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Vol. II.)

MAITLAND V. THE CITIZENS' NATIONAL BANK OF BALTIMORE. [No. 6. the indebtedness below the required amount was inadmissible under any form of pleading in an action like this; but it is especially so in this case, because there is no averment in the pleadings contradicting the record. The sole objection is, that upon the face of the record the error is apparent. A record cannot be impeached without previous notice by proper form of pleading.

The judgment is affirmed.

COURT OF APPEALS OF MARYLAND.

(To appear in 40 Md.)

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EVIDENCE. - CORROBORATION OF WITNESS BY HEARSAY PROOF OF

PREVIOUS UNSWORN STATEMENTS. LIABILITY OF MAKER OF ACCOMMODATION NOTE GIVEN AS COLLATERAL SECURITY FOR PREEXISTING INDEBTEDNESS. - HOW FAR HOLDER OF SUCH NOTE CAN BE AFFECTED BY FRAUDULENT TRANSFER TO HIM FOR PURPOSE NOT CONTEMPLATED BY MAKER. BURDEN OF PROOF TO ESTABLISH SUCH FRAUD. MEASURE OF RIGHT OF RECOVERY ON SUCH NOTE, AND UPON WHOM BURDEN OF PROOF LIES TO SHOW AMOUNT DUE.

MAITLAND v. THE CITIZENS' NATIONAL BANK OF BALTIMORE.

a

The firm of P. & M. kept an account with a bank in Baltimore and received from it dis

counts of drafts or bills to a considerable amount. While the account was still running, the bank instructed G. its cashier to call upon M., a member of the firm, for collateral security. G. did so on the 10th of January, 1872, and suggested the giving of the note of M.'s father as such security. M., the father, upon the request of his son, gave him his promissory note in favor of the firm for $10,000, which was indorsed by the firm and delivered to the bank. P. & M. failed on the 15th of January, 1872, owing the bank, on account of dratts discounted on and after the 10th of January, $5,681, and on account of drafts discounted prior to said 10th of January, $15,000. In an action brought by the bank against M., Sen., on the note for $10,000, one of the questions raised was whether or not this note was given as collateral security for the payment only of the drafts discounted, on and after the said 10th of January, 1872, or was also intended to cover drafts discounted prior to that day: G., the cashier, testified that the demand which he made was for collateral security, for all drafts then held by the bank, as well as for all others that might thereafter be discounted for the firm. On the other hand, it was testified on the part of the defendant, that security was only required, and therefore only given for drafts thereafter to be discounted, including the drafts discounted on the 10th of January, 1872. The plaintiff then, in order to corroborate the testimony of G., offered to prove by its president and two of its directors, that G., a few days after the 11th day of January, 1872, and before the failure of P. & M., stated to the board of directors, that he had obtained from P. & M. the defendant's note for $10,000, “ which was to be held by the bank as collateral security for all drafts which it was carrying; that is, which it had discounted at the date of said note, as well as for all drafts which should be discounted by it for said house subsequently to the date of said note.Held, that this evidence was inadmissible, on the ground that there was no real or substantial similarity in facts and circum

stances between the unsworn and the sworn statements of G. An indorsee of a negotiable promissory note made for the accommodation of the indorser,

taking the note in good faith as collateral security for an antecedent debt, and with

a

Vol. II.)

MAITLAND v. THE CITIZENS' NATIONAL BANK OF BALTIMORE.

