O'Neal v. Clark

• Decision Date: 10 May 1934
• Docket Number: 4 Div. 749.
• Citation: 155 So. 562,229 Ala. 127
• Parties: O'NEAL et al. v. CLARK.
• Court: Alabama Supreme Court

155 So. 562

229 Ala. 127

O'NEAL et al. v. CLARK.

4 Div. 749.

Supreme Court of Alabama

May 10, 1934

Rehearing Denied June 28, 1934.

Appeal from Circuit Court, Covington County; Emmet S. Thigpen Judge.

Action in assumpsit by Franklin A. Clark against Dudley L O'Neal, as administrator of the estate of C. S O'Neal, deceased, T. E. Henderson, and others. From a judgment for plaintiff, the named defendants appeal.

Reversed and remanded.

Powell, Albritton & Albritton, of Andalusia, for appellants.

E. O. Baldwin, of Andalusia, for appellee.

BOULDIN Justice.

The questions presented on this appeal concern the liability of indorsers on a certificate of deposit issued by a bank.

Indorsers claim a discharge for want of presentment and notice of dishonor.

Following the order in which questions are presented in brief, we consider the cause on the merits, as presented by the evidence, which is without dispute.

On January 1, 1932, the Andalusia National Bank issued to Dr. Franklin A. Clark, plaintiff, a certificate of deposit for $12,000 in usual form "payable to the order of himself 12 months after date on the return of this certificate properly endorsed. Interest at 4% payable quarterly."

As part of the transaction, and before the delivery of such certificate of deposit, R. N. McLeod, C. A. O'Neal, L. M. Milligan, T. E. Henderson, and C. S. O'Neal, officers, directors, or stockholders of the bank, indorsed the same on the back in blank.

Dr. Clark was, at the time, a depositor of the bank, having on general deposit a sum greater than the amount of the certificate, and, on execution of the certificate, drew his check in favor of the bank for like amount, and same was charged against his checking account.

Without question the indorsers were original parties to the instrument, given in consideration of his leaving the money in the bank, just as if he had made a time deposit in the first instance on the security of such indorsement.

On October 3, 1932, before the maturity of the certificate of deposit, the bank failed, closed its doors, and a receiver took charge for liquidation under the national banking laws. He occupied the same offices, kept regular hours for the business of liquidation up to and including the date of maturity, January 1, 1933.

The instrument was not presented for payment at maturity. It was, prior to maturity, filed with the receiver as a claim against the closed bank, and there remained at date of maturity.

C. S. O'Neal, one of the indorsers, died, and an administrator of his estate was appointed prior to the maturity of the instrument.

On January 2, 1933, the date of maturity (January 1st being on Sunday), Dr. Clark filed in the probate court a verified claim against his estate, which is set out in the report of the case, and on the same day caused a copy to be handed Dudley L. O'Neal, the administrator of such estate.

No notice of dishonor is shown to have been given to appellant T. E. Henderson until February 23, 1933, when a letter was written demanding payment from him as a party who had guaranteed the payment of the claim.

The indorsers resided in the town of Andalusia.

Prior to the Uniform Negotiable Instruments Law, which has been in force in Alabama for more than a quarter of a century, there was great want of harmony as to the legal status of indorsers of this class in the decisions of several states.

In Alabama, they were held to be indorsers, prima facie at least, and within the rules of the commercial law touching presentment for payment and notice of dishonor. Carrington v. Odom, 124 Ala. 529, 27 So. 510; Marks v. First National Bank, 79 Ala. 550, 58 Am. Rep. 620; Hooks v. Anderson, 58 Ala. 238, 29 Am. Rep. 745.

By the present law his liability is defined to be that of an "indorser." Code, § 9090; Copeland v. Keller, 221 Ala. 533, 129 So. 571; O'Neal v. Peaden (Ala. Sup.) 151 So. 877.

"Every indorser who indorses without qualification * * * engages * * * that if it (the instrument) be dishonored and the necessary proceedings on dishonor be duly taken, he will pay," etc. Code, § 9092.

A certificate of deposit, such as here involved, having all the requirements of negotiability defined by law, is a negotiable instrument. In effect, it is a promissory note. First Nat. Bank of Abbeville v. Capps, 208 Ala. 235, 94 So. 112; Elmore County Bank v. Avant, 189 Ala. 425, 66 So. 509; O'Neal v. Peaden, supra.

