Case ID: mart-os_8/html/0682-01.html
Source: Caselaw Access Project
Author: {"author": "Martin, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

CANFIELD & AL. vs. VAUGHAN & AL.
    
    Appeal from the court of the fifth district.
    If the payee of a note writes on the black. I guarantee the payment of this note E. M. this does not make the person to whom he delivers it an endorsee.
    
      Brownson, for the plaintiffs.
    This suit is brought upon a note hand, drawn in a negociable form by the defendants, and payable to one Miles, two months after date. The note is dated 23d Sep. 1818. It was endorsed on the 25th Nov. following. At the time the note was given, certain documents were put into the hands of Miles, the original payee, which, if collected, he engaged to apply to the note. It is admitted that, of these demands, the amount 274 dollars, 56 cents, was collected before endorsment, and not applied according to contract. But of all this, the endorsers had no notice at the time the note was passed to them.
    West'n District.
    August, 1820.
    Upon these facts, the point to be decided, by tine court, is whether the plaintiffs have a right to recover, for the whole sum expressed in the note, or whether compensation can be claimed, as against them, of the said $274, 56 cts.
    It is conceived that the equity of the case is clearly in favour of the plaintiffs. If Miles has been guilty of a fraud, it was the defendants, not the plaintiffs, who enabled him to commit it. The note was made negociable for the express purpose of being put in circulation. Its very form shews that it was intended to be endorsed. The defendants not only promise to pay to Miles, but to his order, thereby virtually engaging to accept any order, which he might write upon the back of it, payable at the time therein expressed. If they had not had full confidence in Miles, they ought to have restrained the transaction. They should not have made the note negociable, or they should have attached to it the receipt. Third persons would then have been, duly cautioned, or, if they placed their confidence injudiciously, it would be their act, and they alone ought to suffer.
    But, it is thought that the law is not less in favour of the plaintiffs. In a transfer of negociable paper, before due, the assignee is not bound to enquire into any circumstance, existing between the assignee and any of the previous parties, as he will not be affected by them. Chitty on bills, 141, 3 Term Rep. 82. This is the general doctrine, and it is believed that no book can be found to contravene the principle.
    It may, however, be contended, as the note is dated on the 23d of September and payable two months after date, that consequently it fell due on the 23d Nov. two days before the endorsement was made, which was on the 25th. But, we must, however, recollect that our enquiry is not when the two months, the time of credit specified in the note expired, but when it became due. It is contended that it did not become due until the 25th of November, the last of the days of grace allowed for the payment of negociable paper. When can an instrument be said to be due? It seems to me at any moment, when the right to demand payment commences. If this be correct, all the authorities will shew that payment cannot be demanded, until the last of the days of grace. If the third day of grace happens to be a Sunday, Christmas day, good Friday, upon which no money ought to be paid, the holder ought to present it for payment on the second day of grace, and in case it be not then paid, must treat the bill as dishonored. In other cases, a presentment before the third day of grace, being out of time, would be a mere nullity. Chitty on bills, 74. See also Wiffen vs. Roberts, 1 Esp. Rep. 262. Bayl. 67
    But, it may be contended, that these days of grace are merely an indulgence, extended by courtesy, to the person bound to make the payment, and therefore, that the note ought to be considered as due in fact, at the expiration of the time stipulated in it. This was indeed originally the case. But, they are now known and recognised both in the civil and common law, or, rather in the law merchant, which is of all countries, as a claim of right. They make as essential a part of the time of credit, as any portion of the time stipulated. Thus “the days of grace, which are allowed to the drawer, are so called, because they were formerly merely gratuitous, and not to be claimed as a right by the person on whom it was incumbent to pay the bill, and were dependant on the inclination of the holder. They still retain the name of grace, though the custom of merchants, recognized by law, has long reduced them to a certainty and established a right in the acceptor to claim them, in all cases of bills or notes, payable at usance or after date, after sight or after a certain event.” Chitty, 272, Pother, Traite du contrat de change 7, says ce qu'accorde l'ordonnance, n'est terme de grâce, que de nom, parce que c'est humanitatis ratione qu'elle l'a accordé, et pour le distinguer de celui porté par la lettre. Il est réellement terme de droit, puisque c’est la loi qui le donned." See also authorities referred to in Chitty, Coleman vs. Sayer, Barnard B. R. 303, Vin. ab. tit. bills of exchange B. 9, Brown vs. Hanaden, 4 Term Rep. 151. The days of grace as allowed in England, and allowed in the United States. Corp vs. McComb, 1 John. Cas. 328. Jackson vs. Richard, 2 Binn. 343, Lewis vs. Ban, 2 Binn. 195, Bank of North America vs. Petit, 4 Dall. 127, 5 Binn. 541
    The right also to days of grace in all cases of negociable paper is recognised by our statutes. 1 Martin’s Dig. 598, 2, 3.
    But, Pothier seems more fully to have decided this case, than any authority in the common law, which the counsel for the plaintiffs has yet been able to find. He says in his Traité du contrat de change, 
      
