Bank of the United States v. Donnally

Citations: 33 U.S. 361; 8 L. Ed. 974; 8 Pet. 361; 1834 U.S. LEXIS 595

Court: Supreme Court of the United States; March 17, 1834; Federal Supreme Court; Federal Appellate Court

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In the case of The Bank of the United States v. Andrew Donnally, the plaintiff, the Bank of the United States, initiated a debt action against Donnally in the district court of western Virginia. The declaration included five counts based on a note dated June 26, 1832, in the amount of $12,877, executed by Campbell, Vaught & Co. as principals and Donnally, along with others, as sureties. The note specified payment to the bank in Louisville, Kentucky, within sixty days, with interest accruing at six percent annually if not paid at maturity.

The first three counts regarded the note as a simple contract debt, to which Donnally responded with a plea of 'nil debet' and invoked the Virginia statute of limitations. The court ruled in favor of Donnally for these counts. The fourth and fifth counts referenced a previous note made on June 26, 1822, by Donnally and his partners, affirming a similar obligation to pay the bank. The plaintiffs argued that this note, being a writing without seal, was treated under Kentucky law as equivalent to a sealed writing, thus holding the same legal effect. The document presented included a certification from Kentucky's law confirming this equivalence in legal standing.

The plaintiffs allege that a sum of $12,877, specified in a promissory note, has remained unpaid despite being due for an extended period. The defendants, including Andrew Donnally, Richard Steele, Robert M. Steele, Adam Steele, and William Steele, have not settled this debt, both during the lifetimes of some defendants and after the death of Robert M. Steele. The plaintiffs assert that they made repeated demands for payment, which were refused. On June 26, 1822, the defendants executed a writing obligating themselves to pay the same amount, with interest at 6% per annum, but this payment was also not made by the due date of August 28, 1822. The writing, made in Louisville, Kentucky, was executed without a seal; however, under Kentucky law, it holds the same legal weight as a sealed instrument. As a result, the plaintiffs claim they are entitled to recover the owed amount, including interest, from Andrew Donnally, one of the obligors. The district court ruled in favor of the demurrers filed by the defendants concerning the fourth and fifth counts, indicating a procedural or substantive dismissal of those claims.

The defendant pleaded 'nil debet' and invoked the statute of limitations from Virginia, which the plaintiffs contested regarding both the statute and the plea on the fourth count. The relevant Kentucky statute, effective February 4, 1812, established that writings executed without seals for monetary payments or obligations would be treated the same as sealed writings in legal proceedings. The district court ruled that the Virginia statute of limitations barred all counts and ruled in favor of the defendant, leading the plaintiffs to file a writ of error.

The core legal issue revolves around whether the Virginia statute of limitations applies to the note referenced in the fourth and fifth counts. It was argued that Virginia's statute concerns simple contract debts, not debts secured by specialties, thus raising the question of whether the note constitutes a specialty. The note was executed and payable in Kentucky, where a non-sealed note is classified as a specialty under state law. The principle that the law of the contract's location governs its terms was emphasized, asserting that the Virginia statute does not apply to specialties.

While it is acknowledged that Virginia's statute is the relevant one to be pleaded, it does not pertain to specialties. The Kentucky statute, enacted in 1811, has established that the note in question is treated as a specialty in Kentucky, thus maintaining its classification regardless of jurisdiction. The defense argued that if the note is not a specialty, the demurrers should be upheld, emphasizing that 'nil debet' cannot be used against a writing obligatory, which requires a plea of non est factum.

The case is filed in Virginia, where Virginia's statute of limitations applies rather than Kentucky's. In both states, the debt is classified as a simple contract, although Kentucky law treats it similarly to a sealed instrument for certain judicial purposes. However, the law of Kentucky is applicable only within its own courts, and any recovery sought outside of Kentucky must adhere to the law of the jurisdiction where the suit is filed. The cited cases by the plaintiffs' counsel only demonstrate that Kentucky courts apply Kentucky law and do not influence Virginia courts' adherence to Virginia law.

Mr. Sergeant argued that if the court considers Virginia's limitation law, it should apply that law to the current suit without undermining the plaintiffs' rights in Kentucky or elsewhere. He emphasized that the referenced cases primarily address the impact of statute limitations on remedies, not the extinguishment of the debt itself due to the passage of time.

