Case Name: C. & J. Wood v. Pugh, Gano and Lee
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1836-12
Citations: 7 Ohio 156
Docket Number: 
Parties: C. & J. Wood v. Pugh, Gano and Lee.
Judges: 
Reporter: Cases decided in the supreme court of ohio : upon the circuit at the special sessions in Columbus
Volume: 7
Pages: 448–457

Head Matter:
C. & J. Wood v. Pugh, Gano and Lee.
The prayer of a bill, supra protest, for the honor of the indorser, must give-reasonable notice to the party that he has made such payment for his credit, otherwise he is not subjected to refund.
This case was adjourned from the county of Hamilton, upon a-motion made by the plaintiffs for a new trial. The action was assumpsit, and was founded upon the following state of facts : Thomas- Bell, a merchant of Cincinnati, drew a draft in favor of Pugh, G-ano •.and Lee, on Willis and Robinson, merchants in New York, dated March 21, 1831, at four months. *Pugh, Gano and Lee sold this draft at the Branch Bank of the United States, in Cincinnati, by whom it was transmitted to the branch in New York. The . draft was duly accepted, and on the 3d of August, protested for non-payment, and the legal notice given to the parties interested, On the 4th of August, the plaintiffs paid the amount of the draft as under protest; or, in commercial and legal language, supra protest, for the credit of the drawers and indorsers; and this suit was brought to recover the amount of Pugh, Gano and Lee, the indorsers.
On the trial, the plaintiffs produced no proof that notice of the ■payment supra protest, for the credit of the defendants, was communicated to them, and the defendants proved that the next day after receiving notice of the protest, they were advised by the cashier of the branch bank of Cincinnati that the draft was paid in New York.
The defendants’ counsel moved the court to instruct the jury “ that the plaintiffs were not entitled to recover without proving -that they gave a reasonable notice to the defendants that they had paid the draft, after protest, for their honor.” This instruction was given by the court, and a verdict found for the defendants. For error, in this instruction of the court, the plaintiffs moved for ■a new trial.
Haines,
in support of the motion:
The only question now presented for the consideration of the court is, “ whether the holder of a bill for the honor of an indorser must give notice within a reasonable time of such intervention for his honor, although due notice of non-payment has been given ?”
The general rule of law is, that no man can constitute himself the creditor of another without his consent, express or implied. The only exception to this rule is, the payment of a bill supra protest. The reasons for this rule are, that it induces the friends of the drawers or indorsers to render them this service, and thereby prevent the great expense attending the return of the bill, and preserves the credit of the trader. The law implies consent of the party for whose honor acceptance is made, from the nature of the Javor conferred — being gratuitous, and incurring hazard, for the purpose of rendering a service. An acceptance supra protest may demand recompense *for the credit given, for whoso benefit the acceptance of payment is made. And in case he redraws on such person, his bill ought to be promptly complied with, besides a grateful acknowledgment of the favor. Thus it would appear, from the language of this celebrated writer on the law merchant (Beawes), that the payer for honor is not only entitled to repayment, but to the gratitude of the parties whose names are saved, from discredit. In accordance with this principle, we find in T Esp. 112, it is said, “That the common law, and the law merchant as part of the common láw, jiresumes a general standing request to be made by the drawer and indorsers of an unpaid bill, to-every friend, to prevent the dishonor of the bill and the burden of heavy damages, in consequence of this. If acceptor supra protest, for the honor of an indorser, pays the bill, he may sue the indorser, as he is to be considered as an indorser, paying full value for the bill.” Esp. 112. And in the language of Ch. J. Marshal, “No reason can be assigned why the person who has made himself the holder of the bill, by accepting and paying it under protest, should not recover its amount from the drawer and indorser.”
As to those parties, he is in the character of an indorser, and as such may maintain an action against all or any of the parties to it, except the person whom he paid, either on the bill or for money paid, etc. He acquires all the right that the holder of the bill had, although no regular transfer be made to him. He is placed in the same position in which he would have been had he purchased the bill after its maturity. In the language of Chancellor Kent, “The policy of the rule granting these privileges to the acceptor or payor supra protest is to induce the friends of the • drawer or indorsers to render them this service, for the benefit of commerce and the credit of the trade.”
