Case Name: The Mechanics Bank at Baltimore vs. The Merchants Bank at Boston
Court: Massachusetts Supreme Judicial Court
Jurisdiction: Massachusetts
Decision Date: 1843-03
Citations: 6 Met. 13
Docket Number: 
Parties: The Mechanics Bank at Baltimore vs. The Merchants Bank at Boston.
Judges: 
Reporter: Massachusetts Reports
Volume: 47
Pages: 13–32

Head Matter:
The Mechanics Bank at Baltimore vs. The Merchants Bank at Boston.
Under the Rev. Sts. c. 33, §5, grace is to be allowed on post notes issued by a bank and made payable at a day certain,<{ with interest until due, and no interest after,” though the bank insert a memorandum on the margin of the note, that it is “ due ” on such day.
No usage, nor any agreement, tacit or express, of the parties to a promissory note, aa to presentment, demand and notice, will accelerate the time of payment, and bind the maker to pay it at an earlier day than that which is fixed by the law that applies to the note.
Where the indorser of a note is discharged by want of due demand on the maker, or of notice of the default of the maker, the legal presumption is, that he will avail himself of such discharge ; and the holder, therefore, is not bound to prosecute a fruitless suit against the indorser before he can maintain an action against his own agent for neglecting to make due demand on the maker, or to give due notice of his default,
An agent is liable to his principal for injuries that are caused by want of reasonable skill and ordinary diligence in the exercise of his agency, but not for injuries that are caused by his mistake in a doubtful matter of law.
The holder df a post note, which was issued by a bank that failed before the note fell due, sent it to another bank for collection, and this bank caused payment to be demanded, and notice of non-payment to be given to the indorsers, on the day the note was due, without grace, whereby the indorsers were discharged on the ground that by law the promisors were entitled to grace on the note, although they had, while solvent, paid such notes without grace : The holder thereupon brought an action against the collecting bank to recover damages for negligence in not making such demand and giving such notice as would hold the indorsers : It appeared, on the trial, that at the time when the note fell due, the question whether banks were entitled to grace on their post notes, had never been decided, and that there was no uniform practice, as to demanding payment of such notes and of giving notice to the indorsers, after the promisors failed. Held that the action could not be maintained.
This was an action of trespass upon the case, to recover damages for alleged negligence of the defendants in relation to the collection of a post note.
At the trial before Wilde, J. there was evidence of the following facts: A post note was issued by the Franklin Bank at Boston, signed by their president and Cashier, dated April 12th 1837, by which the president, directors and company of said bank promised to pay E. D. Harris or bearer $1000 in three months, with interest at the rate of per cent, per annum, until due, and no interest after. In the margin thereof was written, “Due July 12th 1837, $1000, interest $11*25.” Several indorsers’ names were on the note, two of whom were inhabitants of Baltimore, in the state of Maryland. All the indorsers were solvent at the maturity of said note, and continued to be so, up to the time of the trial of this action. The plaintiffs were the holders of said note, and transmitted it, before its maturity, to a bank in New York, to be forwarded to Boston for collection ; and said bank sent it to the defendants for that purpose.
Alden Bradford, Esq. a notary public, testified, that at the request of an officer of the defendants, he went with the note aforesaid to the Franklin Bank, on the 12th of July 1837, and demanded payment of it, which was refused; and that he then protested it, and sent notices to the indorsers.
No other demand on the promisors, or notice to the m dorsers, was proved ; but the plaintiffs gave evidence that the Franklin Bank stopped payment and became insolvent on the 5th or 7th of July 1837.
The' defendants insisted, that the plaintiffs, in order to make out a cause of action, must prove that proper means had been taken to procure payment of the indorsers, or that the indorsers had refused to pay. But the judge ruled otherwise.
The defendants then called a counsellor at law, who testified that he made the writ in the action of Perkins v. Franklin Bank:, reported in 21 Pick. 483 ; that he commenced the action on a post note, on the 7th of July, the day on which it fell due, if payable without grace ; that he doubted whether it was then suable, but ascertained that if he waited till the 10th, a suit would be unavailing.
The defendants also called E. F. Bunnell, who testified that he was cashier of the Franklin Bank, for seven months next before the autumn of 1837 ; that a large number of post notes were issued, and that up to the time of the failure of the bank, they had always been paid at maturity, when presented, and that the maturity was without grace ; and that the bank never refused to pay them on the day they fell due, upon the ground that grace was allowable.
