Where the drawer of a bill has no right to expect the payment of
it by the acceptor -- where, for instance, the drawer has withdrawn
or intercepted funds which were destined to meet the bill, or its
payment was dependent upon conditions which he must have known he
had not performed -- such drawer cannot claim to be entitled to
notice of the nonpayment of the bill.
It becomes a question of law whether due diligence has or has
not been used whenever the facts are ascertained, and therefore
there is no error in the direction of a court to the jury that they
should infer due diligence from certain facts where those facts, if
found by the jury, amounted in the opinion of the court to due
diligence.
If the drawer and acceptor are either general partners or
special partners in the adventure of which the bill constitutes a
part, notice of the dishonor of the bill need not be given to the
drawer.
Page 43 U. S. 458
A court is not bound to grant an instruction prayed for where it
is merely a recital of general or abstract principles, and not
accompanied by or founded upon a statement of the testimony.
The strictness of the rule requiring notice between parties to a
bill is much relaxed in cases of collateral security or of
guarantee in a separate contract; the omission of such strict
notice does not imply injury as a matter of course. The guarantor
must prove that he has suffered damage by the neglect to make the
demand on the maker and to give notice, and then he is discharged
only to the extent of the damage sustained.
This suit was brought in the court below by Poe, the cashier of
the bank, against Rhett as the endorser upon a note for $8,000
under the following circumstances:
Dixon Timberlake was a merchant who, it appeared from the
evidence, had been for several years prior to 1837 in the habit of
going from New York to the south during the cotton buying season
and then returning to New York. In the winter of 1836-1837, he was
at Augusta, in Georgia, with large letters of credit from various
houses in New York, and also one from Benjamin R. Smith, then a
merchant in Charleston, South Carolina. By the aid of these letters
he acquired a credit at the Bank of Augusta and purchased
considerable quantities of cotton and some bank and other stocks in
the course of the season. Some of these purchases were upon the
joint account of Smith and himself, but the evidence was
contradictory as to the particular purchases thus made.
In February and March, 1837, Timberlake, being in Augusta, drew
several bills upon Smith in Charleston which all became due in May.
The whole amount of the bills thus due in May, was $21,500. A
separate bill for $14,000 is not included amongst these, because it
was paid.
This sum of $21,500 was divided into two classes, one class
consisting of $8,000 and the other of $13,500.
It appeared by the evidence that Smith was to provide for the
first class of $8,000, and Timberlake for the remaining
$13,500.
In order to carry out the arrangement respecting the first
class, a bill was discounted drawn by Timberlake upon Smith for
$8,000, and the note which was the subject of the present suit
offered and accepted as collateral security. The note was as
follows:
Page 43 U. S. 459
"$8,000 Charleston, May 9, 1837"
"Sixty days after date, I promise to pay to W. E. Haskell or
order eight thousand dollars for value received."
"BENJAMIN R. SMITH"
"Endorsed, W. E. HASKELL, per attorney B. R. SMITH"
"R. BARNWELL SMITH, per attorney B. R. SMITH"
R. Barnwell Smith, whose name it was admitted was placed upon
the note by proper authority, was the same person as R. Barnwell
Rhett, his name having been changed after the time of the
endorsement.
Timberlake having made no provisions for the other class of
bills, amounting to $13,500, Smith was unable to take them up, and
they were protested.
On 2 June, Smith made an assignment of his property for the
benefit of his creditors in a certain order which it is unnecessary
to state, and it was further proved that at and before the maturity
of the note on which the action was brought, Benjamin R. Smith was
insolvent.
On 11 July, both the bill drawn by Timberlake upon Smith for
$8,000, and the note in question for $8,000, became due, but
neither being paid, the note was regularly protested and certain
proceedings had upon the bill which constitute the defense in this
case, where suit is brought upon the note.
