This Court has decided that a suit could be maintained in equity
by the holier of an endorsed note, against a remote endorser, and
upon grounds perfectly familiar to courts exercising equity
jurisdiction.
It has been decided in Kentucky that a suit at law could not be
maintained in that state by the endorsee against a remote endorser.
The conclusion then results from our own decisions that he must be
let into equity, for an endorsement is certainly no release to the
previous endorsers, and the ultimate assignee alone is entitled to
the benefit of their liability. And this we understand to be
consistent with the received opinions and practice in Kentucky.
The law in Kentucky is settled, as it is in Virginia and in this
Court, that upon Virginia contracts by endorsement of promissory
notes, very reasonable effort must be made to recover of the drawer
by suit, before the assignee can have recourse against the assignor
or endorser.
It is upon the question what constitutes such diligence that all
the difficulties arise in suits upon these contracts. And certainly
this Court cannot be called upon to carry the obligations imposed
upon assignees on this point further than the state courts have
already extended them.
What will be considered a sufficient compliance with the
requisitions of the laws of Kentucky imposing diligence in the
prosecution of a suit against the drawer of a note by the endorsee
in order to charge a prior endorser.
The discharge of an insolvent under the statutes is the most
satisfactory evidence of insolvency. After such discharge, it is
not required that process of execution shall be issued against the
party in order to conform to the injunction of diligence.
The 2d, 3d, and 4th sections of the Act of January 6, 1806,
entitled "An act for the relief of persons imprisoned for debts,"
make provision for the discharge of persons confined under
execution, and the 5th section extends "the privileges and relief"
of that act to persons in confinement, against whom judgment is
obtained but no execution issued. Under the provisions in favor of
persons charged in execution, on the day of arrest, a notice may be
served upon the person at whose suit they are confined, and at the
end of thirty days, they may be discharged. By the 5th section it
is enacted
"That any person imprisoned upon process issuing from any court
of the United States, except at the suit of the United States in
any civil action against whom judgment has been or shall be
recovered shall be entitled to the privileges and relief provided
by this act after the expiration of thirty days from the time such
judgment has been or shall be recovered, though the creditor should
not within that time sue out his execution and charge the debtor
therewith."
It has been argued that under this section the defendant must
remain in prison thirty days after judgment before he can sue out
his notice to the plaintiff, thus requiring him to remain sixty
days in confinement in the cases which come under this section,
whereas he remains but thirty days when confined under
execution.
There can be no reason for this distinction, and in favor of
liberty, and with a
Page 27 U. S. 332
view to consistency, the construction should be otherwise. If
such were the true construction, the relief would not be the same
as is extended to debtors of the other class. The day of entering
judgment under the 5th section is the day that corresponds to the
day of arrest, under the previous provisions of the law, and
therefore in thirty days after the judgment, the defendant maybe
discharged, complying with the other requisitions of the law.
Where the agent of the plaintiff agreed in writing to dispense
with the imprisonment required by law, to entitle the defendant to
be discharged under the insolvent law of the United States, and the
defendant who was in confinement was discharged without having been
imprisoned thirty days, this was not such a proceeding as would bar
the assignee of the note to recover against a subsequent assignor.
The object of the imprisonment is to give the plaintiff an
opportunity to ascertain the situation of the defendant, and if he
does not require this, it may be waived without prejudice to his
claims on others.
A discharge under the insolvent laws of the United States is
confined in its effects altogether to the particular cause, and
even as to that does not exempt the debtor's present effects or
future acquisitions from the process of the law. Nor is his person
exempt from confinement for the same debt should he be detected in
a fraud upon the creditor.
The complainants' bill, filed in the Circuit Court of Kentucky,
on 22 November, 1822, stated that on 25 July, 1821, Peter G.
Voorhees made his promissory note for $2,560, payable sixty days
after date, to Daniel Weisiger; that Weisiger assigned to John H.
Hanna, and Hanna to the complainants, who discounted the note. That
they duly instituted a suit against Voorhees on the common law side
of the court, recovered judgment, and prosecuted him to insolvency.
It prayed that the defendant may be decreed to pay the amount, with
interest and costs.
