Murdock v. Caruthers

GrOLDTHWAITE, J. — -The following are the facts of the case, as they are shown by the record : William Armour and Henry Lake were a mercantile firm, under the name of Armour & Lake. The same persons, with James Murdock, [788] composed another firm, doing business by the style of J, Murdock & Co. The firm of J. .Murdock & Oo. made a promise in writing, to pay to the order of this, other firm, Armour & Lake, on a day certain, a specified sum, for‘value' received. This writing was assigned by Armour & Lake to the defendant in error, who brought suit upon the same against said Murdock, the plaintiff in error, averring these facts in his declaration. The legal question in,this court is, as to his right to recover upon this state of facts, N The plaintiff in error urges against the right to maintain the action, that the instrument sued upon, being a-promissory note, was not assignable at the common law; that it was made assignable only by the statute of this State, (Clay’s Digest, 381 § 6, 383 § 12;) and that this statute, while it confers upon the assignee the right to sue in his own name, confines the exercise of this right to those cases only in which the payees might have maintained an action; and that, as in the present case no action at law could have been maintained by Armour & Lake, so the defendant in error, who claims as their assignee, and derives his only right to sue under the statutes referred to, cannot sustain his action. . "Waiving the discussion of the question as to the assigna-bility of promissory notes at the common law, and conceding for the present that the terms of the statute are such as require us to recognize the construction contended for; still, we do not think it necessarily follows that the law upon the-facts as presented is with the plaintiff in error. Unquestionably, under that construction, if it is admitted that the instrument sued on was a promissory note before its endorsement by Armour & Lake, the consequences insisted on by the counsel for the plaintiff in error must ensue. Armour & Lake would then be the payees; and as they could not maintain an action upon it, their assignees could not. But was this instrument, legally speaking, a promissory note, before its endorsement by the parties to whom it was payable ? A promise in writing made by A, to pay a specified-sum of money to his own order, is not a note, until endorsed by him; for the reason, that, until then, no legal obligation is created. So also, in relation to a note payable in bank, drawn by a firm payable to one of its members, and by him assigned, it [789] bas been beld by tbis court, that tbe assignee could, maintain an action against tbe makers in bis own name. Smyth v. Strader, 9 Porter, 446; and see also Smith v. Lusher, 5 Cowen’s R. 688, and Pitcher v. Burrow, 17 Pick. 361. It is true, that tbe cases cited rest tbe decisions mainly upon tbe law merchant ; but tbe principle on which they are based must be, that, as legal obligations, they were incomplete, until endorsed ; until then, they would simply be evidence of a debt from tbe makers to tbe parties to whom they were payable; but when endorsed i they became promissory notes, tbe en-dorsee being, as between, himself and tbe maker, tbe actual payee. Tbis being tbe principle applicable to mercantile paper, the reason of the rule must equally apply to all promissory notes. The case of Lacy v. LeBruce, 6 Ala. 904, is directly in point, upon tbe principle involved. That was a note not mercantile in its character, made by one firm payable to another, each firm containing a common partner. Tbis partner died; tbe surviving payees brought their action; and it was beld, that they could recover. Tbe decision was based upon tbe ground, that the death of tbe common partner operated as an assignment to tbe surviving payees; thus recognizing the principle, that, if tbe payees had assigned the note, the as-signee could have maintained the action. The authorities referred to, and the reason on which they are based, lead us to tbe conclusion, that tbe writing sued on, until assigned by Armour & Lake, bad no validity as a note, and that after the assignment the assignee, as between himself and tbe maker, must be regarded as tbe real payee, and sustaining in the present case tbis relation, be is not affected by tbe statute. These views are entertained by the other members of the court, and in relation to tlieir correctness I express no opinion, preferring myself to rest tbe decision upon the construction of the acts of 1812 and 1828, (Clay’s Digest, 381 § 6, 383 § 12,) authorizing the assignment of promissory notes; in which we all concur. The first of these acts declared promissory notes, &c., assignable; and the act of 1828, after providing that bills of exchange and notes payable in bank should be governed by the law merchant, &c., proceeds thus: “All other contracts for the payment of money,” &c., “shall be [790] assignable as heretofore, and the assignee may \maintain such suit thereon as the obligee or payee could have clone, whether it be debt, covenant or assumpsit." These acts were not restraining acts; they were not intended to diminish the rights of the holder against the maker, but rather to enlarge them. The object was, to make every description of promissory notes assignable, protecting the rights of the maker by allowing him to assert any legal defence which he had before receiving notice of the transfer; and the words which we have italicized were not intended to confine and limit the right of the assignee to sue, to those cases only in which the payee could have maintained his action, but to confer upon the as-signee the additional right of suing the maker in any form of action which the payee could legally resort to; “ whether debt, covenant or assumpsit.” Thus the payee could bring debt against the maker; but it was for some time a question, whether the endorsee or assignee could bring that action against the maker of a note, there being no privity of contract between them, (Chitty on Bills, 690;) and the statute, in securing to the assignee the same form of remedy that the payee had, was intended to remove this doubt. In regard to the difficulty suggested by the counsel for the plaintiff in error, upon this construction of the statute, in relation to sets-off existing between the maker and payee, we do not well understand bow any question of that kind can arise, upon assignments like the one under consideration. Its validity is not denied; that can only be done by a sworn plea, (Clay’s Digest, 341, § 158;) and in all cases in which the transfer was made by payees who were also members of the firm that made the note, we think the assignment being-made by one partner would not operate as a waiver of any set-off on the part of the firm to which he belonged. But even if this is not the law, the right of set-off by the makers would not be affected, although they might be required to assert it before another tribunal. The statute could not have contemplated equitable sets-off; and as between two firms having common partners there could be no other. We may add, the same difficulty in relation to sets-off is presented in the case of Lacy v. LeBruce, supra, and is necessarily covered by that decision. The judgment is affirmed.