IN error. This was an action by the indorsee, against the
drawer, of a promissory note; and the following case was submitted
for the opinion of the Court:
'Sometime about the end of December
1792, the defendant, for a full and valuable consideration, that is
to say, in consideration of Wm. Duer, of the city of New-York,
relinquishing to him (the defendant) his the said Wm. Duer's right
to a certain portion of a contract, made with the state of
Massachusetts, for
Page 4 U.S. 47,
48
the purchase of a large tract of land, caused to be paid and
delivered at the city of New-York to the said Wm. Duer, the several
promissory notes in the declaration mentioned; all of which were
drawn by the defendant, payable at the bank of the United States,
to the order of Henry Knox, esq. a citizen of Massachusetts, and
indorsed in blank by him to the said Wm. Duer, whose property they
became by the said delivery; and continued so to be, until he
parted therewith, as hereafter mentioned. On the 11th of May 1793,
a foreign attachment issued out of the Court of Common Pleas for
Philadelphia County, at the suit of Nicholas Fish, a citizen of the
state of New-York, against the said Wm. Duer, which was, on the
same day, duly served in the hands of the defendant, with notice to
him as garnishee; and on executing a writ of inquiry, in the said
attachment, the sum of 4103l. 15s. 6d. Pennsylvania currency was,
on the 8th of March 1794, found due to the plaintiff therein, from
the said Wm. Duer, and judgment thereupon rendered, which judgment
still remains in full force and unsatisfied. At the time of issuing
and serving the said attachment as aforesaid, the said notes
remained in the possession, and were the property of the said Wm.
Duer, and continued so to be, until some time afterwards, in the
same year, when they were paid away by him in New-York to citizens
of New-York, for a full and valuable consideration, by delivery,
and without his indorsement thereon; and, afterwards, they were
severally paid away and delivered in New-York, by the persons so
receiving them respectively (before the bringing of the actions)
citizens of New-York (except M'Crea, who is a citizen of
Pennsylvania) respectively for full and valuable considerations and
without any knowledge on their parts of the said attachment having
been served or issued, other than such knowledge as may be deemed
to result from the record of the said attachment, and the
proceedings thereon; and without any knowledge of the agreement so
as aforesaid made between the said Wm. Bingham and Wm. Duer. It is
agreed that promissory notes were, at the time of negotiating the
said promissory notes, and still are, negotiated and considered in
New-York, upon the same footing as foreign bills of exchange,
according to the custom of merchants.
'Questions submitted to the opinion
of the Judges: Were the sums of money, or any part thereof, due on
the said notes, liable to the said attachment, and bound thereby in
the hands of the defendant? Or, is he bound to pay the plaintiffs
in these causes, notwithstanding the said attachment, and
proceedings thereon, the amount of the said notes, or any part
thereof? After an opinion shall be given on these questions, it is
agreed, that the Court shall be authorised to give such judgment in
the several actions, as the facts here stated, and as the facts
Page 4 U.S. 47,
49
that shall be brought forward, under the subjoined agreement,
shall induce them to deem right.'
The case was argued by Ingersoll and Dallas, for the plaintiff,
and by Lewis and E. Tilghman, for the defendant.
For the plaintiff, Dallas premised, that the case admits all the
facts essential to constitute a legal right of recovery: the note
was originally issued for a valuable consideration; it was
delivered in New- York; all the parties to the note and the
attachment, except Bingham, are citizens of New-York or
Massachusetts; it was attached before it was due; the note vested
in Duer by the delivery, and was afterwards divested for a valuable
consideration, without notice of the attachment, by delivery and
without Duer's indorsement; and promissory notes are on the same
footing in New-York as foreign bills of exchange. Whethere, then,
we consider, 1st, the nature of the contract between the original
parties to the note; or, 2d, the operation of the transfer, by
delivery, from Duer to the purchasers of the note, the plaintiff is
entitled to recover.
1st. The original contract was an agreement by Bingham, to give
his own note, payable to Knox, or order, indorsed in blank, by
Knox, to Duer; and such a note is transferable merely by delivery.
Doug. 633. 9. This quality of transfer by delivery, was the essence
of the contract; so that the person holding the note on the day of
payment might be entitled to receive the amount. As long as it
remained in the hands of Duer, it was susceptible of such a
transfer; the right could not be changed, modified, or defeated, by
Bingham himself; and though a creditor of Duer's might attach a
debt due to him, he could not alter the conditions of the contract
on which the debt arose; on the one hand, to release Bingham from
the obligation of those conditions; or, on the other hand, to
injury him for performing them.
But the place of negotiating the contract was New-York, and the
note was actually delivered there. The law of New-York, therefore,
is to be regarded in construing the contract and obligation of the
parties. It is true, that the note is dated at Philadelphia, and is
made payable at the bank of the United States: but Philadelphia
merely designates the place of the drawer's residence; the note is
not payable at his house; and being payable at the bank of the
United States does not necessarily make it payable in Pennsylvania.
