
    
      J. C. McAlpin vs. Wingard & Muller. The same vs. Richard Sondley.
    
    In an action by the holder of a note, can a demand against the payee, which does not grow out of the same transaction, and is in no way connected with the note, be set up as a defence to the action ? quasre.
    
    An independent demand which the makers have against the payee, but which is not due at the time the note is transferred, cannot be set up as a discount in an action by the holder.
    These were actions of assumpsit on a promissory note drawn by Wingard & Muller, and indorsed by Richard Sondley. The action against the drawers was tried before RichaRdson, J. at Richland, Fall Term, 1845 ; and the action against the indorser, before O’Neall, J. at the same place, Spring Term, 1846.
    The note was due the 13th October, 1844, and was payable at the Commercial Bank, Columbia. It was made to comply with a purchase of goods by Wingard & Muller at •auction. The goods were the property of John McCully, and were sold by his order, to enable him to raise money to' pay a debt for which a friend was bound for him in Charleston. The note was intended to be discounted in the Commercial Bank, but when lodged for discount it was understood that Wingard & Muller intended to set up a defence against it, and it was, therefore, not discounted. On the same day that it was offered for discount at the bank, which was the 19th June, 1844, it was purchased by the plaintiff from McCully. Prom the evidence, it was probable that the plaintiff knew of the defence set up by the defendants when he purchased the note. The de-fence set up by way of discount, was a note of nearly an equal amount on John McCully, not due until the 14th November, 1844.
    In the case before Richardson, J, the jury, under the instructions of his Honor, found for the defendants, and the plaintiff appealed. In the case before O’Neall, J. the jury were instructed that, inasmuch as the note held by Wingard & Muller, the makers, on McCully, was not due at the time the plaintiff purchased their note from him, nor at the time it became due, the note of McCully could not be set up as a discount against the plaintiff, a bona fide holder. The jury found for the plaintiff, and the defendant appealed.
    
      W. F. DeSaussure, for the plaintiff.
    
      Tradewell and Arthur, for the defendants.
   Curia, 'per O’Neall, J.

In these cases, two legal questions have been argued. 1st. Can any defence, which does not grow out of the same transaction, and which is in no way connected with the note, be set up against a bona fide holder of the note with notice ? 2d. Can the note set up as a discount against the plaintiff’s note, be allowed, inasmuch as it was not due when the note in question was negotiated to the plaintiff, nor when it fell due ?

Upon the first question, there is some diversity of opinion among the members of the court; and as the cases can be decided upon the second question, the first is reserved for some future occasion.

The words of our discount law, § 2, Act of 1759, 4 Stat. 76, are exceedingly broad. The provision is, “that in all actions whatever, brought for the recovery of any debt, by any plaintiff, either in his own right or in the right of his wife, or as executor or administrator of any person deceased, it shall and may be lawful for the defendant, if he have any accompt, reckoning, demand, cause, matter or thing, against the plaintiff, to give the same in evidence, by way of discount; regard being always had to the cause of action, so that accompts, reckonings, demands, causes, matters, or things relating to the defendant in his own right, shall only be given in evidence by way of discount to actions brought against such defendant in his own right; and so, if such defendant is sued in the right of his wife, or as executor or administrator of any person deceased, and the same shall be noted, and judgment be entered for the balance only ;, and if the plaintiff be found indebted to the defendant, judgment shall be entered for the defendant, with costs of suits, and execution go against the plaintiff.” These words, broad as they are, do not extend the discount law to demands against persons not parties to the record. It is plain, from all the words used, that the Legislature alone looked to account, reckoning, demand, cause, matter, or thing against the plaintiff, or his or her testator or intestate ; they did not look to the same demands against a party from whom the plaintiff acquired his cause of action. It is, therefore, more to give effect to the equity of the statute, than its provisions, that de-fences like the present have been allowed.

