# Primer v. Kuhn

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PRIMER, Plaintiff in Err. verʃus KUHN.
E
“ Trefpafs ʃur le Caʃe, in the Common Pleas, Philadelphia County:
“ And now the 6th day of February 1788, upon the trial of this
“ caufe, the Council for the Defendant, under the Pleas of Non Aʃʃumpʃit,
“ payment, and defalcation, and, in order to maintain the
“ fame iffue, offered to give in evidence a certain bond, or obligation,
“ of the faid Ludwig Kuhn (prout obligation) affigned (prout affignment)
“ entered into by the faid Plaintiff, before his difcharge
“ under the Infolvent Act, and prayed, that the monies thereon ​
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“ due might be defalked againft the faid Ludwig Kuhn's demand,
“ which it was argued, had commenced after his faid difcharge.
“ To this the Counfel for the Plaintiff objected, and prayed the
“ Court not to admit the fame obligation and affignment thereof in
“ evidence ; to which the Court affented, and over-ruled the teftimony.
“ Whereupon the faid Counfl for the defendant, did
“ then and there, on behalf of the faid defendant, except to the laft
“ opinion of the Court, and did then and there requeft of the faid
“ Court to put their feals to this bill of exceptions, which was
“ granted accordingly.”
To the bill of exceptions a memorandum was fubjoined by the Counfel, on both fides, ftating, that the Plaintiff below had notice of the bond and affignment before the fuit brought, but not before the fale and delivery of the goods by him to the defendant.
The refufal of the Court of Common Pleas to permit the bond and affignment, to be given in evidence, was the error now alledged ; and, on the 26th of September, the cafe was argued by Levy, for the Plaintiff in Error, and Sergeant, for the defendant.
Levy, Before the acts of affembly are particularly examined, it may be proper to confider fome of the inconveniencies that exifted, in fuch cafes, at common law. Goods delivered in part might, perhaps, be given in evidence in an action of Aʃʃumpʃit, by way of mitigating the damages, but not under a plea of payment to a fpecialty ; nor could the defendant difcount any note, bill, bond, recognizance, or judgment entered into by, or obtained againft, the Plaintiff. This neceffarily multiplied fuits and cofts ; and, it often happened, that a Plaintiff, in defperate circumftances, recovered againft a defendant to whom he was, in fact, indebted in a greater fum. It, indeed, by accidental circumftances, his action was brought to a conclufion, earlier than the defendant's crofs action, he might receive the money, and for his larger debt, become utterly infolvent, by the time the defendant had obtained a judgment.
Inconveniencies of this kind have been perceived by the Legiflature, or judicial power, of the moft enlightened nations, and a remedy, in a greater or lefs degree, provided. See Lord Kaim. Prin. oƒ Eq. 201.2.3.4.5. and, in England, even before the ftatutes had given relief in the Courts of Common Law, the Courts of Equity endeavoured to provide for fuch cafes. Show Ca in Parl. 17. 1 Vern. 121. 2. 2Vern. 428. 9. Caʃe 390. 2 P.Will. 128.
In Pennʃylvania there are two Acts of Affembly that treat of this fubject. 1State Laws 48. and Ibid. 165. It is obfervable that the firft general provifion by the former act, paffed in 1705, was twenty-two years previous to the firft general provifion of the fame nature in England, which was not till the 2Geo. 2.c. 22. ʃect. 13. The latter Act of Affembly, however, is copied, almoʃt verbatim, from the 2Geo. 2.c. 22. and is pofterior in point of time.
Thefe two Acts of Affembly, made in pari materia, are, then, to be confidered as remedial laws, and muft receive a liberal ​
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construction : And, as they declare, that where two are indebted to each other, they may set off their demands, it only remains to investigate the objections which are urged against the defalcation contended for, on behalf of the Plaintiff in error.
The Plaintiff below, in effect, says, that he has obtained the benefit of the insolvent act ; and, if he is compelled to pay, or allow, this bond in discount, his property is taken away to pay his old debts. This is true ; but, it is to be answered, by remarking, that the very insolvent act, on which he relies for the protection of his person, makes his future effects liable for debts preceding his discharge ; and herein consists the well known distinction between bankruptcy and insolvency. See 1 State Laws 164. ʃect. 7. Jenk. Cent. 256. Caʃe 49. This was the condition upon which he obtained his liberty ; and, having obtained it, shall he be thus allowed to evade the condition ? As, upon an execution against him, his effects would be liable, it can make no odds to him, in point of justice, whether his creditor obtains payment by a cross suit, or by defalcation. By the former mode, indeed, he might have an opportunity of secreting his effects the moment that they were recovered in the action brought by him, and thus prevent his creditor from deriving any benefit by a subsequent judgment and execution. Such practices, however, have been too frequent to escape notice, and are to flagrant to be countenanced and supported in a Court of Law. Besides, the right of set-off is far more material against an insolvent debtor than any other person ; for, it is contrary to conscience that he should recover against those to whom he is, in truth, indebted in an equal, or larger sum. 2 P.Will. 129 .
