U.S. Supreme Court Yeaton v. Bank of Alexandria, 9 U.S. 5 Cranch 49 49 (1809)
Yeaton v. Bank of Alexandria
9 U.S. (5 Cranch) 49
ERROR TO THE CIRCUIT COURT
OF THE DISTRICT OF COLUMBIA
In Virginia, the endorser of a promissory note was not, when the Town of Alexandria was separated from that state, liable to the holder by any express statute. He was only liable under the implied contract created by his endorsement. This implied contract, by the general understanding of the country, was that he would pay the debt if, by due diligence, it could not be obtained from the maker. This condition, however, was not expressed; yet it was just, because it was consistent with general usage, and therefore was the real understanding with which an endorsement was made and received.
If the case shows that the bank received this note under an understanding that it was subject to the rules which govern inland bills of exchange, then it would seem reasonable, in the case of notes actually negotiated with them, to imply from the act of endorsement an undertaking conformable to that usage.
The Bank of Alexandria may, under the charter of the bank, maintain an action against the endorser of a promissory note made negotiable in that bank without first suing the maker or proving him insolvent, although the endorsement was for the accommodation of the maker and notwithstanding that in Virginia, the implied contract of the endorser of a promissory note, by the general understanding of the country, is that he will pay the debt if by due diligence it cannot be obtained from the maker.
Perhaps the undertaking of the endorser of a note to the bank may be different.
It is no objection that the endorsement was for the accommodation of the maker. The consideration moving from the bank to the maker of the note on the credit of the endorser charges both the maker and the endorser.
Error to the Circuit Court of the District of Columbia in an action of assumpsit brought by the defendants in error against the plaintiff in error as endorser of a promissory note for the accommodation of R. Young, the maker.
The declaration contained two counts. One upon the endorsement of the note in the usual form and without any averment of the insolvency of the maker or of any steps taken to enforce payment from him. The other was for money had and received.
The same questions arose in this case as in the preceding case of Young v. Bank of Alexandria, but the only question argued in this cause was whether an endorser of a promissory note to the Bank
of Alexandria, for the accommodation of the maker, was liable in an action by the bank until after a suit, judgment and execution against the maker had proved fruitless or the maker was otherwise proved to be insolvent.
MR. CHIEF JUSTICE MARSHALL delivered the opinion of the Court as follows:
The question in this case is whether the endorser of a note negotiable in the Bank of Alexandria, if such endorsement be for accommodation, may be sued by the bank before a suit shall be instituted against the maker, if the maker be solvent.
In Virginia, the endorser of a promissory note was not, when the Town of Alexandria was separated from that state, liable to the holder by any express statute. He was only liable under the implied contract created by his endorsement. This implied contract, by the general understanding of the country, was that he would pay the debt if by due diligence it could not be obtained from the maker. This condition, however, was not expressed.
Yet it was just because it was consistent with general usage, and therefore was the real understanding with which such an endorsement was made and received.
But in banks this is probably not the usage, and if it be not, then the same reason does not exist for annexing such a condition to the contract created by endorsement. If banks are understood to receive notes made negotiable with them as subject to the law which governs inland bills of exchange, then it would seem reasonable, in the case of notes actually negotiated with them, to imply from the act of endorsement an undertaking conformable to that usage. If, then, the case showed that such was the usage of the bank and such the understanding under which notes were discounted, this Court is not prepared to say that the undertaking created by the endorsement would not be so fashioned as to give effect to the real intention of the parties.
But the incorporating act removes any doubt which might otherwise exist on this point.
The 20th section of that act declares
"That whenever any person or persons indebted to the said bank on bonds, bills, or notes given or endorsed by them with an express consent in writing that they may be negotiable at the said bank and shall refuse or neglect to make payment at the time the same may become due, and a suit shall thereupon be commenced, . . . judgment is to be rendered in a summary manner."
A person, then, may become indebted to the bank on a note endorsed by him, as well as on a note made by him, and the question is when does he become indebted. The act appears to answer this question in the succeeding member of the sentence. The words are "and shall refuse or neglect to make payment at the time the same may become due." To what antecedent does the word "same" refer? Most obviously to the words "bond, bill or note." When the bond, bill, or note becomes
due, the maker or endorser who shall refuse or neglect to make payment is within the description of the act. No man can be said to refuse or neglect to make payment before the money is demandable from him, and till then no action can be brought. But the law proceeds to say "and a suit shall thereupon be commended." The word "thereupon" must refer to the note or to the circumstances previously stated. Give it the one meaning or the other and the law obviously contemplates a suit against the maker or endorser, on his refusing or neglecting to pay such note when it shall become due. The act then proceeds to say that when this suit shall be so commenced, the court shall render judgment thereon in a summary way.
It is alleged that the preceding part of the section is all recital, and cannot, therefore, be construed to give a right to sue where that right did not before exist; that the enacting clause gives no remedy where one did not before exist, but substitutes a summary mode of proceeding for that more tedious action which the previous laws had given.
It is true that the first part of this section is recital, but it describes the precise case in which judgment shall be rendered in a summary way. That precise case is where a person indebted, by making or endorsing a note negotiable and negotiated in the bank, shall refuse or neglect to make payment thereof when such note shall become due. The time when he becomes indebted is declared to be when the note becomes due.
