Bailey v. South Western Railroad Bank (11 Fla. 266, 1867)

BAKER., J.,

delivered the opinion of tbp court.

This suit was commenced by attachment, issued from the Circuit Court of Leon county, in favor of William Bailey, President of the State Bank of Florida, against the South Western Railroad Bank, upen a draft drawn by James II. Bull, Agent of the South Western Railroad Bank, and set forth in plaintiff’s declaration, as follows:

Agency of the South Westeeh R. E. Bajnk, ) Taluahassee, May 6th, 1862. j

No. 482.

Cashier of the South Western Railroad Bank, Charleston, pay to the order of H. L. Hart, eight hundred and fifty currency dollars, ($850).

Signed, J. II, BULL, Agent.

Endorsed II, L. Hart, P. B. Brokaw.

The plaintiff, as holder and endorser of said draft, on the 17th day of September, 1866, caused the same to be presented at the Bank, in Charleston, for payment, which was refused, and the draft regularly protested. This suit is instituted against the Bank as drawer and not as drawee of the bill.

It is charged in the declaration that the defendant, by its agent J. II. Bull, made its certain bill of exchange, and directed the said hill of exchange to the cashier of the South Western Railroad Bank, being the same Bank of which the said J. II. Bull was agent.

The defendant appears by counsel, takes no exception to the manner of commencing the suit, or to the plaintiff’s declaration, and for defence, files following pleas: 1st. General issue. 2d. Two special pleas setting forth laches on the part of the plaintiff in not presenting the check for payment within a reasonable time.

An agreement of counsel was also filed to the effect that the bank agent, having received Confederate Notes for said draft, the party in whose favor it was drawn wras to receive like funds in payment.

The court, upon consideration of the case, rendered a judgment for the defendant, from which judgment the plaintiff appealed to this court.

The plaintiff’s counsel filed the following assignment of errors, to-wit:

1st. The court erred in holding upon the case submitted, that a demand by the holder upon the drawee, at the place at which the draft was payable anterior to the 13th day of September, 1866, was necessary to bind the defendant as drawer.

2d. That the court erred in holding that demand of payment of the draft in suit at an earlier day was necessary to entitle plaintiff to recover.

3d. That the court erred in giving judgment for the defendant.

The only point presented by the assignment of errors is, whether the plaintiff was barred-from recovery in this suit on account of the delay in making a demand on the drawee and giving notice of non-payment.

It is urged by the counsel for the defendant that the drawee owes no duty to the holder until he accepts the draft; neither can the holder resort to tiro drawer until he has used due diligence to obtain payment from the drawee. As a general proposition of law, there can be no doubt of the correctness of this position, nor of the weight of the numerous authorities quoted in its support, when applied to the ordinary cases arising under the law regulating demand and notice.

There being no difference of opinion in relation to these general principles, they need not be discussed here.

We are only required to determine how far they apply to this particular case, and whether there rvas anything in the relations existing at the date of this draft, between the drawer and drawee, that would relieve the holder from the binding obligations of these well-settled rules of law.

If a suit had been brought against the agent Bull as drawer of this bill, the plea oí laches would have been a good defence. He certainly would have been entitled to notice, to enable him to protect himself from loss while he was in possession of the funds of the bank. The case oi Pitts vs. Jones, 9 Florida Reports, so forcibly urged by the counsel for appellee, would be conclusive authority to sustain his defence, though it does not seem applicable to tiro case before us.

The plaintiff, however, sets up no claim against the agent, and relies upon the suit against the bank as drawer of the draft. The record show's that J. II. Bull was the authorized agent of the South Western Railroad Bank, doing business in Tallahassee; that in the regular discharge of his duties as such, he made this draft, and signed it as agent; and it is not denied that the act was at the time as binding as if it had been the act of the principal. An individual may draw a bill of exchange by an agent, and it will be as binding upon him as if drawn by his own hand. 10 Wendell, 275.