The defendants also called their own cashier, E. H. Eldredge, who testified that the defendants never issued post notes, but that such notes were often lodged with them, by various banks. for collection ; that it was the uniform custom of the defendants to demand payment on the day they were due without grace; and that he never knew of the refusal of a bank to pay its post notes, on the ground that they were entitled to grace.
Charles Sprague, cashier of the Globe Bank, was called by the defendants, and testified that that bank, in the spring of 1837, issued post notes, and always paid them on the day when due without grace; that the same bank collected post notes of other banks, and that payment was uniformly demanded and made on maturity without grace; that it would have injured the credit of a bank, to have insisted on the grace; and that he never heard of a refusal to pay without grace, until the decision in the case of Perkins v. Franklin Bank : That post notes were considered like bank bills; but that his belief was, that if he had had occasion, he should have protested a note of this sort on both days; certainly on the last day of grace.
Eliphalet Williams, cashier of the City Bank, was also called by the defendants, and testified, that that bank issued post notes in 1836 and 1837, and always paid them when at maturity without grace ; that it frequently had such notes of other banks, and always sent them in for payment, on the day they became due without grace, like bank bills, and that he never knew payment refused: That the said bank never deducted interest, on account of grace, or had anything to do with grace, on post notes. In answer to a question by a juror, whether he paid such notes because of the custom, or because he considered them due, the witness answered, that the post notes of the City Bank were different from some others, being payable without interest after the day of payment, and that the bank understood them to be then due.
James Dalton, cashier of the Tremont Bank, testified that said bank issued post notes, which were uniformly paid on the day they became due without grace; that such notes of other banks, which came into that bank, were always so paid, and that it would not have been safe for any bank to refuse payment on that day.
Samuel O. Mead, formerly cashier of the Market Bank, testified that that bank issued post notes; that it was the in variable custom to pay them without grace; and that it would have injured the credit of a bank, if it had refused so to pay them.
John E. Thayer, a broker, testified that he had held many post notes, and never was refused payment on the day of maturity without grace: That in discounting these notes, the banks always made up the interest to the first day, and never took nor allowed it for grace ; and that he had discounted such notes, and never allowed for grace. He further testified that he protested post notes of the U. States Bank on both days — the day of maturity, and the third day of grace —but that there were no indorsers on those notes: That the object, in protesting them, was to secure 12 per cent, interest, and establish the demand made.
The plaintiffs then called Alden Bradford, Esq. again, who testified that on the 24th of August 1837, by request of the Merchants Bank, (the defendants,) he went to the Lafayette Bank, to demand payment of a post note of that bank, dated March 21st 1837, payable in five months, with interest at 4| per cent, till due, no interest after; and on (Saturday) the 9th of September 1837, by like request, demanded payment of another note of the Lafayette Bank, dated March 7th, payable in six months, with interest as above: That said notes were, in other respects, in the same form as the note in question in this suit: That he protested said notes on said days, respectively -• That he never presented any post notes for payment prior to the 12th of July 1837: That he then had two such notes of the Lafayette Bank, and had a doubt about presenting them on the day of maturity without grace, and showed one of the notes to the cashier of that bank, and asked him if it was payable on that day, and he said it was. The witness could not designate the note which he then presented, but understood the cashier to recognize the fact that it was demandable on that day.
Thomas A. Dexter, notary public, was also called by the plaintiffs, and testified that after the 5th or 7th of July 1837, he protested several post notes; some of them on the last day without grace, and some on the last day of grace ; but most of them on the last day of grace: That when he acted, without instructions, upon his own discretion, he protested on the last day of grace.
William Stevenson, notary public, being called by the plaintiffs, produced a memorandum of nineteen post notes, all protested by him on the last day of grace, beginning on the 10th of July and ending on the 27th of November 1837. Ten of them were handed to him by the Suffolk Bank, two by the New England Bank, and the others by individuals. Those which came from the banks, he was sure, were sent to him on the last day of grace, and he believed the others were.
The attorney, who made the writ, on the 11th of July 1837, in the case of Staples v. Franklin Bank, (1 Met. 43,) testified that he made inquiries respecting the custom as to the time of demanding payment of post notes, but could not satisfactorily ascertain what it was, and therefore directed that demand and protest should be made on the last day of grace, according to his own view of the law.
The case was taken from the jury, under an agreement that the court might “ draw all inferences that a jury might lawfully draw from the foregoing evidence, and order a nonsuit or default, and render judgment according to law ; and that if judgment should be rendered for the plaintiffs, they should have the same made up, with interest, in the same manner as if they had taken a verdict for the amount of the post note and interest, on the day of trial.”
