Case ID: scl_21/html/0077-01.html
Source: Caselaw Access Project
Author: {"author": "Earle, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

WILLIAM THOMPSON VS. THE BANK OF THE STATE OF SOUTH CAROLINA.
    The protest of the bank notary recognizing the plaintiff as depositor, and the fact that he is the last indorser, are sufficient circumstances to shew that he is the real owner and depositor of a note placed in bank for collection.
    Where a bank receives a note for collection it- is liable for any neglect by which the indorsers are discharged. The general custom of banks to use monies so collected, is a sufficient consideration for this undertaking.
    Where a bank takes a note for collection it is bound to demand payment of' the maker, and to cause notice of non-payment to be given to all the indorsers, and failing to do so is a neglect of the obvious and legal means of collection.
    Where a bank placed a note, left for collection, in the hands of a notary public, he will be regarded as the agent of the bank, for whose omissions or mistakes the bank is liable.
    What constitutes sufficient notice of the dishonor of a note or bill, is, in general, a question of law ; but what shall be deemed reasonable diligence in ascertaining the residence of an indorser, in order to give notice, is a question of fact for the jury.
    
      
      Tried, Charleston, May Term, 1835, before Mr. Justice Evans, who made the following report.
    
    “ In this case, the note was lodged in the branch bank at Camden, for ■collection. The note was drawn by Joseph Goodman, payable'to Black, and indorsed by him and William Thompson, dated at Camden, 24th February, 1829, for $170 42-100. The note was lodged in bank by'Shannon, who had received it from Flemming & Ross. When the note was payable, as the drawer was insolvent, Salmond, the president of the bank, called on Shannon, supposing him the owner, but he was from home. He advised McGee, Shannon’s clerk, to withdraw the note. McGee could give no information where the indorsers lived. The note was delivered to the bank notary, who protested it for non-payment, but no notice was given to the indorsers, they not being residents of Camden, and having no agent there. The object of the action was to charge the bank for this omission, whereby the liability of the indorsers was discharged. The substance of the testimony of Shannon and McGee is stated above. The statement of Mr. Ravenel, as to the usage of the bank, and some letters from Flemming & Ross, and one from the plaintiff to Shannon, with the .protest by the notary, constitute all the evidence given at the trial. I was of opinion, and so charged the jury, that when a note lodged for collection was unpaid at maturity, the bank was bound to demand payment of the drawer, and to give notice to the indorsers. This, I think, is clearly established by the testimony of Mr. Ravenel, and by what is said by the .court in the case of Johnson v. Harth, 1 Bailey, 482. Except in the case of ■foreign bills, a protest by a notary is not necessary. The bank may employ one, or the demand and notice may be made and given by a private person. I regarded the notary as the mere servant or agent of the bank, and if he had omitted to perform his duty, the batik was liable. I was clearly of opinion, that notice to Shannon, the depositor, was insufficient, provided the bank had any means of knowing who the indorsers were, and where they resided. Whether the bank had used due diligence in ascertaining this fact, so as to enable them to give the proper notice to the indorsers, was left to the jury to decide, and they found for the plaintiff. My own opinion was decidedly, that the bank had done all they could be required to do. Application was made to McGee, the agent of Shannon, and he could give no information about the indorsers. I am inclined to •think I ought to have stated this opinion explicitly to the jury, and it may be, that in my anxiety to avoid any expression of opinion on the facts of a case, I omitted to state to them what may be more properly considered a .question of law,.’-’
    
      
      Grounds of Appeal.
    
    1. Because his -Honor charged the jury, that although the note in suit Was lodged at the bank for collection, the bank was bound to give regular notice to all the indorsers ; whereas, it is respectfully submitted, that the hote.being for collection, the bank was the mere agent of the depositor, and bound to give notice of non-payment to him only, and is in no way responsible to the indorsers.
    2. Because his Honor charged, that although it was proved that the indorsers did not live where the note was payable, that the bank was bouhd to ascertain where they were, and to send the notice accordingly; whereas, under such circumstances, notice is due to the depositor only, whose duty it is to give notice to those whom be intends to make responsible to him.
    3. Because when the indorsers of a note do not live at the place where the note is payable, if the depositor wishes notice of non-payment to be extended to the indorser, it is his duty to inform his agent, the bank, where the indorser lives; and where this knowledge is duly sought from the de» positor, by the bank, the diligence required by law has been fulfilled, and the bank is not responsible.
    . 4. That a notary public is a public officer, and where the bank, as the agent of the depositor, lodges a note.with him for protest, the bank is not responsible for his ignorance or laches, unless his incapacity is notorious.
    
