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all equitable defences as a transferee by indorsement. But there
must be an actual transfer, made in good faith, to shut out these
defences. If, therefore, one present such paper merely as agent
of another who is the actual owner, and the payee has a good
defence against that owner, he may make it against the agent ;
and this even in the case where the owner owes his agent more
than the amount of the paper. (s)

This rule would apply undoubtedly where the paper was in-
dorsed to the agent to give him authority to collect ; but not
where the paper had been assigned in payment or as security for
the debt to the agent, because he would then collect it as his
own. This distinction depends upon that between an authority
coupled with an interest and a bare authority. And here, un-
doubtedly, the further distinction, l)est illustrated by Chief Jus-
tice Marshall, (i'a) should be applied. That is, if the agent were
only authorized to collect the proceeds for the principal, and
then to apply the proceeds to the payment of a debt due to him-
self, this would not give him an interest in the paper itself. It
would be much the same as if he were bound to apply the pro-
ceeds to the payment of some other debt due from the principal ;

(r) These questions are very fully considered in the chapter on a Lost Note or Bill.
See also supra, Vol. I. p. 2.'i8.

(s) See Solomons v. Bank of England, 13 East, 135, note ; Lowndes v. Anderson,
1 Rose, 99.

(sa) Hunt v. Rousmanier, 8 Wheat. 174, 201.



CH. II.] RIGHTS OF TRANSFEREE BY DELIVERY. 4S

aor can he have the rights of pi'incipal instead of agent, unless
there has been an actual assignmont of the paper to him.

If such a note be pledged only, the pledgee holds it as free
from all such defences as if it were absolutely transferred to
him. The peculiar quality and exemptions of negotiable paper
go with them when pledged. And although the pledge was
given with such absence or infirmity of title of the pledgor, that,
had it been a pledge of chattels, the true owner miglit have
maintained ti'over for them against the pledgee, he cannot do
tills, nor demand the paper or its proceeds in any way from the
pledgee, provided it was received in good faith, and the pledgee
had the possession in fact, and the note was transferable by de-
livery, (i)

It may be remarked, in this connection, that, as no one can say
to a holder for value of negotiable paper which the transferrer
had sent with his credit into circulation, or exposed to being so
used, that he had in fact a private bargain with his transferee, or
private rights over the paper, it follows that a holder of such
paper, whether as pledgee or not, may sell, or discount, or pledge
it, or otherwise dispose of it.(M)



(t) Collins V. Martin, 1 Bos. & P. 648. This was an action of trover for two bills
of exchantje indorsed in blank and deposited by the plaintiff with his bankers for col-
lection, and by them pled<;ed for their own debts to the defendant. Held, that the
action could not be maintained. This decision was cited and approved of in Treut-
tel V. Barandon, 8 Taunt. 100, and Wookcy v. Pole, 4 B. & Aid. 1. See also Bolton v.
Puller, I Bos. & P. 539, 546 ; Ex. parte Pease, 1 Rose, 2.32; Thompson v. Giles, 2 B &
C. 422. If a party authorized by the holder of a bill uf exehanffc to get it discounted,
and to apply the proceeds in a particular way, misa|)i)lies any of the proceeds, he can-
not be sued in. trover for the bill, but must be sued for money had and received. Palmer
V. Jarmain, 2 M. & W. 282 ; Stierneld v. Holden, 4 B & C. 5, llyan & M. 219. And
see Sij^ourney v. Lloyd, 8 B. & C. 622, 5 Bin<j;. 525. If the transferee has notice that
the paper was wrongfully pledged to him, he will be liable in trover to the true owner ;
as where a bill was indorsed by the payee in this form : " Pay A. B., or order, for the
account of C. D.," and A. B. pledged it with the defendant, who advanced money upon
it to A. B. personally ; it was held, that the defendant had sufficient notice that it was
transferred to him without authority, and was liable in trover to C. D. Trcuttel v. Ba-
randon, 8 Taunt. 100, 1 J. B. Moore, 54.3.