C. P. Curtis, for the plaintiffs.
The bank which issued the post note was entitled to grace, and therefore the demand made by the defendants was premature, and the notice did not charge the indorsers. Perkins v. Franklin Bank, 21 Pick. 483. The evidence of usage cannot affect the rule of law, and must be disregarded. Bayley on Bills, (2d Amer. ed.) 236. Mitchell v. Be Grand, 1 Mason, 176.
The defendants were bound to do all that was necessary to save the plaintiffs’ rights ; viz. to demand payment of the note at the proper time, and to give such notice to the indorsers as would make them answerable to the plaintiffs. Fabens v. Mercantile Bank, 23 Pick. 330. Washington Bank v. Triplett, lPet. 31, per Marshall, C. J. Bank of Utica v. M’Kinster, 11 Wend. 473. Smedes v. Bank of Utica, 20 Johns. 372, and 3 Cow. 662.
The defendants rely on the usage of the banks in Boston to demand and pay post notes without allowance of grace; but this is no legal defence. Homer v. Dorr, 10 Mass. 26. Perkins v. Franklin Bank, 21 Pick. 483. Woodruff v. Merchants Bank, 25 Wend. 673. The usages of banks bind those only who do business with the banks, under a knowledge of their usages, and submit to the obligation of the usages. Jones v. Fales, 4 Mass. 252. Lincoln &/• Kennebeck Bank v. Page, 9 Mass. 155. Blanchard v. Hilliard, 11 Mass. 88. Peirce v. Butler, 14 Mass. 310. Whitwell v. Johnson, 17 Mass. 452. Stevens v. Reeves, 9 Pick. 201, 202.
But if evidence of usage were properly received, for the purposes of the defence, it failed to support the usage relied on. The testimony shows that the Suffolk and New England Banks demanded post notes, on the last day of grace, and that even the defendants themselves did not always conform to the usage on which they now rely. The usage was certainly not fmiform, nor long continued, and therefore was of no binding force. 1 U. S. Digest, Custom & Usage, 1. 1 Bl. Com. 76, 77. Local usages, in mercantile matters of general concern, are not to be favored, and must be proved by conclusive evidence.' 9 Pick, ubi sup. The Reeside, 2 Sumner, 567.
If it be argued that the fault was in the notary public, and not in the defendants, the answer is, that it is not necessary that a note should be presented and protested by a notary, and that, when he is employed, he is the servant of the employer, who is answerable for his acts and omissions. City Bank v. Cutter, 3 Pick. 414. Nicholls v. Webb, 8 Wheat. 326. Bayley on Bills, (2d Amer. ed.) 261. Story on Agency, §452.
As the indorsers of the post note were discharged by want of due notice, a suit of the plaintiffs against them would be fruitless, and therefore need not be brought in order to charge the defendants. Renner v. Bank of Columbia, 9 Wheat. 581. Washington Bank v. Triplett, 1 Pet. 31.
C. G. Loring & Dehon, for the defendants.
The demand and notice, in this case, were sufficient, as between the holder and indorsers, to charge the latter; being according to the usage and contract of the Franklin Bank itself. By an express or implied agreement of the promisor, a legal demand may be made on him, before he is by law liable to an action for nonpayment. And indorsers agree, by legal implication at least, that demand shall be made according to the usage of the prom-isor. Mills v. Bank of U. States, 11 Wheat. 438. Washington Bank v. Triplett, 1 Pet. 33. Bank of U. States v. Corneal, 2 Pet. 543. Renner v. Bank of Columbia, 9 Wheat. 581. City Bank v. Cutter, 3 Pick. 414. Shed v. Brett, 1 Pick. 404. Grand Bank v. Blanchard, 23 Pick. 307. Blanchard v. Hil-liard, 11 Mass. 88. Lincoln, &fc. Bank v. Hammatt, 9 Mass. 159. Central Bank v. Da vis, 19 Pick. 375. Bank of Rochester v. Gould, 9 Wend. 279. Fuller v. M’Donald, 8 Greenl. 213, 220. Bank of Cape Fear v. Seawell, 2 Hawks, 560. The demand was according to the usage which uniformly prevailed before the time when it was made, and that usage is the law of this case, and not the usage subsequently adopted.- In Perkins v. Franklin Bank, there was an attempt to make a note due and payable without grace, by usage ; but no such at tempt is made by the present defendants. The plaintiffs were conusant, in law, of the usage of the promisors ; the note being payable at the banking house. And the indorsers were not misled nor injured by the notice that was given to them. A delay of three days would rather have injured than benefitted hem. See Smith v. Whiting, 12 Mass. 6.
