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French's Executrix vs. The Bank of Columbia.

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 endorser. If, however, the course of decisions be otherwise, the endorser 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 vs. St. Quintin, and of Whitfield vs. Savage. The first which has been cited is De Berdt vs. Atkinson. This note was endorsed for the accommodation of the maker, the endorser 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 endorser. 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 endorser from want of notice. The opinion of Justice Buller was founded upon the circumstance that the note was endorsed 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 vs. Gouthit.

This was a strong case, because the endorsement was made in consequence of a previous engagement on the part of the endorser 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 connexion with the maker, and from other circumstances, the endorser must have known that the maker would not pay the note, and it was the understanding of all parties that it should be paid by the endorser.

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.

French's Executrix vs. The Bank of Columbia.

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 endorser, 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 endorser.

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 endorser, 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 vs. 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 vs. Gouthit, that the law with regard to a promissory note is different, and that if, in any case where the note is made for the benefit of the maker, notice to the endorser can be dispensed with, it is only in the case of an insolvency known at the time of endorse

ment.

In point of reason, justice, and the nature of the undertaking, there is no case in which the endorser is better entitled to demand strict notice than in the case of an endorsement 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

French's Executrix vs. The Bank of Columbia.

payment to the endorser, did not deprive the plaintiffs of their remedy against the endorser, 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.

This case was cited and approved in Dickens vs. Beal, 10 Peters, 572, and the rule which is here laid down, that where the drawer of a bill has no fair pretence for drawing, there is no person upon whom he can have a legal or equitable demand in consequence of the non-payment or non-acceptance of the bill, is declared to be supported by the cases which have been since decided in England and New York. To place the transaction without the pale of commercial usage, and to relieve himself from the obligation of proving notice of the dishonor of the bill, it is incumbent upon the holder to show that the drawer was without funds, property, or authority; and that, therefore, the giving of notice would have been an idle and useless form. If the drawer has any effects whatever in the hands of the drawee, or any in transitu to him, or if there is a running account between them, or a fluctuating balance in the course of their transactions; or if the course of business between them could have induced any reasonable expectation that the bill would be paid; or if the drawer would be entitled upon taking up the bill to sue the acceptor, or any other party, as where it was drawn for the accommodation of the acceptor, the want of notice will be fatal.

See Robinson vs. Ames, 20 Johns. Rep. 146; Stanton vs. Blossom, 14 Mass. Rep. 116; Campbell vs. Pentengill, Green, 126; Barber vs. Graves, 2 Marsh. 152; Hopkirk vs. Page, 2 Brok. 20; Smith's Leading Cases, Vol. 2, page 36, and Norton vs. Pick, 8 Barn. & Cres 610.

It is not to be supposed, however, in every case where the drawer has any funds in the hands of the drawee, however inadequate to meet the draft, that he is entitled to notice. "If this doctrine was true, the mere fact that a drawer has a single dollar in the hand of the drawee, without any expectation that more will be added, or any right to believe that a bill for more would be honored, would authorize him to draw for ten thousand dollars; and if the bill should be dishonored (as he knows it will be), claim to the letter the rights of a fair endorser; whereas, if he had not a dollar in the drawee's hands, he would be entitled to no notice at all. Now I do not understand the law to involve any such strange anomaly, not to say absurdity. In each case the same reason applies, the draft is a fraud upon the holder, and in neither case will a meditated fraud be protected behind a rule intended to protect the innocent and trustworthy. The two cases which have been relied upon at the bar to establish the opposite doctrine, turn upon the considerations which have been previously suggested. In Hammond vs. Dufrene (3d Camp. R. 145, the bill was drawn by the party having no funds at the time; but the drawees accepted the bill, and afterwards and before the same became due, the drawer paid a larger sum on account of the acceptors; and Lord Ellenborough held that the drawer was entitled to strict notice of the dishonor when the bill became due.

French's Executrix vs. The Bank of Columbia.