      Smiths, Defendant’s Attorneys,
   Curia, per

Earle, J.

The plaintiff deposited a note, by the hands of Mr. Shannon, resident in Camden, in the branch bank at that place, for collection. One Goodman, also resident there, was the make'n Black, the payee, had indorsed it to the plaintiff, who also indorsed it, when he sent it to the bank. He was the last indorser, and owner. At maturity, the note being unpaid, the president called at Shannon’s, who was absent from home, and the note was protested for non-payment by the bank notary ; but no notice was given to the indorser, Black, or to the plaintiff, “they not being residents of Camden, and having no agent there.” This action is brought by the plaintiff, for the non-performance of its undertaking by the bank, to collect the note for the plaintiff, and on non-payment, to give the necessary notice to charge the indorser, it being alleged, that for want of such notice, the indorser is discharged, and the plaintiff has lost his debt.

On the argument in this court, I was inclined to think this action would not lie for the plaintiff against the bank, until he had failed in his suit against the indorser. But the other members of the court being of a different opinion, and no question being raised on that ground, by the counsel for the bank, the case will be considered and disposed of, without reference to it.

The exception mainly urged against the verdict is, that the bank was the 'agent of Shannon, the depositor, only, and not of the plaintiff; that the bank having given notice of non-payment to him, performed all that it engaged to perform, and was not bound to give notice to the indorser or owner. It will, in the first place, be proper to inquire, who Was the depositor. The protest, which is competent evidence as an admission' against the bank, although not evidence for the bank, of the facts stated in it, expressly recognizes thet plaintiff as the depositor and owner of the' note; “ at the request of the president and directors of the branch of the' Bank of the State of South Carolina, at Camdefn, for William Thompson, I, Robert Mickle,” &c. The plaintiff was the last indorser, and, of course, the money, when received, if paid at all, would have been placed as a deposite' to his credit, and he alone could have withdrawn the fund. These circumstances shew, that in fact the plaintiff Was himself the depositor ; and that the Bank regarded him as the owner, and undertook the collection of the note as his agent. The Bank was, therefore, responsible to him, for the performance of this duty or engagement.

The extent of that engagement, and the manner'' in which it was to be' performed, ne'xt become the subject of inqury. And as these much depend on the benefit to be1 derived by the promiser, or the injury so be sustained by the other contracting party, it is material to inquire, whether there was any such consideration for this undertaking on the part of the Bank. And it could not but excite some surprise,- at this day, if it were seriously alleged, that a Bank had undertaken to do any act of this kind, from which it did not expect to derive a benefit; to collect and appropriate any sum of money for a customer, on which it expected no commission, and no use equivalent to a commission. The readiness with which banks engage in this business, is a proof that they do derive a benefit from it; and the benefit is proportioned to the extent of it. The money received on notes lodged for collection, becomes a deposite, on which, as a portion of their active capital, banks derive an income, as it enables them to extend their issues; and it is well known that deposites are always considered by the banks as a portion of their available means to meet emergencies. In a commercial community, where such deposites are numerous and extensive, they form an important item in the business transactions *ot banks, from which large sums are frequently accumulated ; and which may reasonably be expected to remain there, as a place of safety, until some exigency may require them to be withdrawn ; and which may, therefore, prudently be relied on as a permanent source of revenue, I apprehend, therefore, it will not be denied, that such deposites, in general, are highly beneficial to a bank ; and that for the purpose of this action, is enough. The money was not received on this note ■; no benefit was actually derived. But this was only one out of many 5 it was one small item in an extensive branch of business, from which the bank did derive a benefit ; and it was the anticipation of that benefit, which induced the bank to undertake the collection. And this forms, in the opinion of the court, a sufficient consideration. Smedes vs. the Bank of Utica, 20 John. Rep. 372; where several of the questions involved in this case are ably discussed» and decided as they are now by this court.