Without question, therefore, this instrument is subject to the requirements of law touching presentment for payment and notice of dishonor.

The Negotiable Instruments Law is quite inclusive, apt, and concise in terms, designed to advise all parties to commercial paper of their legal rights and duties.

Touching presentment for payment, the statute declares: "* * * Except as herein otherwise provided, presentment for payment is necessary in order to charge the * * * indorsers." Code, § 9096.

The statute further declares: "Presentment for payment is dispensed with: (1) Where after the exercise of reasonable diligence presentment as required by this chapter cannot be made." Section 9108, Code.

What are the requirements of the chapter as to presentment in this case?

The instrument was payable at a bank, the issuing bank, who was also the maker, the party due to make payment.

"Where the instrument is payable at a bank, presentment for payment must be made during banking hours, unless the person to make payment has no funds there to meet it at any time during the day, in which case presentment at any hour before the bank is closed on that day is sufficient." Section 9101, Code.

This contemplates, as of course, an open going bank, functioning as a bank, with whom people can do the business to be done at a bank.

It is not necessary to go beyond our own decisions for the law of presentment in the instant case.

In Calkins v. Vaughan, 217 Ala. 56, 59, 114 So. 570, 573, it is said:

"As to the duty of the holder of this note to present it for payment at the time and place specified, the following points are settled: (1) The fact that the maker has no funds at the bank designated as the place of payment excuses presentment there during banking hours, but presentment is nevertheless required to be made at some time before the bank is closed. Code, § 9101. (2) The fact that the maker is insolvent at the time for payment does not excuse presentment at the time and place specified. Stocking v. Conway's Ex'rs, 1 Port. (Ala.) 260; Lee Bank v. Spencer, 6 Metc. (Mass.) 308, 39 Am. Dec. 734; 8 Corp. Jur. 689, § 963, and cases cited in note 57. (3) Where a place for payment is specified, presentment must be made there (Code, § 9099), if it can be done by the exercise of reasonable diligence (Code, § 9108). (4) If the place specified has ceased to exist, presentment there will be excused; and in that case personal presentment to the maker at another place is not required. Roberts v. Mason, 1 Ala. 373.

"The decisive question here is whether the specified place of payment-the Merchants' Bank of Montgomery-had ceased to exist, in such sense as to excuse presentment of the note for payment. That question, it seems to us, permits of only one answer. The Merchants' Bank had gone out of business, and ceased to function as a bank. In a business sense-in the sense in which it was designated in the note, and known to the public-it had utterly ceased to exist. It was not continued as a place of business, or as a place where negotiable instruments could be presented and handled, and paid, by the fact that a liquidating agent, operating under the authority of the state banking department, maintained an office somewhere in Montgomery for the purpose solely of winding up its affairs.

"We are constrained to the conclusion that the Merchants' Bank, as a place for presentment and payment, had ceased to exist, and that plaintiff was excused from making presentment there, and was not required to make it elsewhere."

The case of Roberts v. Mason, 1 Ala. 373, cited in the above excerpt, is an apt authority on the point. Some courts and text-writers, have inaptly treated that case as holding a presentation at the Bank of Mobile, under the facts of that case, a sufficient presentation. On the contrary, the case holds the presentation at the Bank of Mobile ineffectual for any purpose. Page 378 of 1 Ala. Without reviewing the facts, the holding is aptly stated in the fourth headnote as follows: "The office of discount, etc., at Mobile, having been disposed of, previous to the maturity of the note, by the Bank of the United States to the Bank of Mobile, and the latter made the agent of the former, 'for settling the affairs of the office of discount,' etc., did not make it necessary for the endorsee to demand payment at the Bank of Mobile."

See, also, Daniel on Negotiable Instruments (7th Ed.) § 1289.

The fact that the receiver winding up the affairs of the closed bank was at the banking place on the day of maturity can make no difference. He had no connection whatever with honoring or dishonoring paper presented for payment. Neither he nor any one else could act for the bank in making payment. As a bank, it had ceased to exist. It was not a mere question of inability to pay as in case of insolvency or bankruptcy, but want of lawful authority to function with regard to the presentation of paper for the purpose of binding indorsers.

We hold, under the law, presentment was dispensed with or excused in the case at bar.

Dealing with the question of notice of dishonor, the statute declares: "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...