It was given in evidence on the part of the plaintiff, in order
to establish the regularity of the proceedings with regard to the
bill, that the notary demanded payment at the store of Smith, the
acceptor, and his clerk (Smith being absent) replied, "there were
no funds for paying the same;" that the notary thereupon protested
the bill for nonpayment and enclosed the notice thereof for
Timberlake, the drawer, in a letter sent by mail, addressed to
Robert F. Poe, the cashier of the Bank of Augusta, as was the
custom in similar cases; that the notary, at the time when he
protested the draft, did not know where Timberlake was to be found;
that he had heard that he had resided and done business at Augusta,
but was told that he had left that place. That he had made
inquiries for Timberlake, and was then told that he had left
Augusta, and it was not known where he had gone to. That the
discount clerk of the Bank of Augusta had it in charge, as a part
of his business, to make diligent search for the parties upon whom
notices were to be served; that such notices were served upon them,
personally, by said clerk if they were in Augusta,
Page 43 U. S. 460
and transmitted to them through the post office if they were at
a distance; that said clerk was in Augusta on 11 July, 1837, and
believes the notice would have been served on Timberlake if he had
been in Augusta; that said clerk has searched for the notice to
Timberlake and cannot find it; that Timberlake lived in a boarding
house whilst in Augusta; that he was insolvent when said bill
became due. It was further testified by the postmaster and his
assistant that two or more letters were received at the post office
for Timberlake during the summer after he had left Augusta, which
were not advertised; that he leased a box at the post office for a
time which did not expire until 1 October, 1837, into which his
letters were placed; that such letters could not have been
forwarded to the general post office because they were not
advertised; that Timberlake left Augusta on 30 June, 1837, in the
public stage, and that he left no agent in Augusta.
On the other hand it was given in evidence on the part of the
defendant, upon the cross-examination of Timberlake himself in this
case, that Timberlake left Augusta on 30 June, having requested the
postmaster to forward his letters after him, and that he received
several letters, forwarded from Augusta agreeably to his
directions, but never received any letter or notice of the
nonpayment of the bill.
The defense rested chiefly on the ground that proper diligence
had not been used to give notice to the drawer of the dishonor of
the bill, and that consequently the securities upon the note which
was given collaterally were exonerated from its payment.
In the trial of the cause in the court below, two separate sets
of instructions were prayed for on behalf of Rhett, the defendant.
The first set consisted of two prayers, which were refused by the
court and were as follows:
"1st. That by omission to inquire for the residence of
Timberlake or to send notice after him, the plaintiff has lost his
right of action against him as drawer of the bill for $8,000."
"2d. That if the jury find that the note was given as collateral
security for the bill drawn by Timberlake and that Timberlake is
discharged, then the plaintiff cannot recover against the defendant
on the note sued upon."
The second set of instructions consisted of five prayers which
the court was asked to grant, but the court refused to do so, with
the exception of the fourth, and gave its own instructions to the
jury. The prayers and instructions given are as follows:
Page 43 U. S. 461
And the defendant, by his counsel, before the jury retired from
the bar, further prayed the court to instruct the jury as
follows:
"1st. The parties having shown that Timberlake had drawn upon
Smith four bills, amounting in all to $21,500, which Smith had
accepted, and had, at the time of the acceptance of the said bills,
$10,000 in hand, received of Timberlake, to meet those bills, the
defendant prayed the court to instruct the jury that if the
evidence was believed, then Timberlake had funds in the hands of
Smith and was entitled to notice."
"2d. The defendant having shown that Timberlake resided in New
York, and came habitually, between the months of October and
January, to Augusta and resided in Augusta during the winter and
spring, and that Timberlake left Augusta on 30 June, 1837, and that
the notice of nonpayment of the draft was forwarded by the notary
in Charleston, to the plaintiff, on 11 July, 1837, and nothing was
shown to prove that the plaintiff had made any inquiry after
Timberlake, or endeavored to give him notice."
The defendant prayed the court to instruct the jury that the
plaintiff had not used due diligence to give the drawer notice.
"3d. And inasmuch as evidence had been given that the bills
drawn by Timberlake on Smith were drawn for purchases of cotton or
stock on the joint account of Smith and Timberlake, and Timberlake
had diverted the property purchased on joint account to his own
use, and was therefore bound to provide for the bills which fell
due in May to the amount of $13,500, and had not done so; the
defendant prayed the court to instruct the jury that the default of
Timberlake to take up the bills for $13,500 did not excuse the want
of notice to make him liable on the bill for $8,000."
"4th. And the defendant prayed the court to instruct the jury
that if Timberlake had effects at any time between the drawing and
the maturity of the said bill, in the hands of Smith, he was
entitled to notice."
"5th. The defendant prayed the court to instruct the jury that
the insolvency of the acceptor and drawer before the maturity of
the bill did not excuse the holder from giving notice of nonpayment
to the drawer."
