Opinion
(December Term, 1857.)
A note, made payable to the cashier of a bank, negotiable and payable at that bank and two others in the same town, not founded on any dealing between the payee and makers, endorsed in blank by the payee, without value, without recourse, shows that it was made to be discounted and has no validity as against the sureties, unless it is thus discounted.
It could not be recovered in the name of the payee, or his endorsee, for the want of a consideration.
Such a note is distinguishable from a note or bill founded upon a real transaction and evidencing real indebtedness; for in that case, though made negotiable at a bank and not discounted, such a note is valid.
Action of ASSUMPSIT, tried before ELLIS, J., at the last Fall Term of Duplin Superior Court.
London, for the plaintiff, cited Byles on Bills 88, (margin) Chitty on Bills 79; Ibid 177; Powell v. Walters, 17 Johns. N.Y. Rep. 179; Horah v. Long, 4 Dev. and Bat. Rep. 634; Robinson v. Reynolds, Eng. Com. L. Rep. vol. 42, p. 634.
W. A. Wright, for the defendants.
The plaintiff declared on the following promissory note:
"Wilmington, N.C. December 24, 1854.
"$775. — Ninety days after date, we, John Whitaker, as principal, and John B. Quince and S.W. Dunham, sureties, promise to pay to William Reston, cashier, or order, seven hundred and seventy-five dollars, value received, negotiable and payable at the bank of Cape Fear, the Wilmington branch of the bank of the State of North Carolina, or at the Commercial Bank of Wilmington."
The plaintiff introduced Mr. Hall, who testified that he saw this note in the hands of the plaintiff before the name of Reston, the payee, was inserted in it; nor did it then have any endorsement; that he saw the plaintiff fill up the blank with Mr. Reston's name; the note was left with him, and he procured Mr. Reston to endorse it in blank "without recourse." Nothing was paid him for it.
Mr. Kelly was called by the defendants, who stated that he paid nothing to Reston for his endorsement, and that he, Kelly, endorsed it to the plaintiff without consideration to him, and he did this merely to enable the plaintiff to sue in Duplin county.
Mr. Wright, for the defendants, testified that he was an officer in the bank where Mr. Reston was cashier; that this note was placed there for collection; that it was not collected, but given back to the plaintiff, not having been discounted at the bank.
Mr. Reston testified, that he was applied to by Mr. Hall as the attorney or agent of the plaintiff to endorse the note in question, which was then past due. He further states, that the said note was never delivered to him, or accepted by him, under any contract or agreement made by the payers, or either of them, or with any other person; that he had no title to it, nor interest in it, and never saw it till it was presented to him for his endorsement.
The Court charged the jury that, taking the testimony of all the witnesses to be true, the plaintiff could not recover; that it appeared that no contract had been made with Reston by the defendants, and no consideration moving from him to them, and nothing paid by Kelly or plaintiff for the endorsement; there was no presumption of law that the plaintiff paid value for the note before it was endorsed to him, and no evidence was offered that he had paid value.
Plaintiff excepted.
Verdict for the defendants. Judgment and appeal.
This case is not distinguishable from Dewey v. Cochran, 4 Jones' Rep. 184. The principle settled by that case is, where a note shows on its face that it was made for the purpose of being discounted at a particular bank, it does not become a note, and has no validity so far as the sureties are concerned, unless it be so discounted, and consequently it cannot be thrown into the market and traded off to a private individual. The principle rests on the ground, that from the known rules and practice of the bank, one may be willing to become bound as surety to a note negotiable and payable at that bank, who would not be willing to incur the responsibility of a surety to a note which was to be thrown into market, and might pass into the hands of an individual who was unknown, and remain there for years, during which time the surety might be uniformed as to whether it had ever been negotiated, and if so, who held it; or whether the principal had made any arrangement in regard to it. Our case illustrates the soundness of the principle. The note is not heard of until six months after it was written, and three months after its maturity. It is then found in the hands of the plaintiff. What he paid for it, or how he obtained it, no one knows. Then follows the filling up and the endorsements for the purpose of collecting it out of the sureties who had been kept uninformed of the disposition which had been made of it; but who knew that it had not been discounted at bank according to the original purpose for which it was made, and who were justified in coming to the conclusion that it had been destroyed or thrown aside as waste paper, and therefore did not feel called on to require of the principal any security for their protection, as it is reasonable to suppose they would have done, had it been discounted, and its dishonor at maturity become known; because, by the rules of the bank it must be then paid, or renewed; whereas, according to the habits of our people, a note may be overdue for years without its being considered dishonored, except so far as its negotiability may be affected by the law merchant.
The fact that this note is negotiable and payable at one of three banks in Wilmington, does not vary the principle. There is a marked difference between a note negotiable and payable at bank generally, and at one of three particular banks; for when it is discounted, the identity of the bank is fixed. The play in respect to the three banks is attributable to the circumstance, that as the rules and practice are the same, it was a matter of indifference to the sureties, and they were willing to consult the convenience of the principal, in reference to which one of these three particular banks he might select, or be able to meet with accommodation.
It was said on the argument, "property is frequently sold on time, the purchasers to give notes with sureties, negotiable and payable at bank; this is done to meet the requirement of the bank charters, and to enable the seller to realize the money before the notes mature. Can it be that if the bank refuses to discount the note, he has no remedy against the sureties?"
There is an obvious distinction between that case and ours. There, the note is made payable to the seller; the intent that it is to become a note and have validity from the time it is written, and its being made afterwards negotiable and payable at bank is a collateral circumstance, introduced for the accommodation of the seller, and not intended to affect the validity of the note. Here, the intention is, that the paper shall not be a note, or have validity, unless it is discounted; in other words, in our case it is made a condition precedent to the existence of the note, and is not a mere collateral circumstance.
His Honor puts his decision upon a second ground, that there was no proof of a consideration. We concur with him upon this point also. As a general rule, a consideration is implied in reference to instruments of this sort; but where circumstances of suspicion are thrown upon a note, that the name of the payee is not inserted, and his endorsement is not made until it is six months over-due, and is then made without consideration and without recourse, and the holder gives no account of the manner in which he came by it, there must be proof of a consideration.
PER CURIAM, Judgment affirmed.