Annexed to the bill is a copy of the record of the proceedings
against Voorhees, from which it appears that the declaration was
filed on 2 October, 1821, and on the same day a writ of
capias
ad respondendum was issued, with this memorandum: "This is an
action of debt; bail required." The marshal made return to the
writ, as follows -- "Executed 6 October, 1821, and committed
defendant to jail of Franklin County; receipt hereon." The jailor's
receipt bears date 5 November, 1821.
At November term, 1821, judgment was entered for the plaintiffs
by default, for $2,560, with interest from 26 February (September),
1821, and costs. Afterwards, on
Page 27 U. S. 333
14 December, 1821, the jailor of Franklin County surrendered the
body of Voorhees into court.
On 29 December, 1821 a
fieri facias issued, which was
placed in the hands of the marshal on 19 January, and the marshal
returned "No estate found."
On 11 April, 1822, a writ of
capias ad satisfaciendum
issued, to which the marshal returned "Not found."
To this bill the defendant Weisiger moved the court for leave to
file a demurrer, alleging for cause, that the bill did not aver the
prosecution of any suit against Hanna, the immediate assignee of
the complainant, and that Hanna was not made a party defendant;
that the bill contained no case of equitable jurisdiction, nor for
a decree against Weisiger, and was altogether void of equity.
Afterwards, in the same term, the defendant Hanna appeared and
waived all objection to a decree on account of the want of service
of process upon him, and Weisiger waived the demurrer so far as
respected the want of proper parties.
And at the following term, the court overruled the demurrer.
At May term, 1826, the defendants failing to answer according to
rule, the bill was taken for confessed, and the cause came on for
hearing on the bill and exhibits, whereupon the court decreed that
the complainants should recover from the defendant Weisiger the sum
of $3,278.17 and costs unless, &c., which decree was afterwards
set aside on Weisiger's motion, and leave given him to file an
answer.
The answer of Weisiger, protesting against the jurisdiction of
the court, relies and insists, by way of plea in bar to the relief
claimed, that the matters contained in the bill, if true, do not
constitute a case for the interposition of a court of equity, but
are cognizable at law and relies upon the 16th section of the
Judiciary Act of 1789. It admits that he may have put his name on
the note, but denies that he ever received any consideration for
the same, or that it was ever passed or negotiated by him or for
his use or benefit. He answers further that he did not of his own
knowledge know
Page 27 U. S. 334
of the discount of the note, although he was informed that such
discount had been made, and for a long time believed that it had
been fully satisfied by Voorhees; that he is advised that the
proper measures were not adopted in due season to enforce the
payment; and that the proceedings had were not such as to authorize
a recovery against him, inasmuch as the return of the marshal shows
that Voorhees was committed to jail, and it does not appear that he
had ever been discharged or escaped, and there does not appear to
have been any order to charge him in execution; nor is there any
return that he had no property or estate on which the
fieri
facias might have been levied. He does not admit that Voorhees
was insolvent at the time the judgment was obtained against him,
but believes he then had estate within the district sufficient to
satisfy the same in whole or in part.
The complainants' amended bill states, that before the rendition
of the judgment against Voorhees; he was brought before the
district judge, took the oath required by the act of Congress, and
was discharged as an insolvent from the custody of the jailor.
Shortly after, and before the return of the
fieri facias,
he left the state, and has ever since remained out of it, leaving
no estate upon which the amount could be levied, or any part of it;
all of which is averred to be personally known to Weisiger, as is
also the fact that he endorsed the note for the accommodation of
Voorhees, and to give him credit, and with the view and expectation
that it would be discounted by the bank.
The exhibit referred to in the amended bill states the
proceedings to discharge Voorhees from imprisonment, in three suits
of the bank of the United States, entitled as follows:
The president, directors, and company of the Bank of the
United States, plaintiffs v. Peter G. Voorhees, defendant.
The Same v. The Same.
The Same v. George M. Bibb, Charles S. Todd, and Peter G.
Voorhees.
