Federal Intermediate Credit Bank v. Epstin

The opinion of the Court was delivered by Mr. Justice Stabeer. On January 15, 1926, the defendants executed and delivered to the Beaufort Bank, of Beaufort, S. C., their promissory note in the sum of $626.25, due June 15, 1926. The note was payable at the Beaufort Bank, and contained a provision that such bank was authorized to apply, on or after maturity, to the payment of the note, any funds in the bank belonging to the makers. By the terms of the note, the makers waived demand, presentment, etc. On April 13, the Beaufort Bank indorsed this note to the South Carolina Agricultural Credit CompanjE which, in turn, indorsed it before maturity to the Federal Intermediate Credit Bank of Columbia, the plaintiff in this case. When the note fell due, June 15, 1926, the makers had on deposit in the Beaufort Bank sufficient funds to meet its payment. On June 24, the defendants sent by mail to W. E. Richardson, president of the Beaufort Bank, a check on their account at the bank for payment of the note. Although the bank received and accepted the check, and charged the same against the makers’ account on July 2, no remittance was made to the holder of the note. On July 12, 27 days after the note fell due, the bank was taken over by the State‘Bank Examiner and has not, since been open for business. The plaintiff thereafter, as the holder and owner of the note, brought this action for collection against its makers. The defendants pleaded that the note *70 was payable at the Beaufort Bank and that they paid it there on June 24, 1926. On trial of the case, both plaintiff and defendants asked for a directed verdict. Honorable J. W. DeVore, the presiding Judge, overruled the defendant’s motion, but directed a verdict for the plaintiff for the principal sum of the note, disallowing interest, attorney’s fees, and costs, because the defendants at the time the note fell due had on deposit in the Beaufort Bank a.sufficient sum to pay the debt. The main question presented by the appeal is: If the holder of a note payable at a bank, where the maker has sufficient funds on deposit at its maturity to meet payment, does not present it there for payment when due, and the note is not paid, and the funds are lost through subsequent failure of the bank, who must bear the loss ? It is well-settled law that the presentment of a note for payment at a place specified is not a condition precedent to an action against the maker, nor is it necessary in such action that presentment be pleaded or proved. McNair v. Moore, 55 S. C., 435, 33 S. E., 491, 74 Am. St. Rep., 760. It is also held in most jurisdictions that loss resulting from a failure of a bank at which a note is payable, and in which the maker has sufficient funds deposited at its maturity to pay the debt, does not fall upon the holder, even though he fails to present the note for payment at such bank. See cases cited in note to Binghampton Pharmacy v. Bank (Tenn.), 2 A. L. R., 1377. The exception to the great weight of authority is our own case of Bank of Charleston Nat. Banking Ass’n v. Zorn, 14 S. C., 444, 37 Am. Rep., 733, decided in 1881. That case involved a note payable to Wroton & Dowling, commission merchants, at their office in the City of Charleston. The note . was assigned by them before maturity to the Bank of Charleston National Banking Association as collateral security to theirnote for money borrowed from the bank. The defendant Zorn had with Wroton & Dowling at the matur *71 ity of the note and until their subsequent failure, sufficient ’funds for payment of same, but the hólder did not present it for payment when due nor thereafter before the failure, and the funds were lost. A verdict was rendered for Zorn and an appeal was taken by the bank. With respect to the ■question of presentment at the time and place specified in the note, the Court said: “The last exception alleges error in that the Judge charged that the bank was bound to demand payment at the office ' of Wroton & Dowling, etc. The English commercial law, when strictly applied and enforced, seems to require that demand shall be made at the place of payment, when specified in the note, either on the day of payment or at some future time, and without this, no default arises on the part of the maker for non-payment.” The American doctrine, however, is not so rigid; demand is not a precedent condition here, and suit may be brought against the maker under that doctrine' without presentment or demand at the place mentioned, subject, however, to the right of the maker to prove by way of defense that on the day and at the place specified he had the necessary funds .to make payment, and that if any loss has occurred it should be the loss of the holder of the note and not his; in other words, the burden of proof is shifted. Instead of requiring the plain- ' tiff to prove that he made demand, the maker, defendant, is required to prove that he deposited the money according to the terms of the note, and that it was lost to the plaintiff on account of his failure to demand it at the proper place. Wallace v. McConnell, 13 Pat., 136, 10 L. Ed., 95; Story on Promissory Notes, §§ 227, 228, and note to page 287; Wolcott v. Van Santvoord, 17 Johns. (N. Y.), 248, 8 Am. Dec., 396; Clarke v. Gordon, 3 Rich., 313, 45 Am. Dec., 768. Now, if the matter complained of in the last exception had stood alone in the Judge’s charge, the exception would be well founded, as the charge in this respect is not in accordance with the above principles;. but, when the whole *72 charge on this branch of the case is taken together, as appears in the brief, it is apparent that the Judge properly qualified the doctrine as a whole when he instructed the jury “that if they believed the plaintiff was guilty of laches in not demanding payment of the note at the office of Wroton & Dowling before their failure, and that plaintiff would have received the money if the note had been presented, and by their failure to do so the defendant lost the money, they should find for the defendant.” This rule is in'accord with the doctrine announced by' Judge Story in his Treatise on Promissory Notes (5th Ed.), p.'286, and is still of force in this State, unless in conflict with the provisions of the Negotiable Instruments Daw, adopted in 1914, the several pertinent sections of which we shall now consider. Section 87, appearing as Section 3738, 3 Code 1922, is as follows: “Where the instrument is made payable at a bank it is equivalent to an order to the bank to pay the same for