in regard to demand notes is more liberal than in regard to demand bills. The facts of each case must be considered, but perhaps two to three months seems the ordinary time permissible for notes.23 In several States, prior to the passage of the Negotiable Instruments Law, statutes fixed the length of a reasonable time; 24 but the Negotiable Instruments Law has repealed such statutes.25 In Massachusetts, however, it has been held that a usage had grown up making sixty days (the period previously fixed by the local statute) a reasonable time within which demand must be made on the maker, in order to charge an indorser on such a note.26 There is great advantage of certainty in having the limits of a reasonable time exactly defined. There can be no question that Section 71 has reversed an exceptional doctrine prevailing in New York to the effect that if a note payable on demand contained an express provision for the payment of interest it was intended as a "continuing security" and an indorser would not be discharged by failure to make demand so long as the note remained an enforceable obligation.27 $1177. Domiciled notes. Section 87. [RULE WHERE INSTRUMENT PAYABLE AT BANK.] Where the instrument is made payable at a bank it is equivalent to an order to the bank to pay the same for the account of the principal debtor thereon.28 23 See Hampton v. Miller, 78 Conn. 267, 61 Atl. 952; Ranger v. Cary, 1 Metc. 369; Stevens v. Bruce, 21 Pick. 193; McAdam v. Grand Forks Mercantile Co., 24 N. Dak. 645, 140 N. W. 725, 47 L. R. A. (N. S.) 246; Sice v. Cunningham, 1 Cow. 397, 404. 24 E. g., in Connecticut, Massachusetts, Minnesota, Vermont. 25 Hampton v. Miller, 78 Conn. 267, 271, 61 Atl. 952; Merritt v. Jackson, 181 Mass. 69, 62 N. E. 987. 26 Merritt v. Jackson, 181 Mass. 69, 62 N. E. 987; Plymouth County Trust Co. v. Scanlan, 227 Mass. 71, 116 N. E. 468. 27 The prior law is indicated by Merritt v. Todd, 23 N. Y. 28, 80 Am. Dec. 243; Shutts v. Fingar, 100 N. Y. 539, 3 N. E. 588, 53 Am. Rep. 231. As to the effect of the statute, see supra, § 1165. 28 This section is omitted in Illinois, Nebraska and South Dakota, and has been repealed in Kansas. In Minnesota the section is retained but instead of the words "it is equivalent" are substituted "it shall not be equiva A note payable at "any bank in Boston" is not within the scope of this section. 29 The effect of making a note payable at a bank, a form of instrument sometimes called a "domiciled note," has been thus stated.30 "In England, presentment of a domiciled note at the designated place is necessary as a condition precedent to suit against the maker, but failure to present at the day of maturity seems only to affect the question of interest and costs.31 In America, before the Negotiable Instruments Law, no presentment was necessary as a condition to bringing suit against the maker, though, as in England, the maker could set up as a valid tender the fact that he had funds at the bank at the day of maturity.32 If the holder did thus present the note, the majority view was that the bank might pay it out of funds of the maker on deposit,33 though this was vigorously disputed.34 And there seem to have been but two isolated and much criticised decisions which denied the holder a recovery where his neglect to present resulted in a loss to the maker due to failure of the bank.35 However, the situation lent." In Missouri and New Jersey the order is limited to the day of maturity. 29 Carpenter v. National Shawmut Bank, 187 Fed. 1, 109 C. C. A. 55. 30 29 Harv. L. Rev. 205. 31 Citing Dickinson v. Bowes, 16 East, 110; Sands v. Clarke, 8 C. B. 751. Contra, Nichols v. Bowes, 2 Campb. 498. Cf. Rowe v. Young, 2 Brod. & B. 165. 32 Citing Wallace v. M'Connell, 13 Pet. 136, 10 L. Ed. 95. 