If the Franklin Bank had continued to be solvent until July 14th, and had stopped payment on the 15th, would not the defendants have been hable, under the usage, for not demanding payment on the 12th ?
But if the demand and notice were unavailing in law, yet the defendants have not been guilty of such negligence as renders them liable to the plaintiffs. An agent is answerable only fc want of reasonable skill and ordinary diligence; and in the absence of instructions, it is his duty to conform to known usages and modes of transacting the business entrusted to him. Story on Agency, §<§> 183, 199. In the most favorable view of the case, which can be taken for the plaintiffs, the evidence shows a doubtful case of usage; and the defendants are not liable, though they should be held to have made a mistake. The decision in Perkins v. Franklin Bank was not made till long after the post note in question was payable; and the defendants cannot be charged with a loss which was caused by their ignorance how this court would decide a doubtful question of law.
Besides ; it does not appear that the plaintiffs have failed to recover of the indorsers, by reason of the premature demand and notice. The indorsers might have waived notice, and paid on demand of payment being made.
As reasonable diligence was used to give the indorsers proper notice, they are responsible to the plaintiffs, and the defendants are therefore not responsible. Bank of Utica v. Bender, 21 Wend. 643. Ransom v. Mack, 2 Hill’s (N. Y.) Rep. 587.

Opinion:
Shaw, C. J.
The principle we believe is now well established, that incorporated banks, being associations of persons authorized by law to borrow and lend money, purchase, sell, and discount bills of exchange and promissory notes, to issue bills, receive deposits, and generally to deal in money and securities, as well for their own profit, as for the accommodation of the mercantile community, are entitled to the same benefits, and subject to the same duties and obligations, as an individual person, so far as they act within the legitimate scope of the objects and purposes for which they are established. One important and highly useful part of their regular functions is, to collect bills and notes for other persons, in the places where they are established, and to remit to othei; places, for the like purpose, when they are there payable. The benefits which the collecting bank derives from the use of the funds, whilst in its custody, and the profits on exchange, are a valuable compensation for the labor and expense to which the business subjects it, and constitute such a bank, in acting for others, an agent for reward. It may seem inconsistent with strict propriety to say that an aggregate corporation may be guilty of a wrong, and be chargeable in an action for a tort; but in reality an action of the case proceeds on the ground, that a duty exists, that the defendant has failed in the proper performance of that duty, by means of which the plaintiff has sustained a loss. When such a duty devolves on a corporation, they are responsible for the skill and fidelity of their agents, and the form of an action of the case is well adapted to afford the proper remedy. Bank of Washington v. Triplett, 1 Pet. 25. Fabens v. Mercantile Bank, 23 Pick. 330. Bank of Utica v. Smedes, 3 Cow. 662.
Two questions arise in the present case: First, whether in consequence of the presentment and demand of the plaintiffs' post note, on the 12th day of July, which was the day of payment without grace, and notice to the indorsers on the same day, the plaintiffs lost the benefit of their legal recourse to the indorsers: Secondly, if this is established, whether the circum stances disclose such negligence and unskilfulness on the part of the agents and officers of the defendants, as to make the defendants liable, in this action, for the damages.
I. The case has been argued on both sides, upon the admit ted facts, that the note in question was a note issued by the Franklin Bank, payable to A. B. or bearer, #1000, in three months, with interest, at 4J per cent, till due, and no interest after; dated 12 April, 1837, and marked in the margin, "Due July 12, 1837." A note of this description, when issued by a bank, is usually denominated a post note, though a note in the same terms, issued by an individual person, would be called a promissory note. When was payment of this note legally de-mandable ? It is frankly conceded, on the part of the defendants, that the case of Perkins v. Franklin Bank, 21 Pick. 483, is directly in point, and that it cannot now be decided that this note was legally payable on the 12th of July, without reversing that decision. The cases are certainly, in this respect, precisely alike. In recurring to that case, we cannot perceive any ground, were it now a new question, upon which it could be decided differently. It is said that a similar question has been differ ently decided in New York. It may have been so held, upon the general custom of merchants, or upon a statute expressed in different terms. But the case of Perkins v. Franklin Bank was determined upon a statutory provision, which scarcely admits of construction. The terms of the Rev. Sts. c. 33, § 5, are these : " On all promissory negotiable notes, orders and drafts, payable at a future day certain, within this State, in which there is not an express stipulation to the contrary, grace shall be allowed, in like manner as it is allowed, by the custom of merchants, on foreign bills of exchange, payable at the expiration of a certain period after date or sight."
