Exchange Bank v. Sutton Bank

Page, J., delivered the opinion of the Court. This is an action of assumpsit upon a case stated for the opinion of the Court, with a request to render a judgment in accordance therewith. The appeal is taken from the pro forma judgment of the learned Judge who sat in the case. The defendant below, being indebted to the plaintiff for certain collections made by the former, on account of the latter, on the 9 th day of January, 1892, mailed to the plaintiff the following instrument of writing, viz., “The Sutton Bank. ■ “Sutton, W. Va., Jan. 9, 1892. “Pay to the order of J. J. Jones, Esq., Cashr., $936.50. Nine hundred and thirty-six and jjjj dollars. T. M. Berry, Cashier. To J. J. Nicholson & Sons, No. 1916. Baltimore, Md.” The plaintiff received it on the thirteenth following, and on the same day forwarded it by mail to the Nicholsons, (with whom both parties kept accounts,) endorsed as follows: “For collection and credit account of Exchange Bank, January 13th, 1892, of Wheeling, West Ya., John J. Jones, Cashr.” On the morning of the — 585 — 14-th, the paper was received by the Nicholsons, and was stuck upon a file where were generally placed the various checks drawn upon the house in the ordinary course of business. The defendant then had on deposit to its credit with the banking house a sum in excess of S>956!o!{. Later in the day it was taken from the file and entered to the debit of the defendant’s account, but was not then entered as a credit to the account of the plaintiff. On the morning of the 14th, Nicholson & Sons were hopelessly insolvent, and about one o’clock of that day made an assignment to trustees, who, after they had taken possession, entered the check to the credit of the plaintiff; but at the time of the receipt of the check, the Nicholsons did not have in their banking house the amount of the plaintiff’s claim in actual cash, nor at any time thereafter. The paper is now lost, and it is not known whether it was protested or not; but if it was, no notice thereof, or of the non-payment was sent to or received by either the plaintiff or defendant. A demand was made by the plaintiff on the defendant for payment on the 7th of June, 1893, and, until that day the defendant had no knowledge that it had not been paid. This was the only demand ever made on the defendant by any one. It is not contended that the treatment of the paper by the Nicholsons or theii trustees was tantamount to a payment. There was no credit given to the payees for the amount; and, under the circumstances of the ■case, until this wras done there was no evidence that it liad been accepted. Whether it be regarded as a bill of exchange or a check, it did not operate as an assignment pro tanto of the drawer’s funds in the hands of the Nicholsons until it was accepted. Moses vs. Franklin Bank of Baltimore, 34 Md., 580. So far as the plaintiff was concerned, there was no evidence that the Nicholsons had accepted the order — 586 — upon them, and thereby agreed to become responsible to it for the amount. And apart from this, at the time the paper was drawn, and when received by the Nicholsons, they were hopelessly insolvent; and under such circumstances a transfer of credit from the defendant to the plaintiff would have been a mere delusion. After the assignment they ceased to be a going concern, and neither the firm nor their trustees had the right to make a transfer of credit which was wholly worthless. Manufacturers’ Bank vs. Continental Bank, 148 Mass., 553. A check or bill is not a payment until paid, Morse on Banks and Banking, secs. 544, 546; Lewis Bros. & Co. vs. Brehme, 33 Md., 412; Insurance Co. vs. Smith, 6 Harr. & J., 166, or unless it is accepted as cash, or the creditor parts with it, or is guilty of some laches by which injury inures to -the drawer. Glenn vs. Smith, 2 Gill & J., 509. In this case, therefore, unless it can be shown that the plaintiff has been guilty of some negligence whereby the defendant has been either actually or constructively injured, the paper having been lost, it was not improper to resort to the original cause of action. Myers vs. Smith and Barrick, 27 Md., 50. What was the character of the paper offered in evidence? The appellee contends it is a bill of exchange. This Court has stated in Moses vs. Franklin Bank of Baltimore, 34 Md., 579, that “a check is denominated a species of inland bill of exchange, not with all the incidents of an ordinary bill of exchange it is true, but still it belongs to that class and character of commercial paper.” And in Bull vs. First National Bank of Kasson, 123 U. S., 105, in which an instrument of writing exactly similar to the one in this case was declared by the Court to be a check, Judge Field, speaking for the whole Court, says: “When an instrument is drawn upon a bank, or a person engaged in the banking business, and simply directs the payment to a party of a specified sum of money which is at — 587 — the time on deposit with the drawee, loithout designating a future day of payment, the instrument is to be treated as a check. The chief points of difference are that a check is always drawn on a bank or banks. No days of grace are allowed. The drawer is not discharged by the laches of the holder in presenting it for payment, unless he can show that he has sustained some injury by the default. It is not due until payment is demanded, &c.” Merchants’ Bank vs. State Bank, 77 U. S., 647; Harker vs. Anderson, 21 Wend., 375; Merchants’ National Bank vs. Bitzinger, 118 Ill., 484; Harison, Receiver vs. Wright, et al., 100 Indiana, 515; First National Bank of Cincinnati vs. Coates, 5 McCrary, 9; Daniel onNego. Instr., sec. 1566; Story on Prom. Notes, sec. 487; Morse on Banks & Banking, see. 362. We do not think what was said by this Court in Hawthorn vs. State, 56 Md.} 534, is in conflict with the views here expressed. There, as well as in Moses vs. Franklin Bank of Baltimore, {supra,) they held that a chock was a species of bill of exchange, not with all the incidents of an ordinary bill of exchange, but belonging to that class and character of commercial paper, or, in other words, as was said by Cowen, J., in Hacker vs. Anderson, (supra,) the “bill is the genus and the check is the species;” and therefore, Hawthorn was within the terms of the statute, which made it a felony to forge an endorsement on a bill of exchange. The instrument of writing in question in this case, must therefore be treated as a check. On receipt of the check the plaintiff, with reasonable promptness, forwarded it to the Nicholsons, endorsed “Eor collection and credit account of Exchange Bank, Jan. 13, 1892, of Wheeling, W. Va.” Such an endorsement constituted them the agents of the plaintiff to collect and credit, and at the same time, as drawees of the check, they were also the agents of the drawers to pay. The plaintiff was therefore responsible — 588 — for any omission of duty on the part of the Nicholsons in their capacity as collectors. As collecting agents of the plaintiff, it was their duty to do whatever was necessary in respect to demand and notice to the drawer, and for any negligence in regard to this they would be liable to the plaintiff, and not to the defendant, for such damages as might be occasioned by reason of their neglect. Montgomery County Bank vs. Albany City Bank, 7 N. Y., 459, (3 Seld.) The evidence is clear that they did not transfer the credit for the amount of the note, from the defendant to the plaintiff. If they had done this, other questions would have to be considered here, upon which we are not now called to decide, and do not intimate our opinion; and the failure to make such transfer was equivalent to a refusal to accept and pay. Under such circumstances, it was their clear duty to give notice of the non-payment, to the drawer, in order that the drawee might take any necessary steps to protect its interest; and if they failed to do so, and loss ensued by reason of such want of notice, it falls on the plaintiff, and not upon the drawer. A failure however to notify the drawer of the non-payment of a check does not always discharge him from liability; it must also be shown that he has either actually or presumptively suffered from loss or injury therefrom. Daniel on Neg. Inst., see. 1587, and authorities there cited; Bull vs. First National Bank of Kasson, (supra.) In the case of Norris, et al. vs. Despard, 38 Md., 491, it is true this Court said: “If the notice be not given, it is a presumption of law that he is injured by the omission;” but they explain this remark by adding, that “in the application of the principle, Courts must inquire into the liabilities of the respective parties to the check for the purpose of ascertaining whether this injury, either actual or presumptive, could take place." And further on, in the same opinion, “it was but just that they should give the defendant notice — 589 — of the non-payment in reasonable time before they brought their action, or to have shoion that the defendant sustained no injury in consequence.” Rhett vs. Poe, 2 Howard, 457; Eichelberger vs. Finley, 7 Harr. & J., 385; Schuchardt vs. Hall & Loney, 36 Md., 602. (Decided 8th February, 1894.) Here it is clear, that at the time the check reached the Nicholsons, they were hopelessly insolvent, and did not have in their banking house the amount of the check in actual cash. Their assignment on the same day, placed all their assets in the hands of trustees, and definitely fixed the status of any claim the defendant had, or could have, upon them. Under these circumstances, we can perceive no way by which, on account of the want of notice, injury to the defendant, either “ actual or presumptive, ” could take place. The judgment below must be reversed. Judgment reversed, and judgment for the appellant, for the sum of S'1,053.56, with interest from this date until paid, and costs.