McCullough v. Houston
SUPREME COURT of Pennʃylvania :
M‘CULLOUGH, Affignee verʃus HOUSTON.
T
HIS was an action brought by Hugh M‘Cullough, as affignee of Samuel Young, upon a promiffory note drawn by John H.Houʃton ; and, on the trial of the caufe, a verdict was given for the Plaintiff, fubject to the opinion of the Court on the following point:“Whether the indorfee of a promiffory note, makes it fubject to all equitable confiderations, to which it was fubject, in the hands of the indorfer, the original payee?” And, if the opinion of the Court was in favor of the Defendant, a new trial was to be awarded.
The point was argued at the laft term, before all the Judges, by Sergeant, for the Plaintiff, and Ingerʃol, for the Defendant.
For the Plaintiƒƒ, it was obferved, that in the act of Affembly making bonds and notes negotiable, there is no provifion enabling the promiffee, or drawee, to bring an action on the note itfelf ; 1 State Laws 77. that fuch an action did not lie at common law ; and, confequently, that wherever it has been brought in Pennʃylvania (which is in numerous inftances) the proceeding muft have been founded on the ftatute of 3 and 4 Ann.c. 9. and the law of merchants. That ftatute, therefore, muft be confidered as extended in practice to this country before the revolution ; and a legiflative fanction is given to the practices by the act of Affembly, which declares, that fuch parts of the ftatute law of England as were heretofore in force, fhall ftill be binding in Pennʃylvania. 2 State Laws 3. On the affignment itfelf the affignee cannot bring an action againft
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the assignor ; but he may bring covenant, or, perhaps an action for money had and received &c. 2 Lord Raym. 1242. 1419. But, in respect to notes, a blank indorsement passes, as if payable to bearer ; and every part of the statutes of William and of Anne, for giving negotiability to bills of exchange and notes of hand, has been introduced into this province from the earliest times.
For the Defendant, it was urged, that, at common law, bonds and notes were mere choses in action, and the assignee took them under all the equitable circumstances to which they were liable in the hands of the assignor. That promissory notes do not come within the law of merchants is clear ; for, if they did, the statute of Anne would have been unnecessary. The question, therefore, is , whether that statute has been extended to Pennsylvania? or, whether, by out act of Assembly, notes are put on the same footing with bills of exchange ?
From the general rule of the extension of statutes, the 3 &4 Ann. has not been extended ; because it was passed subsequent to the settlement of Pennʃylvania ; because the province is not particularly named in it, nor would it, indeed, have been the policy of the Britiʃh Legislature to promote the circulation of our paper credit ; and because it has not been recognized and adopted by any positive act of Assembly. With respect to the introduction of the statute by practice, it operates no further than this, that the payee of a promissory note has brought an action on the note against the signer before our act of Assembly was passed ; but till the, the indorsee could not maintain such an action ; and obligations and promissory notes, are put on the same footing.
With respect to the act itself, that the Legislature could not intend to put promissory notes upon the same footing with Bills of Exchange, appears evidently from this consideration, that the preceding part of the act pursues the statue of Anne, nearly verbatim ; but when it comes to that clause in the latter ; which places Notes on the same footing with Bills of Exchange, the Act equally varies its spirit and expression : And, it is declared, that the assignee of a note, &c. shall recover so much thereoƒ as shall appear to be due at the time of the assignment, in like manner of the assignor could have done.
the chief justice now delivered the opinion of the Court in the following manner:
M,‘KEAN, Chieƒ Juʃtice––In pronouncing the opinion of the Court, on the point reserved for their consideration, I shall premise that Bonds, and Promissory Notes in writing, stood on the same footing at common law ; and that the assignment of those instruments, as well as the form, operation, and effect of such assignment, depends entirely upon the municipal law of the place where it is made.
