U.S. Supreme Court
Rhett v. Poe, 43 U.S. 2 How. 457 457 (1844)
Rhett v. Poe
43 U.S. (2 How.) 457
Where the drawer of a bill has no right to expect the payment of it by the acceptor -- where, for instance, the drawer has withdrawn or intercepted funds which were destined to meet the bill, or its payment was dependent upon conditions which he must have known he had not performed -- such drawer cannot claim to be entitled to notice of the nonpayment of the bill.
It becomes a question of law whether due diligence has or has not been used whenever the facts are ascertained, and therefore there is no error in the direction of a court to the jury that they should infer due diligence from certain facts where those facts, if found by the jury, amounted in the opinion of the court to due diligence.
If the drawer and acceptor are either general partners or special partners in the adventure of which the bill constitutes a part, notice of the dishonor of the bill need not be given to the drawer. chanrobles.com-red
A court is not bound to grant an instruction prayed for where it is merely a recital of general or abstract principles, and not accompanied by or founded upon a statement of the testimony.
The strictness of the rule requiring notice between parties to a bill is much relaxed in cases of collateral security or of guarantee in a separate contract; the omission of such strict notice does not imply injury as a matter of course. The guarantor must prove that he has suffered damage by the neglect to make the demand on the maker and to give notice, and then he is discharged only to the extent of the damage sustained.
This suit was brought in the court below by Poe, the cashier of the bank, against Rhett as the endorser upon a note for $8,000 under the following circumstances:
Dixon Timberlake was a merchant who, it appeared from the evidence, had been for several years prior to 1837 in the habit of going from New York to the south during the cotton buying season and then returning to New York. In the winter of 1836-1837, he was at Augusta, in Georgia, with large letters of credit from various houses in New York, and also one from Benjamin R. Smith, then a merchant in Charleston, South Carolina. By the aid of these letters he acquired a credit at the Bank of Augusta and purchased considerable quantities of cotton and some bank and other stocks in the course of the season. Some of these purchases were upon the joint account of Smith and himself, but the evidence was contradictory as to the particular purchases thus made.
In February and March, 1837, Timberlake, being in Augusta, drew several bills upon Smith in Charleston which all became due in May. The whole amount of the bills thus due in May, was $21,500. A separate bill for $14,000 is not included amongst these, because it was paid.
This sum of $21,500 was divided into two classes, one class consisting of $8,000 and the other of $13,500.
It appeared by the evidence that Smith was to provide for the first class of $8,000, and Timberlake for the remaining $13,500.
In order to carry out the arrangement respecting the first class, a bill was discounted drawn by Timberlake upon Smith for $8,000, and the note which was the subject of the present suit offered and accepted as collateral security. The note was as follows: chanrobles.com-red
"$8,000 Charleston, May 9, 1837"
"Sixty days after date, I promise to pay to W. E. Haskell or order eight thousand dollars for value received."
"BENJAMIN R. SMITH"
"Endorsed, W. E. HASKELL, per attorney B. R. SMITH"
"R. BARNWELL SMITH, per attorney B. R. SMITH"
R. Barnwell Smith, whose name it was admitted was placed upon the note by proper authority, was the same person as R. Barnwell Rhett, his name having been changed after the time of the endorsement.
Timberlake having made no provisions for the other class of bills, amounting to $13,500, Smith was unable to take them up, and they were protested.
On 2 June, Smith made an assignment of his property for the benefit of his creditors in a certain order which it is unnecessary to state, and it was further proved that at and before the maturity of the note on which the action was brought, Benjamin R. Smith was insolvent.
On 11 July, both the bill drawn by Timberlake upon Smith for $8,000, and the note in question for $8,000, became due, but neither being paid, the note was regularly protested and certain proceedings had upon the bill which constitute the defense in this case, where suit is brought upon the note.