But, the Plaintiff below may also urge, that the Plaintiff in Error in an aʃʃignee with whom he never dealt. See 1 State Laws 48. and, endeavour to establish an analog between his case, and that of a debt due to a man in right of his wife,which can not be set off in an action against he husband on his own bond. Bull N.P. 179. The reason, however, is essentially different. What is due to a husband in right of his wife, he must sue for in the mane of himʃelʃ and wife ; and, as discount is in the nature of a suit, to permit the setoff in the case alluded to, would be adding a party to the suit, that is the wife, who was not named in the writ. Besides, debts due to the wife are not absolutely vested in the husband ; for, if he does not reduce them into possession, they survive to her, and do not go to his executors.
But the ʃecond Act of Assembly, does not say any thing with respect to the party's dealing together ; and even if there were any force in an objection grounded on those words, the answer would be easy, that the assignee of a negotiable, or aʃʃignable inʃtrument, is as much contracted with by the words of the obligation, “ and his aʃʃigns,” as the original obligee ; and, under the Act of Assembly he is equally the “credior ” of the obligor. See 1 State Laws 165. ​
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To illuftrate this argument, fuppofe that C gives his bond to D. which D affigns to A: A gives his bond to E. which E affigns to C. A then fues C. They are both affignees: What motive of policy, what principle of conftruction, could in this cafe, preclude a difcount ? It is the object of law to put an end to ftrifes; and the Courts of Juftice are ever anxious to prevent an unneceffary circuity of action. Under the ftatute of 2 Geo. 2. which is in the fame words with the acts of Pennʃylvania, the Judges of England have permitted an indorfement after the fuit brought to be difcounted ; the practice requiring only that if fhall be proved to have been made “ beƒore plea pleaded.” Cromp. Pract. 161. And the cafe in 2 Strange 1234, makes no queftion, whether an affignee may difcount, but merely turns upon the time of indorfement.
The objection, that the allowance of fuch accounts would be the means of preventing infolvent debtors from obtaining a fubfiftance, goes much too deep : it is confidering inconveniencies arifing on a queftion which clear and pofitive law has determined ; for, the Act of Affembly fays that the future of his old debts ; and the Judges of the Courts of Common Law have extended the principle of difcount, by a moft liberal equity, far beyond the words of the ftatute in England. 2Bl.Rep. 869.
Sergeant, for the Defendant in Error, contended, that the attempt to pay for goods, by the bond of an infolvent debtor, purchafed at five fhillings in the pound, or, perhaps obtained without any confideration, was in itfelf an act againft confcience ; that no cafe could be fhewn of a difcount allowed upon an indorfement made after the action brought ; for, Cromp. 161. is not a fufficient authority ; that the rule of retaining, where there are mutual debts, did not apply ; and that a fet off muft be a demand in the Defendants own right. He cited 8Vin. 557. Bro. (Debt) pl. 172. Ibid. (Condition) pl 181. S.C. 1 State Laws 48. 3Black. 304. 2Geo. 2.c.22. 8Geo. 2. c.24. Bull. N. P. 179.
On the 3d day of October the chief justice, after ftating the cafe, delivered the opinion of the Court to the following effect:
M‘KEAN, Chieƒ Juʃtice. As a difcharge under the infolvent laws, while it exempts the perfon from future moleftation, leaves the effects of the Defendant for ever liable to the demands of his creditors, the difcharge obtained by the Defendant in Error, can have no operation in the decifion of his caufe.
A queftion has been made, whether the Plaintiff in Error might have defalked his bond under the Engliʃh ftatutes ; the firft of which takes notice of mutual debts,&c. The Judges there were, indeed, of opinion, that only debts of the fame dignity could be fet off ; but for this, I can difcover no good and fatisfactory reafon ; and a remedy was afterwards provided by a fubfequent ftatute, which declares, that debts of different natures may be defalked.
The true ground, however, for the decifion of this caufe, arifes from the conftruction of the feveral Acts of Affembly for the relief ​
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of infolvent debtors, for the affigning of bonds, and for defalcation: And the laft of thefe Acts fays, that “ if two or more, dealing together “ (which words are not to be found in either of the Engliʃh ftatutes) “ be indebted to each other upon bonds, &c.” when an action is commenced, the Defendant may plead payment, and give his bond, &c. in evidence againft the Plaintiff's demand.
If then, the obligee could have defalked the bond in queftion, (of which, we think, no doubt can reafonably be entertained ) and he has legally affigned all his right and intereft in it to the Plaintiff in Error, why fhould not the affignee be entitled to the fame advantage, fince the Act for the affignment of bonds has placed him on the fame footing?
There is another claufe in the Defalcation Act, which provides, that where a Plaintiff and Defendant have accounts to produce one againft another, they may refer them, and the report of the referrees fhall have the effect of a verdict: Now, although the words are confined to the cafe of accounts, yet the conftruction of the Act has liberally extended the right and benefit of fuch a referrence, to every other caufe of action.
For the fake of Juftice, and to prevent an odious multiplication of fuits, we think, that the fame liberality fhould be exercifed in the cafe before us ; and are unanimoufly of opinion, that the Judgment of the Court below ought to be reverfed.
Judgment reverfed.