New York National Exchange Bank v. Jones ( 1880 )

Van Hoesen, J.

Ebbitt, the maker of the notes, was asked whether Patten, the defendant’s testator, who indorsed the notes, did so solely for the accommodation of Ebbitt, or whether some of the money was used for Patten’s purposes. The question was objected to as calling for a personal transaction between a deceased person and a person interested in the event of the action. The objection is not tenable. Ebbitt was not interested in the event of the action. When interest in the event of the action disqualified a person from testifying as a witness, the maker of a note was always a competent witness for the indorsee in a suit against the indorser ; the reason being that if the plaintiff prevailed, the witness would be liable to pay the note to the defendant, and if the defendant prevailed, the witness would be liable to the same extent to the plaintiff; so that his interest was balanced (Greenleaf Evid. § 399).

It appears that Ebbitt had made default, so that his liability did not at all depend on the result of this action; nor would the judgment against Patten be any evidence in an action between Ebbitt and Patten’s executors that Patten was not, as his executors assert, a mere surety for Ebbitt., Section 829 of the Code of Civil Procedure was not, therefore, violated by permitting Ebbitt to testify that Patten was himself interested in the avails of the notes that were discounted by the bank.

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It appears that the defendants requested the court to direct a verdict in their favor, and that when they excepted to the refusal to do so, they declared that they did not think that there was any question for the jury. The first question before ús, therefore, is, did the evidence show that Patten was a surety ? for, if it did not, it is unnecessary to examine the legal question presented by the defendants, did the failure of the plaintiff to refile the chattel mortgage, given by Ebbitt, the maker, release or discharge Patten, the in dorser ? If'Patten were not a surety, he has no right to complain of the failure of the bank to refile the mortgage.

I think that the evidence fails entirely to show that Patten was a surety for Ebbitt. On the contrary, I think it appears that he was quite as much a principal as Ebbitt himself.

At fol. 74 of the case, the question was put, to which I have already adverted: Did Mr. Patten indorse these notes entirely for your accommodation, or was some of the money used for Mr. Patten’s purposes? the answer was, Half his, and half my own.

When the counsel for the executors heard this, they began an examination of the witness with the hope of explaining away that statement, but they failed to break the force of it.

They did succeed in showing that the bank account was in the name of Ebbitt, and that the various checks given for the purpose of reducing the amount of the original loan, were all drawn by Ebbitt, but the statement that the money obtained was half for Patten, and half for Ebbitt, was not withdrawn, contradicted, or qualified. It is evident that when the witness said that the money was half for him, and half for Patten, he referred to the money obtained on the first discounting of the notes in 1874 and 1875, and there is not one word in the testimony elicited by the defendants inconsistent with this view of the witness’s meaning. The foundation of the defense, under this construction of the evidence, utterly fails.

But, even if Patten had been shown to be a surety, I am not prepared to concede that, .the failure of the bank to refile the mortgage would have discharged him. It is not necessary to discuss the question, but I will say that I have looked into the following eases among others, as well as into the note upon Rees v. Berrington, 2nd part, 2nd vol. Leading Oases in Equity, pp. 375-380, and my conclusion is that a failure of the creditor to refile, or to file, a mortgage upon the property of the principal debtor, will not discharge a surety.

There is in the case of Shroeppel v. Shaw (3 N. Y. 459), a dictum of Judge Habbis that such a failure on the part of the creditor might discharge the surety, but there is no decision to that effect, and the following authorities are expressly opposed to such a rule (Hampton v. Levy, 1 McCord Ch. 107; Lang v. Brevard, 3 Strobh. Ch. 59; Philbrock v. McEwen, 29 Ind. 347).

The foregoing cases all relate to mortgages given by the principal debtor to the creditor, the value of which was lost by the neglect of the creditor to file them, and' the decisions are that the surety was not thereby discharged; the courts agreeing that a surety will be discharged only where the creditor does an act of a positive character, the effect of which is to destroy, abandon or waive a security to the benefit of which the surety is entitled; and' that no act of passive sufferance, where the creditor is not required by the surety to proceed, will affect the surety’s obligations.

I see no answer to the objection that the plaintiff, being a national bank, failed to prove its corporate existence. Evidence of incorporation was indispensable. Our statute provides that in suits brought by or against any corporation created by or under any statute of this state it shall not be necessary to prove on the trial the existence of the corporation, unless the defendant shall have alleged in his answer that the plaintiff or the defendant, as the case may be, is not a corporation (2 R. S. 458, § 3, as amended by chap. 422, Laws 1865).

Unfortunately for the plaintiff, it was not created by or under any statute of this state, and it is not within the protection of the provision to which I have referred. The omission to prove the charter might have been supplied at the argument, as we then stated, but it was not supplied (Bank of Charleston v. Emeric, 2 Sandf. 715).

We must, therefore, reverse this judgment, and leave the plaintiff to apply for a re-argument, upon which, the missing proof may be furnished.

Charles P. Daly, Oh. J., concurred in the result.