Case Name: The JUNIATA BANK against HALE and another
Court: Supreme Court of Pennsylvania
Jurisdiction: Pennsylvania
Decision Date: 1827-06-20
Citations: 16 Serg. & Rawle 157
Docket Number: 
Parties: The JUNIATA BANK against HALE and another.
Judges: 
Reporter: Reports of cases adjudged in the Supreme Court of Pennsylvania (Sergeant & Rawle)
Volume: 16
Pages: 157–163

Head Matter:
[Sunbury,
June 20, 1827.]
The JUNIATA BANK against HALE and another.
The death of the drawer óf a promissory note before it becomes due, and the taking out letters of administration upon his estate by the indorsers, and others, before the note arrived at maturity, do not dispense with the necessity of notice to the indorsers of non-payment by the drawer.
This cause was tried on the 19th of Jlpril, 1827, before the Chief Justice, at a Circuit Court for Mifflin county, and now came before this court, on an appeal from his decision in overruling a motion made by the defendants for a new trial.
It was an action of assumpsit, brought by the Juniata Bank against Elias W. Hale and James Chrisioell, upon a promissory note for seven thousand six hundred dollars, drawn by John Starrett in favour of E. PF. Hale, dated November 10th, 1816, payable six months after date. Fíale was the first, and Chriswell the second indorser. The note was for the accommodation of the drawer, and discounted by the Juniata Bank. Before the day of payment arrived, the drawer died, and on the 2nd of December, 1816, letters of administration on his estate were granted to Rebecca Starrett his widow, Robert Starrett his brother, and to Hale and Chriswell, the defendants. On the 14th of May, 1817, the note was protested, but no notice of a demand on, or'non-payment by the drawer, was given to the indorsers, or either of them.
The defendants proved that John Starrett, the drawer of the -note, lived and died about twelve miles from Lewistown; that his widow continued to live there after his death; that Robert Starrett lived on the adjoining farm, and that both Hale and Chris-well lived in Lewistown, where the Bank was situated. They also proved, that John Starrett was the owner of a tract of land, a grist mill, saw mill, and a still house, and was doing in his lifetime a tolerably large business, and that he purchased in speculating times a tract of land in the Narrows, which in the year 1814, would have sold for a great deal of money.
The defendants, likewise, gave in evidence the record of an action brought in the Court of Common Pleas of Mifflin county, to Jlugust term, 1818, by the Juniata Bank, against the administrators of John Starrett, in which judgment was confessed by the defendants in the sum of three thousand seven hundred and eighty-five dollars and twenty-seven cents, “ de bonis non, of the intestate, and not otherwise.”
At the conclusion of the trial, the Chief Justice charged the jury .as follows:
“Under the.facts and circumstances given in evidence, it is the opinion of the court, that neither demand of payment, nor notice of non-payment is necessary. This direction is given for the purpose of bringing the point in contest, which is one exclusively of law, before the Supreme Court.”
Alexander, for the appellants.
Notice was a condition of the contract, and could not be dispensed with. Gibbs v. Cannon, 9 Serg. & Rawle, 201. Even the death of the party, or notorious insolvency, does not render notice unnecessary. Knowledge is not notice, Esdaile v.Somerville, 11 East, 114, and inquiry whether damage has ensued, is altogether irrelevant. Chitty on Bills, 209, 212, 274 note. Sneeds v. Utica Bank, 20 Johns. 382. The promise of the indorser is conditional, and is incomplete for the purpose of sustaining a suit, until the condition is performed. 9 Johns. 121. Berry v. Robinson, 12 Mass. R. 91. Chiity, 199. Murray v. King, 7 Eng. Com. Law Rep. 57. 4 Cox, 163. 20 Johns. 150. 9 Mass. R. 205. 10 Mass. R. 52. Where the indorser knew the maker to be insolvent at the time of drawing the note, it was nevertheless held that notice must be given. Farnum v. Fowle, 12 Mass. R. 89. Reed v. Commonwealth, 11 Serg. & Rawle, 441. The want of notice was, in the present instance, actually very injurious to the indorsers. The land of the maker might have been made liable for this note, and in fact the profits would have paid it,and from want of notice that the defendants were held liable by the bank, the land has been placed beyond their reach. Notice is necessary in order to charge the drawer, though the maker be absent from the county, and the same principle applies to the case of death. 14 Johns. 177. M‘Kinney v. Crawford, 8 Serg. & Rawle, 353. The case of Bond v. Farnham, is the only one which militates against the doctrine now contended for; but that case is distinguishable from the present, because there was there a particular assignment in favour of the indorser. Here the assignment which, the law makes of the assets, is for the benefit of the creditors generally. It is like an assignment in a case of bankruptcy, and there notice is indisputably necessary. Smith v. The Bank of Washington, 5 Serg. & Rawle, 321.
