S. & M. Allen v. Merchants Bank

By the Court, Nelson, J. The plaintiffs in error claim a reversal of the judgment below upon two grounds: 1. That the bill of exchange, being deposited with the defendants and received by them for collection, they thereby assumed the duty of protesting and giving notice of its dishonor; and 2. That a general understanding in the mercantile community, in re.spect to a particular branch of mercantile business, constitutes a commercial usage, and ought to be enforced as a rule of -action between parties engaged therein, when, one party has [487] acted upon the faith of it, and the other has given no evidence of a dissent. The first proposition is undoubtedly correct, and is the law of this court as decided in the case of Smedes v. The Bank of Utica, 20 Johns. R. 372, 3 Cowen, 663, and M’Kinster v. same, 9 Wendell, 46, and 11 id. 473. The only difficulty here is in bringing this case within the rule. A note or bill of exchange left at a bank, and received for the purpose of being sent to some distant place for collection, would seem to imply upon a reasonable construction no other agreement than that it should be forwarded with due diligence to some competent agent, to do what should be necessary in the premises. The language and acts of the parties fairly import so much, but nothing beyond it. The person leaving the note is aware that the bank cannot personally attend to the collection, and that it must therefore be sent to some distant or foreign agent. The extensive correspondence of banks in money matters enables them to make the transmission with more facility and greater convenience than it can be done by individual holders. The service is done by the banks without compensation, and is looked upon as a favor to their customers. There seems to be therefore nothing in the nature of the transaction that can reasonably imply an assumption for the fidelity of the agent abroad. The holder is not without remedy, because the foreign bank or notary is responsible to him for any default. The agents abroad become his agents in the collection. In the case of The Bank of Washington v. Triplett & Neale, 1 Peters, 50, the defendants left a draft with the Mechanics Bank in Alexandria, tobe transmitted to a bank in Washington City for collection. Chief Justice Marshall, in delivering the opinion of the court, said that- the bill was not delivered to the Mechanics Bank for collection, but for transmission; that the bank in Washington became the agent of the holder ; that the Mechanics Bank performed its duty by transmitting the bill, and the whole responsibility of the collection devolved on the bank which received it for that purpose. He further remarks, that the “ deposit of a bill in one bank, to be transmitted for collection to another, is a common usage of great public convenience, the effect of which is well understood. This [488] transaction (alluding to the facts above stated) was unquesti0Jtjably of that character.” It was undoubtedly competent for the plaintiffs to have proved, that by the custom and usage of banks with their cusr 3 J . ° tomers, the mere déposit of a bill payable at a distant place, like Philadelphia, and reception of it for transmission and collection, imposed upon the defendants the obligation to answer for the negligence or omission of the bank, notary, or other agent to whom the bill was transmitted. This is the foundation of commercial law, and whenever that law is silent or. doubtful upon a question that arises, and should be settled in conformity to its principles, evidence of the usage and custom of merchants is admissible. 2 Burr. 1216, 21. Chitty on Bills, 37,95,110. In the case of Stone v. Rawlinson, Willes, 559, where it was first decided that an executor or administrator might transfer, by endorsement, a promissory note payable to the order of their testator or intestate, Chief Justice Willes said, there being no judicial determination upon the point, traders and merchants of undoubted credit were consulted, and all agreed that it was the constant practice thus to transfer notes ; and the point was decided upon this usage and the evidence of it. See also 2 Douglas, 653, n. The inquiry in these and the like cases, however, is not after the opinion of traders and merchants, in respect to the law upon a given mercantile- question, but after the evidence of a fact, to wit, the usage or practice in the course of mercantile business in the particular case. Independently of this usage, merchants are no more permitted by courts to testify to the commercial law, than other individuals. Their understanding of the usage is given, which usage may be the rule of the case to be decided. This system of customs is of mercantile invention, devised for the convenience of business, and embodied into the common law for the benefit of trade and commerce. After the rule has been recognized at law, it is no longer under the control of mercantile usage, and the adjudication is the proper evidence of it. Before' it has been thus recognized it turns upon the fact of mercantile usage, and then the testimony of merchants affords the best proof of it. The usage being the foundation of the law in this respect, must of course precede the rule, and [489] unless proof can be given of it, no such rule or law exists— the common, not the mercantile law, must then define and regulate the rights and obligations of the parties. Traders and merchants are quite competent to prove, from their own knowledge as well as from the information derived through others in the course of trade, the practice in respect to a particular branch of business; but if none exists, their conjecture about what it would be, in a given case, though the chances of its correctness might be greater than that of others out of their line of business, is obviously too problematic to become the foundation of an established rule of law. Courts, for the convenience of trade and commerce, frequently follow merchants in their usages and customs ; but neither the convenience of trade nor a judicious administration of the law would justify the taking the opinion of traders and merchants in advance, and incorporating them into the commercial law as permanent rules of future action. We have before said, that when recognized by judicial determination it can never be moulded, as in usage or custom, by merchants, in subserviency to the convenience of trade and commerce. It then becomes fixed and unalterable, except by legislative .authority. The counsel for the plaintiffs in error cited upon this point some insurance cases, supposed to contain analogous principles in his favor. We have looked into them, and are of opinion they do not support him, but on the contrary confirm the views of the court below. In each case it was the usage and custom of the trade that was permitted to be proved and to influence the decision of the cause. Smith v. Wright, 1 Caines, 43. Coit v. Com. Ins. Co. 7 Johns. R. 385. In the last case it was determined, that if the terms used in a policy of insurance have, by the known usage of trade or by use and practice, as between assurers and assured, acquired an appropriate sense, they , are to be construed according to that sense. Ashton v. Union Ins. Co. 7 Cowen, 202, and Doug. 512. Upon the whole, the only question in the case is as to the obligation of the defendants, independently of usage or custom, none having been proved. That must depend upon the naked fact of the deposit of the bill in the bank in the city of [490] New-York for collection in Philadelphia. It seems to me. unreasonable to conclude from this, that the defendants assumed become responsible for the fidelity of the agents, who all parties knew must interVene'before collection could be effected. * Transmission in due season, to a competent agent, is fairly implied; so much was personally within the power of the defendants, and which duty, it was known to the plaintiffs, the defendants must themselves perform; but beyond this the plaintiffs also knew others must be trusted. If proper care was taken in the selection of agents, the plaintiffs have lost nothing; they are in as good a condition as if the agents had been selected by themselves. Nothing more can reasonably be claimed, by mere implication from the defendants, especially when all that has been done by them is without compensation. . Judgment affirmed.