Deal v. Atlantic Coast Line R. Co.

• Decision Date: 25 June 1932
• Docket Number: 4 Div. 653.
• Citation: 225 Ala. 533,144 So. 81
• Parties: DEAL v. ATLANTIC COAST LINE R. CO.
• Court: Alabama Supreme Court

144 So. 81

225 Ala. 533

DEAL v. ATLANTIC COAST LINE R. CO.

4 Div. 653.

Supreme Court of Alabama

June 25, 1932

Rehearing Granted Nov. 3, 1932.

Appeal from Circuit Court, Coffee County; W. L. Parks, Judge.

Action on check by the Atlantic Coast Line Railroad Company against J. J. Deal. From a judgment for plaintiff, defendant appeals. Transferred from Court of Appeals.

Affirmed on rehearing.

P. B Traweek, of Elba, for appellant.

A. H Arrington, of Montgomery, for appellee.

KNIGHT J.

Suit on check by payee against drawer. The Code furnishes no form for such a suit. A check is, in every legal sense, a bill of exchange. As stated in the case of Atwood v. Benson, 215 Ala. 72, 109 So. 361: "There is no form prescribed for suit by the payee against the maker or drawer of a check. In some respects the action is more analogous to a suit on a note or bond by the payee against the maker than to an action by an indorsee of a bill of exchange. The general rule is everywhere recognized that payment is an affirmative defense."

The check imports a consideration, which, however, may be impeached by plea. Code, § 7662. There is nothing averred in the complaint to change the rule that the check imports a consideration, and therefore the defense of want of consideration could only be raised by plea. Likewise a check is a contract within itself, and imports an obligation or engagement on the part of the drawer to pay the same, if, on due presentation to the bank, payment is refused.

The complaint avers that the check sued on was duly presented and payment refused. The complaint was sufficient, and not open to any ground of demurrer interposed to it, unless it be that notice of non-payment was not given the drawer, and this we will presently consider. Atwood v. Benson, supra; Dowling et al. v. Parker, 221 Ala. 63, 127 So. 813; Martin v. Foster, 83 Ala. 213, 3 So. 422; Bolling v McKenzie, 89 Ala. 470, 7 So. 658.

Was it incumbent upon the payee to aver that notice of the dishonor was given in a reasonable time to the drawer? There is a contrariety of holding on this question, but whether failure to give notice of the dishonor of the check would penalize the payee to the extent of discharging the drawer from all liability on the instrument, or only to discharge him from liability to the extent of the loss occasioned by this failure, must be determined by a proper construction and interpretation of the provisions of the Negotiable Instrument Law now found in chapter 321 of the Code (section 9029 et seq.), and the rules of the Law Merchant, which are by express provisions of the statute made applicable in cases not provided for in the Negotiable Instrument Law.

Section 9114 of the Code provides: "Notice of dishonor; to whom given.-Except as herein otherwise provided, when a negotiable instrument has been dishonored by nonacceptance or nonpayment, notice of dishonor must be given to the drawer and to each indorser, and any drawer or indorser to whom such notice is not given is discharged."

Section 9134 of the Code provides:

"Notice to drawer when not required.-Notice of dishonor is not required to be given to the drawer in either of the following cases:

"(1) Where the drawer and the drawee are the same person.

"(2) Where the drawee is a fictitious person, or a person not having capacity to contract.

"(3) Where the drawer is the person to whom the instrument is presented for payment.

"(4) Where the drawer has no right to expect or require that the drawee or acceptor will honor the instrument.

"(5) Where the drawer has countermanded payment."

Section 9203 of the Code provides: "A check is a bill of exchange drawn on a bank payable on demand. Except as herein otherwise provided, the provisions of this chapter applicable to a bill of exchange payable on demand apply to a check."

Section 9204 of the Code provides: "A check must be presented for payment within a reasonable time after its issue, or the drawer will be discharged from liability thereon to the extent of the loss caused by the delay."

By section 9214 of the Code it is provided: "In any case not provided for in this chapter, the rules of law merchant shall govern."

These several provisions of the Negotiable Instrument Law stand in pari materia, and must be so construed as to give each a field of operation, to effectuate the legislative purpose.

But for section 9204 a literal interpretation of sections 9114 and 9203 would lead to the conclusion that failure to give notice of dishonor would discharge the drawer.