[No. 6.

out other consideration, is entitled to the position of holder of such paper for value,

and therefore not affected by the defence of the want of consideration to the maker. It is no defence that the note sued on was known to the plaintiff to be an accommodation

note between the maker and the payees, provided the plaintiff took the note for value bonâ fide before it was due. Where the payee of the note received it from the maker, with authority to use it as col

lateral security for a specified indebtedness, and the payee exceeds his authority, and transfers it to the indorsee as collateral security for a larger indebtedness, the latter is not to bear the consequence of this excess of authority, unless it be shown that it

was taken with knowledge of the fact, that the payee had so exceeded his authority. But if the fact of such knowledge be established, the indorsee would be affected by it,

and could have no right to recover, except for amounts due on the indebtedness for

which the note was authorized to be pledged. Where the maker of the note, in an action against him brought by the indorsee, seeks to

avail himself of the defence of such excess of authority, it is for him to prove it. In such action in order to make the defence effectual, on the ground of the want of au

thority in the payee to pledge the note for past discounts, there should be such proof as would justify the conclusion, that the indorsee had actual knowledge of the limited purpose for which the note was made, and consequently of the excess of authority by the payee in applying it to a different purpose. The plaintiff was not bound to make inquiry, and mere negligence however gross, not

amounting to wilful and fraudulent blindness, while it may be evidence of mala fides,

is not the same thing. The question whether the plaintiff had such knowledge or not is one of fact for the jury. Where prayers are objected to because some of the propositions of fact contained in

them are not supported by the evidence, the objection ought not to prevail, where the defects pointed out by the objection amount to nothing more than discrepancies between the evidence of the witnesses, and the facts stated in the prayers in regard

to immaterial matters. In an action against the maker of a promissory note, brought by the indorsee to whom

it was passed as collateral security for the payment of notes discounted by the indorsee for the benefit of the indorser, the measure of the plaintiff's right of recovery is the amount due on the debts embraced by the security. And it is incumbent on the plaintiff to show what debts were intended to be secured by the note, and the amounts remaining due in respect thereof. APPEAL from the superior court of Baltimore city.

The suit in which this appeal is taken was brought by the appellee against the appellant on an accommodation promissory note. The case is stated in the opinion of the court.

First exception. Stated in the opinion of the court.
Second exception. The plaintiff offered the following prayers :

1. If the jury shall find from the evidence, that the plaintiff had been in the habit of discounting drafts for the firm of Phillips & Maitland, prior to the 10th of January, 1872, and that upon that day the said firm applied to the plaintiff to discount two drafts which the plaintiff declined to do, unless the said firm would furnish them with security, to the amount of $10,000 or $15,000, to cover any drafts which had theretofore been or should thereafter be discounted by the said plaintiff, for or on account of said firm, and that Burgwyn Maitland, being a member of the said firm, stated to the cashier of the plaintiff that the said firm was anxious to obtain the money on the said drafts on that day, and that if the said plaintiff would discount them, he would bring the defendant's note for the amount named as such security on the next day; and shall further find that the said plaintiff did discount the said drafts on the faith of the said promise, and that on the following day the said Maitland brought and delivered to the plaintiff the note offered in evidence by the plaintiff,

Vol. II.)

MAITLAND 0. THE CITIZENS' NATIONAL BANK OF BALTIMORE.

(No. 6.

and agreed that the plaintiff should hold the same as collateral security for drafts discounted, or to be discounted, as aforesaid; and if they shall further find, that at the time of the institution of this suit there was due from the said Phillips & Maitland to the plaintiff, on account of drafts discounted prior and subsequent to the promise of the said Maitland to furnish such security, a sum greater than the amount of the said note, then the plaintiff is entitled to recover the full amount of the said note, with interest in their discretion, from the maturity thereof.

2. If the jury shall find the facts set out in the plaintiff's first prayer, and shall further find that the said note was signed and given by the defendant to said Burgwyn Maitland, under the circumstances stated in the evidence of the defendant, but that the said circumstances were not communicated to the plaintiff, and that the plaintiff took the said note, as stated in said first prayer, without any knowledge or notice of any limitation upon the authority of the said Burgwyn Maitland, as to the purpose for which the said note was to be used by him, then the plaintiff is entitled to recover the full amount of said note, with interest from the maturity thereof, in their discretion ; and there is no evidence in the case from which they can find that the plaintiff had such knowledge or notice.

