
    William Jervey, assignee of P. M. Cohen & Co. vs. M. Strauss.
    
      Assignee of Bond or Note — Discount—Evidence.
    Where in an action by the assignee of a sealed note, the defendant pleads as discount a demand due him by the obligee before action commenced, the onus is on the plaintiff to show that the note was assigned before the demand was due, otherwise the discount will be allowed.
    BEFORE WARDLAW, J., AT ABBEVILLE, SPRING TERM, 1858.
    Tbe report of bis Honor, the presiding Judge, is as follows:
    “ Debt on single bill; suit commenced September, 1856. “The single bill, dated Charleston, November 28th, 1854, for one hundred and ninety-six dollars and ninety-seven cents, was made by the defendant, payable to Dr. P. M. Cohen & Co. at their office; and upon it was written the name P. M. Gohen & Oo. The plaintiff proved the execution of the bill by defendant, and that the name endorsed on it was in the handwriting of P. M. Oohen, but gave no direct evidence as to the time of the assignment.
    
      “ The defendant relied on discounts against P. M. Cohen & Co.
    “ It appeared that P. M Cohen. & Co., were druggists in Charleston, and that the defendant, a friend and a customer of theirs, was a shopkeeper in Cokesbury, Abbeville District. “ The defendant produced and proved the following papers:
    “ 1st. A bill of exchange for two hundred and twenty-eight dollars and eighty cents, drawn March 29th, 1854, by M. Strauss, at Cokesbury, on P. M. Oohen & Co., Charleston, payable to tbe order of Whelan & Co. six months after date : —accepted by P. M. Coben & Co., September 9, 1854, endorsed by Wbelan & Co., protested for nonpayment by tbe acceptors, October 2, 1854, and paid by M. Strauss, December, 1857.
    “ 2, 3, 4, 5. Pour notes made by M. Strauss in Charleston, for tbe accommodation of P. M. Coben & Co., wbicb bad all been negotiated by P. M. Coben & Co., and they having failed to meet their endorsements of them, bad all returned to M. Strauss, who paid them since tbe commencement of this suit, except about six hundred dollars, wbicb be paid in May, 1856, viz:
    “ October 7, 1854, payable six months after date, to tbe order of P. M. Coben & Co., at tbe Bank of Hamburg, -.$71953
    “December 19, 1854, payable four months after date, to tbe order of P. M. Coben & Co., at tbe Bank of Hamburg, ------ 731 59
    “ February 2, 1855, payable sixty days after date, to tbe order of P. M. Coben & Go., at tbe Bank of tbe State of South Carolina, - - - - 650 00
    “February 10, 1855, payable sixty days after date, to tbe order of P. M. Coben & Co., at tbe Bank of tbe State of South Carolina, - - 175 00
    $2,276 12
    “6. A paper signed by P. M. Coben & Co., Charleston, February 26, 1855, certifying that tbe above mentioned four notes “ were loaned by him (M. Strauss) for our accommodation, and that we are to see them paid out of our assets.”'
    “ 7. A note made Charleston, February 26, 1855, by P.M. Coben & Co., for two thousand two hundred and seventy-six dollars and twelve cents, payable one day after date to the order of M. Strauss.
    “The plaintiff contended that payments made by Strauss, subsequent to the assignment, upon liabilities previously existing against him, either as drawer of a bill, or maker of an accommodation note, did not constitute discounts against the single bill in the hands of an assignee ; that the onus of showing the time of assignment, so as to sustain the discount claimed was on the defendant; but that if it was on the plaintiff, the note given by Cohen & Co. in February, 1855, for the whole amount of the accommodation notes, without deduction or notice of the single bill now sued on, which had been previously given by Strauss, raised the presumption that both parties to that note then knew that the single bill was not then in Cohen’s hands.
    “ The defendant insisted that the onus of showing the time of the assignment, from which the plaintiff desired to have advantages superior to those of the original obligees, was on the plaintiff; that such presumption as had been suggested, weak in itself, was wholly rebutted by a consideration of the bill of exchange then outstanding, and other dealings between Strauss and Cohen ; that even before payment by Strauss, the accepted bill of exchange and accommodation notes constituted demands against Cohen; that the note of February 26, 1855, was a good discount, and that at any rate the six hundred dollars paid before commencement of the suit was.
    “ I held that the onus of showing the time of the assignment, if it was claimed to be before the instant which preceded the commencement of the suit, was on the plaintiff; that the bill of exchange and the accommodation notes constituted no discount before payment by Strauss; that the note of February 26, 1855, was plainly intended only as a collateral security for the accommodation, which Strauss had extended by making tbe four accommodation notes, and having been given before either of them was due, was without consideration ; but that the six hundred dollars paid constituted a good discount against the single bill, if that had not been assigned before May, 1856. Whether it had been or not, I left to the jury upon the circumstances suggested by the plaintiff as ground for presumption. Much of the debate and of the instructions in the case would have been unnecessary, if it had appeared at the proper stage, that the six hundred dollars had been paid before September, 1856; but through some misapprehension, the exact time of that payment (May, 1856,) was not shown until I had nearly concluded my remarks to the jury, when it was by consent shown.
    