33 Citing Bedford Bank v. Acoam, 125 Ind. 584, 25 N. E. 713, 9 L. R. A. 560, 21 Am. St. Rep. 258; Kymer v. Laurie, 18 L. J. Q. B. 218. See also Home Nat. Bank v. Newton, 8 Bradw. 563; Etna Nat. Bank v. Fourth Nat. Bank, 46 N. Y. 82, 7 Am. Rep. 314; Commercial Nat. Bank v. Henninger, 105 Pa. 496. And perhaps the bank was bound to the maker to make the payment. German Nat. Bank v. Foreman, 138 Pa. 474, 21 Atl. 20, 21 Am. St. Rep. 908. But the bank was under no obligation to make such a payment from the account of an indorser. Mechanics', etc., Bank V. Seitz, 150 Pa. 632, 24 Atl. 356, 30 Am. St. Rep. 853. 34 Citing Wood & Co. v. Merchants' Savings, etc., Co., 41 Ill. 267; Grissom Commercial National Bank, 87 Tenn. 350, 10 S. W. 774, 3 L. R. A. 273, 10 Am. St. Rep. 669. v. 35 Citing Lazier v. Horan, 55 Ia. 75, 7 N. W. 457, 39 Am. Rep. 167 (this case was thought to hold that there was a payment, and was in terms overruled in Bank of Montreal v. Ingerson, 105 Ia. 349, 75 N. W. 351); Bank of Charlestown, etc., v. Zorn, 14 S. C. 444, 37 Am. Rep. 733. See Story, Promissory Notes, § 228. For a careful criticism of these cases, see Adams v. Hackensack, 44 N. J. L. 638, 43 Am. Rep. 406 (15 Vroom). See also Williamsport Gas Co. v. Pinkerton, 95 Pa. St. 62. has been materially changed by the Negotiable Instruments Law. At common law the bank had at most but a bare authority to pay a note domiciled there. Now, by express provision, such an instrument is equivalent to an order on the bank to pay the same.36 This is in effect the creation of negotiable paper similar to a check, differing only in that it is payable at a future date. And there is not even this distinction when the note is payable on demand. In both cases the business understanding is that the debtor will have sufficient funds at the bank, and it is the duty of the bank to apply such funds to payment of the instrument. It might well be urged, therefore, that the statute has, in substantial effect, put the maker of a domiciled note in a position of secondary liability similar to that of the drawer of a check.” 37 § 1178. Payment. Section 88. [WHAT CONSTITUTES PAYMENT IN DUE COURSE.] Payment is made in due course when it is made at or after the maturity of the instrument to the holder thereof in good faith and without notice that his title is defective. Payment before maturity is only a personal defence even though made to the holder,38 and if made to one who is neither the holder nor authorized by him to receive payment is totally inoperative, 39 unless the party paying acquires the instrument properly indorsed, and in effect becomes a purchaser of it. Payment at or after maturity is in effect an absolute defence 36 Citing Brannan, Negotiable Instruments Law, (3d ed.) § 87. 37 This view is supported by the cases of New England Nat. Bank v. Dick, 84 Kans. 252, 114 Pac. 378; Baldwin's Bank v. Smith, 215 N. Y. 76, 109 N. E. 138, Ann. Cas. 1917 A. 500. But these decisions seem inconsistent with Sec. 70 of the statute, unless it can be said that the maker of a note is not the "person primarily liable” if the instrument is payable at a bank-a somewhat extreme contention. The New York decision is criticised in Crawford's Negotiable Instruments Law (4th ed.), 162. See also Binghampton Pharmacy v. First Nat. Bank, 131 Tenn. 711, 176 S. W. 1038. 38 Burbridge v. Manners, 3 Camp. 193; Watson v. Wyman, 161 Mass. 96, 99, 36 N. E. 692. 