The State of Ohio not having been admitted into the Union until
1802, the Act of Congress passed May 8, 1792, which is expressly
confined in its operations to the day of its passage, in adopting
the practice of the state courts into the courts of the United
States, could have no operation in that state, but the district
court of the United States established in that state in 1803 was
vested with all the powers and jurisdiction of the District Court
of Kentucky, which exercised full circuit court jurisdiction, with
power to create a practice for its open government. The District
Court of Ohio did not create a system for itself, but, finding one
established in the state in the true spirit of the policy pursued
by the United States, proceeded to administer justice according to
the practice of the state courts, and by a single rule adopted the
state system of practice. When in 1807 the Seventh Circuit was
established, the judge assigned to that circuit, found the practice
of the state adopted in fact into the Circuit Court of the United
States, and the same has since, so far as it was found practicable
and convenient, by a uniform understanding been pursued without any
positive rule upon the subject.
The Act of 18 February, 1820, relative to proceedings against
parties to promissory notes, was a very wise and benevolent law,
and its salutary effects produced its immediate adoption into the
practice of the courts of the United States, and the suits have in
many instances been prosecuted under it.
It will not be contended that the practice of a court can only
be sustained by written rules, nor that a party pursuing a form or
mode of proceeding sanctioned by the most solemn acts of the court
through the course of years, is to be surprised and turned out of
court upon a ground which has no bearing upon the merits. Written
rules are unquestionably to be preferred because of their
certainty, but there can be no want of certainty where long
acquiescence has established it to be the law of the court that the
state practice shall be its practice as far as it has the means of
carrying it into effect or until deviated from by positive rules of
its own making.
The course of prudence and duty in judicial proceedings in the
United States when cases of difficult distribution as to power and
right present themselves is to yield, rather than encroach. The
duty is reciprocal, and will no doubt be met in the spirit of
moderation and comity. In the conflicts of power and opinion
inseparable, from our very peculiar relations, cases may occur in
which the maintenance of principles and the administration of
justice according to its innate and inseparable attributes may
require a different course, and when such cases do occur, our
courts must do their duty; but until then, it is administering
justice in the spirit of the Constitution to conform as nearly as
possible to the administration of justice in the courts of the
several states.
Although the act of the Legislature of Ohio regulating the mode
of proceeding in actions on promissory notes was passed after the
making of the
Page 26 U. S. 605
note upon which this action was brought, yet the Circuit Court
of the United States for the District of Ohio, having incorporated
the action under that statute, with all its incidents, into its
course of practice and having full power by law to adopt it, there
does not appear any legal objection to its doing so in the
prosecution of the system under which it has always acted.
Modern decisions go to establish that if a note be at, the place
where it is payable on the day it falls due, the onus of proving
payment falls upon the parties who are liable to pay it, and the
instructions of the circuit court in this case were more favorable
to the parties to the note, where the court said, upon the
sufficiency of the demand, that on an article or a note made
payable at a particular bank, it is sufficient to show that the
note had been discounted and become the property of the bank, and
that it was in the bank, and not paid when at maturity.
This was a writ of error brought to reverse a judgment rendered
in the Circuit Court of the United States for the District of Ohio
in favor of the Bank of the United States, the present defendants
in error. The declaration contains a common count for money lent
and advanced. The plea is
non assumpserunt. There is
another plea of
nonassumpsit, filed by H. Fullerton alone,
and under it a notice that he will offset a large sum of money,
$3,957.33 1/3, due by the bank to the said Fullerton, being the
avails of a certain note (the note on which the action was brought)
which was discounted by the said Fullerton at the office of
discount and deposit in Cincinnati, and the proceeds of which he
had never checked out. There is another notice of offset by all the
defendants -- that the plaintiffs are indebted to the defendant
Fullerton in a large sum of money, $5,000 -- being the avails of a
certain promissory note (the note on which plaintiff's action is
founded) which has never been paid by the bank to Fullerton or
received by him, but retained by the plaintiffs, and Fullerton
applies the same by way of discharge and setoff to the said note
made to plaintiffs. The cause was tried by a jury, and on the trial
the plaintiff exhibited in evidence, a certain note, a copy of
which follows:
"$4,000 Cincinnati, February 1, 1820"
"Sixty days after date, I promise to pay John Carlisle or order,
at the office of discount and deposit of the Bank of the United
States at Cincinnati, four thousand dollars for value
received."
