We further find the statute of Pennsylvania in force within that State at the time of the execution of said note, and the indorsement thereof and delivery of the same to the plaintiffs as aforesaid, in these words: "Act of 27th February, 1797.-4 Dallas, 102; 3 Smith, 278.

"An Act to devise a particular Form of Promissory Notes not liable to any Plea of Defalcation or Set-off.

"6. Sec. 1. All notes in writing, commonly called promissory notes, bearing date in the city or County of Philadelphia, whereby 473*] *any person or persons, bodies politic or corporate, or copartnership in trade, shall promise to pay, or cause to be paid, to any other person or persons, bodies politic or corporate, or copartnership in trade, and to the order of the payee for value in account, or for value received, and in the body of which the words without defalcation,' or 'without set-off' shall be inserted, shall be held by the indorsees discharged from any claim of defalcation or set-off by the drawers or indorsers thereof; and the indorsees shall be entitled to recover against the drawer and indorsers such sums as, on the face of the said notes, or by indorsements thereon, shall appear to be due: Provided always, that in every action brought by the holder of any such note, whether against the drawer or indorsers, the defendant may set off and defalk so far as the plaintiffs shall be justly indebted to him in account by bonds, specially or otherwise."

(See 8 Serg. & Rawle, 481, and posted notes.) "A copy from a copy filed in my office. "Teste: ALEXANDER T. LAIDLEY, Clerk." And if the law be for the plaintiffs, then we find for them the sum of $5,437.50, the debt in the declaration mentioned, with interest thereon at the rate of six per cent. per annum from the 1st day of December, 1841, till paid. But if the law be for the defendant, then we find for the defendant. T. W. HARRISON.

And because the court will consider what judgment should be rendered upon the verdict aforesaid, time is taken until to-morrow.

Memorandum. Upon the trial of this cause, the parties, by their attorneys, filed a written agreement in the words following, to wit: "And the parties agree that the court, in deciding upon the foregoing verdict, shall look to and regard the decisions of the courts of the State of Pennsylvania, as found in the several printed volumes of the reports thereof, to avail as much as if the same were found by said verdict, and to have such weight as in the judgment of the court they ought to have; and the parties further agree to waive all objections to said verdict on account of its finding in part evidence, and not fact. And that the court, in deciding thereupon, may make all just inferences and conclusions of fact and law from the evidence and facts therein stated, and the decisions aforesaid, which, in the opinion of the court, a jury ought to draw therefrom, if the same were submitted to them upon the trial of this cause; and that 474*] *this agreement is to be made part of the record in this suit.

"M. C. GOOD, Attorney for Plaintiffs. "JACOB & LAMB, Attorneys for Defendant." Which agreement is ordered to be made a part of the record in this suit.

On the 9th of September, 1846, the District Court pronounced the following judgment, viz.: "The matters of law arising upon the special verdict in the cause being argued at a former term of this court, and the court having maturely considered thereof, it seems that the law is for the defendant."

A writ of error brought the case up to this court.

It was argued by Mr. Badger and Mr. Bibb for the plaintiffs, and Mr. Ewing for the defendant.

The points raised by Mr. Bibb, for the plaintiffs in error, were the following:

The legal right of the plaintiffs to have judg ment for the sum expressed in the note stands, 1st, upon the effect of the Act of 1797, as declared in the title, body, soul, and spirit of the act itself; 2d, upon principles well established by adjudged cases, which confirm and fortify their right.

I. The true meaning and effect of that act, to be collected from the expressions of the act itself, stand in the foreground.

It may be useful, and will be according to the usages of the sages of the law in expounding statutes, to look into the old law, the inconveniences and grievances arising under it, thereby the better to understand the remedy intended by the new law, so that the mischiefs may be suppressed, and the remedy advanced.

The Legislature of Pennsylvania, on the 28th May, 1715, passed" An Act for the assigning of bonds, specialties, and promissory notes.' (1 State Laws, p. 77.) The inconveniences growing out of the provisions of that act, in the remedies allowed to assignees, will be suffi ciently understood, for all the present purposes, by looking into the decisions of the courts in these cases, viz.: Wheeler, Assignee, v. Hughes, in 1776 (1 Dallas, 23); M'Cullough, Assignee, v. Houston, in 1789 (1 Dallas, 441); Stille v. Lynch, in 1792 (2 Dallas, 194).