1 vol. 284. Swift's edit. Acts of Congress. The note never passed
from the drawer in Pennsylvania; but continued in his hands, in the
nature of an escrow, till it was delivered in New-York. The
delivery there, first gave life to the note. It was, of course,
contemplated (as the event has proved) that the note should be
negotiated where it was delivered; that it should circulate there
till the day of payment; and that on the day of payment it should
be presented at the bank of the United
Page 4 U.S. 47,
50
States. Referring, therefore, to the lex loci as our guide, a
promissory note must be regarded as a foreign bill of exchange,
which can never be affected in the hands of a bon a fide indorsee,
on account of any circumstances, not appearing on the face of the
instrument itself. 2 Dall. Rep. 396. But even considering
Philadelphia as the place of executing the contract, what would be
the effect? It is the place where Bingham is to pay according to
the terms of the contract; that is, to pay to any bon a fide holder
by the indorsement of Knox, and the delivery of Duer; so that it
could not be ascertained to whom he was debtor on the note, till
the day of payment. There is no analogy between the present case,
and the case of M'Cullough v. Huston. 1 Dall. Rep. 453. There the
equity allowed was between the drawer and payee, arising on a note,
which was not like a foreign bill of exchange, but was of a
restricted negotiable character under an act of assembly. Even if
this had been, strictly, a Pennsylvania transaction, Ludlow would
only have taken the note, on the principle of M'Cullough v. Huston,
subject to the equity existing between Bingham, the drawer, and
Knox, the payee. Besides, the Court have repeatedly decided, that
the principle of that case did not apply to accommodation notes. It
is, likewise, to be observed, that by the act of assembly the
drawer is liable for no more than is due upon the note at the time
of the first assignment; and there is no question in the present
case as to the amount, but merely as to whom the amount is
payable.
2d. The operation of Duer's transfer by delivery is conclusive.
It is a great ruling principle, that circumstances existing between
parties to a contract, shall not affect the rights of third
persons. Nothing that passed between Bingham and Duer, which the
face of the instrument does not show; no right which Fish acquired
against Duer, ought to affect Ludlow, without notice express or
implied. A latent bar ought never to impearch the validity of an
apparently good transfer of negotiable interests. 1 Lofts. Gilb.
Evid. 194, 5. On the face of the note, the contract of Bingham has
no relation at all to Duer; it does not appear that Duer was ever
interested in it; and though it may be presumed that the first
purchaser, who took the note by Duer's delivery, was apprised of
the fact, the presumption, will not in any degree, apply to the
plaintiff. The case admits, indeed, that there was no express
notice of the attachment, and there is no ground to argue an
implied notice from the record: for, even if a citizen of New-York,
purchasing a note, or a bill of exchange in New- York, is bound to
respect the laws of Pennsylvania, and to examine the records of all
our Courts, before his purchase, to ascertain whether an attachment
has not issued against every indorser of the note, what was there
that could lead to such an examination, in relation to Duer, who is
not a party to the note, and might be an utter stranger to the
present plaintiff? Again: if notice is to be presumed from the
Page 4 U.S. 47,
51
lis pendens, it applies to a negotiation in London, or
Amsterdam, as well as in New-York; to a bill of exchange, or any
other contract, as well as to a promissory note; and to a
negotiation through a hundred persons merely by delivery, as well
as to such a negotiation by an individual. It is obvious,
therefore, that the credit and facilities of commerce would be
destroyed, should such a doctrine prevail.
The consequences of allowing the attachment as a bar would,
likewise, be peculiarly unjust and injurious to the present holder
of the note, who did not take it on the credit of Duer, and to whom
Duer is in no wise bound. If, indeed, payment to Fish is a good
payment of the note, it is a payment by the drawer; and, of course,
it extinguishes all remedy against the indorsers, whose undertaking
is merely a collateral one, to pay on the drawers default: so that
the plaintiff, the last indorsee, taking the note, perhaps, on the
credit of the indorsers, more than on the credit of the drawer, is
deprived of every security, without any imputable laches on his
part. But a fair holder, for a valuable consideration, of a bill of
exchange, or note payable to bearer, is protected even against the
true owner, who has been robbed, or has lost the instrument. 1
Burr. 452. 3 Burr. 1516. 1524. 1 Bl. Rep. 485. 4 Bac. Abr. 705, 6.
The attachment cannot surely amount to more than a legal
assignment: let it, therefore, be supposed, that Duer had assigned
the note to Fish, with notice to Bingham; still the plaintiff, a
purchaser of a negotiable instrument, for a valuable consideration,
without notice, would be entitled to recover. Or let the stronger
case be supposed, that on such an assignment, the note itself had
been delivered to Fish, but that he had lost it, or had been robbed
of it, that Duer had found, or had stolen it, and afterwards had
sold it, the purchaser would be entitled to receive the money from
Bingham, and not the assignee. The rule is exemplified in the
fullest manner, by considering the note as payable to bearer; for,
unless Duer keeps it till it is due and payable, he is not the
bearer contemplated by the contract; there is no engagement to pay
him at all. Though, therefore, our law permits the attachment of
debts due and payable, it is manifest that unless Duer held the
note till it was actually due, it could not be payable to him, and
if not payable to him, it could not be attached as his debt. If the
instrument of contract had expressly provided, that something being
done by a third person, the debt should become the property of that
third person, when the act was done, Duer's interest must surely
escape, and nothing would remain upon which an attachment against
him could operate. Though not by the words, yet by the nature of
the contract, the same effect is produced: for, a third person
being the bearer on the day of payment, and presenting the note, at
the place of payment, the contract is to pay him; and every
antecedent transmissible interest, of which Duer was possessed, is
effectually extinguished.