The judge's order to discharge, dated 14 December, 1821, states
that Voorhees was imprisoned in the jail of Franklin County by
process in these suits; that judgment
Page 27 U. S. 335
had been rendered in the suits, and he had petitioned to have
the oath administered to him; that a citation had been served upon
Henry Clay, Esq. agent, &c., that they appeared, and no good
cause being shown, the oath was administered, and he was
discharged.
The citation bears date 14 December, 1821, and requires
appearance on 7 January following. And then there is a paper of
which the following is a copy:
"I agree, on behalf of the Bank of the United States, to waive
the previous imprisonment by law to entitle the defendant to take
the oath of an insolvent debtor, and that the said oath may be now
administered, with the same effect as if that imprisonment had
taken place. 14 December, 1821."
"[Signed] H. CLAY"
"
Counsel of the B.U.S."
Upon the bills, answer, and exhibits above set forth, the court,
at May term, 1827, decreed the complainants' bill to be dismissed
with costs.
Page 27 U. S. 347
MR. JUSTICE JOHNSON delivered the opinion of the Court.
This case turns altogether upon doctrines peculiar to the states
of Virginia and Kentucky. It is the case of a suit in equity,
instituted by the endorsee, or, in the language of the country, the
assignee, of a promissory note, to charge an intermediate endorser.
All the doctrine on the subject will be found fully stated in the
two cases of
Riddle & Co. v. Mandeville &
Jameison, reported among the decisions of this Court, and in
the cases of
Smallwood v. Woods and
Spratt v.
McKinney, to be found among the decisions of the Court of
Appeals of Kentucky.
The defendant here has demurred to the bill, for want of equity,
and this raises the first question in the cause.
In the last case decided in this Court,
Riddle & Co. v.
Mandeville & Jameison, which was a case in most respects
similar to the present, this Court decided that a suit could be
maintained
in equity by the holder of an endorsed note
against a remote endorser, and upon grounds perfectly familiar to
courts exercising equity jurisdiction. It was a Virginia contract,
governed by the same law which is of force in Kentucky. This Court
had before decided that by the laws of the country governing the
contract, a suit at law could not be maintained between the holder
of the note and a remote endorser. But then a suit at law could
have been maintained by him against the immediate endorser and by
him against the preceding endorser and so on through any number of
endorsers. This presented the ordinary case of an assignment of a
chose in action, which transfers an interest without the right of
action.
To maintain this demurrer, then, it was incumbent on the
defendant to have shown that there was some principle in the
jurisprudence of Kentucky that could sustain a
Page 27 U. S. 348
distinction between his case and that previously decided here;
but everything concurs to repel the idea of such a distinction. In
the case of
Drake v. Johnson, the Court of Appeals of
Kentucky also decided, that a suit at law could not be maintained
in that state by the endorsee against a remote endorser.
The conclusion then results from our own decisions that he must
be let into equity, for an endorsement is certainly no release to
the previous endorsers, and the ultimate assignee alone is entitled
to the benefit of their liability. And this we understand to be
consistent with the received opinions and practice of Kentucky.
The second point made for the defendant is that as he received
no consideration for assigning the note, he is not liable at
all.
But on this it is only necessary to observe that he endorsed it
to give credit to Voorhees, the promisor, and the law therefore
imputes to him the consideration paid to Voorhees.
The most material point in the cause, and that on which the
decision below was rendered in favor of the defendant, was the want
of due diligence against the drawer of the note. The law is settled
there, as it is in Virginia and in this Court, upon Virginia
contracts of this description; that every reasonable effort must be
made to recover of the drawer by suit before the assignee can have
recourse against the assignor or endorser. It is on the question
what constitutes such diligence that all the difficulties arise on
suits upon these contracts. And certainly this Court cannot be
called upon to carry the obligations imposed upon assignees on this
point, further than the state courts have already extended
them.
There are three grounds on which the defendant would impute to
the complainant a want of diligence fatal to his right to
recover.
The first is that the
fi. fa. did not come to the
marshal's hands, until the expiration of about thirty-six days
after the judgment was obtained and nineteen after it issued.
The second, that the
ca. sa. did not issue until about
three months and a half after the
fi. fa.
