Swift v. Ellsworth

Hanna, J.

. This was an action by Ellsworth, assignee of Rowe, against Swift and Rowe, on a promissory note, made by Swift to Rowe, and to foreclose a mortgage, &c., for 4,780 dollars.

Rowe filed no answer. Swift'answered in four paragraphs, setting up, 1. Matters of set-off between himself and Rowe, and also certain counter-claims for damages by way of recoupment. 2. Part payment to Rowe. 3. That Ellsworth was not the real party in interest, but that the note, &c., was the exclusive property of Rowe. 4. As follows; “That said note was assigned by the defendant, Rowe, to the plaintiff, by indorsement in blank, as alleged; that it was so assigned and delivered to the plaintiff by Rowe, to secure to said plaintiff 2,500 dollars which Rowe owed plaintiff, and for no other consideration; that after said assignment and delivery, the defendant, Swift, paid to the plaintiff the said sum of 2,500 dollars, in full, being all the interest of the said Ellsworth in said note, and that since said payment the said plaintiff has not acquired any interest in the residue of said note; that the said pay-merit is credited on the note, and that the plaintiff is not the real party in interest in this suit, but that the said defendant, Rowe, is the exclusive owner of said'note.”

Ifhe affidavit of the agent of Swift was filed as to the truth of this fourth paragraph, and as to the materiality, &c., of an answer to the interrogatories therewith filed.

Separate denials were filed by Rowe and Ellsworth to the first and second paragraphs of the answer of Swift, forming issues of fact; and to the third and fourth paragraphs Elisiaorih demurred. The demurrer was sustained. Trial on the issues of fact. Finding and judgment for Ellsworth against Swift for 2,034 dollars and 4 cents. Swift appeals.

The interrogatories filed with the fourth paragraph were intended to elicit evidence to support the allegations of said answer. After the demurrer was sustained to the fourth paragraph, the Court refused to continue the cause for an answer to said interrogatories. i

Three questions are presented—

First. As to the sufficiency of the third and fourth paragraphs of the answer.

The third paragraph is clearly bad. Lamson v. Falls, 6 Ind. R. 311. That was a suit similar to this, and the answer was the same as this third paragraph. /It is there said that “ The defect in the paragraph in question is, that, in effect, it admits the assignment of the note and mortgage, but does not contain such a state of facts as'would enable the Court, in view of the assignment, to say, as matter of law, that Falls is not the real party in interest.” The third paragraph in this case is open to the same objection.

The fourth paragraph is framed with a view to avoid that objection, by setting out the facts specifically, and causing the truth thereof to be verified by affidavit. The appellees insist that, even if this fourth paragraph shows facts sufficient to enable the Court to say that Ellsworth was not the real party in interest, yet, under the statute, he was, as the holder of the note by assignment, entitled to maintain the action in his own name. That statute is as follows: Section 1. “That all promissory notes, &c., shall be negotiable by indorsement thereon, so as to vest the property thereof in each indorser successively.” Section 2. “ The assignee of any such instrument may, in his own name, recover against the person who made the same.” 1 R. S. p. 378.

This statute makes the assignee, for the purpose of suing, the legal holder of the instrument, unless a state of facts may be shown to deprive him of that right, under § 3, 2 R. S. p. 27, which is as follows: “ Every action must be prosecuted in the name of the real party in interest, except as otherwise provided in the next section.” The provision of the next section is as follows: “ An executor, administrator, a trustee of an express trust, or a person expressly authorized by statute, may sue, without joining with him the person for whose benefit the action is prosecuted.”

Is the assignee of a promissory note, who may hold it as such, without any real interest, one of that class of persons here referred to as being “expressly authorized by statute” to sue? or does the provision have reference to another class of persons, such as the guardian of an idiot, &c. ?

We are of opinion the clause of this section above quoted, does not have reference to the rights of an assignee of a promissory note, but to such persons as may be authorized to sue in their own names, because of holding some official placé; as the president of a bank, under the géneral law (1 R. S. p. 157), or as the trustee of a civil township (Id. 467), &c. It therefore follows, that the real party in interest, as was formerly the rule in equity, must bring the action, subject to the provisions and exceptions of the statute; and that if any other than those thus authorized should bring suit as plaintiff, an answer showing affirmatively the facts, is a good answer. We think the fourth paragraph of this answer was sufficient. Van Santvoord’s PL 109, 421, 478.

The next question arises upon the refusal of the Court to continue the cause for an answer to the interrogatories filed with the answer of the defendant, Swift. They were pertinent and relevant to the issues tendered by the third and fourth paragraphs of the answer. A demurrer having been sustained to those paragraphs, a refusal' to continue for an answer to the interrogatories, was, under that ruling, correct, for the reason that responsive answers to those questions could not have been properly admitted as evidence under either of the other issues. But as the fourth paragraph was sufficient, the demurrer ought to have been overruled as to it, and the cause continued, if necessary,- to obtain an answer to the interrogatories.

