Lane v. Padelford , 14 Me. 94 ( 1836 )

After a continuance, the opinion of the Court was prepared by

Weston C. J.

The deposition of Solon Beale does not prove the note in suit to have been originally void; but that it was made, .with a view to be discounted to raise money for the use of one of the makers, part of which was to be applied to pay a debt, due to the deponent. The party did not succeed in that object, but left it with the witness, as collateral security for his debt. To that amount it was his property; for tire residue, he held it in trust for the maker. It was not void. If negotiated before it was due, notwithstanding these facts, it would have been good for its whole amount, in the hands of a bona fide holder, without notice of the' trust.

In Adams et al. v. Carver et als., 6 Greenl. 390, Churchill v. Suter, 4 Mass. R. 156, was regarded as the leading case, in which it was decided, that a party to a negotiable instrument shall not be received as a witness, to prove it to have been originally void. The Court there say, “ this is the extent and limit of the objection to testimony of this kind.” In the same case it was decided, that a party to a note may be received to prove, that it was negotiated after it became due. And we think Beale's testimony is admissible to prove also, that after it was made, and after their failure to raise money upon it, he received it as collateral security. As such, it was operative, not void. The objection taken in this case, was urged in Van Schaack v. Stafford, 12 Pick. 565, and upon much stronger ground than here; yet the admission of a party as a witness there, was held not inconsistent with the case of Churchill v. Suter.

When Beale transferred the principal debt, nearly two months after this note was due, he passed the note also, notifying the party to whom he passed it, that it attended the principal debt, only as collateral security. It is now separated from the principal debt, and by the fraud of some subsequent holder, has passed to the plaintiff, without notice of the purpose for which it was held, or the trust attending it. But being dishonored paper, he must be understood to have taken it, upon the credit of the party, from whom he received it. In his hands, it is subject to every defence, which could have been set up by the maker, if it had remained with Beale. Tucker v. Smith, 4 Greenl. 415.

That part of Beale’s deposition, which states the admissions of McDougall, to whom he passed the note, but who was not then the holder, is inadmissible ; although the same facts are testified to by the deponent, as within his own knowledge. The plaintiff, the holder, has been deceived, and fails to realize what he may have expected; and so he would have been, receiving the note after it was due, if the maker could prove matter of offset in defence, or payment to a former holder. He must look to the party, who negotiated it to him. Not being the holder of the principal debt, to which this was collateral, he is not entitled to recover any part of the note of the maker. The default is accordingly taken off, and a nonsuit is to be entered.