Bank of the United States v. Dunn

ERROR to the circuit court of the United States for the county of Washington, in the district of Columbia.

In the circuit court, the Bank of the United States instituted an action of assumpsit against John O. Dunn, as indorser of a promissory note drawn by John Scott, in the following words:

'$1000-Sixty days after date I promise to pay John O. Dunn or order one thousand dollars for value received, negotiable and payable at the United States Branch Bank in Washington.

JOHN SCOTT.

Indorsed J. O. Dunn.-Overton Carr.'

The signatures of the parties to the note were admitted, and notice of a demand of payment of the same at the Bank, and of the non-payment, were proved to have been regularly made and given.

The defendant offered as a witness Overton Carr, the indorser of said note, who testified that before he indorsed the same, he had a conversation with John Scott, the maker, and was informed by him, that certain bank stock had been pledged, or was to be pledged, by Roger C. Weightman, as security for the ultimate payment of the said note, and that there would be no risk in indorsing it. That the witness then went into the room of the cashier of the plaintiffs' office of discount and deposit at Washington, and found there the cashier, and Mr Thomas Swann the president of the said office, to whom he communicated the conversation with Mr Scott, and from whom he understood, upon his inquiry, that the names of two indorsers, residing in Washington, were required upon the said note, as a matter of form, and that he would incur no responsibility (or no risk) by indorsing the said note. He did not recollect the conversation in terms, but such was the impression he received from it. That he went immediately to the defendant and persuaded him to indorse the note, by representing to him that he would incur no responsibility or no risk in indorsing it, as the payment was secured by a pledge of stock, and to whom he repeated the conversation with Mr Scott and the president and cashier. That no other person was present at the conversation, the terms of which he does not recollect; but that the impression he received from his conversation with the president and cashier, and with Scott, and which impression he conveyed to the defendant, was that the indorsers of the said note would not be looked to for payment of it, until the security pledged had been first resorted to, but that the said indorsers would be liable, in case of any deficiency of the said security, to supply the same. That neither this witness nor Mr. Dunn was at the time able to pay such a sum, and that both indorsed the note as volunteers, and without any consideration; but under the belief that they incurred no responsibility (or no risk) and were only to put their names upon the instrument for form's sake. To which evidence the plaintiffs, by their counsel, objected, but the court permitted it to go to the jury.

The plaintiffs then offered as a witness, Richard Smith, the cashier of their office of discount and deposit aforesaid, who was summoned on the part of the defendant, and who testified that he has no recollection of the conversation mentioned by the said Carr; but that no stock was ever pledged for the payment of the said note. That Roger C. Weightman had give to the said office a guarantee, that he would pay the said note, in case the parties to the same should fail to do so, after all legal and proper measures had been taken to procure the payment of it by them. That he is certain that nothing was said either by him or by Mr Thomas Swann in his presence, as to the indorsers not being held liable for the payment of the said note. That it was contrary to the practice of the said office, to take indorsers on notes who were not to be held liable. That the president and himself conjointly, nor either of them, were authorised to give any such exemption to indorsers, or to determine who should be taken as indorsers on notes. That this was the province of the board of directors alone; unless when they appointed a committee of the board for that purpose. That the guarantee aforesaid was given by the said Weightman after the note had been made and indorsed.

Mr Smith, upon cross examination, having stated that he was a stockholder in the bank, the court rejected his testimony, and instructed the jury that it was not evidence.

The plaintiffs' counsel then offered to swear Mr Swann, who had been summoned as a witness on the part of the defendant; but the defendant's counsel objected to his competency for the same reason, which objection the court sustained, to which the said plaintiffs, by their counsel, excepted; and also to the admission of the testimony of Mr Carr, and the rejection of Mr Smith's testimony.

The jury found a verdict for the defendant, and judgment in his favour was entered thereon.

The plaintiffs prosecuted this writ of error.

The case was argued by Mr Lear and Mr Sergeant for the plaintiffs in error; and by Mr Coxe for the defendant.

For the plaintiffs in error it was stated, that the principal question for the decision of the court was, whether the testimony of Mr Overton Carr was legal, and should have been admitted.

The object for which that testimony was introduced, was to vary the contract entered into by himself and his co-indorser, and to show another contract of an entirely different character.

It is a general and an important rule, that evidence of this description will not be admitted to vary or explain a contract in writing. The propriety of the rule is deduced from the obscurity and uncertainty which would be thrown over all such contracts, from the frailty of memory, and the uncertainty of understanding the parties. This rule is sustained by a number of decisions. 2 Stra. 955. 2 Camp. 205. 3 Camp. 57. 4 Camp. 127, 217. Skinner, 454. 1 Gow, 74. 8 Taunt. 92. 1 Chitty's Rep. 661. 9 Wheat. 587. 7 Mass. 238. 3 Dall. 415-1 Peters's Condensed Rep. 193.

It is admitted that there are exceptions to this rule: latent ambiguity is an exception: so also, as to the consideration in a deed, when the question was whether the receipt was conclusive evidence of payment. The decisions of the courts of the different states of the union are divided. Maine, Maryland, North Carolina on one side; Massachusetts, New York and Pennsylvania on the other. The cases are collected in a note to 3 Starkie on Evidence, (Am. Ed.) 1001, 1002.

If the deed recite a particular consideration, and 'other good considerations,' it may be shown what they were: but, in general, consideration cannot be denied; nor a different consideration be proved. That would invalidate the contract. The question for the consideration of the court is, whether this parol evidence shall be admitted to prove a different contract. The Pennsylvania authorities, upon which it is claimed to introduce such evidence, are to be considered as affected by the absence of a court of chancery in that state. The law of Pennsylvania as to parol evidence is peculiar, and in the case of Hurst v. Kirkbride, 1 Yeates, 139, the judges express their dissatisfaction with it. Cited, Whart. Digest, 270, for the Pennsylvania cases.

The reason for the admission of such evidence, does not apply to contracts by the operation of law. 4 Wash. C. C. Rep. 480. 5 Serg. & Rawle, 353.

Mr Coxe, for the defendant. The object of the evidence of Mr Carr was not to render the note void at its inception; in such a case the party to the note would not be a witness. Parol evidence is admissible when it does not go to contradict or vary the original contract. There is no written contract of the indorsers of the note; the contract arises from the legal implication of his being an indorser. What is the legal effect of a blank indorsement? It is only an authority to fill it up according to the agreement of the parties, and to the authority so given. All the cases agree, that as between the parties, a total want of consideration, or a partial failure of consideration may be shown. 1 Serg. & Rawle, 663. 4 Wash, C. C. Rep. 480.

Upon these principles the evidence was legal. This was the case of security in trust for the benefit of the indorsers, and parol evidence to show the trust was proper.

Mr Justice MCLEAN delivered the opinion of the Court.