Smedes v. President of Bank of Utica

Woodwobth, J.

delivered the opinion of the Court.

Henry B. Gibson testified, that the uniform custom is, for the bank to cause notice to be given to all the endorsers; he considered this as the established custom and generad understanding; and that the bank appoint their own notary, with whom the customers have nothing to do.

The plaintiffs offered to produce other witnesses, conversant in banking business, to the same effect; but it was deemed unnecessary by the Judge.

Seymour, cashier of the Utica branch, testified, that this note, not being paid, was handed to Mower, agent of Childs, the notary usually employed by the bank, to protest, and give notice of non-payment; that the bank has nothing to do with the notary; he considered the duty discharged'^ when the note is delivered to him for protest; that it was no part of its business to transmit notice of non-payment. This testimony may seem, at first view, to be at variance with the evidence of Gibson; but, when attentively considered,.it is not opposed to it. Seymour does not speak of the established custom and general understanding between banks and their customers, but gives his opinion as to the legal liabilities of the Utica branch. He proves nothing in relation to the general usage of banks, nor the nature and extent of the understanding, on lodging notes for collection. He does not state any act done, by which the public might learn, that the Utica branch claimed an exemption from the operations of an established custom and general understanding, if any such exist. Gibson’s testimony is not matter of opinion, as to the duties of banks; he stated, as a fact, that the uniform custom is, to give notice to all the endorsers, and so is the general understanding: he goes on to give his opinion, that a bank which should neglect it, would be liable ; but, of this part, I take no notice.

t Without examining the point, how far the Court will take ■'judicial notice of the general usage and custom in this respect, of which I have never heard a doubt expressed, before the argument of this cause, I think the evidence before us, fully proves the general custom and understanding to be, 'as contended for by the plaintiffs’ counsel;jand, if so, the plaintiffs, placing a reliance on this known and general rule, are entitled to the benefit of it, as against the defendants, until it be shown, that they did not acquiesce in the usage, and gave publicity to their dissent. The practice adopted at tlie Ki'ea branch, also proves, that they give notice when a note is lodged for collection. Seymour admits, that the note was handed to the agent of the person usually employed to give notice: whether he is correct, in supposing, that the duty of the bank was discharged, after this was done, is a distinct question, and will be subsequently examined. My conclusion, on this part of the case, is, that from the acts of the parties, and the established usage of banks, the defendants must he considered as undertaking, in default of payment by the makers, to give notice to the endorsers.

The next question is, whether a sufficient consideration is alleged to support the action ? There is a well settled distinction between actions for nonfeasance and for misfeasance. When one party intrusts the performance of a business to another, who, without consideration, undertakes, but wholly omits to do it, no action lies, notwithstanding the plaintiff may have sustained special damages ; but if the party enters upon the execution of the business, and does it amiss, through the want of due care, by which damage ensues to the other party, an action will lie for the misfeasance. In the case of Thorn v. Deas, (4 Johns. Rep. 96.) this question was ably discussed, and all the authorities examined $ and the result of the investigation sanctions this distinction. In Elsee v. Gatwood, (5 Term Rep. 143,) the law is laid down in the same manner. If the plaintiffs had declared for misfeasance, the question of consideration would not arise; yet the action in that form would be equally well calculated to afford redress. I think this proposition warranted, inasmuch as the defendants did, in fact, enter upon the execution of the business, by delivering the note to Mower, for the purpose of giving notice. But there is no count in the declaration adapted to the proof respecting a misfeasance. The third count is the only one on which the plaintiffs can rely; and that is for a nonfeasance, which cannot be supported, unless founded on a valid consideration. I have already stated my views of the nature and extent of the contract in this cause. The promise of the defendants is founded on the delivery of the note by the plaintiffs.

