Morris v. Eufaula National Bank

122 Ala. 580

Opinion

PER CURIAM.

— A draft had been drawn by the Mound City Distilling Company on the plaintiff, Morris, and duly accepted by him. It Avas due on March 30th, 1891, and was held by the defendant, the Eufaula National Bank, for collection. The latter made due presentment of it to the dnvvree and acceptor thereof for payment on March 30th, and received from him a bank check draAvn by him for the amount due on the accepted draft, on the John McNab Bank, another banking institution then doing business at Eufaula, Alabama, where the payee thereof Avas located. The check dated March 30 Avas payable to the Eufaula National Bank and Avas delivered about ten o’clock in the forenoon. The John McNab Bank continued to pay checks drawn on it and presented during the remainder of the day of March 30, and having then closed its doors did not thereafter resume business operations. The plaintiff had funds on deposit with the drawee sufficient to meet the check AAliich Avould have been paid if presented within banking hours on the day it'AAras delivered to defendant. On March 31, the John McNab Bank being then closed, the plaintiff took up his check and paid defendant the amount called for therein, $470.22. The first amended' count from which the aboAre facts appear states that the plaintiff “was compelled” by the defendant to take up the check, and Ave, therefore, assume that it was taken up and the amount paid on the insistence of the defendant that it should be done.

The plaintiff afterAvards brought his action against the defendant wherein he claims damages on account of the failure of the defendant to present the check on March 30.

A check is payable on presentation and demand. To charge the drawer, the holder is required to present it within a reasonable tune, and after the lapse of a reasonable time from its delivery by the drawer the holder retains it at his peril. — Industrial Trust &c. Co. v. Weakley, 103 Ala. 458; Watt v. Gans, 114 Ala. 264.

As between the holder and drawer of the check, however, presentment may be made at any time, and delay in presentment does not discharge the liability of the drawer unless loss to him has resulted. — Carroll v. Street, 128 N. Y. 19; 2 Daniel on Neg. Instr., § 1587; Industrial Trust &c. Co. v. Weakley, supra.

Without questioning these general principles, it veas held on the former appeal in this case (106 Ala. 383), that the amended complaint showed a cause of action. The conclusion of the court was reached upon a distinction, therein pointed out, as being established by the authorities cited in the opinion. In illustrating the proposition announced by him (2 Morse on Banks and Banking, §421), quoted in our former opinion, that learned author was not as lucid as he usually is, but the proposition itself is clear. I-Ie thus states the same doctrine in section 240: “But when a check is taken, instead of money, by one acting for others, a delay of presentment for a day, or for any time beyond that within which with proper and reasonable diligence it can be presented, is at the peril of the party retaining the check and postponing presentment, as between him and the persons in interest whom he represents. And where loss occurs because such a check is not presented on the day of its reception, the agent is liable.” The same doctrine is thus stated by Mr. Daniel: “The. allowance of a day to present the check does not extend to an agent who receives one for a debt of his principal. He must present it instanter.” — 2 Dan. Neg. Instr., § 1590.

The authority cited by each of these text writers is Smith v. Miller, 43 N. Y. 171; Mr. Daniel citing in addition, Farwell v. Curtis, 7 Biss. 165 and First Nat. Bank v. Fourth Nat. Bank, 17 Hun 332. As the case of Smith v. Miller, 43 N. Y. 171, s. c. 52 N. Y. 546, is cited as sustaining the conclusion of the court in this case on the former appeal, it is proper to make a fuller statement of it than we would otherwise feel called on to do.

The plaintiffs in that case brought an action to recover the unpaid balance of the price of a bill of goods sold by the plaintiffs to the defendants. The defendants set up a defense of payment by a draft for $2,968.69,-drawn by them on James K. Place & Co., of New York, to the order of plaintiffs, who resided and did business in New York, the defendants residing at Buffalo. The plaintiffs received the draft by mail on the morning of November 19, and immediately indorsed it and at about _ half past one in the afternoon of the same day presented' it for payment at the counting house of James K. Place & Co., the drawees, who were merchants in New York in good standing. In payment of the draft James -K. Place & Company gave their check on the Manufacturers' National Bank of New York city to the order of plaintiffs for the full amount. At the time plaintiffs received the .check of James K. Place & Company, the latter had funds in the Manufacturers. Bank to meet the check which would have been paid, had it been presented on that day. The check was deposited during the same afternoon in the Citizens Bank for collection and Avas not presented for payment at the Manufacturers National Bank till twelve o’clock the next day, on the morning of Avhich James K. Place & Co. had failed, and on that account payment of the check Avas refused.