Page 4 U.S. 47,
52
For the defendant, E. Tilghman and Lewis** contended that Fish,
having attached, while the note was in Duer's hands, obtained a
legal lien upon the money mentioned in it; although the money was
not then due from the drawer, nor had the note ever been in the
possession of the attacher; and that having pursued his lien,
without laches, he is now entitled to the money. The general
principle of the attachment law, is clearly in favour of Fish; and
his claim must prevail, unless the plaintiff in error shows, that
the note was a species of property not liable to an attachment.
In attempting to maintain this exemption from attachment it has
been urged, that the note is subject to the laws of New-York, where
promissory notes are upon the same footing with bills of exchange;
and, therefore, it was not attachable: but the fact, and the
inference deduced from it, are alike denied. The note was executed
at Philadelphia; it is dated there; it was there indorsed by Henry
Knox; and it is payable at the bank of the United States. It is
true, that the note was delivered to Duer in New-York, agreeably to
Bingham's contract; but Duer well knew that it had been previously
executed in Philadelphia, and by the delivery in Philadalphia,
Knox's indorsement took effect. An express stipulation on the face
of the note, made it payable at the bank of the United States; and
it is an established principle, that a contract for the payment of
money is to be governed by the laws of the place, where it is
payable. Prac. in Chan. 128. 2 Burr. 1083, 4. 1 Bl. Rep. 258, 9. It
is not a sufficient answer, that the bank of the United States is
not permanently fixed at Philadelphia; for, the parties to the
contract, in making it the place of payment, considered it as at
Philadelphia; and there could be no idea of a removal of the bank,
while Philadelphia continued the seat of the federal government;
inasmuch as it is expressly provided, that the officer at the head
of the treasury department shall be furnished with weekly
statements of the affairs of the institution, and should be
entitled to inspect the general accounts in relation to such
statements: 1 vol. 293. sect. 7. art. 16. (Swift's edit). The place
of payment was, evidently, fixed for the drawer's convenience: and
although, if there is a place appointed for payment, a personal
application need not be made to the drawer of a note ( 2 Hen. Bl.
Rep. 509.) yet, stipulating that payment should be made at the bank
of the United States, shows that the law of Pennsylvania was to
furnish the rule, for construing the legal effect of the
contract.
Again, it is urged, that the note was in the nature of an escrow
till it was delivered to Duer at New-York; and that receiving its
life in New- York, it must be governed by the law of the place
of
Page 4 U.S. 47,
53
its existence. But the note is payable in four years from its
date; and, therefore, even considering it in the nature of an
escrow, when the condition was discharged, it took effect, with
relation to its date and execution in Philadelphia. There is
nothing to show, that with regard to this note, more than with
regard to any other note executed and payable in Philadelphia, but
delivered to the indorsee in New-York, it was in the contemplation
of the parties, that New-York should be the scene of negotiation.
It is in vain for counsel to assert, that it could not have been
put in circulation at New-York, with a view to the laws of another
state; for, the date of the note, and the place prescribed for its
payment, are premises from which the legal inference is
insurmountable, that the law of Pennsylvania was contemplated. Let
it be supposed, that on the day of payment Bingham had tendered the
money at the bank of the United States, when no person was ready to
receive it: the tender, if legal, would discharge him from any
claim for future interest; but by what law would the validity of
the tender have been tried? Or suppose, that the note had been
invalid by the law of Pennsylvania, could it have been rendered
valid by reference to the law of New-York?
It has been objected, however, as another ground of opposition
to the lien of the plaintiff in the attachment, that even an
attachment cannot prevail against the bon a fide holder of the
note, for a valuable consideration, and without notice: while it
remained in the hands of Duer, the adverse counsel admit, that it
was subject to an attachment; but they contend, that the defendant
in the attachment might defeat the lien, whenever he pleased, by
the mere delivery of the note. It will hereafter be shown, however,
that the concession and the argument cannot be reconciled. But the
corner-stone of the defence is, that notes of this description are
to be governed only by what appears on the face of the paper; and
this, undoubtedly, is the law in England (whence the authorities
have been adduced) except as to attachments. In Pennsylvania,
however, the face of the paper is not the criterion, on which a bon
a fide purchaser is to judge. The distinction arises on this
ground, hat in England the holder of a promissory note is not
considered as an assignee, but in Pennsylvania he is so considered;
Doug. 614. and although an indorsee in England is discharged from
all equitable circumstances existing between the original parties,
which do not appear on the instrument itself, an assignee of a
note, in Pennsylvania, is bound to resort to the drawer, to know
whether there is any defence equitable or legal. Showing, then,
that the face of the note is not the criterion, we destroy the very
foundation of the plaintiff's claim. That the indorsee takes the
note subject to all the equity between the drawer and indorser has
been expressly adjudged. 1 Dall. Rep. 442, 3, 4. The negotiability
of the note is qualified, not absolute. The first indorsee, indeed,
is as innocent, as any subsequent one;
Page 4 U.S. 47,
54
and if the equity of the drawer's defence against the indorser
is to affect the first indorsee, there can be no just reason why it
should not equally affect the second: the face of the note is the
same in the one case, as in the other; the second indorsee can
recover no more from the drawer than the first; and it may as
fairly be contended that a payee could defeat an attachment by
indorsement, as an indorsee by delivery.
