80 Ky. 190 | Ky. Ct. App. | 1881
Lead Opinion
delivered tiie opinion of the court.
The appellee, J. W. Bruffj sold to the appellant, J. H. Francis, a grist-mill engine and boiler, and accepted as payment from the latter two notes on David A. Dunn for one ^hundred dollars each, indorsed or assigned by the appellant for value received.
These notes were a lien on a small tract of land sold Dunn’s wife, and this land was subjected to the payment •of the debts by a judgment in equity, but failed to satisfy the full amount of the two notes and interest. The balance
There is no demurrer to the petition, but an answer filed, in which the appellant alleges that the appellee failed to prosecute his suit in equity with that diligence required, and further alleges facts showing that there was no action instituted at law, or judgment obtained at the first term of the court at which an action could have been properly broúght, and that when judgment was obtained no execution ever issued. He therefore denied the exercise of such diligence on the part of the assignee as would make him responsible, but failed to deny the allegation of insolvency, as alleged by the appellee, and for that reason the court below seems to have .rendered the judgment holding him responsible as assignor.
The petition was clearly defective, and has not been cured by the answer; but, on the contrary, that pleading discloses a state of fact that must necessarily bar the appellee’s right of recovery.
The fact of insolvency existing, not only at the time of the assignment, but continuously since that time, does not constitute a cause of action, or authorize the recovery against the. appellant; and although such allegations are made and not responded to, the liability of the assignor to the assignee is made to depend upon the existence .of
Exceptions may be found to this general rule, as where the obligor in the note has been released by a discharge in bankruptcy. That fact being admitted, no judgment could be obtained,' and if legal proceedings were instituted, it would result in a dismissal of the action, as the obligor has been released -from all liability. So if the obligor leaves the state, going beyond the jurisdiction of its legal tribunals, the assignee is not compelled to pursue him, but the mere fact of insolvency at the date of the assignment, or continuously thereafter, has never been held by the courts.
In speaking of the liability of the assignor, and when he ■became responsible on his assignment, this court in that case said: ‘ ‘It is agreed that this responsibility is to accrue after ■due diligence by suit.” In that case, a Virginia case of Mackie’s ex’r v. Davis, and a former opinion of this court in the case of Boals v. McConnel, were adverted to as not settling the question as to what constituted due diligence, but leaving it at large, and without designating the ultimate point to which the assignee shall go in prosecuting the debtor before he has his recourse on the assignor. The declaration in that case only averred that the assignee had used due diligence, and the court below, having permitted the jury to take the record on that subject, the jury referred the matter back to the court to know whether the record amounted to due diligence. The facts being agreed, it was then a question of law with the court whether due diligence was used, and this court said: “It seems to follow that the assignee ought to take every compulsory process of the law against the debtor until his insolvency is established, or the suit and its incidental remedies prove insufficient to coerce payment.”
The doctrine of that case has been followed so long by the decisions of this court that it may now be regarded as among the fundamentals of the law, and the rule is now well settled, in the absence of some agreement, that before the assignee can recover of the assignor in a case
But it is maintained that the record of the action against, the debtor, with a judgment and return of no property, is only the evidence of the debtor’s insolvency, and that fact (the insolvency) being admitted by the answer, or not denied, requires no proof; that the record is only required to be produced when the issue as to insolvency is made, and then 'because it is the best evidence. This reasoning would be •sound if, as counsel contends, the insolvency of the debtor alone will authorize the recovery. The fallacy of the argument consists in the failure of counsel to recognize the fact that the record of the action against the debtor, showing a return of no property, is not the evidence of a right already existing in the assignee, but is the creation of the right itself, and is indispensable to a recovery, the fact of insolvency, without any legal proceeding against the debtor, creating no implied obligation on the part of the assignor •to the assignee. It is more like an action based on a record, as the failure to allege its existence leaves the assignee without a cause of action, or is analogous to cases where, in order to sustain the agreement or promise declared •on, one character of evidence will alone support the action.
Due diligence, says this court, in the case of Johnson v. Lewis, ist Dana, is a question of law. If so, the facts in this case are, that the maker of the notes was insolvent when they were assigned, and has so continued since that time. On these facts will the law enable the assignee to recover? Certainly not, because the assignee has shown no diligence in coercing payment. It further appears that a court intervened in the county of the debtor’s residence between the date of the assignment and the institution of the action on the notes; that the assignee had ample time to bring his suit at the first court, but neglected it, and has never had an execution issued on one of the judgments. These addi
The assignee is not required to coerce payment by an action at law, or to exercise any diligence if the insolvency •of the obligor in the note is admitted on demurrer, or by ■failure to answer, and a breach of the implied undertaking • occurs on the part of the assignor from the moment of the • assignment, and continues so long as the maker remains insolvent; and the only mode the assignor has of defeating the recovery is to deny the insolvency, and when this is ■done, the assignee has alleged a cause of action; but as there is an absence of record, with a return of no property, he is without evidence to support it. This cannot be the rule. The legal effect of an assignment of notes not regarded as commercial paper was at one time involved in
The rule here with ■ reference to- the right of recovery by the assignee is unlike that adopted in some of the other States. In Virginia, while a suit is in general necessary, the insolvency of the obligor is one substantial ground of' excuse for not instituting the action. (See Drane v. Schofield, 6 Leigh.) “If the obligor be insolvent at the time of the assignment, so that a suit against him would be wholly unavailing, it-is unnecessary for him to bring suit.” (Brown v. Ross, 6 Munford, and Carrier v. Hansbarger, 4 Leigh.) Such an excuse will not avail the assignee under the well settled doctrine of this court. In fact, a debtor may be insolvent, that is, unable to pay all his debts, and still with ample estate to pay the debt assigned, or he, may have no property subject to execution, and his credit good for double the amount of the debt assigned, and to preserve that credit would pay the debt to avoid litigation.