By providing specifically for checks, and the penalty exacted for the failure to present the same for payment within a reasonable time, it seems clear that it was the legislative purpose to withdraw this class of bills of exchange from the category of negotiable instruments dealt with under section 9114; and we are thus remitted to section 9204 to ascertain the penalty to be imposed upon a holder or payee who fails to make presentation within a reasonable time, and to the law merchant, in virtue of section 9214 of the Code, as to the penalty for the payee's failure to give notice of the dishonor within a reasonable time. We say the law merchant because, while section 9204 fixes the penalty to be visited upon the payee for failing to present the check within a reasonable time, this section omits to provide for the failure to give notice of the dishonor, and section 9214 provides that, in any case not provided for in the Negotiable Instrument Law, the rules of the law merchant shall govern.

Under section 230 of Bigelow on Bills and Checks, which discusses the subject of "Liability of drawer of checks, and notice of dishonor," we find the following note: "But as the purpose of notice is to enable the drawer to protect his interest when his check has been dishonored, and since presentment may be made, and hence the dishonor may occur, at any time within the statute of limitations (say, five years) subject only to the drawer's right to recoup his actual loss, the importance of notice seems too slight for the statutory penalty of complete discharge for its omission. So unreasonable an interpretation is to be avoided if possible. Presentment and giving of notice are so closely connected, in purpose and performance, that, in the light of the rule of Law Merchant, and of Negotiable Instrument Law, § 186, discharging the drawer of a check only to the extent of his loss in case of non-presentment, the courts might well conclude that section 89 (our section 9114) requiring notice to the drawer was meant to apply to the drawer of a bill of exchange only; and that a literal interpretation of section 89 as applicable to the drawer of a check is not within the meaning and spirit of the two sections read together. See Judge Brewster's comment, Brannon, Negotiable Instrument Law (3d Ed.) ubi supra. There is manifestly no sound reason for changing the former rule. The case should be treated as casus omissus, and governed by the unwritten rule, under section 196. *** It is equally clear that if notice be required, it is notice of 'dishonor'; and dishonor cannot occur until presentment made." Negotiable Instrument Law, § 89.

Judge Freeman, in his excellent notes in the case of Holmes & Sons v. Briggs & Drum, 17 Am. St. Rep. 804, says: "As a general rule, the drawer or indorser of a check is not discharged from liability by the holder's omission, delay, or laches in presenting it for payment within a reasonable time, and in not giving notice of dishonor or nonpayment, unless such drawer or indorser has suffered some actual loss or damage through the failure of the bank or otherwise, and then he is only discharged pro tanto." Stewart v. Smith, 17 Ohio St. 82; Henshaw v. Root, 60 Ind. 220; Compton v. Gilman, 19 W.Va. 312, 42 Am. Rep. 776; Cox v. Boone, 8 W. Va. 500, 23 Am. Rep. 627; Cogswell v. Rockingham, etc., Bank, 59 N.H. 43; Bell v. Alexander, 21 Grat. (Va.) 1; Cork v. Bacon, 45 Wis. 192, 30 Am. Rep. 712; Pack v. Thomas, 13 Smedes & M. (Miss.) 11, 51 Am. Dec. 135; Allen v. Kramer, 2 Ill.App. 205; Griffin v. kemp, 46 Ind. 172; Smith v. Jones, 2 Bush (Ky.) 103; Purcell v. Allemong, 22 Grat. (Va.) 739; Morrison v. McCartney, 30 Mo. 183.

It is said in Daniel on Negotiable Instruments (5th Ed.) § 1587: "But there is an important distinction as to the extent of the legal consequence of neglect and delay in presentment and notice, between bills and checks. It is true that the indorsers of such instruments stand on the same footing in reference to the effect of delay, or failure in making presentment, or giving notice. They are absolutely and entirely discharged, if presentment be not made within a reasonable time, and due notice given. But the drawer of a bill stands on a different footing from the drawer of a check. In the case of a bill of exchange, negligence, in respect to presentment or notice, absolutely discharges the drawer. But the drawer of a check is regarded as the principal debtor, and the check purports to be made upon a fund deposited to meet it. And the negligence of the holder in not making due presentment, or in not giving him notice of dishonor, does not absolutely discharge him from liability, unless he has suffered some loss or injury from such negligence, and then only to the extent of such loss or injury. He is at most entitled only to such presentment and notice as will save him from loss. Were it otherwise, the drawer would profit by a neglect which could do him no harm."

In Allen v. Kramer, 2 Ill.App. 205, the court, in accord with the foregoing from Daniel, says: "The law is well settled that want of due presentment or notice of dishonor of a check does not discharge the drawer, unless he has suffered some loss or injury thereby." In...