German-American Bank v. . Atwater

Parker, Ch. J. That the plaintiff had to make a demand on the makers for payment and give notice of dishonor to the defendant in the event, of non-payment, in order to recover of her upon the notes, is of course conceded. The time at which demand should have been made and notice of protest *40 given, has been the subject of sharp controversy; but we regard the law applicable to this situation as settled by Eisenlord v. Dillenback (15 Hun, 23 ; affirmed in this court on the opinion below, 79 N. Y. 617). In that case, as in this one, the defendant indorsed the notes after maturity, but denied liability, notwithstanding the indorsement, because of the failure of the. indorsee of the notes to make a proper demand for payment and give notice of dishonor; and the court stated the law in this state to be that where a party indorses past due paper “ the law implies a contract * * * that he will proceed with reasonable diligence to demand payment and give notice if not paid. Failing in this, the indorser is discharged.” The plaintiff in this case caused a notice of protest to be given to defendant on the 9th day of April, 1897, nearly a year after the latter had indorsed the notes, and we are to inquire whether the effect of that protest was to charge the indorser. What is a reasonable time cannot always be measured by months; indeed, an investigation of a limited number of authorities discloses that as short a period as three months and as long a one as twenty-one months has been held to be wdthin a reasonable time, depending upon the special facts of each case. The period of three months seemed at one time likely to be adopted by the' courts, because that is th 3 period for which notes intended for discount are usually made. But an arbitrary period of time, it was found, did not often measure a reasonable time within the apparent understanding of the parties, and so the rule came to be adopted that what constitutes a reasonable time shall depend upon and be ascertained from the facts of each case. In this case we think it not difficult to determine the time when it became the duty of the plaintiff to make a demand and give notice to the defendant in order to hold her liable as indorser. It was thought desirable that the notes held by defendant should be paid next after the obligations of the firm held'by the plaintiff, and to effectuate that result the- notes were indorsed to the bank and the amount due ou them placed to. *41 the credit of the defendant, but to stand as security for the final payment of the notes. This arrangement indicates that it seemed probable to both these parties that the assigned property would prove sufficient to pay all the notes, including those indorsed to the bank by defendant; but they were not sure of it and hence the precaution requiring the proceeds of the notes to stand as security until in the course of liquidation of the assets it could be determined whether there would be ealized therefrom sufficient moneys to pay either the whole or some part of the notes indorsed by defendant. When that fact was ascertained, the defendant was entitled to have the demand made and notice of protest given to her, for under the arrangement of the parties that constituted a reasonable time within which the plaintiff should have performed the contract implied by law upon the delivery to it of the past due notes indorsed by the defendant. A day or two prior to March 24th, 1891, the plaintiff’s cashier, having previously informed defendant’s husband that the assets had not turned out as well as had been anticipated, said to him : “ I understand that your wife is liable as indorser on these notes.” To which Mr. Atwater replied that lie' did not so understand it. On the 24th of March formal demand in writing was made for their payment, but notice of protest was not given to defendant until nearly two weeks afterward and on the 9th day of April. It appears, therefore, that as early as the 24th of March the plaintiff had ascertained that the assets were not sufficient to pay the notes and had determined to look to the indorser, and hence within the scope of the arrangement between the parties the time had arrived to make demand and give immediate notice of dishonor. But instead the notice of protest was not given until two weeks after a formal demand. The implied contract between the parties required that the demand should be made within a reasonable time, and that protest should follow dishonor at once, not that demand should he made within a reasonable time, and notice of protest given within a reasonable time afterwards. *42 We agree, therefore, with the courts-below in holding that the delay in giving due notice of protest operated to discharge defendant as indorser. The appellant further insists that oral notice of dishonor was several times given during the summer of 1896. Within a few days after April 29th, 1896, when the defendant was given credit for the amount due on the notes, defendant asked permission to draw from the deposit $1,175 to be used in paying for certain property, promising to return the money. Other cash was drawn from time to time up to, and including December 23d, when only $181.18 remained on deposit, but as to such amounts there was no promise to redeposit. The plaintiff demanded the return to the account of the moneys thus drawn out, and it is now insisted that the demands thus made were ecpiivalent to notice of protest. A sufficient answer to this claim is that it is not pretended that such demands were intended to be, or understood as a notice of protest. It was originally agreed that the proceeds of the notes should remain on deposit as security for their payment. It was doubtless thought that these moneys would not be required to pay the notes, but the arrangement was made to assure the plaintiff against possible loss. Without a change in the agreement, but in spite of it, nearly all of the moneys were withdrawn ; and the. request that they be returned was in harmony with plaintiff’s right to have the original contract carried out. The demand in fact was that the situation should be restored as it was before the defendant, without right, withdrew from the account the greater part of the money. A demand that the defendant should live up to her agreement by restoring the moneys improperly withdrawn, was no more a notice of dishonor of the notes than was the original agreement that the money should remain on deposit as security for their payment. The judgment should be affirmed, with costs. Gray, Bartlett, Martin, Vann, Cullen and Werner, JJ., concur. Judgment affirmed.