And it is now a firmly established rule of law, that eor-porations may bind themselves as drawers, endorsers or acceptors of bills of exchange through the instrumentality of agents, or become parties to any other negotiable paper, if within the proper scope of the objects and purposes of their charter. Story on" Bills, § 79.

The agent who made this draft was clearly using the appropriate means to accomplish the objects and purposes for which the bank was chartered, and for which the agency was established at Tallahassee. The draft seems to have been properly signed, and was drawn within the scope of the agent’s authority on the cashier of the Bank at Charleston. The consideration for which it was given was paid to the agent, and went to the credit and use of the bank. Neither the agent nor the cashier appears to have any interest in the matter, except in the honest discharge of the trust confided in them; both representing one party and one common interest.

Notice is generally required, so that all parties to the bill of exchange may have time to protect their interests and prevent loss. Mr. Chitty says: “ The reason why the law in general requires the holder to give due notice of nonacceptance by the drawee is, that the drawer may forthwith withdraw from the possession of the drawee such effects as he may already have, or may stop those which he is in course of receiving, and that the drawrnr and endorsers may respectively take the necessary measures to obtain payment from the parties respectively liable to them.” Chitty on Bills, 355.

In all cases where the spirit and reason of this law applies, it must be strictly complied with. In this case, however, it is claimed that the drawer and drawee are the same; if so, the application of the law would involve on absurdity. It cannot be supposed that the agency at Tallahassee would be liable to suffer loss on account of the misapplication of its funds by the bank, or that the agency could withdraw funds from the bank, or “ stop any it might be in course of receiving.”

In absence of all authority upon this question, we would have little difficulty in arriving at a satisfactory conclusion upon the application of general principles; but we are not without authority to sustain our position. It has frequently been decided that notice is not necessary even in cases where the drawer and drawee are not identical, but where they stand in some business relations towards each other that raises the presumption of notice. “ Where a bill is drawn by several persons upon one of themselves, since the acceptor is likewise the drawer, notice of dishonor is superfluous, as dishonor must be known to one of them, and the knowledge of one is the knowledge of all.” Byles on Bills, 366.

In the Supreme Court of the State of Hew York,.it has been held that if the drawer of a bill be a partner in a firm on which the bill is drawn, the holder need not give notice of the dishonor by non-acceptance of the bill by the firm, for as the firm must have notice thereof, that is notice to himself. 20 John., 116.

Even where there is no interest in common between the drawer and drawee, when the drawer makes a bill payable at his own house, notice of dishonor is unnecessary. Byles on Bills, 364.

Tlief rule of law given in the cases above stated applies with greater force to the case now under consideration.

The drawer and drawee being one, the responsibility cannot be divided.

The bank received the consideration, and its draft in the hands of the holder is simply an evidence of indebtedness.

In legal contemplation, such draft is regarded as a promissory note, payable on demand, and the maker thereof not entitled to notice. 1st Manning & Hyland, 120; Koscoe on Bills, 20, 40.

The law in all eases of this sort deems the draft to admit a present debt to be due to the payee or holder, and payable absolutely, and at all events, whenever presented for payment according, to its purport, and no other demand need be made-, except by bringing suit thereon. Story on Promissory Notes, § 29.

The agreement filed by counsel in this case shows, that the consideration given for the draft was Confederate Treasury Notes. The assessment of damages should, therefore, be made in accordance with the provisions of the ordinance of the Convention, adopted Nov. 7, 1865.

It is ordered that the judgment be reversed, and the cause remanded for new trial.

Dissenting opinion of

Hon. THOS. T. LONG,

Judge of the Suwannee Circuit of Florida,

setting in the place of Douglas, J.

Since the investigation of this cause, at the time the decision was rendered, I have tried to persuade myself that the decision of a majority of the court was correct; but, being unable to do so, I am constrained to carry out the convictions of my mind, made known to the court at that time.

The record discloses the fact, that the check upon which the suit was brought in the cou^t below was drawn by J. H. Bull, Agent of the South Western It. K. Bank, on the 6th day of March, 1862; and that it was presented to the bank and payment demanded on the 17th day of September, 1866, four years and four months after it was drawn.

