Grissom v. Commercial Nat. Bank

• Decision Date: 23 February 1889
• Citation: 10 S.W. 774,87 Tenn. 350
• Parties: GRISSOM v. COMMERCIAL NAT. BANK.
• Court: Tennessee Supreme Court

10 S.W. 774

87 Tenn. 350

GRISSOM v. COMMERCIAL NAT. BANK.

Supreme Court of Tennessee.

February 23, 1889

Appeal from chancery court, Davidson county; ANDREW ALLISON Chancellor.

Stokes Parks & Stokes, for appellant.

Champion & Head, for respondent.

FOLKES J.

This is a bill brought by complainant to recover of the defendant the sum of $1,000 claimed as a balance due after crediting the bank with all checks drawn against sundry deposits made therein by complainant as a customer of the bank.

The defendant interposes two defenses: It admits that between May 1, 1886, and July 27, 1887, the complainant made deposits with it in sundry sums aggregating $5,134.05; but says that it has paid out the same for and on account of complainant upon sundry checks, except as to $1,000, which it says was paid upon and in discharge of a note of complainant's for that amount, made and dated at Nashville, March 26, 1887, and payable 60 days after date to the order of J. D. Carter & Co., at the Commercial National Bank, Nashville, indorsed by J. D. Carter & Co., and by John F. Wheelis; the latter of whom, as the owner and holder thereof, placed the same in the Fourth National Bank of Nashville for collection. That on May 28th, the last day of grace, the note was by the Fourth National Bank presented for payment at the defendant's banking-house, where it was marked "good," by defendant, and was, on May 30th, paid by defendant to the Fourth National Bank, and the amount thereof charged up to complainant in the same manner as though it had been a check drawn by complainant. It claims that it was and is the custom of the banks in Nashville, where notes are made payable at a particular bank, to pay such notes, when the maker has sufficient funds to his credit for that purpose, without instructions, and to charge the same to the general account of the maker. It also insists that, independent of custom, it has the right to treat a note so made as the equivalent of a check, and as a direction, therefore, on the part of the maker, to pay same on his general account as a depositor. The chancellor found both defenses in favor of the bank, and dismissed the bill. Complainant has appealed, assigning errors.

We will consider, first, the matter of custom. The defendant introduces the testimony of the officers of four banks in the city of Nashville, who say that such a custom, with certain modifications and variations, prevails at their respective banks, and, so far as they know, at the banks in the city generally. But these witnesses are not agreed as to the manner of exercising the usage. Mr. Porterfield, of the defendant bank, says it is the custom with his bank to pay such notes, unless on their face they appear to have been given for land, in which event they are not paid. Mr. Williams, of the First National Bank, says that while the habit of his bank was to pay such notes, they did not pay land-notes, nor where there was some complication about them. Mr. Keith, of the Fourth National Bank, proves that it was the custom of his bank to pay such notes, and that he knows of no exception to the rule, although his bank may have made some. Mr. Jones, of the American National Bank, says that it is the custom with his bank to pay such notes, if given by mercantile men; but when given by men not so engaged, they ask for instructions, before paying; and that, immediately upon paying a note under the usage referred to, his bank always gave written notice to the depositor that such payment had been made. If the custom of this last bank as to giving notice had been followed by the defendant bank, it is probable that this suit would never have been brought, as the complainant would have had opportunity of protecting himself by recourse over on the parties for whom he was accommodation maker, as will appear later on. It is clearly proven that such a custom was not known to this complainant, who was a lumber-man, living in a small town in the state of Kentucky, 200 or 300 miles from Nashville. From what has already been stated as to the proof on this subject, it is clear that the defendant cannot justify its payment of the note in question upon the ground of custom. It is well settled that, to be binding, a custom must be general as to place, and not confined to any particular bank or banks. It must be certain, and uniform, and there must be a reasonable ground to suppose that the custom was known to both parties to the contract, as it is upon this supposition that the parties are presumed to have contracted with reference to it. Dabney v. Campbell, 9 Humph. 686; Saint v. Smith, 1 Cold. 52; Adams v. Otterback, 15 How. 545; 1 Morse, Banks, (Ed. 1888,) § 9.

