 2 Aik. R. 138, but this decision is said to have been disapproved by all the judges, in Chandler v. Mason, 2 Verm. R. 198. The general doctrine of Jordaine v. Lashbrooke has been followed in New York; Virginia; (Taylor v. Beck, 3 Rand. R. 316.) Connecticut; (Townsend v. Bush, 1 Conn. R. 260.) South Carolina; (Knight v. Packard, 3 McCord, 71.) Tennessee; (2 Yerger, 35.) Maryland, (Ringgold v. Tyson, 3 Harr, and John. R. 172.) New Jersey; (Freeman v. Buttin, 2 Harr. R. 192.) North Carolina; (Guy v. Hall, 3 Murphy, 151.) Georgia; (Slack v. Moss, 1 Dudley, 161.) Alabama; (Todd v. Stafford, 1 Stew. R. 199.)
I have thus reviewed, at some length, a few of the many adjudications involving the important question before os, and stated as far as I have been able to do so, the rule which has been adopted by the courts of the several states. Before proceeding to examine the question upon general principles, it may be proper to correct a misapprehension which might arise from the language of the court in the leading case of the Bank of the U. S. v. Dunn. The doctrine of that case is said to be clearly laid down in Walton v. Shelley, and still held to be law. If the learned judge by whom that opinion was delivered, meant to affirm that the rule as laid down in Walton v. Shelley was still held to be law in England, it is apprehended, that the remark is not supported by any adjudged cases
In the case of Jones v. Brook, 4 Taunt. 464, tried in 1808, it became a question whether the wife of the drawer of the bill was a competent witness, in an action against the acceptor, to prove usury; the evidence of the wife having been received, a rule nisi was obtained to set aside the verdict, on the ground that the witness ought not to
Let us now examine the question on principle. Mansfield, Chief Justice, predicates the rule laid down in Walton v. Shelley, on public policy, which forbids a party who
O. P. Lacey was not legally interested in the event of the cause. The original bills, as well as the one on which this suit was brought, were made and discounted for his exclusive benefit. The contract for discounting them was made between him and the real plaintiffs in this case : they were the original parties to the transaction. The drawer of the bill, who, for aught that appears*, was in no respect conversant with the facts-or circumstances respecting the negotiation of the original bills, is now sued, and offers to show by O. P. Lacey, the acceptor, that the contract declared upon is tainted with usury.. The court below received his testimony, and I think, both upon principle and authority, that its ruling in this respect, was legal and proper.
2. The next question to be determined, is, whether that part of the charge of the court, by which the jury were directed, in the event that they found the contract declared upon was usurious, to render a verdict for the-
Supposing, however, that the jury should find that the facts warrant the presumption that the payment by the bank to O. P. Lacey, of depreciated bank notes, was a device, by which to obtain a greater rate of interest than is allowed by law : — it then becomes important to determine whether the contract is absolutely void, or whether, according to our laws, the plaintiff only forfeits three times the usurious interest. A corporation possesses only those powers expressly given by its charter. Among those granted to the Indiana State Bank, is a power to discount bills and loan money, reserving upon such loan six per cent, per annum, and no more. There is no provision in the charter which declares that a contract reserving more than six per cent, shall be void. No principle, however, is, at this day, better settled, than that a court will never carry into effect a contract made in violation of a positive law, any more than they would a contract founded on an immoral consideration. If, therefore, there was an incapacity on the part of the bank to make the contract declared upon, or, if that contract was made in violation of its charter, a court of justice will not lend its aid to carry it into execution. How far is the principle I have thus laid down, applicable to the present case? The contract sued upon was made in Michigan, to be performed in New York. On the part of the defendant, it was insisted that if the jury found that the consideration
It is proper to remark, that this view was not brought to the attention of the court below. The great struggle on the part of counsel seemed to be, on the one hand, to support the contract declared upon, by the laws of Michigan, and on the other hand, to apply to it the law of New" York, without reference to the fact that the plaintiff was a corporation — a legal entity, — whose powers were restricted, limited, and controlled, by the law of its beings
We can no more lend our aid in carrying into execution the agreement now sought to be enforced, if it involve a violation of the charter of the bank,, than we could carry into effect any other contract made by the bank, for the purchase of lands, mills, or other property, though that contract were made in this state.-
New trial granted.