1. Although it may be conceded that notice of demand and
nonpayment of a note need not be given to an endorser who has
received funds from the maker, indisputably and only for the
purpose of paying the note whenever presented (an endorser in such
a case becoming liable as a principal debtor), yet as such a rule
does not apply when the endorser having funds of the maker has them
not in that way, but only from the profits of a business in
conducting which he was a partner of the maker, and is simply
authorized to apply the funds so in his hands to the payment
Page 84 U. S. 412
of notes
at their maturity, and thus may have parted
with them a certain time
after the maturity -- in such a
case it is error to take away from the jury the question whether
the note was legally presented to the maker for payment and whether
notice of dishonor was legally given to the endorser. The most that
in such a case can properly be asked by the holder of the notes is
that the evidence should be submitted to the jury to find whether
it proved that the defendant had become the principal debtor by
arrangement between him and the maker, with instructions that if it
did, the plaintiff was entitled to recover, and that if it did not,
the endorser could not be held liable without proof of reasonable
demand upon the maker, and notice.
2. Though a party may have taken exception before a trial to the
refusal of a court then to suppress a deposition, yet if he allow
the deposition to be read on the trial without opposition, he
cannot avail himself, in this Court, of his previous exception.
Smith, in November, 1866, sued Ray in the court below as the
endorser of two negotiable notes, made by one Harkaway. The notes
were both dated April 12, 1861, and were made payable at the Bank
of Mobile, one on the 1st day of March, 1862, and the other on the
1st day of November, in the same year. Both the maker and the
endorser were then, and continued to be, citizens of the State of
Alabama, and the holder of the notes was and continued to be a
citizen of the State of New York. When the notes fell due in 1862,
they were not presented for payment, in consequence of the war of
the rebellion then existing, but they were presented in 1866, a
certain time after the close of the war, and were dishonored.
Notice of the dishonor was then given to the endorser.
The plaintiff alleged in his declaration, as an excuse for the
nonpresentation of the notes at the time when they fell due, the
existence of the civil war and the residence of the holder in the
State of New York and that of the maker and endorser in Alabama,
regions then at war with each other, and alleged further that he
had presented the notes and given notice of the dishonor within a
reasonable time after the termination of the war, specifying the
date of the presentation &c. The defendant set up that the date
named
Page 84 U. S. 413
was not reasonable in point of time. And evidence was given as
to when the war ended and intercourse was resumed, when the notes
could have been presented, and when they were in fact
presented.
A portion of the evidence (descriptive of the course of business
out of which the claim arose) was derived from a deposition of the
plaintiff, taken
de bene esse, which before the trial the
defendant had moved to suppress. The court on this motion refused
to suppress it. An exception was taken to this refusal, but on the
trial it was read without objection.
It appeared in evidence that the maker of the notes, and Ray,
the endorser, were partners in a business which was actively
conducted by Ray; that after the notes were endorsed to the
plaintiff and before their maturity, Ray had in his hands of the
profits of the business, belonging to the maker, a sum larger than
the amount of the two notes, that this sum remained in his hands
until after the notes matured, and that he was authorized to apply
it to their payment, at their maturity. But it also appeared that
he could not find the notes at their maturity, nor until the spring
of 1866, at which time, as already said, they were presented to the
maker for payment, and that before they were thus presented, the
maker had instructed the defendant to apply the sum in his hands to
the payment of other debts, which the defendant had done.
The court charged:
"If there were no evidence in this case that the maker of the
notes in suit had provided the endorser with funds to discharge
them at maturity, then the question whether the notes were legally
presented for payment and the question whether legal notice of
protest was given to the endorser would have had to be submitted to
the jury. The evidence on this point is that Ray was provided by
the maker of the notes with the means of indemnifying himself
against his endorsement. He need not have parted with these means
until the notes were paid and in his possession. He chose to do so,
however, and cannot now complain of the want of demand on the maker
or notice of
Page 84 U. S. 414
protest to himself. I therefore direct your verdict for the
plaintiff for $1,124.50, with interest thereon from the 4th March,
1862, and for $1,124.50, with interest thereon from the 4th
November, 1862."
To this charge the defendant excepted, and offered to state to
the court the grounds of his exceptions; but the court refused any
such statement.
MR. JUSTICE STRONG delivered the opinion of the Court.
Whether timely presentment of the notes was made to the maker,
and whether due notice of their dishonor was given to the defendant
who had endorsed them, are questions which were not submitted to
the jury. The court below appears to have been of opinion, that in
view of the facts given in evidence, neither demand of payment nor
notice to the endorser was necessary to justify a recovery against
him. The jury was instructed in substance that even if there was no
legal demand and notice, the want of them was sufficiently excused,
and that the plaintiff was entitled to a verdict for the amount of
the notes with interest from the dates when, according to their
terms, they fell due. It is necessary, therefore, to inquire
whether the evidence, as exhibited in the bill of exceptions,
warranted such instructions.
