The opinion of the court was delivered by
Huston, J.
— In order to understand this cause, and the reasons of our opinion, we must attend to dates as well as facts. Harker and Thorn were erecting a house in Walnut street in the year 1818. They got lumber from Conrad and Lancaster for this house, and the first charge is on the 23d of June, 1818. On the 11th of July, 1818, the price of the lumber delivered was less than one hundred dollars. On the 11th of July, 1818, Moses L,ancaster assigned to Harker and Thorn a note, signed by Conrad and Lancaster, and dated the 18th of March, 1818, for one hundred dollars, payable in lumber. On this day, then, Harlcer and Thorn were the creditors, and Conrad and Lancaster were indebted to them; but Conrad and Lancaster continued to deliver more lumber, and soon became creditors. The house was finished about the last of-December; or, qts the jury have found, though I cannot see why, some time in January, 1819.
On July 1st, 1819, Conrad and Lancaster filed in the office of the District Court a claim for three hundred and thirty-four dollars and forty-four cents against Harker and Thorn for lumber furnished this house in Walnut street; and the dispute arose on the trial of an issue on the validity and amount of this mechanic’s lien. The plaintiffs proved-the delivery of the.lumber, and there was contradictory proof about the time when the house was finished.
The defendant showed a title in Mia B. Thorn, and a deed from him to H. Hopkins, dated the 15th of May, 1S19, and a deed from H. Hopkins to J. B. Hopkins, dated the 21st of June, 1819; and then proved by Moses Lancaster, that he transferred to Harker and Thorn the note for one hundred dollars, payable in lumber, above mentioned, on the 11th of July, 1818; and that about a year afterwards (that is, after the purchase of the defendant, and the filing of the claim for a lien,) he was informed by Harker and 27iora that the note was lost; and an arrangement was made by Conrad and Lancaster, Harker and Thorn, and himself, that the note for one hundred dollars which was lost should be replaced, and an order should be given by Moses Lancaster on Conrad and Lancaster, as if the first note had been presented. This arrangement was made, and the order given the 26th of February, 1820. Conrad and Lancaster, he says, knew nothing about these orders, so far as he knew, before that time. On the sáme day he gave Harker and Thorn another oi’der on Conrad and Lancaster for one hundred and thirty-seven dollars and twenty-six cents, being a balance he owed Harker and Thorn. He afterwards says, Conrad and Lan[324]*324caster knew of every arrangement with Harker and Thorn, but he does not know: when they became acquainted with it; he never, heard them speak of being paid for the lumber for the Walnut street house by these orders, or of transferring them to the house in Fourth street.
Harker and Thorn built another house, in Fourth street, and got lumber for it from Conrad and Lancaster. . Against this last house they filed no claim of lien. The first article of lumber for it was furnished the 24th of April, 1819, and several months .after the first house was finished. Conrad and Lancaster wished to give credit for these two orders of M. Lancaster on the Fourth street house. Hopkins alleged he was entitled to eredit for one or both of them on the house in Walnut .street. This cause was tried before, and is reported in 12 /$'erg.. S¡' Rawle, 301; hut the point in dispute, or rather the sum, was different; that related to a payment of five hundred dollars; this to the two orders of M. Lancaster. I refer to that case, for the general law, as to .what debt, a payment made, and not appropriated-at the time, shall be applied; and adopt the principle there stated as applicable to this matter, but much more strongly to these facts.
This cause has been ingeniously and well argued, except that the counsel of. Conrad and Lancaster have relied on the British statutes of set-off, and not on our act about defalcations, which goes much further than the British statutes; a matter which every lawyer ought to keep constantly in view, and which the court generally recollect. There can be no quéstion as to what debt a payment or a counter demand shall be applied to, unless the party has two demands payable at different times, or secured by different instruments; or, of which one, at least, is a lien on some fund, which another part of the debt does not bind.