3. If the jury shall find from the evidence that the promissory note mentioned in the evidence was signed and given by the defendant to his son, under the circumstances stated in the evidence of the defendant, and shall further find that neither the defendant nor his said son informed the plaintiff that the authority of the said son of the defendant to use the said note had been in any way limited by the said defendant, as stated in his the said defendant's testimony, and that the said plaintiff had no notice of such limitation of authority, and if they shall further find that the said note was indorsed and delivered by the payees therein named to the plaintiff, as security for any indebtedness on the part of the said payees to the plaintiff, on account of transactions prior or subsequent to the date of the said note, and shall further find that the plaintiff, upon the faith of such indorsement and delivery, or promise of the said payee to indorse and deliver the same as such security as aforesaid, advanced money to the said payees, then the plaintiff is entitled to recover against the defendant the full amount of the said note, provided they shall find that there was due at the time of the institution of the suit, from the said payees to the plaintiff on account of such transactions, an amount equal to the amount of said note.

And the defendant offered the following prayers :

1. If the jury shall believe from the evidence, that at the time when the promissory note of the defendant here sued upon was deposited with the plaintiff's cashier, the said cashier knew that it was an accommodation note drawn in favor of and lent by the defendant to Phillips & Maitland for the purpose of being deposited with the plaintiff as collateral security, and received and accepted it as such with that knowledge; and shall further find that the defendant, in lending his said note to be deposited as aforesaid with the plaintiff, authorized and consented only to its being pledged as security for the two drafts discounted on January 10, 1872, and such other paper as plaintiff might subsequently discount for Phillips & Maitland and for none other, and executed and lent the said note to

Vol. II.)

MAITLAND 0. THE CITIZENS' NATIONAL BANK OF BALTIMORE.

[No. 6.

;

that firm for such specific purpose and application and none other; then

' the plaintiff is not entitled to recover against defendant on account of any indebtedness or liability of Phillips & Maitland to plaintiff for discounts prior to January 10, 1872, of paper not matured when said pledge was made, even although the jury shall find that Burgwyn Maitland did in fact pledge the said note to the plaintiff to secure it against loss from such previous discounts as testified to by Mr. Guest, and that Mr. Guest believed he had authority to do so.

2. If the jury believe that the note sued on was an accommodation note, known to and received by Mr. Guest as such, and was lent by defendant to Phillips & Maitland to be lodged with the plaintiff, as collateral security, to the knowledge of Mr. Guest ; and shall further find, that the defendant did 'not authorize Phillips & Maitland, in lending said note to them, to pledge it for any liability of theirs upon any transactions with plaintiff prior to January 10, 1872, and that they had no right as between him and them to do so, but that Burgwyn Maitland did, nevertheless, pledge it, as testified to by Guest, as security for prior discounts of paper not then matured, and in excess of the authority given to him by the defendant as aforesaid ; the existence of such preëxisting liability on the part of Phillips & Maitland to plaintiff furnishes no sufficient consideration for such pledge to bind the defendant therefor; and he is not liable thereunder in this action.

3. If the jury shall find from the evidence, that the promissory note sued on in this case was made by the defendant for the accommodation of Phillips & Maitland, the payees thereof, and without any value or consideration paid by them to him therefor, and was given by him and received by them, with the agreement that the said note should be left with the plaintiff as collateral security, for the payment of the two drafts of January 10, 1872, drawn by said Phillips & Maitland, and discounted by the plaintiff for them, and for the payment of any other drafts which said Phillips & Maitland might thereafter draw and have discounted by the plaintiff, and for no other purpose; and that the procurement of said note by said Phillips & Maitland from the defendant was obtained because of the suggestion of the cashier of the plaintiff, that said firm should obtain from the defendant his note to be left with the plaintiff as collateral security; and shall further find, that said note was left by said Phillips & Maitland, with the plaintiff, on the 11th January, 1872, as collateral security, not only for the said drafts, dated January 10, 1872, and all drafts which might thereafter be drawn by the said Phillips & Maitland, and discounted by the plaintiff for them, but also for all drafts of said Phillips & Maitland, which had been discounted by said plaintiff prior to the said 10th January, 1872, and were then running, then the plaintiff is not entitled to recover against the defendant the amount of any drafts which had been drawn by said Phillips & Maitland, and discounted by the plaintiff prior to the 10th January, 1872, nor for any other indebtedness on the part of said Phillips & Maitland, except the amount of such of the drafts drawn by the said Phillips & Maitland on or after the 10th January, 1872, and discounted by the plaintiff, as were not paid to the plaintiff.

