Yeaton v. the Bank of Alexandria

• Decision Date: 01 February 1809
• Citation: 3 L.Ed. 33,5 Cranch 49,9 U.S. 49
• Parties: YEATON v. THE BANK OF ALEXANDRIA
• Court: U.S. Supreme Court

9 U.S. 49

5 Cranch 49

3 L.Ed. 33

YEATON v. THE BANK OF ALEXANDRIA.

February Term, 1809

ERROR to the circuit court of the district of Columbia, in an action of assumpsit brought by the defendants in error against the plaintiff in error as endorsor of a promissory note for the accommodation of R. Young, the maker.

The declaration contained two counts. One upon the endorsement of the note, in the usual form, and without any averment of the insolvency of the maker, or of any steps taken to enforce payment from him. The other was for money had and received.

The same questions arose in this case as in the preceding case of Young v. The Bank of Alexandria, but the only question argued in this cause, was, whether an endorsor of a promissory note to the bank

of Alexandria, for the accommodation of the maker, was liable in an action by the bank, until after a suit, judgment and execution against the maker had proved fruitless, or the maker was otherwise proved to be insolvent.

Upon the opening of the point, MARSHALL, Ch. J. observed that it had been decided by this court in the cases of French v. The Bank of Columbia, (ante, vol. 4. p. 141.) and Violet v. Patton, at this term, that the circumstance of its being for the accommodation of the maker makes no difference. The endorsor is as much liable as if he had himself received the money.

Youngs, for the plaintiff in error.

The general law of Virginia, upon the subject of promissory notes, is, that the endorsor is not liable until a suit has been brought against the maker, and judgment recovered; and the execution has proved fruitless, or the maker is otherwise proved to be insolvent. If there be any exception in favour of the bank it must be a privilege granted by its charter. The only words under which such a privilege can be supposed to exist are these: 'And whereas it is absolutely necessary that debts due to the said bank should be punctually paid, to enable the directors to calculate with certainty and precision on meeting the demands that may be made upon them, be it enacted, that when any person or persons indebted to the said bank on bonds, bills or notes, given or endorsed by them, with an express consent in writing that they may be negotiable at the said bank, shall refuse or neglect to make payment at the time the same may become due, and a suit shall be thereupon commenced against such defaulter, and a capias ad respondendum returned executed, or a copy left at the usual place of residence of such defaulter, at least ten days before the return day of such writ, the court shall' order the proceedings to be made up, and the cause tried at the first court.

But according to this act, the person to be sued must be a person indebted to the bank by endorsement; and under the general law of Virginia no person is indebted by endorsement of a note until the maker be insolvent, or the plaintiff shall have failed to obtain payment from the maker by suit, judgment, and execution.

Swann, contra, admitted the general law of Virginia respecting promissory notes to be as stated, but contended that by the words of the act of incorporation, an endorsor of a note is to be considered as indebted to the bank upon failure to pay the note when it becomes due. The preamble shows that punctuality in payment was the object in view; which would be entirely defeated if the bank could not compel payment from an endorsor until they had pursued the maker through all the tedious delays of the law. If the note be not paid when it becomes due, the act calls the endorsor a defaulter, and directs judgment to be entered up against him at the first court thereafter.

March 10.

MARSHALL, Ch. J. delivered the opinion of the court as follows, viz.

The question in this case is, whether the endorsor of a note negotiable in the bank of Alexandria, if such endorsement be for accommodation, may be sued by the bank, before a suit shall be instituted against the maker, if the maker be solvent.

In Virginia, the endorsor of a promissory note was not, when the town of Alexandria was separated from that state, liable to the holder by any express statute. He was only liable under the implied contract created by his endorsement. This implied contract, by the general understanding of the country, was, that he would pay the debt, if by due diligence it could not be obtained from the maker. This condition, however, was not expressed. Yet it was just, because, it was consistent with general usage, and, therefore, was the real understanding with which such an endorsement was made and received.

But in banks, this is probably not the usage; and if it be not, then the same reason does not exist for annexing such a condition to the contract created by endorsement. If banks are understood to receive notes made negotiable with them, as subject to the law which governs inland bills of exchange, then it would seem reasonable, in the case of notes actually negotiated with them, to imply, from the act of endorsement, an undertaking conformable to that usage. If, then, the case showed that such was the usage of the bank, and such the understanding under which notes were discounted, this court is not prepared to say that the undertaking created by the endorsement would not be so fashioned as to give effect to the real intention of the parties.

But the incorporating act removes any doubt which might otherwise exist on this point.

The 20th section of that act declares, 'that whenever any person or persons indebted to the said bank on bonds, bills, or notes, given or endorsed by them, with an express consent, in writing, that they may be negotiable at the said bank, and shall refuse or neglect to make...