Humphrey Fullerton, John Carlisle, and John Waddle, Plaintiffs In Error v. the President, Directors and Company of the Bank of the United States, Defendants In Error

• Citation: 7 L.Ed. 280,1 Pet. 604,26 U.S. 604
• Parties: HUMPHREY FULLERTON, JOHN CARLISLE, AND JOHN WADDLE, PLAINTIFFS IN ERROR, v. THE PRESIDENT, DIRECTORS AND COMPANY OF THE BANK OF THE UNITED STATES, DEFENDANTS IN ERROR
• Decision Date: 01 January 1828
• Court: United States Supreme Court

26 U.S. 604

1 Pet. 604

7 L.Ed. 280

HUMPHREY FULLERTON, JOHN CARLISLE, AND JOHN WADDLE, PLAINTIFFS IN ERROR, v. THE PRESIDENT, DIRECTORS AND COMPANY OF THE BANK OF

THE UNITED STATES, DEFENDANTS IN ERROR.

January Term, 1828

THIS was a writ of error brought to reverse a judgment rendered in the Circuit Court of the United States, for the District of Ohio, in favor of the Bank of the United States, the present defendants in error. The declaration contains a common court for money lent and advanced. The plea is non assumpserunt. There is another plea of non assumpsit, filed by H. Fullerton alone, and under it, a notice, that he will off-set a large sum of money, $3957 33 1/3, due by the bank to the said Fullerton, being the avails of a certain note (the note on which the action was brought) which was discounted by the said Fullerton at the office of discount and deposit in Cincinnati, and the proceeds of which he had never checked out. There is another notice of off-set by all the defendants—that the plaintiffs are indebted to the defendant Fullerton, in a large sum of money, $5000—being the avails of a certain promissory note (the note on which plaintiff's action is founded) which has never been paid by the bank to Fullerton, or received by him, but retained by the plaintiffs; and Fullerton applies the same, by way of discharge and set-off to the said note made to plaintiffs. The cause was tried by a jury; and, on the trial, the plaintiff exhibited in evidence, a certain note, a copy of which follows:

$4000.

Cincinnati, February 1, 1820.

Sixty days after date, I promise to pay John Carlisle, or order, at the office of discount and deposit of the Bank of the United States at Cincinnati, four thousand dollars, for value received.

(Signed ISAAC COOK.

Endorsed—John Carlisle, John Waddle, Humphrey Fullerton.

Isaac Cook, the drawer of the note, died pending the suit, and before the trial. To the introduction of this note in evidence the defendants objected, as evidence of a several contract of the drawers and each one of the endorsers, and not of any joint undertaking or liability of the defendants. This objection was overruled by the Court, and the note permitted to be read in evidence, under the eighth section of the Act of the General Assembly of Ohio, entitled, 'An Act to regulate judicial proceedings, where banks and bankers are parties, and prohibit the issuing bank bills of a certain description, passed 18th February, 1820; to which decision of the Court the defendants excepted.

The eighth section of the Act provides, 'That when any sum of money due and owing to any bank or banker shall be secured by endorsements on the bill, note, or obligation for the same, it shall be lawful for such bank or banker to bring a joint action against all the drawers or endorsers, in which action the plaintiff or plaintiffs may declare against the defendants jointly for money lent and advanced, and may obtain a joint judgment and execution for the amount found to be due; and each defendant may make the same separate defence against such action, either by plea or upon trial, that he could have made against a separate action; and if in the case herein provided for, the bank or banker shall institute separate action against drawers and endorsers, such bank or bankers shall recover no costs. Provided always, that in all suits or actions prosecuted by a bank or banker, or persons claiming as their assignees or under them in any way for their use or benefit, the sheriff upon any execution in his hands in favor of such bank or banker, their or his assignee as aforesaid, shall receive the note or notes of such bank or banker, from the defendant in discharge of the judgment, and if such bank or banker, their or his assignee or other person suing in trust for the use of such bank or banker, shall refuse to receive such note from the sheriff, the sheriff shall not be liable to any proceedings whatever at the suit, or upon the complaint of the bank or banker, their or his assignee as aforesaid.'

The facts of the case, so far as they were considered as important to the decision of the Court, are fully stated in the opinion delivered by Mr. Justice Johnson.

The case was argued for the plaintiffs in error by Mr. Leonard, and by Mr. Sergeant for the defendants.