By these decisions it appears that the statute of 3 and 4 Anne, chap. 9, respecting assignments, was not considered as in force, e proprio vigore, in Pennsylvania; and that the Act of Pennsylvania of 1715 differed materially from the statute of Anne, especially in omitting to allow promissory notes to be negotiated and assigned in like manner as bills of exchange.

46

*The assignee took the assignment [*475 of a bond, specialty, or promissory note, under the Act of 1715, at his peril, and stood in the place of the payee, "so as to let in every defalcation which the obligor had against the payee at the time of the assignment, or notice of the assignment.' The only intent of the act being to enable the assignee to sue in his own name, and prevent the obligee from releasing after assignment" (1 Dall., 28), “subject to all equitable considerations to which the same was subject in the hands of the original payee.” (1 Dallas, 444.)

In Stille v. Lynch (2 Dallas, 194), the maker of a promissory note was permitted, in an action by the indorsee, to set up in defense, that the note was without any consideration. This trial was had at the September Term of that court, in the year 1792.

On the 30th of March, 1793, the Legislature of Pennsylvania passed an act (3 Dallas's State

blank) did not indorse it, but delivered it to the plaintiffs. The want of Stivers' indorsement is no objection to the title of the plaintiffs. They had a right to fill up the blank indorse ment by an assignment to themselves, as they did. (A number of cases cited. 11 Peters, 81, &c). The parties, by agreement of record, waive all objections to the verdict for "finding in part evidence, and not fact," and agree that the court may make all just inferences and conclusions of fact and law from the evidence and facts therein stated, which a jury ought to draw therefrom."

66

Upon the deposition of Anthony, and the bill, 478*] answer, cross *bill, and answers, between Prentice & Weissinger, as original complainants, and John Thomas, to compel him to contribute for the debt for which the parties were bound as co-securities for Stivers as principal, and paid by Prentice & Weissinger; and the cross bill by Thomas v. Prentice & Weissin ger, to account for the notes by them received of Stivers, and the answer of Prentice & Weissinger to the cross bill; it appears that Prentice & Weissinger had paid as indorsers and securities for Stivers upwards of twelve thousand dollars, and that this note and others were delivered over to Prentice & Weissinger in consideration of the moneys so previously paid by them for Stivers, and as indemnities; from which, however, they are not likely to be saved from loss by all the securities which Stivers gave them.

It is clear from the transcript of the record of the suit in chancery, and the deposition of Anthony, as found by the special verdict, that the note upon P. Zane was delivered by Stivers to the plaintiffs, in consideration of a precedent debt, greatly exceeding the sum due by this promissory note.

The question is, whether the possession so obtained by the plaintiffs of this negotiable note, in consideration of a precedent debt, entitles them to protection as indorsees against the defense set up by the maker, on account of the transactions between them and the payee?

This question was fully argued and decided by this court in the case of Swift v. Tyson (16 Peters, 2, 16, 20, 21, 22). It was thereupon resolved by the court, that a pre-existing debt constitutes a valuable consideration in the sense of the general rule applicable to negotiable instruments. The question was examined upon principle, and upon the adjudged cases, English and American; and the conclusion is, that a bona fide holder taking a negotiable note in payment of, or as security for, a preexisting debt, is a holder for a valuable consideration, entitled to protection against all equities between the antecedent parties." To sustain that doctrine many cases are cited by the court previously decided in the Supreme Court of the United States, and in England, and the opinion in that case says of them: "They go farther, and establish, that a transfer as security for past, and even for future responsibilities, will, for this purpose, be a sufficient, valid, and valuable consideration." (16 Peters, 21.)

This decision, and the authorities therein cited by the court, are full and conclusive Nothing can be, or need be added on this point by the counsel for the plaintiffs.

The special verdict submits to the court the question whether, *in the absence of all [*479 positive proof upon the subject of the consideration between Johnson and Stivers for the note, it is to be presumed that Stivers gave value for it.

The presumption is so until repelled by proof to the contrary; as stated in Swift v. Tyson (16 Peters, 16). But the question is immaterial whether or not Stivers paid value to Johnson, seeing that the plaintiffs are holders bona fide, for value, and without notice, and obtained the note regularly in the direct line of negotiation.

In Haley v. Lane (2 Atk., 182), Lord Hardwicke determined, that," where there is a nego tiable note, and it comes into the hands of a third or a fourth indorsee, though some of the former indorsers might not pay a valuable consideration for it, yet it is a good note to him, unless there should be some fraud, or equity appearing against him in the case."