An injury to one party, or a benefit to another, is a sufticient consideration for a promise. (Miller v. Drake, 1 Caines, 45. Foster v. Fuller, 6 Mass. Rep. 58.) It will be conceded} that had this been an undertaking by an individual, to demand payment and give notice, it would be a nudum pactum, unless something more appeared than is disclosed in this case ; for no benefit could result to the promisor in performing the service, and paying the money over immediately after he received it; but the case of banking institutions is widely different; they are established to aid the commerce of the country, by giving facilities to the monied operations of the community, and on the strength of credit, to enlarge the amount of actual capital. They have a powerful influence in enforcing punctuality in payments, and thereby producing a state of confidence essential to commerce and useful to all classes. The operations of a bank principally consist in loaning money and discounting notes, which are direct and immediate sources of profit. Incident to the business of a bank, is the receiving of notes from their customers for collection ; when paid, the money is placed to the credit of the depositor, and remains in bank until called for. Where business of this kind is done extensively, it is,evident that more or less of the money collected may be calculated on with safety to remain in the vaults of the bailie. In some instances, the money may be immediately withdrawn; in others, it will remain a considerable time ; the amount being subject to be increased or diminished, from week to week, and varying according to the sums collected and withdrawn by the depositors, it is possible that at some particular time, a bank may not have a cent of the money collected; but from the course of business, and the occasions for using money, being so diversified among different individuals, and the certainty that money will be permitted to remain in a place of such safety, until really wanted, there is no reasonable doubt, that large sums frequently, and to some amount, at all times, may with entire prudence be calculated on. The amount of notes discounted will depend not only on the actual capital paid, but on various other considerations not necessary to be considered. As one important item, the deposits may be mentioned :—If a bank has been in successful operation, for a number of years, and the deposits have never been less than a certain amount, though often greatly exceeding it $ if the prospect of future business affords no ground to expect a diminution, then the deposits will be considered, by the most prudent board of directors, as authorizing an increased discount, beyond what the capital alone would justify. Notes being discounted for short periods, at the expiration of which payments may be demanded, the bank is thereby enabled to regulate its operations, so as not to incur risk in the event of sudden fluctuations, whereby the deposits may be wholly-withdrawn or greatly diminished. No evidence was necessary on the trial to show such a practice 5 it is sufficient that it is incident to a bank, and may be a benefit, which I apprehend will not be questioned The custom of receiving notes for collection is not founded on mere courtesy, but with a view to the interests of the institution, and is the source from whence profit may and does arise. It is no answer to this view of the subject to say, that banks have no fees or pecuniary advantages from the notes lodged for collection, by which is meant, I presume, specific compensation. Seymour states this in his testimony ; and although undoubtedly true, it does not operate against the argument 1 have advanced 1 neither is it to the purpose, that in the opinion of the defendants’ cashier, notes received • from the Ontario Bank were rather a burden than an advantage, because the money, if paid, would be immediately withdrawn. In the particular instance before us, such opinion must be founded on what had been the practice previously 5 but as to the future, it is merely conjecture. For aught that appears, this money might have lain for months before it was demanded; be that, however, as it may, it is enough for the plaintiffs to establish, that the deposit of money in a bank, as a general proposition, is beneficial. This, I apprehend, has been done, and consequently the delivery of the plaintiffs’ note for collection, when nothing appears that either party knew or expected that the money would not be paid, must be considered as an act not imposing a burthen, but as conferring a benefit,from which profit, however small, might probably arise. This act, then, was a good consideration for the defendants’ promise, and removes the objection taken on that ground. It is not necessary to show, that profits would inevitably accrue tQ tjle ^an]c. js enough that a reasonable expectation exists- that such will be the result. In the case of The Union Turnpike Company v. Jenkins, (1 Caines, 389.) it was held, that the expected profits to accrue from the stock, for which Jenkins had subscribed, was a sufficient consideration to uphold the promise. The judgment of reversal turned on other grounds, and left that point untouched, as was adjudged by this Court, in 9 Johns. Rep. 217.

The next question is, has legal notice been given to the endorser ? The law has so well settled what shall constitute legal notice, as to be familiar to persons usually employed to protest bills and notes. When the party resides in the same city or town where the demand is made, notice must be personal, or left at the dwelling house. (Ireland v. Kip, 10 Johns. Rep. 490.) If the endorser resides in a different place, notice must be forwarded on the day of demand, or the day after, and by the next mail, directed to the endorser, and advising him of the protest. In case of a temporary removal of an endorser, from the place where payment is to be made, notice left at his last place of residence there, will be sufficient. (Stewart v. Eden, 2 Caines, 121.) Demand and notice, in every case, are a condition precedent to the holder’s right to recover. (Berry v. Johnson, 9 Johns. Rep. 121.) And in every case, the endorser is entitled to strict notice. (French v. The Bank of Columbia, 4 Cranch, 164.)

If the defendants have complied with these requisitions, then, without reference to the termination of the suit against the endorser, they are exonerated, for they were not parties to that suit, nor are they concluded by it.

Mower testifies, that on the day the note fell due, he delivered notice at the post office, or, at the law office of Spencer, the endorser, but could not tell which ; that in the afternoon of the day the note was protested, and previous thereto, he inquired of Wilson, Spencer’s partner, if certain funds were applicable to the payment of the note, who answered, he had no instructions. The witness further - testified, that he had no recollection of ever leaving at the post office a notice of protest, addressed to an inhabitant of the village, and believed the notice was left at Spencers office, but cannot say, positively, that it was not at the post office. From this evidence, the presumption is rather stronger, that notice was left at the endorser’s office, than at the post office; still, however, the fact is doubtful. The notice at one place would be sufficient; at the other, a nullity. The question is not, what inference the jury might draw, but what testimony does the law require in this case. We have seen, that this is a condition precedent, and that strict proof is required. The law has allowed the endorser this protection ; nothing short of clear proof of notice shall subject him to liability.

