Lewis v. Planters' Bank

delivered the opinion of the court.

As a general rule, when no place of payment is specified in a note or bill, a personal demand, or something equivalent, must be made of the maker or acceptor, in order to hold the endorser liable. Courts, however, have gone great lengths in deciding that this personal demand is rendered unnecessary by the particular customs of banks, at which the paper may be negotiated or deposited for collection; not on the ground that the custom of a bank changes the law, but that he who knows of the existence of such custom, and endorses or negotiates paper at the bank when it exists, impliedly agrees to be bound by it, and thereby waives the conditions imposed by law. 4 Mass Rep. 251; 1 Peters, 32-3-4. When the custom of the banks is known to the contracting parties, *272no injury is likely to result; and when a note or bill is made for the purpose of negotiating in bank, it is but right that the parties should ll)e bound by such customs as prevail in the bank, whether they know of their existence or not, as they may be presumed to have agreed to be governed by bank usages. Thus far the authorities go; but, in all the adjudications on this subject, I find none that bear out the instructions given to the full extent, in direct terms; and certainly they have gone far enough in substituting customs for the law of the contract. After a careful review of many of the leading cases, I • do not think the reasoning in them can be extended so far as to justify the instruction. I apprehend when a note is not made payable in bank, and the parties have no knowledge that it was pláced there for collection, that a demand at the counter would not be sufficient to charge an endorser who was ignorant of the custom' of the bank in making a demand.

In the case of Jones v. Fales, 4 Mass. Rep. 251, the reason for letting in bank usage is as clearly given as it is in any of the cases. ,It is said that the endorser is riot liable unless the condition upon which the law implies that he agreed to pay, be performed; but being a condition implied by law for the benefit of the endorser, like all other conditions, it may be waived by him for whose benefit it was made.' The evidence of the general custom of the banks in Boston in giving notice on notes payable with grace, and lodged in bank for collection, and that the defendant was conversant of the usage, and had conformed to it in other instances, was held to be proper evidence of the defendant’s agreement or waiver, to be submitted to á jury. ' The court did not intimate an opinion that the endorser would be ‘liable without a knowledge of the custom. The principle'established by this decision is, that an endorser may either expressly or impliedly waive the personal demand required by law.' •

The same principle is reiterated in 6 Mass. Rep. 450. In that case the defendants knew’and had conformed to the usage. All the subsequent cases in Massachusetts, so far as I have examined them, are founded on this principle, but none of them have gone beyond it.

In the case of Mills v. The Bank of the United States, the note .was -made payable in bank!, and the reasoning adopted in that *273case cannot be applied in this. The court said “ that when a note is made payable or negotiable at a bank, whose invariable usage it is to demand payment, and give notice on the fourth day of grace, the parties are bound by that usage, whether they have a personal knowledge of it or not. In the case of such a note, the parties are presumed by implication to agree to be governed by the usage of the bank at which they have chosen to make the security itself negotiable.” This does not vary the principle contained in the Massachusetts cases, but on the contrary maintains it. The liability of the endorser, is placed on the ground of an agreement to be governed by the usage of the bank, which agreement is implied or presumed, from the act of making the note payable in bank, where the usage prevails. The making of a note payable in bank is in itself evidence of the agreement, but, there is nothing in the case last cited to justify the position that when a note is not payable in bank and the endorser has no knowledge of the custom that he would be bound by it.

The case of the Bank of Washington v. Triplet and Neale, 1 Peters, 25, goes a step further, but evidently maintains the same principle, vary in nothing but as to the evidence of the agreement. The bill sued on, was not made payable in bank, nor there negotiated, but placed in the Bank of Washington for collection. The reasoning of the court shows on what ground the custom of the bank was sustained. Chief Justice Marshall said: “ If a promissory note were made in the city of Washington, payable to a person residing in the same place, though not purporting to be payable and negotiable in bank, it would very probably be placed in a bank for collection. It is a common practice, and the parties would contemplate such an event as probable, when the note was executed. The same reason seems to exist for applying the usage of the bank to such a note, as to one expressly made negotiable and payable in bank. Such notes are frequently discounted, and certainly the person who discounts them, or places them in bank for collection, stands in precisely the same relation to the bank, as respects its usage, as if the notes purported on their face to be negotiable in bank. The maker of negotiable paper in such a case, may fairly be presumed to be acquainted with the customary law which governs that paper at his place of residence.”. *274Nothing is said in the case, to dispense with a knowledge of the custom, or to hold an endorser without such knowledge liable. It only establishes a rule of evidence, and it is this, that he, who makes negotiable paper in a place where a particular usage exists in relation to such paper, is presumed to have contemplated the operation of such usage, when the paper was made. It presumes the knowledge of the party from his act. And this rule is predicated on the supposition that it is in the custom, of the place, to put all paper in bank for collection, whether it be payable there or not. The question here decided will not still apply to the case before .us, unless we undertake to decide that it is the practice, when the hill was made payable, to place such bills in bank for collection, and that, therefore, the parties may be presumed to have contracted in reference to that practice. This we cannot do. We cannot and do not know any thing of the practice in such eases. If such a one is followed, it ought to have been proved. If we are to speak of our knowledge of the practice, we can only say that in this country, it is not usual to place paper in bank for collection, which is neither, negotiated nor made payable there.

If I am right then in the position that the cases cited sustain these usages on the ground of an express or implied waiver or agreement of the parties to the contract, and that they turn mainly on what is evidence of the waiver or agreement, the charge of the court in the case before us cannot be sustained. The agreement presupposes an act or assent of the party agreeing. In this case, there was no express agreement, and the only question is, was there an implied one? An implied agreement, is one which is raised by operation of law, but still some act or assent of the party is presupposed, on which the law raises the inference. Can it be said, that the law will presume an agreement in this case, that the endorser would waive his right to have a personal demand made, by submitting to the custom of a bank, of which custom he was wholly ignorant, and did not even know that the bill was placed in bank for collection; and when he could not anticipate that it would be placed there when it was made? Certainly there is nothing in the case from which the law will presume an agreement, and if he be liable at all, it cannot be on the ground of waiver, and the reasoning in the authorities must *275be regarded as having no just foundation. The contract of an endorser is conditional, that he will pay, if the maker does not, on demand made at maturity, and notice to the endorser of the non-payment. By law the demand must be persona], where no' place of payment is designated. Can it be, that any bank into whose hands paper may come, may evade this law, by pursuing their own particular customs, of which the endorser knows nothing, and thus destroy the condition of the contract? If so, the law has uselessly imposed the condition. The customs of banks would take the place of the law. The law requires a demand for the benefit of the endorser; it is wholly immaterial as to the maker or acceptor, whether it be made or not. It does not vary his liability. The endorser has a right to insist upon the performance of the conditions which the law has raised in his favor, and cannot be deprived of their benefit, without his assent, either expressly or impliedly given.

A singular feature in this case is, that neither the acceptor, nor endorser knew that the bill was in bank, and no custom is proved in regard to the negotiation of paper, from the existence of which they might conclude that it would be placed there. It is, therefore, a place of payment., made without the agency or consent, either directly or indirectly, of either of the parties, and in this particular, it goes far beyond any of the cases. All that appeared on this subject was, that the acceptor was acquainted with the custom of the bank; but there was nothing from which he was bound reasonably to infer that the bill would be placed in bank for collection. In this it differs also from those cases in which' the maker has been permitted by memorandum at the bottom, or in the margin of the note, to designate a place of payment, after the note has been made, as was done in the case of the Bank of America v. Woodworth, 18 Johns. Rep. 315.

The judgment must be reversed, the cause remanded, and a venire de novo awarded.