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Vol. II.)

MAITLAND v. The Citizens' NATIONAL BANK OF BALTIMORE.

(No. 6.

when objection was made to the propounding of the question, stated its object to be, to corroborate the statements made on the witness stand by Mr. Guest, its cashier, by showing he had made similar statements shortly after the giving of the promissory note sued on in this case.

There is no disposition to call in question the principle established by the decisions of this court, in the cases of McAleer v. Horsey, 35 Md. 441, 462 ; Washington F. Ins. Co. v. Davison, 30 Ib. 104; Cook v. Curtis, 6 H. & J. 93.

Accepting the proposition on this subject, announced in these cases, and remembering at the same time the remark of the court in 35 Md. 463, 464, that “it would not be safe to extend or enlarge the application of the rule,” we yet contend that the question allowed to be asked, and evidence admitted under it in this case, was not properly allowed to be asked or admitted.

The principle established in the cases cited is, that in order to corroborate the witness, it may be shown that on a previous occasion he has made the same statements as those made on the witness stand. And accordingly the appellee's counsel stated to the court below that its object in offering the evidence was for the purpose of corroborating the statements made on the witness stand, by showing he had made similar statements shortly after giving the note in question. To determine, therefore, whether the question as propounded, and the evidence as given, came within this principle, the statements made on the witness stand by Guest must be examined.

These statements will be found to amount to this in substance, so far as this point is concerned: that having received certain instructions from the bank, he communicated these to Burgwyn Maitland, and also told him what the firm of Phillips & Maitland must do if they expected any further bank accommodations, that is, they would have to give security for what paper of theirs the bank already had, as well as for what it might thereafter take, and suggested to him to give his father's note as security; to which young Maitland replied he thought he could get his father's note, and several days after this brought the note now in suit and left it with Guest. These are the statements of Guest, which it was sought to confirm by the admission of the declarations, whose admission is excepted to.

What do the statements as made by Guest, on the witness stand, in substance amount to ? They amount to a statement of a certain conversation held by him with young Maitland prior to the delivery of the note sued on.

Now the only evidence which comes within the principle of the cases above cited would be evidence of witnesses to prove that Guest had given to them the same account of the conversation between himself and young Maitland as he had given on the witness stand. McAleer v. Horsey, 35 Md. 461.

Look at the evidence as actually admitted against the protest of the appellant. Here

you find no statement of the conversation between Maitland and Guest given. But on the contrary, a statement of a certain fact or general result of the doings of him, the said Guest, and that the note of defendant was to be held as collateral security for certain drafts. Not

Vol. II.)

MAITLAND v. The Citizens' National BANK OF BALTIMORE.

(No. 6.

a

that Guest said to these witnesses that young Maitland had said the things which he, Guest, testified to on the stand Maitland had said, which was the only shape in which the evidence was admissible ; but Guest's declaration of what he, Guest, had done, - that is, that he had got the note, and what was to be done with it, viz. : that it was to be held by the bank as collateral ; which latter, it is not alleged, Guest said to these witnesses young Maitland had agreed to. Such testimony does not come within the case of 35 Md. 462, and was clearly hearsay, and also calculated to produce a wrong impression on the jury, as they might infer from this statement, thus declared to be admissible evidence, that the defendant himself had in some way agreed that the note was to be held for the purpose stated by Guest. The principle of the case of 35 Md. 464 is not to be extended ; and

.; the admission of this evidence would be an extension.

In discussing the legal propositions involved in the several prayers offered by the defendant, and rejected by the court, or the objections to the plaintiff's prayers, the general propositions contended for may be stated as follows:

1st Proposition. That while negotiable paper, transferred for valuable consideration, in usual course of trade, bona fide, and without notice, or under such circumstances as do not put the party taking it upon inquiry as to the right of the person transferring, will give a good title to the transferee even against the real owner, and freed from the equities between the original parties to the note. Yet such a result is an exception to the general rule applicable to all other kinds of property, and is founded only in commercial policy, and exists only because the innocent holder, in such cases, has parted with money or property, or incurred loss on the faith of the transfer of the note. Jones v. Hardesty, 10 G. & J. 420 ; Bay v. Coddington, 5 Johns. Ch. 56, and 20 Johns. 644 ; Miller v. Farmers' F M. Bk. 30 Md. 329.

2d Proposition. The principle upon which the title of the transferee prevails against that of the true owner, where the transfer was unauthorized as between such owner and the transferrer, does not apply to cases where the note is transferred as collateral security for a preëxisting debt; nor to any case, unless money, property, or other rights are parted with in exchange for such note at the time of the transfer. Gwynn f Co. v. Lee et al. 9 Gill, 137 ; Farrington v. Frank. Bk. 24 Barb. 554; Smith v. Van Loan, 16 Wend. 659; Bank of Mobile v. Hall, 6 Ala. 639; Stalker v. McDonald, 6 Hill, 93; Jenness v. Bean, 10 N. H. 266 ; Williams v. Little, 11 N. H. 71; Coddington v. Bay, 20 Johns. 644 ; Goodman v. Simonds, 20 How. 343; Becker v. The Sandusky City Bank, 1 Minn. 319; 2 Am. Leading Cases, 146 (5th ed.); Desseau v. Waddington, 6 Whart. 232; 1 Am. Leading Cases, 333, 422; Wormley v. Lowry, 1 Humph. 470 ; Sumwalt v. Ridgely, 20 Md. 107.