"[Signed] ISAAC COOK"
"Endorsed -- John Carlisle, John Waddle, Humphrey Fullerton"
Isaac Cook, the drawer of the note, died pending the suit and
before the trial. To the introduction of this note in evidence the
defendants objected, as evidence of a several contract of the
drawers and each one of the endorsers, and not of any
Page 26 U. S. 606
joint undertaking or liability of the defendants. This objection
was overruled by the court, and the note permitted to be read in
evidence under the eighth section of the Act of the General
Assembly of Ohio entitled
"An act to regulate judicial proceedings, where banks and
bankers are parties, and prohibit the issuing bank bills of a
certain description, passed 18 February, 1820, to which decision of
the court the defendants excepted."
The eighth section of the act provides
"That when any sum of money due and owing to any bank or banker
shall be secured by endorsements on the bill, note, or obligation
for the same, it shall be lawful for such bank or banker to bring a
joint action against all the drawers or endorsers, in which action
the plaintiff or plaintiffs may declare against the defendants
jointly for money lent and advanced, and may obtain a joint
judgment and execution for the amount found to be due, and each
defendant may make the same separate defense against such action
either by plea or upon trial that he could have made against a
separate action, and if in the case herein provided for, the bank
or banker shall institute separate action against drawers and
endorsers, such bank or bankers shall recover no costs. Provided
always that in all suits or actions prosecuted by a bank or banker
or persons claiming as their assignees or under them in any way for
their use or benefit, the sheriff, upon any execution in his hands
in favor of such bank or banker, their or his assignee as
aforesaid, shall receive the note or notes of such bank or banker
from the defendant in discharge of the judgment, and if such bank
or banker, their or his assignee or other person suing in trust for
the use of such bank or banker shall refuse to receive such note
from the sheriff, the sheriff shall not be liable to any
proceedings whatever at the suit or upon the complaint of the bank
or banker, their or his assignee as aforesaid."
The facts of the case, so far as they were considered as
important to the decision of the Court are fully stated in the
opinion delivered by MR. JUSTICE JOHNSON.
Page 26 U. S. 611
MR. JUSTICE JOHNSON delivered the opinion of the Court.:
The record exhibits a judgment recovered by the defendants here
against the plaintiffs in an action for money lent
Page 26 U. S. 612
and advanced. The plea was
nonassumpsit, with notice of
a discount and a verdict for plaintiff below.
The errors assigned arise upon various bills of exception, the
first of which was taken to the evidence offered to maintain an
action, in these words,
" The plaintiff, in support of his action, offered in evidence
the following promissory note drawn by Isaac Cook, and endorsed by
Humphrey Fullerton, John Waddle and John Carlisle."
" $4,000 Cincinnati, February 1, 1820"
"Sixty days after date, I promise to pay John Carlisle or order,
at the office of discount and deposit of the Bank of the United
States at Cincinnati, four thousand dollars for value
received."
"[Signed] ISAAC COOK"
" Endorsed -- John Carlisle, John Waddle, Humphrey
Fullerton"
"To the introduction of this evidence the defendant by his
counsel objected, as evidence of a several contract of the drawer
and each of the endorsers on the note, and not of any joint
undertaking or liability of the defendants, which objection was
overruled by the court, and the note permitted to be read in
evidence, under the act of the general assembly of Ohio, entitled,
'An act to regulate judicial proceedings, where banks and bankers
are parties, and to prohibit the issuing of bank bills of certain
descriptions,' passed 18 February, 1820, to which decision the
counsel excepted."