What, then, was the extent of the engagement! The bank received the note as indorsee, to entitle it to demand the money. The plaintiff, had he retained the note, it may be assumed, would have known what was necessary to charge the indorser, and would hot have neglected it. The defendant, for valuable consideration, took the note out of his hands, in the character of indorsee, for the purpose of collection; not merely for the purpose of demanding payment of the maker, at maturity; for Black, the indorser, was liable, in default of the maker; and if he had received notice, may have paid it. We are to presume that he would have paid it, in consideration of his legal liability, and out of regard to his credit. When the note was deposited for collection, it was for the purpose of being collected from all who were liable upon it; and to omit giving notice of the dishonour to the indorser, was neglecting a part of the obvious and legal means of collection. The understanding and usage of banks, every where, are conformable to this view of the subject. I consider, therefore, that where a bank takes a note for collection, it is bound to demand payment of the maker, and to cause notice of non-payment to be given to all the indorsers, as on a note discounted.

^ It is next to be considered, whether the Bank is excused, by the circumstances relied on, from its liability for this default. And first, of that ground of defence which supposes the bank excused, because it employed a notary, “ who is a public officer, and the bank is therefore not responsible for his ignorance or laches, unless his incapacity were notorious.” To what extent this ground might avail the defendant, if the subject of the controversy were a foreign bill of exchange, on which protest is necessary, will not now be considered, much less decided. The question here arises on a promissory note; protest for non-payment is not necessary; it is altogether superfluous; a demand of payment was necessary ; and to enable it to be proved, it was necessary to employ some one to make it; but a notary was not requisite ; any other individual would have sufficed to make the demand, or to make the inquiries necessary to giving notice. Supposing the notary employed here for that purpose, which is not clear, Jie cannot be regarded as acting officially, and must be regarded as the mere agent of the bank, for whose omissions or mistakes the bank is liable. } As I have intimated, however, it is not clear that there was any .omission on the part of the notary, for it seems that the demand of payment, if made at all, was made before the note was placed in the hauds of the notary ; as also were the inquiries at the residence of Shannon, by the president Salinond, who inquired of McGee, his clerk, where the indorsers lived ; and as he could give no information, “ the note was delivered to the bank notary, who protested it for non-payment, but no notice was given to the indorsers, they not being residents of Camden, and having no agent there.” Such is the language of the report, (I presume the evidence .of Shannon himself,) and such is the language of the protest, which, as before remarked, is an admission of the notary, or bank agent, and therefore evidence against the bank. It is therefore not clear, whether the reason assigned for the protest, is to be attributed to the president, or to •the notary. The president made the inquiries at Shannon’s, and receiving ,no information concerning the indorsers, gave the note to the notary, who protested it, without further inquiry concerning their residence, although ¡Goodman, thejmaker, resided in the town, and the bank knew that Thompson, the plaintiff, was the owner of the note. If the reason assigned in .the protest, be the ground assumed by the notary, as the agent of the bank, that of itself would furnish sufficient evidence of his ignorance and .incapacity to charge the bank. But supposing otherwise, and that the •president and notary made inquiry of McGee concerning the indorsers, we are brought to the next ground of defence, that the bank, by making the inquiry,of .the immediate,depositor, used due diligence, and is not liable further.