We admit that the intervention of a stranger to the bill and payment for the honor of the parties, does not vary the duties of the holder; he is bound to have it protested at maturity, and to • have the same notice given to the antecedent parties as if the bill was not taken up; but when that formality is complied with, we claim that his right of action is complete — that ho has discharged his duty to the parties, and is then to be considered as an indorsee - for value,-and may claim immediate payment and remuneration, by suit or otherwise without *any notice or advice to the parties for whose honor he had intervened.
Why should such further notice be required?
The parties have already, by the protest for non-payment, by the drawer, been notified of the dishonor of the bill, and are thus -enabled to protect themselves by obtaining satisfaction from any parties liable to them; for which purpose alone notice is required. They are then put upon inquiry, and it is then their duty to project their names, and take up their paper, whether in the hands -of a regular indorser, or of a friend who has saved their name from dishonor, and the parties from heavy damages. They owe that friend, in the language of Beawes, a debt of gratitude, instead ■of requiring the further idle act of advising them of such intervention, and thus subjecting the payor for honor to an additional risk, and to one which, if required, would be very apt to put a stop to all these voluntary or gratuitous payments.”
How will you distinguish between the acceptor and payor for honor as to these rights ? Were the Woods the acceptors for honor and failed to pay at maturity, the acceptance supra protest would have been obligatory on them and they might have been ■compelled to pay. Would it have been then contended that upon such compulsory payment, they could not have recovered against these parties for the want of notice of such intervention ? The only object of protesting the bill for non-payment and giving notice is, to entitle the payor for honor, to all the rights of an indorser; for if “the acceptor for honor receive approbation of the acceptance, he may pay the bill without any protest for non-payment.” The only object, therefore, without such approbation in protesting for non-payment is, to secure all the rights of an indorsee, and. as such, the books consider a payor for honor. Not .a single dictum can be found, requiring the holder for honor, to advise the parties to the bill, of his intervention, and this silence affords a fair implication that no such notice is itecessary. There can be no advantage in any such requisition; but, on the contrary, it would tend greatly to increase the risk to all parties connected with this most useful species of commercial paper, and to •lessen its utility by a diminution of confidence in its punctual .payment.
*Fox, for defendants :
In order to determine whether the notice was necessary in this transaction, it will be well to inquire into the character of the party paying supra protest
It is said any person may appear and accept or pay a draft (after the same has been protested) for any one of the parties to the bill, and, on such payment being made, he is invested with all the rights of the person for whose honor he paid. Bailey on Bills, 213, 214.
The person paying supra protest can not hold any party who would not have been liable to the party for whose honor the bill was paid. Bailey, 214.
The person paying supra protest holds in his original character, •and not as upon a transfer from the person he has paid. Bailey, 212, 213.
A perfect stranger, then, it appears, has the right, according to mercantile usage, without the knowledge of a party to the draft of making that party his debtor by a voluntary payment, without his assent; and the question presented is, whether the law imposes no duty on such stranger in order to perfect his right. We •contend that the law has imposed a duty on the person thus paying, and we say it is this: That he shall, in a reasonable time,
give notice to the person of what he has done, in order to enable the party, for whose benefit the act is intended, to secure himself •against the effect of the non-payment.
It is held, wherever an acceptance is made generally, it is considered as made for the honor of the drawer, unless otherwise expressed. Bailey, 45.
Such acceptance, however, may be so worded, that though it be intended for the honor of the drawer, yet it may equally bind the indorser; but in this latter case, notice of such acceptance must be sent to the latter. Chitty on Bills, old ed., 256; Beawes’ PI. 39,
If the person do not choose to accept in honor of the drawer.
“ he may accept for the honor of the indorser, in which latter case he should immediately send the protest in which he made the acceptance to the indorser.” 16 East, 391; Ld. Raym. 88; Chitty on Bills, old ed., 254; Beawes’ PI. 33, 34.
If we examine the cases, we shall find the uniform practice *of acceptors and payors, after protest, has been to give immediate notice to the persons for whose honor they have acted. Leoux v. Leverett, 10 Mass. 1; Konig v. Bayard, 1 Peters, 261, 262.
