This was an action brought by Hugh M'Cullough, as assignee of
Samuel Young, upon a promissory note drawn by John H. Houston; and,
on the trial of the cause, a verdict was given for the Plaintiff,
subject to the opinion of the Court on the following point:
'Whether the indorsee of a promissory
note, takes it subject to all equitable considerations, to which it
was subject, in the hands of the indorser, 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 last term, before all the Judges, by
Sergeant, for the Plaintiff, and Ingersol, for the Defendant.
For the Plaintiff, it was observed, that in the act of Assembly,
making bonds and notes negotiable, there is no provision enabling
the promissee, or drawee, to bring an action on the note itself; 1
State Laws 77. that such an action did not lie at common law; and,
consequently, that wherever it had been brought in Pennsylvania
(which is in numerous instances) the proceeding must have been
founded on the statute of 3 and 4 Ann. c. 9. and the law of
merchants. That statute, therefore, must be considered as extended
in practice to this country before the revolution; and a
legislative sanction is given to the practice by the act of
Assembly, which declares, that such parts of the statute law of
England as were heretofore in force, shall still be binding in
Pennsylvania. 2 State Laws. 3. On the assignment itself the
assignee cannot bring an action against
Page 1 U.S.
441, 442
the assignor; but he may bring covenant, of, 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 our 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 Pennsylvania; because the province
is not particularly named in it, nor would it, indeed, have been
the policy of the British 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 then, the indorsee could not maintain such
attraction; 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 statute 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 thereof as
shall appear to be due at the time of the assignment, in like
manner as the assignor could have done. The Chief Justice now
delivered the opinion of the Court in the following manner:
M'Kean, Chief Justice 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 'An act for the assigning of Bonds, Specialties, and
Promissory Notes,' it is recited in the preamble, 'that it hath
Page 1 U.S.
441, 443
been held, that Bonds and Specialties under hand and seal, and
Notes in writing, signed by the party who makes the same, whereby
such party is obliged, or promises to pay unto any other person, or
his order, or assigns, any sum of money therein mentioned, are not
by law assignable or indorseable over to any person, so as that the
person to whom the said Bonds, Specialties, Note or Notes, is or
are assigned or indorsed, may, in their own names, by action at
law, or otherwise, recover the same, &c.' 1 State Laws, 77.
This, then, is conclusive as to the operation or effect of the
assignment of a Bond, or the indorsement of a Note, previously to
the passing of the Act; for, no assignment, or indorsement, could
take place by law, though it might in equity; and, the assignee, or
indorsee, could not, in any case, sue in his own name. The Act,
however, afterwards provides for such assignment and indorsement
toties quoties: It also declares, that the person or persons to
whom the assignment or indorsement is made, may, in his, her, or
their name, or names, sue at law, 'for the recovery of the money
mentioned in the Bond, Specialty or Note, or so much thereof as
shall appear to be due at the time of the assignment, in like
manner as the person or persons to whom the same was, or were, made
payable, might, or could, have done;' and that 'the assignors shall
not, after the assignment, have power to release any of the debts
or sums of money really due by the said Bonds, Specialties, or
Notes. The question before the Court must be decided upon a just
construction of the parts of the act of Assembly, to which I have
just referred. Throughout the whole of this Act, Bonds and
Promissory Notes are placed exactly on the same footing; except,
indeed, that Bonds and Specialties are to be assigned under hand
and seal, and in the presence of two or more credible witnesses:
How, then, can the Court make any distinction or difference between
assignees of the one, and indorsees of the other? They certainly
may both sue in their own names, and respectively recover the money
mentioned in the Bonds or Notes, assigned or indorsed, or so much
thereof as shall be really due thereon, in like manner as the
obligees, or payees, could have done; but, surely, this seems to be
equally clear, that neither can recover more than what was really
due at the time of the assignment or indorsement; in other words,
no more than the original payees could have done prior to the
transfer. Before this act was passed, it appears, that actions by
the payee of a Promissory Note, were not maintained, nor can they
since be maintained, otherwife than by extending the English
statute of 3 & 4 Ann. c. 9. Sect. 1. Actions upon Promissory
Notes were probably brought here, soon after the passing of the
statute, by attornies. who came from England, and were accustomed
to the forms of practice in that kingdom, but did not, perhaps,
nicely attend to the discrimination with regard to the extension,
or adoption of statutes.
Page 1 U.S.
441, 444
I have no doubt, indeed, that many acts of Parliament, passed,
not only before, but subsequent to the union of England and
Scotland, have, by the same means, been introduced and practised
upon in Pennsylvania; and as experience has proved such proceedings
to be beneficial, so constant and uninterrupted usage has given
them a legal existence, that cannot now be shaken or destroyed. But
the indorsees of Promissory Notes, according to the best
information which we can obtain, have never grounded their actions
against the drawer, upon any other basis than the act of Assembly
now under consideration; though, I think, the action by an
indorsee, against the indorser, must be founded on the statute of
Anne, and the usage under it, as no such action is given by the
act.
The question, so far as it relates to the assignees of Bonds,
has been determined in the affirmative, in the Supreme Court of
Pennsylvania, before the revolution. See ant. 23. And, as, on the
one hand, the Legislature has made no difference whatever between
the assignees of Bonds and the indorsees of Notes, so, on the
other, we cannot discover any solid or good reason to introduce a
distinction in the particular before us.
Upon the whole, we are unanimously of opinion, that the indorsee
of a promissory Note, does take it, subject to all equitable
considerations, to which the same was subject in the hands of the
indorser, the original payee. And, therefore,
Let the defendant have a new trial.
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