Cook, it appears, was originally made a party defendant to the
action, but died pending the suit; the plaintiff suggested his
death on the record, and went to trial against the remaining three
defendants.
In order to understand the bearing which the instruction moved
for has upon the cause, it is necessary to remark, that the State
of Ohio was not received into the Union until 1802, so that the
process act of 1792, which is expressly confined in its operation
to the day of its passage, in adopting the practice of the state
courts into the courts of the United States, could have no
operation in that state. But the district court of the United
States, established in the state in 1803, was vested with all the
powers and jurisdiction of the district court of Kentucky, which
exercised full circuit court jurisdiction, with power to create a
practice for its own government.
The District Court of Ohio, it appears, did not create a system
for itself, but finding one established in the state, in the true
spirit of the policy pursued by the United States, proceeded to
administer justice according to the practice of the state courts,
or in effect adopted by a single rule, the state system
Page 26 U. S. 613
of practice, in the same mode in which this Court, at an early
period, adopted the practice of the King's Bench in England. So
that when the Seventh Circuit was established, in the year 1807,
the judge of this Court, who was assigned to that circuit, found
the practice of the state courts adopted in fact into the circuit
court of the United States.
It has not been deemed necessary to make any material
alterations since, but as far as it was found practicable and
convenient, the state practice has, by an uniform understanding,
been pursued by that court without having passed any positive rules
upon the subject. The Act of 18 February, 1820, alluded to in the
bill of exceptions, was a very wise and benevolent law, calculated,
principally, to relieve the parties to promissory notes from
accumulated expenses; its salutary effects produced its immediate
adoption into the practice of the circuit court of the United
States, and from that time to the present, in innumerable
instances, suits have been there prosecuted under it. The
alteration in practice (properly so called) produced by the
operation of this act was very inconsiderable, since it only
requires notice to be given of the cause of action by endorsing it
on the writ and filing it with the declaration, after which the
defendants were at liberty to manage their defense, as if the note
had been formally declared upon in the usual manner.
It is not contended that a practice as such can only be
sustained by written rules; such must be the extent to which the
argument goes, or certainly it would not be supposed that a party
pursuing a former mode of proceeding, sanctioned by the most solemn
acts of the court, through the course of eight years, is now to be
surprised and turned out of court, upon a ground which has no
bearing upon the merits.
But we are decidedly of opinion the objection cannot be
maintained. Written rules are unquestionably to be preferred,
because their commencement, and their action, and their meaning,
are most conveniently determined; but what want of certainty can
there he, where a court by long acquiescence has established it to
be the law of that court, that the state practice shall be their
practice, as far as they have the means of carrying it into effect,
or until deviated from by positive rules of their own making. Such
we understand has been the course of the United States Court in
Ohio for twenty-five years past. The practice may have begun and
probably did begin in a mistaken construction of the process act,
and then it partakes of the authority of adjudication. But there
was a higher motive for adopting the provisions of this law into
the practice of that court, and this bill of exceptions brings up
one of those difficult questions, which must often occur in a court
in which
Page 26 U. S. 614
the remedy is prescribed by one sovereign, and the law of the
contract by another. It is not easy to draw the line between the
remedy and the right, where the remedy constitutes so important a
part of the right; nor is it easy to reduce into practice the
exercise of a plenary power over contracts, without the right to
declare by what evidence contracts shall be judicially established.
Suppose the State of Ohio had declared that the undertaking of the
drawer and endorser of a note, shall be joint and not several, or
contingent, and that such note shall be good evidence to maintain
an action for money lent and advanced; would not this become a law
of the contract? where then would be the objection to its being
acted upon in the courts of the United States? Would it have been
prudent or respectful, or even legal, to have excluded from all
operation in the courts of the United States, an act which had so
important a bearing upon the law of contracts, as that now under
consideration? An act in its provisions so salutary to the citizen,
and which, in the daily administration of justice in the state
courts would not have been called upon otherwise than as a law of
the particular contract; a law, which as to promissory notes
introduced an exception into the law of evidence, and of actions.