It is asked, whether it is reasonable to expect that the
purchaser of the note in market, should inquire after attachments,
or liens against Duer, whose name does not appear on the note? And
yet the plaintiff himself relies on the supposed terms, on which
the note was delivered to Duer in New-York. But the fact is, that
the note came to Duer for a valuable consideration, as a common
note, not merely as an accommodation note; and our argument is,
that the face of the note affording no criterion to protect the
holder from a set-off, or attachment, against Duer, it was
incumbent on the person purchasing it, to apply to the drawer for
information, not, particularly, as to the right of Duer, but,
generally, as to the validity of the note.
The adverse counsel urge, that if payment by Bingham to Fish
will be good, then the note will be extinguished, and the holder
can have no remedy against any of the indorsers. But might not each
indorser recover from the person with whom he dealt, in an action
for money had and received? At all events, each party to the note
runs his risque; it is nothing more than the risque run in the case
of notes given in England, upon usurious and gaming contracts; nor
is it harder than the operation of the principle in M'Cullough v.
Huston, which would have produced the same decision, had there been
twenty indorsers on the note then in controversy.
That Fish's right could not be stronger, as plaintiff in an
attachment, than as the assignee of Duer, is a position not true to
every intent. For instance; Fish might attach the debt before it
was due. Again; in the case of an assignment he would be guilty of
laches, and ought to answer, for not taking possession of the note,
or for suffering it to be lost, or stolen; but from the very nature
of the attachment, a hostile process against Duer, Fish could not
obtain the possession of the note, and the law will aid and supply
the want of it. Nor is it correct to say, that Bingham was a debtor
to no man till the day of payment; and then only to the bearer of
the note; for, the obligation of the drawer was coeval with the
execution of the note, which was debitum in praesenti, solvendum in
futuro; and a debt of that description is clearly attachable. 2
Dall. Rep. 211. Though the drawer is guilty of some negligence in
making a payment, without indorsing it on his note; yet, even in
his case, it has been shown, the payment will be allowed in
Pennsylvania against a bon a fide holder, without notice: and,
surely, the case against
Page 4 U.S. 47,
55
the garnishee is much stronger, the plaintiff in the attachment
being in the prosecution of a legal right, and founding his demand
against the garnishee upon the positive provisions of the act of
assembly, which, though it is in some respects analogous, in others
extends further than the custom of London. The words of the
original act speak only, it is true, of goods, chattels and
effects; but they were always construed to include debts, and even
lands; and the supplement expressly extends to the goods, chattels,
monies, effects, and credits of the defendant: 2 vol. 733. Dall.
edit. The attachment, ipso facto, secures the effects attached, to
abide the judgment of the Court: 1 vol. Penn. Laws, p. 60. Dall.
edit. The words of the domestic attachment law (a law made in pari
materia, and, therefore, to be regarded on the present question of
construction) expressly recognise 'lands, goods, chattels, and
effects,' as objects of attachment; and among the powers vested in
the auditors under such an attachment, they are authorised 'to
grant and assign, or otherwise to order or dispose of, all or any
of the debts due, or to be due, to and for the benefit of the said
defendants [in the attachments] to the use of their creditors. And,
that the same grant, assignment, or disposition, of the said debts
so to be made, shall vest the property, right, and interest,
thereof, in the person or persons, to whom it shall be so granted,
assigned, or ordered, by the auditors; so that such assignees may
sue for and recover the said debts in their own names, and detain
the same to their own use. And that after such grant, assignment,
or disposition, made of the said debts, neither the defendants, nor
any other to whom such debts shall be due, shall have power to
recover the same, nor to make any release or discharge thereof.'
Ibid. s. 2. 7. p. 194, 5, 6, 7. The domestic attachment has,
indeed, the effect of a bankruptcy; but if the plaintiff's doctrine
is true, a bankrupt's agent may effectually, by mere delivery, pass
away notes indorsed in blank.
