
    Gray against Sutton.
    A promisposited for collection in one oftheBmiks Banks,>’ passdrawnpayaBa^: is „ot Iiable t0 defaloation.
    In Error.
    WRIT of error on a bill of exceptions to the Court of Common Pleas of JLllcghanry county.
    „ , , . . . In the Court below, it was an action on a promissory for two hundred dollars, dated 30th ,March, 1816, drawn by fames Gray, the plaintiff in error, who was defendant below, payable on 1st April, 1820, to Thomas O'Connor or •without defalcation, for value received. In September, it was endorsed by O'Connor to Samuel Edgar Co. and by them to George Sutton, the plaintiff, who deposited it in the Bank of Pittsburg for collection. The usual notice was given by the Bank to the drawer, and the note not being paid, it was protested, .and returned to the plaintiff.. On the 29th June, 1818, the defendant obtained judgment against OiConnor for two hundred and twenty-one dollars twenty-seven cents, which he offered as a set-off against the plaintiff, but the Court refused to permit it. The only question arising upon the record was, whether the defendant had a right to set-off this judgment against the plaintiff’s claim on the note ?
    
      Hopkins and Brackenridge, for the plaintiffin error.
    The case .depends on the construction of the 8th section of the Act of 27th March, 1814, Purd. Dig. 59; and the question is, whether the drawer of the note can be divested of his right of set-off, by' the mere circumstance of its being deposited in -the Bank of Pittsburg for collection ? Independently of the Act of Assembly, the case of M'Cullough v. Houston, 1 Dall. 441, the authority of which has never been questioned, places it beyond a doubt, that the note is subject to the same defalcation to which it would have been liable in the hands of the original payee, and the law, as established by that case; cannot be altered by the Act of 1814,• by implication. When the Legislature spoke of a note falling due at a Bank, they must have contemplated a note, ^nfuch on its face, was made payable at a particular Bank.
    
      M-Donald and Campbell, contra.
    When the Act of 1814, was passed, a general rage for Banks pervaded the community, and the Legislature, participating in its influence, intended to give certain advantages to the Banking Companies, at that time incorporated. The intent and policy of the Act, were to take away a set-off against negotiable paper, which was designed to be placed on the same footing, as in the city and county of Philadelphia. Besides the great benefit secured to commerce from this provision* which alone should induce the Court to give a liberal construction to the law, in order to effectuate its intent, there was another object in view. , The privilege attached to notes lodged in these Banks for collection, was a great inducement to deposit them there, which was an advantage to the Bank, and of course to the State, which had an interest in all of them. Added to this, the law was calculated to produce the desirable effect of breaking up the unchartered Banks.
   Thé opinion of the Court was delivered by

Tilghman C. J. —

In the Court below, the case was considered as depending on the construction of the 8th section of the “ Act regulating Banks,” passed the 21st March, 3814, I shall consider it in the same point of view, without giving any opinion of the law independent of that Act of Assembly. In the section referred to, it is enacted, that “ all notes or bills discounted by any of the Banks incorporated by virtue of that Act, or deposited for collection, and falling due at any of the said Banks, shall be placed on the same footing as foreign bills of exchange, or as bills obligatory ; so that the like benefit shall be had in the payment, and the like remedy for the recovery thereof against the drawers and endorsers and their representatives, and with the like effect, except so far as relates to damages.” It is not denied by the counsel for the defendant, that the right of set-off would have been taken away, if this note had been discounted by the Bank of Pittsburg; but it is contended, that by falling due at the Bank, is meant, being drawn, payable at a certain Bank, and therefore this case is not within the law, because the note is not payable at any particular Bank or place. I cannot agree with the counsel for the defendant. When a note is deposited in a Bank for collection, and remains there until the time of payment, it falls due at that Bank ; so that the case is directly within the -words of the Act, and there are many reasons which induce me to think, it is within the intent of it. Promissory notes will not answer the purposes of commerce, when they afe liable to defalcation, or set-off. And although the ease of McCullough v. Houston, 1 Dall. 441, in which it was decided, that the endorsee of a note, takes it subject to all considerations, legal or equitable, which might have been set up by the drawer against the original payee, has not been denied for law, yet it certainly has not been generally approved of; and the inconvenience of that principle was so severely felt in the commercial part of the State, that the Legislature thought proper to alter the law within the city and county of Philadelphia by the Act of 27"th February, 1797. When Banks were established throughout the State, it was found necessary to guard against defalcation> which would have defeated the circulation of notes, and consequently paralised all Bank operations. This was the reason of the provision in the 8th section of the Act reguiating Banks, by which promissory notes were put on the same footing as bills of exchange. And we may easily perceive why notes deposited in any Bank for collection, and falling due there, were put on the same footing as notes discounted. The State .had an immediate interest in the profits of all Banks incorporated by the Act of March, 1814. Now it is certain, that the collection of'almost all notes, would fall to those Banks in which no defalcation was allowed, and consequently the public finances would be benefited, at the same time that the interests of commerce were promoted. The clause in question therefore, calls for a liberal construction, for the purpose of preventing defalcation. Nor has the defendant the least right to complain. For he must be supposed to have known the law, by which his right of set-off would be taken away, in case his note should be lodged in Bank for collection. And moreover, it was his express agreement, that he should not have that right,'for such are the words of the note. I am clearly of opinion, therefore, that the set-off w’as not admissible, and the judgment should'be affirmed.

Judgment affirmed.  