It is true the act in some of its provisions has inseparably
connected the mode of proceeding with the right of recovery. But
what is the course of prudence and duty, where these cases of
difficult distribution as to power and right present themselves? It
is to yield rather than encroach; the duty is reciprocal, and will
no doubt be met in the spirit of moderation and comity. In the
conflicts of power and opinion, inseparable from our very peculiar
relations, cases may occur, in which the maintenance of principle,
and the administration of justice according to its innate and
inseparable attributes, may require a different course; and when
such cases do occur, our courts must do their duty; but until then,
it is administering justice in the true spirit of the Constitution
and laws of the United States, to conform, as nearly as
practicable, to the administration of justice in the courts of the
state.
In the present instance, the act was conceived in the true
spirit of distributive justice, violated no principle, was easily
introduced into the practice of the courts of the United States,
has been there acted upon through a period of eight years, and has
been properly treated as a part of the law of that court. But it is
contended that it was improperly applied to the present case,
because the note bears date prior to the passage of the law; and
this certainly presents a question which is always to be approached
with due precaution, to-wit, the extent of legislative power over
existing contracts.
But what right is violated, what hardship or injury
Page 26 U. S. 615
produced by the operation of this act? It was passed for the
relief of the defendant, and is effectual in relieving him from a
weight of costs, since it gives to the plaintiff no more than the
costs of a single suit, if he should elect to bring several actions
against drawer and endorser. Nor does it subject the defendants to
any inconvenience from a joint action, since it secures to each
defendant every privilege of pleading and defense of which he could
avail himself if severally sued. The circuit court has incorporated
the action with all its incidents into its course of practice, and
having full power by law to adopt it, we see no legal objection to
its doing so, in the prosecution of that system, upon which it has
always acted. It cannot be contended that the liabilities of the
defendants under their contract have been increased or even varied,
and as to change in the mere form of the remedy, the doctrine
cannot be maintained that this is forbidden to the legislative
power or to the tribunal itself when vested with full power to
regulate its own practice.
The next bill of exceptions has relation exclusively to the
discount. It sets out a great deal of evidence, and sixteen
specifications, if they may be so called, of the prayers asked of
the court by the defendant's counsel; the whole making out this
case. It appears that in December, 1817, Isaac Cook's note, with
these endorsers upon it, was discounted at the Bank of Cincinnati,
and renewed every sixty days down to February 1, 1820. It commenced
at $6,000, and in September, 1818, was reduced to $4,000, for which
amount it was renewed uniformly down to the last date. In its
origin, one McLaughlin's name was also on the paper, and sometimes
he and sometimes Cook was the last endorser, until March, 1819,
when Cook was uniformly the last endorser down to the date of the
present note. The proceeds of the successive renewals were of
course credited to him and passed to the payment of the preceding
note.
But on this note Fullerton stands as the last endorser, and the
proceeds were credited to him, and Cook's note of the preceding
date was charged to Fullerton's account without his check, thus
balancing the credit which the discounting of the last renewal gave
to Fullerton on the books of the bank. The note so charged was of
course not protested, and thus Fullerton and his co-endorsers
escaped payment of that note, and now they propose to escape the
payment of this, by insisting that without a check from Fullerton,
authorizing the application of the proceeds as credited to him, to
the payment of the previous note, the bank is still indebted to him
to that amount. This is an ungracious defense, and one which no
court of justice can feel disposed to sustain. To repel it, the
plaintiffs introduced witnesses to prove, that this note was
expressly discounted in
Page 26 U. S. 616
order that the proceeds might be applied to the previous note,
and would not have been discounted otherwise, and contend, that the
bank, having the fund in hand to pay itself, had a right so to
apply it without a check, upon the ground of implied assent. With a
view to that question, the defendants below have introduced
thirteen out of sixteen of their prayers. They all go to maintain
the single proposition, that Fullerton, as last endorser, was
entitled to credit for the proceeds of this note, and is still
entitled, if they have not been legally applied to the payment of
the note which preceded it.
