
    Richmond.
    Lyons v. Miller.
    1849. October Term.
    
    (Absent Cabell, P.)
    1. The transferrer for value, of a negotiable note, though not a guarantor of the solvency of the parties to the note, is a guarantor of the genuineness of the instrument.
    3. Nor is it material whether the person making the transfer receives the consideration for his own use, or for the use of another; unless he is acting as agent, and discloses not only his agency, but the name of the principal for whom he is acting.
    3. Where plaintiif comes into equity on the ground of discovery, the whole answer is to be read, if it is used at all, as the testimony of a witness; and no part of it pertinent to the discovery, is to be rejected because it is affirmative matter in avoidance of that which is admitted to be true. But though the answer is to be read, it is subject to be discredited, in the same manner as the testimony of any other witness.
    4. The general rule is that when a party comes into equity for a discovery, the Court will retain the cause, and give the proper relief founded on the discovery; unless where the discovery is sought to be used in a pending action at law.
    This was a bill for discovery and relief filed in April 1835, in the Circuit court of Henrico county, by James Lyons against Dabney M. Miller, Edward Powell and Peterson Goodwyn. The bill charges that the plaintiff having been requested by his friend Philip B. Winston, of the county of Hanover, if he met with an opportunity to purchase in fair market, good bonds or notes in Richmond, at a profitable discount, to purchase some for him, and he would remit a check on one of the banks in Richmond whenever called on. That in the month of June 1834, the plaintiff being in the Circuit court of Henrico, a conversation arose between Dabney M. Miller, himself and some other persons, touching the money market of Richmond, and the price at which good paper could be bought, when Miller said he could purchase paper of undoubted responsibility, at a discount of 5 per cent, a month; whereupon the plaintiff stated that a friend of his would like to invest a few thousand dollars in good paper, and the plaintiff would purchase such for him at a much lower rate than 5 per cent, per month; when Miller enquired at what rate, and the plaintiff said at two per cent, per month; to which Miller replied, I shall be glad to get your custom, sir; I can accommodate you. That a few days after this conversation, the plaintiff being again in the Court, Miller came in and applied to him to know if he would purchase a good note, and was .told he would if he approved the names. They walked out of .the Court, and Miller exhibited a note drawn by Thomas C. Powell, then the keeper of the Eagle hotel in Richmond, and endorsed with the names of Edward Powell and Peterson Goodwyn, and offered it at the discount of two per cent, per month. Plaintiff said the name of Goodwyn was itself sufficient, if the signatures were genuine, but of that he knew nothing; to which Miller replied, there was no doubt on that point, for he knew .they were genuine. It was then agreed that the plaintiff should take the note for Mr. Winston, at a discount of two per cent, per month, the note being at 60 days, and that the money should be paid on the next Tuesday; that being the earliest period at which Mr. Winston, who was to pay the money, could be heard from. That the plaintiff wrote to Winston, stating the fact of the purchase, and requesting the remittance. On Tuesday, Miller applied for the money, when the plaintiff informed him that he had not heard from Mr. Winston. At this Miller expressed regret and uneasiness, saying that in his confidence of receiving the money, he had advanced the amount by giving his check, which would be payable at 9 o’clock the next morning; that he was compelled to go that evening on business to New Kent, and had not the money in bank to meet the check; and he urged the plaintiff to advance the money for Winston. This the plaintiff at first declined, on the ground that he had no interest in the matter, as Miller knew, and knew too that the money was to come from Winston. But upon the representations of Miller, that the disappointment rendered his situation extremely uncomfortable and embarrassing, the plaintiff finally consented, that if he did not receive the money from Winston by the mail of the next morning, which arrived in Richmond by 7 o’clock, he would advance the money, and deposit it in the Farmers Bank, the bank designated by Miller, to Miller's credit. Thereupon Miller delivered the note to the plaintiff. That after this was done, in a conversation between them, Miller, referring to a previous enquiry of a similar character, which he made of the plaintiff, touching his liability for the said note, remarked, “now I am not liable to you for that note; am I.” To which the plaintiff replied, as he had done in the first instance, that he was not liable for the solvency of the makers of the note, but only for the genuineness of the signatures. To which he answered, with much apparent confidence, that there was no doubt the note was genuine. That Miller further stated to the plaintiff, after the agreement was completed, and the note was delivered to him, that he had obtained the note at a discount of 4 per cent, per month, and had therefore made two per cent, without advancing a cent.
    That the plaintiff not hearing from Winston the next morning, deposited in the Farmers Bank, to the credit of Miller, the sum of 336 dollars, and wrote again to Winston on the subject. That Mr. Winston answered this letter; and the plaintiff perceiving from his answer, that he was not satisfied with what had been done, though he was willing to ratify it on his part by paying the money, the plaintiff would not permit him to do so, although he was thereby made to become for the first time in his life, the purchaser of the note. That as soon as he could see Miller again, the plaintiff returned to him the note, and requested him to tender it to the maker for the sum he had paid for it, without interest. That it was retained by Miller for some days, and he ^hen returned it, saying it was not then convenient for Mr. Powell to pay the note, but it would be paid at maturity. That a short time afterwards he was informed the signatures of the endorsers on the note were forged. That the note was deposited in bank for collection, and duly protested for non-payment. That the maker of the note, Thomas C. Powell, had absconded to Texas, and had died there. That the plaintiff is satisfied that the signatures of Edward Powell and Peterson Goodwyn are not in the handwriting of these persons; but he has been informed that they gave Thomas C. Powell verbal authority to endorse their names upon his notes, but the plaintiff knew of no proof by which this authority could be proved, without a discovery from them. And having made Miller, Edward Powell and Goodwyn, defendants, the plaintiff called upon them to answer each and every allegation contained in the bill. That Powell and Goodwyn say whether their signatures are genuine, or whether Thomas C. Powell was not authorized by them to make the endorsement. That Miller be required to disclose how, under what circumstances, in what manner, and for what consideration, the plaintiff obtained the note aforesaid from him; whether the statement of the circumstances herein made by the plaintiff is not true, and if not true, in what it is not true. The-prayer was for a decree for the money he had paid, with interest, and for general relief.
    