In allowing such defences, even against a bond in the hands of an assignee, before 1798, and since, it has been held, that transactions subsequent to the assignment could not be set up as a discount;' Newman vs. Crocker, 1 Bay, 246 ; Williams & Co. vs. Hart, 2 Hill, 483. If such be the rule in those cases, it is clear that in such a case as that before the court, the rule more strongly applies. For in Newman vs. Crocker the action was before ’98, and was in the name of the obligee ; the assignor had only his equity to oppose to the discount, which was between the parties on the record. Here, however, the plaintiff’s title to the paper by indorsement is legal; he is the party to the record, and the discount is against one not a party. Wil liams vs. Hart was on a sealed note, after the Act of ’98, and in the name of the assignee. The Act reserves, however, to the obligor, any defence which he had at the assignment against the obligee. In that case, the obligor obtained the note, of which that offered in discount was a renewal, while the note under seal remained in the hands of the obligee. After the assignment, the obligee renewed it to the obligor, and the court held it to be “ matter” subsequent to the assignment, and disallowed it, There the party making the defence had more cause than the party in the cases before us, for he had a valid, subsisting de-fence, when the note was transferred. By his folly he destroyed it, in accepting a subsequent renewal. In Cain vs. Spann, 1 McMul. 260, my brother Evans, on the question I am now considering, states the true rule. He says that “ he who takes a note after it is due, takes it subject to any defence which the maker can set up against the payee; and according to my understanding of the law, where the action is in the name of the indorsee or bearer, to entitle the defendant to set up, by way of discount, any matter between him and the payee, he must prove that the note was transferred after due, and that the matter of defence existed between them at the time of the transfer.” A note negotiated before due, but with notice of the de-fence, (as I assume the note in these cases to have been,) stands upon the same ground with a note negotiated after due. The inquiry is, had the defendants any defence against the note negotiated to the plaintiff, when it was transferred 1 It is clear they hád none. The note on McCully was not due then, nor until a month after this note was due. Previous to the accrual of their cause of action or defence, this note was out of McCully, and in the plaintiff. They had, therefore, in no sense, any account, reckoning, demand, cause, matter or thing, against McCully at the time he passed away the note. It was conceded by the defendant’s counsel, that if the plaintiff had sued as soon as this note fell due, the defendants could not have set up any defence, as' the note on McCully was not then due. There is no doubt that this concession is true, and it admits the plaintiff’s case ; for if, when this note fell due, he had the right to recover every dollar against the defendants — nothing arising subsequently, between the defendants and McCully, (as his note falling due,) can divest the plaintiff’s fixed and ascertained rights. The case of Shepherd vs. Turner, 3 McC. 249, relied upon by the defendants’ attorneys, has no application to this case. That merely decided, as between the parties, that a discount, to be allowed, must belong to the defendant when the plaintiff brought his suit.

The motion for a new trial, in the case of J. C. McAl-pin against Wingard & Muller, is granted ; in the case of the same plaintiff against Richard Sondley, the motion is dismissed..

Evans, Wardlaw and Frost, JJ. concurred.

Richardson, J.

dissenting. The rule of law, as heretofore well established, and I might say, inveterate in practice, is this, that where a note is indorsed after it has become due, or, what is the same, before due, but with notice from the maker of his defence against the note, the in-dorsee takes the note upon the responsibility of the indorser ; and the maker is let in to make the same defence against the indorsee, that he could have made against the original payee. And if such defence should be established, the in-dorsee’s sole resort is against the payee, upon whose responsibility the note so dishonored had been taken. Past due, or notice, takes from the note the peculiar character of negotiable, commercial paper, and places the note on the common law applicable to unnegotiable notes, bonds, and other demands that have been assigned.