It was given in evidence on the part of the plaintiff, in order to establish the regularity of the proceedings with regard to the bill, that the notary demanded payment at the store of Smith, the acceptor, and his clerk (Smith being absent) replied, "there were no funds for paying the same;" that the notary thereupon protested the bill for nonpayment and enclosed the notice thereof for Timberlake, the drawer, in a letter sent by mail, addressed to Robert F. Poe, the cashier of the Bank of Augusta, as was the custom in similar cases; that the notary, at the time when he protested the draft, did not know where Timberlake was to be found; that he had heard that he had resided and done business at Augusta, but was told that he had left that place. That he had made inquiries for Timberlake, and was then told that he had left Augusta, and it was not known where he had gone to. That the discount clerk of the Bank of Augusta had it in charge, as a part of his business, to make diligent search for the parties upon whom notices were to be served; that such notices were served upon them, personally, by said clerk if they were in Augusta, chanrobles.com-red
and transmitted to them through the post office if they were at a distance; that said clerk was in Augusta on 11 July, 1837, and believes the notice would have been served on Timberlake if he had been in Augusta; that said clerk has searched for the notice to Timberlake and cannot find it; that Timberlake lived in a boarding house whilst in Augusta; that he was insolvent when said bill became due. It was further testified by the postmaster and his assistant that two or more letters were received at the post office for Timberlake during the summer after he had left Augusta, which were not advertised; that he leased a box at the post office for a time which did not expire until 1 October, 1837, into which his letters were placed; that such letters could not have been forwarded to the general post office because they were not advertised; that Timberlake left Augusta on 30 June, 1837, in the public stage, and that he left no agent in Augusta.
On the other hand it was given in evidence on the part of the defendant, upon the cross-examination of Timberlake himself in this case, that Timberlake left Augusta on 30 June, having requested the postmaster to forward his letters after him, and that he received several letters, forwarded from Augusta agreeably to his directions, but never received any letter or notice of the nonpayment of the bill.
The defense rested chiefly on the ground that proper diligence had not been used to give notice to the drawer of the dishonor of the bill, and that consequently the securities upon the note which was given collaterally were exonerated from its payment.
In the trial of the cause in the court below, two separate sets of instructions were prayed for on behalf of Rhett, the defendant. The first set consisted of two prayers, which were refused by the court and were as follows:
"1st. That by omission to inquire for the residence of Timberlake or to send notice after him, the plaintiff has lost his right of action against him as drawer of the bill for $8,000."
"2d. That if the jury find that the note was given as collateral security for the bill drawn by Timberlake and that Timberlake is discharged, then the plaintiff cannot recover against the defendant on the note sued upon."
The second set of instructions consisted of five prayers which the court was asked to grant, but the court refused to do so, with the exception of the fourth, and gave its own instructions to the jury. The prayers and instructions given are as follows: chanrobles.com-red
And the defendant, by his counsel, before the jury retired from the bar, further prayed the court to instruct the jury as follows:
"1st. The parties having shown that Timberlake had drawn upon Smith four bills, amounting in all to $21,500, which Smith had accepted, and had, at the time of the acceptance of the said bills, $10,000 in hand, received of Timberlake, to meet those bills, the defendant prayed the court to instruct the jury that if the evidence was believed, then Timberlake had funds in the hands of Smith and was entitled to notice."
"2d. The defendant having shown that Timberlake resided in New York, and came habitually, between the months of October and January, to Augusta and resided in Augusta during the winter and spring, and that Timberlake left Augusta on 30 June, 1837, and that the notice of nonpayment of the draft was forwarded by the notary in Charleston, to the plaintiff, on 11 July, 1837, and nothing was shown to prove that the plaintiff had made any inquiry after Timberlake, or endeavored to give him notice."
The defendant prayed the court to instruct the jury that the plaintiff had not used due diligence to give the drawer notice.
"3d. And inasmuch as evidence had been given that the bills drawn by Timberlake on Smith were drawn for purchases of cotton or stock on the joint account of Smith and Timberlake, and Timberlake had diverted the property purchased on joint account to his own use, and was therefore bound to provide for the bills which fell due in May to the amount of $13,500, and had not done so; the defendant prayed the court to instruct the jury that the default of Timberlake to take up the bills for $13,500 did not excuse the want of notice to make him liable on the bill for $8,000."