Why? Because the drawer had a reasonable expectation that the bill would be accepted (and it was accepted), and that it would be paid at maturity by the acceptors, as he was then in advance for them to a larger amount. In Thackery vs. Blackett, 3 Camp. Rep. 163, the two bills drawn were accepted, and were dishonored at their maturity by the acceptors; but due notice thereof was not given to the drawer. The bills were in fact drawn for the accommodation of the drawer; but before they became due he had contracted engagements on account of the acceptors, to the amount of about £1000, the bills amounting to upwards of £3600. Lord Ellenborough held that the drawer was entitled to strict notice; but it was upon the ground that there was an open account between the parties, and therefore the drawer could not necessarily have been aware beforehand that either of the bills would be dishonored; so that the case was put upon the clear ground that the drawer had a right to draw and also to believe that his drafts would be honored. Indeed, in cases of a fluctuating balance between the parties, this may well constitute a ground upon which, without knowing the exact state of the balance, the drawer may reasonably draw. And to this effect are the cases of Orr vs. Maginnis, 7 East's Rep. 358, and Legge us. Thorpe, 12 East's Rep. 171." In the matter of Brown, 2 Story's C. C. R. 521.

This decision is sustained by the case of Rhett vs. Poe, 2 How. S. C. R. 457. It appeared there that the drawee of a bill of exchange had funds of the drawer in his hands, at the time of the acceptance of the draft, but by a previous arrangement between the parties, this amount was to have been applied to the satisfaction of joint claims against drawer and drawee, and in fact was subsequently so appropriated; and the draft in question was to be paid by the drawee, in the event of the drawer's making arrangements to meet acceptances of the drawee to a larger amount, which became due before the maturity of the draft. The drawer having failed to provide for these acceptances, they were protested, and the question arose whether he was entitled to notice of the subsequent dishonor of his own draft. Judge Daniel, delivering the opinion of the Court, says: "There could be no reason for such notice. Timberlake (the drawer) could have no right to calculate on the payment of this draft; on the contrary, he was bound to infer its dishonor. He knew that the payment of the draft was dependent upon a condition to be performed by himself, and he was obliged to know, from the notice of the dishonor of all his bills, that he had not performed that condition, and had thereby intercepted the very funds from which the acceptances of the drawee were to be met. He, therefore, quoad this draft, never had any funds in the hands of Smith (the drawee), and consequently never had any claim to notice of non-payment from the holder. The case of Claridge vs. Dalton, 4 Maul. & Selw. 226, is strongly illustrative of the principles here laid down. The drawer had supplied the drawee with goods which were not yet paid for. To this extent, then, the former unquestionably had funds in the hands of the latter; but on the day of payment of the bill, the credit on which the goods were sold had not expired, and the Court thereupon unanimously ruled, that quoad the obligations of the parties arising upon these transactions, the drawer must be understood as having no effects in the hands of the drawee, and therefore not entitled to notice." See also, Valk vs. Simmons, 4 Mason, 113, Baker vs. Gallagher, 1 Wash. C. C. R. 461.

McLemore vs. Powell.

The point decided in this case was expressly ruled by the Supreme Court of North Carolina, in the case of Smith vs. McLean, Term (Taylor) Rep. 72. "I cannot perceive," says J. Ruffin, "either in common sense, or in the nature of the engagement of an endorser, any reason why an endorser who has had no benefit, and who accommodated with his credit the maker, to whom all the value went, should not be entitled to the strictest notice." S. P. Denny vs. Palmer, 5 Iredell's L. R. 610.

McLEMORE vs. POWELL ET AL. *

What Agreement between the holder of a bill of exchange, and the drawer or principal debtor, will be sufficient to discharge the endorser.

MR. JUSTICE STORY delivered the opinion of the Court.

This is a writ of error to the Circuit Court of the United States for the district of West Tennessee.

The original action was assumpsit, brought by Powell, Fosters and Co., as holders of a bill of exchange, drawn by one Thomas Fletcher, in May, 1819, at Nashville, upon Messrs. M'Neil, Fisk and Rutherford, at New Orleans, payable to Thomas Read, or order, for two thousand dollars, in sixty days after date, and by him endorsed to the defendant, John C. M'Lemore, and by him to the plaintiffs. The bill, upon presentment for acceptance, was dishonored, and due notice of the dishonor was given to the defendant.

At the trial, upon the general issue, Thomas Fletcher the drawer was, under a release from the defendant, M'Lemore, examined as a witness, and among other things testified, that in the month of October following the dishonor of the bill, “one of the plaintiffs applied to him at Nashville for the money on the bill, and threatened to sue immediately if an arrangement was not made to pay the bill. The witness then proposed to the plaintiff, if he would indulge him four or five weeks, he would himself to a certainty pay the bill. To this the plaintiff agreed, and told the witness he was going to Louisville, Kentucky, and would return by Nashville about the expiration of that time, and would receive said payment. Since said time the witness has never

* 12 Wheaton's Rep. 554; 6 Cond. Rep. 634.

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