Case ID: miss_6/html/0301-01.html
Source: Caselaw Access Project
Author: {"author": "Mr. Justice Tkotter", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Commercial Bank of Natchez, use of Briggs, v. Claiborne et al.
    
    Where a note is made payable in bank for discount, and not discounted by the bank, but sold by the principal, it is equivalent to a letter of credit, and binds the accommodation drawers and endorsers.
    ERROR from the circuit court of the county of Adams.
    This is an action upon a promissory note, made by the defendants, and payable to the Commercial Bank of Natchez, for the sum of three thousand dollars. It appears from the evidence, that Claiborne, one of the makers, presented it to the bank to be discounted, and that the bank declined to do so. The note was made for the accommodation of Claiborne. He' afterwards presented it to Briggs, Lacoste & Co. who advanced him the sum of two thousand dollars. They took his receipt for the amount, and his blank check on the bank. On the trial below, the plaintiffs read to the jury the note, receipt and check, and then offered a witness to prove, “ that it was the usual course of business with them, to receive notes like the above from their customers, to be discounted in bank and payable to the bank, and make advances of money thereon, and take a blank check to enable them to control the funds when discounted, to reimburse them the money so advanced.” This evidence was objected to by the defendants, and excluded by the court. The plaintiffs excepted to the opinion of the court, and have assigned the matter of this exception as error. The defendants had previously introduced the cashier of the bank as a witness, who proved that the note never had been discounted by the bank, but on the contrary, the bank had refused to discount it, and that the bank was not and never had been the -owner of the note. That Osman Claiborne was the principal •maker of the note, and the other defendants were his securities. The object of this proof on the part of the defendants, was to disprove the plaintiffs’ right to maintain an action on the note, as they were not parties to it, and derived no title from the bank. In answer to this objection, the plaintiffs sought to show by the evidence which was excluded, that they had become the holders of it, and had paid for it a valuable consideration, and had done so fairly in pursuance of their established custom, and in the regular course of business.
    Montgomery, for plaintiff in error.
    There is nothing in the nature of a promissory note to distinguish the right to it, from the right to a chattel or real estate. If one person advances the consideration, and, it be made payable to another, the party advancing the consideration can certainly control it in opposition to the wish of the payee.
    It has been decided, that if A lend B one hundred dollars, and receive from him a note payable to a bank, to be discounted for his benefit, that there is a vested interest in A, which cannot be defeated by the act of one of the makers of the note. 16 Pickering Rep. 52. 2 do. 298.
    When a note was made by A, and endorsed by B, for the purpose of being discounted by A, for his own benefit, at a particular bank, was on refusal of such bank to discount it, discounted by another, with full knowledge of the circumstances, it was held to be no fraud on the endorser, and that the holder was entitled to recover from him. 17 J. R. 176.
    
    There can be no doubt, if there is a sufficient consideration for the note, no matter who furnished it, the payee may maintain an action for the benefit of the person who advanced the consideration. Having received a consideration, and having promised to pay the price therefor to any person, with the consent of all parties, or at any rate of the person who advanced the consideration, they are bound by their promise. The testimony offered, was calculated to show that Briggs, Lacoste & Co. advanced the consideration of the note, and that it was deposited with them, with authority to control the proceeds when discounted, and should have been admitted. Walker’s Rep. 331. . 17 Mass. R. 400. 2 Story’s Eq. 445. 1 J. R. 140. 1 Chitty’s Plead. 105. 2 Chan. Cases, 2 6. 1 Eq. Abr. 382 pi. 11. 2 Mad. Chan. Prac. 101. 1 P. Williams, 607. 10 Vesey, 366.
    
    Boyd, on the same side.
    D. S. Jennings, contra.
    
    Upon the trial in this case, it appeared in evidence, that 0. Claiborne made a note for three thousand dollars, with A. L. Bin-gaman and others, his endorsers, payable twelve months after date, to the Bank, that he oifered it for discount, which was refused. Briggs, Lacoste & Co., the usees, adduced 0. Claiborne’s check for two thousand dollars, and then oifered to prove, that “ it was the usual course of business of B. L. & Co. to receive notes of their customers like the above, to be discounted in bank, and payable to the bank, and take a blank check to enable them to control the funds when discounted, to reimburse them the money advanced,” which evidence the court below refused to admit.
    By the provisions of the charter of the Commercial Bank, all notes similar to the one'in question, when discounted by the bank, were subject to renewal, which brings this case directly within the principle of the case of “Deniston v. T. L. Bacon and another,” 10 John. 196. In that case the note was renewable by agreement, in this by a provision of the bank charter. The authority of the case has never been questioned, and is decisive of this. But suppose it not to be, what is the error complained of in the court below ? The exclusion of testimony to prove a usage or habit of business of B. C. & Co. which (supposing the principal or sureties especially to be bound by a usage that no offer was made to prove that they had a knowledge of) had reference to cases where notes were discounted, and gave them control of the funds, not of the notes rejected.
   Mr. Justice Tkotter

stated the case, and delivered the opinion of the court.

The competency of plaintiff’s proof depends upon the validity of their title acquired by the purchase under the circumstances proposed to be shown.. This note was made to enable Claiborne to raise money upon it. It was an accommodation note. In this respect it is to be considered as a letter of credit for the amount specified on its face, and is consequently valid and binding against the makers, in the hands of any holder who comes fairly to the possession of it for a bona fide consideration. This we take to be a well settled principle of the law merchant. And accordingly, in the case of Powel v. Waters, 17 J. R. 176, the Supreme Court of New York held that the action might be maintained by a third person who had purchased a note payable to a bank in the manner and for the purposes of the note in the case at bar. After the bank had refused to discount it, the note in that case was put in circulation, and was discounted by a third person, who had full knowledge of the circumstances. It was held to be no fraud on the endorsers, and the holder recovered. So in the case of the Bank of Rutland v. Buck, 5 Wend. 66; the note was for twelve hundred dollars, and was made payable to the bank, which refused to discount it. It was then delivered by the two principal makers, for whose accommodation it had been made, to E. House and two others, as collateral security for the payment of a judgment in their favor against the two principal makers of it. The action was on the note in the name of the bank for the tise of the holders, and the court held that the suit might well be maintained. That it was immaterial to the surety who advanced the money, provided the principal makers had the benefit of it. It did not alter his responsibility. The Bank of Chenango v. Hyde and others, 4 Cowen, 557, is in all respects like the present case. Hyde, and two others as his securities, made their note payable to the bank, which declined to discount it. B. at the request of Hyde, advanced him the amount of the note. B. afterwards sued and recovered against Hyde for the money lent, but could not collect his judgment. He then brought an action in the name of the bank against all three makers of the note. And it was held that he was entitled to recover. The money advanced by him was a good consideration for the note. It was made, say the court, to raise money on, and that therefore the validity of the note was not affected by the circumstance that it was payable to the bank. The same is held in the case of the Utica Bank v. Ganson et al., 10 Wend. 314, and in the Bank of Burlington v. Beach, 2 Aikin, 62. The case of Denniston v. Bacon, 10 J. R. 198, does not conflict with the principle of the above cases. The plaintiff there was non-suited, not because the note had been rejected when offered for discount, but because he sought to enforce its payment in violation of the terms of payment agreed upon between the parties. We are therefore clearly of opinion that the plaintiffs are entitled to recover upon the note in this case, and that they have a right to use the name of the bank for their use.

Let the judgment be reversed, and a venire de novo awarded.