Davis v. Brown

• Decision Date: 01 October 1876
• Citation: 94 U.S. 423,24 L.Ed. 204
• Parties: DAVIS v. BROWN
• Court: U.S. Supreme Court

94 U.S. 423

24 L.Ed. 204

DAVIS v. BROWN.

October Term, 1876

ERROR to the Circuit Court of the United States for the Northern District of Illinois.

This action was against the defendants, as second indorsers of certain promissory notes, transferred by them to the Ocean National Bank of the city of New York. The bank having failed, the notes came into the possession of the plaintiff, as its receiver. The facts are sufficiently stated in the opinion of the court. The defendants obtained judgment, and the plaintiff brought the case here.

Argued by Mr. H. G. Miller for the plaintiff in error, and submitted by Mr. U. P. Smith and Mr. Stephen Sibley for the defendants in error.

Mr. JUSTICE FIELD delivered the opinion of the court.

This was an action against the defendants, as second indorsers upon ten promissory notes of one McOmber, made at Saratoga Springs, in the State of New York, in June, 1870, each for $500, and payable to his order in from thirty-two to forty-one months after date.

The defence set up to defeat the action was that the notes in suit were transferred in June, 1871, with other notes of the same party of like amount and date, to the Ocean National Bank by the defendants, in part satisfaction of a note of their own then past due, the balance being paid in cash, and were indorsed by the defendants as a mere matter of form, upon an agreement in writing of the bank that they should not be held liable on their indorsements, or be sued thereon.

On the trial, Harvey Brown, one of the defendants, was called as a witness to prove the matters thus set up as a defence, and was permitted, against the objection of the plaintiff, to testify to the settlement of the note of the defendants, the transfer for that purpose to the Ocean National Bank of the McOmber notes, and their indorsement by the defendants under the agreement of the bank not to hold them liable as indorsers; and that this agreement was in writing, and was destroyed in the great fire at Chicago, in October, 1871.

To meet and repel the defence founded upon this agreement, the plaintiff produced and gave in evidence a record of a judgment, recovered by him against the same defendants upon two other notes of the same party, of like amount and date as those in suit, except that they became due at an earlier day, which were part of the series of notes transferred by the defendants to the bank, and indorsed by them, in settlement of their own note, as already mentioned, and were included in the agreement as part of the same transaction.

The questions presented for our determination relate to the competency of the witness Brown, and the admissibility of the evidence of the alleged agreement of the bank, and to the operation of the judgment mentioned as an estoppel against the defendants setting up any defence founded upon the agreement.

The objection to the w tness arose from his being a party to the notes, and, as such, it is contended that he was incompetent to impeach or discredit the same, or to show that his liability was not such as his indorsement imported. The case of The Bank of the United States v. Dunn, reported in the 6th of Peters, is cited in support of this position. There, the indorser of a note had been permitted by the court below to testify, against the objection of the plaintiff in the action, to a verbal understanding with the cashier and president of the bank which took the note, that he was not to incur any responsibility, or, at least, would not be held liable on the note, until the security pledged for its payment had been exhausted. The admission of the witness this court considered erroneous, holding that no one who was a party to a negotiable note could be permitted by his own testimony to invalidate it, which, in that case, meant that no one could be permitted to show that a note indorsed by him was void in its inception, or that his indorsement did not impose the liability which the law attached to it. The opinion which announces the decision proceeds upon two grounds: 1st, That the evidence would contradict the terms of the instrument, or change their legal import; and, 2d, that it would be against public policy, as tending to destroy the credit of commercial paper, to allow one who had given it the sanction of his name, and thus added value and currency to the instrument, to testify that it was executed orindorsed by him under such circumstances as to impair his obligation upon it.

This last position was supported by reference to the celebrated case of Walton v. Shelley, 1 T. R. 296, decided in 1786, where the indorser of a promissory note was held by the King's Bench to be inadmissible as a witness, on grounds of public policy, to prove the note void for usury in its inception; Lord Mansfield observing, that it was 'of consequence to mankind that no person should hang out false colors to deceive them, by first affixing his signature to a paper, and then afterwards giving testimony to invalidate it.' Aside from the assumed estoppel of the parties from their position on the paper, the maxim of the Roman law, that no one alleging his own turpitude shall be heard (nemo allegans suam turpitudinem est audiendus), was cited to justify the...