Duvall v. Farmers' Bank

Archer, Judge, delivered the opinion of the court. When this case was last before this court, on appeal, the court gave a construction to the agreement of 17th of July, — 45 — 1827, and determined, that certain inferences of fact were deducible from the agreement. The construction placed upon the agreement was, that on the note not due, both demand and notice were dispensed with; and, that on the other note, which was due, when the contract was entered into, notice was dispensed with; and it was further decided, that the inference, as an inference of fact, to be drawn from the acts of the parties in this agreement was, that there had been a demand, and of course that the agreement was evidence of a demand. But it was not meant to be intimated, that this inference of a fact was to be conclusive ; on the contrary, the court below have rightly interpreted the opinion of this court, in deciding that such inference may be rebutted. The cause having been remanded to the court below, and rebutting evidence having been offered, the plaintiff deemed it necessary to take the opinion of the court, whether under the evidence in the cause any demand was necessary to be made, or notice given. This we think it was entirely competent for the plaintiff to do. We do not perceive any thing in the agreement of the 17th of July which prevents it. That agreement was, however, certainly made under the impression, by the parties, that the bank, but for the agreement, was under the usual obligation to make demand, and give notice on both notes. The agreement, however, notwithstanding its construction, and the inferences which may be drawn from it, cannot prevent the plaintiff from showing, if he can show, that the acts and agreements of the parties anterior to the agreement of the 17th of July, have dispensed with demand and notice, and rendered them unnecessary: nor do we perceive, that because the plaintiff had offered evidence of a demand, that he could be precluded from showing, that no demand was necessary to have been made; and accordingly the plaintiff has relied on several matters, each of which, it is alleged, is sufficient to enable the plaintiff to recover in the same manner as if a .demand had, in fact, been made, — 46 — 1. That the defendant knew that the notes were not to be paid at maturity, and that they were, but for the agreement, to be renewed. 2. That all the endorser’s property had been conveyed as an indemnity, and to secure the payment of the endorser’s liability. 3. That by the deed of mortgage of 1825, the defendant has placed it out of his power to sue the drawer in case of his default, till 1829. As to the first proposition, without an inquiry into the legal effect of a knowledge on the part of the defendant, that the notes would not be paid, it may be sufficient to observe, that we can perceive no evidence in the cause from which it can be inferred, that when the first note arrived at maturity it was known to the defendant, that it was not to be paid. The agreement, it is true, stipulates that it was to lay over; but that was not entered into for several days after the note had .arrived to maturity. There is evidence that the notes were renewals of former accommodations, and that they were to be renewed from time to time. But with whom was this understanding that the notes were to be renewed ? There is no evidence to shew, that the defendant was, in any manner, a party to such agreement. The accommodation was for the benefit of the drawer, and although he might have entered into an agreement with the bank, that his note should be renewed, it could not affect the endorser, unless he was in some way privy to, or participated in the agreement for such renewal. Giving the greatest legal efficacy to such an agreement, as between the immediate parties to it, the endorsers, strangers to it, at the maturity of one of the notes, must still be considered, so far as this question is concerned, as standing upon their conditional liability as endorsers, and entitled to have a demand made on the drawer, and to have notice given to them. The deeds offered in evidence do not appear to throw any light on this branch of the case. The covenant by the drawer, in his deed of mortgage, to pay his liabilities to the bank in 1829, viewed in the light of an agreement by — 47 — them to give him time to pay, and indemnify them in case they should be compelled to pay as his security, does not look to any agreement existing between the bank and the drawer for a renewal of those notes; but on the contrary, it is plain from the deed, that the parties looked to the probability of payment by the drawer, before the time when the mortgage should be forfeited. As it regards the agreement of the 17th of July, it may be sufficient to remark, that we have heretofore determined, that it might be inferred from it, that the notes were, but for its stipulations, to have gone through the customary forms of demand and notice ; and we cannot therefore, deduce from it now, an inference directly the contrary. The notes in controversy were at their maturity, according to the usage of all banks, to be either paid or renewed. The note over due at the date of the agreement, had not been paid, and anxious to avoid a protest, the defendant had only stipulated that the bank should waive its practice in this respect, of either protesting, or of asking a renewal, and ought not to be considered as evidence, that any arrangement had existed between the endorsers and the bank, either at the maturity of the note, or at any anterior period, that the note was to be renewed. 2. The position that a transfer of all the drawer’s property to the endorser to indemnify him against loss for his liability, exempts the holder from the necessity of making a demand, might, perhaps, if it were a new question, admit of some discussion, unless shown to be amply sufficient to meet the notes. But then there are respectable authorities which sanction the doctrine. Bond et al vs. Farnham, 5 Mass. 170. Morton vs. Lewis, Conn. Rep. 478. 