Let it be observed that the note fell due on 25
Page 27 U. S. 349
September, the writ was issued on 2 October; the judgment was
entered the November term following; and the drawer, Voorhees,
being held in custody for want of bail, was discharged as insolvent
on 14 December of the same year.
Justice can hardly be charged with a halting gait thus far. As
to her subsequent progress, it does not appear on what day the
court for November term adjourned; but as the
fi. fa.
bears date on 29 December, it is presumable that it sat on that
day. The
fi. fa. did not reach the office of the marshal
until three weeks after, and the
ca. sa. was not sued out
at the time when the
fi. fa. issued. But it was sued out
at the term to which the
fi. fa. was returnable, to-wit,
on 11 April, 1822. So that from the time the note fell due, to the
last step in the progress of judicial means for enforcing payment,
we count but six months and a half. We do not recognize the
supposed obligation or power of the party, in the circuit court, to
sue out the
ca. sa. contemporaneously with the
fi.
fa., and with the exception of that interval, we are rather
inclined to attribute to the complainant extraordinary diligence,
than culpable delay.
But why were the executions issued at all in this case, except
from abundant caution and to avoid the imputation of laches? Was it
necessary? The courts of Kentucky have certainly decided otherwise.
In the case of
Stapp v. Anderson, 1 Marsh. 240, they
express themselves thus:
"The discharge of an insolvent under our statute is a judicial
act, of a record character, and is in its nature, as it must be in
contemplation of law, the most satisfactory evidence of the
insolvency of the person discharged."
This, it is true, was declared respecting a discharge in another
suit, on a different cause of action, under the insolvent law of
the state, and upon a
ca. sa. But it would be difficult to
assign a reason why it should not apply to a discharge in a suit on
the same cause of action, under the law of the United States, and
where the defendant was in custody under an order for bail. In both
instances, a state of insolvency is judicially established, and as
the court expresses itself in
Page 27 U. S. 350
the same case, "it would have been worse than idle," nay, in
this case it would have been false imprisonment, to have retaken
the debtor if, as the defendant contends and no doubt was the fact,
he was discharged under the suit upon this note.
The third and last ground of laches, and that which it appears,
by a report handed to us, influenced the court below, was the
consent of the agent of the complainant to dispense with the
imprisonment to which the drawer of the note might have been
subjected before he would have taken the oath and received a
discharge under the act of Congress.
The correctness of the decision below upon this point must be
tested by considerations drawn from the object of the imprisonment,
the influence of the discharge upon the loss of the debt, and from
adjudged cases. We are inclined to think that it has been rather
too hastily conceded that no case similar to the present has been
adjudicated. That it adds another to the long list of instances of
laches which have been held to be fatal to the recovery of the
assignee against his assignor in that country cannot be
doubted.
This case, it must be recollected, comes within the fifth
section of the Act of January 6, 1800, entitled "An act for the
relief of persons imprisoned for debt." The second, third, and
fourth sections of that act make provision for the discharge of
persons confined under execution, and the fifth section extends
"the privileges and relief" of that act to persons in confinement,
against whom judgment is obtained but no execution issued. Under
the provisions in favor of persons charged in execution on the day
of arrest, a notice may be served upon the person at whose suit
they are confined, and at the end of thirty days they may be
discharged. By the fifth section it is enacted
"That any person imprisoned upon process issuing from any court
of the United States, except at the suit of the United States, in
any civil action, against whom judgment has been or shall be
recovered, shall be entitled to the privileges and relief provided
by this act, after the expiration of thirty days from the time such
judgment has been or shall be recovered, though the
Page 27 U. S. 351
creditor should not, within that time, sue out his execution and
charge the debtor therewith."
It has been argued that under this section the defendant must
remain in prison thirty days after judgment before he can sue out
his notice to the plaintiff, thus requiring him to remain sixty
days in confinement in the cases which come under this section,
whereas he remains but thirty days, when confined under
execution.