In the case of Jacob Clair v. T. & K. Barr, reported in 2 A. K. Marshall, page 658, it was alleged in the declaration that the maker of the note was, at its date, and when it became due, insolvent, and continued so until his death, without any estate to satisfy said-note or any fart of it. To this peti
It is true no question was raised as “to the sufficiency of the petition in that case, but it necessarily follows, that if the evidence of the same facts alleged in the petition would not excuse the assignee from suing, the statements in the petition containing the same facts, and nothing more, cannot be held to excuse, although the petition may be. taken for confessed. The insolvency of the debtor is no breach of the implied obligation on the part of the assignor to refund the money, unless the assignee has complied with his implied undertaking, by prosecuting the debtor without unreasonable delay, and obtaining a return of no property. The latter rule affords, ordinarily, a conclusive guide in determining when the cause of action accrues to the assignee, as well as the insolvency of the payee, and avoids the necessity of resorting to parol testimony as'to the pecuniary condition of the debtor, with the conflicting opinions of witnesses that would likely arise on such an issue after the lapse of years, or even at the date of the transaction itself. It is, therefore, an immaterial inquiry in this case whether the maker of these notes was solvent or insolvent, or whether the insolv
Dissenting Opinion
dissents in the following opinion:
Appellant, for a valuable consideration, assigned to appellee two promissory notes for $100 each, for the security of which there was a lien on a certain tract of land. Suit was not brought on either of the notes until some time after they were due, and it is conceded that, by ordinary diligence, an action might have been brought on either of them several terms earlier, and that an effort to enforce the lien on the land .was not made until some time after the maturity of the last note. On the judgment on the first note an execution was issued and returned “no property.” On the judgment on the second note no execution ever issued, and the lien on the land being enforced and it proving to be insufficient to satisfy the full amount of the two notes, the assignee instituted this action against the assignor to recover the remainder. The petition states the several steps taken to enforce payment and alleges that “at the time of the assignment the payor was insolvent, had no property subject to execution, has been since and is now utterly insolvent.” To this petition appellant answered, insisting upon a want of diligence on the part of appellee, but did not deny the allegation quoted as to the insolvency of the assignor.
From a judgment against the assignor for the unpaid balance this appeal is taken, and the only question presented is, whether the admitted insolvency, as charged, excuses appellee from the exercise of ordinary diligence in prosecuting appellant to insolvency.
My understanding of the -legal effect of such an assignment is that the assignor assumes to pay the assignee the debt in the event he cannot make it off the payor. That the.assumpsit does not imply that the assignee shall do any specific thing in order to render the assignor liable is manifest both from the reasqn of the law and from adjudged ■ cases. The fact to be established by the assignee to enable him to recover of the assignor is that the claim cannot be made out of the payor of the note or bond, which fact, when established shows the assignment to be without consideration, and for that reason the right of recovery exists. The manner in which that fact is to be established is a question of evidence to the determination of which the ordinary rules of evidence are to be applied. This court heretofore seems to have proceeded upon the conservative idea that the best evidence of the insolvency and inability of the payor to satisfy the demand against him is to show a judgment and return of “no property,” both of which must be obtained with ordinary diligence. That rule ought not to be departed from, not only because of the sanction it has' received by adjudications extending over a period of eighty years, but because of the uncertainty that would result in a determination of the fact of insolvency by the introduction of oral •evidence. The rule is founded upon the familiar principle that the best evidence should in every case be presented. .But when the reason fails the rule must open for excep
The error, that there must be in every case a judgment and return of “no property,” has resulted from confounding the cause of action with the evidence by which it is ordinarily to be established. The cause of action springs from the-fact that the debt cannot be made out of the payor, and when that fact is*admitted, as in this case, no evidence is-necessary; but when an issue is made by the assignor upon-the ability of the assignee- to make the debt the best evidence of that fact-must be adduced, and if the inability grows out of insolvency, the best evidence of the insolvency is a judgment and return of “no property.” The object to-be attained by the introduction of evidence is to establish or to controvert some disputed fact, and when the fact upon, which the right to recover exists is not disputed no evidence is necessary.
