Holland v. Turner

10 Conn. 308

• Court: Supreme Court of Connecticut
• Decided: July 15, 1834
• Status: Published

Opinion

Bussell, J.

In this case, the jury have found, that the note in question was not made and indorsed for the benefit of the defendant ; but that it was indorsed by him, for the accommodation of Brockivay, the maker. The case also finds, that neither at the time of the indorsement, nor at any subsequent period, had Turner any funds in the hands- of Brock-way. It is also found, that during all the time from the making of the note, to its arriving at maturity, Brockivay was insolvent ; but that that fact was not known to the defendant, at the time of his indorsement. It was also claimed, by the plaintiff, to have been proved, on the trial, that funds were placed in the hands of the defendant to secure him against this indorsement.

Upon the facts thus found, and the claims so made, two questions are presented for decision :

1. Whether the defendant was entitled to notice of the nonpayment of the note ? And if so,

2. Whether due notice has been given ?

Other questions have, indeed, been raised and discussed, by the defendant’s counsel. It has been contended, that the declaration is insufficient, as it contains no averment that payment of the note was refused by the maker. It has been further contended, that as the declaration avers a demand and notice, the plaintiff is bound to strict, proof, and cannot be permitted to give in evidence any facts going to show, that notice was unnecessary. These questions it is not necessary to decide; as we are unanimously of opinion, that the verdict is right upon both , . , ' , or the points above slated.

1. Was the defendant entitled to notice of the dishonour of the note?

Although it is admitted, that Brockiony, the maker, was insolvent, yet it has not here been contended, that this fact, standing alone, dispenses with the necessity of notice. But it has been urged, that notice was unnecessary, on two grounds: first, because the indorser had no funds in the hands of the drawer. It is said, that when the drawer of a bill of exchange has no fundi in the hands of the drawee, he need not be notified of the dishonour of his bill. And it is further said, that promissory notes when endorsed, stand on the same ground, and are governed by the same rules, as bills of exchange ; and hence it is inferred, that notice is not necessary where the in-dorser has no funds in the hands of the maker.

It was decided in Bickerdike v. Bollman, 1 Term Rep. 405. that where the drawer of a bill had no effects in the hands of the drawee, he was not titled to notice. And this decision has been followed up in Great-Britain ; and it may now be considered as the settled rule there, that where the drawer of a bill has no effects, at the time of the bill drawn, and no reason to expect that it will be honoured, he is not entitled to no ice. But the judges, in that country, have been very careful not to extend the exemption further, at the same time that they have not been wanting in expressions of regret, that the former rule, requiring notice in all cases, should have been broken in upon. Orr v. Maginnis, 7 East 359. Rogers v. Stephens, 2 Term Rep. 713. Legge v. Thorpe, 12 East 171. Waluyn v. St. Quintin, 1 Bos. & Pul. 265. Clegg v. Colton, 3 Bos. & Pul. 241. Blackhan v. Doren, 2 Campb. 503.

The late Lord Tenderdn, speaking of the case of Bikerdike v. Ballman, says:. “That decision, which substituted' knowledge for notice, I have always regretted, because it introduced nice distinctions into the law, instead of adhering to a plain and intelligible rule.” Indeed, there can be little doubt, from the frequent intimations that have fallen from the Bench, that were this now an open question in Great-Britain., the ancient rule would be adhered to, as being less uncertain, and less inconvenient in practice. But, admitting the correctness of the case of Biker\ of the rule, in regard to bills of exchange, it is not easy to sec its application to the case now before us. It is certainly difficult to trace any analogy between the case of a bill, where the drawer has no effects, and that cf a promissory note, indorsed for the accommodation cf the maker. Why is it, that in the former case, the drawer is not entitled to notice ? The reason is, that he had no right to draw the bill. The case has been treated as proceeding on the ground of fraud; and it was put upon that ground, by Lord Alvanley, and by Heath and Chambre, Justices, in the case of Clegg v. Cotton, 3 Bos. & Pul. 242. It was placed on the same ground, by the late Chief Justice of this court, in the case of Buck v. Cotton, 2 Conn. Rep. 126. He says : “ His drawing the bill is a fraud ; he knows it. will be dishonoured, and in the last resort, he is answerable, without the possibility of recourse to any other person.” But this is very far from being true with regard to him, who indorses a promissory note for the accommodation of the maker. He is guilty of no fraud. He has a right to expect that the not^ will be paid, ¿y the maker, when it arrives at maturity ; and has aright of recourse to him, if he shall be compelled to pay it. As is remarked in the case last cited, his undertaking is not absolute, but conditional. His contract is, not that he will pay, in all events, but that he will pay the note, provided the maker does not; and provided also, that demand be made, and reasonable notice given. Are we at liberty, either on the ground of principle or authority, to give a new character to the indorsement of a promissory note ? To change the nature of the defendant's contract, and to hold hint liable, although there be no demand, and no notice ?