      “ The jury found for plaintiff the amount of the single bill.”
    The defendant appealed and now moved this Court for a new trial, on the grounds:
    1. Because the plaintiff', in September, 1856, sued upon a sealed note given by defendant in November, 1854, to P. M. Cohen & Co., and before action brought, or proof of assignment, his discount had certainly accrued against P. M. Cohen & Co., and should have been allowed.
    2. Because the plaintiff sued as assignee of a sealed note, and it was necessary for him to prove the time of assignment to himself, and until that at least, (if not until notice to the defendant also appeared,) all demands of the defendant against P. M. Cohen & Co. should have been allowed as a valid discount to the note.
    3. Because the plaintiff' offered no proof as to the assignment to himself, or notice of it, before the action was brought in September, 1856, when P. M. Cohen & Co. undoubtedly owed him a large amount, which was offered in discount.
    
      4. Because, it is respectfully submitted, bis Honor erred in ruling that the draft in favor of Whelan & Co., accepted by P. M. Cohen & Co., protested for nonpayment by them, and paid by the defendant, the drawer, was not matter of discount against P. M. Cohen and Co.
    5. Because, it is respectfully submitted, his Honor erred in ruling that accommodation notes given by defendant to P. M. Cohen & Co., upon which they having endorsed the same, raised money in bank, were not matter of discount against P. M. Cohen & Co., until actually paid by defendant.
    6. Because his Honor erred in ruling that a plain promissory note given by P. M. Cohen & Co. to defendant, the consideration of which was money raised upon accommodation notes of defendant, was not a legal and valid demand against P. M. Cohen & Co., and could not prevail as a discount.
    7. Because, even under the hard rule of setting aside the above note, yet the accommodation notes themselves were paid by defendant before action brought — before any proof of the assignment, or any notice of the same to the defendant, and should surely have been allowed as a discount.
    8. Because the jury was evidently bewildered by the mass' of papers, and the verdict for the plaintiff was given in ignorance of the facts and the charge of the Judge, and is utterly without proof to sustain it, and contrary to every principle of law and justice.
    
      Me Q-owan, for appellant.
    Debts to be set off must be mutually subsisting debts at the time the action is brought. 7 Stat. 169; Sheppard vs. Turner, 3 McC., 249. The assignee of a sealed note may bring his action as assignee, but the “ obligee is not thereby precluded from any discount, which be would have been entitled to, if tbe action bad been brought in tbe name of payee.” 5 Stat. 330. From tbe nature of a sealed note, tbe original payee remains tbe legal owner of it, until tbe assignment is shown. Tbe onus is upon tbe assignee, both as to tbe assignment and tbe time it was made. And it is necessary for him, who claims benefit from it to prove that the assignment was made -before tbe discount accrued; if it is not also necessary to prove notice of tbe assignment. Newman vs. Crocker, 1 Bay, 247; Brown & Co. vs- Bees, 2 Tr. Con. R. 498; Tibbets vs. Weaver, 5 Strob., 144. The defendant may discount “ any accompt, reckoning, demand, cause, matter or thing against tbe plaintiff,” &c., 3 Stat. 611.
    