The remaining three prayers, to-wit, the 13th, 14th, and 15th,
raise a question on the sufficiency of the demand on the drawer,
and of the notice of nonpayment to the endorser, and the proof
introduced to establish both facts.
The entry in the record on the subject of the charge to the jury
is in these terms.
"But the court instead of the foregoing instructions as asked,
charged and instructed the jury, that to enable the plaintiffs to
recover, the jury ought to be satisfied from the evidence that the
note had been discounted by and become the property of the bank;
that it was in the bank and not paid, when it came to maturity;
that due notice of the protest and nonpayment, had been given to
the parties, and that such notice had been put into the post office
the day after the last day of grace in time to go by the
succeeding mail; that every note discounted in bank, was
prima facie to be regarded as a business note, and that
when such notes were discounted, generally and regularly, the
proceeds of the note should be carried to the credit of the last
endorser, and paid to his check; that the printed and published
rules of the bank, ought in the absence of other testimony to be
considered as regulating the course of business of the bank; but
that if the jury were satisfied from the evidence, that a practice
and course of business in the office of discount and deposit in
Cincinnati, had prevailed and was known to defendants, and that the
note in question had been discounted and treated in all respects,
according to such practice and course of business, but not
according to the printed rules, the plaintiffs had a right to
recover. That the bank had not a right to apply the proceeds of the
note contrary to the understanding and directions of the last
endorser, or to any other use than the use of the last endorser,
without his consent; but that if the jury were satisfied from the
evidence, that according to the custom and practice of the bank in
the case when a new note was put into the bank for the purpose of
renewing and continuing a former loan or discount, the check of the
last endorser was sometimes required, and sometimes dispensed with,
and that in the latter case it was the practice to file away the
old note as a check, and that, if the note sued upon had been
Page 26 U. S. 617
discounted and treated in the latter manner, with the consent of
the parties to it, the plaintiffs had a right to recover, and that
such consent may be inferred and found by the jury, from the facts
and circumstances given in evidence, without direct or positive
proof, if in the opinion of the jury the facts and circumstances
proved warrant such inference. That if the jury find the note was
not discounted, the plaintiff cannot recover; or if they find that
it was discounted, but the proceeds remain in the bank carried to
the credit of the last endorser, and not drawn or applied with his
consent to any other purpose, the money may and ought to be set off
against the note; but if they find, that the note sued on was put
into bank for the purpose of renewing a former note or loan, and
for no other purpose, and with the understanding of all the
parties, that if discounted the proceeds could and would, by the
course of business in the bank, be applied solely to the discharge
of the former note, and that they had been so applied, and the old
note retained, and written off as a check, by the bank; that the
plaintiffs ought to recover."
The exception taken is to refusing to give the instructions as
asked, and to giving them in the form in which they were propounded
to the jury. And the question is whether the instruction given
covered the whole ground of the instructions prayed for, and were
legally correct in the form in which they were rendered.
We are of opinion they cover the whole ground taken by the
defendants, or at least as far as they had a right to require. This
will be obvious from a simple analysis of the charge. The
propositions which it imports will be examined in their order. The
first is upon the sufficiency of the demand, and the law laid down
on this point is
"that on a note made payable at a particular bank, it is
sufficient to show that the note had been discounted and become the
property of the bank and that it was in the bank not paid at
maturity."
Nothing more than this could have been required of the court,
for the positive proof that the bill was
not paid will
certainly imply that there were no funds of the drawer there to pay
it. The fact could not have been made more positive by inspection
of the books. The charge is perhaps too favorable to the
defendants, since modern decisions go to establish, that if the
note be at the place on the day it is payable, this throws the
onus of proof of payment upon the defendant. 4 Johns. 188.
This is more reasonable than to require of the plaintiff the proof
of a negative, and comports better with the general law of
contracts.