      Powell and Goodwyn answered the bill, and denied that they had endorsed the note or authorized any other person to endorse it for them. Miller also answered. He admits the conversation in the Circuit court, touching the money market of Richmond, but denies that he expressed a desire to carry on any speculation in paper with the complainant, or to furnish him with paper to purchase; on the contrary, the complainant stated to him that he would purchase twenty thousand dollars worth of such paper as he believed to be good or approved of the names, at the rate of two per cent, per month discount ; and requested the defendant to bring any paper that he should find offering in the market. He denies that the complainant stated in that conversation, that the money so to be invested belonged to another and not to himself; or that there was any agreement between the defendant and the complainant, that the defendant should bring to the complainant, paper to purchase at the rate of two per cent, per month, or at any rate. He admits that he did, in compliance with the aforesaid request of the complainant, carry him the note mentioned in the bill; that the complainant, after examining the note, stated that he was well acquainted with Peterson Goodwyn, one of the endorsers, and that he did not have the money to purchase the note, but would in a few days obtain it from the person for whom he intended to buy and take the same: and he avers that this was the first intimation he received that the complainant designed purchasing the said note on account of another person and not for himself; and he denies that any thing whatever was said by either of them about forgery or the genuineness of the signatures, or that he knew or had any reason to believe that Philip B. Winston was the person for whom the complainant intended to purchase the said note, and from whom he expected to receive the money to pay for the same; and he says he does not recollect, and therefore does not believe, that any day was fixed for the payment of the money by the plaintiff.
    The defendant further says, that in consequence of the engagement of the complainant to obtain the money in a few days, and take said note, the defendant called a second time on him, who stated that he had not been able to get the money, at which time the defendant may have represented his situation as uncomfortable, as well it might be; for, relying upon the assurances of the complainant, he had assured the drawer of the note, that the money would be raised thereon, and he did not wish his assurance to fail; and as the defendant was about to leave Richmond for several days, and wanted to have the matter settled before he went, he desired the complainant to say positively, whether or not he intended to take said note: If he did, to give the defendant the money for it; and if not, to say so at once, that the note might be returned to the drawer. The complainant then proposed, that the defendant should deliver him the said note, and give to the drawer thereof the defendant’s check on one of the banks in Richmond, payable the next day, by which time the complainant declared he believed he would receive from the person for whom he was purchasing said note, money to pay for it; and that if he should fail to do so, he would, out of his own funds, deposit in bank the money to pay said check. That defendant acceded to this proposition, and delivered the note to the complainant, and after-wards gave to the drawer of the note his check on the bank in which the complainant had promised to deposit the money. The defendant may have designated the bank in which he wished the money to be deposited; for no other reason, however, than that the money might be put in the bank on which he intended to give his check. And he most solemnly avers, that he never said to the complainant, that in his confidence of receiving the money he had advanced the amount, by giving his check, which would be payable at 9 o’clock the next morning, and that he had not the money in bank to meet the check.
    In answer to the allegation that he, defendant, offered said note to the plaintiff for sale, the defendant says, If to have brought paper to him at his own request, and which he agreed to take, was a sale by the defendant, then, indeed, there was a sale ; but he unequivocally denies that he ever sold the note to the complainant; for in the whole transaction, the defendant was acting at the instance and request of the plaintiff, who, it seems, knew fully as much about the parties to the note as the defendant, who did not mean in any manner whatever, for any trifling compensation that he might receive, to guaranty the payment or sufficiency of any note the complainant might take of him ; otherwise the defendant’s name as endorser would have been put upon the note.
    The defendant further said, it was true that when he delivered the note to the complainant, defendant remarked to him that the defendant was not to be liable for the money, and this, with reference exclusively to the solvency of the parties, to which complainant replied that he could not be responsible as he had not endorsed the note. And he again denies that he ever, at any time, said to the complainant, that the note or that the signatures were genuine. And he denies that after he delivered the note to the complainant, or at any other time, that he said to him, that he had obtained the same at a discount of four per cent, per month, and had, therefore, made two per cent, without advancing a cent.
    The defendant admits what is said in the bill about the delivery of the note to him by the plaintiff, to be offered to the maker, and his returning it again to the plaintiff. He says that the names of the endorsers may be forgeries for aught he knows, but he does not admit that they are, and calls for proof.
    After the filing of this answer, the plaintiff amended his bill, and called upon Miller to say who employed him to negotiate the note, and who paid him the trifling compensation he had admitted, and the amount of that compensation.
    
