President of Central Bank v. Davis

Morton J. delivered the opinion of the Court. The plaintiffs having derived their title to the note through the defendant’s indorsement, he is estopped from denying the genuineness of the signatures of the antecedent parties. It is not competent for him to show that he had no legal title to the chose in action which, for a valuable consideration paid by the plaintiffs, he transferred to them. Peake’s Ev. 221; 2 Stark. Ev. 267; Bayley on Bills, (Phil. and Sewall’s 2d ed.) 149; Lambert v. Oakes, 1 Lord Raym. 443; Critchlow v. Parry, 2 Campb. 282; Codwise v. Gleason, 3 Day 12. The origin of the note and the circumstances under which it was discounted by the plaintiffs, do not increase the defendant’s liability. An accommodation bill or note is entitled to no peculiar favor, and the indorsers of such securities are holden in the same manner and upon the same principles as the indorsers of business paper. Bayley on Bills, (Phil, and Sewall’s 2d ed.) 149 ; Brown v. Mott, 7 Johns. R. 361; [375] Yeaton v. The Bank of Alexandria, 5 Cranch, 49; Violett v. Patton, ibid. 142. The undertaking of an indorser is conditional; and unless the condition be performed, the undertaking does not become obligatory. The condition on which the indorser promises to pay is, that the holder shall use due diligence to collect the amount due, of the antecedent parties, and give seasonable notice of their delinquency to the subsequent indorsers. Jones v. Fales, 4 Mass. R. 251; Copp v. M'Dougal, 9 Mass. R. 5. But as this condition is for the benefit of the indorser, he may waive it or agree to dispense with the performance of it, and obligate himself to pay without demand or notice. Such an agreement may be proved in the same manner and by the same kind of evidence that any other contract may be. And for this purpose circumstantial, as wrell as direct evidence, is admissible. One acknowledged mode of proof is by evidence of usage. An established usage of a bank, known to its customers, would be evidence against them. All who transact business at a bank must be presumed to agree to conform to their modes of doing business, so far as they are known to them. They incorporate its known usages into and make them a part of their contracts. They are therefore bound, not by the force of the usage, but by virtue of their own contracts. Jones v. Fales, 4 Mass. R. 252; Widgery v. Munroe, 6 Mass. R. 450; Lincoln & Kennebeck Bank v. Page, 9 Mass. R. 157; The same v. Hammatt, ibid. 159. But we find no evidence of any usage of this bank upon the point in question. Their by-laws required all indorsers to “ waive their right to notice, on the back of the paper.” This was intended more immediately for the government of the directors ; but might, by them, be enforced upon their customers, by refusing to discount any paper which did not conform to it. But they did not uniformly do this. And so far from showing a usage to hold indorsers without notice, they required an express written agreement from them that they would dispense with notice. The written waiver on the back of the note was the act of Roberts, the first indorser. He, being the payee, could alone [376] indorse the note. This transferred the legal interest to the defendant. The waiver was an essential part of the indorsement and materially affected the liability of the first indorser. It was his several act and does not bind any one else. If filled up as it must be supposed to be, it would read, I? M. R., “ waiving right to notice,” order the contents of this note to be paid to J. D. or order. Then follows the blank indorsement of the defendant, which the holder has a right to fill up. But in doing it he is not at liberty to write just what he pleases over the name, but is bound by mercantile usage ; which on this point has the force and certainty of law, and clearly does not extend to a waiver of any of the legal conditions of indorsements. In the decision of this case, we must act upon the assumption that the first indcsement is valid, as it is implied, by law, to be genuine, and no p.’oof is admissible to show the contrary. And while the defendant is precluded from showing it to be a forgery, the plaintiffs cannot in this case be allowed to do it, to remit them to a prior remedy for the consideration paid Unless the first indorsement be deemed to be valid, the plaintiffs show no title to the note. And they cannot, in this action, recover the money paid for it, treating it as a forged instrument, because they did not buy it of the defendant or pay the consideration to him. The defendant never having been notified of the dishonor of the note, nor waived his right to notice, is not liable upon it. Plaintiffs nonsuit.