      Parker, contra.
    Tbe assignee is legal owner, and no discount after assignment is admissible. Bussell vs. Liihgoe, 1 Bay 57; Newman vs. Crocker, 1 Bay, 246-; Williams vs. Hart, 2 Hill, 483 ; McAlpin vs. Wingard, 2 Rich. 546 ; Thorn vs Myers, 5 Strob. 210; 3 Hill, N. Y. 228; 19 Wend. 397 ; 2 Hill, 140. Tbe onus of showing time of assignment is on defendant, Cain vs. Spann, 1 McM. 258 ; Ballard vs. McCaskill, 8 Rich. 90. Tbe accepted bill was not good discount until paid, 6 Rich. 275 ; Martin vs. Solomons, 10 Rich. 583.
   Tbe opinion of tbe Court was delivered by’-

Wardlaw, J.

If tbe jury regarded tbe instructions ' which were given to them, they must, in finding a verdict for tbe plaintiff, have proceeded upon tbe presumption urged in bis behalf; that is, they must have inferred that the defendant when be took tbe note of two thousand two hundred and seventy-six dollars and twelve cents, Eeb. 26, 1855, knew of tbe assignment.to tbe plaintiff of tbe single bill now in 'question, because no deduction on account of that bill was then made. A faint presumption of tbe assignment might arise against Cohen & Co., from, their giving tbe note; but against tbe defendant, under mucb stronger circumstances, hardly any presumption of knowledge of the assignment could arise from his accepting • the note. We choose, however, now to confine ourselves to the fact of the assignment then existing, whether the defendant knew of it or not, and the papers on their face show so plainly what the note was given for, that is both its professed consideration and its real motive, that we would suffer violence to be done to obvious truth, if we admitted that the note and its attending circumstances as they appeared, afforded any evidence at all that the single bill was not then in Cohen’s hands.

The verdict upon the fact being then unsupported, the case is resolved into the propriety of tbe instructions which held the onus of showing the time of the assignment to be on the plaintiff. If the payment of the six hundred dollars in May, 1856, had been shown at the proper time all the questions concerning liability without payment would have been saved, most of the papers which were introduced would have been unnecessary, and a plain debt of the obligees in the single bill to the defendant, due several months before the commencement of the suit having been shown, the question would have been which was prior in time, this debt or the assignment ? and upon that question of fact nothing appearing but the assignment without date, the case would have been decided by deciding whose duty it was to show the time of the assignment.

In 1792 it was decided in an action brought upon a bond in the name of the obligee for the benefit of an equitable assignee, that a discount acquired by the obligor after the assignment would not avail. Newman vs. Crocker, (1 Bay. 245). The Act of 1798 (5 Stat. 330), turned the right of the assignee of such an instrument as the Act relates to, from an equitable to a legal right, so as to enable him to sue in his own name; but cautiously guarded against any construction which in an action brought by the assignee, would preclude tbe defendant from tbe advantage of any discount or defence wbicb be would bave been entitled to, bad tbe action been brought in tbe name of tbe obligee or payee of tbe instrument. If this suit bad then been in tbe name of Cohen & Co. would Strauss bave been entitled to discount tbe six hundred dollars ? Yes, certainly, if tbe discount existed at tbe commencement of tbe suit, and nothing more appeared. If an assignee interposed to prevent tbe discount, upon him would devolve tbe necessity of showing what would serve bis purpose, that is an assignment having higher equity than tbe discount, — at least an assignment prior in time to a just discount — perhaps also notice to tbe defendant of tbe assignment before the defendant acquired tbe discount. (We choose, however, to reserve all questions concerning notice, and concerning tbe distinction, if any, between discount and payment.) The Act of 1798 left tbe rights of tbe parties in respect to discounts, as it found them. Tbe rights of tbe defendant depend not upon a proviso of tbe Act, but upon tbe pre-existing law, which the Act studiously abstained, in what has tbe form of a proviso, from interfering with. See Williams vs. Hart, 2 Hill, 483. Before tbe Act a discount availed against tbe obligee, until tbe priority of an assignment was shown: since tbe Act tbe discount has like advantage against either obligee or assignee until tbe priority of tbe assignment be shown; tbe difference being only, that, in an action by tbe obligee, tbe defendant may by force of a discount against tbe obligee, recover a balance, but in an action by an assignee must be confined to defeating tbe recovery against himself. ■