      Miller answered the amended bill. He says he received the note from Thomas C. Powell for the purpose of raising money on it, without stipulating for any compensation whatever for the service ; and the defendant would never have thought of the complainant with reference to the said note, but for the complainant’s own request. That the defendant being a collector of debts for other people, and having a small bill against the said Thomas C. Powell in favour of William B. Bailey, called on Powell for payment; whereupon Powell informed him that he had no money, and could not then pay the bill; but told the defendant that he would pay it if the defendant would raise the money on a note of his own, endorsed by Edward Powell and Peterson Goodwyn. The defendant took the note, and, in accordance with what had previously passed between himself and the complainant, carried it to him. The defendant stipulated with Powell for no compensation whatever; and his object at the time, was to collect the debt due to Bailey, and to oblige the complainant. After the complainant had taken the note, and the defendant returned to settle with Powell, he paid the defendant the debt due to Bailey, and then, as a sheer gratuity, gave the defendant five dollars for having obtained the money for him. The trifling compensation alluded to in his former answer, was the commission on the debt due to Bailey upon the collection of it.
    Among the papers in the cause was an answer of Miller, which he had offered to be filed, but which being objected to by the plaintiff as not being responsive to several of the allegations of the bill, was withdrawn. The omissions will appear from the objections endorsed thereon by the plaintiff:
    1. The answer does not admit or deny that Miller was informed that the money to be advanced was the money of another, and not of the plaintiff.
    
      2. It does not admit or deny that it was agreed that Miller should bring the paper at two per cent, per month discount.
    3. It does not admit or deny that Miller was informed. when the note was brought, that the money was to come from Winston, and therefore the delay.
    4. Does not admit or deny that a day was appointed for the payment of the money, to give time to hear from Winston.
    
    
      5. Does not admit or deny, but only evasively touches that part of the bill which states what occurred when Miller came a second time with the note, down to the final agreement to deposit the money in bank.
    6. Does not admit or deny that Miller stated that he had purchased the note at four jper cent., and thus made two per cent., without, in fact, advancing any thing.
    7. Does not admit or deny that the interviews between the plaintiff and Miller took place in the room in which the Circuit court was sitting.
    8. Does not admit or deny that the note was returned to Miller in the manner and for the purpose stated in the bill, retained by him nearly a week, and returned with the assurance that it would be paid at maturity.
    That part of the answer to which the 5th exception refers, says that the defendant called again on the complainant, who then had not obtained the money, at which time the defendant may have represented his situation as uncomfortable, as well it might be, for in consequence of the assurances of the complainant, the defendant had assured the owner of the said note that the money would be raised upon the same, and the defendant did not wish his assurance to fail, and, therefore, proposed (as he was obliged to leave town, and wished to close the transaction before he left,) to give his check for the money, provided the complainant would deposit the amount thereof in one of the banks of the City of Richmond, to meet it. To this the complainant assented, and took the note. Whereupon this defendant gave his check for the amount, and the complainant made the deposit according to. his promise. This was done by the defendant, as well for the accommodation of the complainant, who wished to purchase the note, as to relieve the defendant, who had assured the holder, upon the representations of the complainant, that the money would be raised.
    The note referred to in the pleadings, was for 350 dollars, and bore date the 10th day of June 1834 It was payable sixty days after date, and Avas duly protested for non-payment on the 12th of August 1834.
    The letter of Winston, Avhich bore date the 18th of June, referred to the letters of Mr. Lyons, as of the 8th and 12th of June. It appears that Mr. Lyons deposited 336 dollars in the Farmers Bank on the 11th of June ; and that Miller's check on that bank in favour of Powell for 322 dollar’s, was paid on the same day. And it was proved that the names of Edward Powell and Peterson Goodwyn, as endorsers on the note, were forgeries.
    The cause came on to be heard on the 28th of March 1843, when the Court dismissed the bill, with costs. Whereupon Lyons applied to this Court for an appeal, which Avas allowed.
    
