at the ensuing May term in this county, delivered the opinion of the Court.
Hatch, having agreed in the Common Pleas, that one trial shall be final on his part, would have been precluded from making any further defence to the action, if the judgment of that Court had been against him. But the trial, which he had agreed should be final as to him, resulted in his favour. He had, there- . fore, no occasion to defend further, unless called so to do by Dennis. Hatch was willing that the trial should be final. He made no movement to disturb the judgment. Dennis was the dissatisfied party. He appealed and called upon Hatch to defend further in this Court, and it would be wholly inconsistent with any reasonable construction of the agreement, to suppose that the parties intended that the plaintiff might prosecute' by appeal and the defendant not be permitted to defend. It would be placing Hatch completely in the power of the other party. If he, Hatch, failed, his agreement would conclude him. If he succeeded, Dennis would avoid the judgment by appeal; and if Hatch is not allowed to defend in the appellate court, in consequence of the agreement, his rights are thereby wholly concluded. If the intention of the parties had been, that one verdict against Hatch should be final, it would have been so expressed. We cannot thus construe the language of the agreement as written.
The next question relates to the admissibility of the declara-, tions of Clark. An indorsee without notice, and for a valuable consideration, is, in general, not affected by the transactions between the original parties. But when he takes a note under circumstances which might reasonably create suspicion, as when it is negotiated after the time of payment has elapsed, he is considered as identified in interest with the payee, and may, in an action against the maker, be met with every defence of which the maker could have availed himself in an action by the payee. The instrument still retains its negotiable character, and may be passed by indorsement, or if previously indorsed, by delivery *247only, and is distinguishable from a more dioso in action, inasmuch as the holder may maintain an action in his own name. But the maker, on proof of its having been negotiated after it became due, is entitled to the benefit of any payments, which he has made previous to its transfer. He may prove the same facts in defence against the indorsee that he might have proved if the action had been in the name of the payee. In the latter case the proof could not come from the testimony of the payee, for being a party to the suit, the defendant could not avail himself of that evidence. But when the action is brought in the name of the indorsee, the payee, not being a party to the record, and not interested for the defendant, is a competent witness to prove certain facts necessary for the maker’s defence, not, however, relating to the original validity of the instrument. If he be a party to the record and a party in interest, his admissions are evidence. If the instrument declared on be not negotiable, the action having been brought in the name of the payee, but for the benefit of his assignee, the admissions of the payee subsequent to the assignment, are not to be received as evidence, because, at the time of making them, he had no interest in the subject matter; but if made previous to the assignment, they may be received, because he was then admitting against his own interest, and being a party to the record, the defendant cannot make use of him as a witness. This is the principle recognised in Mackei v. Martin, 8 Greenl. 77. But where the instrument declared on is negotiable and transferred by indorsement, although not so transferred until after it has become due and payable, yet there may not be the same reason for receiving in evidence the declarations or admissions of the payee, made before the transfer, by indorsement, as there is for receiving the admissions of the payee of an instrument not negotiable ; the former being a competent witness not being a party to the record, while the latter, being a party, must be excluded ; and it is a general principle that the sayings and declarations of one who is a competent witness in a cause, are not to be admitted as evidence to charge another, upon the general ground, that they are but hearsay evidence, and not the best which the nature of the case affords.
*248But there are exceptions to this rule. Starkie, in his treatise on evidence, says, “ an admission by the owner is some- “ times evidence against one who claims title through him/’ 2 Stark. 48 ; and a number of cases are to be found, both in American and English reports, where the declarations or admissions of the payee of a negotiable note, made while the note remained in his possession, were received as evidence for the maker in a suit against him by an indorsee, it having been first, proved that the note was.indorsed after it became due. — Such was the case of Pocock v. Billings, first reported in 2 Bing. 269, where the admissions were received, and the verdict set aside and a new trial ordered, because it did not appear that the note was over due when indorsed. At the second 'trial that fact appeared, and the question of the admissibility of the payee’s declarations, made while he held the note, was again raised, and upon argument they were held to be admissible. The same doctrine is recognised in Shaw v. Broom, 4 Dowl. & Ryl. 730; in Beauchamp v. Parry, 1 Barnw. & Adol. 89, and in Smith v. De Wruitz, Ryan & Moody, 212; Graves v. Key, 3 Barnw. & Adol. 313.
Roscoe, in his late treatise on evidence, says that the declaration by the payee of a note, payable on demand, the note being then in his possession, that he gave no consideration for it to the maker, is not admissible in an action by an indorsee against the maker, the payee being alive, and he cites Barough v. White, 4 Barnw. & Cresw. 325. On looking into that case it will be found that it turned upon the’question whether the note was over due when it was indorsed, and the Court all held that it was not, and consequently that the declaration of the payee was inadmissible. But it was said in the course of the opinion, that where the party making the declarations can be identified with him against whom they are offered, the declarations are admissible as evidence ; — precisely as was said by Bayley J. in Beauchamp v. Parry, before cited, that the indorsee of a note cannot be affected by the declaration of the payee, unless it be shown that he is identified in interest with him, as if he took it without consideration, or after it was due. When the indorsee is thus identified, or in other words, when he takes *249the instrument subject to all the equities, which existed between the maker and payee, at the time of the indorsement, the current of English decisions shew the declaration of the payee, while he held the instrument and adverse to his own interest to be admissible as evidence in favour of the maker. The only case found in the English books where a different doctrine was holden is Duckham v. Wallis, 5 Esp. Rep. 252, where Lord Ellenborough, at JNiisi Prius, rejected the declarations of the payee, though made against his own interest previous to the indorsement of the note. The case went off upon another point, and the question was not presented to the full court. From the recent cases in the King’s Bench and Common Pleas, before cited, it would seem that the ruling of Lord Ellenborough is not now considered as law in England.
