Colbourn v. Rossiter

Swift, Ch. J. The note in question was negotiable ; but not having been actually indorsed, it did not vest in ft'alkley, and stands on the footing of a note not negotiable. It is agreed, that such notes may be assigned, by delivery only, so far as they are assignable j and the question is, whether a note thus assigned vests such an interest in the buyer, that in a petition for an act of insolvency, it is sufficient to make the assignee only a party, without averring an assignment, or making the promissee a party. It is a principle of the common law, that a chose in action can never be transferred from one man to another, so as to enable the purchaser to bring a suit in his own name, except in the case of bills of exchange by the custom of merchants. It is by statute, that notes are made negotiable. Though a chose in action can never be assigned, so as to transfer the property at law $ yet the purchaser, usually called the assignee, acquires certain rights, which will be protected, both in law and equity. It will not be the subject of a set-off; it will not vest in the assignees«f a bankrupt ; nor is it liable on a foreign attachment. If the assignor should release the debt, or prevent the assignee from pursuing a legal remedy in his name, he would be liable on the contract of assignment. If the debtor, after notice of the assignment, should take a release from a bankrupt assignor, he would be subjected for a fraud on the equitable rigid of the assignee. If any person should steal, or destroy, such assigned note, the assignee has such a special property, by the lawful possession*, that he could maintain a proper action against the wrong-doer for the injury. Though the beneficial interest is vested in the assignee, yet he is always considered and treated in the character of attorney to the assignor, without responsibility ; and every proceeding in law or equity is grounded on the idea that the property is not vested in him at law, but. that he only has the right of an attorney to collect and apply it to his own use. Of course, every proceeding at law directly — 506 — to enforce the contract, must be in the name of the assignor/ or original party. But it is said, that the assignee of a note, not negotiable, is, to all intents ami purposes, the owner, except that lie cannot bring an action in his own name. Why not bring an action in his own name, if he is the owner of the note ? It is a solecism to say, that a man is the owner of a thing, and cannot bring an action in his own name. The real reason why he cannot bring an action in his own name, is, because he is not, in any sense, in judgment of law, the owner ; but as he has certain equitable rights, he is considered and treated as the owner for the protection of such rights. Hence, in common speech, he is usually called the owner. He has, however, only the beneficial, not the legal interest. But the admission, that the note cannot be sued in the name of the assignee, and that the suit must be brought in the name of the promissee, concedes all that is claimed ; for on the same principle that the note must he sued in the name of the prom-issee, he ought to be made a party to the petition for an act of insolvency ; for if, in contemplation of law, he is the owner of the note, so that he must be the plaintiff in an action brought on the note, then for the same reason he ought to be made a party to the petition, which seeks to divest him of that legal right. There cannot be a greater inconsistency than to say, that a note must be sued in the name of the promissee, because he is the legal owner, and yet in a petition for an act of insolvency, which seeks to divest him of that right, it is not necessary that he should be a party : for it is a first principle, that no man can be divested of a legal right, by a proceeding at law, to which he is not a party j and it has been ,repeatedly decided, that an act of insolvency passed by the legislature has no effect on the rights of those who are not parties to the application. From the circumstance that the suit cannot be brought in the name of the assignee, and that the assignment is no bar to a suit in the name of the original party, it is clear, that the assignee cannot he the owner, in judgment of law, but can only be considered as an attorney, with power to collect, without accountability. Indeed, such is the usual form of all transfers of this <h scription. There is no rule of the common law clearer than this, that an attorney can never be — 507 — treated as a principal. An attorney can never maintain a suit in his own name, in the same manner as if lie were the principal ; nor can process be brought against him, in the same manner ; but the principal must always appear as a party on the record. It can make no difference whether he be an attorney to collect and pay over to the principal, or to apply to his own use ; in either case, he is but an attorney, and the same rules are applicable. It has been insisted on, in the argument, that Waikely bad power to discharge the note; and this is only a discharge by act of Assembly, to which he was a party. So, any attorney who has a note, merely to collect, can discharge it: but it will not be seriously pretended, that because an attorney can discharge a note, it will be sufficient to make him a party to a petition for an act of insolvency, without giving notice to