Suppose an action brought on the note by the bank as endorsee, against •.the plaintiff as indorser, and the facts now relied on to excuse the bank, were relied on to dispense with notice, to wit: that the bank, on nonpayment, had made application at the house of an intermediate indorser, or .even of a person employed to negociate the last indorsement, and by whose .agency it had been passed to the bank. I think it could not be held sufficient to dispense with notice. What constitutes sufficient notice of the dishonor of a note or bill, is in general a question .of law ; and yet what shall be .deemed reasonable diligence in Ascertaining the residence of an indorser, in order to give notice; is á question of fact for the jury. The rules in relation to notice are very well settled, and generally understood. They are well stated by Mr. Justice Washington, in Williams vs. The Bank of the United Stated, 2 Peters, 96; ‘‘The holder of a bill or promissory note, in order to entitle himself to' call upon a drawer or indorser, must give notice of its dishonor to the" person whom he means to charge. But if, when the notice shall be given; the party entitled to it be absent from the State, and has left no known agent to receive it; if he abscond, or has no place of residence which reasonable diligence, used by the holder, can enable him to discover, the law dispenses with the necessity of giving regular notice.” And in Bateman vs. Joseph, 12 East Rep. 432, it was held that whether a party used such reasonable diligence, to ascertain the residence of an indorser, was a question of fact to be left to the jury. That was an action by a subsequent indorsee" against the drawee and first indorser of a bill of exchange, which became due on the 27th September, when it was presented for payment; to the acceptor in London, and dishonored. Notice of the dishonor reached' Manchester, where the plaintiff lived, on the 30th September, early enough to give notice to the defendant on that day, by the post from Manchester to Liverpool, where the defendant lived , and the plaintiff had like opportunities of giving notice on the 1st, 2d and 3d of October, hut none ivas given until the 4th, when the defendant received it in a letter from the plaintiff directed to Liverpool. Atthe trial; before Lord Ellenborough, this apparent laches of the plaintiff was accounted for by the evidence of his servant, that his master did not know the residence of the defendant, until the day when the notice was sent by the post. And his lordship left it to the jury to say, whether the plaintiff had used due diligence; in acquiring the knowledge of the defendant’s place of residence, admitting that otherwise the notice was too late. The jury having found a verdict for the plaintiff, on a motion for a new trial, it was agreed by all the court, that it was a question proper to be left to the jury, and they had decided it. “Whether due notice has been given of the dishonor of á bill, all the circumstances necessary for the giving of such notice being knówn, is a question of law; but whether the holder haVe used dué diligence to discover the place of residence of the person fo whom the notice is to be given, is a question of fact for the jury.”

( If we consider the question as one between principal and agent, and discuss the degree of diligence, in reference to the duty undertaken to be performed, we shall come to the same conclusion, that it was1 one very proper for the decision of the jury. Whosoever undertakes an agency, engages likewise to Employ an adequate degree of skill; and’ to use a rea= sonable degree of diligence. In this case, the bank engaged for the ex-ercise of so much skill, in the particular department of business, as to perform the duty of collecting the note, and, as I have endeavored to show, of doing whatever was necessary to charge those to whom the plaintiff might resort for payment; and in accomplishing this, lhat it would omit nothing which reasonable diligence would enable it to perform. If it be said that it was the fault of the plaintiff, that the bank was-not informed of the residence of the indorsers, it may be replied, that the bank must have known, when it took the note for collection, that a notice of dishonor might become necessary ; and if the residence of the indorser was unknown, as the information- was indispensable, to enable the bank to perform the duty, it was equally the duty of the bank to seek for and obtain it, at the time of receiving the note. And supposing both to be in-fault, at the time of the dishonor of the note, it was surely incumbent on the bank to use all the means then in its power, to ascertain the residence-of the indorser. It was submitted to the jury whether the bank had used reasonable diligence, in seeking that information, and the jury have decided against the bank, and a majority of the court thinks with good reason. "^The plaintiff was known as the owner, yet the note was taken from 'Shannon, without inquiry concerning him, or the previous indorser. And after non-payment, no inquiry was made of Goodman, the maker, and but one attempt to inquire of Shannon, although both lived in the-same town.

A majority of the court concurs entirely with the presiding judge; in his1 charge to the jury, and in all that is stated in his report, except when he-thinks the bank did all it was bound to do ; and when he doubts whether lie should not have so charged the jury, as matter of law. He did well in leaving it to the jury. And the motion to set aside their verdict is refused,

Butler, DeSaussure, O’Neall and Richardson, CC. and JJ. concurred.