It is also made known to the court that the check was paid for in Confederate money, the existing currency of this State at that time, and that it was to be paid by the bank at Charleston in the like funds. It is also shown to the court that Bull, the agent of the bank, had, previous to the presentation of the check to the bank and payment der manded, ceased to be the agent of the bank, and liad, as such agent, a full settlement with the hank. These seem to be the material facts set out in the record.

The defendant in the court below pleaded: 1st, The general issue, and, 2d, Special pleas of laches on the part of plaintiff in not presenting the check for acceptance and payment in a reasonable time to the bank at Charleston.

It is contended in this cause that the drawer and drawee were the same parties, and that there were no obligations on the holder of the cheek to make a demand on the drawee for its payment, and to give notice to the drawer of its nonpayment, the act of the agent being the act of the principal. As a general rule, this doctrine may be very correct, and doubtless is.

Restricted agents of corporations, created for the purpose of facilitating commerce, must be governed by the Lex Mer-eatoria, which is but custom recognized and made so by mercantile usage, approved by the wisdom of the age.

I need not go beyond the decision of our Supreme Court to give credit to this proposition, and show that the doctrine of principal and agent., as assumed by a majority of the court, is utterly untenable. The case of Pitts vs. Jones, 9th Fla. Rep., 519, is decisive of this cause. In that case Pitts, the agent of Pierce & Son, purchased as agent, pine logs, for his principal, which he was authorized to do. (So was Bull authorized to make the draft, subject matter of this suit.) For the payment of these logs, Pitts drew a draft at sight on Pierce & Son, their principal, in favor of Jones, the vendor, for $168.32-100, which draft, Pierce & Son, the principals, refused to accept, and no notice was given to Pitts, the agent, of the non-acceptance by Pierce & Son, the principals. Jones, the vendor, afterwards brought suit against Pitts, the agent, to recover the amount of the draft which he had drawn upon the principals. Associate Justice Walker, in delivering the opinion of the court, says: "Although the drawer has no funds in the hands of the drawee, yet if he has a right to expect to have funds in the hands of the drawee to meet the bill, or if he has a right to expect the bill to be accepted by the drawee in consequence of any agreement or arrangement made with him, or if upon taking up the bill he would be entitled to sue the drawee or any other party on the bill, then in every such case he is entitled to strict notice of the dishonor of the.bill.” See Story on Bills, 311.

The learned Judge goes further, and says: “It is indeed difficult to conceive of any class of persons more strictly entitled to notice than those acting as agents, even if they have no funds in the hands of the drawee, their principal.” The record shows that Bull, the agent, drew the check, and had in his own right no interest in the matter, and from his position as agent, he had the right to believe that the check would be accepted and paid by the drawee, in consequence of an agreement with the bank, and the notice of his agency.

How what protection could the South Western Railroad Bank have, against a profligate or dishonest agent, (which is not the fact in this case,) considering the check, as is assumed by a majority of the court, to be in the nature of a promissory note, and the drawer not entitled to notice? Such a doctrine would entirely destroy these facilities of trade, and clog the wheels of commerce.

The opinion of the majority of the court seems to pre-sup-pose the fact that under the old common law rule, “ that in exchange or commercial agencies, the principal and agent are one and the same person.” To the contrary, as in the case at bar, Bull was the agent of a foreign corporation, and his checks or drafts, by the law and usages of merchants, are to be regarded as foreign bills and subject to the customs and usages of merchants.

If to the contrary, no principal could protect himself against his agent, md vice versa ; for in the present case it cannot be doubted that if the check had been duly presented and payment refused, the holder could have given notice to Bull, the agent, and sued him for the amount of the check, and Bull in turn could have sued the drawee upon taking up the check.

The next question presented under the pleadings, is the plaintiff entitled to recover from the defendant, or has he lost his remedy by laches ? T think clearly so. For the drawee owes no duty to the holder until after the bill is presented and accepted. See 2 Seldon’s Rep., 412; 21 Wend. Rep., 373 ; 8 English Law and Eq. Rep., 523.