the account of the principal debtor thereon.” This section in no way conflicts with the rule announced in the Zofn case; on the contrary, it is in harmony with that rule, as it gives to the bank at which the note is payable specific authority, if such authority was lacking otherwise, to pay such instrument and charge same to the account of the maker. It is urged, also, in favor of the rule that the provisions of this section, making such a note “equivalent to an order to the bank to pay the same for the account of the principal debtor thereon,” lay upon the holder of a note the same duty as that placed upon the holder of an ordinary check, and that if the note is not presented at the bank where payable by the holder at maturity, or within a reasonable time thereafter, the maker, as in the case of the drawer of a check, “will be discharged from liability thereon to the extent of the loss caused by the delay.” Section 186 (Acts 1914, p. 695). It is urged, on the other hand, that this section is not decisive of *73 the question, ‘unless the language used be so broadly construed as to destroy other provisions of the law. It is contended that, under a correct interpretation of the provisions of Section 70 of the Act, appearing as Section 3721 of our Code, a different rule applies to the holder of a note from that applying to the holder of a check. This section provides in part: “Presentment for payment is not necessary in order to charge the person primarily liable on the instrument; but if the instrument is, by its terms, payable at a special place, and he is able and willing to pay it there at maturity, such ability and willingness are equivalent to a tender of payment upon his part.” It is argued that, the maker of a note being primarily liable thereon, and presentment therefore not being necessary in order to charge him with liability, the holder’s failure to present the note cannot constitute negligence or laches on his part. In the case of Binghampton Pharmacy v. First National Bank, 131 Tenn., 711, 176 S. W., 1038, 2 A. L. R., 1377, the facts of which were very similar to 'those of the case at bar, this question was fully considered. The Court in that case, holding that the question was one determinable by a correct interpretation of the pertinent provisions of the Negotiable Instruments Raw, said: “The difference between the drawer of a check and the maker of a note is that the latter is primarily liable on the instrument, while the former is not. The maker of a note ‘by the terms of the instrument is absolutely required to pay the same.’ That is to say, he is primarily liable on the instrument. Section 192 [Acts 1899, c. 94], The drawer of a check or bill of exchange is.not primarily liable, but he engages that if the instrument be dishonored he will pay the amount thereof to the holder or subsequent indorser, who may be compelled to pay it. Section 61. “The provisions of Section 70, therefore, which we have quoted above do not apply to the drawer of a check or bill of exchange, while they do apply to the maker of. a note. *74 “By Section 186 of the Acts of 1899, it is made the duty of the holder of a check to present- the same for payment ‘within a reasonable time after its issue, or the drawer will be discharged from liability thereon to the extent of the loss caused by the delay/ “There is therefore an absolute duty resting upon the holder of a check to present the instrument for payment at the place where it is payable, within a reasonable time. If he breaches this duty, the drawer is discharged from liability to the extent he is damaged by the breach. “As between him and the maker of a note, no such duty rests upon the holder of a note with respect to presentment. By the terms of the Act (Section 70) presentment is not necessary to charge, the person primarily liable on the instrument. “The obligation of the maker of a note is not a conditional promise to pay only at a specified place, but is a promise to pay generally, even though a place of payment is named.” See, also, Adams v. Hackensack Improvement Commission, 44 N. J. Law, 638, 43 Am. Rep., 406. We are impressed with the cogent reasoning of the Tennessee Court, and think that its interpretation of the Negotiable Instruments Law is correct, and that any different interpretation with respect to the point at issue would be inconsistent with the. legal effect of the provisions of Section 70 of the Act. As this Act supersedes any prior conflicting rule of law, whether created by legislative enactment or declared by judicial decision, the rule announced in the Zorn case, although in force in this State up to the enactment of the Negotiable Instruments Law, has been rendered inoperative by the provisions of that Act. In addition, the makers of the note in the present case specifically -waived' presentment for payment and thereby agreed as a part of the contract that no presentment by the holder at any time or place would be required, and such waiver operated to relieve the holder of the duty of making *75 presentment, even if it should-be held that, in the absence of waiver, such duty actually- existed under the law. For this reason, also, the contention of the appellants cannot be sustained. As it is agreed that the makers of the note had at the Beaufort Bank at the time of its maturity, and up to the date of the bank’s failure, sufficient funds to meet the payment of the note,and-as there was evidence of willingness on their part to make such payment, the Circuit Judge was correct in limiting the verdict for the respondent to the principal sum of the note. The defendants have also filed an exception to the order of the trial Judge settling the case for appeal. They charge the Court with error in ordering, on motion for respondent’s attorney, that the testimony be printed in the case, contending that the facts were undisputed, and therefore it was in violation of Rule 4 of the Supreme Court to print the testimony and the cost of printing it should be taxed against the respondent. Section 7 of Rule 4 of this Court provides that “any party aggrieved by the order of settlement, may appeal therefrom and insert in an appendix to the case as settled, such matters as may be necessary for the proper consideration of his appeal.” The appellants having failed to present, as provided by the rule, such nedessary matters, the Court is unable to decide the question raised by this exception.- All exceptions are overruled and the judgment of the Circuit Court is affirmed. Messrs. Justices BeEase and Carter concur.