On July 11th, 1818, Conrad and Lancaster had -but one demand, and that for lumber furnished to the Walnut street house; it could become a lien on that house, but on no other property Under the act creating a mechanic’s lien. On that day Harker and Thorn became owners of a note payable in lumber by Conrad and Lancaster exceeding the price of lumber then furnished. The note was honestly due; admitted now to be due. The operation and effect of this state of things were, that Conrad and Lancaster could not by suit recover the price of the lumber furnished; nor could they, transfer to any other person a right to recover, it. Harker and Thorn could not recover on their note, exéept the balance; nor could they transfer to' any other person a right to recover it. It was not a negotiable note: it was., to be sure, transferable, but would be subject in the hands of a third person to defalcation, to the amount of the claim of Conrad and Lancaster for lumber furnished; for, in Pennsylvania, where two persons have each, in their own right, whether strictly a legal or only an equitable right, demands against each other, due at the time, neither can transfer to a third person a [325]*325right to recover more than the balance, unless the demand on one of them, is a negotiable note, and that note not over due. This is so by express act of assembly, and decisions in every book of our reports; and it does not make the slightest difference that the party transferring, and he to whom it was transferred, did not know of the fact that there existed a cross demand. It is so as to bonds; so as to notes, except those strictly negotiable; so as to book' accounts; so in case of the insolvency of one of the parties, or in case of the death of the creditor party insolvent; his executors can recover only the balance. Murray v. Williamson, 3 Binn. 135.
This note then paid or extinguished its own amount of the price of the lumber furnished to the Walnut street hpuse; and the lumber furnished to the Walnut street house extinguished this note long before any debt was contracted for the house in Fourth street. The parties were'both bound by the law; by consent of both they could change this; neither could change it without the consent of the other. They did, however, both consent to change it; but it was after the right of J. R. Hopkins
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The opinion of the court was delivered by
Huston, J.
— In order to understand this cause, and the reasons of our opinion, we must attend to dates as well as facts. Harker and Thorn were erecting a house in Walnut street in the year 1818. They got lumber from Conrad and Lancaster for this house, and the first charge is on the 23d of June, 1818. On the 11th of July, 1818, the price of the lumber delivered was less than one hundred dollars. On the 11th of July, 1818, Moses L,ancaster assigned to Harker and Thorn a note, signed by Conrad and Lancaster, and dated the 18th of March, 1818, for one hundred dollars, payable in lumber. On this day, then, Harlcer and Thorn were the creditors, and Conrad and Lancaster were indebted to them; but Conrad and Lancaster continued to deliver more lumber, and soon became creditors. The house was finished about the last of-December; or, qts the jury have found, though I cannot see why, some time in January, 1819.
On July 1st, 1819, Conrad and Lancaster filed in the office of the District Court a claim for three hundred and thirty-four dollars and forty-four cents against Harker and Thorn for lumber furnished this house in Walnut street; and the dispute arose on the trial of an issue on the validity and amount of this mechanic’s lien. The plaintiffs proved-the delivery of the.lumber, and there was contradictory proof about the time when the house was finished.
The defendant showed a title in Mia B. Thorn, and a deed from him to H. Hopkins, dated the 15th of May, 1S19, and a deed from H. Hopkins to J. B. Hopkins, dated the 21st of June, 1819; and then proved by Moses Lancaster, that he transferred to Harker and Thorn the note for one hundred dollars, payable in lumber, above mentioned, on the 11th of July, 1818; and that about a year afterwards (that is, after the purchase of the defendant, and the filing of the claim for a lien,) he was informed by Harker and 27iora that the note was lost; and an arrangement was made by Conrad and Lancaster, Harker and Thorn, and himself, that the note for one hundred dollars which was lost should be replaced, and an order should be given by Moses Lancaster on Conrad and Lancaster, as if the first note had been presented. This arrangement was made, and the order given the 26th of February, 1820. Conrad and Lancaster, he says, knew nothing about these orders, so far as he knew, before that time. On the sáme day he gave Harker and Thorn another oi’der on Conrad and Lancaster for one hundred and thirty-seven dollars and twenty-six cents, being a balance he owed Harker and Thorn. He afterwards says, Conrad and Lan[324]*324caster knew of every arrangement with Harker and Thorn, but he does not know: when they became acquainted with it; he never, heard them speak of being paid for the lumber for the Walnut street house by these orders, or of transferring them to the house in Fourth street.
Harker and Thorn built another house, in Fourth street, and got lumber for it from Conrad and Lancaster. . Against this last house they filed no claim of lien. The first article of lumber for it was furnished the 24th of April, 1819, and several months .after the first house was finished. Conrad and Lancaster wished to give credit for these two orders of M. Lancaster on the Fourth street house. Hopkins alleged he was entitled to eredit for one or both of them on the house in Walnut .street. This cause was tried before, and is reported in 12 /$'erg.. S¡' Rawle, 301; hut the point in dispute, or rather the sum, was different; that related to a payment of five hundred dollars; this to the two orders of M. Lancaster. I refer to that case, for the general law, as to .what debt, a payment made, and not appropriated-at the time, shall be applied; and adopt the principle there stated as applicable to this matter, but much more strongly to these facts.
