Commercial Nat. Bank Of Syracuse v. Zimmerman

• Decision Date: 15 May 1906
• Parties: COMMERCIAL NAT. BANK OF SYRACUSE v. ZIMMERMAN et al.
• Court: New York Court of Appeals Court of Appeals

185 N.Y. 210

77 N.E. 1020

COMMERCIAL NAT. BANK OF SYRACUSE

v.ZIMMERMAN et al.

Court of Appeals of New York.

May 15, 1906.

Appeal from Supreme Court, Appellate Division, Fourth Department.

Action by the Commercial National Bank of Syracuse against Martha E. Zimmerman, as administratrix of Joseph Zimmerman, and another. From a judgment of the Appellate Division (94 N. Y. Supp. 1141), affirming a judgment in favor of the administratrix, plaintiff appeals. Affirmed.

The plaintiff brought this action to foreclose a lien on certain bonds of a railroad company, which it had held as collateral security for the payment of a note of the defendant, the Syracuse Construction Company, indorsed by Joseph Zimmerman, and to recover a judgment for any deficiency, arising upon the sale of the bonds, against Zimmerman's estate. The note reads as follows. ‘$10,000. Syracuse, N. Y., Sept. 16, 1899. On demand after date we promise to pay to the order of Joseph Zimmerman ten thousand dollars at Commercial Bank. Value received with interest. Syracuse Construction Co., per J. S. Kaufmann, Treas.’ Upon the trial of the issue, which was had without a jury, the trial judge found, as the facts of the case, that the note was indorsed by Zimmerman, without consideration and for the accommodation of the maker; that on September 20, 1899, the plaintiff discounted the note for the maker, the defendant construction company, receiving the bonds of the railroad company as collateral security for its payment; that, in January, 1903, Zimmerman died interstate, and his widow, this defendant, was appointed his administratrix; that on April 9, 1903, the note was presented to the maker for payment and, payment being refused, was duly protested for nonpayment; that ‘said note was not presented within a reasonable time after it was issued and that said plaintiff did not demand the payment thereof, or give notice of the dishonor thereof, within a reasonable time.’ Upon these facts, he reached the legal conclusion that the plaintiff was entitled to enforce a lien upon the bonds by the sale thereof; but that, as the ‘presentment of said note was not made within a reasonable time after the discount,’ the indorser, Zimmerman, and his estate were released from all liability thereon. Upon the plaintiff's appeal from so much of the judgment thereupon entered, as adjudged that it was not entitled to judgment against the estate of the indorser for the deficiency upon a sale of the bonds, the Appellate Division, in the fourth department, by a unanimous vote, affirmed the judgment as rendered. The plaintiff now appeals to this court.

Edwin Nottingham, for appellant.

George W. O'Brien, for respondent.

GRAY, J. (after stating the facts).

The only question of importance, which this appeal presents, is of the correctness of the decision that the presentment of the note for payment had not been made by the plaintiff within a reasonable time. That must, necessarily, turn upon the effect of the enactment of the provisions of the negotiable instruments law of 1897. Laws 1897, p. 719, c. 612. Section 131, p. 736, of that law provides that, where the instrument ‘is payable on demand, presentment must be made within a reasonable time after its issue, except that in the case of a bill of exchange, presentment for payment will be sufficient if made within a reasonable time after the last negotiation thereof.’ By section 4, it provided that ‘in determining what is a ‘reasonable time,’ or an ‘unreasonable time,’ regard is to be had to the nature of the instrument, the usage of trade or business (if any) with respect to such instruments, and the facts of the particular case.' Prior to this legislative enactment, the decision of this court in Merritt v. Todd, 23 N. Y. 28, 80 Am. Dec. 243, was regarded as having settled the rule of law applicable to the determination of such cases. In that case, the note was payable on demand, with interest, and the question arose as to the continuance of the indorser's liability, where three years had intervened between the making and presentment for payment. Chief Judge Comstock, with the concurrence of the majority of the judges, undertook to resolve what he regarded as the existing uncertainty, as to the rule, which conflicting decisions had brought about, by referring the interpretation of the contract to the adoption of one of two principles. By the one principle, a promissory note, payable on demand with interest and indorsed, is to be regarded as a continuing security and no dishonor attaches until payment is required and refused. By the other, or opposing, rule the holder, if he wishes to charge the indorser, must make his demand of the maker without delay. Judge Comstock finds no intermediate ground to stand upon and holds ‘that questions of this kind ought to be determined according to one of the two rules which have been mentioned: in other words, that the demand may be made in due season at any time so as to charge the indorser, or else that he is discharged unless it be made with due diligence, in the general sense of the commercial law. Between these alternatives, we are to select the one which will best harmonize with the language of the contract and the intention of the parties. A demand note may be payable with or without interest. If the security be not on interest, it may be a fair exposition of the contract to hold that no time of credit is contemplated by the indorser, and that the demand should be made as quickly as the law will require upon a check or sight draft. * * * But * * * we think that a note payable on demand with interest is a continuing security, from which none of the parties are discharged until it is dishonored by an actual presentment and refusal to pay. * * * If the parties declare in the written instrument, which is the only evidence of their agreement, that the money shall be paid on call, with interest in the meantime, a productive investment of the sum for some period of time is plainly intended. What, then, is that period? The only answer which can be given is that it is indefinite or indeterminative,...