In the cases of Grant v. Vaughan (3 Burr., 1516), Anonymous (1 Salk., 126, plea 5), Miller v. Race (1 Burr., 452), and Peacock v. Rhodes (2 Douglas, 632), the negotiable papers passed through the hands of mere finders and thieves into the possession of bona fide holders for valuable consideration without notice, yet such valueless and vicious derivatives did not impair the rights and titles of such bona fide possessors.

The special verdict finds that this note was made and delivered in Philadelphia, and indorsed and delivered in Louisville by the payee to Stivers, and by Stivers delivered to the plaintiffs in Louisville. So this note was made and delivered in one State, negotiated in another, and sued upon in a third.

The note so made in Pennsylvania, having no reference by its terms to performance in any other State, must be adjudged by the laws of that State, and was there a good and valid con tract. By the law of that State, it was a mercantile negotiable instrument. The act of the Legislature found by the jury and the decisions of the Supreme Court of that State, before cited (5 Binn., 469; 1 Serg. & Rawle, 180. and 9 Serg. & Rawle, 193), show that this note and all such like are, by the law of that State, negotiable according to the principles of the "general mercantile law"; that such notes are in the situation of bills of exchange"; that the Act of 1797, relating to such promissory notes, was passed "for the purpose of making them sub ject to the rules of general mercantile law." The supreme judicial tribunal of that State has so expounded the statute, and settled its meaning and effect.

The points were thus stated by Mr. Badger, upon the same side:

*It will be also insisted for the plaint. [*480 iff, that

1st. Every holder of a bill or note is presumed to be a bona fide holder for value, until something is shown to repel the presumption. (Story on Prom. Notes, p. 220, sec. 196; 1b. on Bills of Exch., p. 492, sec. 415.)

2d. Every person in possession of a bill or note, indorsed in blank, and appearing to be the lawful holder thereof, can by delivery convey a good title thereto to anyone believing him to be such owner, so as to convey a right of action against the maker or acceptor, notwithstanding the want of consideration, or any other matter

of defense as between the previous parties to the bill or note. (Arbouin v. Anderson, 1 Adolph. & Ellis, N. S., 498; Story on Bills, sec. 415.)

3d. To repel the presumption that the holder came by the bill or note honestly, fraud, felony, or some such matter, must be proved, and a holder for value is not affected by any infirmity in the bill or note, or in the previous negotiations thereof, unless mala fides is brought home to him. (Knight v. Pugh, 4 Watts. & Serg., 445; Goodman v. Harvey, 4 Adolph. & Ellis, 870; Arbouin v. Anderson, above cited; Story on Bills, secs. 415, 416.)

And as a consequence from these positions, it will be insisted that the plaintiff in error is entitled to recover.

the court from the evidence, cannot be a subject of reversal. This court deals with errors in law.

The jury, therefore, not having found any consideration for the assignment of the note, the judgment cannot be reversed because the court below did not infer a consideration from evi dence which, by agreement of counsel, it was to pass upon. The record does not show whether the court inferred any consideration for the transfer or not. This court cannot assume that they did infer any. The jury did not find any. So that the facts found leave a clear case of a note obtained by fraud, and transferred without consideration. The evidence referred to cannot change it here, as this court has nothing to do with evidence.

Mr. Ewing, for defendant in error:

1st. This suit was brought in Virginia, on a promissory note. by the assignee, against the maker. It is not averred in the declaration that the note was made in any other State or community, or that it is affected by any law or usage other than the laws and usages of Virginia. There being no such averment, there can be no such proof or fact found legally in the case, for it makes a different contract, goverened by dif ferent legal principles. The case, therefore, stands as it is set out in the declaration. A suit upon a note made in Virginia, and controlled by the laws and usages of Virginia. By these, a promissory note is not a commercial instrument, and the fraud of the payee in obtaining the note may be set up against the indorser.

agreed in it that, so far as the jury find facts, the court shall pronounce the law upon them. So far as they find evidence, the court shall infer from it the facts, and pronounce the law upon the facts so inferred. It is pro tanto a submission to the court upon the evidence.

But if this court look to and pass upon the evidence, which was by consent submitted to the court below, then the case *made out [*482 is that of a note obtained by fraud, transferred to the plaintiff as security for a pre-existing debt, no consideration being paid for the note, no debt extinguished by its transfer.