There can be no reason for the distinction, and we think that in
favor of liberty and with a view to consistency, the construction
should be otherwise. If such were the true construction, the relief
would not be the same as is extended to the debtors of the other
class. We think, therefore, that the day of entering judgment under
the fifth section is the day that corresponds to the day of arrest
under the previous provisions of the law, and therefore that in
thirty days after judgment, he may be discharged by complying with
the other requisitions of the law. The day of entering the judgment
appears nowhere in this record, but as the notice was served on the
plaintiffs' agent on 14 December, we must presume that the judgment
had then been entered, and on the same day the agent signed that
consent to dispense with "the previous imprisonment by law to
entitle the defendant to take the oath of an insolvent debtor," by
which it is now insisted that the complainants are barred of their
right to recover of the assignor.
The error of the court below obviously consists in this, that it
considers the imprisonment to which the defendant is subjected as
among the means of coercing payment. The arrest certainly is so,
but the thirty days' confinement that ensues is only incidental to
the notice required to be given to the plaintiff of the defendants'
intention to claim his discharge as an insolvent. Now he must be
insolvent when this notice is given, and what is to be forced from
an insolvent man by the thirty days imprisonment? It is obvious
that the confinement is not regarded as the means of coercion, but
only as a time necessary to the investigation of the defendants'
circumstances or the collection of evidence
Page 27 U. S. 352
to repel his insolvency. The coercive means of the law are to be
found in the searching oath to be administered and in the fear of
prosecution for perjury and recommitment in the same actions.
If, then, this imprisonment has no other object than to make the
debtor await the investigations of his creditor, it is difficult to
assign a reason why the creditor may not dispense with it when
satisfied that the application is an honest one and that delay
would discover nothing that he was not already acquainted with. In
the language of the Kentucky court, it would be "worse than idle"
to detain him. Nothing but unavailing hardship upon him and
ultimate expense to his endorser could result from it.
Nor do we think ourselves unsupported by the Kentucky decision
in this view of the subject.
In the case of
Young v. Cosby, the drawer of the note,
being in custody under a
ca. sa. issued by the assignee,
was discharged for want of security for the payment of prison fees.
This discharge, it was contended, was imputable to the assignee and
barred his recovery against the assignor unless he could prove that
the drawer had nothing which might have been wrung from him by a
protracted imprisonment. But the court of appeals decided otherwise
and established that if the assignor had sustained any injury in
that respect, it was incumbent upon him to prove it. The language
of Chief Justice Boyle on that occasion was this.
"It has repeatedly been decided in this court that to entitle
the assignee of a bond or note to recover of the assignor, it was
necessary to show that he had used due diligence by suit to recover
the amount from the payor or obligor, but it has never been
required of him to prosecute the suit against the payor or obligor
further than a man of ordinary prudence and diligence would do in a
case where he was solely and exclusively interested. To make it
necessary to do so would be unreasonable and unjust, inasmuch as it
would tend to accumulate costs without the prospect of any probable
advantage to either of the parties."
We entirely approve of the opinions here expressed: they are
Page 27 U. S. 353
conceived in the reason and benignity of the law, and we are
unwilling to extend the diligence required of the assignee beyond
the limits there laid down.
In the case of
Oldham v. Bengan, the doctrine laid down
in
Young v. Cosby is considered and affirmed, and Chief
Justice Bibb observes "that although due diligence has always been
required in such cases, yet in no case has all possible diligence
been exacted."
And both these cases concur to establish this principle that it
is not on the ground of a mere possible injury that the assignor
can claim his discharge; much less where it is improbable, as judge
Rowan remarks in the case of
Stapp v. Anderson, before
cited. The present case presents the drawer in a situation in which
it is not only improbable but scarcely possible that the assignor
could have sustained an injury. For a discharge under the insolvent
law of the United States is confined in its effects altogether to
the particular case, and even as to that does not exempt the
debtor's present effects or future acquisitions from the process of
the law; nor is his person exempt from confinement for the same
debt should he be detected in a fraud upon the creditor. The bare
speculative idea, then, of a possible acquisition of property
within the thirty days, during which Voorhees might have been
compelled to await the will or inquiries of his creditor, and of
property not tangible by the process of the law, is too feeble a
consideration to affect the rights of the complainant.
The decree below will be reversed and a decree entered here
that the complainant recover his demand.