The next instruction is, in the language of the court,
"that notice of the nonpayment and protest should have been
given to the endorser through the medium of the post office the
day
Page 26 U. S. 618
after the last day of grace in time to go by the succeeding
mail."
The defendant's counsel, in arguing on this part of the
instruction, insisted much on the obligation on the plaintiff to
establish definitively and positively, that the notice given was in
time to go by the next mail, but has not adverted to his own
omission, in not putting into the case evidence that there was a
mail established from Cincinnati, to the place of the defendant's
residence. Yet if the jury might be left on this point to take that
fact upon notoriety or personal knowledge, it would be difficult to
maintain that they might not, on the same grounds, find the minor
fact, that the notice deposited in any part of the business hours
of that day, would be in time for the mail ensuing the third day of
grace. It is argued that the language used by the court on this
point is equivocal, and may have led the jury to suppose, that
sending the notice by the mail which
succeeded the day after
the last day of grace, was sufficient. But we think the
construction is forced. The words are "the day after the last day
of grace, in time to go by the succeeding mail." Succeeding what?
Obviously the last day of grace, otherwise there might be no
necessity for putting it in the office, until the second day after
the last day of grace, whereas the necessity of putting it in on
the first day after, is expressed in the charge.
With this signification, it was rather more favorable than need
be given, since the mail of the next day may have gone out before
early business hours, or no mail may have gone out for several
days.
The residue of the charge relates to the application of the
proceeds of this note, to the previous note without the check of
the last endorser, and this also, we think, embraces all the
defendants asked, and is as favorable as the law would sanction. It
admits that this should be regarded as a business note, that the
proceeds should have been passed to the credit of the last
endorser, and should not have been applied otherwise than by his
assent; but it then goes on to assert what surely could not be
controverted -- that with the assent of the last endorser, the
money, instead of being passed to his credit, might be otherwise
applied; that with his consent it might be applied to the
satisfaction of another note, for which he was endorser, without
his checking for the amount; and that his consent may be implied,
from circumstances, as all other facts may be.
The jury has found, then, that with his consent it was so
applied, and the evidence fully bore them out in their finding; if
competent, it was all the law requires.
It may be proper to observe that every discount is in the nature
of a cross-action, and if the discount filed in this case were
Page 26 U. S. 619
thrown into the form of an action, it would be for money had and
received to defendant's use.
The merits of this defense need only be tested by the law which
governs that action to make it clear that the evidence would not
sustain it. It goes in fact to show that in what are called
renewals of bank loans, the lending is qualified and not absolute;
that when credit is given and money advanced upon a note of that
description, it is not an advance on general account, but only for
the purpose of a specific application. Any act done by the bank,
therefore, whatever be the mere form, if it have for its end the
carrying of the contract into effect, in its true spirit and
intent, must be binding upon all the parties to the contract.
Nothing more is affirmed in this charge or verdict.
One general objection was taken in argument to the instruction
given, importing a charge of inconsistency, inasmuch as although it
admits the note to be a business note, as it is called, and
therefore to be passed to the credit of the last endorser, it
permits it to be treated as an accommodation note, in allowing it
to be passed to the credit of the drawer. But if this were strictly
the fact, what defense does it afford to the action if such were
the agreement and the real understanding of the parties? In
strictness, however, it was not passed to the credit of the drawer
alone, for in the progress of the ruinous system of loans, which
prevails over the country, the note discounted as the renewal of an
accommodation note, cannot be called a business note, nor can it in
correctness be predicated of such a note, that it is passed to the
credit of the drawer alone, when the last endorser has in effect an
equal relief from the application of the proceeds.
We do not deem it necessary to consider a question commented
upon in argument by the counsel for the bank and perhaps glanced at
by the opposite counsel, whether this note was not void as an
accommodation note, under the rules of the bank, because not
secured by a deposit of stock.
No one of the exceptions raises the question, and we should
think it injustice to the counsel for the plaintiffs here, to
suppose that he intended to raise it.
Judgment affirmed, with costs.