3d Proposition. Where a note is made for the accommodation of the payee, if he, without right, put this note into circulation, it is then incuinbent, that is to say, the burden of proof is on the holder, to show that he had paid value, parted with property, or gave credit on the faith of the paper at the time of the transfer, and taking it in payment of a preëxisting debt would not be such a consideration as would make a su

Vol. II.]

MAITLAND v. The Citizens' NATIONAL BANK OF BALTIMORE.

(No. 6.

perior equity to that of the true owner. Smith v. Van Loan, 16 Wend. 659; Atkinson v. Brooks, 26 Verm. 569.

Where authority is given to an agent to accept a draft for a particular purpose, and agent accepts for a different purpose, and draft so accepted is used by payee to discharge an antecedent debt, acceptor will not be responsible. Where the circumstances are such as to put a party taking the note on inquiry as to the right of the transferrer, and he makes no inquiry, the right of the true owner, or equities as between the original parties, will prevail against holder. Nixon v. Palmer, 4 Selden N. Y. 400.

In applying these principles to the defendant's prayers, the first second, and third prayers may be considered together, as they practically involve the same general principles of law. By these prayers we concede the right of the plaintiff to recover the amount of the drafts discounted for Phillips & Maitland, on and after 10th January, 1872; but we, in the prayers, deny the right of recovery as to these drafts discounted previously to the 10th January, and which were then running.

The ground of our denial of this recovery rests on the principles above stated, for which we have cited the decisions above given.

1st. That such prior drafts not having then matured, if the note was deposited as collateral security for them in violation of the rights of defendant as between him and the payees, such transfer was not within the true meaning of the phrase, in the usual course of business and for valuable consideration. (See cases cited under 2d proposition.)

2d. Knowledge on the part of the cashier of plaintiff (the only person connected with the plaintiff, with whom the transaction took place), that note had been obtained by payees from defendant as an accommodation note, to be deposited as collateral security, and consequently that it was taken by cashier at his risk, in the absence of inquiries to ascertain the extent of the authority of the payees, and for what liabilities they were authorized to pledge it. Smith v. Van Loan, 16 Wendell, 659; Nixon v. Palmer, 4 Selden, 400; Farrington v. Frankfort Bank, 24 Barbour, 554.

Maitland, Jr., was, under all the circumstances of the case, the agent as well of the cashier as of the defendant. The defendant's fourth prayer should also have been granted. 16 Wend. 659; 4 Selden, 400; 10 G. & J. 420; 2 Parsons on Bills and Notes, 438; Millis v. Barber, 1 M. & Wels. 431; Hutchinson v. Boggs f. Kirk, 28 Penn. 294.

The plaintiff's prayers are inconsistent with the principles stated, when considering the defendant's prayers.

John H. Warner f Robert D. Morrison, for the appellee. The testimony objected to under the first exception was properly admitted under the authority of the Maryland cases of Cook v. Curtis, 6 H. & J. 93 ; Wash. Fire Ins. Co. v. Davison f Symington, 30 Md. 91; McAleer v. Horsey, 35 Md. 439.

A party taking a negotiable instrument in good faith, as security for an antecedent debt, and without any further consideration, holds the same unaffected by the equities between the original parties. 3 Kent Com. 80, &c. ; Swift v. Tyson, 16 Peters, 15, and cases therein cited ; Story on Prom. Notes, sec. 195, note 1; 1 Parsons on Notes and Bills, 218 et seq.;

Vol. II.)

MAITLAND V. THE CITIZENS' NATIONAL BANK OF BALTIMORE.

[No. 6.

2 Am. Leading Cases, 229 et seq., 232, to 243 ; Williams v. Little, 11 N. H. 66 ; Stoddard v. Kimball, 6 Cush. 469; Chicopee Bk. v. Chapin, 8 Metc. 40; Lord v. Ocean Bank, 20 Penn. St. 384; Manning v. McClure, 36 Ill. 490; Stevenson v. Heyland, 11 Minn, 198; Lathrop v. Morris et al. 5 Sandf. 7; Bk. of New York v. Vanderhorst, 1 Robertson, 216 et seq.; McCarty v. Roots, 21 How. 439.

All authorities agree that where a note is transferred as security for a preëxisting debt, and upon any new consideration, such as a further advancement, &c., the holder is altogether unaffected by any equities. Story on Prom. Notes, sec. 195 and note; 1 Parsons on Bills and Notes, 218 et seq., Stalker v. McDonald, 6 Hill, 93.

In 2 American Leading Cases, 242, it is said : “ The rule, that the transfer of a note or bill, as security for an antecedent debt, will not raise the title of the indorsee higher than that of the indorser, meets with an exception where the instrument is executed for the accommodation of the payee, with a view of enabling him to obtain credit from third persons.”