"4th. And the defendant prayed the court to instruct the jury that if Timberlake had effects at any time between the drawing and the maturity of the said bill, in the hands of Smith, he was entitled to notice."
"5th. The defendant prayed the court to instruct the jury that the insolvency of the acceptor and drawer before the maturity of the bill did not excuse the holder from giving notice of nonpayment to the drawer."
And the court instructed the jury as follows:
"On the first instruction asked, the court instructed the jury that if they believe from the evidence that Timberlake had in the hands of Smith, when Smith accepted the bill for $8,000, $10,000, that Timberlake was entitled
to notice of the dishonor of the bill from the holder. But if the jury also believed from the evidence that the $10,000 in the hands of Smith was a fund raised upon Smith's letter of credit to Timberlake, and was to be applied to the payment of purchases on joint account, and had been so applied, and that there was an arrangement afterwards between Timberlake and Smith in respect to all the bills drawn by Timberlake, amounting to $21,500; that Timberlake was to put Smith in funds to pay bills to the amount of $13,500, of the $21,500, which were to become due before the bill of $8,000 became due, and that on Timberlake's doing so, Smith was to pay the $8,000 bill; and that Timberlake did not put Smith in funds to pay the $13,500, and that the same were protested, of which Timberlake had notice; then that Timberlake had no right to notice of the nonpayment of the $8,000 bill from the holder."
On the second instruction asked, the court instructed the jury
"That if they believe from the evidence that Timberlake resided in New York, and was a sojourner in Augusta from time to time, as stated in the instruction asked, that then, as drawer of the bill, he was entitled to notice of its dishonor; but if the jury believe from the evidence, though he may have resided in New York, that he had made Augusta his residence since the fall of 1834 or 1835, and that he had removed from Augusta, and out of the State of Georgia, after the bill for $8,000 was drawn, and before its maturity, that then due diligence had been used to give him notice of the dishonor of the bill."
On the third instruction asked, the court instructed the jury
"That if they believe from the evidence that the bills drawn by Timberlake upon Smith were drawn for purchases of cotton or stock on the joint account of Smith and Timberlake, and that Timberlake had diverted the property purchased on joint account to his own use, and that after promising Smith, the acceptor, to take up the bills to the amount of $13,500, he had failed to do so, and had not supplied Smith with money to take up the bills for $13,500, after the same were dishonored, up to the time when the $8,000 draft became due, and that there was an arrangement between Timberlake and Smith, after the $8,000 bill was accepted, that Timberlake was to put Smith in funds to take up the drafts for $13,500, which had been dishonored, and did not do so, that Timberlake was not entitled to notice of the dishonor of the bill for $8,000."
To the fourth instruction asked, the court instructed the jury
they believe from the evidence, that Timberlake had effects in the hands of Smith at any time between the drawing of the bill, and the maturity of the said bill, that he was, as drawer, entitled to notice."
To the fifth instruction asked, the court instructed the jury that the insolvency of the drawer and the acceptor, before the maturity of the bill, did not excuse the holder of the bill from giving notice of nonpayment to the drawer. But the court further instructed the jury that if the insolvency of the drawer and acceptor was known to each other, and that this bill was drawn to pay for a purchase on joint account, or a transaction in which they were partners, and that the property so purchased had been diverted by the drawer to his own use, and that the payment of all the bills had been the subject of private arrangement between the acceptor and the drawer, that then the holder was excused from giving notice of the nonpayment of the bill for $8,000.
"Whereupon, the said counsel, on behalf of the said defendant, before the jury retired from the bar, excepted to the aforesaid opinion and charge of the court, on the first, second, third, and fifth instructions moved for, and now excepts, and prays the court to sign and seal this bill of exceptions, which is done accordingly, this nineteenth day of April, in the year eighteen hundred and forty-one."
"JAMES M. WAYNE [L.S.]"
"R. B. GILCHRIST [L. S.]"
The jury found a verdict for the plaintiff for $8,000, with interest from the 11th July, 1837.
To review all these prayers and instructions, the writ of error was brought. chanrobles.com-red