Court Opinion

ID: 3628087
Source: CourtListenerOpinion
Date Created: 2016-07-06 00:08:13.379677+00
Date Added: 2024-06-11T14:07:39.301269
License: Public Domain

The exception to the testimony given by the defendant upon his being recalled was not well taken. It does not appear to have been material to any issue between the parties. The stock for which Herrick said he was offered ninety-five or ninety-six cents, and which the defendant told him he had better sell, does not appear to have been the stock transferred to the defendant, in respect to which, the issue between the parties was, whether it had been borrowed by the defendant of Herrick, and the note in suit given as a security for the return of a like amount of stock, or whether it had been purchased by the former of the latter and the note given for the purchase price. Although the testimony was incompetent, the plaintiff could not have been prejudiced by it. The principal question is, whether a note payable on demand with interest transferred nearly three months after date, is subject, in the hands of the holder to a defence existing in behalf of the maker against the payee previous to such transfer. In the present case, it may be remarked, that the parties were engaged in business in the same street *Page 598 
in Albany, and that the note must be regarded therefore, as dishonored after the lapse of three months if it would be so after the lapse of six or nine. Upon the part of plaintiff, it is insisted that the note, being made payable upon interest, shows that the parties intended that it should not be presented for payment immediately, but rather held as an investment during the pleasure of the parties, the holder having the right to require payment at any time he chose, and that therefore the note was not to be considered as dishonored until an actual demand of payment. It is conceded by the counsel that the earlier cases in this State are in conflict with this view, but the following are relied upon as establishing its correctness by authority. (Wethey v. Andrews, 3 Hill, 582; Barough v. White, 6 Dowling and Ryland, 379; Merritt v. Todd, 23 N.Y., 28;Scovil v. Scovil, 45 Barb., 517; Payne v. Gardiner,29 N Y, 146; same case, 39 Barb., 634, and Weeks v. Prior, 27 Barb., 80.) In Wethey v. Andrews, it was held that a defence of the maker of such a note against the payee could not be interposed against the holder when the note was transferred within a week from its date. I say within a week, for the reason that the case shows that the note was so transferred by the payee to one Grimshaw within that time, who transferred it to the plaintiff in about four weeks thereafter. It is clear that the plaintiff acquired by his purchase from Grimshaw all his right of recovery upon the note unaffected by the lapse of time while the note was in his hands. It is true that, in the opinion of the court, it is assumed that the note was transferred four or five weeks after date, and the doctrine contended for by the plaintiff is pretty broadly though somewhat cautiously asserted. It is said, that it would be contrary to the general course of business to demand payment (of such a note) short of some proper point for computing interest, such as a quarter, half year, year, c. What would be a proper point for the computation of interest is not determined; but I think that would be found to be any period from one day and upward. This case does not profess to overrule Sice
v. Cunningham (1 Cowen, 397), nor *Page 599 
any of the class of cases upon which that was decided; nor is any such design inferable from the opinion. On the contrary, that and several other cases, decided upon the same principle, are quoted without any criticism or expression of dissent. Barough v.White, as reported by Dowling and Ryland, fully sustains the position of the plaintiff in the present case, the judges in their opinions respectively sustaining it; but as reported (4 B. C., 325), Littledale only, places the judgment upon this ground. There was another ground upon which the judgment might clearly have been given: That is, that no competent proof was offered of any defence against the payee. In Merritt v. Todd
it was held by this court that as to an indorser of a note payable upon demand with interest, such note was a continuing security, and that laches could not be imputed to the holder by delaying to demand payment and giving notice to the indorser for any particular time, and that the indorser continued liable until such demand made. This case clearly overrules Sice v.Cunningham; for although in the opinion of the court in the latter case nothing is said about the note being payable with interest, yet the amount of the verdict compared with the sum specified in the note and its date shows that such was the fact. The learned judge, who gave the prevailing opinion in Merritt
v. Todd, admits that there was great uncertainty as to the rule of law applicable to the case, and with his usual ability reviews numerous cases in England and in this and other States involving the point, and shows that there is not only a want of harmony in the cases, but also soundness in the principles upon which many of them were decided. He shows clearly that upon principle it must be held, as to an indorser, either that the note is a continuing security and laches not imputable to the holder for delaying to demand payment for any particular length of time, or that the indorser is discharged by any such delay as would exonerate the drawer or indorser of a sight draft.
He adopted the former view, in which five of the other judges concurred, deciding the case upon that ground. This *Page 600 
upon a commercial question of much practical importance must be regarded as settling the question in this State. But the learned judge, in the opinion, says that it may be well to observe that the present question is not identical with the one which arises when, after the transfer of such a note, the maker seeks to introduce a defence existing against the first holder. The lapse of time, or the non-payment of interest, after the regular period or periods for such payment have passed, may be sufficient to put the purchaser upon inquiry, or to justify a presumption that the instrument was actually dishonored before the transfer; and he further remarks that the question of charging the indorser and question of allowing an original defence to the maker, may depend on very different considerations. This shows that it was not intended to determine anything affecting the latter class of questions. In Scovil v. Scovil, the question was not necessarily involved, and is only alluded to and discussed in one of the three opinions delivered. This case can hardly be said to be any authority upon the point. The question in Payne v.Gardiner was, whether the action was barred by the statute of limitations. The action was upon an instrument as follows: "Received from Capt. William H. Payne, one thousand dollars which is to his credit on our books at six per cent interest."