And the court instructed the jury as follows:
"On the first instruction asked, the court instructed the jury
that if they believe from the evidence that Timberlake had in the
hands of Smith, when Smith accepted the bill for $8,000, $10,000,
that Timberlake was entitled
Page 43 U. S. 462
to notice of the dishonor of the bill from the holder. But if
the jury also believed from the evidence that the $10,000 in the
hands of Smith was a fund raised upon Smith's letter of credit to
Timberlake, and was to be applied to the payment of purchases on
joint account, and had been so applied, and that there was an
arrangement afterwards between Timberlake and Smith in respect to
all the bills drawn by Timberlake, amounting to $21,500; that
Timberlake was to put Smith in funds to pay bills to the amount of
$13,500, of the $21,500, which were to become due before the bill
of $8,000 became due, and that on Timberlake's doing so, Smith was
to pay the $8,000 bill; and that Timberlake did not put Smith in
funds to pay the $13,500, and that the same were protested, of
which Timberlake had notice; then that Timberlake had no right to
notice of the nonpayment of the $8,000 bill from the holder."
On the second instruction asked, the court instructed the
jury
"That if they believe from the evidence that Timberlake resided
in New York, and was a sojourner in Augusta from time to time, as
stated in the instruction asked, that then, as drawer of the bill,
he was entitled to notice of its dishonor; but if the jury believe
from the evidence, though he may have resided in New York, that he
had made Augusta his residence since the fall of 1834 or 1835, and
that he had removed from Augusta, and out of the State of Georgia,
after the bill for $8,000 was drawn, and before its maturity, that
then due diligence had been used to give him notice of the dishonor
of the bill."
On the third instruction asked, the court instructed the
jury
"That if they believe from the evidence that the bills drawn by
Timberlake upon Smith were drawn for purchases of cotton or stock
on the joint account of Smith and Timberlake, and that Timberlake
had diverted the property purchased on joint account to his own
use, and that after promising Smith, the acceptor, to take up the
bills to the amount of $13,500, he had failed to do so, and had not
supplied Smith with money to take up the bills for $13,500, after
the same were dishonored, up to the time when the $8,000 draft
became due, and that there was an arrangement between Timberlake
and Smith, after the $8,000 bill was accepted, that Timberlake was
to put Smith in funds to take up the drafts for $13,500, which had
been dishonored, and did not do so, that Timberlake was not
entitled to notice of the dishonor of the bill for $8,000."
To the fourth instruction asked, the court instructed the
jury
"If
Page 43 U. S. 463
they believe from the evidence, that Timberlake had effects in
the hands of Smith at any time between the drawing of the bill, and
the maturity of the said bill, that he was, as drawer, entitled to
notice."
To the fifth instruction asked, the court instructed the jury
that the insolvency of the drawer and the acceptor, before the
maturity of the bill, did not excuse the holder of the bill from
giving notice of nonpayment to the drawer. But the court further
instructed the jury that if the insolvency of the drawer and
acceptor was known to each other, and that this bill was drawn to
pay for a purchase on joint account, or a transaction in which they
were partners, and that the property so purchased had been diverted
by the drawer to his own use, and that the payment of all the bills
had been the subject of private arrangement between the acceptor
and the drawer, that then the holder was excused from giving notice
of the nonpayment of the bill for $8,000.
"Whereupon, the said counsel, on behalf of the said defendant,
before the jury retired from the bar, excepted to the aforesaid
opinion and charge of the court, on the first, second, third, and
fifth instructions moved for, and now excepts, and prays the court
to sign and seal this bill of exceptions, which is done
accordingly, this nineteenth day of April, in the year eighteen
hundred and forty-one."
"JAMES M. WAYNE [L.S.]"
"R. B. GILCHRIST [L. S.]"
The jury found a verdict for the plaintiff for $8,000, with
interest from the 11th July, 1837.
To review all these prayers and instructions, the writ of error
was brought.
Page 43 U. S. 478
MR. JUSTICE DANIEL delivered the opinion of the Court.