Benedict and Blythe, contra.
The indorsers having been administrators, united in their persons the character both of maker and indorser, and therefore did not require, and indeed could not have the notice usually required, in order to charge the indorser of a promissory note. They held the funds of the maker, and bound themselves faithfully to administer those funds. They were, therefore, pledged to pay this very debt. The object of notice is to secure the indorser, and whenever it would not have that effect, it is considered as waived. Actual prejudice from want of notice need not, it is true, be shown; if there be a possibility of injury, the indorser is entitled to notice; but where no injury can possibly arise, as in the present case, notice would be nugatory, and is therefore, not required. It is upon this principle that notice is not necessary where the drawer is a partner of the firm on which the bill is drawn. Here the indorsers having become the representatives of the drawer, stand in the situation he would have occupied, and do not require notice of that which, from their situation, it was impossible to avoid knowing. Chitty on Bills, 211. Barton v. Baker, 1 Serg. & Rawle, 334. Gowan v. Jackson, 20 Johns. 176. 12 Mass. R. 86, 403. 13 Mass. R. 556. 4 Maule & Selw. 226.

Opinion:
The opinion of the court was delivered by
Duncan, J.
This was an action against the defendants, on a negotiable note, dated the 10th of November, 1816, for six hundred dollars, in which Starrett was the drawer, E. W. Hale the payee, Hale the first indorser and Chriswell the second. It was a note for the accommodation of the drawer, and Hale declares in the memorandum subjoined to it,that it was for the use of the drawer. It was payable in six months, and was discounted by the Juniata Bank. The drawer died before the day of payment; and, on the 2d of December, 1816, letters of administration issued on his effects to Rebecca, his widow, Robert, his brother, and Hale and Chriswell.
On the 14th of May, 1817, the note was protested, but no notice of demand or non-payment was given to the indorsers, or either of them.
The Juniata Bank contended, that notice of non-payment was unnecessary, inasmuch as the indorsers were two of the administrators, who, in their character of administrators, must have had knowledge of the non-payment of the note, and had all the estate of the drawer in their hands to secure themselves.
The indorsers insist, that if knowledge was proved on them, of the fact of non-payment, still they were entitled to notice from the Juniata Bank, the holder of !he note, of the intention of the bank to call on them. And Chriswell, who is joined in the action under the act of assembly, insists, further, that he should have had notice; for although the note might not have been paid by the drawer, who died before it became due, still it might have been paid by the first indorser, and the notice of the non-payment was an important matter to him. It is further insisted by the defendants, that, so far from the bank giving notice of an intention to- look to them for payment, in 1818 they obtained a judgment by confession from the administrators, a special judgment de bonis intestati, and not otherwise; and that they delayed to proceed on this judgment, and did not call on the indorsers until this action was brought, which was lacking a few days of six years, when the statute of limitations would have barred the recovery.
On the trial of the cause before the Chief Justice at the late Circuit Court, for the purpose of having the question settled in this court, which is admitted to be new in species, he instructed the jury, that neither the demand of payment nor notice of non-payment was necessary, and it is from this decision the defendants appealed; and on tbis opinion it is now only necessary fo- this court to decide. From the view they have taken of this subject, if the court did not decide on the general doctrine of the necessity of notice of nonpayment from the holders of the note, the circumstances of the situation in which Chriswell, the second indorser, stood, and the judgment against the administrators, and the long delay in bringing the action, were matters worthy of serious consideration; but they have judged it most advisable to decide upon the general principle.