No exception is made in regard to notes made by banks, and therefore they are bound. In general, corporations are bound by general laws respecting the effect, operation and construction of contracts, in the same manner as natural persons.
If it be argued that, after all, the statute does refer to the custom of merchants, and therefore lets in proof of that custom, to show the extent of the regulation ; the answer is, that it only refers to so much of the custom of merchants, as relates to foreign bills of exchange. That grace shall be allowed on promissory notes, is the subject of positive enactment, and not made to depend on any custom; and the reference is made to the custom respecting foreign bills of exchange, for the sole purpose of defining what is the regulation understood by the term " grace." That custom having determined that " grace " means three days added to the term stipulated in the note, the statute authoritatively declares that it shall apply to such notes. Then the only question is, whether such a note, issued by a bank, is a negotiable promissory note, payable at a day certain, within this State. It was argued on the former occasion, that the memorandum in the margin, designating the day certain, on which it will be due, brings b within the exception. It certainly does designate the day, on which by agreement the note will be payable. Then the statute comes in, and declares, that, beyond the day so fixed by agreement, three days shall be allowed, before payment can be legally demanded, unless other wise expressly stipulated. . If such a stipulation could be inferred from the fact of designating the day of payment, the exception would annul the enactment, because the case stated in the statute always supposes such day fixed by the terms of the contract. Besides; there must be an empress stipulation, that is, a stipulation in terms, or by necessary implication from the terms; and therefore a probable intention, to be inferred from usage or other circumstances, cannot stand in place of such express stipulation.
But supposing the point to be settled by the case cited, that this note was not payable, and could not be legally demanded till the 15th of July, yet the defendants contend, that it is competent for the parties to a negotiable instrument to waive demand and notice, or to consent to a mode of demand and notice different from those prescribed by the general law; that such an agreement may be inferred from the usages of banks, and the tacit assent of the parties to such modes of demand and notice; and that, from the usage proved in the present case, such assent may be inferred; and therefore that the indorsers were bound by the demand made and notice given on the 12th of July.
Undoubtedly parties to negotiable notes may waive demand and notice, and, as a modification of that power, may agree to qualified modes of demand and notice; and a compliance, on the part of the holders, with such qualified modes, will be sufficient to bind the indorsers. But we are not aware of a case, in which, under such agreement, express or tacit, in regard to the mode of presentment, demand and notice, the time of payment can be accelerated, or, where any notice to indorsers is required, that such notice can be given, before the actual dishonor of the note. Any agreement, which would accelerate the time of legal payment, would be a change of the contract, and must be made in such form, and on such consideration, as would be sufficient to constitute a substantive contract.
Under the long established practice of the banks of Massachusetts to issue notices to promisors, on the stated day of payment, without grace, or a few days previous, informing them that the note is in such bank, that it will be payable on a day named, being the last day of grace, and requesting the promisor to come to the bank and pay it; if the note is in fact in such bank, and remains unpaid till the close of usual bank hours on that day, it has been held to be dishonored, and notice may then be given to the indorser. In other words, such previous notice to the promisor, and neglect on his part to pay the note at the bank, are a conventional demand and refusal, amounting to a dishonor of the note. But, in such case, it is not the delivery of the previous notice to the promisor, which constitutes the presentment, nor would an actual presentment, demand and refusal, before the last day of grace, constitute such default of the promisor, as to be a dishonor of the note It is the failure to pay at the bank during bank hours, on the last day of grace, which amounts to such dishonor. New England Bank v. Lewis, 2 Pick. 125. Boston Bank v. Hodges, 9 Pick. 420. Such custom does not accelerate nor alter the day of payment.
In Mills v. U. S. Bank, 11 Wheat. 431, it was held that where it is the known usage of banks to demand payment and give notice on the fourth day of grace, it is sufficient; but this usage did not alter the terms of the contract, nor affect the day of payment. Bank of Washington v. Triplett, 1 Pet. 25, decides the same point, that demand, on the day after the last day of grace, may be warranted by usage. The case of Blanchard v. Hilliard, 11 Mass. 85, seems to have a contrary bearing. But it is difficult, from the short note of the opinion in that case to determine whether the court meant to decide, that by the usage of banks and the assent of the parties thereto, the note should be deemed to be due on the day on which the notice was given, or whether, although the note was not legally due until the next day, yet the parties might consent that notice should be given on the day preceding. We think the court put it upon the latter ground; and therefore treated it as a case where the indorser had waived legal notice. The case however seems opposed to that of Wentworth v. Clap, cited in the note, which somewhat diminishes its authority.