In Carthew 26, it is said, that bills of exchange are
attachable, according to the custom of London; and the adverse
counsel admits, that the note was attachable, while it remained in
the hands of Duer. But if so, how can the attachment be dissolved,
without appearing to it, on the terms of the law? There is no
laches on the part of the plaintiff; and if the note could be
attached at all, it must be effectually attached. It is idle to
allege, that the success of the attachment must depend on the
note's remaining with the defendant, till the attachment had run
its course. Suppose a judgment had been obtained against the
garnishee before the note was due, with a stay of execution till it
became due, could this lien be defeated by a subsequent sale and
delivery of the note? Suppose a suit instituted by the indorsee of
a note against the drawer, and the note afterwards lost, or stolen;
would the claim of a bona fide purchaser, in such cases, supersede
the suit, or prevail against the plaintiff in it, after he had
Page 4 U.S. 47,
56
obtained a judgment? Suppose a bill of exchange protested for
non- acceptance, a suit and judgment upon it, and afterwards, but
before the day of payment, it was lost; a bill may be negotiated
after such a protest ( 2 Dall. Rep. 396.) and, yet, would a
purchaser be preferred to the plaintiff in the suit, or could he
recover a second time from the drawer? The attachment ought, in
short, to be regarded in the nature of a suit brought by Duer
himself. The hardship of the case is not so great, or so
unprecedented, as to require an extraordinary interposition of the
Court, to change, or modify, on equitable principles, the operation
of a positive law. In England, notes, and other securities, given
upon usurious, or gaming, considerations, are void in the hands of
a bon a fide holder, for a valuable consideration, without notice,
even as against the drawer, who was accessary to the injury and
embarrassment by issuing the note. In those instances, as well as
in the present instance, no warning appears on the face of the
paper; and the bar is, emphatically, a latent bar, no record
existing by which it could be traced, or ascertained. Is it not as
reasonable, as just, that the attachment should operate in favour
of a bon a fide creditor of Duer, who had no power to obtain
possession of the note; as that the original taint in the
consideration, of a gaming, or an usurious, contract, should
operate in favour of a party to the illegal transaction? Upon the
whole, Fish has attached when the property and the possession of
the note, were both in Duer; and his opponents must convince the
Court, that an attachment, once operative, can be legally done
away, without some laches, or relinquishment, on his part.
Ingersoll, for the plaintiff in error, in reply. The question under
consideration is novel, curious, and, in its consequences, most
extensive: it is not too much to say, that the negotiable paper of
Philadelphia, depends, for its circulation abroad, upon the event
of the cause. The subject may be considered, with a view to support
two positions: 1st. That the note, under the circumstances of the
case, was negotiable, the property of which, after the indorsement
in blank, passed by delivery as a bill of exchange payable to
bearer. 2d. That negotiable paper of this description, is not
within the spirit, intent, and meaning, of the attachment law of
Pennsylvania; especially when put into circulation and negotiated
out of the state. 1st. The note passed by delivery as a bill of
exchange, payable to bearer. Under this general proposition, we
derive the title of the plaintiff immediately from Henry Knox, not
through William Duer: but against the proposition several
objections have been urged. It is said, that in Pennsylvania
promissory notes are not within the law merchant; that they are
regulated by the common law principle, in pursuance of which every
assignee takes the instrument
Page 4 U.S. 47,
57
subject to every equitable consideration that affected the
assignor; that the act of assembly places notes on a footing with
bonds, enabling the indorsee to recover only what shall appear to
have been due at the time of assignment; and that these doctrines
have been exemplified and enforced by legal decisions. But the
answers to these suggestions, will satisfactorily show, either that
they are not founded in fact, or that they are inapplicable on the
present occasion.
Promissory notes in Pennsylvania are govered by the statute of
Anne, as far as respects the payee's remedy against the drawer, in
an action upon the notes themselves; and, therefore, they are
within the law merchant. The act of assembly, when it provides a
further remedy for the indorsee, implies and recognises the law to
be so. At common law, a promissory note could not be declared on;
all the declarations on record upon promissory notes, state the
liability as arising under the statute of Anne; and the distinction
in this particular has been repeatedly recognised by our Courts.
The statute of 9 & 10 W. 3. c. 17. placed inland bills of
exchange upon a footing with foreign bills; and the statute of 3
& 4 Anne, c. 9. placed promissory notes upon a footing with
inland bills: after an indorsement, therefore, promissory notes are
to be regarded as foreign bills of exchange. It is true, that our
act of assembly limits the drawer's responsibility to an indorsee,
by the measure of his responsibility to the payee; but nothing can
be more extravagant, or unjust, than the deductions which have been
attempted, at different times, from that provision, as recognised
in M'Cullugh v. Huston. 1 Dall. Rep. 444. It was once, indeed,
introduced as an authority to release the friendly indorser of an
accommodation note, from all obligation to pay the indorsee: but
the Court declared, that the determination only applied to the case
of a drawer's being cheated by the payee (when, as in the instances
of gambling and usurious notes in England) he should not be made
liable to the indorsee. What analogy, however, can be suggested
between M'Cullough v. Huston, and the present case? The defendant
is not called on to answer the holder of the note further than if
the payee was plaintiff; there is no idea that the defendant has
been defrauded; the consideration for which the note was given has
not failed; the defendant has made no payment; he owes the full
nominal amount of the note; and, in short, he is a mere
stake-holder. In the cases that have been hitherto decided, the
dramatis personae were the drawer, the payee, or indorser, and the
indorsee: here a new corps of actors appears, the creditors of an
intervening holder of the note, as plaintiffs in the attachment. In
those cases, there was fraud; in the present case, the contest is
between an innocent holder of the note, and a claimant by legal
process. In those cases, if the remedy failed against the drawer,
it might be pursued against the indorser; in the present case, the
debtor in the attachment is not an indorser, the person
Page 4 U.S. 47,
58
who sold to the plaintiff is not an indorser; and, as far as
appears by the state of the case, we are without remedy, unless
this action succeeds.