The instrument upon which this suit was instituted in the
circuit court was, as the foregoing statement evinces, in form
simply a common promissory note, signed by Benjamin R. Smith, made
payable to William E. Haskell, endorsed by Haskell to Robert
Barnwell Smith alias Robert Barnwell Rhett, and by this last
individual to Robert F. Poe, cashier of the Bank of Augusta, the
plaintiff in the action. Such being the nature of the instrument,
and it appearing that the formalities of demand at its maturity and
notice to the endorsers have been regularly fulfilled by the
holder, a question as to the justice of a recovery by the latter
could scarcely be suggested, if the rights and obligations of the
several parties shall be viewed as dependent upon their relation to
the note itself considered as a distinct and separate transaction.
Such, however, is not precisely the attitude of the parties to this
controversy. It is in proof that there was held by the plaintiff
below, beside this note, a draft for $8,000 drawn by Timberlake on
6 May, 1837, at sixty days, in favor of the plaintiff, on Benjamin
R. Smith, and accepted by Smith, and further that upon the note was
written by the plaintiff's agent, a memorandum in the following
words: "This note is collateral security for the payment of the
annexed draft of D. Timberlake on B. R. Smith of $8,000." Upon the
effect of both these instrument as constituting parts of one
transaction the questions propounded to the circuit court and
brought hither for review have
Page 43 U. S. 479
arisen. The further proofs contained in this record will be
adverted to in the progress of this opinion as notice of them shall
become necessary to explain the instructions prayed for and those
given by the circuit court on the trial of this cause.
The second series of instructions, embracing a more extended and
varied survey of the evidence than is contained in that preceding
it, will be first considered. It is to the first, second, third,
and fifth instructions of this second series that exceptions are
taken. To the first proposition affirmed by the court in this first
instruction it is difficult to imagine any just ground of objection
on the part of the defendant below, as that proposition concedes
almost in terms the prayer of that defendant. To the second branch
of this instruction it is not perceived that any valid objection
can be sustained, for although it might have been true that at the
date of acceptance of Timberlake's draft on Smith for $8,000, the
latter had been in possession of $10,000 placed in his hands by
Timberlake, it would not follow under the circumstances proved, or
under those assumed in the instruction, that Timberlake as the
drawer of that draft was entitled to notice. If, as the instruction
supposes, the acceptances for $21,500 which Smith had come under
for Timberlake were drawn for the accommodation of the latter upon
the faith of funds to be furnished by him for their payment; that
the $10,000 had been furnished by Timberlake in part for that
purpose, but had been withdrawn by him for his own uses prior to
the maturity of the draft for $8,000 -- that he should have
intercepted before the maturity of the draft all the funds against
which he knew the acceptances of Smith were drawn, and that he the
drawer, and Smith the acceptor, had, before such maturity, become
notoriously insolvent, under such a predicament the law would not
impose the requirement of notice to the drawer upon the holder.
No useful or reasonable end could be answered by such a
requisition. Where a drawer has no right to expect the payment of a
bill by the acceptor, he has no claim to notice of nonpayment. This
is ruled in the following cases:
Sharp v. Baily, 9 Barn.
& C. 44; 4 Man. & Ry. 18;
Bickerdike v. Bollman, 1
T.R. 405;
Brown v. Meffey, 15 East 221;
Goodall v.
Dolly, 1 T.R. 712;
Legge v. Thorpe, 12 East 171. If
the $10,000 said to have been in the hands of Smith were by the
agreement or understanding between Smith and Timberlake to be
applied in payment of joint claims against them, and falling due
before the draft for $8,000, and had been so applied, it had
answered the sole object for which it had been raised, and could
not in the
Page 43 U. S. 480
apprehension of these parties constitute a fund against which
the draft of $8,000 subsequently to become due was drawn. Those
$10,000 were gone, were appropriated by these parties themselves.
Then if, after this appropriation, there was, as this instruction
assumes, an arrangement between Timberlake and Smith in respect to
the bills drawn by Timberlake to the amount of $21,500, that he was
to put Smith in funds sufficient to pay $13,500 of the amount just
mentioned, which were to become payable before the $8,000 draft,
and that on Timberlake's supplying those funds Smith was to pay the
$8,000 draft, and Timberlake failed to put Smith in funds to take
up the $13,500, and that the drafts for the same were protested, of
which Timberlake had notice, he, Timberlake, could have no claim to
notice of nonpayment of the draft for $8,000. There could be no
reason for such a notice from the holder of the draft. Timberlake
could have had no right to calculate on the payment of this draft;
on the contrary, he was bound to infer its dishonor. He knew that
payment of the draft for $8,000 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 by Smith were to be met. He therefore
quoad this draft had never any funds in the hands of
Smith, and consequently, never had any claim to notice of
nonpayment from the holder.