      Stanard and Macfarland, for the appellant,
    insisted:
    1st. That it was a general principle that a party who passes commercial paper to another, even without endorsement, though not responsible as a party for the sufficiency of the note, or the ability or solvency of the prior parties, is answerable that the bill or note is such as on its face it purports to be. And if the bill or note proves to have been forged, he is responsible. Jones v. Ryde, 1 Eng. C. L. R. 166; Fuller v. Smith, 11 Id. 366; Story on Bills, § 111; Edmunds v. Digges, 1 Gratt. 359; Markle v. Hatfield, 2 John. R. 455; Young v. Adams, 6 Mass. R. 182.
    
      2d. That upon the facts, Miller was not the agent of Lyons in the sale and purchase of the note, but was the agent of Powell; and that upon a valuable consideration. They insisted that the allegation of Miller, that he was acting for Lyons, and without compensation, was only sustained by the answer of Miller; and was an affirmative allegation which ought to be proved. Hart v. Ten Eyck, 2 John. Ch. R. 62. Or if the whole answer was to be evidence as on a trial at law, it was not conclusive, but might be impeached. Bermon v. Woodbridge, Doug. R. 781. And they insisted that the answer was discredited by the evidence, and by its contradictions and evasions.
    Acting as the agent of another without disclosing his principal, they insisted he was personally responsible. Fuller v. Smith, 11 Eng. C. L. R. 366; Story on Agency 323.
    As to the objection that Lyons was not the owner of the note, it was not taken in the Court below, nor was it tenable here. Lyons conducted the negotiation with Miller, and paid the money for the note. And where negotiable paper is endorsed in blank, the holder may sue upon it.
    
      Cooke, for the appellee,
    insisted :
    1st. That Lyons was agent for Winston in the purchase of the note, and therefore could not maintain this suit. 2 Kent’s Com. 629-30; Story on Agency, § 391, 261; Gunn v. Cantine, 10 John. R. 387.
    2d. That Lyons had no right to sue Miller, who was his agent without compensation. That the appellant coming into equity for a discovery upon a claim which, but for the want of a discovery, should have been prosecuted at law, the principle is, that the answer is evidence. That in this case, the bill called upon Miller to disclose how, under what circumstances, in what manner, and for what consideration, the note was passed to the plaintiff; and therefore all the statements in Miller's answer were evidence. And this evidence he insisted shewed that Miller was not responsible under the circumstances of this case.
   Baldwin, J.

delivered the opinion of the Court.

The force and effect of the defendant’s answer in this case is to be determined, not by treating it as matter of pleading, but as matter of evidence. When a plaintiff comes into a Court of equity, in order to obtain redress in that forum, upon a subject falling within its equitable jurisdiction, the facts charged in the bill and admitted in the answer are to be taken as true, because conceded in pleading. But if the answer goes further and sets up other facts in avoidance of what has been .so admitted, those facts must be established by evidence. And in these respects the rules of law and equity are the same. But equity goes a step beyond the law, and requires that an allegation in the bill which is denied in the ansrver, shall be proved by two witnesses, or one witness and strong corroborating circumstances, and hence the responsive answer is said to be evidence for the defendant. A bill, however, which seeks a discovery from the defendant, in regard to a demand or defence properly cognizable at law, but which cannot be established there for want of proofs, gives to the answer of the defendant a different force and effect. The answer in such a case is to be treated a,s matter of evidence, and not as matter of pleading; and is to be used by the plaintiff obtaining it, as evidence on the trial of the controversy, before the proper forum. According to the English practice that forum is, as a general rule, a Court of common law, the chancery cause usually terminating with the discovery obtained, or the failure to obtain it. With us the general rule is the other way, the Court of equity retaining the cause after the discovery has been obtained, and proceeding to give the proper relief founded upon it; instead of turning the parties over to a common law tribunal, in order that the answer may be used as evidence there; unless, indeed, the discovery was sought and obtained in order to be used in a pending common law action between the parties.