This, in the Supreme Court, was construed as evidencing a loan or deposit of money on time, to be determined by an actual demand of payment thereafter. It is true that, in the opinion, it is stated that the case of Merritt v. Todd had wrought a great change in what had theretofore been deemed by the profession as the law of promissory notes payable on demand with interest; but we have seen that the only point determined by that case was, that the holder of such a note was not chargeable with laches as to an indorser by delay in demanding payment, for the reason that the presumption from the paper was that the indorsement was made with the understanding that such demand would not presently be made. If the instrument is regarded as evidence of a deposit of money upon interest, it is clear that no action could be maintained *Page 601 
thereon until an actual demand of payment, and that the statute would not commence running until such demand made. When the case came before this court (29 N.Y., 146), Judge MULLIN, in his opinion for affirmance, ably examines the distinction between a loan and deposit of money, arriving at the conclusion that this was a deposit and not a loan, and therefore that the money was not payable until an actual demand made. After arriving at this conclusion, he proceeds to state that it was held in Merritt v.Todd, that such a note was a continuing security and was not dishonored until after an actual demand. He then correctly argues that if a demand was necessary to fix the time of payment, the statute only commenced running from the demand. DENIO, chief judge, voted for affirmance upon the ground that a payment of interest proved was an answer to the statute, but argued, with the dissenting judges, that no demand of payment was necessary. Four of the remaining judges were for affirmance, but upon what ground does not appear. I think it clear that this case is no authority for holding that a note payable on demand with interest, is not due until an actual demand made.
In Clarke v. Crandall (27 Barb., 77), it was held that a note promising to pay a specified sum to the payee or bearer with use, and transferred within three days from date was, in effect, payable upon demand, and not to be deemed due at the time of its transfer so as to subject it to a set-off against the maker. I think there is nothing in the foregoing cases, or others, requiring us to hold that a note payable upon demand with interest, is not presently due without any previous demand. I am unable to see any valid ground for making a distinction in this respect between a note so payable with or without interest, except as to an indorser as to whom it was well said in Merritt
v. Todd, that he cannot complain of delay in making demand, for the reason that he was notified by the paper itself; that it was intended that the note should be retained by the holder for interest to accrue thereon, and that his assent that it should be so retained was thereby implied. But no such reason applies when the holder offers to *Page 602 
transfer the note. Then it is certain that he does not wish to retain it longer for any such purpose, but to realize the amount thereof. Then why not demand payment at once of the maker is an inquiry naturally suggested to the mind of any person to whom it is offered. It is due, and the money may at once be had thereon unless some obstacle exist that would, if known, be destructive of its negotiable character in the course of business. The note is due without any demand, or it is never due until demand made, and the maker has no right to make payment in its absence; for no tender can be made upon a demand until it is due. The statute of limitations commences at its date, or it never commences until demand made, and a recovery can be had upon such a note against the representatives of a maker after the lapse of any length of time, unless they are able to prove that an actual demand was made more than six years before the commencement of the action. The non-payment of interest furnishes no presumption in favor of the defence, for that is not due until demanded, any more than the principal. Such a note does not come within the statute creating a presumption of payment, for that only applies to judgments and sealed obligations, and to these, only after the lapse of twenty years from the time when the money has become due thereon. In short, the doctrine contended for by the plaintiff, making such notes continuing securities, creates a class of obligations that the debtor can only discharge at the pleasure of the creditor, ever liable to instant payment at his like pleasure, and which no statute of limitations will ever bar. No such doctrine has ever as yet been held by this court, and the entire current of decisions in this State, from the earliest reports, is against it. In Howland v. Edmonds (24 N.Y., 307), the doctrine was reiterated by this court that a note, payable by its terms upon demand, might be prosecuted immediately, no previous demand being necessary. True, it is said, as in some other cases, the suit itself being a sufficient demand. This is only saying that the note is due without any demand; for no rule is better settled than that a debt must be due at *Page 603 
the time of the commencement of the action, or the plaintiff will be nonsuited. It is likewise held in this case that the statute of limitations commences running upon such a note at its date, and it is entirely clear that the statute does not commence running until it is due. Something is said in some of the cases about a presumption of a demand having been made, arising from the lapse of time or of a proper period for the computation of interest, but no period is intimated, and any rule founded upon such presumption would be too vague for application to business transactions. Such rule should be definite and certain when possible.
To attain this result as to the admissibility of a defence of the maker against the payee or other holder against a transferee, it must be held either that the note is matured after the lapse of sufficient time to enable the holder to make a demand by the exercise of due diligence, and the defence therefore admissible, or that when payable with interest, not mature until a demand has in fact been made. Either rule will be found certain in its application. But for some authorities to the contrary, I would prefer a rule holding in accordance with the analogies arising from the commencement of the running of the statute of limitations, and of the right immediately to commence a suit, that the note was due when given, and the defence admissible without regard to the time of the transfer by the payee. In the present case the result is the same whether the first or third specified is the correct rule. The order of the General Term can be sustained only upon the second. I am aware that either the first or third will practically destroy the negotiability of this class of paper; but such has been the practical effect of all the cases in this State except for a very brief period, exceptMerritt v. Todd, and this case is only applicable to questions of laches in charging indorsers. The other questions presented by the respondent's counsel in his brief, were not raised or passed upon at the trial; they cannot, therefore, be considered here. My conclusion is that upon both principle and authority the defence was admissible against the plaintiff. The order of *Page 604 
the General Term granting a new trial should, therefore, be reversed, and judgment given for the defendant on the verdict with costs of the appeal to this court.
For reversal of the General Term, and judgment for the defendant — EARL, Ch. J., GROVER, HUNT, FOSTER and SMITH, JJ.
For affirmance — LOTT and SUTHERLAND, JJ.
INGALLS, J., did not vote.
Order of General Term reversed and judgment for defendant.