THIS was an action brought by the indorsee, against the
indorser, of a promissory note for 5000 dollars, drawn by Samuel
Emory, on the 26th of December 1795, and payable 65 days after
sight. The drawer, failing to pay the note, it was regularly
protested, on the 3d of March 1796; and the only question agitated
upon the trial, was, whether reasonable notice of the non-payment
was given to the indorser, or due diligence employed to give
it?
The material facts were these: Emory and Dennison had purchased
from the managers of the Schuykill canal lottery a number of
tickets, for which a note was given to the president, the plaintiff
in this action. The purchasers settled their accounts of the
speculation, before the note became due, in consequence of which
Emory was bound to pay the note; but when it became due, Dennison
agreed to continue his indorsement for the accommodation of Emory,
though the joint interest had ceased; and the plaintiff, by way of
renewal, at the instance of Emory, took the note, on which the
present action was instituted. Dennison was not a permanent
inhabitant of Philadelphia; but was domiciled at Havre de Grace, in
Maryland. He had, however, an agent in Philadelphia, to whom the
banks, in consequence of written instructions, delivered the
notices of his paper engagements payable there, on which he was
drawer (not indorser) during the years 1795, and 1796; and who
constantly, for that period, made the necessary payments; nor would
he have hesitated (he declared) to pay the present note, if he had
been informed by the default of the drawer. It appeared, likewise,
that Dennison was, occasionally, in the city of Philadelphia, in
the months of February, March, April, May, June, August, and
September 1796; and,
Page 4 U.S.
163, 164
in the month of May, Emmory informed him of the protest; but, at
the same time, declared that he had made preparation to discharge
the note. On the other hand, it was proved, that after the default
of the drawer, particular and repeated inquiry was made for the
indorser by the notary, as well from Emmory as others; that the
indorser was not then in Philadelphia, and the notary did not
himself know that he had an agent here, for such purposes, though
he knew there were transactions of business between him and the
person, who is said to have been his agent; that the notary heard
Dennison lived at Havre de Grace, but, at the same time, was told,
he had gone to the eastward; that as soon as the plaintiff
understood that Dennison was in the city (about six weeks, or two
months, after the protest) the plaintiff's clerk called on
Dennison, mentioned the facts, and demanded payment; when Dennison
said, that he had received no part of the proceeds of the lottery
tickets; but that he would urge Emmory to discharge the note.
The defendant's counsel contended, on these facts, that there
was not reasonable notice of the protest of the note, nor due
diligence to give it: that, under the circumstances of the case,
the defendant was not under a moral obligation to pay the note, and
might fairly take advantage of the strict rule of law, according to
1 Dall. Rep. 234. 252. 270. 2 Dall. Rep. 158. 192.: that no notice
was given to the indorser till May 1796, though he was occasionally
here, before that time, and subsequent to the protest; though he
had an agent here; and though he lived in a neighbouring state, to
which the post would have carried notice, in the course of a few
days: and that actual knowledge of non-payment, is not sufficient
to charge an indorser, unless the information is received promptly
from the holder, with notice that he looked to the indorser for
payment: Kyd on Bills. 79. 1 T. Rep. 167. 5 Burr. 2670. 1 T. Rep.
712.
The plaintiff's counsel insisted, that as the private
arrangement between Dennison and Emmory, was unknown to the
plaintiff, his claim upon the defendant in morality, as well as
law, could not be impaired by it; that the law was not
controverted, on the authority of the cases cited; but still it
left the matter of fact to be ascertained, what was reasonable
notice of protest, under all the circumstances of the case? that
the first important feature of the case, exhibits the defendant as
a non-resident of Philadelphia, a mere transient visitor: that
notice sent south to Havre de Grace, when it was known he had gone
north, would have been useless and idle: that the notary did not
know, and the evidence is, otherwise, uncertain in the instance of
the defendant's begin an indorser, that he had any agent in
Philadelphia: and that due and diligent inquiry was made for the
indorser in Philadelphia, where the consideration arose, and the
note was given.
Page 4 U.S.