The action, therefore, was between parties to the original draft, and was not betAveen the parties to the check Avhicli James K. Place & Co. had given to plaintiffs. The court, in its opinion, says: “When a check is taken instead of money by one acting for others, as Avas done by the plaintiffs, a delay of presentment for a day, or for any time beyond that, within which, Avith proper and reasonable diligence, it can be presented, is at the peril of the party thus retaining the check and postponing presentment, as between him and the persons in interest Avhom he represents.” (p. 176).

In First Nat. Bank of Meadville v. Fourth Nat. Bank of New York, 17 Hun 332 s. c., 77 N. Y. 320, it appeared that the Meadville Bank had forwarded to the Fourth National Bank a sight draft drawn by another bank in Meadville on certain bankers in New York. On receipt of the draft, the Fourth National Bank, presented it to the drawees for payment, who gave their check on another New York bank for the amount and the draft was delivered to them. The Fourth National Bank did not present this check for payment on that day, but sent it through a clearing house and it was presented the next day for payment, but payment was refused — the drawers of the check having failed on that day. The Fourth National Bank thereupon returned the check to the drawers, received back the draft, made formal demand of payment and caused the draft to be protested for nonpayment, and on the next day due notice of protest was served by mail upon plaintiffs and upon the drawer of the draft. The action was brought by the Meadville Bank against the Fourth National Bank to recover damages, resulting from alleged negligence on the part of defendant in the performance of its duty, as agent for plaintiff. It was held that it was the duty of defendant to have presented the check for payment as soon as, with reasonable diligence, it could, and for any damages arising from the delay in presentation it was liable.

This case, it will be observed, was between the drawer or owner of the draft and its agent for collecting the same. The question presented in Farwell v. Curtis, 7 Biss. 165, so far as it bears on the point under discussion was of the same general nature as that in Smith v. Miller, which was there cited and approved.

If the Mound City Distilling Company were suing the Eufaula National Bank for accepting the check of the drawee of the draft and thereby causing loss to it, the cases referred to would be in point, but that is not the case presented by the record before us. And that the court in Smith v. Miller did not intend that its language or decision should be construed to apply to the relative rights of the parties to the check itself, drawn by James K. Place & Co., is apparent from its language just preceding that above quoted, the court saying: “But a check is payable instantly, and as between the drawer and drawee, the latter has, in analogy to the rules applicable to inland bills of exchange, until the day after the receipt of a check to present it for payment, when drawn on a bank in the same place where given and received. But,” continues the court, “the duty of the plaintiffs is not determined by that rule of commercial law. That rule has respect only to the contract and liability of parties to the instrument.” And we may say further that in Syracuse &c. R. Co. v. Collins, 3 Lans. 29, s. c., 57 N. Y. 641, the question decided in Smith v. Miller is clearly pointed out. There the defendant had given the plaintiff a check on a local bank for the amount of freight bills, on May 4th. The bank on which it was drawn failed on the 5th, and the check was not presented or paid. The action was for the amount of the freight bill, for which the check had been given. The court held that there was no laches in not presenting the check before the bank closed, as the plaintiff had the whole of the next day after receiving it (i. e. of the 5th) in which to present it. And referring to Smith v. Miller, distinguished it in the particular above pointed out, namely, that that case was not disposed of upon the rules of law regulating the rights and duties, respectively, of the drawer and drawee of a check, but upon th'e rules applicable to one who takes a check for collection, acting for one not a party to it.

The distinction, therefore, to be drawn from the foregoing authorities is this: That as between the drawer or owner of the draft, on the one hand, and the party charged with the duty of collecting it, on the other hand, the question of their relative fights is to be determined by the rules of law applicable to principal and agent; and that as between the drawer and the payee of a check, given under the circumstances and for the purpose shown in this case, the question of their respective rights and liabilities is to be ascertained and fixed by the principles of commercial law. The defendant here, in collecting the draft, was the agent of the drawer thereof, and in no proper sense can it be said to have been the agent of the plaintiff. — 1 Morse on Banks & Banking, § 214; Dodge v. Freeman’s Trust Co., 93 U. S. 385; Anderson v. Gill, 79 Md. 312, 25 L. R. A. 200.

There are numerous eases, besides those already adverted to, some of which are referred to hereafter, where the action was upon the check itself or upon the original indebtedness, and the defense was interposed of payment, by reason of laches in the presentation of the check for payment, Avhich resulted in a loss or damage to the draAver, and such laches and consequent damage Ave have held may be shown under a plea of payment. Watt v. Gans, 114 Ala. 264.