(u) Bolton I'. Puller, 1 Bos. & P. .539; Collins v. Martin, id. 648, 2 Esp. 520 ; Jar-
ris V. Rogers, 13 Mass. 105, 15 id. 389 ; Appleton v. Donaldson, 3 Barr, 381 ; Palmer
•;. Richards, E.\ch. 1851, 1 Eng. L. & Eq. 529 ; Poirier w. Morris, 2 Ellis &. B. 89, 20
Eng. L. & Eq. 103 ; Atkinson v. Brooks, 26 Vt. 569 ; Ramsbotham v. Cator, 1 Stark.
228; Clement v. Leverett, 12 N. H. 317 ; Brush v. Scribner, II Conn. 388; Sweetser
V. French, 2 Cush. 309 ; Bay v. Coddington, 5 Johns. Ch 54 ; CoddingU)n v. Bay, 20
Johns. 637 ; Stalker v. M'Donald, 6 Hill, 93 ; Swift i-. Tyson, 16 Pet. 1 ; Boggs v.
Lancaster Bank, 7 Watts & S. 331.



44 NOTES AND BILLS. [CH. H.

He must account for it to the pledgor when duly called on,
but his disposition of it in the mean time can work no harm to
the owner beyond that for which the owner is responsil)lc, and
thei'cfore gives him no acticjn. And any i)arty to whom he
transfers it, by indorsement or l)y delivery, according as the pa^
per may be transferable, accjuires a full riglit to it.(y)

If it has been pledged, however, l)y any party, in fraud of the
owner, to a bona fide pledgee, as the pledgee has only a lien for
the amount of his debt, the true owner, by paying the debt and
discharging that lien, may repossess himself of the paper. And
in such case, if the pledgee sue tlie parties liable upon the note,
he can recover only to the amount for which he took the note as
collateral security. (i^?)

It is, under some points of view, an important question
whether such paper has been transferred for a new or an old
consideration, or in payment of a new purchase or for a former
debt ; in full payment of, or only as security for, an antecedent
debt. But these questions have been already considered. (a;)



SECTION IV.

OF TRANSFER BY ASSIGNMENT.

Bills and notes which are not payable either to bearer or to
order cannot be transferred, either by indorsement or by deliv-

(v) Lowndes v. Anderson, 13 East, 130; Jacks v. Darrin, 3 E. D. Smith, 557;
Palmer i-. Richards, Exch. 1851, 1 Eng. L. & Eq. 529 ; Marston v. Allen, 8 M. & VV. 494.

(iv) Stoddard v. Kimball, 6 Cush. 469; Chicopee Bank v. Chapin, 8 Met. 40. In
this case, an action was brought against the first indorser of a note, by a holder to whom
it was pledged by the second indorser, as collateral security for a debt. The defendant
offered to show that he indorsed the note for the accommodation of the maker, and in-
trusted it to him for a special purpose, and that the maker without any consideration
transferred it to the second indorser, who had knowledge of these facts, though the
pledgees had not ; and it was held that they could recover only the amount secured by
the pledge. Shaw, C. J. said : " So far as they would recover beyond that, they
would recover to the use of the indorser. But if the facts were proved, which the evi-
dence that was offered tended to prove, they could not recover for his use, because it
would show that, he was not a tmna fide holder. Such a division of the damages re-
coverable by an indorsee is well warranted, we think, on principle and on the authori-
ties," citing Jones v. Hibbert, 2 Stark. 304 ; Wiflen v. Roberts, 1 Esp. 261 ; Parish ».
Stone, 14 Pick. 198. See also Hilton ». Smith, 5 Gray, 400; Bond r. Fitzpatrick, 4
Gray. 89.

(a;) See mpra. Vol. I. pp. 218-228.



GH. II.] TRANSFER BY ASSIGNMENT. 45

eiy, SO as to substitute the transferee for the transferrer, and
enable the former to sue in his own name.(y) But all debts are
choses in action ; and bills and notes, which are, strictly speak-
ing, only evidences of indebtedness, are themselves called and
treated, as choses in action ; and now all choses in action may be
assigned.