39 Wheeler v. Guild, 20 Pick. 545, 32 Am. Dec. 231; Hayden v. Speakman, 20 N. Mex. 513, 150 Pac. 292. But see Bainbridge v. Louisville, 83 Ky. 285, 4 Am. St. Rep. 153. if made to the party entitled to receive it, since there can be no new holder in due course after maturity. But the only conclusive proof that a person is entitled to receive payment is the contemporaneous surrender of the instrument properly indorsed, 40 and a payment made to one who is not at the time the holder is inoperative. On the other hand, payment at or after maturity to a holder is a discharge by the express words, of section 88; but the party paying will not be discharged if he has notice that the holder is not the person equitably entitled to payment. 42 § 1179. Requirement of notice, and its effect. ARTICLE VII NOTICE OF DISHONOR Section 89. [TO WHOM NOTICE OF DISHONOR MUST BE GIVEN.] Except as herein otherwise provided, when a negotiable instrument has been dishonored by nonacceptance or non-payment, 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. By this section, following the rule of the law merchant, proper notice is made a condition precedent of any liability on the instrument on the part of a drawer or an indorser.43 Failure to give notice may also deprive the holder of any right to resort to a debt for which the instrument was given.44 A guarantor is not entitled to notice of dishonor. 44 Nor is an accommodation maker. 45 40 Loizeaux v. Fremder, 123 Wis. 193, 101 N. W. 423. 41 Adair v. Lenox, 15 Oreg. 489, 16 Pac. 182. 42 Hinckley v. Union Pac. R., 129 Mass. 52, 37 Am. Rep. 297. 43 By the French Commercial Code (Arts. 168-170), though lack of notice discharges indorsers, it does not discharge the drawer unless he shows that the drawee had sufficient effects of the drawer to meet the bill when presented. 44 Roberts v. Hawkins, 70 Mich. 566, 38 N. W. 575; Hungerford v. O'Brien, 37 Minn. 306, 34 N. W. 161; Brown v. Curtiss, 2 N. Y. 225. 45 First State Bank v. Williams, 164 Section 90. [BY WHOM GIVEN.] The notice may be given by or on behalf of the holder, or by or on behalf of any party to the instrument who might be compelled to pay it to the holder, and who upon taking it up would have a right to reimbursement from the party to whom the notice is given. Section 91. [NOTICE GIVEN BY AGENT.] Notice of dishonor may be given by an agent either in his own name or in the name of any party entitled to give notice, whether that party be his principal or not. 46 Section 92. [EFFECT OF NOTICE GIVEN ON BEHALF OF HOLDER.] Where notice is given by or on behalf of the holder, it enures for the benefit of all subsequent holders and all prior parties who have a right of recourse against the party to whom it is given.47 Section 93. [EFFECT WHERE NOTICE IS GIVEN BY PARTY ENTITLED THERETO.] Where notice is given by or on behalf of a party entitled to give notice, it enures for the benefit of the holder and all parties subsequent to the party to whom notice is given. Section 94. [WHEN AGENT MAY GIVE NOTICE.] Where the instrument has been dishonored in the hands of an agent, he may either himself give notice to the parties liable thereon, or he may give notice to his principal. If he give notice to his principal, he must do so within the same time as if he were the holder, and the principal upon the receipt of such notice himself the same time for giving notice as if the agent had been an independent holder. 48 § 1180. Form of notice. Section 95. [WHEN NOTICE SUFFICIENT.] A written notice need not be signed, and an insufficient written notice may be supplemented and validated by verbal communica Ky. 143, 175 S. W. 10; Rouse v. Wooten, 140 N. C. 557, 53 S. E. 430, 111 Am. St. Rep. 875. 46 See Hooper v. Herring, 14 Ala. App. 455, 70 So. 308; Traders' Nat. Bank v. Jones, 104 N. Y. App. D. 433, 93 N. Y. S. 768. 47 Piedmont Carolina Ry. Co. v. Shaw, 223 Fed. 973, 138 C. C. A. 227. 48 Gleason v. Thayer, 87 Conn. 248, 87 Atl. 790, Ann. Cas. 1915 B. 1069. See also Fielding v. Corry, [1898] 1 Q. B. 268; Blue Ribbon Garage . Baldwin, 91 Conn. 674, 101 Atl. 83. |