A further exception is made to the plaintiff's prayers because it is alleged that they submit to the jury the question as to whether the plaintiff had any knowledge or notice of the limitation of the authority of Maitland, Jr., to pledge the note, which question, as put, is claimed to be a question of law.

The language of the prayers shows that actual notice or knowledge of the limitation of authority was the matter submitted to the jury, and the appellee contends that actual knowledge or notice of the alleged limitation of authority would be necessary to affect the plaintiff.

In Goodman v. Harvey, 4 Adol. & Ellis, 870, Lord Denman said: “When a bill of exchange has passed to the plaintiff without any proof of bad faith in him, there is no objection to his title.” Cecil Bank v. Heald, 25 Md. 574; Davis v. W. S. Bd'g. Union, 32 Ib. 285 ; Matthew8 v. Poythress, 4 Geo. 287; Goodman v. Simonds, 20 How. 366.

The first prayer of the appellant is defective, if for no other reason, because it assumes there was no evidence in the case that the cashier of the plaintiff knew that the note was an accommodation note. There was no such evidence in the case; and if there were, the law of the prayer is

Renwick v. Williams, 2 Md. 356; Lord v. Ocean Bank, 20 Penn. St. 384; Davis v. W. S. Bd'g. Union, 32 Md. 285; Fulweiler v. Hughes, 5 Harris, 440; Moore v. Baird, 6 Casey, 139.

The appellant's prayer is obnoxious to the same objection as to the assumption of evidence not in the case, and because it treats the case as though it stood upon the antecedent debt as the sole consideration. The first and second prayers are both contrary to the law of the case of Davis v. W. Saratoga Build. Union, 32 Md. 285, because it seeks to affect the plaintiff by a limitation of authority of which it had no notice.

The third prayer of the appellant is defective, because the mere fact that the cashier suggested that Phillips & Maitland should obtain the defendant's note, or some other collateral, is not sufficient from which to infer that the plaintiff knew, or should be put upon inquiry as to the authority of Burgwyn Maitland, or as to the equities between the original parties.

The instrument being a promissory note in the usual form, without

erroneous.

Vol. II.)

MAITLAND v. THE CITIZENS' NATIONAL BANK OF BALTIMORE.

(No. 6.

limitation of any sort upon its face, the plaintiff had a right to take it as it did, and the antecedent debt was a good consideration even if there had been no other, but certainly as a part of the whole contract it is good and cannot be lopped off.

This prayer is also against the law in Davis v. W. Saratoga Build. Union, already quoted.

That the fourth prayer was properly rejected, see Davidson v. Lanier, 4 Wall. 447. Even if the prayer was good law, it was properly rejected, because the plaintiff, in all its prayers, had assumed the burden of proof, and the defendant had the full benefit of the proposition, as to the burden of proof, by the concession of his fifth prayer, which said to the jury, in effect, if you do not believe Guest you cannot allow the plaintiff for the antecedent indebtedness; to have granted the fourth prayer would have been to embarrass the jury.

ALVEY, J., delivered the opinion of the court.

This appeal is taken from a judgment of the superior court of Baltimore city, rendered in an action on a promissory note, of which the defendant was maker, for $10,000, dated January 11, 1872, payable four months after date, to the order of Phillips & Maitland, and by them indorsed to the plaintiff. The note was protested for non-payment at maturity.

The declaration was in the usual form, and the pleas were, that the defendant never was indebted as alleged, and that he did not promise as alleged.

At the trial, two bills of exceptions were taken by the defendant: the first to the ruling of the court in admitting certain evidence offered by the plaintiff ; the second to the rulings of the court in granting the three prayers offered by the plaintiff as instructions to the jury, and the refusal to grant the first, second, third, and fourth prayers offered by the defendant.

Before proceeding to consider the specific questions presented by the bills of exception, in order the better to understand the nature of the transaction out of which the controversy arose, we shall state briefly the leading facts of the case as disclosed by the record.

The son of the defendant and a party by the name of Phillips composed the firm of Phillips & Maitland, a house doing business in the city of Baltimore at the time of the making the note sued on. This firm, for some time prior to the date of the note, had kept an account with the plaintiff, and had received from the latter discounts of drafts or bills drawn upon certain houses in New York to a considerable amount. While the account was still running, in consequence of some distrust as to the solvency of the house of Phillips & Maitland, the bank, by its directors, after examining into the state of the account, instructed its cashier, Mr. Guest, to call upon Mr. Maitland, of the firm of Phillips & Maitland, for collateral security. This instruction was given the cashier some time between the 5th and 10th of January, 1872; and on the last mentioned date, Mr. Maitland presenting himself at the bank, had his attention called to the instruction of the board of directors by the cashier, with a request that the security should be furnished; but whether the security required by the board of directors and demanded by the cashier was for all existing indebtedness of the firm to the bank, as well as for all indebtedness that might thereafter be contracted with it, is the controverted question in the

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