The reason and justice of requiring clear proof against a surety, will not be doubted. It is imposing no hardship on a party, to require the proof supposed to be in his power; it is in coincidence with the general principles of law, in respect to sureties. A relaxation of this rule, would make the liability of sureties depend on the various and different opinions, which different juries would form on the same state of facts : a doctrine so mischievous, ought not to be tolerated. If the witness had understood his duty, he would have known, that notice at the post office was unavailing; and, as there cannot be a doubt but that he intended to serve the notice legally, there would seem to be no difficulty in speaking positively, that it had not been left at the post office, if that was the fact. On reviewing this evidence, there can be no surprise, that the plaintiffs failed to recover against the endorser. I think it equally clear, that, in this respect, the defendants have failed in making out their defence.

I have already stated, in general terms, that the defendants were bound to give notice to the endorser ; and as effectual or sufficient notice has not been given, it becomes necessary to examine, more particularly, whether the defendants have, in legal contemplation, shown a compliance with the duty which had thus devolved on them. The holder of a note, who requires the service of notice upon the endorser, if he wishes to possess evidence of the fact, must, of necessity, substitute another person to perform the service. In the case of a corporate body, it can be performed in no other way than by substitution. Does the engagement of a bank to give notice, guaranty absolutely, that legal service shall be made ; or is the understanding satisfied, if the bank selects an agent to do the business, of known fidelity, and in every respect competent to discharge the duty ? In order to decide the extent of the defendants’ undertaking, the nature of the business to be performed, and the manner it is generally executed, must be considered. The plaintiffs must be presumed to know the course of practice to charge an endorser. Banks employ some suitable person to malte protest of notes, and to give notice. The plaintiffs would have done the same had they retained the note. It would, therefore, be manifestly against the understanding of the parties, as well as unjust, to construe the contract otherwise than according to the known and uniform course of proceeding in such cases; that would be extending the liability, in case of default, arising from whatever cause, instead of placing it on the ground of negligence, upon which it ought to rest. The defendants, then, had not, as Seymour supposes, discharged the duty, merely by handing the note to a person fpr protest; but they must meet the inquiry as to the competency and fidelity of the agent selected ; and if, in this respect, there is no cause for complaint, they have done all that was required ; their defence is complete. The controversy being, then, narrowed to this single point, the question is, have they shown, affirmatively, what I conceive they were required to do, that Mower was, in every respect, qualified to perform the duty according to the principles I have laid down ? If the note had been delivered to a notary, it would present a different case. Notaries are officers appointed by the state ; confidence is placed in them by the government. This may be evidence sufficient to justify an agent in committing to theiti business relating to their offices, although, in point of fact, it might subsequently appear, they did not possess the necessary qualifications. But there was no notary in the village of C., and asno protest of a promissory note, or inland bill of exchange, is necessary, nor is it evidence of the facts stated in it, the note might, equally well, be placed in other hands. (6 Wheat. Rep. 140. 572.) All the evidence given by the defendants is, that Mower was a clerk in the bank, and agent of Childs. the notary usually employed by the bank to protest, and givenotice of non-payment. He received notes from the bank, and delivered them to Childs. If the latter sent him to serve notices, they were undoubtedly accompanied with msiructions, so that the general competency of Mower, when no instructions were given, is left undecided. There is no proof to show that a proper agent was selected; in addition to this, I think there is affirmative evidence of Moiver,s want of skill, and necessary knowledge, derived from the manner he performed the service. If the steps necessary to charge an endorser had been familiar to him, his mind would not have been in doubt, whether he left the notice at the post office, or at the endorser’s office. He would know, that in the former case, the notice was a nullity. We cannot suppose he would do a nugatory act knowingly; if he was doubtful whether such notice was not effectual, the course he pursued will cease to excite surprise. Owing to this cause, I apprehend, he did not testify in so decided and unequivocal a manner, as would render the endorser liable. Mower also testified, that in the afternoon of the day on which the protest was made, and after it was actually made, as Jamieson states, he called on Wilson, at the endorser’s office; Mower then had a notice of protest, and Jamieson saw it; yet, instead of serving it, he contented himself with inquiring whether certain funds were applicable to the note, and being answered by Wilson, that he had no instructions, he leaves the question of actual service in uncertainty. I cannot persuade myself, from an attentive consideration of these facts, that the agent employed by the bank was well qualified to execute the business committed to his care. I do not hold him responsible for want of memory; but judging from his acts, he seems not to have possessed accurate knowledge of the business he had undertaken.

In either point of view, this presents a case of negligence, for which the defendants are responsible; and on this ground the plaintiffs are entitled to judgment.

Judgment for the plaintiffs.