the, creditor. If, however, Walkley had such an interest, that it was sufficient to make him a party, then the nature of his interest should have been set forth. When the assignee of a negotiable note brings an action, he states the assignment : so here, on the same principle, Walkley should have been described in the petition as the assignee of Colbourn, so that it might have appeared from the record whose interest was to nave been affected. But now1, from the record of the court that rendered the judgment, Calboum, the plaintiffin fids suit, appears to be the creditor; and his name no w here appears in the proceedings before the General Assembly. It does uot appear from the record, that Walkley ever had any interest in the judgment: but his name appears as a creditor in the petition. From the records, it does not appear, that the debt for which this action is brought, was discharged, by the act of insolvency. ,To give it this operation, an extrinsic fact must be shewn, and proved. But the record ought to speak for itself, and not be eked out by matter dehors; it may lead to serious inconvenience. The sheriff could not know, that this debt, apparently due to Cdhourn, was discharged : he could institute no inquiry to ascertain (lie-assignment to Walkley. If lie permitted the debtor to depart from gaol, and the note had not been assigned, he became liable for an escape: if he refused, and the note had been assigned, be became liable for false imprisonment. — 508 — No practice should be permitted, that may place an officer iu such a dilemma. On the whole, it appears to ine, to say, in this case, that notice to the assignee is sufficient, is, in effect, to say, that a chose in action is assignable ; a proposition directly repugnant to' a well known maxim of the common law, as old, and as venerable, as the common law itself, i would not advise a new trial. Trumbttii and Peters, Js. were of the same opinion. Smith, J. It appears, in this case, that the note had been transferred, for a valuable consideration, by Colbourn to Stephen Walkley, though not indorsed, agreeably to the statute rendering nptes negotiable : that this fact being known to Pearl, he made Walkley a party to his petition for an act of insolvency, as being the creditor, and gave no notice to Colbourn. It is now insisted, that the act of insolvency obtained on such petition, will not justify the sheriff in releasing Pearl from an imprisonment, procured by Walkley, upon an execution obtained by him in the name of Colbourn, upon the note so transferred. But in my judgment, Walkley was the real creditor, and the only proper person to be made a party to the petition. He being a purchaser.of the note, for a valuable consideration, was the owner of the debt. He alone' could dispose of it; and he onl/ could receive payment. I speak not of chancery, merely ; it is the same at law. There is no hostility between the different jurisdictions on this subject. It is a well settled principle of common law in Connecticut, that the property in a chose in action, may be assigned ; and the courts of law have long since recognized the property in the assignee as fully as courts of chancery. TJhe last feature, which remained for some time, to distinguish the two jurisdictions, was that of resorting to a court of chancery for redress against an obligor, who had/receivcd a discharge from a bankrupt obligee, knowing the debt to be assigned. But this distinguishing feature is now removed ; and the eoursé is so well settled to bring suits at law, that I feel no hesitation -hrsayiug, that a-«oiu*t of c lymcbry 'would not sustain*a bill of the kind. The old form of Jp'jnging*thg — 509 — suit on the note, in the name oí ihe obligee, is, indeed, continued j but it is now mere form , and whenever any collateral injury is done to the debt, such as obliterating, destroys ing, or converting the note wrongfully to the use of another; or any injury to'process on the note, such as rosco us, or escape ; the abtion may, and ought to be, brought in the name of the assignee. In the present case, bringing the action in the name of Collourn, is a mere attempt of the party, to avail himself of the forms ef law, regardless of the substance. Walkley was the only person injured by the escape, if any injury was jjone ; and the right of action, if fny, was to him $ and the action ought to fíltve been in his name, Edmojíd and Braiiíakd, ⅞. were of the same opinion. HosmeR, J. The act of insolvency in, favour of Ralph Pearl, as against the parties to his petition, is* conclusive on «very debt to which it extends. ' . . Walkley was ,a party, and the act explicitly operates on any demand which may'have been due to him at the date of Pearl's petition. The judgment against Pearl, theifree of wh,ich is now in question, was rendered on a promissory note which.he had given to Colhourn. This note was ncfjfhtrable, and had, by delivery, wftlíout indorsfenttnt, been transfgrred to Walkley, ⅝⅛. least, so far as related to the equitable or heueiicial inter-" *est of it. Jones v. Witter, 13 Mass. Rep. 504. The f^uit in name of Colhourn, was instituted by Walkley ; on the execution which issued, he caused Pearl Jo ⅛⅜ imprisoned ; the money due was his; and he was the only person who could be injured by Pearl's escape. In my judgment, it would be a very limited construction of the act of insolvency, to say, that ft was intended to