We admit and contend that the liability of the maker of this note is governed by the laws of Pennsylvania; and if by the statutes, as expounded by the courts of that State, he is allowed to set up the defense here set up, he is intitled to do so, notwithstanding it has been indorsed in another State. (Story's Con. of Laws, secs. 317, 332, 333, 345; Story on Bills, secs. 158, 161, 163, 164, 167, 168, 169; Judiciary Act, 1789; Shelby v. Guy, 11 Wheat., 361; Green v. Neal, 6 Pet., 291; Elmendorf v. Taylor, 10 Wheat., 152; 12 Pet.. 89.)

The plaintiffs are indorsees; but pending the case in the courts below, they had due notice that the note was obtained by fraud, and that they would be called upon on the trial to prove the consideration paid for the note.

Commercial paper which is obtained by fraud is subject to the same defense in the hands of the assignee as in those of the payee, unless he show that it was transferred to him for a valuable consideration, in the due course of trade. (Holme v. Karpser, 5 Binn., 469; Morton v. Rogers, 14 Wend., 580; 2 Barn. & Adolph., 291; 4 Taunton, 114; Chitty on Bills, 69, and cases cited in notes.)

The verdict does not find that the plaintiffs gave any consideration for the note, or received it in any fair transaction, except as the same may be deduced from evidence to which it refers. This evidence must be treated as a nullity, were it not for the agreement of counsel, that the court, in deciding the case, may make all just inferences and conclusions of fact and law from the evidence. Conclusions of fact, deduced by

According to the law of Pennsylvania, the

note may be set up against an indorsee who has received it merely as collateral security for a pre-existing debt. (Petrie v. Clark, 11 Serg. & Rawle, 377; Walker v. Geisse, 4 Whart., 257, 258; Depeau v. Waddington, 6 Wharton, 232; Jackson v. Polack, 2 Miles, 362; and see 4 Wharton, 500, and Evans v. Smith, 4 Binney, 366; Cromwell v. Arrot, 1 Serg. & Rawle, 180.) In Virginia there has been no decision of the question, as one of general commercial law affecting negotiable paper; but see 2 Rand., 260; 2 Leigh, 503; and Prentice & Weissinger v. Zane (2 Grat., 262).

In Kentucky notes are not negotiable unless negotiated by a bank. (1 Marsh., 540; 3 lb., 162.) No decision of the courts of that State has been found upon the question whether the indorsee of negotiable paper, in a case like this, holds it discharged of all equties between the original parties. At all events, it has been shown that the local law of that State would not affect the liability of this defendant.

In New York negotiable paper is on the same footing as in Pennsylvania, when received as collateral security for an existing debt. (Bay

v. Coddington, 5 Johns. Ch., 56; and the same | case, in error, 20 Johns., 643; 9 Wend., 170; 6 Hill, 93; 24 Wend., 230.)

In New Hampshire, see 10 N. H., 266; 11 Ib., 66. In Alabama, 4 Ala. Rep. In Tennessee, 10 Serg., 428, 434.

In England the most of the cases have been those of bankers, who probably make advances to their customers upon an understanding, in all cases, that they shall be covered by bills; or advances are made on the credit of the bills. (See 1 Stark. R., 1; 8 Ves., 531; 4 Bing., 396; 1 Bing. N. C., 469; 16 E. C. L. Rep., 256; 17 lb., 356; Vallace v. Siddell, Chitty on Bills, 87, 88, 10th Am. ed.) De la Chaumette v. Bank 483*] of England (9 Barn. & Cress., 209, 17 E. C. L. R., 356) seems to sustain the doctrine for which we contend.

Numerous cases, in this court and elsewhere, which seem, perhaps, to affect the pres ent question, really turn upon the circumstance, that the bill or note has been received in payment of the pre-existing debt, and not as collateral security; or that advances have been made, or some other consideration given, at the time of taking the note; as Swift v. Tyson (16 Pet., 1), 2 lb., 170; 2 Wheat., 66; Brush v. Scribner (11 Conn., 388), 12 Pick., 399; 22 lb., 24; 11 Ohio, 172; &c. Even in Pennsylvania (4 Whart., 258), and now in New York (21 Wend., 499; 23 lb., 311; 24 Ib., 115; 1 Hill, 513; 2 lb., 140), it is held, that, if the indorsee receive a bill in payment or discharge of a preexisting debt, he holds it exempt from all equitable defenses; but not if he has taken it merely as collateral security for such a debt. (See Munn v. M'Donald, 10 Watts, 270.)