It is undoubtedly the law that though the plaintiff was relieved
by the war from obligation to make demand upon the maker of the
notes when they came to maturity, it was necessary for him, in
order to charge the endorser, to make such demand within a
reasonable time after it became possible --
Page 84 U. S. 415
that is, after the close of the war -- unless he was excused by
the fact that the endorser had sufficient funds of the maker in
hand, which he had received in the course of a current business and
which he had authority to apply to the payment of the notes at
their maturity. And whether that alone constituted a sufficient
excuse is the real question now.
An endorser of a promissory note is only secondarily liable. His
responsibility is, in its nature, a contingent one, and ordinarily
performance of the condition to make demand of the maker and give
notice of his default in due time is an essential part of the title
of one who asserts an endorser's liability. It has often been
regretted that courts have dispensed with the performance of that
condition for any cause. Still, the principal reason for the
requirement of demand and notice is, that the endorser, if looked
to for payment, may have the earliest opportunity to take steps for
his own protection. Hence, it has been said, in some cases, that
when by no possibility a failure to make demand and give notice
could have injured him, or rather, when they could by no
possibility have enabled him to protect himself, proof of demand
and notice are not necessary. It must be admitted there had been
much inconsistency in the decisions respecting the application of
this rule. In some, it has been held that if an endorser has taken
an indemnity from the maker, he is not entitled to notice of
default. But this is not sustained by sound reason, and the
best-considered cases assert the contrary doctrine. The indemnity
may prove insufficient. At all events, it is not inconsistent with
the existence of a remedy over against the maker, and the correct
rule, as stated by Bailey, J., in
Brown v. Maffey,
* is that every
endorser ought to have notice whenever he has a remedy over. All
the cases agree, however, that when, by arrangement between the
maker and the endorser, the latter has become the principal debtor,
and primarily liable, he may not insist upon notice. Presentment to
the maker followed
Page 84 U. S. 416
by notice to himself can be of no service to him, for he has no
remedy over. And he becomes the principal debtor when, either
before or at the maturity of the note, he is supplied by the maker
with sufficient funds for the purpose of paying it. Receiving the
funds for such an avowed purpose, he assumes an obligation to take
up the note; and, as has been said, he may be regarded as an agent
who has undertaken to pay, and who therefore cannot be disappointed
if his principal, trusting to his obligation, takes no further
steps for the payment.
In the present case, the evidence does not necessarily establish
that the funds which the endorser held were placed in his hands for
the purpose of paying the notes. They were derived from the profits
of the business, in conducting which he was a partner of the maker,
and he was merely authorized to apply them to the payment of the
notes, at their maturity. Whether this proved the existence of an
obligation assumed by him to take them up, or in other words,
whether, as between him and the maker, he thus became the primary
debtor, is a question which the court could not correctly answer in
the affirmative as a conclusion of law. If it did establish such an
obligation, absence of demand and notice were immaterial, and the
plaintiff was entitled to a verdict. But if it did not, if the
endorser, as between himself and the maker, had not become the
principal debtor, if the authority to pay the notes out of the fund
in his hands was only an arrangement for his indemnity, we think he
was at liberty to pay them to the maker at any time after the
maturity of the notes, and before he had any notice that they
remained unpaid. In such a case, his liability to the holder
remained contingent, and consequently, unless there was a legal
demand and notice, he cannot be charged. It follows, that the judge
of the court below erred in directing a verdict for the plaintiff.
The most that could properly be claimed by the holder of the notes,
was that the evidence should be submitted to the jury to find
whether it proved that the defendant had become the principal
debtor by arrangement between him and the maker, with
instructions
Page 84 U. S. 417
that if it did, the plaintiff was entitled to recover, and that
if it did not, the endorser could not be held liable without proof
of reasonable demand upon the maker and notice.
Nothing more need be said respecting the charge given to the
jury. But as the case goes back for another trial, it is proper to
notice an exception taken to the refusal of the court to suppress
the deposition of the plaintiff. The deposition had been taken
de bene esse, and before the trial the defendant moved to
suppress it. But when it was offered at the trial, it was read
without objection, and without exception. It may be that had it
been objected to then, it should not have been received. But after
having permitted it to be read at the trial without opposition, we
think it cannot be objected now that the court received it.
Judgment reversed and a new trial ordered.
* 15 East 222.