operate merely on th^ debts nominally due to Walkley. For aught that I have heard, the jmlg-merit debt in the name of Colhourn, was the only demand ^existin.gvin favour of Walkley against Pearl. He answered to the petition of Pearl, to which'-he was made a party ; and opposed it, undoubtedly believing, that if it were granted, it must extinguish the before mentionedNiebt. The words ef the act artfsiffiiciftilly cdTnprclieusU'c tu embrace this subject, . and ti. to claim iu favour of fCalkley^ ^ — 510 — The only remaining enquiry relates to the efficacy of the act against Pliny Colbourn. Hr was no party to the petition, arid on any real demand of his, it is unquestionable, the act cannot have any operation. Any seeming difficulties arising from this source, however, must vanish, so soon as it is recollected, that Colbourn is merely nominal, the trustee only of Walkley; and that the suit was brought by Walkley in his name, and is pursued for his own benefit. It would bte passing strange, to permit the act to be evaded, and the rights of Pearl prostrated, by a refusal to see what is most obviously visible. It has been said, that the interest of Walkley is merely an equity; and that the only claim which a court of law can recognize, is in Colbourn. I do not accede to this proposition. The whole beneficial interest is in Walkley ; and of this, a court of law is authorized to take cognizance. « The good sense” says Butter, J. “ of the rule (that a chose in action cannot be assigned) seems to me to be very questionable; and in early, as well as modern times, it has been so explained away, that it remains, at most, only an objection to the form of action.” Master v. Miller, 4 Term Rep. 340. In Bottomley v. Brooke, cited in Winch v. Keeley, 1 Term Rep. 621. which was debt on bond, the defendant pleaded, that the bond was for security of 100Í. lent to the defendant by. E. Chancellor, and was given by her direction in trust for her; and that E. Chancellor was indebted to the defendant in more money. To this plea there was a demurrer, which was withdrawn by the advice of the court. In Rudge v. Birch, cited in I Term Rep. 622. on the same pleadings, there was judgment for the defendant. In Winch v. Keeley, 1 Term Rep. 619, where the obligee had assigned a bond, and afterwards became bankrupt, the court held, that he might maintain the action in his own name for the benefit of his assignee. In these, and other cases that might be cited, (Coleman v. Wolcott, 4 Day 6. Webster v. Scales, 25. G. 3. B. R.) courts of law have taken notice, that the nominal plaintiff was not the party in interest; that he was trustee for another person; and having looked from the record to the beneficial owner, have decided precisely as if he had been a party to the record. Acting on principles of good sense, with a view to the administration of justice, it must be difficult to assign a reason — 511 — why thccourt should be compelled, by mere forms, to disregard the rights of the only person interested, and sacrifice the substance to the shadow. Had Colbourn obtained an act of insolvency, and given a general assignment to trustees of all his property, it would not have transferred the note before delivered and assigned to Walkley. (Vid. Webster v. Scales, before cited.) A suit in the name of Colbourn might be instituted on the note, for the benefit of Walkley, and against any plea on the part of the defendant, the court would recognize the rights of Walkley, and decide accordingly. (Vid. Winch v. Keeley, before cited.) Now, it seems impossible to assign a reason, why the court should go out of the record to ascertain the property of Walkley, to protect it j and yet, that they should be precluded from the recognition of the same fact, in order to the administration of equal justice to the defendant. The testimony rejected by the superior court should have been admitted; and therefore, I advise a new trial. Gottid, J. The question, whether the resolve of the General Assembly is a good defence to this action, is reducible to two others : 1. Was the beneficial interest in Pearl’s note to the plaintiff, vested, by transfer, in Walkley ? 2. If so, in whom of the two — Walkley, or the plaintiff — would the right to recover for the escape, be, if there had been no such resolve ? There is now no doubt, that a chose in action, though not negotiable, may be assigned to every purpose, except that of conveying the legal interest in the debt. And the only effect of the exception, under our law, as I have ever understood it, is, that the assignee cannot maintain an action, in his own name, upon the note, or other obligation assigned ; and that the assignor, may, therefore, at law, release the debt, after notice to the debtor, of the assignment. In some of our neighbouring states, and by a rule of practice in England, also, the exception has been narrowed still more. Andrews v. Beecher, 1 Johns. Ca. 411. Wardell v. Eden, 1 Johns. Rep. 531. n. Littlefeld v. Storey, 3 Johns. Rep. 425. Jones v. Witter, 13 Mass. Rep. 304. Legh v. Legh, 1 Bos. & Pull. 447. It is true, that, for a reason not applicable to the present question, a negotiable note, payable to order, cannot be so transferred, as to carry the legal title to the debt, without indorsement : but there can be no question, that the equita512 Me, or beneficial, interest, in any chose in ad ion, in genera!, is a subject of