Court Opinion

ID: 6807440
Source: CourtListenerOpinion
Date Created: 2022-07-23 18:49:04.196979+00
Date Added: 2024-06-11T16:03:30.850434
License: Public Domain

Lewis, P.,
delivered, the opinion of the court.
It is the settled law of this state that the assignee of any bond, note or writing, not negotiable, stands in the shoes of the assignor; or, in other words, the assignment is subject to all the equities of the debtor against the assignor until notice of the assignment. Code 1873, ch. 141, sec. 17; Norton v. Rose, 2 Wash. 233; Feazle v. Dillard, 5 Leigh, 30; Etheridge v. Parker, 76 Va. 247. When, however, after notice of the assignment, the debtor promises the assignee to pay the debt, or by his conduct induces him to believe that he will, under such circumstances as that a retraction of the promise, if permitted, would operate as a fraud upon the assignee, the former is thereby estopped from afterwards setting up any defence which he may have had against the assignor. Thus, where after the assignment of a bond, the obligor, the assignor and the assignee all met together and agreed upon the credits to which the obligor was entitled, it was held that the bond was not subject to any set-off not embraced in such settlement. Feazle v. Dillard,, supra. Bo, where the maker of a note, upon being informed of the assignment, replied that “he would see about that,” and said nothing about any set-off against the assignor, it was held that he thereby waived the right to take advantage of the set-off which he afterwards sought to set up. Albee v. Little, 5 N. H. 277. So, it has been held that where the debtor gives his note for the amount of the debt to the assignee, and afterwards pays notes on which he was liable as surety, and the assignor is principle, he cannot, in an action on the note, set off such payments. Waterman on Set-off, see 589 et seq.
These decisions rest on the principle that a man is estopped on grounds of public policy and good faith from denying what by his conduct or representations he has induced others to act upon as true; or, in the language of Lord Coke, “ a man’s own act or acceptance stoppeth or closeth up his mouth to allege or *398plead the truth.” And, on the same principle, it is contended by the plaintiff in error, that a like estoppel arises from the mere silence of the debtor when notified of the assignment; and in support of this position, reference is made to the case of Scott v. Jones, 1 Brock. 244. In that case, it is true, Chief Justice Marshall, in the course of. his opinion, said: “ The obligor in an assigned bond who has equitable discounts against it, ought to inform the assignee of his claims when notice of the assignment is giren to him. In fair dealing he is bound to do this, that the assignee may take measures to secure himself against the assignor.” But the case was decided on another ground, and the doctrine thus broadly asserted would seem to be in conflict with the decision of the Supreme Court of the United States in Stewart v. Anderson, 6 Cranch, 203. In that case an action was brought, under tbe statute of Virginia, by the indorsers of a promissory note against the maker, after notice of the transfer. "When informed of the transfer the latter made no reply. At the trial the defendant pleaded an offset, which was a note executed to him by the assignor, but which was not due at the time of the assignment of the note sued upon, but became due and payable before the maturity of'that note. The right to set up the offset- was controverted by the plaintiff',, but was sustained by the court.
In the present case, as in that, the defendant, when he received notice of the assignment, made no reply. It appears that the assignment was made on the 17th of January, 1878, and that notice thereof was not given until the 14th of the following month, though the parties lived in the same neighborhood. In the meantime, the liability of the defendant to the assignor had been released; and it seems somewhat remarkable that he did not at the time demand the surrender of the bond. But be that as it may, it is conceded that there was no cause of action against the defendant by the assignor at the time of the formal notice of the assignment, and that the plaintiffs took *399subject to all the defendant’s equities against the assignor until knowledge of the assignment was acquired by the defendant.
The question then is, whether by reason of the latter’s silence, when notified of the assignment, the plaintiffs now occupy a better position than did the assignor at that time? In determining this question, it is to be remembered that by the .ancient doctrine of the common law, a chose in action was not .assignable, the reason being, according to Lord Coke, that ■such assignments, if admitted, “ would be the occasion of multiplying of contentions and suits, of great oppression of the people, and chiefly of the terre-tenants, and the subversion of the due and equal execution of justice.” Afterwards, however, courts of equity upheld assignments made in satisfaction of a precedent debt, and at a still later period all assignments on a good consideration. And the common law courts, following their example, took notice of the equitable rights of the as-signee, when suit was brought for his benefit in the name of the assignor. In 1705 a statute was passed in Virginia authorizing the assignment of “ any bond or bill for debt,” and giving to the assignee the right to sue in his own name; but with the proviso that the defendant should be allowed all discounts that he could prove, either against the plaintiff or the first obli-gor. By subsequent statute these provisions were extended to promissory notes and to all writings obligatory whatever; and it was further enacted that all just discounts should be allowed the defendant, not only against the plaintiff, but against the assignor before notice of assignment. Green, J., in Garland v. Richeson., 4 Rand. 266; 2 Rob. Pr. (new ed.), 260, et seq. And such substantially is the statute as it now stands in the Code, chapter 141, section 17, which enacts as follows: “The assignee of any bond, note or writing, not negotiable, may maintain thereupon any action in his own name which the original obli-gee or payee might have brought, but shall allow all just discounts, not only against himself, but against the assignor, before the defendant had notice of the assignment.”
