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MAITLAND v. THE CITIZENS' NATIONAL BANK OF BALTIMORE.
sibi payee to disepts for a diffent to accept a dome
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 & 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 V. 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 & 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 ct seq.; Vol. II.]
MAITLAND v. The Citizens' NATIONAL BANK OF BALTIMORE.
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; Matthews 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 erroneous. 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
Maitland v. The Citizens' National Bank OF BALTIMORE.
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 Vol. II.]
Maitland v. THE CITIZENS' National Bank of BALTIMORE.
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case. According to the testimony of the cashier, Guest, the demand was for collateral security for all drafts then held, as well as for all that might thereafter be discounted for the firm ; and the giving of the defendant's note as collateral security was suggested to Mr. Maitland, Jr., by the cashier himself. On the other hand, it was proved on the part of the defendant that security was only required, and therefore only given, for drafts thereafter to be discounted, including two drafts discounted on the 10th of January, 1872. Phillips & Maitland failed on the 15th of January, 1872, and, according to the testimony of the plaintiff's cashier, of the drafts discounted for the firm from the 10th of January to the day of their failure inclusive, the sum of $5,681 remains unpaid, and of drafts discounted for them previous to the 10th of January, 1872, there remain unpaid over $15,000.
The defendant himself testified that he had no interest in the business of Phillips & Maitland, and no connection whatever with that house, but on the 11th of January, 1872, he signed the note in suit, and gave it to his son, Burgwyn Maitland, for the purpose of being left with the plaintiff as collateral security for the payment of the two drafts which had been discounted by the plaintiff for Phillips & Maitland, on the 10th of January, 1872, and of any drafts which that house might thereafter get discounted by the plaintiff ; that he did not take the note to the bank himself, nor accompany his son to the bank, nor had he any interview on the subject with any officer of the bank; that the note when signed by him was in blank, as to the amount and time of payment, his son having authority to fill both blanks when he took it to the bank, provided the amount did not exceed $10,000. The defendant further testified that the note was given to Phillips & Maitland for the purpose stated, in response to a request made of him on the evening of the 10th of January, 1872, by his son, Burgwyn Maitland, who stated to him, that the plaintiff's cashier had, on that day, declined to discount two drafts drawn by Phillips & Maitland, unless he, the son, would bring defendant's note, or some other security, as collateral, for their payment in case they were not paid by the persons on whom they were drawn. The note was therefore made for accommodation of the house of Phillips & Maitland, and, according to the testimony of the defendant, was only to be used as collateral security for the two drafts discounted on the 10th of January, and such other drafts as should thereafter be discounted for that house.
The defendant therefore contends that he is only liable on the note for any balance that may remain due on the two drafts discounted on the 10th of January, 1872, and on any subsequent drafts that may have been discounted by the plaintiff for Phillips & Maitland ; while, on the contrary, the plaintiff contends that the note was given as collateral security for all drafts discounted for Phillips & Maitland, which remained unpaid at the time of their failure, as well those discounted before as after the 10th of January, 1872, and consequently it is entitled to recover to the extent of the face of the note, if the indebtedness of Phillips & Maitland is as much as or more than that sum.
Such being the nature of the controversy between the parties, as disclosed by the evidence, the plaintiff, on the trial, for the purpose of corroborating the testimony of its witness, Guest, in some particulars in [No. 6.
MAITLAND v. THE CITIZENS' NATIONAL BANK OF BALTIMORE.
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regard to which the latter was in conflict with the testimony of Burgwyn Maitland, a witness for the defendant, as to the debts for which the collateral security was required to be furnished, offered to prove by its president and two of its directors the statements made by Guest to them soon after the transaction; and, under the ruling of the court, was allowed to prove that Guest, a few days after the 11th of January, 1872, and before the failure of Phillips & Maitland, stated to the board of directors that he had obtained from Phillips & Maitland 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 the note, as well as for all drafts which it might discount subsequent to that date, for that house. To the allowance of the question to be propounded to the witnesses, as also to the admissibility of the evidence elicited thereby, the defendant objected, and the objection being overruled, such ruling forms the subject of the first exception.
This exception presents a question that has been upon several occasions before this court, as in the cases of Cook v. Curtis, 6 H. & J. 93; Washington Fire Ins. Co. v. Davison, 30 Md. 104; and McAleer v. Horsey, 35 Ib. 441. The rule recognized and applied in those cases would seem to be an exception to the general principle which excludes all mere hearsay evidence, because ex parte and without the sąnction of an oath. But the evidence admitted under it is not admitted to prove or disprove any fact involved in the issue on trial, but simply to corroborate or support the credibility of the witness who may be in some manner impeached. It is a rule, however, not very generally recognized in the courts of England, or of other states of this country, and it should not be extended, but applied strictly. The legislature, at its last session, abrogated the rule entirely as applied to the case of a party to the cause who may be examined as a witness (Act 1874, ch. 386), but left it in force as applicable to other witnesses.
The object of the rule is to allow a party, whose witness is impeached, to show that the witness has been consistent in giving the same narrative of fact ; that his former statements, when without interest or motive to falsify the truth, consist with his sworn testimony as given on the trial; and thus, to some extent, remove suspicion that his testimony has been fabricated to meet the emergencies of the case, or that his recollection has varied, and is therefore not to be relied on. But, in order that the rule may be properly applied, and the evidence admitted under it furnish the foundation for some rational presumption in corroboration of the witness's credibility, it should appear that there is real or substantial similarity, in facts and circumstances, between the unsworn and the sworn statements. Evidence of mere conclusions or deductions from certain transactions, formerly declared by the witness, do not corroborate or support the credibility of his evidence, consisting of what professes to be the particular facts occurring in the transaction. His opinions or conclusions may have been erroneously founded, or drawn from very different facts from those testified to by him. The former unsworn statements, as compared with his testimony on the trial, should furnish some test of the witness's recollection, as well as of his integrity. In this case, the witness Guest had testified to the particulars of a conversation and as to an understanding