National Revere Bank v. Morse

• Decision Date: 03 April 1895
• Parties: NATIONAL REVERE BANK v. MORSE et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

163 Mass. 383

40 N.E. 180

NATIONAL REVERE BANK v. MORSE et al.

Supreme Judicial Court of Massachusetts, Suffolk.

April 3, 1895

COUNSEL

Charles Thornton Davis, for plaintiff.

William B. Orcutt, for defendant.

OPINION

FIELD C.J.

This case cannot be distinguished from Merchants' Nat Bank v. Haverhill Iron Works, 159 Mass. 159, 34 N.E. 93. In that case the note was signed by the Haverhill Iron Works payable to its own order, and by it indorsed in blank, and the note was also indorsed in blank by the other defendants. The defense in that case, as appears by the original bill of exceptions, was that the note had been fraudulently put into circulation by the Potter-Lovell Company, and that the plaintiff did not take it for value and without notice of the fraud. The Haverhill Iron Works sent the note to the Potter-Lovell Company to be discounted by that company for the iron works, and the Potter-Lovell Company pledged the note to the plaintiff, before its maturity, as collateral security for the payment of a loan of money made by the plaintiff to the Potter-Lovell Company. In the case at bar the testimony of the defendant was that he gave the note to R. Gardner Chase & Co., at their request, and under an agreement with them that they should not use it or negotiate it unless he failed to keep his margin good, or became indebted to them, and not then unless they first notified him, and gave him a chance to make his margin good, or to pay such indebtedness; and that at all times he kept his margin good, and never became indebted to them. On the defendant's testimony, R. Gardner Chase & Co. could not maintain an action against him on the note, because either the note was without consideration, or there had been a failure of consideration, or the note had been delivered to them to take effect on a contingency which never occurred. See Burke v. Dulaney, 153 U.S. 228, 14 Sup.Ct. 816. The main distinction between the defenses set up in the two cases is that in one case the Potter-Lovell Company pledged for its own debt a note sent to it to be discounted, and in the other R. Gardner Chase & Co. pledged for their own debt a note left with them to be used only in a certain event, which never happened. Both were cases where, on the testimony of the defendants, the note was fraudulently put into circulation. In Smith v Livingston, 111 Mass. 342, it is said that; "Upon proof that a note is founded in illegality, or was obtained or put in circulation fraudulently, the burden of proof is upon the indorsee to show that he took it for value, and in good faith, before its maturity. Sisterman v. Field, 9 Gray, 331; Tucker v. Morrill, 1 Allen, 528; Smith v. Edgeworth, 3 Allen, 233; Clark v. Thayer, 105 Mass. 216." By "note" is of...