It is also held “ that the holder could not sue the drawee unless he had accepted the check; that a demand of payment of a check must be made of the drawee before the holder can sue the dra-wer.” See case decided in 6 Cowen’s Rep., 448; 3 Johns, cases, 260.

The drawee of a check is not responsible to the holder until he accepts it. Hor can the holder resort to the drawer until he has used due and legal diligence to obtain payment from the drawee. 6 Wend. Rep., 445. The same principle that applies to bill of exchange and drafts applies to checks, and the drawee owes no duty or responsibility to the holder until after the bill, draft or check, is accepted. Edwards on Bills of Exchange, 396; 2 Seld. Rep., 412; 21 Wend. Rep., 373 ; 2 Hill., 425.

Checks in law must be considered as bills of exchange, and the holder, if he would preserve his right to resort to the drawer or endorser, must use the same diligence in presenting them for payment and giving notice of the refusal or default of the drawee as would be required of him as the holder of a bill of exchange. 6 Wend., 445. See 3 John^ ^ases, 5. It was held that the holder'of a check was bound to demand payment of the drawee before he could resort to the drawer. Judge Kent, in commenting upon this cause, said, “ I consider it a settled rule that a check must be presented for payment in a reasonable time. The question of reasonable diligence fully arises under the special pleas. 4 And the true rule’ both as to cheeks or bills of exchange is that the holder must use reasonable diligence according to the course of business in cases of a similar nature. The question now arises, what is reasonable time, and this depends upon the circumstances of the case. See Story on Promissory Notes; 493,-’4,-’6,-A ; also upon the custom and usage of merchants. 2 Hen. & Back., 565, 570; 7 Taunt., 570; 2 Bacon, 676, 678; 1 Saund. Pld.. and Evidence, 29.

We are advised by all the authorities that the holder oí a cheek must use clue diligence in presenting it to the drawee for payment, and in the event of refusal, in order to bind the drawer, he must give notice of the non-payment by the drawee; and whenever there is an innovation made upon this rule, it must be shown by the record to relieve the laches affirmatively, that no damage has been occasioned by the delay, otherwise the law presumes injury to the drawer of the check. 2 Hill’s Reports, 427 ; 3 Johns, (/ases, 5 and 259. In these cases the court held that a demand on the drawee must be shown, and that no liability occurred until after the demand. The plaintiff being non-suited in the court below upon action brought upon check four years after the making of it, the Supreme Court affirm the de. decision on the case. 3 John, cases. The cheek was not presented for seven months, and the court held that it was incumbent under these circumstances to show affirmatively that the defendant had sustained no damage.

To a void the plea of laches, the plaintiff must show clearly and affirmatively that the defendant has sustained no dam age by the delay.

Injury and damage is presumed by the delay, and this presumption must be overruled by affirmative proof on the part of the plaintiff.

In the case now before the court, the plaintiff did not even attempt to make such proof, and the record shows laches of four years and four months, and that said check was paid for by the payee in Confederate money, and was to have been discharged upon presentation to the Bank at Charleston in like funds; that Bull, the agent, who drew the check on the Bank, long before the check was presented for payment, had settled his accounts and ceased to be its agent.

This court will, to some extent, take judicial notice of the time when the Confederate government ceased to exist as a government and its money became valueless. It is a violent presumption to say that the South Western Railroad Bank, after being notified by its agent, from his return of his doings as agent, that it did make provision for this debt in the then existing currency, and that it -would have been paid if presented, and that the failure to present within a reasonable time, or even before the Confederate government ceased to exist as a government, and that from said failure to present the said check, did produce damage and injury, and that by said laches. The case of the Phoenix Bank clearly sustains the principle. Being guarded in my opinion by almost innumerable authorities of the highest courts, and principles in the text books recognized for ages by the most learned Judges, I am satisfied that the decision of the court below should have been affirmed.