To sustain us in so doing, the case of De Berdt v. Atkinson, 2 H. Bla. 336. has been relied upon. In that case, it was, indeed, decided, that the payee of a promissory note, indorsing it to give it currency, and knowing of the insolvency of the maker, at the time of such indorsement, cannot, in an action against him as indorser, insist on the want of notice.

Admitting the case of De Berdt v. Atkinson to be law, there is this manifest distinction between that and the case at bar. There, the insolvency of the maker of the nóte was known to the indorser, at the time of his indorsement. Here, it is found that the insolvency of Brockway was not known, by the defendant, at the time of making and indorsement of the note. But the authority of He Bert v. Atkinson has ever been questioned ; and I think the case has been expressly overruled, by. repealed decisions, both in Great-Britain and in this country. In Leach v. Hewitt, 4 Taunt. 731. it is said, in relation to this case: “ The court seem to have proceeded on a misapplication of the rule, which obtains as to accommodation acceptances. In those cases, the drawer himself being the real debtor, acquires no right of action against the acceptor, by paying the bill, and suffers no injury from want of notice of non-payment, by ihe acceptor: but in this case, the maker was (he real debtor, and the payee a mere security, having a clear right of action against the maker, upon paying the note ; and therefore, entitled to notice to enable him to exert that right.” See also Smith v. Becket, 13 East 187. Brown v. Maffey, 15 East 216. Cory & al. v. Scott, 3 Barn. & Ald. 619.

It has, indeed, been decided, that if the note be made for the accommodation of the indorser, and the money raised upon it, by a discount, be in fact received by him, he may be considered as a drawer without funds in the hands of the acceptor, and so not entitled to notice of non-payment by the maker. French's executrix v. The Bank of Columbia, 4 Cranch 141. Agan v. McManus, 11 Johns. Rep. 180. And this was the rule laid down, by the judge on the circuit. But there is no foundation for the application of the’rule where the note has been made and discounted for the accommodation of the maker. There, the indorser, as he may have recourse to the maker, is entitled to strict notice. French's ex. v. The Bank of Columbia, 4 Branch 141. May v. Coffin, 4 Mass. Rep. 341. Warder & al. v. Tucker, 7 Mass. Rep. 449. Cory & al. v. Scott, 3 Barn. & Ald. 619. Buck v. Cotton, 2 Conn. Rep. 126.

I will only remark further, on this part of the case, that the point now under consideration was expressly decided, by this court,in the case of Buck v. Cotton before cited. There, the maker of the note was notoriously insolvent, the defendent paid no value for it, and there was no pretence that he had effects in the hands of the maker. He indorsed the note to give it credit and currency. Yet it was held, notwithstanding these circumstances, that he was entitled to regular notice.

Secondly, it is insisted, that as the defendant had funds placed in his hands to secure him against this indorsement, therefore notice to him was unnecessary.

We have shown what was the nalurefand character of the defendant’s undertaking: that it was a conditional, and not an absolute engagement. We have seen upon what conditions' he might be held answerable; and that, in the event of his being compelled to pay the note, he would have a right of recourse to the maker. He has taken security to indemnify him against that undertaking. Can it, then, be seriously contended, that the effect of taking such security, is to change en-^ tirely the character of the undertaking 1 To convert it from a conditional toan absolute one l When the defendant indorsed the note, he tvas entitled, in his character of indorser, to notice. Is there any reason why his subsequently having taken a security should deprive him of a right to which he was entitled when the indorsement a as made ? From the fact, that no notice was given, he would have a right to presume that the note was paid by the maker, and might thus be induced to part with his security.

