Court Opinion

ID: 3238122
Source: CourtListenerOpinion
Date Created: 2016-07-05 16:12:07.314484+00
Date Added: 2024-06-11T07:40:28.059001
License: Public Domain

On Rehearing.
This case was before this court and reported as O'Neal et al. v. Clark, 229 Ala. 127, 155 So. 562. The question now presented on this rehearing was not then urged or considered by Mr. Justice BOULDIN, writing for the court.
In the original brief filed by appellees on this appeal, the fact that the notice was given (if given at all) on the day before the actual maturity of the paper was not called to the attention of the court by counsel for appellees; hence this court did not consider the question of the insufficiency of the notice on account of being given prematurely.
On the former appeal we held that:
"A certificate of deposit, such as here involved, having all the requirements of negotiability defined by law, is a negotiable instrument. In effect, it is a promissory note. First National Bank of Abbeville v. Capps, 208 Ala. 235,94 So. 112; Elmore County Bank v. Avant, 189 Ala. [418] 425, 66 So. 509; O'Neal v. Peaden, supra [228 Ala. 21, 151 So. 877].
"Without question, therefore, this instrument is subject to the requirements of law touching presentment for payment and notice of dishonor." O'Neal et al. v. Clark, 229 Ala. 127, 130,155 So. 562, 564.
We are still satisfied that we were correct in holding the instrument sued upon in this case to possess all the qualities of a negotiable instrument, and was, in fact, such an instrument; and as such an instrument was subject to the requirements of the Negotiable Instrument Law, constituting chapter 321 of the Code (section 9029 et seq.).
It appears from the evidence in this case that the instrument sued upon was executed on January 1, 1932, and was payable 12 months after date.
In 8 Corpus Juris, page 401, it is said: "In reckoning the time of maturity of paper governed by the Law Merchant, a 'month' is taken as meaning a calendar month, so that a bill or note dated on a certain day, and payable one or more months after date, becomes due on the same day as its date of the month in which it is payable, or on the third day thereafter, if entitled to grace, unless such month, being shorter, lacks such day, in which case the paper will become due on the last day of the month."
In Doyle v. First National Bank, 131 Ala. 294, 30 So. 880, 90 Am. St. Rep. 41, this court held that a note which is executed on " 'November 11, 1899,' and is made payable 'six months fixed after date,' matures on the 11th day of May following, and such note is subject to protest for nonpayment on that date." This implies, of course, that it was not subject to protest upon the day before its maturity.
Section 9110, Code, provides: "Every negotiable instrument is payable at the time fixed therein without grace. When the day of maturity falls upon Sunday, or a holiday, the instrument is payable on the next succeeding business day."
There can be no doubt of the fact that the "next business day" means, and can only mean, the next day which is not a holiday, for within the meaning of the Negotiable Instrument Law a "holiday" is not a business day.
The instrument sued on fell due on January 1, 1933. This was Sunday, and the note, therefore, fell due on the next succeeding business day. Monday, January, 2, 1933, being a holiday, section 9215 of the Code, was not the "next succeeding business day," and, therefore, the instrument did not become due and payable, and subject to protest and notice of dishonor for nonpayment, until Tuesday, January 3, 1933. Hagerty v. Engle, 43 N.J.L. 299.
Whatever notice of nonpayment and dishonor of the note was given, confessedly, was given on Monday, January 2, 1933, the day next before the day on which the instrument became due.
It seems to be generally held that officers and stockholders of a corporation who lend it their credit, acting as individuals, by indorsing its negotiable promissory note, and the proceeds on negotiation of the note are received by the corporation, stand in such relation to the paper as entitled them to notice of its dishonor. O'Neal v. Clark, supra; First National Bank v. Bickel, 143 Ky. 754, 137 S.W. 790; Nolan v. H. E. Wilcox Motor Co., 137 Tenn. 667, 195 S.W. 581; McDonald v. Luckenbach, 95 C.C.A. 604, 170 F. 434; Mechanic v. Elgie Iron Works, 98 Misc. 620, 163 N.Y.S. 97; Crane v. Downs,108 Kan. 599, 196 P. 600; Frazee v. Phoenix *Page 589 
Nat. Bank, 161 Ky. 175, 170 S.W. 532; Grandison v. Robertson, 145 C.C.A. 605, 231 F. 785; Overland Auto Co. v. Winters,277 Mo. 425, 210 S.W. 1; First Nat. Bank v. Bach, 98 Or. 332,193 P. 1041.