It is a familiar rule of pleading that the evidence relied’ upon to make out a cause of action or to sustain a defense • should not be pleaded, from which it follows that in an action, by an assignee against an assignor, the allegations should be-confined to the facts that justify a recovery. As, for instance, in the case of the discharge in bankruptcy of the.
It is not unlike a declaration upon a state of facts that are shown of record. In such case it is not necessary to set. forth the record evidence, but if issue is taken on the existence of the facts the only competent evidence. is the record..
The rule is broadly laid down in Smallwood v. Woods, x Bibb, that a suit is necessary to fix the liability of the assignor, but on examination of that case it will be found that the question here presented did not arise. The only-question at issue there was of diligence. The question as-to whether insolvency existing at the date of assignment and continuing would be sufficient to fix liability on the assignor was not considered. Beside, the opinion in that case, as to-the necessity of a suit to establish the liability of the assignor, is expressly based upon the case of Boals v. McConnel, Sneed (Ky.), 130, which does not tquch the point, and upon Mackie v. Davis, 2 Washington, 281 (Va.), in. which it is expressly said that the only question is, ‘ ‘ Can the assignee of a bond maintain an action against the-assignor without a special undertaking by the latter to-insure the payment?” Mackie v. Davis was followed by the case of Brown v. Ross, 6 Munford, 393, in which the-same judge said: “In the case of the assignment of a note, it is generally necessary for the assignee to sue the drawer in order to charge the indorser. There are exceptions, how
To the same effect is Coiner v. Hansbarger, 4 Leigh, 452, and Smith v. Triplett, 4 Leigh, 590.
The Virginia cases go so far as to admit oral evidence upon the issue of insolvency, and in considering the weight to which these cases are entitled it is well'to remember that our statute making bonds, notes, and bills assignable, so as to vest the title and the right of action in the assignee, is ■substantially a copy of the Virginia statute.
I will not undertake to review in detail the decisions in this state, but confidently express the opinion that no reported case can be found in which the exact question here presented, is passed upon. In man)? cases expressions may be found that appear to indicate that there can be no recourse unless there has first been suit and return of “ no property;” but, on examination, it will be seen that the question here presented did not arise. Such expressions áre purely dicta ■wherever found.
Upon these questions I cite, in addition to the cases mentioned: Clay v. Johnson, 6 Mon., 645; Wood v. Berthoud, 4 J. J. M., 304; Stapp v. Anderson, 1 A. K. M., 541;
Since I prepared and read in consultation the foregoing views in regard to the law of this case I have heard read the opinion of the majority of the court, in which I cannot concur. What I have already said I propose to let stand without modification, -but will add, by way of elaboration, some additional suggestions.
The cardinal error in the opinion of the majority of the court grows out of the assumption that the implied obligation resulting from the assignment is, that the assignee will pursue the payor to insolvency by suit. I have already stated that the contract of assignment does not imply such an obligation and that no reported case can be found in which it has been so decided. The conclusion of the majority of the court upon this point is drawn from dicta only. It matters not how often the court may assert the law to be one way or the other, the repetition does not establish the law. That can only be done in a case where the declaration is in reference to a point directly in issue. Of course I admit that as between parties to an action the rule is different. Then the party complaining must present his whole case, and any question that might have been made on appeal, or that is incidentally decided, becomes res adjudicata as between the parties. But when we come to consider how far an opinion is the law of the land, in controlling the rights of those not parties to the particular case, the rule is.
‘ ‘ It is a maxim not to be disregarded that general expressions in every opinion are to be taken in connection with the case in which those expressions are used. If they go beyond the case, they may be respected, but ought not to •control the judgment in a subsequent suit, where the very point is presented.” .... “ No opinion can be relied on •as binding authority unless the case calls for its expression. 'Its weight of reason must depend on what it contains.”
The opinion of the court, to be correct, must be based upon reason or authority — one or both. That this opinion is not supported by reason, I submit, is clear, nor do I under- ■ stand the majority of the court to so insist, and that it is not sustained by authority, I have already asserted, and still so insist. In every case, where the rule insisted upon in the opinion is found, the issue was as to negligence or no negligence, and not as to solvency of the payor or inability ■on the part of the assignee to make the debt out of the payor.
It is suggested in the opinion that that portion of the petition alleging continuing insolvency is demurrable. In •order to reach that conclusion, the court assumes the existence of the very question of law in issue, and that is, whether the law implies from the assignment an undertaking in all •cases to prosecute to insolvency, or whether the obligation of the assignor is to pay in the event the assignee is unable ' to enforce payment from the payor or maker. If the assumption of the majority of this court is correct, then ■nothing will excuse a suit and diligence in its prosecution, •and what then comes of the exceptions already mentioned?
' If there is any defect in the allegation of the petition in regard to insolvency, it is one of form and not of substance, not to be reached by demurrer, but by motion to make more definite, and such a motion not having been made, the defect, if any, is waived. (Posey v. Green, 78 Kentucky.)
I am of the opinion that the judgment should be affirmed.