Eaton v. Alger , 1868 N.Y. App. Div. LEXIS 200 ( 1868 )

By the Court, James, J.

The real question in this case is, whether the defendant should have been allowed to prove that the plaintiffs were not the real owners of the note in suit.

As the Code stood when this action was commenced, every action was required to be brought in the name of the real party in interest, except as otherwise provided. (pode, § 111.) Eo other provision covered a case like this. It would therefore seem very clear, that a defendant, on such an issue made by the pleadings, would have the right to show that the plaintiff was not the real party in interest, particularly if he had pleaded a defense in the action good as against such pretended real party. The plaintiffs, however, insist that notwithstanding this provision of the Code, the indorsee of a note, or the holder of a note payable to bearer or indorsed in blank, may maintain an action upon it, although not in fact the owner, nor, as between himself £ind the owner, entitled to the proceeds when collected. That such was the rule before the Code, is conceded; and the argument is, that it was abolished by the Code; that the codifiers and legislature so intended. In their report to the legislature the codifiers said, “ the rules respecting parties in the courts of law differ from those in the courts of equity; the blending of the jurisdiction makes it necessary' to revise those rules to some extent; in doing so we have had a threefold purpose in view: 1st. To do away with the artificial distinctions existing in the courts of law, and to require the real party in interest to appear in court as such. 2d. To require the presence of such parties as are necessary to make an end to the controversy; and 3d. To allow, otherwise, great latitude in respect to the number of parties who may be brought in. * * * * The true rule undoubtedly is that which prevails in the courts of equity, that he who has the right is the person to pursue the remedy. We have adopted that rule.” This section, now 111, was adopted by the legislature precisely as submitted by the codifiers, showing that they approved the reasons given by the codifiers for its adoption. It is therefore quite immaterial what was the rule previous to the Code, if thereby the legislature intended to, and did, change the rule, by express enactment. That they did so we think clear, from the language of the statute and the reasons for its adoption. In their reasoning the codifiers alluded to the existing rules and the necessity for a revision, one purpose of the proposed change being to require the real person in interest to appear in court as such, followed by an act providing that “ every action must be prosecuted in the name of the real party in interest.” This reasoning, and this enactment, seem too plain for misconception. The act is emphatic; it uses the Saxon word “must,” (a verb which has not yet been twisted by judicial- construction, like the words “may” and “shall,” into meaning something else,) to plaqe beyond doubt or cavil what it intended.

The courts have heretofore held that an action could not be maintained unless in the name of the real party in interest. In Killmore v. Culver, (24 Barb. 656,) in an action on a note, it was held “ that the plaintiff, who held the note merely for prosecution, could not maintain an action, because not the real party in interest.” In Clark v. Phillips, (21 How. 87,) the court said: “ This action on a promissory note cannot be sustained, because not brought by the real party in interest.” And in James v. Chalmers, (2 Selden, 215,) it was said that “ under the Code of Procedure, if it appears that the plaintiff is not the real party in interest, it is a lar to the action, and no further defense is necessary.”

This covers the entire ground of this case, and shows clearly that the judge at circuit erred in excluding the evidence offered.

But it may be said that the remark in James v. Chalmers was not necessary to a decision of the case. If this is conceded, still, as the opinion was concurred in by seven of the eight members of the court, without any objection to the above remark, it illustrates how that section of the Code wás undrstood by the bench.

The importance of the rule enacted by the Code is illustrated in this case. One defense set up is usury. It was charged against the payee of the note, the alleged real party in interest. It was sought t'o establish this defense by proof of his admissions and declarations; but as he was not a party to the action, they were excluded as hearsay, within the rule of Paige v. Cagwin, (7 Hill, 361.) Had the action been in Clark’s name, his declarations would have been admissible as evidence in chief; and if the real party in interest, he should not be permitted, by a nominal transfer, to defeat the other party in the use of his own admissions and declarations. It was earnestly insisted that this question had been expressly decided in City Bank of New Haven v. Perkins, (29 N. Y. Rep. 554,) and Brown v. Penfield, (36 id. 473.) But neither case is in point. The question in each was whether an actual transfer, good in form, and for a valuable consideration, could be impeached by the defendant showing that the transfer was not good as against the other party, and the court held that “nothing short of mala fides, or notice thereof, would enable an indorser or acceptor of negotiable paper to defeat an action brought upon it by one who is apparently a regular indorsee or holder, especially when there is no defense to the indebtedness; that as to anything beyond the bona fides of the holder, the defendant who owes the debt has no interest; it is sufficient if the plaintiff’s title is good as against the defendant.”

In this action we are to presume, from the offer, that the plaintiff was not a regular indorsee or holder; that he held the note apparently as agent for the payee, against whom the defendants claimed a good defense. In this view the defendants were interested in questioning the plaintiff’s title, and had the right to be heard upon that point.

The question is not whether there was proof showing that the plaintiffs were not the real parties in interest, but whether the defendants could give evidence to prove such allegation. If the defendants could make such proof, the case came within the principle of the two cases last above cited; it would impeach the bona fides of the plaintiff’s possession, coupled with a legal defense pleaded, which the defendants should have an opportunity to establish, in an action by the-real owner.

But upon the broader ground, if the plaintiffs were not the real parties in interest, that of itself, under section 111 of the Code, was a bar to all further proceedings in the action, and a complete defense as against the plaintiffs. The law of this State no longer, permits actions to be prosecuted in the name of nominal plaintiffs; the moment that fact appears the action is ended, no matter what the character of the instrument on which it is founded; whether negotiable or not; or whether the defendant has, or has not, any defense to the indebtedness.

[St. Lawrence General Term, October 6, 1868.

For these reasons the learned judge erred in not allowing the defendants to make the proof offered, and a new trial should be granted; costs to abide the event.

James, Bose7crans and Potter, Justices. Boches, J., having been counsel, took no part.]