The nature of the promissory note in question remains, then, to
be ascertained on abstract principles, public policy, general
convenience, the reason of the case, and the design of the
attachment law. On the face of it, the note appears calculated for
general circulation, unaffected by local circumstances: it is
payable at the bank of the United States; and that institution was
not stationary, for its commencement of business only was fixed at
Philadelphia. A demand at the bank of the United States, wherever
its business was transacted, when the note became due, was the only
condition that remained to be performed. 2 H. Bl. 509. The note
took effect and became operative by the delivery only, which was in
New-York: M'Kimm v. Elton.*** And there promissory notes are on
footing with bills of exchange. It was the intent and meaning of
the parties that the note should circulate there, and be governed
by the law of that state. Conventio vincit legem. Reed v.
Ingradham. Post. The act of assembly, indeed, cannot refer to notes
delivered and put in circulation out of Pennsylvania; and surely,
the objection arising under our local law, ought not to proceed
from the plaintiff in the attachment, a citizen of New-York, a
party to, and bound by, the laws of that state. The note was
originally in the form of a bank post note; and after the
indorsement in blank, it assumed the character of a common bank
note. It has, likewise, all the distinguishing characteristics of a
bill of exchange: it is entitled to three days grace; the indorser
is answerable to the indorsee, without express covenant, though the
note be forged; and immediate notice must be given to the indorser,
if the note is dishonoured.
2d. But negotiable paper of this description, is not within the
spirit, intent, and meaning of the attachment law of Pennsylvania.
The opposite doctrine would render our act of assembly a perfect
snare; and inevitably prevent the extra-territorial negotiation of
any note, or bill of exchange, on which any citizen of Pennsylvania
was drawer or acceptor. For, if Duer had purchased the note one
hour, and sold it the next after the attachment was laid, the rule
contended for would equally apply. Such is the absurd and monstrous
inconvenience to which this pretension leads, that neither
Page 4 U.S. 47,
59
the person who sells, nor the person who buys, can know the
injustice that they are concurring to practise: the one has sold
what he had no right to part with, and the other has paid a
valuable consideration for nothing; and, yet, the former shall be
innocent, and no negligence can be imputed to the latter! The lis
pendens has no extra-territorial operation, and cannot be regarded
as implied notice to citizens of other countries.
But the attachment cannot, surely, give a better right to Fish
to claim payment from the drawer, than a sale for value, with
notice to the drawer, though without delivery of the note; or (in
the cases already put) a sale and payment, with delivery of the
note, which is afterwards, however, lost or stolen, and negotiated
bon a fide. By the act of assembly debts may be attached, and so
may money: but suppose a sum of money had been specifically
attached, and the garnishee had afterwards paid it away, could the
money have been followed into the hands of a bon a fide receiver?
If goods, indeed, are attached, and afterwards lost, or stolen,
they may be pursued, and if found again, will still be liable to
the attachment: but not so, in the case of money; a distinction
which exemplifies and establishes the rule on our part. For, notes
payable to bearer are regarded as money; and the reason applying
equally to both objects, the law must be the same. Nor can an
attachment alter the nature and conditions of a contract; as, in
the present instance, the negotiable nature of the instrument, and
the condition that it shall pass by delivery. It is the same thing,
whether the condition is expressed by the parties, or implied by
law. An attachment of real estate would not prevent a springing
use, or a resulting trust; the estate, might, therefore, change its
owner pending the attachment. And why not the property of a note,
liable, by the nature of the contract to this contingency, that it
shall cease to represent a debt owing to Duer, and become a debt
owing to Ludlow, if Ludlow is the bearer on the day of payment?
Debts, in general, are not liable to such contingencies and
conditions; they are not negotiable;, and, therefore, (though it is
only by implication our law is extended to them) they may with
certainty be subjects of attachments. But even stock- contracts, or
bonds, payable to a man, or his assigns, cannot be affected by an
attachment made in another state.
Does it, then, require a greater latitude of construction, than
is authorised by precedent, to exempt negotiable paper, circulating
abroad, from the meaning and operation of the attachment law? It is
not to controul our Act of assembly by the law of New-York, but to
give to our Act a reasonable interpretation. While paper credit
remains in use, it should be regulated by plain and uniform rules;
1 Dall. Rep. 270. and that the bon a fide purchaser should only be
affected by what appears on the face of the instrument, is the
characteristic of negotiable paper. 1 Loft's Gill.
Page 4 U.S. 47,
60
195. 2 Dall. Rep. 396. The departure from the strict terms of a
law, in a variety of other instances, will authorise a much greater
latitude of construction than the present case requires. The cases
of the sick sailor, who remained in a foundering ship, of the
surgeon who bled a man in the street, and of ecclesiastical leases,
in England; 1 Bl. Com. 60. as well as the case of unrecorded
mortgages here, 1 Dall. Rep. 434. are strong examples. But
construction on one side or the other forces itself upon the Court.
An indorser is guarantee for the payment of the note to the holder,
if it is not paid by the drawer; a payment to one not the holder,
is not an exception known to the law merchant; and can a municipal
regulation alter the general law, operating on a negotiation out of
the state? A statutory assignment by bankruptcy (which is an
assignment of rights of action, and stronger than an attachment)
will not enable the assignees to claim from the drawer against a
bon a fide holder. A judgment in an attachment is not conclusive
evidence of a debt out of the state, in which it is rendered: 1
Dall. Rep. 261. and the death of the defendant, after interlocutory
judgment, destroys the attachment, because there is not any party
in Court; because executors, or administrators are not liable to
enter special bail; and because no foreign attachment can issue
against executors or administrators. 1 Dall. Rep. 248.1.