, Mr. Dane, in his abridgement of American law, says, “ the “ declarations of the payee of a note, made before he has in- “ dorsed it, may be given in evidence in an action by the holder “ against the maker, otherwise, if made after he has indorsed “ it.” 9 Dane, 301.
We are not inclined-to go to this extent in receiving the declarations of the payee, although Mr. Dane’s general position is supported by respectable American authorities. — In order to let in the declarations, we think it must be first shown that the plaintiff is identified in interest with the payee, and according to the English cases he is so identified when it appears that he took the note after it became due, or without consideration.
In Pocock v. Billings, Ryl. & Moody 127, Best C. J. in receiving the declarations of a former holder of a bill made during his possession, likened the case to that of declarations made by the owner of an estate during his possession. — In such cases the admissions of a tenant in possession, against his title, arc not only evidence against him but those who claim under him. In Jackson v. Bard, 4 Johns. 230, Thompson J. in delivering the opinion of the Court, said, “ the declarations “ of Smith, under whom the defendant claimed while in pos- “ session of the premises, as to his title, were admissible against “ the defendant. These declarations would have been good “ against Smith, and are also competent evidence against all *250“ who claim under him. This principle has been repeatedly “ recognized both in our own and in the English courts.” In Norton v. Pettibone, 7 Connect. Rep. 319, Dagget J. says, in delivering the opinion of the Court, “ the declarations of a “ person, while in possession of the premises, are always admis- “ sible, not only against him, but against those who claim under “ him.” In Weidman v. Kohr, 4 Serg. Rawle, 174, Tilghman C. J. said, “ there can be no doubt but the declarations of “ the person under whom the plaintiff derived his title, made “ during the time when he owned the land claimed by the “ plaintiff, are evidence. Nothing is stronger than the confes- “ sion of the party interested against himself. But the confes- “ sions of the same person, made after his interest had ceased, “ would not have been evidence. This is the settled distinc- “ tion.” In none of these cases was the question raised whether the grantor was or was not a competent witness, and it does not appear that he was rendered incompetent by reason of any covenants in his deed. In a more recent case in the Supreme Court of Pennsylvania, it was decided that the declarations of a person while holding the legal title to an estate, that he was merely a trustee for another, who paid the purchase money, are admissible in evidence against those claiming under him, although he be, at the time such declarations are offered in evidence, within the reach of the process of the Court, and capable of béing examined as a witness. Gibblehouse v. Stong, 3 Rawle, 437. The applicability of this principle to personal, as well as real actions is also recognised in Snelgrove v. Martin, 2 McCord, 241. The Court say, “ were this not the “ rule, a debtor could not be safe in taking the receipt of his “ creditor. For instance, the obligee of a bond might give loose “ receipts or acknowledge the bond paid in full; but if he after- “ wards assigned the bond, the assignee would hold it inde- “ pendent of such acknowledgment of receipts. In a word, “ there could be no reliance placed in a settlement with a “ debtor, or arrangement with the owner of an estate, as he “ would have merely to assign the one or convey the other in “ order to get rid of his own acts.”
This was an action by the indorsee against the maker of a *251promissory note, and the declarations of the payee, before indorsement, were received as competent testimony to invalidate the note in the hands of the indorsee. See also Hale v. Smith, 6 Greenl. 419 — and the cases there cited.
Where a negotiable note is transferred by indorsement before it arrives at maturity, the holder for a valuable consideration takes it free from all the equities existing between the maker and payee ; and inasmuch as actual payment to the payee before indorsement would not be a valid defence, so any evidence tending to prove that fact, whether arising from admissions of the payee or otherwise would be inadmissible. Of the intimations of the learned Chief Justice, who delivered the opinion of the Court in Webster v. Lec, 5 Mass. 334, and Barker v. Wheaton, ibid. 512, that a negotiable note paid by the maker to the promissee previous to its arriving at maturity and before indorsement, is functus officio and cannot be negotiated, and that the promissor can defend himself by proving a payment prior to the transfer, we arc not unaware. That question was not distinctly presented in either of these cases, and the law seems to be now settled that the holder of negotiable paper, who receives it fairly in the way of business can recover upon it though it has been paid, if he received it before it fell due. But not so if he received it afterwards. It is then considered as dishonoured or discredited, and is not favoured by that commercial policy which sustains the circulation of negotiable paper; and of course the peculiar doctrines of the mercantile law do not apply.
Upon a careful examination of all the cases bearing upon this question, which we have been able to examine, including that of Whitaker v. Brown, 8 Wend. 490, we think the weight of authority is in favour of admitting the declarations of the payee, when made under such circumstances as they were in the case before us, and accordingly the verdict must be set aside and a new trial granted.