*400It will thus be seen that while originally no rights were acquired by an assignment of a chose in action, the rights of the assignee came in course of time to be recognized by the courts, and afterwards by statute, which at first made them subject to all the equities of the defendant, whether he had notice of the assignment or not, and now only to such defences as he may have had before notice of the assignment.
It has been repeatedly held that the statute did not intend to abridge the rights of the obligor, nor to enlarge those of the assignee beyond that of suing in his own name (Gordon v. Rixey, 76 Va. 694; Feazle v. Dillard, supra), and it is plain, we think, from what has been said, that the legal effect of notice to the obligor is not to oblige him to disclose to the assignee the de-fences he may have (for to do so might often be impracticable and even impossible at the time of receiving notice); but to preclude him from setting up any additional defence he may thereafter acquire against the assignor.
In the Bank of Washington v. Arthur, 3 Gratt. 165, it was held, that notwithstanding the obligor, in a bond tainted with usury, had acknowledged the debt, after notice of the assignment, and promised the assignee to pay it, he was not thereby estopped from afterwards setting up the defence of usury. And this was so, said the court, because, first, the promise to pay the assignee could not be treated as a new contract, the same being without a valuable consideration; and, secondly, because, under the circumstances of the case, the assertion of the defence could not operate as a fraud upon the assignee, inasmuch as the representations of the obligor were not made with fraudulent intent, and no loss was occasioned thereby to the assignee. The case was therefore unlike the case of Pettit v. Jennings, 2 Rob. Rep. 676, in which it was held, that where the assignee is induced to take the assignment of the debt by the assurances of the debtor that the same is just, and will be duly paid, the latter is estopped from setting up any de-fence he may have against the assignor, even though the debt *401be for a gaming consideration, and therefore void in its inception, provided the assignee before he accepted the assignment had no knowledge as to the consideration of the instrument assigned.
“The assignee,” says Prof. Minor, “taking, as he does in general,, only an equitable interest, takes it ordinarily subject to all the equities which the debtor has, or may acquire, against the assignor before he has notice of the assignment, or as it is sometimes expressed, the assignee cannot he in a better condition than the assignor. Nor does it affect the application of this principle that the'assignment is for value, and without notice, nor that after assignment the debtor acknowledged the demand to be just. * * * But whilst no acknowledgment made after
assignment, will preclude the debtor from proving, if he can, any equity against the assignor, acquired before he had notice of the assignment, he will be estopped from setting up any equity or defence, however well founded originally, if by his assurance made beforehand he. has induced, the assignee to acquire the debt.” 2 Minor’s Lists. 326. This, we think, is a correct statement of the law, subject to the qualification already adverted to, namely, that where, after notice, of the assignment, the debtor expressly or impliedly promises the assignee to pay the debt, he will be concluded thereby, if the retraction of such promise would operate as a fraud upon the assignee. As where, relying on the debtor’s promise or admissions, the as-signee takes no steps against, or to obtain additional security of, the assignor, who afterwards becomes insolvent, in consequence of which loss is sustained by the assignee. In this and other like cases where the assignee has been influenced to act, or t-o refrain from taking action, by the representations of the debtor, to permit the latter to repudiate those representations to the injury of the former, would be contrary, no less to the well-settled rule of the common law, than to the plainest principles of natural justice. And the same principle prevails in *402■equity. 1 Greenleaf on Evid. sec 207 et seq.; Pettit v. Jennings, supra, 2 Pom. Eq. sec. 812.
It is insisted, however, that prior to the notice of the assignment, and before the release of the defendant’s liability to Thomas Bruce, the assignor, the defendant knew of the assignment to the plaintiffs, and consequently could not'escape liability to the latter by anything that thereafter occurred. It appears from the certificate of facts that “it was proved” that on the 19th day of January, 1878, or two days after the assignment to the plaintiffs of the bond in question, the defendant, in a conversation with the obligee, said: “You have sold my bond to Stebbins & Lawson,” and that he did not deny it. “But,” the certificate continues, “the said Alexander Bruce (the defendant) denied that such conversation occurred.” It is obvious that while the certificate purports to be a certificate of facts proved, it is in some particulars a certificate of the evidence only, and that here it must be construed as certifying merely that it teas given in evidence that such a conversation occurred, and that the defendant denied that it did. This view is strengthened by the fact that the jury found for the defendant, after an instruction by the-court, that if they believed from the evidence that at the time the liability of the defendant to the assignor was released, the former knew of the assignment, they must find for the plaintiffs, whether such knowledge was derived from the plaintiffs or from other sources.
The plaintiffs also rely on a letter addressed to them by the defendant nearly twelve months after the assignment of the bond, in reply to a letter from them, in which he claimed that the assignor was heavily indebted to him, and that he ought to be allowed credit for such indebtedness. This, it is insisted, was equivalent to a distinct promise to pay the debt, subject to credits when ascertained. But the jury, in the light of all the facts, found otherwise, and we see no reason to disturb the verdict. It does not appear that the plaintiffs were induced by the *403letter to alter their position, or that they have in any way been prejudiced thereby. Their note to the assignor, executed as part consideration for the assignment of the bond, had been paid, and the record shows that the assignor was not only insolvent at the time of the assignment, but has since continued so. The judgment is affirmed.
JUDGMENT AEFIRMED.