MCCULLOUGH v. HOUSTON - 1 U.S. 441 (1789)
U.S. Supreme Court
MCCULLOUGH v. HOUSTON, 1 U.S. 441 (1789)
1 U.S. 441 (Dall.)
Supreme Court of Pennsylvania
September Term, 1789
This was an action brought by Hugh M'Cullough, as assignee of Samuel Young, upon a promissory note drawn by John H. Houston; and, on the trial of the cause, a verdict was given for the Plaintiff, subject to the opinion of the Court on the following point:
- 'Whether the indorsee of a promissory note, takes it subject to all equitable considerations, to which it was subject, in the hands of the indorser, the original payee?' And, if the opinion of the Court was in favor of the Defendant, a new trial was to be awarded.
The point was argued at the last term, before all the Judges, by Sergeant, for the Plaintiff, and Ingersol, for the Defendant.
For the Plaintiff, it was observed, that in the act of Assembly, making bonds and notes negotiable, there is no provision enabling the promissee, or drawee, to bring an action on the note itself; 1 State Laws 77. that such an action did not lie at common law; and, consequently, that wherever it had been brought in Pennsylvania (which is in numerous instances) the proceeding must have been founded on the statute of 3 and 4 Ann. c. 9. and the law of merchants. That statute, therefore, must be considered as extended in practice to this country before the revolution; and a legislative sanction is given to the practice by the act of Assembly, which declares, that such parts of the statute law of England as were heretofore in force, shall still be binding in Pennsylvania. 2 State Laws. 3. On the assignment itself the assignee cannot bring an action against
the assignor; but he may bring covenant, of, perhaps, an action for money had and received &c. 2 Lord Raym. 1242.1419. But, in respect to notes, a blank indorsement passes, as if payable to bearer; and every part of the statutes of William and of Anne, for giving negotiability to bills of exchange and notes of hand, has been introduced into this province from the earliest times. For the Defendant, it was urged, that, at common law, bonds and notes were mere choses in action, and the assignee took them under all the equitable circumstances to which they were liable in the hands of the assignor. That promissory notes do not come within the law of merchants is clear; for, if they did, the statute of Anne would have been unnecessary. The question, therefore, is, whether that statute has been extended to Pennsylvania? or, whether, by our act of Assembly, notes are put on the same footing with bills of exchange? From the general rule of the extension of statutes, the 3 & 4 Ann. has not been extended; because it was passed subsequent to the settlement of Pennsylvania; because the province is not particularly named in it, nor would it, indeed, have been the policy of the British Legislature to promote the circulation of our paper credit; and because it has not been recognized and adopted by any positive act of Assembly. With respect to the introduction of the statute by practice, it operates no further than this, that the payee of a promissory note has brought an action on the note against the signer before our act of Assembly was passed; but till then, the indorsee could not maintain such attraction; and obligations and promissory notes, are put on the same footing. With respect to the act itself, that the Legislature could not intend to put promissory notes upon the same footing with Bills of Exchange, appears evidently from this consideration, that the preceding part of the act pursues the statute of Anne, nearly verbatim; but when it comes to that clause in the latter, which places Notes on the same footing with Bills of Exchange, the Act equally varies its spirit and expression: And, it is declared, that the assignee of a note. &c. shall recover so much thereof as shall appear to be due at the time of the assignment, in like manner as the assignor could have done. The Chief Justice now delivered the opinion of the Court in the following manner:
M'Kean, Chief Justice In pronouncing the opinion of the Court, on the point reserved for their consideration, I shall premise that Bonds, and Promissory Notes in writing, stood on the same footing at common law; and that the assignment of those instruments, as well as the form, operation, and effect of such assignment, depends entirely upon the municipal law of the place where it is made. By an act of Assembly of Pennsylvania, passed on the 28th day of May, 1715, entitled 'An act for the assigning of Bonds, Specialties, and Promissory Notes,' it is recited in the preamble, 'that it hath [1 U.S. 441, 443]