The attachment law of Pennsylvania is a copy, in some measure,
from the original mode established as the custom of London; and
that the currency of bills and notes in London (which even pass
under a bequest of money in a will. 1 Burr. 358. 3 Burr. 1516.
1524, 5. 1530. 1 Bl. Rep. 485. 4 Bac. Abr. 705, 6. 2 Burr. 675.
1225.) should be impaired and endangered in this way, is so
improbable, that the most authoritative precedents are necessary to
induce belief. A precedent is, however, cited, but of so light a
texture, that it will hardly bear examination: it is cited, too,
against a bon a fide holder, who never knew of Duer's interest, or
possession of the note; who may fill up the blank indorsement as he
pleases; 1 Bl. Rep. 296. who may deduce his title immediately from
Knox; 2 Burr. 1225. 1216. and who, in that way, can never be
injured by any thing which Duer has done. The solitary precedent is
cited from Carthew 26. where it is said, that a bill of exchange is
liable to attachment. But this was not the point of the cause, and
ought, therefore, to be disregarded; 1 Burr. 526. 3 Burr. 1730. the
only point turning on the question, whether a prohibition ought to
issue. The debt due, and the debt attached, were both upon bonds,
not on a bill of exchange. Holt. 179. The incidental observations
relied
Page 4 U.S. 47,
61
on, did not proceed from the Court, or any member of it; and the
same case is reported in three other books, of superior character,
without a word of a bill of exchange, even by way of allusion, from
the Court, the counsel, or the reporters. Holt. 179. 1 Show. 9.
Comb. 109. But even this precedent might be explained, consistently
with our doctrine, by supposing it meant, that a bill of exchange
might be attached after it was due; for, if negotiated after it is
due, it can only be in a limited degree, liable to all exceptions
as paper not negotiable. 2 Dall. Rep. 396.
After consideration the unanimous opinion of the COURT was
delivered, by the Chief Justice, who, having stated the case,
proceeded as follows:
M'KEAN, Chief Justice.
The first inquiry, which it is necessary to pursue, is, where
was the note in controversy made, in Pennsylvania, or in New-York?
For, whether the act of assembly, relating to promissory notes, is
to be introduced, or excluded, in forming our judgment, depends
upon the answer, that shall be given to this preliminary
question.
It appears, then, that, although the note was signed in
Philadelphia, it was not delivered in Pennsylvania; but that the
delivery was made by the order, or direction, of Henry Knox, the
payee, to William Duer in the city of New-York, in pursuance of a
contract, and for a valuable consideration. It is certain, that the
bare signing of a note will not give it efficacy. It may be signed
with a view to deliver it to the payee, on his complying with some
previous stipulation; so that in case of a refusal, it would become
useless, and might be cancelled by the drawer. A note is not,
therefore, obligatory and valid, until it has been actually
delivered to the party, for whose use it is drawn; and as it
receives its life, existence, and negotiable character, at the
place where it is so delivered, the law of that place must regulate
all its subsequent operations. Hence, we consider the present note,
as having taken effect in New-York, as being liable to the lex loci
of that state (whether depending on positive statutes, or the
adoption of the general commercial law) and as exempt from the
provisions of our act of assembly, by which an indorsee is liable
to all the equity, that the drawer could enforce against the
payee.
The note having been thus paid, or delivered, in New-York, was
deemed by the law of that state to be as negotiable as a foreign
bill of exchange; and it is the nature of a bill of exchange, when
indorsed in blank, to pass from hand to hand, by mere delivery,
like bank notes payable to bearer. It is true, that the
negotiability of the bill may be restrained by the qualified terms
of an indorsement; but there must be express words to produce such
an effect. In the present case, there was no restraint upon
Page 4 U.S. 47,
62
the negotiability of the note; and in a due and fair course of
circulation, it was delivered to Duer, he sold it to a bon a fide
purchaser, that purchaser sold it to others, till, at last, it
became the property of the plaintiff. While, however, it was in the
hands of Duer, an attachment issued at the suit of his creditors,
and the drawer of the note was summoned as garnishee.
And here the second great question arises, whether, under these
circumstances, the money due at that time, but not payable till
long after, on a negotiable note, could be attached as the property
of Duer, so as to defeat a subsequent purchaser, bon a fide, and
for a valuable consideration? In England, I believe, there would be
no hesitation in deciding, that it could not. On the paper credit
of that nation, much of its power and prosperity, (if not its very
existence) will be found to depend; and, therefore, every thing
that can impede, or injure, the circulation of bills of exchange,
promissory notes, and bank notes, is anxiously guarded against. The
situation of this country, however, is not the same; so that the
legislature of Pennsylvania has not found it necessary to hold in
equal respect the negotiability of promissory notes. When the act
of assembly was passed, promissory notes were little used; they
were given for small debts; and they seldom passed out of the hands
of the payee before payment. The object of the act was, simply, to
enable the indorsee to sue the drawer in his own name; but in
giving this benefit, it was expressly provided, that he should
recover no more, than was due at the time of the indorsement. This,
therefore, lets in the equitable claims of the drawer against the
payee, when he is sued by the indorsee; and even in England, there
is no doubt, the consideration of a note may be inquired into, in
an action between the payee and the drawer.