Accordingly, in all such cases, the maker of the dishonored note has been always permitted to make his full defence as if the original payee had sued ; and the only question was, what was the true balance of indebtednesss of the maker to the payee ? and for this alone, such indorsee could take a verdict. True, it has been sometimes suggested that an intermediate or compromise rule might be adopted for such cases — that is, to restrict the discount to matter connected with the note. But this is neither commercial, nor common law, and least of all, statute law. For our-Act lets iu “ any accompt, reckoning, demand, cause, matter or thing,” by way oí discount.

It is under this Act, the good sense of which is to abridge divers litigation, that the maker of a note past due, or when he has fairly put the indorsee on his guard, is, ipso facto, let into, as is so commonly and well expressed, all the equities” he held against the original payee. And accordingly, the apt suggestion of an intermediate rule— but better termed, for it will be, literally, a sliding scale for the maker’s equities, according to the name of the plaintiff — has hot heretofore obtained foothold at law.

If the rule I have first discussed be correct, then Sond-ley ought to have a new trial, on the third ground of his appeal ; that is, for misdirection to the jury in this, that the discount ought to have grown out of the note.

Having shewn what I consider the true sealed measure of the equitable defence in all such cases, whether against the payee or such indorsee, the way is opened for the just consideration of the point more expressly ruled in the case against Sondley; to wit: that the note set up in discount, not being due at the time when Wingard & Muller’s note became due, the note having before passed into the hands of the plaintiff, as indorsee, this discount could not avail the defendant against the indorsee.

It is not questioned that such a discount would be good against the payee, McCully. The rule is settled, that if the discount has become due before the action is brought, that is enough — because, at that date, the legal balance is to be struck ; Shepherd vs. Turner, 3 McC. 249. But if this be the settled law, it follows irresistibly, from the premises first laid down, and which, I do urge, cannot be overturned, that the discount must be equally good against such in-dorsee with notice, because he stands, by our adjudications, in the stead, place, and rights of the payee, and no more — that is, to the extent of the note such indorsee has put in suit.

There is no getting such indorsee out of the rule, or denying it to the maker, unless we adopt the. intermediate rule, against the possible introduction of which I write this dissent, bat which will, inevitably, gain one advance, if MeCully’s note be rejected as a discount against McAlpin, indorsee, when it was good as against the original payee.

That such a consequence, so as to ripen into a general intermediate rule for different applications of the equities of the maker, is not foreseen by the court, I take for granted. Such innovation in law would be too great. And if so, the argument and decision turn on a small point; to wit: whether, when McAlpin bought the defendants’ note, any demand of the defendants was actually due by the payee, McCully. And I grant that after the note had been passed to McAlpin, Wingard & Muller could not acquire and make up new demands against McCully, in order to set them off against McAlpin, e. g. as by selling goods to McCully. This would be a fraud upon the in-dorsee. But such is not the character of this discount. It consisted in McCully’s note, at the time of the transfer to McAlpin, and made known to him; and it was a debt acknowledged in presentí for value received, and made payable hi futuro; that distinction, therefore, does not apply to the case.

But if this be the whole ground of the decision, that is, that there was no existing debt by McCully to Wingard & Muller, at the time of the indorsement, the meaning of money due now, for value received, but payable in futuro, is to be interpreted; and my exposition is, that debitum in presentí is the law of the contract; it is debt ; and sol-vendum in futuro refers to the remedy. It is the mere lex fori, and governs the time of the suit at law only. But as to the debt, the moment the consideration was received by McCully, the debt accrued solvendum in futuro. The discount, therefore, was contemporaneous with the notice of the defence, and with the indorsement of Wingard <fe Muller’s note to the plaintiff, McAlpin. It was a good discount.

It follows, therefore, that Wingard tfe Muller ought to hold their verdict. But the verdict against Sondley ought to be set aside, for misdirection in law in the charge of the Judge, upon two grounds ; first, upon restricting the discount to matter growing out of the note ; and secondly, by the error of considering MeCully’s note as a, discount accruing after Wingard & Muller’s note had been indorsed to. the plaintiff, Me Alpin. '  