The cases principally relied on, by the plaintiff, to support this claim, are Corney v. Da Costa, 1 Esp. Rep. 302. and Bond & al. v. Farnham, 5 Mass. Rep. 170.

With regard to the case of Corney v. Da Costa, it may be remarked, that it was a decision at Aisi Frias ; and Mr. Justice Bailer, who tried the cause, seems to have followed up the decision in De Berdt v. Atkinson. It may be remarked further, that there were peculiar circumstances existing in that case, which distinguish it from the present, and on which the decision may have been rested. There, (he drawers of the note having become embarrassed in their circumstances, entered into a composition with their creditors, and agreed to make an assignment of their effects for their benefit. A deed to that effect was prepared. But in order to save expense, it was subsequently agreed, that the defendant should take these effects of the drawers, and indorse their notes to the several creditors for their respective compositions. It was on one of these notes that the action was brought; and it was held, that a demand and notice were not necessary. And although Mr. Justice Butter adverts to the circumstance, that there were no funds of the drawer in the maker’s hands, yet ho places his decision on the ground that this was an original, and not a collateral undertaking, on the part of the defendant, and that he was solely liable.

In Bond & al. v. Farnham, the maker had assigned all , . . Ins effects to the defendant, to secure him against particular-indorsements. There it was held, that a demand and notice were unnecessary ; and unnecessary because the defendant knew that the demand would be fruitless, he having secured all the property which the maker had. Now, however highly we may respect the learned court, by whom this decision was made, and especially the eminent jurist, by whom the opinion was pronounced; and however we might be disposed to adopt his reasoning in a case resting on the same state of facts ; we certainly do not feel called upon to apply it to a case like the one now before us. Nor are we disposed to enter into any speculations, with regard to the effect of notice ; whether it would be of any benefit to the indorser, or whether he would be likely to be injuriously affected by the want of it. A rule/ founded on such speculations, must necessarily be uncertain, i( not fluctuating, and exceedingly inconvenient in practice.

I believe that the great interests of the commercial community will be much more effectually promoted, by adhering to the ancient rule, requiring notice to the indorser in all cases ; and a departure from which has called forth repeated expressions of regret from the most distinguished judges of the British bench.

I am, therefore, of opinion, that the defendant was entitled to notice of the dishonour of the note.

2. Has that notice been given ? This is the only remaining subject of enquiry ; and upon this it would seem impossible that a doubt should exist.

It appears, that the Union Bank at New-London, who received the note for collection merely, made the necessary demand on the maker, and according to their uniform usage, in such cases, forwarded the protest and notices to the Branch Bank of the United States at Hartford, from whom they received the note, and by whom it appears to have been dis-counteJ. And this is all that the case finds regarding notice, except that the defendant lived in Nero-London. It does not appear, that the Brandi Bank took any measure to notify the defendant; or that he was notified by his immediate indorser, or any other party to tire note, of its non-payment. Now, upon this state of facts, it seems to me to be the height of absurdity, to claim, that there has been, as to the defendant, any thing like a compliance wilh the rule requiring-notice. So far as he is concerned, the Union Bank might as well have locked up the protest and notices in 1 heir own vaults I do not mean to say, that the Union Bank have not done all which was incumbent on them, in order to save themselves harmless. They transmitted the protest and notices to the party, from whom they received the notice; and so far as they were concerned, perhaps that was sufficient. But it was, unquestionably, the duly of the Branch Bank to give reasonable notice to the party to whom they meant to look for payment. And he should have given the like notice to his indorser ; ar:d laches any where in relation to the defendant, will discharge him. Turner v. Leach, 4 Barn. & Ald. 451.

Had the case found, that the defendant received notice through his indorsee, or, indeed, from any other party to the note, the question then might have arisen, whether such notice was reasonable; or whether, as New-Loud on was his known place of residence, he was not entitled to immediate notice from the Union Bank ; and the question of usage might then have been raised. But upon the stale of facts presented to us, no such queslion can arise ; unless it is to be claimed, that notice to one party to a promissory note, is constructive notice to all other parties; and surely, no usage can sanction such a manifest perversion of all principle.

I am, therefore, of opinion, that the direction to the jury was right; and the motion must be denied.

The other Judges were of the same opinion,except Peters, J., who was absent.

New trial not to be granted.