      117, pl. 176, that, when the bill has been acquitted to the drawer by a separate letter, retaining the bill, and it should afterwards be endorsed, he does not think that the acceptor could object the acquittance against the endorser, who should afterwards present it at the time due for payment. And one reason given is, that it would open a door, by antedating the acquittance, by collusion between the endorsor and acceptor, which it might not be in the power of the endorsee to detect. Besides that the transaction would appear suspicious, because it is the ordinary practice in cancelling such bills, to send them to the drawer, with a receipt at the bottom of them. He says afterwards, id. 123, pl. 176, in speaking of compensation, that it extinguishes the bill of exchange for part or all, taking effect from the time it become due. He says again, id. pl. 185, that compensation is equal to a real payment. He says again, id. pl. 184, that it cannot take effect, except from the time the bill become due or after. He then, id. 124, 5, pl. 187 proposes the question, is it sufficient for compensation, that the time of payment expressed in the bill, should have elapsed? Must one wait until the term of grace have expired also? And he answers the question by saying that, since the declaration of 1713 has decided that the bearer of the bill cannot be compelled to receive the payment of it, before the tenth day, on which the term of grace expires, it follows, as a consequence, that compensation cannot sooner take effect, for the reasons before mentioned, since the time of grace is a claim of right.
    
    The defendants might, therefore, undoubtedly have opposed in compensation the amount collected by Miles, before the 25th of November, from the demand in his hands, had he not, before compensation could take effect, passed the note to the plaintiffs for a valuable consideration. But, as the note was endorsed before compensation could take effect, by the rules of law, it is conceived that the defendants' only recourse is upon Miles, whom they have trusted, to whom they have extended their confidence, in whose power they have put it to commit this fraud.
    
      Brent, for the defendants.
    The note, upon which this suit is brought, was given upon the 23d of September 1818, by the defendants, who paid to the drawee, one Miles, S274, 56 cts. before he endorsed it away, which he did upon the 25th day of November 1818. The note was due two months after its date and made payable to order.
    
    The defendants resisted the payment of the full 
      
      amount of the note, for which they were sued, and claimed a deduction for the sum of $274, 56 cents, which were paid to Miles, before he endorsed the note, and the court below was of opinion that they were entitled to it, and allowed it, giving the petitioner’s judgment for the sum of $205, 44 cents, with judicial interest from the 26th of November 1818, until paid. The petitioners have appealed.
    All the facts come up with the record and the statement, and leave this court to determine whether the judgment of the court below ought to be reversed or not.
    I admit that the assignee of negociable paper, before due, is not bound to enquire into the circumstances existing between the assignor and the drawer.
    But I shall shew that the assignee of a negociable note after it is due, takes it subject to all the equity and defence that the drawer may be entitled to. Chitty on bills, 1 Dallas, 441, 2 Caines, 369, 4 Dallas, 370, 3 Caines, 213, 1 John. Rep. 319, 1 Mass Report, 3 Ten. Rep, 80, 1 Bac. ab. 399, 1 Johnson's cases, 51, § 6, id. 331
    Having shewn that the assignee takes the negotiable paper, assigned after it is due, subject to any defence that the drawer may have, I will next shew that this note was assigned after it became due.
    