The very meaning of chose in action is " a thing which lies in
action," or which cannot be reduced into possession without an ac-
tion at law. Anciently it was held that a transfer of this was only
a transfer of a right to go to law, and such was the dislike of the
old law to litigation, that the transfer was prohibited and void.(2:)

Courts of equity long since disregarded this rule, and now,
if an assignee of a chose in action acquires any equitable right
which the court will enforce, he may generally proceed in
his own name. (a) It is not so in courts of law. There the



(y) Hill V. Lewis, 1 Salk. 1.32 ; Tassell v. Lewis, 1 Ld. Raym. 743 ; White v. Heyl-
man, 34 Penn. State, 142 ; Backus v. Danforth, 10 Conn. 297: rarker v. Kiddle, II
Ohio, 102 ; Bush v. Peckard, 3 Harring. Del. 385 ; Whiteraan v. Childress, 6 Humph.
303; Barriere v. Nairac, 2 Dallas, 249; Noland v. Ringgold, 3 Harris & J. 216 ; Mat-
lack V. Hendrickson, 1 Green, 263 ; Pratt v. Thomas, 2 Hill, S. Car. 6.55 ; Fernon v.
Farmer, 1 Harring. Del. 32.

(z) Scholey r. Daniel, 2 Bos. & P. 540 ; Patridge v. Strange, Plowd. 77, 88 ; Perry v.
Jones, 1 H. Bl. 30. " No possibility, right, title, nor thing in action shall be granted or
assigned to strangers, for that would be the occasion of multiplying of contentions and
suits." Per Lord Coke. Sampet's case, 10 R. 48. And again, in his commentaries on
Littleton, he says that it is one of the maxims of the common law, that no right of ac-
tion can be transferred, because, under color thereof, pretended titles might be granted
to great men, whereby right might be trodden down, and the weak oppressed, which
the common law forbiddeth." Co. Lift. 214, a. In Bacon's Abridgment, Tit. Obliga-
tion, A, it is stated that " a bond is a chose in action which cannot be assigned over so
as to enable the assignee to sue in his own name ; yet he has by the assignment such a
title to the paper and wax that he may keep or cancel it." But as the reason of the
rule above stated is inapplicable to the sovereign or government, who can never be pre-
sumed to do any injustice to the subjects, or oppress them in any manner, an assign-
ment of a chose in action could be made by or to the sovereign or government, in the
same way as if the instrument had been originally assignable, though no such power
was conferred upon the assignee of the government. Co. Litt. 232, b, note 1 ; The King
V. Wendraan, Cro. Jac. 82; The King v. Twine, Cro. Jac. 179; Kingdom v. Jones,
Skin. 6, 26 ; Lambert v. Taylor, 4 B. & C 138, 150 ; Prosser v. Edmonds, 1 Younge
& C, Exch. 481, 499 ; Miles v. Williams, 1 P. Wms. 249 ; U. S. v. Buford, 3 Pet. 12 ;
U. S. V. White, 2 Hill, 59.

(a) Wright v. Wright, 1 Ves. Sea. 411 ; Baldwin v. Rochford, 1 Wilson, 229 ; Peters r.
Soame, 2 Vern. 428 ; Coles v. Jones, 2 Vern. 692 ; Carteret v. Paschal. 3 P. Wms. 197 ;
Hammond t;. Messenger, 9 Sim. 327; Ross v. Smith, 19 Texas, 171, per Hemphill,
C. J. It is said that the only authority to be found where a court of equity has re-



46 NOTES AND RILLS. [cil. 11.

ancient rule is, and for a long time has been, so far relaxed that
he may proceed in the name of liis assignor, or of the executor
or administrator of the assignor, if he l)e dead ; (h) but then, a'^
he stands in the place and upon the rights of the assignee, he i,s
subject to whatever defences might be made against the assignor,
provided they are such as the law considers equitable.

On this point the principal rule is, that they must be equities
subsisting at the time the debtor receives notice of the assign-
ment, (c) And the obvious reason is, that the debtor has do
right to create new defences after such notice.



fused to give effect to an assignment for a sufficient consideration of a cliose in action
is a case decided in the 11 James I., 1 Rol. Abr. 376, 1. b.