The case of
Claridge v. Dalton, in 4 Mau. & Selw.,
is strongly illustrative of the principle here laid down. That was
a case in which the drawer had supplied the drawee with goods which
were still not 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 upon 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. The
second instruction affirms in the first place what must be admitted
by all and what is not understood to be matter of contest here,
viz.: that whenever a party to a bill or note is entitled
to notice, such notice, if not given him in person, must be by a
timely effort to convey it through the regular or usual and
recognized channels of communication with the party or his agent,
or with his known residence or place of business. It is to so much
of this instruction as is applicable to what may amount to
Page 43 U. S. 481
a dispensation from the regular or ordinary modes of affecting
parties with notice, that objection is made; to that portion in
which the court charged the jury that if they believed from the
evidence that although Timberlake may have resided in New York,
that he had since the autumn of 1834 or 1835 made Augusta his
residence, and that he had removed from Augusta, and out of the
State of Georgia after the bill for $8,000 was drawn and before its
maturity, that then due diligence had been used to give him notice
of the dishonor of the bill.
It is not considered by this Court that this charge in any
correct acceptation of it trenches upon the legitimate province of
the jury, or transcends the just limits of the authority of the
court, or contravenes any established doctrine of the law. 'Tis a
doctrine generally received, one which is recognized by this Court
in the case of the
Bank of Columbia v.
Lawrence, 1 Pet. 578, that whenever the facts upon
which the question of due diligence arises are ascertained and
undisputed, due diligence becomes a question of law;
see also
Bank of Utica v. Bender, 21 Wend. 643. In the case before us,
every fact and circumstance in the evidence which was to determine
the residence of the drawer in Augusta, or his abandonment of that
residence, or his removal from the State of Georgia; the unsettled
and vagrant character of his after-life, the fruitless inquiries by
the notary to find out his residence, the notoriety of his having
neither domicile nor place of business in Georgia, the effort to
follow him with notice of dishonor of his draft, were all submitted
to the jury to be weighed by them. The charge of the court should
be interpreted with reference to the testimony which is shown to
have preceded it, upon which, in truth, it was prayed; with
reference also, to the reasonable conclusions which that testimony
tended obviously to establish. Interpreted by this rule, it amounts
to this and this only -- a declaration to the jury that if the
evidence satisfied them of the residence of Timberlake in Augusta
at the time of drawing the draft, of the certainty and notoriety of
his having abandoned that residence and the entire state before its
maturity, leaving behind him no knowledge of any place, either of
his residence or for the transaction of his business, satisfied
them also of the real but unavailing effort of the notary who
protested the draft to discover his whereabouts, they ought to
infer that due diligence had been practiced by the holder of the
draft.
In the case of an endorser, with respect to whom greatest
strictness is always exacted, it has been ruled that the holder of
a bill is excused for not giving regular notice of dishonor
Page 43 U. S. 482
to the endorser, of whose place of residence he is ignorant, if
he use reasonable diligence to discover where the endorser may be
found. Thus, Lord Ellenborough in
Bateman v. Joseph, 2
Campb. 462, remarks,
"When the holder of a bill of exchange does not know where the
endorser is to be found, it would be very hard if he lost his
remedy by not communicating immediate notice of the dishonor of the
bill, and I think the law lays down no such rigid rule. The holder
must not allow himself to remain in a state of passive ignorance,
but if he uses reasonable diligence to discover the residence of
the endorser, I conceive that notice given as soon as this is
discovered is due notice within the custom of merchants."
See to the same effect 12 East 433;
Baldwin v.
Richardson, 1 Barn. & C. 245;
Beveridge v.
Burgis, 3 Campb. 262. It has been held in Massachusetts that
where the maker of a promissory note had absconded before the day
of payment, presentment and demand could not be required of the
holder in order to charge the endorser. Opinion of Parsons, Chief
Justice, in
Putnam v. Sullivan, 4 Mass. 53. In
Duncan
v. McCullough, 4 Serg. and R. 480, it was ruled that if the
maker of a promissory note is not to be found when the note becomes
due, demand on him for payment is not necessary to charge the
endorser if due diligence is shown in endeavoring to make a demand.