    
      By a reference to the record, the court will see that this paper is dated upon the 23d of September 1818, and made payable two months after date. The note of course was due upon the 23d of November 1818. Chitty on bills, 211, says “when a bill is due on the 1st of January, and payable at one month after date, the month expires on the 1st of February, and also a bill dated on the 28th of January, and payable one month after date, the month expires on the 28th of February.” So, in this case, the note being dated the 23d of September, and made payable two months after date, the time expires upon the 23d of November, and the note was then due, but the law to favour the drawer, not the assignee, has given the drawer three days of grace more. The principle which governs in this state is that the negociable paper to compel payment from the drawer, under any circumstances, must be endorsed before it becomes due: if after it becomes due, the equitable defence of the drawer will be let in: and a note becomes due upon the day stipulated, the three days of grace, are a favour only extended to the drawer, during which the assignee cannot compel payment or protest. But at the expiration of the two months this note was due, and a legal tender of its amount upon the 23d of November, (which was the expiration of the two months) to the drawee Miles, would have been good, and if he refused to accept it, he could never have recovered his costs in a suit brought, for the amount of the note, upon the days of grace being expired. For the note being due upon the 23d of November, the drawer had the right, to discharge it then; the delay of three days of grace, being only a favour extended to him, which if he did not wish to make use of, the assignee or drawee could not. The law gives the three days of grace, as a right to the drawer, to claim them, if he think proper, but he does not, he cannot be compelled. It has nothing to do with the time the note becomes due. Chitty, 206, Pothier, traité du contrat de change, 1, 5, § 2, 3, no. 140.
    It is clear then, that this note was assigned after it became due. For by a reference to the record, it will be seen, that the assignment was made upon the 25th of November 1818, and the note became due upon the 23d of the same month, and being assigned after it became due, the proof of payment of the sum of $274, 56 cts. to the drawee Miles, before the drawers had any notice of the assignment, was correctly allowed by the court below, and this court cannot do otherwise than affirm the judgment.
    
    
      All the authorities, referred to by the counsel for the petitioners, establish the position I have taken, that the days of grace are a right only to be claimed drawer, and as the authority from Pothier, which I have referred to says “for the purpose of giving him time to raise the money, to avoid having his note protested, if it be not paid when due,” the words of Pothier are "afin que le tireur, en trouvant de l'argent pendant ce tems, puisse éviter le protét; c’est pourquoi ce terme de dix jours est appelé un terme de faveur et de graced."
    
    Look at the endorsement, the manner in which it is made. It appears the petitioners required the drawee Miles, to specially guarantee the payment of the note, this shews that they considered the note as due at the time it was assigned, or that they respected it had been paid, and ought to have been on their guard. If they did not consider the note as due when assigned, why require this special endorsement? It was because the note was due and had lost its negotiability, and a common endorsement would only amount the existence of the debt and no more. Civ. Code, 368, 4 Dal. 371, 2 Caines bases in error, 303.
    
      Brownson, in reply.
    Chitty has been quoted to shew that the note was due on the 23d of November. But the defendants’ counsel thought, probably, that his duty compelled him only to quote so much as would suit the point, which he had an interest in establishing, and that, garbled extracts would be more in his favour than the law itself. He has therefore given a half sentence which, when completed, I am sure is far from shewing that the note was due on the 23d of November. The author is explaining how the word month is understood in regard to bills of exchange, that it means a calendar, and not a lunar month. He says that “when a bill is dated on the 1st of January and payable one month after date, the month expires on the 1st of February,” so far quoted by the defendants’ counsel, “and with the days of grace, the bill is payable on the 4th of February, unless that day be a Sunday, and then on the 3d,” same sentence in continuation.
    The counsel for the defendants has very ingeniously attempted to take the force of the authorities arrayed against him, as to the effect which the days of grace have in postponing the payment of negotiable paper, by saying that they are allowed for the benefit of the drawer only. This way of stating the subject was probably chosen, with a view of drawing off the attention of the court, from the reason of the distinction between endorsement before due, and endorsement 
      