(h) Amherst Academy i'. Cowls, 6 Piclc. 427 ; Skinner v. Somes, 14 Mass. 107 ;
Gordon v. Drury, 20 N. H. 353 ; Day v. Wliitncy, 1 Pick. 503. " The doctrine of
equitable assignments," said Deivey, J., in Gibson v. Cooke, 20 Pick. 15, " has been
gradually extending to meet the convenience of trade and business, and has been favor-
ably viewed in the courts of law, subject, however, to the legal principle, that in such
cases the assignee can enforce his claim only in the name of the assignor, unless there
be an express promise by the debtor to pay the assignee."

(c) Thompson v. Emery, 7 Foster, 269 ; White v. Ileylman, 34 Penn. State, 142 ; War-
ner r. Whiltaker, 6 Mich. 133 ; Murray v. Lylburn, 2 Johns. Ch. 441 ; Cornish v. Bryan,
2 Stockt. Ch. 146 ; Goodrich v. Stanley, 23 Conn. 79 ; Freeman v. Perry, 22 Conn. 617 ;
Hedges r. Sealy, 9 Barb. 214 ; Lithgow v. Evans, 8 Grcenl. 330 ; Guerry j;. Ferryman, f>
Ga. 119; Wood ??. Perry, 1 Barb. 114; Maybin v. Kirhy, 4 Rich. Eq. 105 ; Duncklcc v
Greenfield Steam-Mill Co., 3 Foster, 245. In order to protect the assignee of a bill or note
from thecffect of any subsequent payment by the debtor to the assignor, it is sufficient if
he give the debtor notice of the assignment without exhibiting the security, or offering
him any other evidence of the fact. Davenport v. Woodbridge, 8 Greenl. 1 7. He may
require such evidence of the assignment, say the court, before payment to the as.signee,
but the notice he receives is only a measure of precaution, and to put him upon in-
quiry. If he finds the original creditor still retaining the evidence of the demand, be
may be well justified in paying it to him, but if he cannot produce it, he has the best
reason to believe the notice has truly stated the fact of the assignment. After notice,
the debtor acts at his peril, and the assignee, conducting fairly on his part, is not to l>t>
deprived of his equitable interest. See also Anderson c. Van Alen, 12 Johns. 343:
King V. Fowler, 16 Mass. 397; Ammidown v. Wheelock, 8 Pick. 470; Kellogg r.
Krauser, 14 S. & R. 137. Where the holder of a due-bill assigned it by indorsement
in blank, and the assignee demanded payment, but did not show the due-bill, nor ex-
pressly state that it had been assigned, and the debtor promised to settle it the next,
week in New York, but afterwards paid it in New York to the assignor, it was held
that the assignee could not maintain an action in the assignor's name. Meghan r.
Mills, 9 Johns. 64. A second assignee, who gives immediate notice of his assignment,
and attends to the prosecution of his claim, has a better title than a prior assignee of
whom he had no knowledge, and who gave no notice of his assignment, and took no
step to enforce his claim until after an award had been made in favor of the second.
Judson V. Corcoran, 17 How. 612. Or if the prior assignee be guilty of any neglect or
fraud which enables the agsignor to make a second assignment to a !)onn Jide. assignee



CH. II.] TRANSFER BY ASSIGNMENT. 47

For example, A owes B one thousand dollars, to be paid in
one year ; he gives him a note not payable to order, or some
other recognition and promise, or nothing whatever, for this is
material only as matter of evidence. B for value assigns the
debt or note to C, after half of the year has expired, and C gives
immediate notice to A. At the end of the year C calls on A,
who says that during the first six months he had let B have
divers goods or sums of money on account of this note, and this
he must now offset, for all B could transfer was the same right
he had himself when he made the transfer. To this C must
assent ; but he may also insist that any further goods or sums
which A let B have after the assignment and notice shall not
be offset, because the assignment and notice had the effect of
changing the debt from A to B into a debt from A to C ; and if
A now let B have anything on account of this debt, it was done
in fraud of C, or, at all events, founds no claim against him.