Hartford Bank v. Stedman, 3 Conn. 487, where the holder of
a bill who was ignorant of the endorser's residence, sent the
notice to A. who was acquainted with it, requesting him to add to
the direction the endorser's residence, it was held that reasonable
diligence had been used. The measures adopted in this case by the
holder of Timberlake's draft, when viewed in connection with the
condition and conduct of the drawer himself, appear to come fully
up to the requirement of the authorities above cited, and
therefore, in the judgment of this Court, affect him with all the
consequences of notice, supposing this now to be a substantial
proceeding upon the draft itself.
Next and last in the order of exception is the fifth
instruction. The first position in this is given almost literally
in the terms of the prayer. The court proceeds further to charge
that if the insolvency of the drawer and acceptor were known to
each other, and that this bill was drawn to pay for purchases on
joint account, or a transaction in which they were partners, and
the property so purchased had been diverted by the drawer to his
own use, and that the payment of the bills had been the subject of
private arrangement between the acceptor and drawer, that then the
holder was excused from giving notice of the
Page 43 U. S. 483
nonpayment of the bill for $8,000.
With respect to the exception taken to this instruction, all
that seems requisite to dispose of it is the remark that if the
drawer of the bill was in truth the partner of the acceptor, either
generally or in the single adventure in which the bill made a part,
in that event notice of dishonor of the bill by the holder to the
drawer need not have been given. The knowledge of the one partner
was the knowledge of the other, and notice to the one notice to the
other. Authorities upon this point need not be accumulated; we cite
upon it
Porthouse v. Parker, 1 Campb. 82, where Lord
Ellenborough remarks, speaking of the dishonor of the bill in that
case, "as this must necessarily have been known to one of them, the
knowledge of one was the knowledge of all;" also,
Bignold v.
Waterhouse, 1 Mau. & Sel. 259;
Whitney v.
Sterling, 14 Johns. 215;
Gowan v. Jackson, 20
id. 176. Recurring now to the first series of instructions
prayed for, we will consider how far the two propositions presented
by them were warranted by the correct principles upon which the
opinion of the courts may be invoked; and how far the court was
justifiable in rejecting the propositions in question, upon the
ground either of want of connection with any particular state or
progress of the evidence -- or of support and justification as
derived from the entire testimony in the cause.
It is a settled rule of judicial procedure that the courts will
never lay down as instructions to a jury, general or abstract
positions, such as are not immediately connected with and
applicable to the facts of a cause, but require that every prayer
for an instruction should be preceded by and based upon a statement
of facts upon which the questions of law naturally and properly
arise. It is equally certain that the courts will not, upon a view
of the testimony which is partial or imperfect, give an instruction
which the entire evidence in a cause when developed would
forbid.
Tested by these rules, the two instructions prayed for in the
first series are deemed to be improper. They are accompanied with
no statement of the testimony as their proper and immediate
foundation; they are bottomed exclusively upon assumption, and such
assumption too as the testimony taken altogether is believed to
contradict. The court therefore properly refused these
instructions; for this refusal it was by no means necessary that
the causes should be assigned by the court
in extenso --
these are to be seen in the character of the instructions
themselves and in the testimony upon the record.
This Court has thus considered and disposed of the several
prayers for instruction in this cause, and of the rulings of the
circuit court thereupon.
Page 43 U. S. 484
Whilst this procedure has been proper with the view of
ascertaining how far the rights of the parties have been affected
by the several questions presented and adjudged in the circuit
court, it is our opinion that the true merits of this controversy
are to be found within a much more limited and obvious range of
inquiry than that which has been opened by these questions.
The note on which the action below was instituted was given as a
guarantee for the solvency of the parties to the bill for $8,000,
drawn in favor of the plaintiff and for its punctual payment at
maturity. Such being the character and purposes of the note, was it
necessary, in order to authorize a recovery upon it, that every
formality, all that strictness should have been observed in
reference to the bill intended to be guaranteed, which it is
conceded are indispensable to maintain an action upon a mercantile
paper against a party upon that paper?