Lincoln & Kennebeck Bank v. Hammatt, 9 Mass. 159. decides nothing more than that notice by mail, to an indorser, is sufficient, though not actually received; a point fully established since, by a series of cases. Shed v. Brett, 1 Pick. 401.
But if this were more doubtful, we think it very clear, that when notice has not in effect been waived, where notice is necessary to charge the indorser, although the mode of giving notice, and the time of giving notice of dishonor to the in-dorser, may be the subject of tacit or express agreement, yet it must necessarily be after the note is dishonored. The notice to be given is of a fact, a thing done; and such notice necessarily implies, that the note has become due, and has been dishonored. This cannot be given till the fact has occurred, therefore cannot be given till after the note has become due, by the expiration of the days of grace. Any notice, previously to such actual dishonor, could only inform the indorser of the holder's intent to present it, perhaps of his expectation that it would not be paid, and his intent to hold him responsible, if the note should not be paid. Grand Bank v. Blanchard, 23 Pick. 305. Gilbert v. Dennis, 3 Met. 495. This point is confirmed by that numerous class of cases, in which it is held, that no particular form of notice to an indorser is necessary ; that it is sufficient, if it states the fact of the non-payment of the note, and that the holder looks to the indorser for indemnity.
But if there were any doubt of this point, we can perceive no evidence in the present case, that there has ever been any usage amongst banks or individuals in this Commonwealth, to give notice to indorsers of the non-payment of a post note, or any other note, until the time for payment of the note by the promisor had arrived. In the case of Boston Bank v. Hodges. already cited, such notice was held insufficient.
The court are therefore strongly inclined to the opinion, that in consequence of the failure of the defendants to give notice to the indorsers of the dishonor of the note, the indorsers were discharged from their legal liability on the note. And if this was the case, the holder was under no obligation to commence a suit against the indorsers before commencing an action against the defendants. The presumption is, that if the indorsers were legally discharged, they would avail themselves of that dis charge, in defence ; and the plaintiffs were not bound to prosecute a fruitless suit against them. The gravamen of the plaintiffs' complaint is, that the defendants, by their neglect and mismanagement, have deprived them of their legal right to charge the indorsers.
II. But it does not by any means follow, because the plaintiffs have lost their remedy over against the indorsers, for want of due presentment and demand being made by the defendants on the promisors, and due notice thereof given to the indorsers, that such proof alone is sufficient to enable the plaintiffs to sustain this action. This fact must undoubtedly be proved; but it is necessary further to prove, that this result was attributable directly to such neglect and want of due skill of the defendants, as in law is sufficient to render them responsible. Although, says Mr. Chief Justice Marshall, in the case of Bank of Washington v. Triplett, 1 Pet. 36, the liability of the bank, charged with negligence, will depend on the question, whether the liability of the drawer or indorser has been discharged by want of demand and notice; the bank was the agent of the holder, and not of the drawers, and might consequently so act as to discharge the drawer, without becoming liable to its principal.
The rule of law, we think, is stated with sufficient accuracy in a recent case, and it is this ; where a bank receives a note for collection, it is bound to use reasonable skill in making the collection, and for that purpose is bound to make a seasonable demand on the promisor, and in case of dishonor to give due notice to the indorsers, so that the security of the holder shall not be lost or essentially impaired, by the discharge of the indorsers. Fabens v. Mercantile Bank, 23 Pick. 330. As an agent, such bank is bound to the use of reasonable skill and ordinary diligence. By reasonable skill is understood such as is ordinarily possessed and exercised by persons of common capacity, engaged in the same business or employment; and by ordinary diligence is to be understood that degree of diligence, which persons of common prudence are accustomed to use about their own affairs. Story on Agency, <§> 183. This is applicable to a great variety of employments, requiring a considerable degree of care and skill; as attorneys; Gilbert v. Williams, 8 Mass. 51; insurance brokers; Chapman v. Walton, 10 Bing. 57; factors; Leverick v. Meigs, 1 Cow. 645; surgeons; Seare v. Prentice, 8 East, 348; and so of all similar employments. The difficulty is not so much in stating the rule and estaolishing it by authorities, as in applying it to particular cases.