      after. Lord Kenyon observes, 3 Term Rep. 82, before cited, that to let in the equitable defence, endorsements after due require “the addition of this circumstance, that it appears on the face of the note to have been dishonored, or if knowledge can be brought home to the endorsee, that it had been so.” If therefore this note, payable, as appears from the receipt, at the Vermillon Bridge, and transferred at New-Orleans, had been endorsed two or three days after the expiration of the days of grace, instead of being endorsed two or three days before, I question very much whether the circumstance would not have explained sufficiently the suspicion, which generally attaches to an endorsement after due. But how strong do they render the case when coupled with the fact of endorsement before due? How utterly impossible would it be for any human wisdom to protect itself, against frauds in the transfer of negotiable paper, if circumstances such as exist in this case are not held a sufficient justification for a man’s confidence? How completely and certainly would such a decision go to destroy the credit and currency of these instruments, and how ready will the makers be to collude with those, who hold their paper, to give it a false and deceptive credit, if, by such a decision, they may be sheltered from the losses which they thus occasion?
    But it is said the endorser guarantees the payment of this note. I do not see how suspicion can be attached to this circumstance. What object could the plaintiffs have had in this guarantee ? Did it make Miles any farther liable than he would have been without it? Not at all. For it is the right of the endorsee to fill up the blank with any warranty consistent with the nature of the instrument. It is only expressing in words what would otherwise have been tacitly understood. Certainly the plaintiffs, as merchants in the habit of dealing with such kind of paper, must have known that the liability of Miles was not increased by his saying “I guarantee the payment of the within note.” If he chose to write that upon it, it could have been no reason for the plaintiffs to refuse taking it. It neither made the note better or worse. It is thought, therefore, that every equitable and legal circumstance is in favour of the plaintiffs.
   Martin, J.

delivered the opinion of the court. The plaintiffs, as endorsees of a promissory note, given by the defendants to Edward Miles, instituted the present suit.

They pleaded the general issue, denied the endorsement of the note by Miles to the plaintiffs.

Farther, that, if the note was endorsed, it was after it had become due, and therefore, the defendants were entitled to set off a sum of money, which was due, them by the original payee of the note E. Miles.

The district court gave judgment, that the law and evidence being in favour of the plaintiffs, they recover $205, 44 cents, with interest and costs. They appealed.

The statement of facts admits, that the sum, which the defendants offered to set off, was collected by the payee of the note before its endorsement to the plaintiffs.

The signatures, at the foot of the note, was submitted to be that of the defendants, and that on the back that of the payee.

The words, pay the contents to Canfield and Hill, were written on the back of the note, at the time of trial, by permission of the court.

The note bears date of September 23d, 1818, is for the sum of $480, payable two months after date and on the back of it was written, November 25th, 1818, I guarantee the payment of this note, Edward Miles.

The monies collected by Miles for the defendants, and which he had agreed to credit them for on the note, amount to 8274, 56 cents. This sum added 7 to $205, 44 cents, for which the district court gave judgment, is the amount of the note sued upon.

The plaintiffs’ counsel contends that the district judge erred. That the amount of the note was not due at the time of the endorsement, as there was still one day of grace to run, and therefore, the note in their hand, is their absolute property, and they are not bound to admit any equitable claim, which the makers may have against the original payee.

The defendants’ counsel says that the note was due, altho’ payment of it could not have been compulsorily required till after the expiration of the last three days of grace. That it appears that the plaintiffs, knew that the makers had some claim to set up against the note, since they required a guarantee from Miles.

The defendants did not appeal: we therefore need not enquire whether judgment ought not to have been given in their favour and the amount of the sum awarded is the only object of our inquiry. Otherwise it would be necessary to examine whether there had been a legal endorsement of the note, as stated in the petition, and whether, when the plaintiffs had been satisfied with the delivery of a note payable to order, with a mere guarantee, they could afterwards, even with the leave of the court, add to this guarantee, an endorsement.

The facts of the case are that the original payee delivered this note to the plaintiffs, and agreed to guarantee the payment of it. This certainly did not make them endorsees, so as to enable them to endorse it themselves. It may be taken as evidence of the sale of Miles’ claim, evidenced, by the note. For this they might sue, in their own names, stating themselves the vendees of the claim, or in the name of Miles. In either case, either as vendees or agents of Miles, they could recover no more than their vendor or principal. This has been given them.

It is therefore ordered, adjudged and denied that the judgment of the district court be affirmed, at the plaintiffs’ costs.