Case ID: ky_3/html/0218-01.html
Source: Caselaw Access Project
Author: {"author": "Edwards, Ch. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

DRAKE vs. JOHNSON.
    The aflignee ofanoteorbond cannot maintain an action again ft a remote af-fignor 5 for there is no pri-vity between them.
    Bonds or notes assigned under our a& of af-fembly, are not governed by the mercantile law, nor are the ai-fignments thereon.
    THE circuit court of Bourbon gave a decision in favor of Johnson, upon a case agreed, which was in substance as follows :
    “ That Benjamin and Elijah Craig, on the 4tH day of December 1799, executed their promissory note, for g'500, to Drake, the defendant in that court. That Drake, on the 24th day of January 1800, assigned the said note, by endorsement thereon, tQ John P. Wagnon ; and that at the time of the assignment, it was, by a separate writing, expressly agreed between said Wagnon and Drake, that the said Wagnon should have no recourse upon Drake : which said writing was immediately committed to record in the Fayette county court. That the said John P. Wagnon assigned the said note to the plaintiff, Johnson; and that he had no notice of the agreerhent between Drake and Wagnon, until after the assignment to him ; unless the recording of said writing be considered as notice. That Johnson brought suit against the Craigs; prosecuted the same to judgment, and sued out a fieri facias thereon; upon which the sheriff made /.8 9 7, and returned that the Craigs had no other ;goods and chattels.”
    
      April 16th.
    
    Drake prosecuted a writ of error.
    Bledsoe, for the plaintiff in error.
    — It is admitted that in mercantile paper, or paper governed by the law merchant, that an assignee may sue a remote assignor ; but this is by a rule of the law merchant, and not by the common law. F or by the common law, this kind of paper was not assignable ; but it is made assignable in England by a statute of Anne, and in this country by an act of assembly of modem date . The English statute expressly puts promissory notes upon the footing of bills of exchange; and has thereby given them a new character. Though obtained through fraud, or without consideration, this cannot be used as a defence when they have passed into the hands of a third person. But our act of assembly, with the statute of Anne in view, has dropped the provision that places them upon the footing of bills of exchange ; and expressly declares that they shall be subject to every equity in the hands of the .assignee that they were in the hands of the assignor.
    The right to recover of the assignor of the paper assigned, under our act of assembly, is not founded upon the law merchant, but upon that principle of the common law, which declares that wherever the consideration-fails, the purchaser is entitled to a return of his purchase money. In 1 Cranch 290, is a case in point; and in Tucker’s; Blackston is a note of a decision of a district judge of Virginia, to the same effect . But if this action js maintainable in the general against a remote assignor, yet Drake is not liable in this particular instance ; he is protected by his express contract with Wagnon. This contract having been on a separate paper from the note assigned, must have been occasioned by an erroneous, but not uncommon opinion, that no words coupled with the assignment, could exonerate the assignor from responsibility. And Drake’s having immediately caused the same to he recorded, shews that the transaction was fair and bona jide. And surely it cannot be contended that a man who has made a fair and honest contract, and used his best endeavors to notify the world of it, is to be made responsible, farther than he has contracted for.
    Clay, for the appellee.,
    — I acknowledge that if this cause is to be decided by the authority of the decision of the supreme court of the United States, Ijuust loose it: but if it is to be tested by reason and. justice, I must prevail. Whatever respect this court may have for the su? preme court of the United States, their decisions are not binding on you : and you must be satisfied of the correctness of their decision, before you will follow it. I contend that our act of assembly, by declaring promissory notes, &c. “assignable” makes them mercantile paper; and subject to mercantile law; except in those instances only provided for by the act itself. Indeed, we borrow our knowlege of the term, and consequences pf the act of assignment, from the mercantile law. We are in the habit, when we see paper ‘⅜ assignable,” by law pr usage, afloat in market, to estimate its value by the number and goodness of its indorsers ; but if you say that the holder can only resort to his immediate assignee, you outrage the understanding of mankind ; introduce a pew and different mode of estimating it, that is, by the goodness pf the last endorser; and, in short, make a new law.
    By an assignment of transferable paper, the assignor undertakes that if the paper is not discharged by the giver, that he, the assignor, will pay it; and that he will pay it to his immediate, or any other assignee. It is by this implied assumpsit or undertaking, that you say that the assignor is answerable to his immediate assignee. If you can imply an assumpsit to your immediate assignee, why not to every assignee 1
    In conveyances of real estate, the covenants descend and are transfered by the dispositions of the land. They follow the land, and belong to the holder of the land, because they are incidents ; and every incident must attach to and follow its principal. So here the collateral undertaking of the assignor, must attach to the paper, and go with it; it is but an incident to the principal — the. note. But the right to assign promissory notes, existed by the common law, antecedent to the statute of Anne — - See appendix to 1 Cranch, where the author has demonstrated that the supreme court erred in the decision relied upon by the other side.
    On the grounds of sound policy, you should support this action, in this form, in which the holder can at once resort to the first responsible jndorser ; and not send him round the circle to come at the same point, by a multitude of suits, and considerable unnecessary delay and useless expepce.
    
      If I am right in the previous part of my argument, the conduct of Drake, in this instance, was a fraud upon the world, for which he must answer. He sent this note out into the world, with a credit attached to it by his signature, which it never would have acquired without it. Why did he not, when he assigned it, declare in the assignment, that it was without recourse ? This would have put every one on his guard, and it will be admitted by the gentleman on the other side, that if that had been done, Drake would not have been responsible to any one on such an assignment.
    Recording the contract is no notice to us. The law never makes the recording of any writing a notice, but such only as are required to be recorded by law. For these latter, a man looks to the records ; but for a contract, not required by law to be recorded, no man resorts to the offices to search for them. Drake, must, therefore, resort to Wagnon, if he is injured by Wagnon’s transferring this note, without letting the assignee know that Drake was not to be made answerable for it.
    Nor is there any reservation in the act of assembly, under which Drake can protect himself. The provisions are in favor of the obligor, not of the assignors.
    The conduct of Drake, in this instance, may, with propriety, be assimilated to the cases in Washington’s reports 
       ; where the obligors, who had induced third persons to take assignments of their obligations, were not permitted to make use of a defence against their assignees, which would have been good against the obligees.
    