Tbe argument for tbe plaintiff relies mainly upon tbe case of Cain vs. Spann, 1 McMul. 258. There when a promissory note, payable to bearer, bad been in the bands of tbe original payee almost two years after it was due, and an action upon it was subsequently brought by a bearer, tbe defendant endeavored to set up in defence a discount against tbe original payee, acquired soon after tbe note sued on was proved to bave been in tbe bands of tbe payee; but tbe defendant could not prove when tbe note was transferred by delivery to tbe bearer, tbe plaintiff in tbe suit, and in consequence failed to show that bis discount against tbe payee existed whilst tbe • note remained in tbe bands of tbe payee. It was beld that tbe defendant was bound to mate out every thing necessary to bis defence: that• discount was a cross-action; and that the fact of tbe transfer of tbe note being subsequent to tbe acquisition of tbe discount must be shown by tbe defendant. A verdict rendered under instructions which did not submit this fact to tbe jury was sustained.

Of this case it may be observed that it was decided by three judges against two ; that no weight seems to bave been given to tbe consideration that tbe time of transfer was a matter probably known only to tbe payee and to tbe bearer, and incapable of proof by tbe defendant; that tbe suspicion attending tbe transfer of a note over due was scarce adverted to, and that a jury might well bave concluded that the defendant bad shown enough to require some rebutting evidence from tbe plaintiff. On tbe other hand it may be observed that a negotiable note does not lose its negotiability when it is over due; that by tbe English Law, a note transferred when over due, although subject to such equities, arising out of tbe note or tbe transactions connected with it, as tbe payee was subject to, is not subject to a set-off arising out of collateral matter, (Burrough vs. Moss, 10 Barn. & Cres. 558,) that tbe long practice in our State of admitting a set-off against such a note, renders it subject only to such set-off as existed against tbe original payee at tbe time of bis transfer, (see tbe well-considered case of Perry vs. Mays, 2 Bail. 354;) and that tbe admission, by way of defence rather than of cross-action, of a set-off) against tbe payee, in an action by a bolder, does not stand upon the provisions of our discount Act, (1759, 4 Stat. 76,) but only upon its equity. (McAlpin vs. Wingard, 2 Rich. 549.)

For our present purpose, it is enough to say that the case of Gain vs. Spann related to a promissory note, negotiable by tbe general law, tbe bearer of which claimed only the rights which such law gave to him when the transfer was made ; but the case in hand relates to a bond, the assignee of which can claim only the right which is given to him by a statute, that expressly reserves the pre-existing right of the defendant to have advantage of all discounts that would have availed against the obligee. This discount would have defeated an action by the obligee brought for hi's own benefit: if it will not serve to defeat the assignee’s action, the reason must be that the assignment was prior to it: the priority of the assignment must then be shown by the assignee, else the prima facie sufficiency of the discount will be unrebutted.

The motion is granted.

^Whitwer, Glover, and Muítro, JJ., concurred.

O’Neal, J., dissenting.

I dissent. I think the defendant was bound to show that the note was assigned after the discount accrued.  