What is the nature of the engagement of the indorser? It is founded on the law merchant, and is governed by its principles: his undertaking is only to pay in case the maker does not pay. The indorser takes it on the condition that he will first apply to the maker; and, in an action by the indorsee against the indorser, the declaration must aver that on the note becoming due, the demand was made of the drawer, and that he refused to pay, of which the defendant had notice. It is an essential part of the plaintiff's case, and even a verdict would not cure the omission. This was decided in the Court of Errors and .Appeals, and the judgment of the Supreme Court reversed. Miles v. O'Hara. And though the declaration alleged that the drawer of the bill became liable by the custom of merchants, this is not sufficient, because the law merchant is not a matter of fact, but of law, and the want-of notice is the very gist of the action; for it is that which raises the implied promise. M'Kinney v. Crawford, 8 Serg. & Rawle, 353.
That knowledge of non-payment is not notice, is very clear; for the notice must come from the holder himself, or some one who is a party; for the notice must assert that the holder intends to stand on his legal rights, and to resort to the indorser for payment; and therefore, where the drawer had notice before the bill was due that the acceptor had failed, and gave another person money to pay the bill, and the holder neglected to give notice of its dishonour, it was held that the drawer was discharged. Nicholson v. Gouthit, 2 Hen. Bl. 612. Whitfield v. Savage, 2 Bos. & Pull. 277. Esdaile v. Sowerby, 11 East, 114, 117. And where a few days before the bill became due, the acceptor informed the drawer that he must take it up, and gave him part of the money to assist him in so doing, and the latter promised to take up the bill accordingly, it was held the latter might nevertheless set up, as a defence, that the bill was not duly presented for payment, and that he had not regular notice of the dishonour. Baker v. Birch, 3 Campb. 107. The notice must come from one who can give the drawer or indorser his immediate remedy on the bill, and not from a stranger; otherwise it is merely an historical fact: it must be legal notice, othei'wise the party is discharged from the liability he contracted by indorsing it. 2 Cowp. 177. Chitty on Bills, 292. The reason given, in Ex parte Baisley, 7 Ves, jr., 597, is very satisfactory; for the ground of discharging the drawee is, that the drawer gave credit to some other person liable, as between him and the drawer. Notice from any other person than the holder, that the note is not paid, is not notice that the holder does not give credit to a third person. This is very strongly put by Ashhurst and Buller, Justices, in Tindall v. Brown, 1 Term Rep. 167. According to Ashhurst, "notice means something more than knowledge, because it is competent to the holder to give credit to the maker. It is not enough to say that the maker does not intend to pay, but that the holder does not intend to give credit to such maker: the party ought to know whether the holder intends to give credit to the maker, or to resort to him." And, by Buxrer, J;, it was said, "The notice ought to purport, that the holder looks to the party for payment, and a notice from another party cannot be sufficient: it m,ust come from the holder." And this doctrine of Buxxer has been acted upon in many cases there, as Lord Exdon observed'in Baizeley's case. Now, here these indorsers ought to have had notice from the Juniata Bank; for that would be notice that they did not mean to resort to the estate on which, with others, they had administered, but to them in the character of indorsers; whereas, by not giving notice, they had a right to conclude the bank intended to look to the drawer. And, according to Ashhurst's opinion, they had a right to know from the holder, the Juniata Bank, that they intended not to give credit to the estate of John Starrett, but to look to them personally as indorsers.