4. If the jury find from the evidence that the promissory note sued on was lent and delivered by the defendant to Phillips & Maitland with the

Vol. II.]

MAITLAND v. The Citizens' NATIONAL BANK OF BALTIMORE.

(No. 6.

limited authority, for the use and application thereof as collateral security to the plaintiff, which is testified to by the defendant's witnesses, the burden of proof is upon the plaintiff to satisfy the jury that the said note was pledged to the plaintiff to any extent, or for any purpose not so authorized by the defendant; provided, the plaintiff seeks to recover under such unauthorized pledge.

5. If the jury find from the evidence that the note sued upon was not pledged by Phillips & Maitland to the plaintiff, as security for previous discounts, but only as security for the drafts discounted on January 10, 1872, and thereafter to be discounted, as testified to by Burgwyn Maitland, the plaintiff is not entitled to recover in this case, on account of any liability of Phillips & Maitland, by reason of such previous discounts, and can only recover for such loss as the plaintiff may have incurred by the discount of the drafts of January 10, 1872, and of drafts discounted thereafter.

The defendant excepted specially to the plaintiff's prayers, as follows:

The defendant objects to the granting of the plaintiff's first and second prayers, because there is no evidence in the cause that the plaintiff refused to discount any drafts from Phillips & Maitland on 10th January, 1872, unless said firm would furnish them with security to the amount of $10,000 or $15,000, to cover any drafts which had been theretofore or should thereafter be discounted by plaintiff for and on account of said firm ; or that Burgwyn Maitland stated to the plaintiff's cashier that if the plaintiff would discount any bills on said 10th January, 1872, he would bring defendant's note for the amount aforesaid as such security, of all of which facts the said prayers wrongfully assume that there is evidence to go to the jury. Defendant further objects to the said prayers, because they assume that the jury may find that the plaintiff discounted the two drafts therein particularly referred to, on the faith of a promise of B. Maitland to give security to the amount of $10,000 or $15,000, to cover the drafts previously discounted by the plaintiff, or drafts thereafter to be discounted by it, of which facts defendant submits there is no evidence to go to the jury. Defendant objects to plaintiff's third prayer, because there is no evidence, as it assumes, to show that plaintiff would not have discounted certain drafts therein referred to, but for the indorsement and delivery to plaintiff of defendant's note as security for antecedent discounts. Defendant further objects to the granting of the said first, second, and third prayers of plaintiff, because they leave to the jury to find that plaintiff had no knowledge or notice of the limitation of authority on the part of Burgwyn Maitland, or Phillips & Maitland, as to the use to be made of defendant's note, which knowledge and notice in this case defendant submits are matters of law.

The court (Dobbin, J.) granted the prayers of the plaintiff, and rejected the first, second, third, and fourth prayers of the defendant. The fifth prayer of the defendant was conceded. The defendant excepted, and the verdict and judgment being against him, he appealed.

The cause was argued before Bartol, C. J., Miller, Alvey, and Robin

son, JJ.

Bernard Carter f S. Teackle Wallis, for the appellant. The court erred in allowing the question excepted to to be asked, and in admitting the evidence of the witnesses given in response thereto. The appellee,

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