We have, then, the authority of the elementary writers, and thetmiform practice of the mercantile world, in favor of the position we assume, viz: that when any one,undertakes to pay a draft after-protest for the honor of the indorser, he is bound to give that indorser immediate notice of what has been done. This position is-sustained in express terms by the elementary writers referred to, and the plaintiffs have not shown a single case where a contrary doctrine has been held.
The analogies of the law are all in favor of the position. There-is as much propriety in giving notice in such case, as there is betweeen the parties to the bill or draft. If the object of the notice is to enable the prior party to secure himself, either by taking up the bill and suing the parties ultimately liable to him, or to-enable the surety to secure himself from funds of the drawer, why has not the indorser thesame right to notice from a perfect stranger to the transaction, who voluntarily becomes a creditor of the indorser without his knowledge, as he would have if a party to the bill wished to make him liable?
It is said, however, that a notice from the holder of the bill is-sufficient notice for all parties. We admit that if the holder gives notice to all the parties of the protest for non-payment, any one whose name is on the bill and has paid the note, may rely upon that notice, but it is only the parties to the bill that can take advantage of the acts of the holder, and even then, the parties who rely upon the act of the holder, do so at their peril; for if he acts incorrectly, if he neglects to give the proper notice, the party relying upon it will be affected by the negligence. Every indorser is bound to notify the prior parties to whom he wishes to resort for payment, and if he employs an agent to do it, he is affected by the negligencaof the agent.
But we deny that a person paying after protest, can take any advantago of a notice of non-payment given by the holder. Many reasons might be urged in support of this position. In the first, place, the bill can not be paid by a stranger until after it is protested. At the time the protest is made, he has no concern or interest in the matter; it would be strange, therefore, *thafr ho should be entitled to any benefit arising from the notice of protest. But he afterward, by permission of the law, pays the bill;, and then it is that he is required to give a notice to such parties: as he wishes to look to for his indemnity. Is there any hardship imposed upon such a person to require him to give notice of the claims which he thus asserts? On every person who becomes a party to a negotiable paper, this obligation is imposed. No matter how many persons indorse negotiable paper, the law imposes upon each one the obligation, when he pays the note, of giving notice to such of the prior parties as he intends resorting to for payment. To be sure, the holder of the note may, if he pleases, actas the agent of all the other parties to the note, but he need not do it. But it is only prior parties that can take advantage of a notice given by a subsequent party. It is very certain that a second indorsee could not take any benefit or advantage of a notice given by the first indorsee, because he himself would not be liable to the first indorsee.
The position, then, which we maintain is, that every person who becomes a party to a bill, is obliged by himself or agent, to give notice of non-payment to those who precede him, and that nothing unreasonable is required in holding the payor after protest to the same duty. How can an indorser know where to look for his creditor without such notice? His residence maybe unknown; where to address him, where to find him, so as to pay and possess himself of the draft, the indorser can not tell. The latter can not take up the draft and thus place himself in a situation to pursue the prior partios, without knowing to whom he is bound to pay it. It is in the power of the party volunteering the payment, to prevent any and all difficulties of this kind, by simply notifying the indorser of the facts. If he is negligent, if he omits to furnish the indorser with notice of his having become his creditor, he ought to bear the loss.