The third point raised, is upon the ruling of the Court in admitting, on motion of the plaintiff, Rowe, one of the defendants, as a witness. Rowe had filed no answer. His co-defendant, Swift, had, which involved the right of Swift to have certain deductions from the note sued on, because of claims for' damages and payments by him, held against Rowe as assignor.

The interest of Rowe was certainly adverse to that of Sioift, under the issues of fact found and submitted for trial, and was» not adverse to that of Ellsworth, within the meaning of the statute, for their replies to the answer of Swift are similar. Whatever evidence was introduced, under the issues, was directed to the liability of Rowe for damages and payments; and although the same was intended to lessen the amount to be recovered by the plaintiff from the defendant, Sivift, yet it might, in the same suit, if Rowe was a proper party, authorize the plaintiff to recover against Rowe such sum as should be thus deducted, in consequence of his liability to Swift. The statute, which it is insisted authorized the introduction of the testimony of Rowe, is as follows: “ A party to an action may be examined as a witness, at the instance of the adverse party, or of any one of several adverse parties, and for that purpose may be compelled, in the same manner, and subject to the same rules of examination, as other witnesses, to testify, either at the trial, or conditionally, or upon commission.” 2 K. S. p. 96, § 295. Now, it is clear that, as to the matters put in issue by the pleadings, the real controversy was between the two defendants; and the plaintiff stood ready to take his judgment against Swift for the whole amount due on the note, or for the amount less all just sums deducted for payments to Rowe, or legal liabilities by him incurred before the maker had notice of the assignment. The true construction of this statute arises upon the adverse interest, as shown by the proceedings in the case, at the time the offer was made; and it does not follow that because one person may in his complaint name" himself plaintiff, and several others defendants, that, therefore, all those others shall continue, necessarily, to be adversary parties to him during the whole progress of the case. Rut it is insisted that he was not a necessary party to the suit, and, therefore, although he might have been interested, the plaintiff was entitled to his testimony. Under the 2 R. S. p. 80, § 238, whatever might have been the rule as to his admissibility as a witness upon the issues made, if he had not been a party to the record, it is not necessary to decide, if he is a proper party. The statute under which it is argued that he is a proper party is the following:

“ The holder of any note or bill of exchange, negotiable by the law merchant, or by law of this state, may institute one suit against the whole, or any number of the parties liable to such holder,” &c. 1 R. S. p. 379, § 16.

By the first section of the same act, promissory notes are negotiable by indorsement thereon. But is there such a liability to the holder as makes the indorser a proper party defendant in a suit against the maker? The fourth section of the same act provides that “any such assignee, having used due diligence in the premises, shall have his action against his immediate or any remote indorser.” The question, then, is, when is the liability of the assignor to fhe assignee complete, so as to authorize a suit? Does it attach upon the failure of the maker to pay, or not until suit shall have been resorted to, as to the maker?

In the case at bar, it will be recollected that Rowe did not answer the complaint, nor did he demur because he was improperly joined. His co-defendant could not make the objection for him. 2 Barb. Ch. 106. — Id. 618. — 8 How. Pr. R. 392.

Thus we have, then, a case where the holder of a note, of his own volition, has made the maker, and the payee thereof, defendants. The payee, who is the immediate assignor of the plaintiff, in like manner voluntarily submitted to be made a defendant, by failing to demur to the complaint, and thus testing the question of whether it contained facts and averments sufficient to make him a party defendant. But the further pleadings in the case, the answer of his co-defendant, and what is called his reply to that answer, show that he was then a proper party, under the sections of the statute already referred to when construed in connection with § 22, 2 R. S. p. 32, and § 368, id. p. 121. Section 22 gives the Court the power “to determine any controversy between the parties before it,” &c.; and § 368 gives power to “ determine the ultimate rights of the parties on each side, as between themselves;” in the rendition of the judgment. For instance, in the case at bar, the maker of the note, the payee (who had become the assignor thereof), and the holder, were all before the Court. The issues formed1 were such as to enable the Court to determine how much the holder or assignee was entitled to recover of the maker — what deductions the maker was entitled to for payments, &c., to the assignee, and to the assignor — and thus the amount that the assignor would be ultimately responsible for to the assignee.

S. A. Huff, Z. Baird, and J. M. La Rue, for the appellants. R. C. Gregory, H. W. Chase and J. A. Wilstach, for the appellee.

All that we determine upon this point is, that, under the peculiar circumstances of this case, the pleadings and facts in the progress of the cause, made Rowe a proper party, before he was offered as a witness, and, upon the issues formed, incompetent to testify.

We do not decide what would be, primarily, a sufficient complaint to malte the payee a defendant, together with the payor, where such payee should choose to test the question. That point is not before us.

Per Curiam. — The judgment is reversed with costs*. Cause remanded, &c.

Case Details

Case Name: Swift v. Ellsworth

Court Name: Indiana Supreme Court

Date Published: May 27, 1858

Citation: 10 Ind. 205

Court Abbreviation: Ind.