French's Executrix v. The Bank of Columbia. 4 C.

The court seems to have supposed, that since the drawer could not maintain an action against the acceptor until he had taken up the bill, that it was perfectly useless to enable him, by proper notice, to employ those other various means which he might have taken to secure himself. Such is not the reasoning of the judges in the cases previously decided; and this reasoning certainly would not be permitted to apply to an indorsor who had given value for the bill, not knowing that it was drawn, without funds in the hands of the drawee. Yet he would be unable to recover from the drawer, until he had taken up the bill.

[ *159 ]

* If an action could not have been maintained, might not the drawer have effects of the drawee in his hands which he might retain; or might not various other means of saving himself be neglected, in consequence of the opinion that the bill would be paid? If this might be, how can it be true that notice can be of no use to him?

If the fact even be that the drawer could only sue the acceptor in such a case as this, after having himself discharged the bill, still he ought to have notice, that he might immediately take it up for the purpose of proceeding against the acceptor.

The reasoning of Lord Chief Justice Eyre, to be perfectly consistent with itself and with the principles laid down in previous decisions, would seem to be predicated on an understanding on the part of the drawer when the bill was drawn, that it was not to be paid by the acceptor; or on the idea that a bill drawn without funds is not a commercial transaction, and not subject to commercial rules.

The presumptions are rendered the stronger from the cases afterwards stated, in which a drawer without funds in the hands of his drawee would still be entitled to notice. These are "acceptances on the faith of consignments from the drawer not come to hand," and "acceptances on the ground of fair mercantile agreement;" to which, he says, may possibly be added many others.

If the exception admits of these exceptions and of many others, it would be difficult to apply it to any case of a fair transaction, where the drawer had really a right to draw, unless it be supposed not to be governed by the law merchant.

The judge next proceeds to describe the case in which notice is not requisite.

pre

He says, "Where the drawer has no effects, and has no fair tence for drawing, or where he draws without effects in[ *160 ] tended to be applied in payment, and only *for the purpose

of raising money by discount for himself, and a fortiori for

French's Executrix v. The Bank of Columbia. 4 C.

the acceptor, it is fairly deducible from the cases that notice need not be given."

It is not only necessary that the drawer should have no effects, but also that he should have no fair pretence for drawing. Now he may have a fair pretence, as in the case of a "fair mercantile agreement," without having any funds in the hands of the drawee, which notice of non-acceptance of the bill might enable him to withdraw; and yet in such case it would appear, from the language of the court, that notice could not be dispensed with.

"Where he draws only for the purpose of raising money by discount for himself, and à fortiori for the acceptor," notice need not be given.

Where he draws solely for the purpose of raising money by discount for himself, he expects to pay the bill, and there is no person to whom he can resort for repayment. There is no person on whom he can have a legal or an equitable demand, in consequence of the non-payment of the bill. But how can the same reasoning be said to apply à fortiori to the case of the bill being drawn for the use of the acceptor? In such case the relative situation of the parties must be substantially the same as if the money raised on the bill for the acceptor, were funds of the drawer in his hands, on which the bill was drawn. Every motive for requiring notice of non-payment, in the case of a bill drawn upon funds, except that which results from a right to claim those funds by a suit, would apply to a bill drawn to raise money for the acceptor, unless it was understood at the time that the acceptor was not to pay the bill.

The case of Walwyn v. St. Quintin, then, can only be supported on the idea of an understanding that the drawee was not to pay the bill, or that a bill, drawn, not in the usual course of business, is a transaction to which commercial rules do not apply.

In the case of Whitfield v. Savage, (2 Bos. & Pull. [ *161 ] 277,) the drawer had funds in the hands of the acceptor, and the decision turned upon that point.

The reasoning on the cases of protested bills has been gone into the more at large, because it has been considered as applicable to promissory notes indorsed under the statute of Anne, which is admitted to be in force in Maryland.

The indorser has been considered as the drawer, and the maker of the note as the acceptor; and in all cases of an indorsement for accommodation, the indorser is likened to a drawer without funds in the hands of the acceptor.

Where the money raised upon the note is received by the indorser,

French's Executrix v. The Bank of Columbia. 4 C.

so that the note is discounted, in truth, for his accommodation, not for that of the maker, he is unquestionably without funds in the hands of the acceptor, must expect to pay the note himself, and cannot require notice of its non-payment by the maker. But the same reasons do not appear to exist where the note has been discounted for the maker. In that case the funds which represent the note are in the hands of the maker, or, to use the language applicable to bills, in the hands of the acceptor, before the draft becomes payable; the drawer had a right to draw, and had a right to expect that his bill would be paid. Upon principles of reason and of justice, then, it would seem that notice of non-payment could be as little dispensed with in this case, as if he had himself paid the money to the maker of the note, and then received it from the bank, or as if the note had been given him for a previous debt, and had been discounted for his

own use.