Having failed, then, to show a right to pay the note upon the ground of a usage or custom binding upon this complainant, we are confronted with the proposition that, independent of usage, the bank at whose place of business a note is upon its face made payable, has the right to treat the note as a check, and pay same, and charge it up to the account of the maker, where such maker is a depositor of the bank. The question is presented for the first time in this state, although it has received the attention of text writers, and been passed upon by the courts of other states, where we find a conflict of opinion. Under such circumstances it is our duty to determine the question for ourselves, upon reason and principle, and with a due regard for considerations of public policy and convenience, provided that, in doing so, we do not place our state in antagonism to the current of authority in this country. We recognize the fact that it is of prime importance that the several states in this Union should, as far as may be, without doing violence to well-settled principles of state jurisprudence, endeavor to bring about and maintain as much certainty and uniformity of decision on questions of commercial law as can be accomplished. In response to this idea, we would, upon the question now before us, yield much of the strong conviction we entertain thereon in the endeavor to place ourselves in line with the current of authority, if a strong and steady current could be found, which would not threaten to engulf and destroy distinctions which have been long and well settled in this state.

While we must concede that the weight of text-book authority is in support of defendant's contention, we are unable to discover that the weight of judicial decision is in the same direction. Moreover, we are constrained to believe that the contrary view is more in harmony with well-settled adjudications in this state upon principles presenting analogous questions, and that the current of adjudged cases is certainly as strong in the same direction. Let us see, in the first place, what is the relation between depositor and banker. It is merely that of debtor and creditor, where the deposit is not a special one. The money deposited in the ordinary course of business is at once blended with the general funds of, and becomes the property of, the bank. The depositor has only a debt against the bank, payable on demand, upon the presentation and surrender of the draft or order addressed to and directing the bank in unequivocal terms to pay the amount of such draft to the person therein named, or to bearer. This order is commonly known in commercial and banking parlance as a "check."

Reduced to its last analysis, then, the question at issue here may be said to be: If a creditor makes a note payable to a third party at his debtor's place of business, does it operate as an order on the debtor to pay the note, in the absence of any instructions, and in the absence of any understanding or agreement growing out of the previous course of dealing between the parties? In the absence of authority, the question would seem to carry its own answer in the negative. In McGill v. Ott, 10 Lea, 147, this court has said: "A man who receives the money as agent of another, cannot simply, in that capacity, make an application of such money to the payment of his principal's debt without the assent, expressed or implied, of the principal. The fact that the debt is due to him cannot change the principle. He was bound to account for the money to his principal, it is true, but this simply made him his debtor to that amount. If sued for it, he might, under our law, set off his debt under a plea, and then hold the money subject to such an adjustment of their rights. But this goes on the idea that each is a debtor to the other, and not that one debt has paid the other." The fact that the note was payable "at" the bank, could not change the principle aimed at in the decision just quoted, unless we are to read the words "payable 'at' the bank" as synonymous with the words "payable 'by' or 'through' the bank." It will be admitted that there is nothing in the primary meaning nor general signification of the terms to warrant the use of the words in the sense in which they are to be understood, if the contention of respondent is to prevail. It is equally plain that there is nothing in the origin and purpose of the words "payable at the bank," as used in notes, to justify the meaning sought to be given them. The language is no necessary part of the instrument. It is as valid when made payable generally as when made payable at any particular place. Its purpose, as generally understood, is to designate a place where the holder may find the maker, and ascertain whether the latter is ready, able, and willing to pay the same; if not, then, having made demand at the place designated, there remains nothing for the holder to do but give notice to the indorser that such demand has been made and refused, as required by the law-merchant as a condition precedent to recourse on such indorsers.

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