In general, the rules of law in regard to the presentment of bills of exchange and promissory notes for payment, and for giving notice to indorsers, in case of dishonor, are so plain and simple, so well known by notaries public, cashiers of banks, attorneys and brokers, that any failure to comply with them, by an agent, acting in behalf of another, would carry with it such proof of either want of skill or want of ordinary diligence, as to render him liable to his principal. It is therefore often laid down in general terms, that when the holder of a bill or note has lost his remedy, by these means, against a responsible party, and thereby sustained damage, he has his remedy against his agent. But the specific question to be considered is, whether in all cases an agent is bound to know the rules of law, and conform to them at his peril, in the transaction of his employer's business, although the course of proceeding may depend upon statute provisions so recently passed as not to be generally known, or decisions of those courts whose judgments are usually regarded as precedents and rules of practice, either not promulgated at the time, or so recently given, as not to be generally known among business men. It is undoubtedly a salutary maxim, that every man is bound to know the law, and that ignorance of the law excuses no one; yet these max ims must be confined to the cases for which they were adopted. In the criminal law, a man is estopped from setting up his ignorance of the law, as an excuse for its violation, because it is his duty to inform himself. So in regard to his own rights, in lealings with others, he must, at his peril, ascertain his lega ights, and must be presumed to act in conformity to them; otherwise, there would be no safety for others in dealing with him. But the maxim has no application to the duty of an agent, of whom ordinary skill only is required. Reasonable skill and knowledge only is demanded in every other branch of science; why should absolute knowledge and consummate skill be required in a department, where it is often impossible to know the law in its application to a particular state of facts, until it has been authoritatively declared ? Take for instance, on this very point, as to the legal mode of demanding payment of a bill of exchange, the case of Rowe v. Young, 2 Brod. & Bing. 165, and 2 Bligh, 391, decided in the House of Lords, in 1820. It was the case of a bill of exchange, payable at a day certain, drawn generally on A. B., and by him accepted, payable at the house of a banker, specially designated by the acceptance. The question was, whether it was necessary to aver and prove, in order to maintain an action against the acceptor, that payment had been demanded at the banker's at the maturity of the acceptance. The court of king's bench had decided the question one way, and the court of common pleas the other, and in the House of Lords, on reference to the twelve judges, there was great diversity of opinion, and most of the judges stated the grounds of their respective opinions, at great length. It was ultimately held, that it must be averred and proved, that it was demanded at the house of the banker designated in the acceptance. Now suppose, before that decision, a banker in London had received from his correspondent in the country such an acceptance, and, following a series of decisions in the court of king's bench, had presented it, at maturity, not at the house of the banker, but to the acceptor personally, at another place; but that, before any recovery had on the bill, this decision of the House of Lords had occurred : Would it be reasonable to hold such an agent personally responsible for the knowledge of so doubtful a point of law ? If it would, it would be holding him for a degree of skill greatly beyond that required by the rule. But after such a decision, a decision of so much importance that it would be likely to be soon known to men conversant with that branch of business, it would not be unreasonable to hold, soon after it was generally promulgated, that not to be acquainted with it, and act conformably to it, would be negligence or ignorance, rendering such an agent liable.
And we think this rule is not unsupported by authority, especially in its application to attorneys, whose business it is to know the law, and act upon it, for the benefit of their employ ers. In Pitt v. Yalden, 4 Bur. 2061, which was a case against an attorney, for negligence, or mistake of the law, in not charging a defendant seasonably in execution, Lord Mansfield said, " not only counsel but judges may differ, or doubt, or take time to consider. Therefore an attorney ought not to be liable, in cases of reasonable doubt." But where an attorney is employed to investigate a title to an estate, and, in taking the opinion of counsel, fails to lay before him deeds necessary to the understanding of the title, this is negligence, for which he is liable. Ireson v. Pearman, 3 Barn. & Cres. 799.
The case of Baikie v. Chandless, 3 Campb. 17, was an action against an attorney for negligence in preparing the assignments of an annuity, in not complying with some rule of law to render it valid. The annuity was regularly paid for 14 years. A case was then decided, upon a construction of the statute, turn ing upon a very doubtful question of law, by which it would appear that the assignment was void. Lord Ellenborough said it was impossible to impute that to the defendant as negligence for not discovering a defect in the memorial of an annuity, which was subsequently held to be a defect upon a very doubtful construction of the statute. An opinion of Mr. Justice Le Blanc to the same effect was cited with approbation, in the same case.
In Park v. Hammond, 6 Taunt. 495, and 2 Marsh. 189, which was a case against an insurance broker for negligence and noncompliance with his orders in effecting insurance for the plaintiff, by means of which he lost the benefit of his policy ; Copley, Serjt. moved to set aside the verdict for the plaintiff, on the ground that certain decisions on the point, on which the plaintiff failed of recovering on his policy, had been published so recently before the time of effecting the insurance, that the defendant was not responsible for not being acquainted with them. The case was decided upon other grounds ; but Mr Justice Park, in his opinion, said that, the point having been settled ever since a case in 4 East, and down to a late case in 2 M. & S., no person undertaking to insure for others could be ignorant of it. This clearly implies, that if the judicial decision upon the point had not been known, and, a fortiori, if it had not been made before the insurance was effected, the broker would not have been responsible for his ignorance of the law, in not being acquainted with it.