3 Kent Com. 113. Barton vs. Baker, 1 Serg. and Rawl. 334. And it is important that the law in relation to commercial paper should be uniform in the states of the union. We therefore adopt the judgments of the Supreme court of Massachusetts, Connecticut, and Pennsylvania. And on this branch of the case, the only question remaining is, whether there was evidence that all the property of the drawer had been assigned to the defendant. — 48 — The plaintiff who desires to exempt himself from the necessity of proving a demand, must prove the facts necessary to make his case an exception to the general rule. The onus is on' him, and is rightfully upon him. Does he offer sufficient evidence of the fact when he shows the deed for the maker’s plantation, excepting seventy acres, and all his personal property? Certainly not. The very evidence offered showing unassigned property — and yet, that is the only legitimate evidence offered to prove the fact here, for the deed of the 5th July, 1827, conveying the seventy acres to Richard and Grafton Duvall, is a mortgage for a then existing debt of $10,000, alleged to be due them from Lewis Duvall. And if the terms of the deed are to be regarded, it could not prima facie have reference to these claims, for which they were only security, and towards which, they had not paid a dollar. But if it had reference to their endorsements, was not the plaintiff bound to go further, and by showing the extent of Lewis Duvall’s possessions, give the jury evidence from which they could infer, that he had assigned all as an indemnity for this debt ? Lewis Duvall may have owned ten times the amount of the property here conveyed, for any thing which appears from the conveyance. We do not think enough had been proven, to throw the defendant upon proof that Duvall held other property — nor do we conceive, that by demanding further proof to show that all his property was conveyed, we are calling on the plaintiff for negative proof. The plaintiff is not asked to prove that he had no. other property, but to show affirmatively, what property he had, and that all such property as he was known to have, had been conveyed. „ There is nothing in the deeds that indicate, that all was conveyed: nor can an argument be drawn from the fact, that as he has conveyed all his personal property combined with real, that all his real estate is conveyed, because the very deed by which all his personal property is conveyed makes a reservation of land. But if it had not contained this reservation, it still would not have been legitimate to deduce from it, the — 49 — fact that all his lands were thereby assigned. We therefore think there was not sufficient evidence to support this proposition. 3. The third matter relied upon, involves the consideration of the mortgage of 1825. This instrument of indemnity was taken before the particular notes sued on had an existence : but the mortgage by its terms applied to them, for it was taken not only to secure the particular debt then specified, but applied to any additional sum, that might arise, due them as his endorsers, anterior to the period stipulated in the mortgage for the payment of the money by Lewis Duvall, so that whether these notes were in fact renewals of accommodation notes existing at the time of the mortgage, or. mere debts arising due to the bank subsequent thereto, upon which they, the mortgagees, were endorsers, the mortgage was in either view intended as an indemnity: ■ In this mortgage there is a covenant on the part of Lewis Duvall, to pay the amount for which they may become indebted, on or before the 1st of September, 1829. The effect of this covenant was, in our judgment, not only to prevent the foreclosure of the mortgage, before the time stipulated, but as between the parties to prevent all recovery against Lewis Duvall, of the amount of these responsibilities, until the time limited, in case the endorsers or either of them were compelled to pay them. Had the endorsers paid these notes and instituted an action of assumpsit against their principal, to recover the amount paid, we think the covenant contained in the mortgage, might have been produced to show the extension of time agreed to be given, and that the suits were prematurely brought. If this be true, the endorsers, in our judgment, were not entitled to notice. They had put it out of their power to sue the drawer. The object of the law in requiring notice is to enable the endorser to have his remedy over against the party responsible to him, and if he could have no recourse, for more than two years after the note fell due, having by his agreement with the drawer disabled himself therefrom, we think the demand and notice required accord — 50 — ing to the general rule of law, as applicable to these instruments, was rendered unnecessary to. the responsibility of the. endorsers, nor was it necessary, as we think, to observe these rules in this- case, to' enable the last endorser to have immediate -recourse to his first endorser, .as they had both taken this mortgage, and granted the- drawer indulgence; for we do not think, that the last endorser, in the face of this mortgage, could have had any recourse to the first endorser, until the time limited in the' mortgage for the drawer’s responsibility. The aforegoing Views dispose .of the second, third, and fifth exceptions of the defendant, in each of which, we think the court were in error in granting the plaintiffs’ prayers. We, furthermore, think the court erred in admitting in evidence the deed of the, 5th of July, 1827.. In relation to the fourth exception, we think the court were right in declaring the evidence therein offered, as inadmissible. We mean tó express no opinion, how far such a usage as that attempted to be 'established, would' render a demand and notice necessary, because we do not think' the evidence offered was admissible to establish such an usage. In all the evidence offered, there is but a single instance proven of notice, where the bank knew of the conveyance of all the drawer’s property to indemnify the endorser; and a single case of that description ought not to be allowed to go to a jury to establish an usage. In the former trial of this cause, in this court, there existed no evidence in any of the bills of exception, of non-demand, as there does in these exceptions,,, and we did not, therefore, .examine the questions involved in the fifth and sixth bills of exception in the former record, as we supposed our determination in relation, to the agreement furnishing evidence of a demand, would dispose of the whole case, when it shoúld a second time have been submitted to a jury, and that the questions really meant to be raised in the fifth and sixth exceptions of that record, would never arise again. — 51 — Looking to the fact, that in expressing our former judgment, we expressly waived an examination of the law involved in those exceptions, and did in truth, never examine, or in any manner decide it, on that appeal, we cannot concur in the argument, that such judgment shuts the door to an examination thereof on this appeal. But, although we think the court below erred, we cannot reverse their judgment, because we think the plaintiff was entitled to recover, and therefore must enter their judgment affirmed.