Phipps v. President of the Millbury Bank

Hubbard, J. The object of the present suit is to charge the defendants with negligence in not duly giving notice to the first indorser of a note sent to them for collection, in consequence of which the indorser was discharged. The counsel for the plaintiffs contend, that the defendants were bound to give proper notice to all the indorsers, and that, failing in this duty, they are liable for the damages. As no special agreement is shown in the present instance, the case is to be decided upon the principles of the mercantile law regulating bills of exchange and promissory notes. The note was the property of the present plaintiffs, and was left by them at the Suffolk Bank, for collection, and by that bank was transmitted to the bank in Millbury, where the note was payable. No question has been raised whether the plaintiffs can maintain, in their own names, the present action ; and if it had been raised, perhaps it may be considered as settled by the case of Fabens v. Mercantile Bank, 23 Pick. 330. The only question is, whether the defendants were bound by law duly to give notice to all the indorsers ; it being admitted that [84] the notice actually given by the cashier, acting as notary public, to the first indorser, was insufficient to bind him. In a subject of such constant recurrence as the remitting of bills and notes from one part of the country to the other, for collection, it is of the greatest importance that the duties of the respective parties should be clearly understood, and at the same time, so far as is practicable, that there should be a uniformity of practice. In this case, the defendants were the immediate agents of the Suffolk Bank, who appeared, by the indorsements on the note, to be the real owners; and whether interested or not in the proceeds, they were in law, so far as the defendants were concerned, the owners to whom the defendants were responsible. Acting as such agents, they were bound to make a legal demand of payment of the promisors, and upon nonpayment, to give due notice of the dishonor to the Suffolk Bank, the holders, to enable them to give notice to such parties on the note as they intended to look to for payment. This I consider to be all their duty ; and to bind them to give notice to all the indorsers, there must be some special agreement between them. The indorsers may not be known to them, nor their place of residence; and the paper not having been discounted by them, they have not the ordinary means of knowledge. If banks, thus receiving notes for collection, are to be held bound to give notice to all indorsers, and to be made responsible for any neglect in the right performance of the duty, the service will be too onerous, and a check will be put to the discount of notes payable at a different place from that where the parties are established or reside, to whom the note is offered for discount; and every such check is injurious to the domestic trade of the country. But where the duty of the party, to whom a bill or note is sent for collection, is simply to demand payment of the acceptor or promisor, and if not paid, then to return it to the holder, there no embarrassments need arise. The parties are known, and the agent’s duty is plain and explicit. A case was cited by the plaintiffs’ counsel, (Smedes v. Bank of Utica, 20 Johns. 372,) which supports the doctrine that a [85] bank receiving a note from another bank, for collection, is bound to give notice to all the indorsers. But the court, in giving their opinion, cite no authority in support of the doctrine. They rest it on the ground of established custom and general understanding, as proved in that case by witnesses. We are not aware of any such usage in this State, binding on banks that receive bills and notes from other banks for collection. The bank may indeed notify, and such notice will avail for the benefit of different parties on the bill or note, but their duty is performed by demanding payment of the acceptor or maker, and,-on refusal to pay, by giving due notice to the party from whom they received it. This, we think, is distinctly decided in cases which have arisen in this Commonwealth. The first is that of Colt v. Noble, 5 Mass. 167, where the bill was drawn at New South Wales, and payable in London, in favor of the defendant, a shipmaster, who negotiated it at Madras, while on his voyage; but he lived in Portsmouth, New Hampshire. The bill was sent to London, and was there protested for non-acceptance and non-payment, and was returned to Madras, to the house which had remitted it, who gave the defendant notice from Madras, in a reasonable time. It was agreed that the agents might have sent direct notice to the defendant in three months, and that it was not done. But the court held, that the agents, after procuring the regular protests of the bill, had discharged their duty in returning the bill and protests to their principals ; and the indorser was charged upon the notice received from Madras. The next case is that of Eagle Bank v. Chapin, 3 Pick. 180. The plaintiffs, a bank in Connecticut, were owners of a note payable at a bank in New York, and the defendant, the indorser, lived in Springfield, in this State. The note was presented at the bank in New York for payment, and was refused, and the notary forwarded a notice for the defendant to the owners, at New Haven, and by them notice was given to the defendant. It was in that case contended, that due diligence was not used in giving notice to the indorser, and that it ought to have been sent to him direct from New York. But the court held, that [86] sending the notice, in the first instance, to the holders in Con. necticut, was sufficient. The same point is also settled in the case of Mead v. Engs, 5 Cow. 303, where it was held, that a bank, that is a mere agent to collect a bill or note, is not bound to give notice to all the prior parties, but that it is sufficient to give notice to the next immediate indorser. And so is the case of Haynes v. Birks, 3 Bos. & Pul. 599. But it was contended, in the case at bar, that where the residence of the indorser is known to the bank that receives the note for collection, and, a fortiori, where he lives in the same or an adjoining town, such bank is bound to give notice to him. This point, however, has also been directly decided in the case of Bank of U. States v. Goddard, 5 Mason, 366. There the note was given by J. K. Pickering, in Portsmouth, N. H., and made payable at the U. S. Branch Bank in Boston, to the defendants, who lived in Boston. The owners of. the note were the U. S. Branch Bank in Portsmouth, who sent it to the Branch Bank in Boston for collection; and on payment being refused, the protest and notices were sent to Portsmouth, and from Portsmouth, notice was first given to the indorser. The case was thoroughly argued, and an elaborate opinion given, by the learned judge of the circuit court of the United States, in favor of the plaintiffs, that the agent was not bound to give notice of the dishonor to the indorser, even though living in the same place, but only to his principal. The same general question arose in the case of Howard v. Ives, 1 Hill’s (N. Y.) Rep. 263, and was decided in the same manner. See also Bank of U. States v. Davis, 2 Hill’s (N. Y.) Rep. 451. In the present case, as the note was received for collection by the defendants in the usual manner, without special directions, and due notice of the non-payment was regularly given to the Suffolk Bank, from whom they received it, we think the defendants have executed the trust by law imposed upon them. Whether the cashier of the bank, when acting in his capacity of notary public, is to be considered as the mere agent of the bank in protesting the bills and notes gent to it for collection, or as an independent officer, and, as such, personally rosponsi [87] ble for his own acts, it is not necessary now to determine. If he had received special instructions from the bank itself to give notice to all the indorsers, and had so negligently discharged his duty as to exonerate an indorser; or if the cashier had informed the Suffolk Bank, or the plaintiffs, that he had given notice to the first indorser, and had led either of them into error in consequence of it, the question would be a very different one from that now presented for our consideration. The principle determined by us is this; that a bank, receiv ing from another bank a note for collection, is bound to present the same for payment, and if the same is not paid at maturity, to give due notice of the dishonor to the bank from which they received it, and is not required by the law merchant, as known and practised upon in this Commonwealth, to give notice to all the other parties to the note, where there is no special agreement to do it; and that the defendants, having discharged their duty, are guilty of no laches, and are not responsible to the plaintiffs. Plaintiffs nonsuit.