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brought against him by the obligee. Norton v. Rose, 2 Wash. 250; Picket v. Morris, Id. 255. It is so likewise in Kentucky, Hunt v. Brand's heirs, 5 B. Monroe 563; Maryland, Jones v. Hardesty &c. 10 Gill & J. 420; and Alabama, Withers v. Greene, 9 How. 221.
In Virginia and Kentucky, when an obligor has, by promising payment to a third person, induced him to take a note by assignment, for valuable consideration, or when, after assignment, he has, by such promises, obtained indulgence which would impair the recourse of the assignee against the assignor, he may be considered as waiving a known equity against the note; and on the ground of a consideration for such promise, consisting either in a benefit to himself or a loss to the other party, induced by his promise, he may be precluded from relying even upon an equity then unknown. Buckner &c. v. Smith &c. 1 Wash. 296; Hoomes ex'or of Elliott v. Smock, Id. 389; Davis's adm'r v. Thomas &c. 5 Leigh 1; Pettit v. Jennings &c. 2 Rob. 676; Clay v. McClanachan, 5 B. Monroe 241. But it is otherwise where the assignment precedes the promise, so that the assignee is not induced thereby to part with his money for the note, and the obligor obtains no benefit in the way of forbearance. S. C.
14. In North Carolina, bonds are put on a footing peculiar to that state. They are made negotiable. Effect thereof.
In North Carolina, by the act of 1762, promissory notes are made assignable in the same manner as inland bills of exchange are by the custom of merchants in England; and by the act of 1786, bonds payable to a person are considered as if payable to him or order and made negotiable; and all interest and property therein are transferrable by endorsement in the same manner as promissory notes. The result is, that the right of property in a bond is transferred by the obligee's endorsement and delivery. Nelson v. Nelson, 6 Iredell Eq. 409; Fairly v. McLean, 11 Iredell 158.
It is only a perfect instrument for money that is susceptible of being transferred. It may be that after a bond has become perfect the obligee can, by his endorsement, order the payment to be made to bearer; but no person can sue on it as bearer except by force of such endorsement. Though the bearer might sue on a bill or note made payable to A or bearer, or to the bearer, yet he cannot sue on a bond so payable. It is considered that being a deed it must be made to some certain person, to whom or for whom it may be delivered, and the suit must be by that person or by his endorsee. Marsh v. Brooks, 10 Iredell 410.
When the bond has been made in North Carolina payable to a certain obligee, and endorsed by that obligee, though the endorsement be in another state, the endorsee can maintain an action in North Carolina on the bond in his own name; he may there sue on it as negotiable paper. Reddick v. Jones, 6 Iredell 106.
When he takes it before maturity, he is on the like footing with the holder of a bill of exchange. If he be a bona fide endorsee for value, he is subject to no defence of the obligor against the obligee, which would not be valid against a bona fide endorsee of a bill. Turner v. Beggarly &c. 11 Iredell 331. He will be affected by no payments to the obligee unless they be endorsed on the paper or he had notice thereof. Ormond v. Moyc. Id. 567.
20. The rule of Marsh v. Brooks, 10 Iredell 410, important to be considered in a state wherein bonds are not negotiable.
If in North Carolina, though bonds are there negotiable, the doctrine of Marsh v. Brooks, 10 Iredell 410, cited ante, p. 267, be sound, it would seem still more clear in a state wherein bonds are not negotiable, that upon a bond payable to A B or bearer, no matter through how many hands it may have passed, no action can be brought by any other party than A B, until a statute shall provide otherwise. It was remarked by Bronson, J., in 1843, that a great effort had been made within the last few years to have every thing in the form of paper credit turned into a circulating medium, or at the least placed upon the footing of bills of exchange and promissory notes. If, he said, our overstrained credit system had held out a few years longer he was not sure that the courts would have been able to resist the current which was setting so strongly in favour of negotiability. But the bubble having exploded, he trusted the common law which declares that choses in action are not assignable would not be overturned in New York. In that state it is a settled question that special contracts, other than bills of exchange and promissory notes, are not negotiable instruments, and that upon instruments not negotiable no one can sue in his own name but an original party to the contract. Birckhead v. Brown, 5 Hill 646.
IN VIRGINIA AND OTHER STATES RIGHT OF ACTION OF ASSIGNEE AGAINST ASSIGNOR OF AN INSTRUMENT NOT NEGOTIABLE.
1. In North Carolina assignment of a bond makes assignor as much liable as if he had endorsed, and indeed as if he had made a negotiable note.
The course long pursued in North Carolina, to determine whether in an action against an assignor of a bond the plaintiff can recover, arises out of the statutes of that state just referred to (ante p. 267). There is a case of a sealed instrument assigned in Virginia and on which there had been brought in Virginia a suit against the obligor which proved unavailing. In an action in North Carolina against the assignor, it seems not to have been made known to the court that on a contract of assignment in Virginia the right of action against the assignor depends on whether due diligence had been used against the obligor. Considering the case upon the rule applicable to negotiable paper-as to demand and refusal to pay, and notice thereof the court held that proof of notice was dispensed with by reason of an express promise to pay made with knowledge of the facts; and on this ground the assignee recovered. Moore v. Tucker, 3 Iredell 347.