Supposing these principles to be correct, and to be the true principles, on which the case is to be decided, we are then called upon to apply them to the circumstances of the present case; the facts upon the evidence, as well as the law, being left to the court. One question is, whether the usages and practices of other bankers, brokers, and bill holders, is competent evidence. If the question turned solely on the point, whether in law the note was due and payable on the 12 th or on the 15th of July, it would present a very different matter. But the real issue is, whether the defendants used due care, skill and diligence in their employment, as collectors of bills ; and on that point, the usage and practice of others, reputed to be skilful and diligent in the same employment, is of great importance, and bears directly on the question. In this respect the case is very much like that of Chapman v. Walton, 10 Bing. 57. In general, where a banker follows the usual course of dealing, though his employer sustain loss by it, he is not liable for negligence. Russell v. Hankey, 6 T. R. 12.
It appears by the evidence to have been the uniform course, for the holders of post notes to present them on the day of maturity without grace, and for the banks to pay them on such day, until they became insolvent, and declined paying at all. Now, so long as this practice continued, whether the banks paid under a mistaken belief that they were bound so to do, or because it was more for their interest to do so than to claim the days of grace, it might well be considered to be the duty of an agent to present the note on such day, although, for greater precaution, it might also have been presented on the last day of grace. And if, in the present case, the Franklin Bank had generally redeemed their bills, up to the 13th or 14th of July, and if the defendants had forborne to present the note of the plaintiffs till the 15th, though since ascertained to be the true day on which payment by law was to be demanded, the plaintiffs would at least have had cause to complain that the defendants had not followed the usual course, by which their note would probably have been paid ; though it would by no means follow, that if the plaintiffs had made a presentment and de mand, according to law, they would have been liable to an action. The object of the plaintiffs, in employing the defendants to collect their note, was twofold; first, to obtain payment of the promisors, but failing in that, to charge the indorsers. Had the bank remained solvent, the presentment at maturity, without grace, would have been more likely to accomplish the former purpose; and to compass the other, as it now appears, a presentment on the latter would be necessary. Those who were extremely cautious, as appears by the evidence, to make all sure, did both.
In considering how far following the usage could operate to excuse, we must take the usage as it prevailed before the failure of the banks, and before a controversy on the subject arose. No question appears to have arisen until the 7th of July, when the action was brought by Perkins v. Franklin Bank, but under great doubts, on the part of the attorney who commenced it, whether it would lie ; but because, if he waited till the 10th, (the last day of grace,) it would be unavailing. Such a suit, proceeding on the ground that the note was due without grace, if it were known, would be likely to confirm the confidence of persons unskilled in the law, that the note was then due. On the 11th July, Staples's action was brought, on a demand made on the last day of grace. Staples v. Franklin Bank, 1 Met. 43. It was not, therefore, until the day before the plaintiff's note fell due, that an action was commenced, which would test the question whether the note was due without grace, or with grace. After that controversy had thus arisen, it is natural to presume that different holders would adopt different courses, as they might be advised, and that there would be no uniform practice on the subject; and such seems to have been the result.
The plaintiffs attempted to show, that the practice was not uniform, and to prove by Mr. Bradford, that he demanded two several notes, at the request of the Merchants Bank, on the fast day of grace. But these were so protested August 24th and September 9th, respectively, after the abovenamed suits had been commenced. Mr. Dexter testified, that he protested a number of post notes after the 5th or 7th of July, but does not say on what day particularly he first protested any one on the last day of grace. Unless it was previously to the 12th of July, we think it not material.
Mr. Stevenson presented and protested a number of these post notes on the last day of grace, but one only before 12th July, and that was on the 10th, for the Suffolk Bank. This might not be known, and, if known, it would only raise a doubt, whether the previously prevailing practice was a correct one.
On this evidence, the court are of opinion, that the defendants were not chargeable with culpable ignorance of the law, or want of due care and skill in not knowing when this note became due, and that by law it was not due till the 15th, inasmuch as that depended upon a doubtful question of law, not then settled; that in following the practice which had generally prevailed, up to that time, they were excusable; and therefore that this action cannot be maintained.
Plaintiffs nonsuit.