assignment; and there is, dearly, no rule of law, requiring an assignment of this kind lobe in writing. It is merely the sale of an interest in a personal chattel ; and no other solemnity is essential to such a sale, than is necessary, in transferring a right to any other personal chattel. If a parol contract of assignment, accompanied with delivery, were not valid j it would follow, that the assignment must be by deed : for the common law makes no distinction between a verbal contract, and a written one, not under seal. But there can be no pretence, that a deed is necessary for this purpose. Indeed, the'point is settled, in Howell v. MacIvers, 4 Term Rep. 690. Upon the second question, it is to be remarked, that this is an action, claiming a recovery for damage, sustained in consequence of an escape : and it is a first principle, that the person injured by a wrong, is the party entitled to redress. Who, then, is the party injured, in this instance, if any legal injury has been done ? I answer, Walkley, the assignee of the note — the person, who had the whole beneficial interest in it, and in the judgment recovered upon it ; the person who was actually entitled to the avails of the judgment, and must have received the money, due upon it, if it had been collected. The plaintiff has sustained no injury, or loss, of any sort. The only damage occasioned by FearVs enlargement, (and even this, as it here appears, is damnum absque injuria,) has been incurred by Walkley. He, therefore, is the only person, who could recover for this alleged escape, if there were any right of recovery in the case. For the same reasons,he was the party,entitled to notice,on Pearl’s petition to be liberated from imprisonment. The plaintiff was not interested in the event of that petition. He was not the creditor. The debt was due nominally to him, but actually to Walkley. The latter, it is admitted, •could not maintain an action in his own name, directly upon the note or the judgment, because, upon the face of them, the interest does not appear to be his. And for this reason, the assignor is, for the purpose of enforcing a recovery, by an action, founded immediately upon the assigned security, in the nature of a trustee for the assignee — but no further. And, therefore, in collateral actions, like the present, in which this reason does not operate, the rights of the assignee are a proper subject of — 513 — averment; and courts of law recognize and protect them. The recognition of trusts of this nature, in actions at law, í¡as, in the English courts, long since ceased to be a novelty. 1 Roll. Abr. 29. Mouldsdale v. Birchall, 2 Bla. Rep. 820. Winch v. Keeley, 1 Term Rep. 619. 621, 2. Master v. Miller, 4 Term Rep. 341, 2. In our own courts, also, the decisions, in all analogous cases, have proceeded upon the principle, that the assignee, is the real creditor, except for the purpose of recovering, in his own name, upon the original security. And it has been so often determined, as to have now become a matter of common experience, that if one, having assigned a debt, and absconded, is sued, by foreign attachment ,• the assignment is a good defence, at law, for the assignee : that an assignor is liable, at law, to his assignee, in an action on the case for fraud, as the case may be, for releasing the debt assigned : and that the promissor, or original debtor, is also answerable, in the same, form of action, for accepting a release, after notice of the assignment, and defending under it. Now, what possible objection, that could be urged against Walkley’s recovering, for this escape, (supposing Pearl's enlargement to have been an escape in law), would not be equally strong against a right of recovery in the two former cases ? No difference in principle can be shown, between the three cases ; for none exists. In all of them, the injury consists in a violation of the same equitable right: in all of them, the objection, which would prevent the assignee from recovering, in his own name, upon the original security, is removed; and in all of them, therefore, if in either, an action at law is a remedy, adapted to the injury. The case of an assignee’s recovering, against the original debtor, for accepting a release, is, indeed, much stronger, in point of precedent, than a recovery, by the same party, in a case like the present, would be. And as to the general doctrine, that an action at law lies, for the violation of an equitable right, the case of Coleman v. Wolcott, determined in this Court, (4 Day, 6.). is still stronger than either. The objection, on the part of the plaintiff, that the resolve of the legislature, discharging Pearl from imprisonment, is res inter alios acta, is a total misapplication of the rule referred to in support of it. One might as well contend, that in ejectment, an execution title, under a judgment against the — 514 — former owner of the land, or even a deed of conveyance from him, is not evidence, as being res inter alios acta. The? proceedings of the legislature were not introduced, to prove the truth of any of the allegations in Pearl’s petition. The operative evidence was the decree, or sentence, which is in the nature of a proceeding in rem. My opinion is, therefore, that the resolve of the legislature is a good defence to the action. Chapman, J. gave no opinion, not having been preseni when the case was argued. New trial to he granted.