Wright and Walker,
in reply:
We hold that the law does not require notice. It is agreed on all hands that there is no express authority holding notice to be necessary in this case. The defendants quote from several elementally writers on the subject of acceptance supra protest, but nothing on the subject of payment. The question, ^therefore, is strictly one of first impression; and we must argue from principle and analogy only. Now, on principle, we do not see the slightest reason for notice. The indorsers in this case had notice of protest. This was enough to put them on their guard as to prior parties to the bill, which is the only object of notice in any case. By notice of protest, their liability to the holder was fixed, whether the holder became such in the usual course, or by intervention supra protest. Furthor notice of payment supra protest is therefore absolutely nugatory; and the law will not require a useless act. Nor do the analogies of the law merchant require notice. If a. bill is not paid, the drawer and indorsers must be notified that they may secure themselves. This is a good reason, and this notice was given. Pugh, Gano and Lee were thus apprized of their liability, and might look to Bell. Here, then, the analogy and the reason on the other side end. But there are expressions and analogies directly in our favor. Thus in Chitty on Bills, 329, the payor after protest must declare “to a notary public, for whose honor he pays, of which declaration the notary must give an account to the parties concerned, either in the protest itself, or in a separate instrument.” It is then sufficient to give the account in the protest itself'. This was done in the present case. The protest attached to the bill is explicit as to the manner of payment, and for whose honor; and this is all the law merchant requires. Again :3 Kent’s Com. 75, 1 ed., giving the reason why the drawer or in■dorser is entitled to call for the protest, and identical bill or number of the set protested, before payment, says, “ without this he ■might be exposed to claims from some bona fide holder, or person who had paid it supra protest, for his honor." But if notice of such ¡payment be necessary, he could never be thus exposed; because without such notice he would not be liable. And Kent further ■says, that it is sufficient to produce the bill and protest at trial. But this would not be sufficient if the party could be entitled to the notice before. For these reasons we insist that the law does ¡not require notice of payment supra protest, after notice of protest.

Opinion:
Judge Wood
delivered the opinion of the court:
The fact that no case is found in which the question before us has come up for direct consideration is rather surprising, but it forms no available argument for one or for the other *party. It is subject to the plain and obvious answer long since given in such cases ; either way, it may have been acted upon as a matter .too plain for dispute.
The right of one individual to mako- another his debtor, by volunteering to disturb rights legally fixed, upon dobts due, is conifined to this special case of paying a bill supra protest, for the honor of the drawer or indorser. The proceeding has grown up with the law merchant, and we have not attempted to look after its commencement. The elementary writers treat su ch payor as acquiring an original right in himself-against the persons for whose honor he pays, and upon the right thus acquired, he is invested with the rights of the person for whose honor he paid, in relation to other parties to the protested paper. But he acquires no new rights against any one.
Payment, for the honor of the indorser, binds such indorser to refund the amount paid, upon which he is reinvested, with all his original rights, which, until such payment is made, are held by the payor. It would seem but reasonable that prompt notice should, in such cases, be given to a party, upon whom, without his knowledge or consent, these new relations are imposed. The change may very seriously affect his interests; for it might be that eveiy other party^to the bill were his debtors, and bankrupts, so that this payment for honor subjects him to a total loss that could not otherwise have occurred. Had the rule been settled, that no notice need be given to an indorsor, that a bill had been paid, after a protest, for his honor, we should conform to it; but finding it an open question we are clear in deciding that such notice should be required.
A just conception of the operation of any'rule of law can be best obtained at the trial of a case in which it is involved. The temptations it may create, the shifts and resorts to which it may give rise, are very often developed in the course of a trial. There was somewhat of this in the trial of the ease now before us, as reported by the judges who tried the cause.
The drawer of the. bill resided in Cincinnati, where he transacted .a large business as a commission merchant and dealer in produce. He had correspondents and credit in New York, where he was well known to the plaintiffs, and ti'ansacted business with them. There, too, lived the acceptor, also an acquaintance of the plaintiffs. The indorsers, the defendants, *were pork dealers in Cincinnati, with no direct commercial connection in New York. In this state of things, it was obvious that, if immediate notice that the payment of the bill supra protest, for the honor of the indorsei*s, was not one part of the rule of law that charged them, they were placed in the most disadvantageous relation to all the other parties to the bill. The day succeeding that on which notice of the protest was received, information was forwarded that the bill was paid, with no intimation that it was paid for account of any individual party to it. The effect was to induce a conviction on the indorsers that their liability was at an end, and also to re-establish the credit of the drawer. Thus, the indorsers were led to take no steps for their own security, and a door was opened for a confidential understanding between the other parties, in which time was obtained for efforts to restore their credit at the ultimate risk of these indorsers. This might take place, if the rule of notice was not held necessary. And it very plainly shows what a door would be open in just such a ease, for swindling impositions. There is no imputation of that in the case .before us. But the whole facts tended strongly to suggest what abuses the rule contended for by the plaintiffs, might introduce into the mercantile business of the country. New trial refused.