Young v. Bryan/Opinion of the Court

ERROR to the Circuit Court of Tennessee.

This was an action of assumpsit, brought in the Court below, by the defendants in error, citizens of Pennsylvania, against the plaintiff in error, a citizen of Tennessee, as the endorser of a promissory note drawn by another citizen of Tennessee, and endorsed to the plaintiff. The only questions in the cause were,

(1.) Whether the Court below had jurisdiction; and, (2.) whether notice of protest was necessary to charge the endorser in this case. Judgment having been rendered against the defendant below, the cause was brought by writ of error to this Court.

Mr. Eaton, for the plaintiff in error, (1.) argued, that under the 11th section of the judiciary act of 1789, c. 20, the Court below had not jurisdiction. The decision of this Court, in the cases of Montalet v. Murray, 4 Cranch 46, and Turner v. the Bank of North America, 4 Dall. 11, shows, that where jurisdiction does not attach between the drawer and drawee, assignment cannot give jurisdiction. The endorser can only transfer by the assignment, the rights and interest he possesses; as he had no right (he and the drawer being citizens of the same State) to sue in the Federal Court, he could not consequently create any such right by the assignment. It would amount to a creation of jurisdiction by consent, which the law does not warrant. The case of Slacum v. Pomery, 6 Cranch 221, went off on the ground of the want of notice. At any rate, that was a foreign bill, and perhaps within the operation of the 11th section of the judiciary act: it is, then, not authority in this case. In the language of the 11th section of the judiciary act, this is a 'suit to recover the contents of a promissory note in favour of an assignee,' &c. The declaration contains but a single count, founded upon the assignment, non-payment, and consequent liability of the plaintiff in error. There is no count for money had and received; there is but a single count, and that is to recover the contents of the note, a chose in action, which is against the express provision of the act. There is no distinct substantive contract, between the endorser and holder of the note; and, if there were any, it is not declared on. (2.) No notice of protest was given. This was necessary to charge the endorser: French v. Bank of Columbia, 4 Cranch. 141; Donaldson v. Means, 4 Dall. 109; and the declaration should contain an averment of notice of protest. Slacum v. Pomery, 6 Cranch 221.

Mr. Sergeant, contra, (1.) admitted, that where by the judiciary act, jurisdiction does not attach between the drawer and the payee of a note, assignment cannot give jurisdiction. Such, and no more, is the amount of the decisions referred to. If the payee of the note could not maintain a suit in the Federal Courts against the drawer, neither can the endorsee maintain a suit in the Federal Courts against the drawer. But the jurisdiction of the Federal Courts extends to the case of a suit brought by the endorsee against the endorser, being citizens of different States, whether a suit could have been there brought against the drawers or not. By the words of the act, a general jurisdiction is given, in terms, embracing all cases where citizens of different States are parties. Being in conformity with the provisions of the Constitution, and intended to secure to the suitor an impartial tribunal, it ought to be libereally construed. Out of this general grant, there is a particular exception, which ought not to be extended beyond its natural construction, but rather to be strictly taken, being against constitutional right; and if there be doubt, that interpretation should be given which is most favourable to the jurisdiction. The words are, 'Nor shall any District, or Circuit Court, have cognizance of any suit to recover the contents of any promissory note, or other chose in action, in favour of an assignee, unless a suit might have been prosecuted in such Court to recover the said contents, if no assignment had been made, except in case of foreign bills of exchange.' These words necessarily import a recovery by an assignee, claiming through the medium of an assignment, of the same contents which might have been recovered by the assignor, if he had not assigned. They apply only to a derivative claim. If the payee should make a special endorsement to a citizen of the same State, and such endorsee should endorse the note to a citizen of a different State, the latter, perhaps, could not sue the first endorsee in the Federal Court, because he would be obliged to claim under the assignment, and in right of the assignor. But if the payee endorse the note to a citizen of a different State, there is a new contract entered into between the endorser and the endorsee, by the endorsement, and the endorsee would claim upon the footing of that contract, without regard to the original engagement, except for the fact, (upon which the liability of the endorsee arises,) that the note has been dishonoured. The contract is so entirely independent, that the endorsee would be liable though the note were forged, or the drawer fictitious. The assignment, it is true, is the evidence of the contract, and, in a certain sense, the foundation of his claim; but he does not claim through it, nor under it, nor does he claim at all as assignee. In the case of a note payable to bearer, and transferrable by delivery, it is believed there could be no doubt of the jurisdiction, in favour of a bona fide holder, being a citizen of a different State from the drawer, through whatever hands it might have passed in its course to him. He would claim in his own right, and not by assignment. In the case of a general endorsement, also transferrable by delivery, and conferring upon the bona fide holder an original right of suit against the endorser, the Court would have jurisdiction of a suit against the endorser, for the same reason. And in case of a special endorsement to a citizen of a different State, the argument, if possible, is still stronger. Neither of these is within the words of the act. The plain intention of the provision is effectuated by the construction contended for on the part of the defendants in error. The design of the exception was either to prevent colourable transfers for the purpose of giving jurisdiction, or to enable the party to a negociable contract, to secure to himself the jurisdiction of the State Courts. The interpretation contended for, does not interfere with these views. It is in the power of the endorser to fix the jurisdiction, by making a special endorsement, as it is in the power of the drawer to escape the Federal jurisdiction by making the note payable to a citizen of the same State. But as it must be admitted, that where the note is payable to a citizen of a different State, or being payable to bearer, comes into the hands of a citizen of a different State, the drawer may become subject to Federal jurisdiction, it would seem to follow, conclusively, that the endorser (omitting to guard himself and thereby voluntarily waiving the right) would also be liable. It may be remarked, in the particular case under consideration, that the note appears, from the evidence, to have been drawn, and, probably, endorsed for the very purpose of being delivered to the plaintiffs below, who were, and were known to be, citizens of Pennsylvania. (2.) It appears fully in evidence, that notice of non-payment by the drawer, was in due time given to the endorser. This is all that was necessary to be done, no protest being required of a note or inland bill of exchange. Slacum v. Pomery, 6 Cranch 221, was the case of a foreign bill.

Mr. Chief Justice MARSHALL delivered the opinion of the Court, that a suit may be brought in the Circuit Court by the endorsee against the endorser, whether a suit could be there brought against the drawer or not.

In such a case, the endorser does not claim through an assignment. It is a new contract entered into by the endorser and endorsee, upon which the suit is brought; and if the endorsee is a citizen of a different State, he may bring an action against the endorser in the Circuit Court. As to the other objection insisted upon by the plaintiff in error, all that was incumbent upon the holder, was to give due notice to the endorser. No protest of a promissory note or inland bill of exchange is necessary.

Judgment affirmed.