The original suit was an action of debt by the Bank of the United States based on a promissory note dated June 26, 1822, involving multiple parties who jointly promised to pay a specified amount to the bank, with interest. The declaration included several counts, with the fourth count asserting that the note, although not sealed, should be treated under Kentucky law as having the same force and effect as a sealed instrument. The fifth count similarly described the promise made in writing without a seal, reiterating its legal standing under Kentucky law.

The defendant invoked his right under Virginia law to present multiple defenses, pleading "nil debet" to the first three counts of the plaintiffs' declaration and citing the Virginia statute of limitations. A special replication and demurrer were filed in response. For the fourth and fifth counts, the defendant also demurred generally and pleaded "nil debet" and the statute of limitations. The plaintiffs demurred to the statute of limitations and the "nil debet" plea to the fourth count, while joining issue on the fifth count. The court ruled that the statute of limitations was a valid defense for all counts, favoring the defendant and concluding that the plaintiffs would not prevail.

A writ of error was subsequently filed to review this judgment. The original contract was made in Kentucky and is being enforced in Virginia, where the statute of limitations ruling will bar any subsequent suit in Virginia, but not necessarily extinguish the contract in Kentucky. However, a judgment on the merits from the demurrer could serve as res judicata, impacting the bank's rights in other states. The court opined that the fourth and fifth counts were valid under a general demurrer, as they sufficiently asserted a cause of action despite mentioning the laws of Kentucky, which were deemed surplusage and did not impair the legal basis for the claims.

Regarding the statute of limitations, it was noted that Virginia law requires actions based on non-specialty contracts to be initiated within five years. The court highlighted that the note in question does not qualify as a specialty under common law, and while Kentucky law may categorize it differently, this distinction does not alter its treatment in Virginia. The argument failed to demonstrate that the note should be considered a specialty under common law principles.

Kentucky's statute from February 4, 1812, states that unsealed writings for the payment of money or property will have the same legal standing as sealed writings, receiving equal consideration and enforceability in courts. However, the statute does not classify these writings as specialties or sealed instruments; it merely places them on equal footing with such instruments. A state can allow unsealed contracts to have the same remedies as sealed ones without changing their classification.

State legislation regarding contract obligations and remedies only applies within that state's jurisdiction. The validity and interpretation of contracts are governed by the law where they are made or to be performed, while remedies are governed by the law of the jurisdiction where the lawsuit is filed (lex fori). For example, a contract enforceable in Kentucky may not be enforceable in another state where different laws apply.

If a promissory note is considered a specialty in Kentucky, it does not mean it is also recognized as such in Virginia, which has its own laws governing limitations and interpretations of contracts. The court's decisions regarding the note must align with Virginia law, not Kentucky law. Notably, neither of the relevant counts in this case claims that the note is a specialty or sealed, suggesting the court should not infer the application of foreign law without explicit mention in the declaration.

The excerpt addresses legal precedents regarding the nature of promissory notes and the applicability of various actions based on their execution and jurisdiction. It cites multiple cases: 

1. **Warren v. Lynch**: A promissory note made in Virginia and payable in New York was deemed an unsealed instrument in New York, where a scrawl is not recognized as a seal; thus, the appropriate action was assumpsit, not debt.
   
2. **Andrews v. Herriot**: An action of covenant could not be pursued in New York for a contract performed in Pennsylvania if a scrawl was used instead of a seal, despite Pennsylvania recognizing it as a seal.

3. **Trasher v. Everhart**: A single bill from Virginia, not classified as a specialty there, could not be maintained as a simple contract in Maryland, where it was considered a specialty, necessitating an action of debt.

4. **Jones v. Hook's Administrator**: The Virginia court held that the statute of limitations from North Carolina did not apply in Virginia, which governed the remedy in an action of debt based on a North Carolina judgment.

The court concludes that the judgment regarding the demurrer to the fourth and fifth counts should be reversed, affirming that those counts are legally sufficient. However, the special pleas of the statute of limitations by the defendant, Donnally, are valid, precluding the plaintiffs from maintaining their action on all counts. Consequently, the judgment of the district court requiring the plaintiffs to take nothing by their writ is affirmed, along with the awarding of costs.