The counsel for the plaintiff made the following points:——

1. The Circuit Court erred in admitting the note in evidence under the money counts in the declaration, for if the statute of Ohio could be used as authority for the form of action, the death of one of the parties, during the suit, determined the right to proceed under that statute.

2. The statute of Ohio, regulating the practice of the state, is not obligatory as to the practice of the Courts of the United States, and the statute of 18th February 1820, was passed after the making of the note on which this action is founded.

3. There was no proof of demand of payment of the note, and the endorsers on the note were discharged by this omission, and by the course the bank adopted in reference to the note after its non-payment by the drawer.

4. The notice of the non-payment was not given in time to the endorsers.

Leonard insisted the Court erred in admitting the note in evidence, under the money counts. The statute of Ohio, authorizes joint actions against 'all the drawers, or endorsers.' 22 vol. Ohio Laws, p. 361. This action was instituted against the drawers and endorsers, and the drawer died before trial. Although disjunctives are sometimes construed conjunctively, yet no case could be cited, in which it had been held that a disjunctive might be construed conjunctively, at one time, and, at another, agreeably to its literal signification. The statute being in derogation of the principles of the common law, authorizing a joint action against several persons, on several distinct and dissimilar contracts, was strictissimi juris, and, after the death of the drawer, no suit could be instituted or prosecuted under it. This construction was fortified by another law of Ohio, requiring the property of the principal to be exhausted before that of the security is made liable, which was held to apply as between drawers and endorsers on accommodation notes.

2. The bill of exceptions, distinctly raises the question, whether the statutes of Ohio regulating the state practice, are obligatory, vi propria, on the United States' Courts. There is no evidence in the record, that the state practice was ever adopted by the Court, and 'the note was permitted to be read in evidence, under the Act of Ohio.' See Wayman and another vs. Southard and another, 10 Wheat. 1. Admitting the Circuit Court might, under the authority to establish its practice, adopt by written rules, or otherwise, the prastice in existence at the time of the act of adoption in the state Courts, the Court was not empowered to incorporate into its practice by one Act of prospective regulation, whatever might be the future practice of the state Courts. This would be not to exercise the judicial functions intrusted to the Court—but to transfer them to the state authorities. An Act of Congress adopting the state practice in existence at the time of its passage, is valid; but an Act prescribing such rules of practice as the state legislatures might in future enact, would be unconstitutional, as it would transfer to the states, the powers vested by the Constitution in Congress. If, then, the Court could not, in the active exercise of its powers, establish the future state practice, much less could the passive acquiescence of the Court, in laws and rules of practice enacted from time to time by the state, establish it as a fundamental and constitutional rule that future state regulations should thereby become a part of the Circuit Court practice. In the present instance, the statute had never received the express sanction of the Court, was introduced and followed up by the United States Bank alone, had never been contested, and always used sub silentio.

The Act of Ohio was not passed until after the note was discounted. The Act established a rule of property, construction or evidence, rather than a rule of practice, and therefore could not be applied to a contract entered into before its passage. It was such a rule, as is referred to in 34 sect. Jud. Act, United States, chap. 20.

In general a demand is necessary on the drawer to charge the endorser. It may be dispensed with when the note is payable at the holders; and its place supplied by proof, that the holder was present, ready to receive payment, and the account of the drawer inspected, and no credit found in his favour. United States Bank vs. Smith, and the cases there cited, 11 Wheat. 171. This is the English rule, 2 H. Black. 509, and this Court has strongly intimated an opinion in favour of its correctness. No case—not the cases in Mass. Rep., cited 11 Wheat. 171, go the length to waive proof that the holder was present at the time and place ready to receive payment. The charge of the Court did not come up to the rule. 'If the jury were satisfied, from the evidence the note was in bank, and not paid when it came to maturity,' the record purports to contain all the evidence in the case, and none was exhibited of the non-payment of the note. Agreeably to the charge, it would be sufficient for the plaintiffs to prove the note in bank, at its maturity, without any proof that it was then unpaid; because there was no proof of the non-payment of the note in the case, and besides, proof ought not to be required of a negative, that the note was unpaid. Indeed it is impossible to give positive proof of non-payment. In this case, as in all other cases whatsoever, the jury must be satisfied that the note was unpaid, when it came to maturity, or render a verdict for the defendant. Of this they would be satisfied, without positive proof. Non-payment is presumed, until payment is proven. If, therefore, the jury were...