By an act of Assembly of Pennsylvania, passed on the 28th day of May, 1715, entitled “ As act for the assigning of Bonds, Specialties, and Promissory Notes,” it is recited in the preamble, “ that it hath
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been held, that Bonds and Specialties under hand and feal, and Notes in writing, figned by the party who makes the fame, whereby fuch party is obliged, or promifes to pay unto any other perfon, or his order, or affigns, any fum of money therein mentioned, are not by law affignable or indorfeable over to any perfon, fo as that the perfon to whom the faid Bonds, Specialties, Note or Notes, is or are affigned, or indorfed, may, in their own names, by action at law, or otherwife, recover the fame,&c.” 1 State Laws, 77.
This, then, is conclufive as to the operation or effect of the affignment, of a Bond, or the indorfement of a Note, previoufly to the paffing of the Act ; for, no affignment, or indorfement, could take place by law, though it might in equity ; and, the affignee or indorfee, could not, in any cafe, fue in his own name. The Act, however, afterwards provides for fuch affignment and indofement toties quoties : It alfo declares, that the perfon or perfons to whom the affignment of indorfement is made, may, in his, her, or their name, or names, fue at law, “ for the recovery of the money mentioned in the Bond, Specialty or Note, or ʃo much thereof as ʃhall appear to be due at the time of the affignment, in like manner as the perfon or perfons to whom the fame was, or were, made payable, might, or could, have done;” and that “ the affignors fhall not, after the affignment, have power to releafe any of the debts or fums of money really due by the faid Bonds, Specialties, or Notes.”
The queftion before the Court muft be decided upon a juft conftruction of the parts of the act of Affembly, to which I have juft referred.
Throughout the whole of this Act, Bonds and Promiffory Notes are placed exactly on the ʃame ƒooting ; except, indeed, that Bonds and Specialties are to be affigned under hand and feal, and in the prefence of two or more credible witneffes: How, then, can the Court make any diftinction or difference between affignees of the one, and indorfees of the other? They certainly may both fue in their own names, and refpectively recover the money mentioned in the Bonds or Notes, affigned or indorfed, or fo much thereof as fhall be really due thereon, in like manner as the obligees, or payees, could have done ; but, furely, this feems to be equally clear, that neither can recover more than what was really due at the time of the affignment or indorfement ; in other words, no more than the original payees could have done prior to the tranfer.
Before this act was paffed, it appears, that actions by the payee of a Promiffory Note, were not maintained, nor can they fince be maintained, otherwife than be extending the Engliʃh ftatute of 3 & 4 Ann. c.9. ʃect. 1. Actions upon Promiffory Notes were probably brought here, foon after the paffing of the ftatute, by attornies who came from England, and were accuftomed to the forms of practice in that kingdom, but did not, perhaps, nicely attend to the difcrimination with regard to the extenfion, or adoption of ftatutes.
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I have no doubt, indeed, that many acts of Parliament, paffed, not only before, but fubfequent to the union of England and Scotland, have, by the fame means, been introduced and practiced upon in Pennʃylvania ; and as experience has proved fuch proceedings to be beneficial, fo conftant and uninterrupted ufage has given them a legal exiftence, that cannot now be fhaken or deftroyed. But the indorfees of Promiffory Notes, according to the beft information which we can obtain, have never grounded their actions againft the drawer, upon any other bafis than the act of Affembly now under confideration ; though, I think, the action by an indorfee, againft the indorʃer, muft be founded on the ftatute of Anne, and the ufage under it, as no fuch action is given by the act.
The queftion, fo far as it relates to the affignees of (illegible text) has been determined in the affirmative, in the Supreme Court of Pennʃylvania, before the revolution. See ant. 23. And, as, on the one hand, the Legiflature has made no difference whatever between the affignees of Bonds and the indorfees of Notes, fo, on the other, we cannot difcover any folid or good reafon to introduce a diftinction in the particular before us.
Upon the whole, we are unanimoufly of opinion, that the indorfee of a promiffory Note, does take it, fubject to all equitable confiderations, to which the fame was fubject in the hands of the indorfer, the original payee. And, therefore,
Let the defendant have a new trial.