Manifestly the drawer’s case is not made any stronger by the mere fact that he is plaintiff than it would, under the same circumstances, be if he Avere defendant and pleading that he Avas discharged by the payee or holder’s delay in presenting the check; It Avould indeed be an anomaly to decide that the defendant had a reasonable time Avitliin which to present the, check for payment in order to charge the draAver, and, under the same state of facts, to hold that the defendant was guilty of negligence in not presenting it before the expiration of such reasonable time.

Under the facts stated in the count of the complaint under consideration, the only obligation, so far as concerned the plaintiff, which rested upon the defendant, Avas to use due diligence to make presentment and demand of payment of the check, Avithin the reasonable time alloAved by the rules of the commercial law, and upon its being dishonored to give due notice to the draAver. — 1 Morse on Banks & Banking, § 218.

What then is the reasonable time which the defendant had within Avhich to discharge the obligation, under the facts of this case?

We consider it thoroughly settled that the reasonable time alloAved the holder for presenting a check Avhen he receives it in the same place AAdiere the bank on which it is draAvn is located is till the close of banking hours on the next secular day, and if in the meantime the bank fails, the loss will fall on the draAver. — Daniel on Neg. Instr., § 1590; Morse on Banks & Banking, § § 240, 42Í; Randolph Com. Paper, §1103; Merchants Bank v. Spicer, 6 Wend. 443; Wear v. Lee, 87 Mo. 358; Bickford v. First Nat. Bank, 42 Ill. 238; Simpson v. Pacific M. L. Co., 44 Cal. 139; Loux v. Fox, 171 Pa. St. 68; Anderson v. Gill, 79 Md. 312; Holmes v. Roe, 62 Mich. 199; Smith v. Miller, 43 N. Y. 171; O’Brien v. Smith, 1 Black (U. S.) 99. We recognized and approved this rule in Industrial Savings &c. Co. v. Weakley, 103 Ala. 458.

In First National Bank v. Nelson, 105 Ala. 180, this court held that checks were included in the word “hills” as used in section 1763 of the Code of this State, relating to instruments governed by the commercial law. In that case, Judge Haralson, speaking for the court, says: “We fail to see why checks, as well as other commercial instruments, do not require the protection of the statute. They are as well known, and from the necessities of the case, enter as largely into the commercial transactions of the country as other species of commercial instruments ; and after all Ave have said and attempted on the subject of negotiable instruments, for these many years, to relegate them to take their chances as.commercial bastardy and make their OAvn Avay in the commercial world, deprived of the protection which is accorded to other negotiable instruments, it seems Avould be against reason, authority, and the interest of the country.”

Nothing is sliOAvn by the count we have discussed which calls for any modification of the well settled rule above announced.

The acceptance of the check by the defendant was only a payment of the draft, sub modo, and could become operative as a payment in fact only when the check Avas paid, (Smith v. Miller, supra), and the drawee bank being closed on March 33, the defendant could on that day have tendered back to the drawer his check and made formal. demand for the payment of the accepted draft. First Nat. Bank v. Fourth Nat. Bank, 77 N. Y. 320.

Whether, therefore, his payment on March 31, be treated as a payment of his check or of the acceptance, the result is the same as to him, as he Avas by reason of having accepted the draft liable thereon as the principal debtor. — 3 Am. & Eng. Encyc. of LaAv, (2d ed.), 470; Tichnor v. Br. Bank, 3 Ala. 135. His liability was not discharged, and under the views we have expressed the defendant was not liable to him in damages.

It follows that the demurrer to the first count should have been sustained; and that the former opinion in this case (106 Ala. 383) must be overruled.

After the case returned to the circuit court, the plaintiff was allowed to amend his complaint by filing an additional count, which averred substantially the same facts that appear in the original complaint, except that he averred that, at the time he delivered his check to defendant, the latter “contracted with plaintiff to present the same within a reasonable time to said John McNab Bank for payment,” and “that defendant violated its contract with plaintiff in that it did not present ’said check for payment to the John McNab Bank within a reasonable time on said March 30,1891.”

Without stopping to determine whether the meaning of the covenants is that a contract was made whereby the defendant agreed to present the check on March 30, the day of its receipt, we are satisfied the court’s ruling is free from error on this branch of the case. As we construe the original complaint, it counted on the want of due diligence or negligence of the defendant in presenting the check, and was therefore in case. The new count claiming damages by reason of the alleged violation of the contract therein set out was in assumpsit. But it is not allowable to join a count in case with one in assumpsit. By the introduction of the additional count, the complaint was made to contain a misjoinder of counts, and the defect was properly taken advantage of by the demurrer to the entire complaint as amended. — Wilkinson v. Moseley, 30 Ala. 562.

The plaintiff having declined to plead further, judgment was rendered against him, and the judgment of the circuit court is affirmed.

The foregoing opinion was prepared by former Chief Justice Brickbll, and is adopted by the court.