The opinion of Story, J., in Swift v. Tyson, on this point, is obiter, and is not sustained by the authorities in England or America. It is directly opposed to the Pennsylvania cases, which, as expositions of a statute of that State, or of the commercial law prevailing there, must be conclusive.

The protection given to indorsees of nego- | tiable paper is analogous to, and perhaps derived from, the doctrine of courts of equity, in cases where a purchaser has obtained the legal title without notice of equitable right. In such cases, if the legal title has been transferred as a mere security for a pre-existing debt, it cannot be retained against a prior equitable owner. (6 Hill, N. Y., 96; 22 Pick., 243; 4 Paige, 221: 6 lb., 648, 466; 4 Whart., 506.)

It is just that the defense here should be sustained; because the defendant received nothing, the plaintiffs really paid nothing for the note, and therefore it is iniquitous to require the defendant to pay the plaintiff some nine or ten thousand dollars, merely because he signed, and they hold, the paper.

The general commercial law does not exclude the defense. The law of Virginia, where the suit was brought, or (so far as we know) of Kentucky, where the plaintiffs took the note, does not exclude it. In neither of those States is the note negotiable by their own law. (2 Leigh, 198; 6 Munf., 316; 1 Call, 226, 497; 2 Wa.. 219.) Therefore the plaintiffs are driven to rely on the statute of Pennsylvania; and that, as expounded by the courts of that State, does not sustain them.

Mr. Justice GRIER delivered the opinion of the court:

The plaintiffs in error were plaintiffs below. They declared on a promissory note [*484 given by defendant to James H. Johnson, or order, for the sum of $5.437.59, payable five years after date. The note was indorsed by the payee and delivered to John Stivers, who delivered it to the plaintiffs. The defendant pleaded non assumpsit, and a jury being called, found a special verdict, setting forth the note, and finding that it was made by the defendant and delivered by him to the payee, but that the consideration was fraudulent on the part of the payee"; that the note was indorsed by the payee to John Stivers before its maturity, "and that there has not been any evidence submitted to the jury that said Stivers paid value therefor, or that there was any consideration for such indorsement, unless the same ought to be inferred from the matters herein stated," &c. They also find that Stivers delivered the note to plaintiffs, but without saying whether for a valuable consideration or not; and they refer the court to the deposition of a witness and the record of a chancery suit appended to the verdict for the evidence on that point.

This special verdict is manifestly imperfect and uncertain, as it finds the evidence of facts, and not the facts themselves.

A verdict says Coke (Co. Litt., 227, a), finding matter uncertainly and ambiguously, is insufficient, and no judgment will be given thereon.

A verdict which finds but part of the issue and says nothing as to the rest is insufficient, because the jury have not tried the whole issue. So, if several pleas are joined, and the jury find some of them well, and as to others find a special verdict which is imperfect, a venire facias de novo will be granted for the whole. (2 Roll. Abr., 722, Pl., 19; Auncelme v. Auncelme, Cro. Jac., 31; Woolmer v. Caston, Cro. Jac., 113; Tresirell v. Middleton, Cro. Jac.. 653; Rex v. Hayes, 2 Ld. Raym., 1518.)

In all special verdicts, the judges will not adjudge upon any matter of fact, but that which the jury declare to be true by their own finding; and therefore the judges will not ad judge upon an inquisition or aliquid tale found at large in a special verdict, for their finding the inquisition does not affirm that all in it is true. (Street v. Roberts, 2 Sid., 86.)

In The Chesapeake Insurance Co. v. Stark (6 Cranch, 268). and Barnes v. Williams (11 Wheaton, 415), this court have decided that, where in a special verdict the essential facts are not distinctly found by the jury, although there is sufficient evidence to establish them, the court will not render a judgment upon such an imperfect special verdict, but will remand the cause to the court below, with di rections to award a venire de novo. The court in this case would have been bound to pursue the same course, if the judgment of [*485 the court below had been rendered on the im perfect special verdict which the record exhibits. But it appears that the court and counsel were aware of this imperfection in the verdict, and that it was not such as would warrant any judgment thereon by the court. Nevertheless, the parties, instead of asking for a