The present case, however, arises from a commercial transaction
in the city of New-York, where the note was regarded in the light
of a foreign bill of exchange. There is no judgment, or
authoritative dictum, to be found in any book, that money due upon
such a negotiable instrument, can be attached before it is payable;
and in point of reason, policy, and usage, as well as upon
principles of convenience and equity, we think it would be
dangerous and wrong to introduce and establish a precedent of the
kind. To adjudge that a note, which passes from hand to hand as
cash; on which the holder may institute a suit in his own name;
which has all the properties of a bank note payable to bearer;
which would be embraced by a bequest of money; and which is
actually in circulation in another state; should be affected in
this way, by a foreign attachment, would be, in effect, to
overthrow an essential part of the commercial system, and to
annihilate the negotiable quality of all such instruments.
It has been said, that the purchaser of the note (toties
quoties) was bound to inquire into its validity, by applying to the
drawer before he bought it. But I cannot perceive the propriety,
nor, indeed,
Page 4 U.S. 47,
63
the utility, of imposing such a duty in this, or any similar,
case. The distance between the place of the drawer's residence, and
the place of the note's circulation; and the frequency of the
transfers of negotiable notes, payable at long dates; would render
such a course highly inconvenient, if not impracticable; while the
information to be derived from it, could only assure the purchaser,
that an attachment had not issued at the very moment of his
application; but could not protect him from an attachment which
might issue in less than an hour afterwards, and sooner than his
purchase could be accomplished.
Upon the whole, we are, unanimously, of opinion, that the
attachment cannot be sustained; and that the bearer of the note on
the day of payment, is entitled to recover the money from the
drawer. The judgment for the defendant must, therefore, be
reversed; and judgment entered for the plaintiff.
SMITH, Justice.
The opinion of the Court is certainly unanimous on the points
that have been stated; but I wish it to be remarked, that my
concurrence rests entirely on the particular circumstances of this
case. The delivery in New- York, which gave effect to the note, and
introduced the law of that state as our guide, is, exclusively, the
ground of my assent.
ADDISON, Justice.
To me, it would have made no difference, had the delivery and
circulation of the note been entirely in Pennsylvania. It is
expressed in commercial form, and was negotiable upon commercial
principles. On general grounds, therefore, as well as for the
particular reasons that have been assigned, I think the judgment of
the Court is right: and I should be surprised to find any doubt
upon the subject in a great commercial city like Philadelphia.
SHIPPEN, Justice.
It is evident, that on the abstract question, the Court do not
agree; nor is it necessary that they should, as we are unanimous in
the judgment pronounced, upon the grounds peculiar to this case.
If, however, I were called upon to give an opinion, I should
incline to the one expressed by Judge Addison.
The judgment below reversed; and judgment to be entered for
Daniel Ludlow, the plaintiff in error. [
Footnote 2]
Footnotes
[
Footnote *] The question involved
in this cause had been argued in the Supreme Court; but before any
opinion was given by the Judges, and in order to avoid delay, a
judgment was entered, by consent, for the defendant, on which the
present writ of error was brought, with an agreement, that the
decision of the High Court of Errors and Appeals, should, also, be
binding in the cases of M'Evers v. Bingham, Service v. Bingham, and
M'Crea v. Bingham, all depending in the Supreme Court on the same
facts. The present report comprises the arguments in both
Courts.
[
Footnote *] * Tilghman having
embraced in his argument on the present occasion, all that had been
suggested by Lewis in the Supreme Court, the latter declined
entering again into the discussion on the writ of error.
[
Footnote *] ** M'Kimm v. Elton.
This case was decided in the Supreme Court some years ago. The
defendant proposing to give a preference to the plaintiff, in an
arrangement with his creditors, drew a note in the plaintiff's
favour, and signed it; but, doubting afterwards the propriety of
the measure, he put the note into his own desk. The plaintiff heard
of this circumstance and applied to the defendant's wife, in the
defendant's absence, for the note; who having a key of the desk,
unlocked it, and delivered the note to the plaintiff. It was
adjudged, that the mere signing of the note, without a delivery by
the drawer to the payee, gave it no effect; and that the plaintiff
could not take advantage of a possession, surreptitiously
obtained.
Footnote 1 The defendant
died after final judgment, but before the money actually paid by
the garnishee: query, the effect of his death, since the attachment
might be dissolved by entering special bail at any time before such
payment? This point was stated, but not relied on, by the
plaintiff's counsel.
Footnote 2 A question arose,
whether this Court should enter the judgment for the plaintiff in
error, or merely remit the record to the Supreme Court, that the
judgment might be entered there? In the present case, a decision
was immaterial, as Mr. Bingham, being a mere stake-holder, was
ready, at once, to pay the money, on the opinion which had been
delivered; but as a precedent it was thought important, and the
Court kept the point under advisement till the next adjourned
session.