It is contended that a guarantee is an insurance of the punctual
payment of the paper guaranteed, is a condition and a material
consideration on which this paper is received, and therefore that a
failure in punctual payment at maturity is a forfeiture of such
insurance on condition, rendering the obligation of the guarantor
absolute from the period of the failure. Whether this proposition
can or cannot be maintained to the extent here stated, the
authorities concur in making a distinction between actions upon a
bill or note and actions against a party who has guaranteed such
bill or note by a separate contract. In the former instances,
notice in order to charge the drawer or endorser is with very few
established exceptions uniformly required; in the latter, the
obligation to give notice is much more relaxed, and its omission
does not imply injury as a matter of course.
In
Warrington v. Furbor, 8 East 242, where the
guarantee was not by endorsement of the paper sued upon and the
action was upon the contract, Lord Ellenborough said
"That the same strictness of proof is not necessary to charge
the guarantees as would have been necessary to support an action on
the bill itself, where by the law merchant a demand and a refusal
by the acceptor ought to be proved to charge any other party on the
bill, and this notwithstanding his bankruptcy. But this is not
necessary to charge guarantees who insure as it were the solvency
of the principal, and if he becomes bankrupt and notoriously
insolvent, it is the same thing as if he were dead, and it is
nugatory to go through the ceremony of making a demand upon
him."
Le Blanc, Justice, says in the same case,
"There is no need of the same proof to charge a guarantee as
there is a party whose name is on a bill of exchange, for
Page 43 U. S. 485
it is sufficient as against the former to show that the holder
could not have obtained the money by making demand of it."
The same doctrine may be found in
Philips v. Astling, 2
Taunt. 205. So too, Lord Eldon, in the case of
Wright v.
Simpson, 6 Ves. 732, expresses himself in terms which show his
clear understanding of the position of a collateral guarantee or
surety, his language is
"As to the case of principal and surety, in general cases, I
never understood that as between the obligee and the surety there
was an obligation to active diligence against the principal, but
the surety is a guarantee, and it is his business to see whether
the principal pays and not that of the creditor."
The case of
Gibbs v. Cannon, 9 Serg. & R. 198, was
an action against a guarantor who was not a party on the note, upon
his separate contract. The Supreme Court of Pennsylvania decided in
this case that provided the drawer and endorser of the note were
solvent at the maturity of the note, notice of nonpayment should be
given to the guarantor, and that the latter under such
circumstances may avail himself of the want of notice of
nonpayment, but it places the burden of proving solvency, and of
injury flowing from want of notice upon the guarantor. The last
case mentioned on this point, and one which seems to be conclusive
upon it, is that of
Reynolds v.
Douglass, 12 Pet. 497, in which the Court establish
these propositions.
1st. That the guarantor of a promissory note whose name does not
appear upon the note is bound without notice where the maker of the
note was insolvent at its maturity, unless he can show that he has
sustained some prejudice by want of notice of a demand on the
maker, and of notice of nonpayment.
2d. If the guarantor can prove he has suffered damage by the
neglect to make the demand on the maker, and to give notice, he can
be discharged only to the extent of the damage sustained. Tried by
the principles ruled in the authorities above cited, and especially
by that from this Court, in 12 Peters. it would seem that this case
should admit of neither doubt or hesitancy. The note on which the
action was brought was given as a guarantee for the payment of the
bill for $8,000, as is proved and indeed admitted on all hands. It
is the distinct and substantive agreement by which the guarantee of
the bill was undertaken. It is established by various and
uncontradicted facts and circumstances in the cause, and finally by
the solemn admissions of Timberlake the drawer and Smith the
acceptor of the bill, both of whom have testified in the cause,
that at the maturity of the
Page 43 U. S. 486
bill they were both utterly insolvent; that Timberlake was
probably so before the commencement of these transactions, and that
Smith before the maturity of the bill had made an assignment of
everything he had claim to, for the benefit of others, and, amongst
the creditors named in that assignment, providing for the plaintiff
in error as ranking high amongst the preferred class.
Under such circumstances, to have required notice of the
dishonor of the bill would have been a vain and unreasonable act
such as the law cannot be presumed to exact of any person. Upon a
review of the whole case, we think that the judgment of the circuit
court should be
Affirmed.
Order
This cause came on to be heard on the transcript of the record
from the Circuit Court of the United States for the District of
South Carolina, and was argued by counsel. On consideration whereof
it is now here ordered and adjudged by this Court that the judgment
of the said circuit court in this cause be and the same is hereby
affirmed with costs and damages at the rate of six percentum per
annum.