So also where the assignee sues in the name of the assignor,
the defendant may set off a debt due from the assignee to him,
in like manner as if the suit had been brought in his own
name. (6?)

The common-law rule, that the assignee of non-negotiable
paper, and of paper payable to order, and assigned without
indorsement, must proceed in an action thereon in the name
of the assignor, has recently been changed by statute in several
of the States, so as to enable him to sue in his own name ; but in
such case it is provided that the action shall be without prejudice
to any defence or set-off the defendant may have had against the
same previous to notice of the assignment.(e)



the latter will be preferred to the first. Maybin v. Kirby, 4 Rich. Eq. 105. In Jones v.
Witter, 13 Mass. 304, Mr. Chief Justice Parker said: " The contract between assignor
and assignee is operative between them only until some act takes place which brings
the maker of the note into the contract. This act is notice to him ; and after such
notice it becomes entirely immaterial to him which shall be his creditor, as all pay-
ments, or lawful offsets existing before such notice, will be allowed him ; and all sub-
sequent payments may as well, for his interest, be made to the assignee as to the
original creditor."

(d) Corser v. Craig, 1 Wash. C. C. 424.

(e) In New York, Ohio, Wisconsin, Minnesota, and California, it is provided that
every action shall be brought in the name of the real party in interest. In the ca«e
of an assignment of a thing in action, the action by the assignee shall be without preju-
dice to any set-off or other defence existing at the time of, or before notice of, the assign-
ment ; but this latter clause does rot apply to a ncgotinble jiromissory note, or bill of



48 NOTKS AND BILLS. [CFL n.

There is also a provision in several States that notes made pay-
able to tlie maker thereof, or to the order of a fictitious person,



exchange transferred in good faith, and upon good consideration, before due. R. S.
of N. Y., Vol. H. p. 499 ; K. S. of Ohio, 18.^4, c 87, ^§ 2^, 26; R. S. of Wise. 18.58,
V: 122, ^ 13; Stats, of Minn., compiled 1859; Wood's Dig. 1858, p. 72. Sec also
tlie Civil Code of Kentucky, adopted March, 1851, § 58, in last edition ^31, and Kelly
r. Smith, 1 Met. Ky. 313. Under the above statutes it is held that a person to whom
.H promissory note, payable to order, has been sold and delivered, previous to its becom-
ing due, for a full and valuable consideration, may maintain an action thereon, in his
own name, without alleging an indorsement of the note to him. Billings v. Jane, 11
Barb. 620.

In Alabama, it is provided that "every action founded upon a promissory note, bond,
or other contract, express or implied, for the payment of money, must be prosecuted in
the name of the party really interested, whether he have the legal title or not, subject
to any defence the payer, obligor, or debtor may have had against the payee, obligee,
or creditor previous to notice of the assignment or transfer ; but this clause does not
apply to bills of exchange, or instruments payable in bank or at a private banking-
house ; in all other cases the suit must be instituted in the name of the person having
the legal title." Code 1852, § 2129.

In Arkansas, it is provided that all bonds, bills, and notes may be sued in the name
of the assignee, subject to the defences or offsets, either in law or equity, that any
defendant may have against the original assignor, previous to the assignment, or
against the plaintiff or assignee after the assignment. The assignee of every such
instrument is not required to prove the assignment, unless the defendant shall annex
to his plea an affidavit denying such assignment, and stating that he believes it was
forged. Dig. of Statutes, 1858, c. 15, §§ 1-4, p. 157. But under this statute it is
held that, to authorize an assignee to sue in his own name, the bill or note must be
indorsed, and delivery alone is not sufficient. Bradley v. Trammel, Hempst. C. C.
I6t ; Hardie v. Mills, 20 Ark. 153.