The corporation is a legal entity, and having received all the proceeds of the deposit, the debt is the debt of the corporation, and not primarily the debt of the stockholder indorsers. The sole purpose of the indorser was to lend the credit of their names. The instrument executed was not executed for the accommodation of the indorsers, as we have heretofore held in this case.
The liability of the indorsers was secondary and contingent. The fact of maturity plus the fact of nonpayment do not produce liability. The contract of indorsement requires, as the sine qua non of liability, in the absence of a waiver,presentment of the instrument for payment at the proper timeand place, and due notice of dishonor. Code, § 9114; Case v. McKinnis, 107 Or. 223, 213 P. 422, 32 A.L.R. 167; Grapes v. Willoughby, 93 Vt. 458, 108 A. 421; Tucker v. Mueller, 287 Ill. 551,122 N.E. 847; Ingalls v. Marston, 121 Me. 182, 116 A. 216; Williams v. Paintsville Nat. Bank, 143 Ky. 781, 137 S.W. 535, Ann.Cas. 1912D, 350; State Nat. Bank v. Vickery (Tex.Com.App.)206 S.W. 841; Hastings v. Grump, 89 W. Va. 111, 108 S.E. 600.
Of course, the contingent liability of the indorser does not become a fixed and consummated liability unless all required steps, due presentment and due notice of dishonor, are taken.
Assuming that presentment was dispensed with, or given, the second step must also be taken, and if omitted, it, the omission, is fatal to the fixation of liability.
It appears, as we have heretofore pointed out, that whatever notice was given the personal representative of C. S. O'Neal, deceased, was given on Monday, January 2, 1933, the day before the note actually fell due. Was this sufficient? We are constrained to hold it was not.
Section 9114 of the Code provides: "Except as herein otherwise provided, when a negotiable instrument has beendishonored by nonacceptance or nonpayment, notice of dishonor must be given to the drawer and to each indorser, and any drawer or indorser to whom such notice is not given is discharged."
The plain, certain, and unambiguous meaning of this section is that the instrument must have been actually dishonored before the notice can be given to be efficacious. Until payment has been refused, it, the instrument, has not been dishonored for nonpayment. Any notice of nonpayment, prior to the occurrence of the actual event, would neither speak the truth on the one hand, nor satisfy the terms of the statute on the other. It is notice that the instrument was not paid at its maturity, on due presentation, that the statute requires to reduce the contingent liability of the indorser to a consummated liability.
In Daniel on Negotiable Instruments (7th Ed.) § 1196, p. 1258, it is broadly stated: "It is quite clear that notice of dishonor implies the dishonor as taking place before notice. Knowledge by anticipation that the instrument will be dishonored does not affect the rule, and if notice be given beforehand it is premature and ineffectual." Chitty on Bills, § (482) 544.
Notice given before the paper becomes due is premature and insufficient. Case v. McKinnis, supra; Mechanics'  Farmers' Sav. Bank v. Katterjohn, 137 Ky. 427, 125 S.W. 1071, Ann.Cas. 1912A, 439; Hart v. Smith, 15 Ala. 807, 50 Am.Dec. 161; Horton v. Wilson, 175 N.C. 533, 95 S.E. 904; Code, §§ 9125, 9114.
"Indorser's knowledge that the maker was in default on the note does not dispense with notice of dishonor, and failure to notify the indorser discharges not only his obligation on the instrument but also the debt for which the instrument was given." Kane v. Eastman (Cal.App.) 288 P. 819, (where many authorities are collected and cited); Brannon's Negotiable Instrument Law, (5th Ed.) § 89, page 830.
In 8 Corpus Juris, § 918, p. 562, it is said: "By analogy to the rule that a demand made before the paper becomes due is invalid, notice given before the paper becomes due is necessarily so, since every notice to be available must be based on a legal demand, and the fact that notice is given prematurely by a mistake in reckoning the date of the maturity of the paper creates no exception to the rule."
In the case of Curry v. Mobile Bank, 8 Port. 360, and Crenshaw v. McKiernan, Minor, 295, it was held that notice of dishonor might be given, at the option of the holder on the day of the dishonor, but *Page 590 
this holding negatives the right of such holder to give the notice prior to the day the paper fell due, and, therefore, before it was in fact dishonored.
It follows that the rehearing prayed for must be granted, and it is so ordered.
We hold that notice given to the personal representative of C. S. O'Neal, deceased, was prematurely given, and was invalid. This being true, the plaintiff showed no right to a recovery against either defendant in the cause.
Rehearing granted, and the judgment reversing the cause as against the appellee Dudley L. O'Neal, as administrator of the estate of C. S. O'Neal, is set aside, and the cause affirmed.
BOULDIN, BROWN, and KNIGHT, JJ., concur.