      Bledsoe and Talbot, in reply.
    — This court will certainly never be induced to give a decision contrary toa solemn adjudication of the highest judicial tribunal in the Union, unless it be from absolute necessity ; and the fullest conviction of the incorrectness of that decision. Policy forbids it. As members of the Union, we should never wish to see a clashing of power or decisions, much less seek for it. But the court which gave the decision in question, is not more distinguished for the pre-eminence of its station, than it is for the talents, abilities, and high standing, for judicial acquirements of Its members.
    The principle contended for by Mr. Clay, of liability jtp a remote indorser, is a principle of the law merchant; 
      and by that, a man cannot assign a negociable paper, so ,as not to make himself liable for it; and is a sufficient answer, on the gentleman’s own principles, to that part of his argument drawn from the supposed improper conduct of Drake, in not assigning without recourse. So if the (gentleman admits that the assignment is to be. ta¡ken as a ¡new note, we are clearly entitled to the benefit ©four contract with Wagnon.
    
      April 18th.
    
    'But upon the principal point in the cause, the expressions of our act; the intentional dropping the'words , of the statute of Anne, “ As bills of exchange,” £s?c. and the express reserve of the equity, &c. of the giver of the note ; shew,.unequivocally, that it was the intention of the legislature to make them negociable sub modo, not ¡generally. As far as the statute has gone, go with it; but farther do not proceed, or you transcend your powers. By the doctrine contended for on the other side, in shortening the road Injustice, you woulfl, to serve them, cut us out of our defence as to the contract with Wagnon ; and make the: liability of a collateral security greater than that of the principal ; or as the. gentleman contends, make the incident greater, and more obligatory, than the principal. Let Johnson, if he chooses, make use of the name of Wagnon, and commence his suit against us, and we will then be on equal ground, and wilLmeet him. But ifthe court will say that by our assignment to Wagnon, we may be sued by Wagnon’s assignee, they will surely not deprive us of our defence, according to the fair understanding of that contract, under which this suit is maintained.
    
      
       Sec Virginia a&s of 1748, ch. 27— Añs ot ^en-of’ ch. 27, p. 6o, 1 Brad> ⅞°-
    
    
      
      ,, ^/ Z V01.
    
    
      
      
        [a) Buckner •vs. Smith, i Waflu 299— lioomes •vs Smock 1 Wiih 389.
    
   Edwards, Ch. J.

now delivered the opinion of the court. — .The principal question to be decided, is, whether the action was maintainable by Johnson, the last assignee, against Drake, a remote assignor ; there being an intermediate endorser between them ?

In Mandeville and Farmison vs. Riddle, & Co. in the supreme court of the United States, reported in 1 Cranch 290, it was decided, that in Virginia, an indor-see of a promissory note, cannot maintain -an. action against a remote indorser, for want oí privity.. A, similar decision has been .given in one of the district courts-of Virginia, which has been acquiesced in : and it is believed, a similar decision has been given in the supreme court of Maryland.

It is true, these decisions are not binding authority upon us ; but they certainly deserve our respect; especially that of the supreme court of the United States ; as well on account of its being the highest tribunal of justice in the Union, as on account of the acknowledged learning of the judges.

The act of assembly in this country, making notes, &c. assignable, has not placed them on the footing of bills of exchange ; as was done by the statute of Anne. But with that statute before them, the legislature has made notes, &c. assignable, without using the expressions, “in like manner with bills of exchange have enabled the assignee to maintain an action in his own name; and have declared they shall be subject to the same objections in the hands of the assignee, that they were subject to in the hands of the assignor. This proves, that our legislature, patterning after Virginia, whose laws on the subject are the same in substance ; did not intend to elevate them to the rank of mercantile paper ; nor that they should be governed by the law of merchants.

This court accords in opinion with the supreme court of the United States, that “As the act of assembly gives no right to sue the assignor, such an action can only be maintained on the promise w hich the law implies from the assignment; and consequently, can only be sustained by and against the persons, to and from whom, the law implies such a promise to have been made.” As the assignment is made to a particular person, the law implies a promise to that person, but raises no promise to any other.

There is a privity of contract between the assignor and his immediate assignee ; but no such privity exists between the assignor and a remote assignee. It is held in Spencer’s case, 5 Co. 16, 3d resolution — Doug. 736, and many other books, that there is no privity of contract'between the lessor and the assignee of the lease, whether the lease be of land, or of a personal matter, as of a flock of sheep ; because the lessee is interposed between them : but the privity of contract remains between the lessor and lessee, notwithstanding the assignment.

. The same reason is applicable to this case, and shews that no privity exists between the assignor and a remote assignee. Privity of estate cannot apply to the; case.

The law of merchants cannot apply between the as-* signor and a remote assignee of a note or bond assigned, under our act of assembly ; for if it could apply, it would place the implied contract, growing out of the assignment of a note or bond, Upon a more elevated footing than the express contract, the n-ne itself; which would involve the absurdity of making the incident greater and more worthy than the principal,

We are therefore of opinion, both upon principle and precedent, that the action is not maintainable by the as-signee, Johnson, against the remote assignor,Drake ; but that he must resort to his immediate assignor ; and consequently, that the judgment of the inferior court is erroneous.-Judgment reversed.