Bank Of Richland v. Nicholson

• Decision Date: 13 July 1904
• Citation: 120 Ga. 622,48 S.E. 240
• Parties: BANK OF RICHLAND v. NICHOLSON.
• Court: Georgia Supreme Court

48 S.E. 240

120 Ga. 622

BANK OF RICHLANDv. NICHOLSON.

Supreme Court of Georgia.

July 13, 1904.

domestic bills—dishonor—notice—discharge op drawer.

1. In an action by the holder against the drawer of a domestic bill of exchange which has been discounted at a bank it is not necessary, in order to charge the defendant, that it should appear that notice of dishonor was given to the Brawer.

2. In such a suit, evidence showing the drawing of the bill and the failure of the drawee to accept, or a failure on the part of the acceptor to pay according to the tenor of the bill, makes a prima facie case, and any matter relied upon to discharge the drawer must be set up by way of defense.

3. The contract of the drawer of a domestic bill of exchange being in the nature of a contract of suretyship, he is relieved from liability under the same circumstances in which a surety would be ordinarily relieved, except that the release of the drawer is only to the extent of the injury sustained.

4. While the mere failure of the holder of a Jomestic bill of exchange to give the drawer notice that the same has been dishonored will not discharge him, if statements are made by the holder to the drawer to the effect that the bill has been paid, which statements lull the irawer into security, and as a consequence thereof injury results to him by reason of the depreciation in value of property pledged to secure the payment of the bill, the drawer will be discharged to the extent of the injury thus sustained.

5. Some portions of the charge which were excepted to were not in accord with the principles above stated.

(Syllabus by the Court.)

Error from Superior Court, Stewart County; Z. A. Littlejohn, Judge.

Action by the Bank of Richland against D. W. Nicholson. Judgment for defendant, ind plaintiff brings error. Reversed.

E. A. Hawkins, for plaintiff in error.

J. H. Lumpkin and J. B. Hudson, for defendant in error.

COBB, J. This was an action by the payee of an inland bill of exchange against the irawer. The defense was that the drawerhad not been given notice of dishonor within a reasonable time after the refusal of the drawee to pay; that he had been notified by the holder that the bill bad been paid; that he relied upon this statement, and was thus lulled into security, as a consequence of which he sustained damage by reason of the fall in the market price of cotton which was held as a pledge to secure the payment of the bill; the amount of the damage being in excess of the balance claimed to be due on the bill. The jury returned a verdict for the defendant, and error is assigned upon the refusal of the court to grant a motion for a new trial filed by the plaintiff. The motion contains, among others, assignments of error upon extracts from the judge's charge and upon a ruling allowing the defendant to open and conclude; it being contended that the admission made by the defendant for this purpose was insufficient, in that he failed to admit that he had received notice of dishonor in due time after the bill was dishonored.

1. Under the law merchant drawers and indorsers of both inland and foreign bills of exchange were entitled to notice of dishonor. Protest was permissible on inland bills, but required on foreign bills. 7 Cyc. 1064, 1068, 1052; 4 Am. & Eng. Enc. Law, 397, 399; Broom's Com. 459, 477-478; Story on Bills of Ex. §§ 307, 281; Norton on Bills & Notes, pp. 272, 281. In 1826 (Acts 1826, p. 38) the practice which originated under the law merchant of making demand for payment upon the makers of promissory notes and other instruments and giving notice of nonpayment within a reasonable time to the indorsers was in this state abolished by statute as to all instruments within the law merchant except promissory notes given for the purpose of negotiation, or intended to be negotiated, or left for collection at a chartered bank. Cobb's Dig. p. 594, § 437. In Hartridge v. Wesson, 4 Ga. 101, it was distinctly held that that portion of the act of 1826 which abolished the necessity for notice to indorsers was applicable in the case of an indorser of a foreign bill of exchange, but the question "whether bills of exchange payable at a chartered bank stand on the same footing as promissory notes so made payable" was distinctly left open. And in Smith v. Barnes, 24 Ga. 445, the statement was made that it was still an open question. In Davies v. Byrne, 10 Ga. 329, it was held that in a suit by an indorser against the drawer of a foreign bill of exchange it was necessary to aver notice of dishonor of the bill, or that which the plaintiff relies upon as an excuse for not giving notice, and also to aver protest for nonpayment, or an excuse for not protesting. Judge Nisbet in the opinion says: "But it was indispensable that the plaintiff plead and show a protest for nonpayment, or an excuse which would be good in law, why it was not protested. These are familiar rules of the law merchant, and I shall not dwell upon them." No reference was made to the act of 1826. If drawers are within the terms of that act, the decision in 10 Ga. cannot be reconciled with that in 4 Ga., but, if the act is limited in its operation to strict indorsers, then the two decisions are perfectly consistent with each other. In Patten v. Newell, 30 Ga. 271, 274, where an inland bill of exchange had been drawn by a person who had no funds in the hands of the drawee, Judge Lyon says: "The controversy was between the holder and the drawer, and as between them the drawer is not entitled to notice of nonacceptance or of nonpayment, whether the paper was a 'bank transaction' or not, unless the drawer has sustained some injury in consequence of a failure to demand payment at a proper time." The Code of 1803 provided that indorsers of both bills of exchange and promissory notes should be given notice of nonacceptance or nonpayment and of protest within a reasonable time, or they would be discharged in all cases where the bill or note was given for the purpose of negotiation, or intended to be negotiated, at a chartered bank, but that in no other case, and upon no other bill or note, was notice or protest necessary. Code 1803, §§ 27, 31. This section was amended in 1876 (Acts 1876, p. 18) by distinctly providing that it should not be necessary to protest in order to bind indorsers, except when the paper was payable on its face, or discounted, or left for collection at a bank or banker's office. See Civ. Code, § 3688. In Holmes v. Pratt 34 Ga. 558, it was held that demand and notice were not necessary to charge the drawer of a foreign bill of exchange. While there is an intimation that demand and notice would be necessary if the bill had been payable or intended to be negotiated at a chartered bank, there was no direct ruling to this effect. In Hall v. Davis, 41 Ga. 614, which was a suit by the holder against the drawer of a foreign bill of exchange, it was held that notice of nonpayment to the drawer was a condition precedent to his liability. This case is in line with Davies v. Byrne. In the opinion Mr. Chief Justice Lochrane distinctly states that the act of 1826, as contained in the Code, applies only to indorsers, and does not alter, repeal, or annul the well-established principles of the law governing the liability of drawers and their rights with reference to notice of dishonor; in other words, that as to this matter the law merchant controls. This decision seems to be in conflict with the ruling in Holmes v. Pratt, and, if the two decisions are irreconcilable, the earlier decision would control. In Gilbert v. Seymour, 44 Ga. 63, the defendants were both drawers and indorsers of a domestic bill of exchange, not a bank paper, and it was held that under the Code they were not entitled to notice as indorsers, and that, as they were bound as indorsers...