It is alleged that an accommodation endorser cannot then become indebted. This distinction was completely overruled in the case of Violet v. Patton, 9 U. S. 142 . The consideration moving from the bank to the maker of the note on the credit of the endorser charges both the maker and the endorser. The endorser is in this respect as liable, both in reason and in law, to the claim of the bank as if he had placed his name on the face instead of the back of the note.
Judgment affirmed with costs.
Both the questions, * argued in this case, arise out of the act of Virginia incorporating the Bank of Alexandria.
On the point of the summary jurisdiction, I concur with my brethren, and think this opinion perfectly consistent with the decision, at the last term, relative to the right of appeal. I remember that my opinion in that case was founded on the idea that the provisions of that act, relative to the summary recovery of debts, was entirely a judicial regulation. That the judicial power was unalienable from the sovereignty of a country, and must, therefore, in all its modifications, remain subject to the will of succeeding legislatures. That it was, in fact, a subject in which a peculiar, indefeasible right could not be vested in an individual. I thought it, therefore, from its nature, unaffected by the clause of the act of acceptance reserving to the bank its corporate rights, and of course affected by the law which gives an appeal, generally, from the courts of this district to the supreme court, above a certain amount. I have no doubt of the power of Congress to deprive them also of their summary remedy; but it has not yet legislated to that effect.
On the other question, I entertain a very strong opinion in opposition to that of the court.
The doctrine has been repeatedly sanctioned in this Court, that, in the State of Virginia, the holder of a promissory note cannot recover against an endorser without proving the insolvency of the drawer. But it is contended that the act, incorporating this bank, has placed the notes negotiable therein on a different footing; and that an endorser of such a note may be sued as soon as it is dishonored, without any evidence of the insolvency of the drawer. The following are the words of the clause, so far as they are material to this case:
"And whereas it is
absolutely necessary that debts due to the said bank should be punctually paid to enable the directors to calculate with certainty and precision on meeting the demands that may be made upon them, be it enacted that whenever any person or persons indebted to the said bank on bonds, bills, or notes, given or endorsed by them, with an express consent in writing that they may be negotiable at the said bank, and shall refuse or neglect to make payment at the time the same may become due, and a suit shall be thereupon commenced against such defaulter, and a capias ad respondendum returned and executed or a copy left at the usual place of residence of such defaulter at least ten days before the return day of such writ, the court shall. . . ."
It then goes on and enacts that in such case "the court shall order the proceedings to be made up, and the cause tried at the first court." This bare recital or preamble, without one enacting word, is what is supposed to have effected this important change in the law of Virginia relative to the liability of an endorser. Much stress was laid in the argument upon the use of the word "indebted" as applied to the endorser, the words "negotiable at the said bank," and words which suppose the commencement of a suit, as soon as a note "becomes due." I positively deny the correctness of maintaining any repeal or alteration in the principle of a law upon an implication drawn from a mere preamble or recital to an act. Enacting words will undoubtedly often produce a repeal by implication, but a recital or preamble sets forth merely the motives or inducements of the legislator, and whether founded in error or truth, serves no other purpose than to justify him to those for whom he is legislating, or, at times, to assist in developing the meaning of doubtful enacting words. Admit the principle that a preamble may have the effect of enacting words and there is no necessity for dilating on the inextricable absurdities in which a court may be involved. In the case before us it is possible that the legislature may have supposed that the law of Virginia would sanction an immediate suit against the endorser without evidence of the drawer's insolvency,
but their courts of justice have decided otherwise, and it would be singular if an erroneous opinion entertained by that body should have all the effects of a law passed by it. But there is not a word contained in this preamble which may not be fully satisfied, without producing any necessary implication against the general law of Virginia relative to the liability of the endorser.
When the legislature speaks of a person indebted by endorsement, it can only be understood to speak of one indebted according to the legal liability of an endorser, which is only, by the laws of Virginia, in case of the insolvency of the drawer.
When it speaks of a consent in writing that it may be negotiable at the said bank, it can only mean what it expresses, and intends it for the purpose of subjecting the individual to the summary recovery given in such a case, for as to this general liability as endorser, such a consent was in nowise necessary; that liability existed in its full extent without it.
And as to the supposition of the endorser's liability to be sued when the note becomes due, this also is strictly and literally true if the drawer should then be insolvent, or (I suppose) if he should become so at any time before the trial of the issue.
Upon the whole, therefore, it appears to me that there is no possible difference between the liability of an endorser generally and an endorser of a note negotiable in the Bank of Alexandria, that the legislature intended to make no distinction, and if it had expressly declared such to be its intent, no such change would have been produced without following up that intention with sufficient enacting words, but that in fact its sole object was to do that which it professes to intend, and alone has effected, viz., to give a summary remedy against all persons becoming indebted to that bank whenever their legal liability is incurred. In fact it may with the utmost correctness
be affirmed of an endorser that he is indebted, and that he may be sued when the note becomes due without at all interfering with the laws of Virginia on this subject, for a thing may be debitum in praesenti and yet no cause of action exist against him; he may lie under a present obligation to pay a sum of money, upon some contingency or future event. And with regard to his liability to be sued when the note becomes due, it may be very correctly affirmed that it is not due from him until the insolvency of the drawer can be shown. As to the drawer, the note is due when it is made payable, but the principles of the Virginia law add a contingency to the liability of the endorser, so that, in fact, his undertaking is collateral and contingent, and the amount is not legally due from him until after the day of payment, and provided the drawer should prove insolvent.
* This case was argued in connection with that of
Young v. Bank of Alexandria
as one case. This opinion, therefore, applies to both cases.