Case ID: scl_4/html/0021-01.html
Source: Caselaw Access Project
Author: {"author": "Wilds, J. Brevard, J., Trezevant, J. Bay, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

CONSTITUTIONAL COURT, CHARLESTON,
    JAN. 1806.
    Fiddy v. Campbell, M’Laughlan and Co.
    An indorser of a note is only a provisional guarantee for the payment of the money.
    Receiving part from the acceptor, without notice to the indorser that the balance is unpaid, will discharge him; so also giving time to the acceptor or maker.
    But after failure of the acceptor or maker, .and notice to the drawer or indorser, the holder is not bound to proceed against the acceptor or maker, and the drawer or indorser is absolutely liable; therefore a forbearance afterwards to press the drawer or maker, or even receiving part from either of them, will not discharge the indorser or drawer.
    The case was tried in Charleston district, before Trelevant, J. The action was assumpsit against the defendants, as indorsers of a promissory note, drawn by Edwin Gairdner & Co., in favor of the defendants, for three thousand dollars, payable on the 22d and 2oth January, 1802. The note had been placed in the bank for collection, and was protested on the last day of grace. Tt appt ared in evidence, that several mouths after the note had been protested, Gairdner, the drawer, had placed certain securities in the plaintiff’s hands, in consideration of which the plaintiff had agreed not to press him for payment. These securities were two notes of hand, and a bond. On the bond, a considerable balance appeared due; but in fact, only a small sum was due, several payments not having been receipted on the bond. When these securities were given to the plaintiff, he appeared satisfied. The protest was in January, 1802, and the de. fendants Were not called on for payment until October afterwards ; after Gairdner had failed. Previous, however, to Gairdner’s fail, ure, and a few days after the securities were taken by the plaintiff, the defendants called upon Gairdner «fe Co., and urged them to make payment, and was told by Gairdner, that the matter was settled. This was in September, 1802. - The defendants and Gaird-ner then waited on plaintiff, who said that he had received papers, but had neglected to put one of the notes in the bank for collection. It appeared, from the evidence of Gairdner, that he had paid to different creditors, and to the banks, five hundred thousand dollars, between the time the note was due, and the time when he failed, and that if plaintiff had pressed for payment, he would'have paid the note in question: and,that if plaintiff had not induced him to consider the securities sufficient, he would have otherwise secured the defendants, and that shortly before, in August, he had secured the defendants in every thing in which he thought they might suffer on his account, by kids on London. This no.te was not'included, as it was thought the plaintiff had been satisfied with the securities received by him. Mr. Stephens, whose bond was given by way of security, testified, that in October, 180á, he called on plaintiff to pay the balance due on his bond, and produced Gairdner’s receipts. Plaintiff seemed alarmed on account of the balance being so small. He received it, ' however, J665 and upwards.
    For the defendants, it was contended, that the indorser was discharged, up,on tjie ground that even after protest, the holder of a bill, or note, has no right to take any new security with the in-dorsor’s consent. Trezevant, J. in his charge to the jury, said that the case depended on its particular circumstances. He thought ■the rule contended for too broad and general, as cases might happen where a holder might have security, and not discharge the indor-sor, as if for the benefit of the indorsor the security is taken. But if'the holder of a note by his conduct lulls the defendant into a belief that the holder is secured and satisfied, and thereby induce him to omit the use of diligence to secure himself, in such case, he thought the indorser would be discharged. Verdict was for plaintiff.
    The motion in this court was for a new trial, on several grounds. The chief ground was, that the securities placed by Gairdner in plaintiff’s hands, ought to be considered complete satisfaction, and sufficient to exonerate the indorser.
    Turnbull, for; defendants.
    Indorsers only provisional guaran» tees. Cited 1 Bos. and P-. 652. Walwyn v. St. Quinton. 2 Bos. and P. 61. English v. Darling.
    Desaussure, for plaintiff.
    Gairdner’s testimony not intitled to credit. The notes, and the bond, were received as collateral security, but not by way of satisfaction. Cited Str. 94. Not received as in satisfaction, otherwise the notes would have been taken up. The taking collateral security is for advantage of indorser. But did not'discharge him. He was bound to take notice that he might be called on. His liability was fixed by protest for non payment. After protest, no laches is imputable to the holder. If holder receives that afterwards, indorser not discharged; because for his advantage. This not like taking security for the whole.
    Drayton, for defendants.
    Indorser discharged. 3 Espin. Rep, 49. English v. Darling. 3 Bos. and Pul. 363. Executors Moles v. Dewlin. If holder give time to acceptor, without knowledge of drawer, he cannot, afterwards resort to them-
    
      The judges delivered their opinion the 11th January, 1806.
   Wilds, J.