163, 165
As to the cases cited, for the defendant, they are susceptible
of answers, easily distinguishing them from the present case. Thus:
In 1 Dall. Rep. 234. 270. the bill was kept who years and a half;
the indorser lived in Poughkeepsie, only 130 miles distant; he was
a man of note, in extensive business, and actually had some
transactions with another of the indorsers. In 1 Dall. Rep. 252.
the note was protested for non-payment on the 12th of June 1786; on
the 5th of July and 23d of August, the plaintiff received partial
payments from the drawer; and it was not till after the last date,
when the drawer had become embarrassed, that notice was given to
the indorser; who, during the whole time, lived and kept a counting
house in Philadelphia. In 2 Dall. Rep. 158, both parties lived in
Philadelphia; and the jury thought three or four days was not too
late to give notice. In 2 Dall. Rep. 192. the bill of exchange was
drawn in September 1781, presented and refused acceptance in
November 1781, and protested for non- payment in August 1782; but
no notice was given to the indorser till the beginning of the year
1790. When the bill was presented, the drawee had funds of the
drawer in his hands; but he had paid the amount to the drawer's
agent, who died, and whose wife had lost the money.
SHIPPEN, Justice.
1
The cause depends upon one point, which is a matter of fact. The
general law is, that when a promissory note is dishonoured by the
drawer, the indorser becomes immediately liable; and the holder is
entitled to recover the amount from him, unless he is discharged by
the act of the holder, either in giving further time, or credit, to
the drawer; or in neglecting to give the indorser due notice of the
non-payment. This notice is indispensable: so much so, that it is
immaterial. whether the drawer becomes insolvent before the notice,
or not. Still, however, what constitutes due notice, is a point to
be settled. In England (where it is regarded as a question of law)
the rule is strict and positive, that the notice must be given on
the next day, if the parties live in the same place; and by the
next post, if they live in different places. But in Pennsylvania,
it has hitherto been regarded as a matter of fact, to be decided by
a jury, under all the circumstances of each case, as it arises. In
deciding it, however, the jury will always be governed by a sound
and reasonable discretion. They will allow but a short time for
giving notice, where the parties reside in the same town; for, six
weeks in such a case would certainly be too long; and, for giving
notice in different parts of the country, they will bring into the
calculation of a reasonable time, the facility of the post, the
state of the roads, and the dispersion of the inhabitants, in
relation to the post towns.
Page 4 U.S.
163, 166
With these prefatory remarks, let us review the circumstances of
the present case. The note was duly protested for non-payment. The
notary, at the same time, made diligent inquiry after the indorser;
particularly from the drawer, who was most likely to possess the
necessary information. He heard that the indorser lived at Havre de
Grace, but was the gone to the eastward. Proof has, also, been
given of Dennison's repeatedly visiting Philadelphia, after the
protest; but it is not proved, that the plaintiff was acquainted
with the fact; and, without that proof, he cannot be legally
charged with laches. It is proved, that J. B. Bond was Dennison's
general agent in Philadelphia; but it is not proved, that he was a
public, known, agent; nor (which is again essential to affect the
plaintiff's claim) that the plaintiff was apprised of the agency.
As to the fact, that Dennison lived at Havre de Grace; and as to
the argument, that notice ought to be given wherever the indorser
lives; it is important to remember, that the commencement of the
transaction was in Philadelphia; that the note was dated there; and
that all the parties contemplated Philadelphia as the place of
payment. Besides, it would interrupt the negotiability of notes,
and greatly embarrass the general operations of commercial credit,
if an indorser was entitled to notice, on the strict terms
suggested, though he lived in the East, or the West, Indies; or
though he was a mere itinerant, constantly shifting the place of
his abode, and the scene of his business. It is, therefore, an
object of leading influence, in the decision of this cause, to
consider, whether, under all the circumstances in proof, the
plaintiff was bound to inquire for the defendant, beyond the city
of Philadelphia? The case of Steinmetz v. Curry, 1 Dall. Rep. 234.
270. ought not to be a guide on the occasion; for, there, the bill
was kept by the holder two years and a half, without giving notice
to an indorser, who was known to reside constantly at Poughkeepsie,
in New-York. But, upon the whole, it appears to the Court, that the
plaintiff did make a prompt inquiry for the indorser in the city of
Philadelphia; and that the defendant has not sufficiently
established those facts, which would have made it incumbent upon
him, either to send notice to Havre de Grace; or to serve notice
upon the agent in Philadelphia. If the jury concur in the opinion,
they will find for the plaintiff; but if they do not, it is their
right, and their duty, to find for the defendant.
Verdict (delivered without the jury's retiring from the bar) for
the plaintiff, 6051 13/100 dollars, and six cents costs.
Footnotes
Footnote 1 SHIPPEN, and
SMITH, Justices, were the only judges on the bench, at the trial of
this cause.
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