An act of 1827 declares that the endorser shall be liable as surety. It has been settled that the sole purpose of this act was to turn the implied conditional contract between the endorser and holder into an unconditional one. He is not charged as if he had executed the bond as co-obligor, nor charged on an endorsement without consideration, nor deprived of the benefit of the statute of limitations. Williams v. Irwin, 3 Dev. & Bat. 74; Ingersoll v. Long, 4 Id. 293. But in declaring against him there may be omitted the former requisites of a demand on the obligor and a notice of dishonour to the endorser. Topping v. Blount, 11 Iredell 64.
With this course of legislation and decision in one of the southern states, one should not be surprised to learn that in others, bonds were used after the peace of 1783, to a great extent as a kind of circulating medium. 1 Bay 399.
Decisions in South Carolina.
In 1785 an obligee in South Carolina wrote on the back of
a bond " pay the within contents to J H or order, value received." On this, as a bill of exchange, a South Carolina court maintained an action brought by the endorsee of J H against the obligee as drawer. Bay v. Freazer, 1 Bay 66.
When in 1794 the courts of that state passed upon the question whether an obligee who at the time of passing a bond, wrote his name on the back of it, was liable for the amount of it, if the obligor proved insolvent, it was stated that more money depended on the determination of this question than on any other before discussed in the state; bonds to the amount of several hundred thousand pounds sterling having been passed away since the peace. It is not to be wondered at that on such a question the judges were much divided in opinion. Three of them held that the judgment should be for the defendant. Parker v. Kennedy, 1 Bay 398. But two were of a different opinion. If the bond could not be recovered at the time it was passed, Waties, J., considered that the plaintiff had paid his money on a consideration which had failed and was entitled to recover it back on a count for money received. S. C. 422, 425. Bay, J. was of the like opinion. S. C. 429, 433; Hall v. Smith, 1 Bay 330.
These cases in South Carolina were followed by others in that state holding that no action lay against the assignor on the ground of the obligor's insolvency; that the assignment was no guarantee of payment unless the guarantee was express. Walker v. Scott, 2 Nott & M. 286, note; Twitty ads. Todd, 1 Id. 261; 2 Id. 285.
3. Statute of Maryland gives assignee right of action against assignor.
With respect to the liability of an assignor to his immediate assignee there was a statute in Maryland as far back as 1763, c. 23, under which if the assignment was sealed, the assignee having paid a consideration might resort to the assignor after using due diligence to recover the money from the obligor. Parrott v. Gibson, 1 Har. & J. 398; Boyer v. Turner's adm'r, 3 Id. 285. Though an assignee may not bring himself within that statute, there seem to be cases in which his right of action against his assignor is maintainable on common law principles. Crawford v. Bury, 6 Gill & J. 63; Lewis v. Hoblitzell's adm'r, Id. 259.
4. How right of action against assignor has been established in Virginia and Kentucky.
In Virginia the assignor of a lease may not be liable to re
store the purchase money to an assignee who is deprived of the leased premises. McClenachan v. Gwynn, 3 Munf. 558. But the assignee of a bond or writing such as is embraced in the statute cited ante, p. 262, stands on a different footing. The paper not being negotiable under the law merchant, the party transferring it by endorsement is not responsible as endorser of a bill of exchange; but he is responsible as assignor of a chose in action. Pitman v. Breckenridge &c. 3 Grat. 127. The principle on which this responsibility rests is well established.
The assignee having under the statute a right of action against the principal debtor, it is his duty to use due diligence to recover the money from him. If after using such diligence he fail to recover it from the principal, then though there may be on the assignor's part no undertaking to insure the payment other than what is manifested by the assignment, it is held in Virginia that on common law principles, the assignee may maintain an action against his assignor. Mackie's ex'or v. Davis &c. 2 Wash. 229.
Although a bond be for the purchase money of property, and a deed of trust be executed on that property to secure the same, and although at the time the bond is assigned, the assignee takes from the assignor a mortgage on other real estate by way of additional security to that afforded by the deed of trust, yet the assignment being for value received, will, in the absence of proof of an express agreement to the contrary, be regarded as importing a right on the part of the assignor to resort to the assignee for any part of the amount which he may be unable to collect from the obligors, if there be no want of proper diligence on the part of the assignee in pursuing his remedies against them. Peay v. Morrison's ex'ors, 10 Grat. 155.
In Kentucky it is considered that the law not only implies an assumpsit from the assignor to the assignee, to pay or refund the consideration of the assignment, should payment after due diligence not be obtained from the maker; but also implies a warranty on the part of the assignors as to the title of the note, and that it was valid, and given for a legal and sufficient consideration. Turneys v. Hunt &c. 8 B. Monroe 409.
5. Right of action rests on the ground of there being a valuable consideration for the assignment.
The right of the assignee to sue his assignor rests on the ground that there was in fact a valuable consideration for the