This is a question of great importance to the commercial part of the community. It involves the inqiiiry how far the holder of a bill, or note, may extend indulgence to the acceptor, or maker, without discharging the indorsers. The doctrine on this subject is stated to be, that if the holder of a: bill, or note, receive any part of the money due, from the acceptor, or maker, he shall never resort to the drawer, o'r indorser, because it is considered as-giving the whole credit to the acceptor, or maker, and discharging the drawer, or indorser. 1 Ld. Raym. 743. 2 Str. 745. 1 Bos.' & Pul. 656. This, when qualified with the proviso, “ that timely notice be not given to the drawer that the bill is not paid,” is a rule established in good sense, and consonant to-the undertaking of the parties. The maker and several indorsers of a bill of exchange, and'' the indorsers of a note, become only provisionally guarantees for the payment of the money : it is the undertaking of the parties, ánd forms part of the contract, tliat the acceptor shall be first re-' sorted to, and it is only in case of his failure to comply with his un-” dertaking, that the drawer! or indorser, is to be called on. In ordinary cases, it is not only necessary that the accepter should fail to comply, but the’earliest information practicable thereof given to-the drawer; and this to enable the drawee to remove his funds,which the policy of the doctrine presumes to be in the acceptor’s hands. Any circumstances, therefore, as receiving part from the acceptor, without-informing the drawer-that- the balance-is unpaid or giving time to the acceptor, after the bill has fallen due, shews on whom the holder relies, and discharges the drawer-, and several indorsers. To' apply this doctrine tef the case under consideration : Had the plaintiff, when this note became due, made the arrangements which have taken place, with Gairdner; had he done' less, had he even given-time to Gairdner, and all this without the knowledge or assent of the defendants, the indorsers, they would unquestionably have been discharged. But this extreme caution, this extraordinary diligence in the holder of a bill, is only required until it is ascertained whether the acceptor, the person first liable, complies or not with his engagement!- When he fails to do so, and the drawer is advertised of the failure, the situation of the parties become changed. The drawer is put on his guard, and may pro» vide for his indemnity, by withdrawing his effects from the accbpt! or’s hands. He becomes then absolutely liable; the holder then is not bound to proceed against the acceptor, but may resort immediately to the drawee. In tho present case, GairdnerVnote- was re>. gularly protested. The plaintiff, by this step, informed the indors. era that he considered them as liable ; and they were authorized, if they saw proper, to proceed against the makers of the note. A forbearance after this, to press Gairdner, receiving part from him, or any thing short of a satisfaction, or- what would be esteemed equal to it, would discharge the defendants. Thus we find in the case of Walwyn v. St. Quintin, cited in the argument, 1 Bos. & Pul. 653, the holder, after protest, received part of the money due on-the bill from one of the indorsers, and agreed not to press the acceptor, and yet was allowed to recover from the drawer ; it being detet mined, that an agreement not to press the acceptor, whom, af. ter protest, he was not bound to pursue, did not prevent the drawer from proceeding, if he saw proper: and receiving part from an in-dorser, is no discharge to the acceptor, who is first liable, being to his advantage, as lessening the sum he was liable to pay. An in-dorsee cannot compromise, or bitid himself not to sue the acceptor, and then resort to his indorser, because by his conduct he has prevented the indorser from indemnifying himself by an immediate resort to the acceptor. In the present case, if the plaintiff made any agreement with Gairdner, which would have prevented the defendants from proceeding against him immediately, after protest, he has discharged them : but fairly receiving part of the money from Gaird-ner, or m dd.ig arrangements for receiving the whole, without actu ally receiving it, is not sufficient. Receiving part, is not taking security for the whole. Ib. 057. In the case of English v. Darley, 2 Bos. & Pul. 61, the plaintiff brought his action against the in-tlorser of a bill of exchange ; also, against the acceptor. He puf-sued the acceptor to judgment, took out execution, received £100 in part payment of the bill, a id took a boud and warrant of attorney as security for the balance. He was afterwards prevented from proceeding against the indorser, and for the best of reasons: by his accommodations with the acceptor, he had deprived the indorser of his recourse upon him for indemnity. So, for the same reason, a discharge or accommodation, with a prior indorser, prevents a recourse upon a subsequent one ; although the converse of the proposition is otherwise.