In California, there is the further special provision that "all bonds, due-bills, notes,
or other instruments in writing not negotiable may be assigned, by indorsement, in the
>ame manner as bills of exchange are, so as absolutely to transfer and vest the prop-
erty thereof in the assignee, who may maintain an action thereon in his own name,
subject to any defence which the maker or obligor might have set up to the action of
the payee or obligee, where the same has arisen previous to notice of the assignment."
Wood's Dig. 1858, p. 75, Arts. 198, 199.

In Florida, it is provided that the assignee or indorsee of any bond, note, or bill of
exchange may bring suit thereon in his own name, with the same rights and powers
as might have been possessed by the assignor or indorser. Thomson's Dig. 1847. p. 348.

In Indiana, actions must be prosecuted in the name of the real party in interest.
•' When any action is brought by the assignee of a chiim arising out of contract, and
not assigned by indorsement in writing, the assignor shall be made a defendant to
answer as to the assignment, or his interest in the subject of the action. And all
actions by assignees shall be without prejudice to any set-off or other defence existing
at the time of, or before notice of, the assignment, except actions on negotiable prom-
issory notes and bills of exchange, transferred in good faith and upon good considera-
tion before due." 2 R. S. 1852, pp. 27, 28, ^ 3, 6.

In Iowa, actions are to be brought in the names of the real parties in interest, and it
is provided specially that notes payable to order or to bearer may be sued in the name
of the person to whom they are indorsed or delivered, and that bonds, dne-bills, and



CH. II.] TRANSFER BY ASSIGNMENT. 49

bliall, if negotiated by the maker, have the same effect, as agamst
him and all persons having knowledge of the facts, as if payable

other promises in writing to pay, without words of negotiability, are assignable by in-
dorsement or by other writing, mid the assignee may sue thereon in his own name, sub-
ject to any defence or set-oft', legal or equitable, which the maker or debtor had against
any assignor thereof before notice of his assignment. Code 1851, c. 58, §§ 948, 949, and
c. 100, § 1676.

In Maryland, the assignee of any chose in action for the paj-ment of money, entitled
thereto by assignment in writing, may maintain an action thereon in his own name ;
hut the defendant may make the same legal or equitable defence as might have been
had against the assignor at the time of such assignment, and before notice thereof
Code 1860, Vol. I. p. 43.

In Michigan, it is provided that "the assignee for a valuable coiiiideration of any
bond, note, or other chose in action, which has been or hereafter may be assigned, if
the assignor be dead, and there be no executor or administrator appointed upon his es-
tate, or if such executor or administrator have no interest in the thing assigned, or shall
refuse to prosecute for the same, may sue and recover in his own name upon such bond,
note, or other chose in action, and the defendant in all such suits, until due notice of
such assignment shall have been given, may set up and avail himself of any defence
he may have in such action, in the same manner and with the like effect as if the as-
signor had been living, and the action had been prosecuted in his name." Comp.
Laws, 1857, Vol. II. p. 1147, ^ 4159.

In Mississippi, all bonds, obligations, bills single, and promissory notes may be
assigned by indorsement, whether the same be payable to order or assigns or not; and
the assignee or indorsee may maintain an action thereon in his own name, subject to
the defence and set-off's which the defendant had against the same previous to notice of
assignment, in the same manner as though the suit had been brought by the obligee or
payee. R. Code 1857, c. 43, § 2, p. 355. i

In Missouri, it is provided that actions shall be prosecuted in the name of the real
party in interest. 2 R. S. 1855, p. 1217, c. 128, Art. 2, § 1. Under this statute it was
held, in Boeka v. Nuella, 28 Misso. 180, that a promissory note may be transferred by de-
livery, without indorsement or written assignment, so as to enable the assignee to main-
tain an action thereon in his own name. It seems, however, that a note transferred in
that way will be subject to every defence which tlie maker had against it at the time of
or before notice of the transfer. And so it was held of a note non-negotiable, in Ben-
nett V. Pound. 28 Misso. 598. And again, in Lewis v. Bowen, 29 Misso. 202, it was held
that no indorsement or written assignment of a note is necessary to enable the holder
to maintain an action in his own name. A deed of assignment for the benefit of cred-



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