This cause has been ingeniously and well argued, except that the counsel of. Conrad and Lancaster have relied on the British statutes of set-off, and not on our act about defalcations, which goes much further than the British statutes; a matter which every lawyer ought to keep constantly in view, and which the court generally recollect. There can be no quéstion as to what debt a payment or a counter demand shall be applied to, unless the party has two demands payable at different times, or secured by different instruments; or, of which one, at least, is a lien on some fund, which another part of the debt does not bind.
On July 11th, 1818, Conrad and Lancaster had -but one demand, and that for lumber furnished to the Walnut street house; it could become a lien on that house, but on no other property Under the act creating a mechanic’s lien. On that day Harker and Thorn became owners of a note payable in lumber by Conrad and Lancaster exceeding the price of lumber then furnished. The note was honestly due; admitted now to be due. The operation and effect of this state of things were, that Conrad and Lancaster could not by suit recover the price of the lumber furnished; nor could they, transfer to any other person a right to recover, it. Harker and Thorn could not recover on their note, exéept the balance; nor could they transfer to' any other person a right to recover it. It was not a negotiable note: it was., to be sure, transferable, but would be subject in the hands of a third person to defalcation, to the amount of the claim of Conrad and Lancaster for lumber furnished; for, in Pennsylvania, where two persons have each, in their own right, whether strictly a legal or only an equitable right, demands against each other, due at the time, neither can transfer to a third person a [325]*325right to recover more than the balance, unless the demand on one of them, is a negotiable note, and that note not over due. This is so by express act of assembly, and decisions in every book of our reports; and it does not make the slightest difference that the party transferring, and he to whom it was transferred, did not know of the fact that there existed a cross demand. It is so as to bonds; so as to notes, except those strictly negotiable; so as to book' accounts; so in case of the insolvency of one of the parties, or in case of the death of the creditor party insolvent; his executors can recover only the balance. Murray v. Williamson, 3 Binn. 135.
This note then paid or extinguished its own amount of the price of the lumber furnished to the Walnut street hpuse; and the lumber furnished to the Walnut street house extinguished this note long before any debt was contracted for the house in Fourth street. The parties were'both bound by the law; by consent of both they could change this; neither could change it without the consent of the other. They did, however, both consent to change it; but it was after the right of J. R. Hopkins had come in, and then it could not be changed for .the reasons given at the former trial of this cause: it was illegal and unjust towards a third person; it was intended to relieve Harker and Thorn, and secure Conrad and Lancaster, by considering a note of the latter to the former ■ unpaid, and transferring the credit for it to ánother fund, at the expense of a purchaser for a full and valuable consideration.
Let it be distinctly understood that I do not say this note-for the one hundred dollars-, payable in sawed timber, was a good defence to every demand of every kind which Conrad and Lancaster might have against the holder of the note.; but it was.a good defence to a demand by them' for the price of the sawed timber furnished to those who held the note. Our act about defalcation is the first legislative provision -giving chancery powers to the common law courts. It was intended to give the common law courts all the power'which chancery had ever exercised over bond and other debts; to put an end to what had been said, that a demand was good at law, but would be relieved against in equity, and to do all at the trial of the cause, which a chancellor had been used to do after-wards; and it was intended to do, and has done more; it has prevented cross actions, wherever one will effect the ends of justice better. It is a most beneficial law, and has never been complained of, except by those who think nothing good can be done on this side of the great water.
As to the other order, for the one hundred and thirty-seven dollars and twenty-six cents, we have not enough before us to give an opinion, further than that it must be decided on the principles laid down by this court on the former hearing, and this. In a cause like this, where a paper is lost or found, or, perhaps, made at different trials, as may best tend to suit the interests of two parties who wish to af[326]*326feet a third party, we cannot conjecture what shape it would assume next time.
■ Mia B. Thorn was not a witness; he was dir.ectly bound by his warranty. This verdict and judgment would be evidence in the suit against him, for one purpose, if he had no notice; conclusive, if he had notice; and I do not see how a man, who was examined as a witness in a cause, could deny that he had notice, or what better proof of notice could be given..
Judgment reversed, and a venire facias de novo awarded.