Notice of non-payment by the maker is necessary, because the undertaking of the indorser is conditional; and wherever, in fact, the transaction is such that the maker of the note ought in justice to pay it, and is bound ultimately to make it good, it would seem reasonable that payment should be demanded from him, and that reasonable notice of non-payment should be given to the in

dorser.

[162] *If, however, the course of decisions be otherwise, the indorser of a note for the accommodation of the maker must come within the exception which dispenses with notice in his

case.

The cases which have been adjudged in England on promissory notes, are anterior, in point of time, to the cases of Walwyn v. St. Quintin, and of Whitfield v. Savage.

The first which has been cited is De Berdt v. Atkinson, (2 H. B. 336.) This note was indorsed for the accommodation of the maker, the indorser well knowing at the time that the maker was insolvent. Four judges who tried the cause were unanimously of opinion, that want of notice did not discharge the indorser. The opinion of the chief justice was founded on the known insolvency of the maker, and the consequent impossibility that loss could be sustained by the indorser from want of notice. The opinion of Justice Buller was founded on the circumstance that the note was indorsed for the accommodation of the drawer. He states explicitly, that the general rule is only applicable to fair transactions, and by fair transactions he means "bills or notes given for value in the ordinary course of trade."

Justices Heath and Rooke, accorded in the decision, but whether

for the reasons assigned by the chief justice, or for those assigned by Justice Buller, or for both, does not appear.

The same point came on to be considered in the case of Nicholson v. Gouthit, (2 H. B., 609.)

This was a strong case, because the indorsement was made in consequence of a previous engagement on the part of the indorser to guarantee the payment of a debt due from the maker of the note, who appears, from the transaction, to have been in bad circumstances at the time, and who became insolvent before the note was payable. From his connection with the maker, and from other circumstances, the indorser must have known that the maker would not pay the note, and it was the *understanding of all parties [* 163 ] that it should be paid by the indorser.

The justice of the case was said to be clearly in favor of the plaintiff, and under an impression that the want of notice in this case could not injure the plaintiff, the lord chief justice had at the trial, instructed the jury that it was unnecessary, and indeed that it might be considered as received by anticipation.

In this case the note was not made merely to raise money, but was made to pay a debt. The indorser, however, gave no value for it, and, if likened to the drawer of a bill of exchange, he had drawn without funds in the hands of the acceptor, and with a knowledge that the acceptor would not pay the bill.

But in the argument in favor of a new trial, the counsel contended that the law upon a promissory note was different, in this respect, from the law on a bill of exchange, and though notice of the dishonor of a bill drawn without funds in the hands of the drawee need not be given, yet the rule in the case of promissory notes is totally different, and notice must in all cases be given to the indorser.

In delivering the opinion of the court, Lord Chief Justice Eyre assented to this distinction, and admitted the rule with respect to notice to the indorser to be as stated. He, therefore, reversed his own decision at nisi prius, and granted a new trial upon the strict law, contrary to his ideas of the justice of the case.

Heath and Rooke, concurred in this opinion. Buller was not present, and, reasoning from his opinion in the case of De Berdt v. Atkinson, it is probable he would not have concurred in the decision of this case.

However, then, the law may be with regard to the drawer of a bill of exchange who from other circumstances may fairly draw, but who has no effects in the hands of the drawer, it seems settled in England, by the case of Nicholson v. Gouthit, that the law with re

gard to a promissory note is different, and that, if in any [* 164 ]

Hopkirk v. Bell. 4 C.

case where the note is made for the benefit of the maker, notice to the indorser can be dispensed with, it is only in the case of an insolvency known at the time of indorsement.

In point of reason, justice, and the nature of the undertaking, there is no case in which the indorser is better entitled to demand strict notice than in the case of an indorsement for accommodation, the maker having received the value.

This court is of opinion that the circuit court erred in directing the jury that the laches of the plaintiffs, in failing to demand payment of the maker of the note, and to give notice of non-payment to the indorser, did not deprive the plaintiffs of their remedy against the indorser, and therefore, the judgment rendered in this case is reversed, and the cause remanded for further trial. A new trial, with instructions, &c.

Judgment reversed.

5 C. 49; 10 P. 572.

HOPKIRK V. BELL.

4 C. 164.

THIS case was again certified from the circuit court for the district of Virginia.

It appeared upon the trial, in addition to the facts stated in the former report of the case,1 that Andrew Johnston, one of the partners of the house, trading under the firm of Alexander Spiers, John Bowman, & Co., of whom the plaintiff is the surviving partner, came to this country after the treaty of peace, in 1783, namely, in the spring of 1784, and died here in 1785, but that no other partner of the firm has been in this country at any time since the treaty of peace.

[* 165 ] * THE COURT ordered it to be certified as their opinion that, under all the circumstances stated, the act of limitations of Virginia was not a bar to the plaintiff's demand on the note of 21st August, 1772.

13 C. 454.