Houk v. Foley ex rel. Gaullagher , 2 Pen. & W. 245 ( 1830 )

The opinion of the Court was delivered by

HustoN, J.

There has been a struggle within the last twenty years to alter the law of this state in an importantparticular. Iallude now to the law prescribed by the act of assembly respecting the assignees of bonds arid notes. The decisions of this Court fori the last seven or eight years might seem to render any further' opinion unnecessary, but as the same thing is brought before us in what is called a new shape, we will consider it. The case of Lewis v. Reeder, 9 Serg. & Rawle, 193, it is said gave rise to the present decision, for rather a dictum in it) and the same has been urged here: that case arose on a promissory — this on a single bill or note sealed. The opinion of the late Chief Justice that if McCullough v. Huston, had been decided ten years later, the decision would have been different, when coupled with the declaration that it is not now to be disturbed seems but a slight ground for taking up the matter at the present day and carrying it beyond what the law or usage of any part of the world ever sanctioned — for I know of no law in which or' by .which a bond or single bill has the same qualities as to negotiability as bills or notes have. I have before said that in the nation most mercantile — in England, it has not been even attempted to give to bonds and single bills the qualities of negotiable paper-It is not necessary here — our legislature has provided dértain modes by which a man who owes a .debt may give an evidence of* that debt, which shall have all the .negotiable qualities of a bill of exchange. If that form is not adopted the evidence of debt cannot have those qualities by the express law of the land. If the Courts had the power of altering this, there iSa great objection to it. If the legislature make a change' it affects all evidences of debt drawn aftei the passage of the law. If the Court make it*1 it retrospects and affects all those already in existence.

Perhaps out of a million and a half of inhabitants of Pennsylvania, two hundred thousand (and this is a large allowance) may have drawn a paper in the mercantile form, and with the intention that it would or might be indorsed, and be collectable without regard to the state of accounts between the original payor and payee.' The residue of the people never drew or saw such a paper — these last know from their youth that a note or bond is only evidence of a debt, of its amount and the time bf payment — and they also know that before the day of payment, or rather before actual payment; a defence from fraud or want of consideration, can be made to the debt secured by bond or note, precisely as it Can to a debt proved by parol, and further that if there has been fraud or imposition the matter is as open to inquiry as if sued by the original obligee-.

• Our law has then distinctly settled that a promissory note drawn at a certain place, and in a certain manner, or drawn at any place with a view to be used as negotiable paper-, and put into a bank¿ Shall have the effect intended by the parties. It is also settled that specialities or evidences under seal have in case of the obli-gor’s dying insolvent, preference before promissory notes. The two are in-other respects essentially different, and we cannot, and for myself, I would not if Í could, abolish the distinction»

I have said mercantile policy does' not require that bonds and notes ihdorsed should have the qualities of mercantile paper. There are reasons, why the law as to bonds and notes not mercan*■ tile should continue as heretofore. If every one who has imposed on another in a cpntract and got a note under seal could obtain the effect of his fraud or villainy by assigning his note, it would neither promote the character of our judiciaí system, nor the morality of our citizens.

The case in 13 Serg. & Rawle, 317, was an attempt to turn a note exactly like this into a mercantile note, by a blank indorsement-. — and to follow that up by'holding the in'’orse| liable as on a bill of exchange — but if did not succeed. The assignor of a bond indorsed or not indorsed, has not \ m been he^d liable directly in a suit on the assignment; but on mercantile paper, the indorser, where diligence has been used, is always liable on the indorsement. If the obligor can be made liable at all events to-an assignee, it must follow that the other incident of mercantile paper goes along, and the assignor must be liable'directly on hie assignment. ,

The argument that the party may sign a note without defalcation, and thus preclude himself from a defence, presumes too much, and not enough:

First, if it avails at all, it will in its terms preclude a defence to* a-suit by the obligee, as much as by the assignee.

Next, if it avails, then a bill to pay $100>m 1-0 days, and in-case of failure to pay $200, would enable the holder to recover $200 on the eleventh day — and a mortgage might be drawn not" redeemable after a certain day, though the transaction was for a loan of money and security for it at first. Now-none of these- . will be pretended, no device or ingenuity of man has been able' to give such form to any instrument for securing money, as that some Court has-not ■ existed or grown up which- would relieve-from fraud, oppression and extortion. Chancery power began and grew on this, it was the- rock on which its present enormous-power was built, — I omit gaming, and usury, &c. all of which might be protected on this plan;. — but the argument does not ■ prove enough. Defalcation issetting off another account or another contract — perhaps total want of consideration founded on fraud, imposition, and falsehood, is- not defalcationthough beihg.' relieved in the same-way they are-blended. Mercantile transactions require honesty — are based on good faith — they never cari-be promoted by giving sanction and validity to what is-not fair, what is founded on deception.

Our law however has-provided different securities for debt, and-has given different qualities, advantages and disadvantages to each: the criterion necessary to be mentioned in this case is, that the paper is a bond,- it has a seal, and every paper so drawn is-liable to investigation- as to its truth andfairness in the hands of the-assignee or indorsee, it depends on the seal and the act of assembly, and the single exception is where before taking the paper the-assignee calls on the obligor and he tells him there is no defence; or where the obligor induces the assignee to take it.

Judgment of the Court below reversed and judgment entered-for plaintiff for- $100.06^.-