The argument,'that the indorsers received no injury from the want of notice does not now hold. Whatever vacillation prevailed in courts for a time, it is now settled, that the insolvency of the draiVer of a note does not dispense with the necessity of demand, and notice of non-payment. Between the parties.to the notice the rule is inflexible, and it is not open to the inquiry whether notice could have availed the indorser. The holder has no right to speculate and judge what may be the interest of the parties: his duty is a plain one — to give notice; and, if that rule is dispensed with, it opens a door for endless litigation, and perplexing .inquiries. Death, bankruptcy, notorious insolvency, or the drawer's being -in prison, constitute no excuse either in law or equity. Gibbs v. Cannon, 9 Serg. & Rawle, 201. Notice to one of several partners, who are joint indorsers, is notice to all; and, if one of the drawers of the bill be also an acceptor, and there is no fraud in the transaction, no notice, in fact, is necessary to the others. Neither is notice necessary to a party who by his conduct dispensed with it, as, by engaging to call on the holder, and ascertain whether the acceptor has not paid the bilí. Chitty on Bills, (Carey & Lea's Ed.) 297. So, if the drawer of a bill promises to pay, this is a waiver of the objection of the want of notice, where the party knew all the facts and the legal consequences. But it has been recently held, that though the drawer of a hill may impliedly waive his light of defence, founded on the laches of the holder, yet an indorser can only do so by an express waiver. Borradale v. Lowe, 4 Taunt. 93, 96, 97. Brown v. M'Dermot, 5 Esp. Rep. 265. And there is, in all those cases of want of notice, a material and essential difference between the drawer of a bill and the indorser; for, if the drawer of a bill had no effects in the hands of the drawee or acceptor, and the bill is drawn for the accommodation of such drawer, he is prima facie not entitled to notice of the dishonour of the bill, nor can he object in such case. He, being the the real debtor, acquires no right of action against the acceptor by paying the bill, and suffers no injury from want of notice of nonacceptance or nonpayment, (12 East, 71,) and therefore the laches of the holder affords him no defence. 4 Taunt. 733. But it is no excuse for not giving notice to the indorser of a bill, that the acceptor had no effects. Peake's Rep. 202. " That circumstance," said Lord Kenton, " will not avail the plaintiff. The rule extends only to actions brought against the drawer: the indorser is, in all cases, entitled to notice." See Chitty, 259, 295.
It has been attempted to bring this within the principle of Bond v. Farnham, 5 Mass. R. 170, and Barton v. Baker, 1 Serg. & Rawle, 334; but those cases were decided on very different grounds. In the first, Chief Justice Parsons says, "The opinion was founded on this, that if the indorser, representing himself liable for the payment of particular indorsements,receives a security to meet them, he shall not afterwards insist on a fruitless demand upon the maker, or a useless notice to himself, to avoid payment of demands, which on receiving security he has undertaken to pay." In the latter, the late Chief Justice put it on the ground, that it was not unreasonable to suppose that the defendant took upon himself the payment of the indorsed notes, and on no other ground could it be held Jhat the notice of non-payment was not necessary.
But here the indorsers had no security, beyond any other simple contract condition of John Starrett; they obtained no advantage beyond strangers to the administration; for by the death of the intestate, his goods and lands.were seized by act of law, by a kind of statute execution' in the hands of his administrators, just as in the case of a cotnmission of bankruptcy, and tó be discharged in a prescribed order; in which the administrator cannot prefer himself or retain his own debt, as he could by the laws of Eng•land. The lands, the fund here for the payment of debts, do not come into the possession of the administrator: he has no right of entry, and can bring no ejectment; the possession descends to the heir. The executor or administrator have, by virtue of their office, in no case a right to the possession of the deceased's lands. As I do not find the case of an-indorser becoming an administrator to the drawer, in any decision among the books, of authority, to form an exception to the necessity of giving notice to the drawer, and as there is no reason vyhy it should, I am not for relaxing one jot further than it has been done, this wholesome and convenient rule. Indeed, we find judges regretting that it had ever been departed from in any case.
The Chief Justice, who decided the case in this court, for the purpose of bringing this new question before the court, joins in the opinion of the other members of the court, that the indorsers not having received notice of non-payment, are not liable on the indorsement, and that the appeal be sustained.
The rule of demand and notice is one of universal obligation. I would not extend the exceptions further than to the cases which have been expressly decided. Policy and the convenience of the public, require a rigid adherence to the rule; for, otherwise, excéption would creep in after exception, and leave the law, which ought to be certain, open to speculation and to doubt.
Judgment reversed.