The effect of treating the answer to a bill of discovery as evidence is, that on the trial before the proper forum, whether of law or equity, the whole of it is to be read, if used at all, as the testimony of a witness; but of a witness deposing in his own cause, and whose admissions against himself are to be taken as true, while his assertions against his adversary may be disproved or discredited, and are subject to the ordinary tests of consistency, probability and candour, or the reverse. The answer gains no artificial force by being responsive to the bill : nor is any part of it .pertinent to the discovery to be rejected, because affirmative matter in avoidance of that which is admitted to be true. These are rules of pleading and not of evidence, and the answer to such a bill does not make up issues to be tried in the cause, but furnishes evidence to be used collaterally on the trial of the common law action, or on that which is substituted for it, when the Court of equity, to prevent circuity, expense and delay, undertakes itself to give or refuse redress after the discovery has been made. On the common law trial, so much of the answer as makes in favour of the defendant may be disproved by its context, or by extrinsic evidence, and on the other hand may be sustained by corroborating testimony: and this is equally true of the substituted trial in equity.

The prominent facts disclosed by the defendant’s answer in this case are, that the note in question was transferred by the defendant to the plaintiff, for a valuable consideration, paid by the latter to the former, without endorsement. By declining to endorse, the defendant avoided the responsibility of an endorser; but he could not, without an agreement or understanding to that effect, avoid the responsibility of warranting the genuineness of the instrument. That is a guarantee which the law imposes upon the transfer, for a valuable consideration, of bills, bank or promissory notes, and other assurances for money, though without endorsement. The person so transferring impliedly undertakes that the instrument is genuine, in other words that it is what it purports to be; and if it turns out to be a forgery, there is a failure of the consideration, which subjects him to the repayment of the money he has received. Nor is it material whether the person making the transfer, receives the consideration for his own use, or for the use of another; unless he is acting as an agent, and discloses not only his agency, but the name of the principal for whom he is acting; in which case he is not a party to the contract, the contract being made with his principal through his agency.

In this case the defendant cannot escape liability for the genuineness of the instrument by the fact that he brought it to the plaintiff pursuant to the request of the latter, that he would bring him good paper for discounting at two per cent, per month. The assertion of this fact is no averment that in the transfer of the note the defendant acted as the agent for the plaintiff, and such an averment would be absurd upon its face, inasmuch as according to his own admission he brought the note for sale and actually sold it to the plaintiff, which in the nature of things he could not do as the plaintiff’s agent. If he was in any wise acting as agent for the plaintiff, it could only have been in purchasing paper for the plaintiff with the plaintiff’s funds, in which case the transaction would have been accomplished by the defendant’s purchasing such paper, which, if he acted in good faith, and without negligence, would thereby have become ipso facto, the property of the plaintiff; but nothing of the kind is pretended: the paper was to be discounted by the plaintiff after it should be brought to him, and he was at liberty to accept it or reject it. The transaction, therefore, could have been nothing else but a sale of the note by the defendant to the plaintiff; and whether it belonged to the defendant or to another person for whom he was acting, was to the plaintiff wholly immaterial. It was only material to the defendant, who if he was not the owner of the instrument, and wished to avoid responsibility as vendor thereof, ought to have made the contract, not in his own name, but in the name of the owner.

That the defendant transferred the note to the plaintiff in the name of another person as owner thereof, is not asserted, nor at all pretended, unless by a side wind, and in this and in other respects the answer is evasive and suggestive, leaving to intendment and inference what the defendant would not venture directly to allege as matter of fact. This is remarkably true in two other important particulars. The defendant in his answer says, that in his second interview with the plaintiff, when he could not obtain from him the money to be paid for the note, he spoke of returning it to “ the drawer,” (in the previous answer withdrawn, to “the owner,”) from which he would have it inferred, though he does not assert it, that the plaintiff was in effect informed that he was purchasing accommodation paper, put into circulation by the drawer for the purpose of raising money, at a discount of more than lawful interest, which would have been a usurious transaction. And it is not until his answer to the amended bill that he discloses the fact, that he derived a benefit to himself from the transaction with the plaintiff, and in disclosing misrepresents it; for the evidence is perfectly satisfactory to prove that he accounted with the maker at a discount of four per cent, per month, while the discount to the plaintiff was only of two per cent, per month, and that the difference was actual profit to the defendant himself.

Decree reversed, with costs, and decree that the defendant pay to the plaintiff 336 dollars, the amount received from him, with interest thereon from the 11th of June 1834, till paid, and the costs.  