In the case of the Executors of Moles v. Dewlin, the defendants drew a bill of exchange, which was indorsed to the plaintiff, on Atkinson, by whom it was accepted. Upon his nonpayment, the defendants were informed of it. Atkinson was afterwards arrested, imprisoned, and finally discharged by the holder, all with the know, ledge of the drawer, who was held to be still liable; as it was in-íerred from his knowledge and conduct, that he virtually assented to the holder’s proceedings: And it was said in this case by Lord Alvanly, O. J. a holder is not bound to seek his remedy against the acceptor, but he müst take care that he dCfes not give the acceptor á defence against the drawer. 8 Bos. and P. 363. From these high authorities, it clearly restilts, that after protest, the drapers of a bill, or the indofsérs of a note, become immediately and abso. lutely liable. That laelies in the holder, which before would die-charge the drawer, is no longer imputable to him. Thai nothing but absolute satisfaction, or suC'h arrangements made with the acceptor, as will prevent the drawer having immediate recourse upori him, if he sees proper, will discharge the drawer from his liability; In the present case, if Gairdner’s testimony were believed, there would be an end of the inquiry. But laying that out of the question, as it is probable the jury did, it will appear that Fiddy, the plaintiff, acknowledged he had received those papers as collateral Security, but had forgotten to lodge one of them in the bank for collection, and that he manifested some alarm whe'n he discovered hoyf small the balance was, that Was due on Stephens’ bond. Is taking' a collateral security for part of the debt a satisfaction for the whole? Did any act, or arrangement of the plaintiff, prevent the defendants from paying off this note, and immediately bringing suit against Gairduer ? I think not. But it is said that the defendant was lulled hito a belief that he should never be resorted td, and was prevented from indemnifying himself out of the wreck of Gaird-ner’s fortune, while it was in fits power. But I would ask upon whom did the law, in this case', impose vigilance ? After protest, unquestionably, on the defendants. It was not the plaintiff’s business to apprise them of their duty; they were bound to' know it. It was sufficient if he did not interpose any legal impediment to their proceeding against Gairdner. Wé find, that as long as duty imposed vigilance'on him, he was guilty of no laches.- The liabilities of the several parties in these kind of mercantile transactions, are now wisely settled, and well known ; and Ido think we should-introduce an innovation, which would be seriously felt by the commercial part of the community, were we to vary fiom the decisions heretofore made. For these reasons, I think, the verdict in thief case should not be disturbed.

Brevard, J.,

concurred with Wilds, J. Whether the indorsee' received the notes and bond, in satisfaction, or agreed, in conse--quence thereof, to give further time for payment to the drawee, were questions of fact for the determination of the jury ; and it is to be presumed they have decided thereon against the evidence of Gairdner. Was the question of fact fairly submitted to the jury 7 ^ certainly wag ; and in a shape as favorable for the defendants as could be. More favorable for him than if the doctrine on the subject had been thus stated : “ That if the indorsee, or holder, after protest and notice, discharge the drawer, or give him further time for payment, so as to prejudice the right, or interfere with the remedy which the indorser would otherwise have against the drawer, this will discharge the indorserwhich seems to be the plain rule of law that governs the case. The charge of the judge in the district court, did not state this rule in precise terms, yet, in effect, the rule which he did lay down, was in substance the same, only it was qualified in favor of the defendants. The material question of fact was then fairly left to the jury'; and their verdict being consistent with law, ought to stand.

Trezevant, J.

dissented. Thought Gairdner’s testimony was intitled to credit, as it was not impeached. The parties must have been under an impression, each of them, that further time was given ; that the defendants must have thought they could not proceed against Gairdner until the engagement between him and Fiddy was at an end. Also, the evidence, independent of Gairdner’s testimony, shews that it was the understanding of the parties that Gairdner was to have further time to pay the note; and likened the case to that of English v. Darley. 3 Bos. and P. 305.

Bay, J.

agreed with Trezevant, J. There was no legal ground on which the jury could discredit Gairdner’s testimony. There was a want of due diligence on the part of the plaintiff. He ought to have entered Gairdner at the bank. But he was otherwise guilty of laches, in not proceeding immediately against the indor-ser, after protest. Besides, it is certain, he made a composition, and took collateral security from Gairdner- This he declared him-sejf; and thus lulled defendants into a fatal security.

Waties, J. not having been present at the argument, gave no-opinion.

Grimke, J., agreed with Wilds, and Brevard, Justices. The whole depended on Gairduer’s evidence, which the jury had a right to credit or not. The securities taken by the plaintiff, appear to have been taken by way of collateral security, and not as payment ; nor was it intended to delay the indorser’s remedy against the maker. It cannot be considered as interfering with his right to proceed immediately against the maker, because it appears he eon-sented to the arrangement, which he would not have done, if he considered it as having that effect.

New trial refused.