Case ID: wend_17/html/0275-01.html
Source: Caselaw Access Project
Author: {"author": "Nelson, Ch. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Spencer and Sharp vs. Harvey and others.
    The holder of a note is relieved from demanding payment and giving notice of non-payment to an endorser, who within a few days before the maturity of the note, writes to him that the maker has failed, acknowledges his liability and asks indulgence until funds can be realized from security given by the maker of the note.
    The mere talcing of security by an endorser from the maker of the note does not dispense with a demand and notice, unless it appear that funds have actually come into the hands of the endorser to an amount sufficient to satisfy the note; or that all the property of the maker has been actually transferred to the endorser, 
    
    This was an action of assumpsit, tried at the Chautauque circuit in September, 1835, before the Hon. Charles H. Tuggles, one of the circuit judges.
    
      The suit was on a promissory note made by John I. Leonard and Russel Austin, for $1700, bearing date 1st February, 1833, payable one year after date, to the order of Silas Austin, by whom it was transferred to Charles R. Harvey; Harvey transferred it to Charles Butler, and Butler to the plaintiffs, by whom a suit was commenced against the makers and endorsers jointly. Harvey and Butler defended, the others suffered a default. The signatures of Harvey aild Butler were admitted. To show a waiver of notice of nonpayment by Butler, the plaintiffs produced a letter from him dated at Jamestown, in Chautauque county, on the 23d January, 1834, directed to the plaintiffs in New York, informing them that the makers of the note had failed; that the first endorser, who was the owner of a farm worth $6500, had given a judgment to secure the payment of the note, but that the farm could not be sold until June or July; that no additional security would be obtained by prosecuting the note; that he had made no [490] calculations to raise the money, and therefore was under the necessity of asking indulgence until the real estate of the first endorser could be sold. The plaintiffs also, to excuse themselves for not proving notice of non-payment to Harvey, showed that the makers and first endorser of the note had confessed a judgment in favor of Harvey, to indemnify him against the payment of the note in question, and that an execution had been issued upon such judgment, and levied upon the farm of the first endorser. It however appeared that, subsequently a bill in chancery had been filed by the first endorser and one of the makers against Harvey, to be relieved from the judgment; and also that another bill in chancery had been filed against Harvey by a third person, who claimed an interest in the farm thus levied upon. Upon this evidence the judge ruled that enough was shown to relieve the plaintiffs from the necessity of proving a demand of payment and notice of non-payment to Butler and Harvey, and under his direction the jury found a verdict for the plaintiffs, i The defendants move for a new trial.
    
      M. T. Reynolds, for the defendants.
    
      J. A. Spencer, for the plaintiffs.
    
      
      
         An endorsee of a note does not dispense with the necessity of presentment for pay-, ment by taking from the maker security against his liability. Seacord v■ Miller, 3 Iiernan, 55. In that case, it did not appear whether the security was Hidicient, fully to indemnify the endorser. See The Commercial Bank v. Hughes, ante p. 94; 5 Connect. 175 ; 9 Gill. & J. 47; 4 Harrison, N. J. 61; 4 Watts & Serg. 328 ; Dolfus v. Frosch, 1 Denio, 367; Biekerdike v. Bollmar, 1 T. R. 405; Dickens v. Beal, 10 Peters, 572. See 3 Kent’s Comm. 110, note c. The courts are inclined rather to restrict than enlarge the exceptions to the rule requiring notice to he given. 3 B. & Aid. 623 ; 6 Bingham, 623. The exception applies only to the drawer and not to an endorser. Kent’s Comm, ubi supra and cases there cited, Agan v. McManus, 11 Johns. 180. Chitty on Bills, 357. But in 17 Wend. 94 the court lay down the broad principle that neither a drawer or endorser is discharged by the omission of demand and notice, where it is clearly shown that no damage has been sustained in consequence of the omission, as in the case where the maker has made an assignment of all his property to secure the endorser. Bond v. Farnham, 5 Mass. Rep. 170 ; Barton v. Baker, 1 Serg. & Rawle, 334; Mech. Bank v. Griswold, 7 Wend. 165 ; Durham v. Rice, 5 >$|erg. 300; Kelly v. Mayor of Brooklyn, 4 Hill, 263. It is supposed that this rule will apply to the case of a note made for the accommodation of the endorser. See Chitty on Bills, 356 ; Story on Prom. Notes, § 257, 268. The progress of the cases on this subject is stated in Brown t>. Maffey, 15 East, 171.
    
   By the Court,

Nelson, Ch. J.

I am of opinion that Harvey, the second endorser, is discharged for want of notice. This was supposed to have been dispensed with on the ground that he had taken indemnity of the makers by means of a judgment, upon which execution has been issued; but it is extremely uncertain if any thing will he realized out of the property. The security is already in litigation in chancery. The mere precaution, by an endorser, of taking security from his principal, has never been adjudged to operate as a dispensation of a 'regular demand and notice; it is no doubt a common occurrence, yet such effect has never been imputed to it. There must be something more, such as the taking into his possession the funds or property of the principal, sufficient for the purpose of meeting the payment of the note; or he must have an assignment of all the property real and personal of the makers, for that purpose. The notice is dispensed with when funds are received, upon the ground that the object for which it is required to be given, namely, to enable the endorser to obtain indemnity from his principal, has already been attained. Partial or doubtful security falls short of this, and leaves the reason of the rule requiring notice in full force. In Mechanics’ Bank v. Griswold (7 Wendell, 166), which arose upon pleadings, there was an averment of the assignment of sufficient property in some counts, and in others of the whole of the property of the maker to secure endorsers. Such also was the case of Bond v. Farnham there referred to.

The letter of Butler to the plaintiffs, I am of opinion, should be considered as a dispensation of the notice to him. He advises the plaintiffs the note will not to be met at maturity by the makers; he informs them of the security which has been given by the first endorser, the probable necessity of a sale of his farm, and of the inutility of a suit; also that he, himself, was not prepared to advance the money, and the letter winds up by requesting indulgence. In the ordinary course of the mail, it must have reached the plaintiffs just before the note fell due, and most obviously was calculated, and doubtless had the effect, to put them off their guard in respect to notice. It must have appeared to them, as it would to all, an idle step to give notice of non-payment by the makers, to a person who had just communicated to them the information above referred to, and who admitted his own liability as endorser, and asked indulgence till the funds could be realized out of the security. It may fairly be said, that the omission to give notice is attributable to the interference, and Butler should not now be permitted to take advantage of it. It is said that the plaintiffs did not assent to the delay sought, but this affords no answer to the ground taken. Their assent would not have strengthened it; no agreement was propoted by Butler, or answer to his letter requested. It was a mere application for indulgence, assigning his reasons for the same, and which did not necessarily call for an answer.

New trial granted in respect to Harvey, costs to abide the event.