Opinion
No. 6,569.
Submitted February 14, 1930.
Decided February 28, 1930.
Checks — Nonpayment — Insolvency of Bank — Action Against Drawer by Indorsee — Delay in Presentation for Payment — Notice of Nonpayment — When Immaterial — When Excusable — Appeal and Error. Appeal and Error — Evidence — Sufficiency — Cause Tried Without Jury — Judgment Supported by Substantial Evidence to be Upheld. 1. Where, upon conflicting evidence, in a cause tried without a jury, the court found in favor of plaintiff, the province of the supreme court in determining whether the judgment is supported by the evidence is but to determine whether there is substantial evidence to warrant it, and in doing so must accept as true that which the prevailing party's evidence tends to prove even though it is contradicted. Checks — Prompt Presentation for Payment — Rule as to Indorsees. 2. In an action against the drawer of a check to recover thereon, defendant pleading payment by reason of the delay of plaintiff in presenting it before the bank on which drawn closed its doors, the rule is that transfers of it to successive indorsees do not extend the time within which it must be presented so far as defendant drawer is concerned, which, under section 8593, Revised Codes 1921, is within a reasonable time after its issue. Same — Presentation for Payment by Mail — Wrongful Refusal to Honor Check not Chargeable to Delay on Part of Holder. 3. Under section 8593, supra, the drawer of a check is discharged from liability thereon for delay in presenting it for payment, only "to the extent of the loss caused by the delay"; hence where the indorsee of a check, drawn on a bank in another town, immediately upon its receipt three days after its issuance, mailed it to his bank, which in turn on the same day mailed it to the bank upon which drawn, which, while paying checks presented over the counter, refused to pay check presented by mail, of which fact the indorsee was ignorant, the loss sustained by the drawer was due to the wrongful act of the drawee bank and not to delay in presenting the check for payment. Same — Effect of Record not Showing Length of Time Check Held by Drawee Bank Before Dishonor on Right of Drawer to Claim Payment Under Section 8544 of Codes. 4. In the absence of proof showing the length of time for which the check above referred to was held by the bank upon which drawn before returning it dishonored, the contention of defendant drawer that the bank having held it for more than twenty-four hours, his obligation thereon was discharged under section 8544, Revised Codes 1921, may not be sustained; the burden of proving payment in this manner having been upon him. Same — Delay in Giving Notice of Nonpayment — When Immaterial. 5. The general rule is that unless the drawer of a check has sustained loss or damage by reason of delay in giving notice of dishonor or nonpayment, such delay is of no consequence; hence where even if timely notice had been given, it could not have reached him and therefore not aided him in preventing loss, the delay was immaterial. Same — Delay in Giving Notice of Nonpayment Excusable — Case at Bar. 6. Under sections 8519 and 8520, Revised Codes 1921, held that where the drawer of a check was out of the state at the time of its dishonor and despite efforts of the holder to ascertain his whereabouts could not be reached until the bank upon which drawn had closed its doors, a finding exculpating the holder for failure to give notice sooner was warranted.
Appeal and Error, 4 C.J., sec. 2855, p. 884, n. 37. Bills and Notes, 8 C.J., sec. 755, p. 544, n. 62; sec. 758, p. 546, n. 67; sec. 778, p. 561, n. 9; sec. 1317, p. 1011, n. 68; sec. 1364, p. 1056, n. 83.
Appeal from District Court, Fergus County; Edgar J. Baker, Judge.
Mr. Stewart McConochie, for Appellant.
Messrs. Belden DeKalb and Merle C. Groene, for Respondent.
There is no question from the testimony but that the plaintiff received the check in question on September 29 and held this check until October 2, a period of four days, and did not mail it to Winifred or do anything else with it, nor did he send it to the American Express Company's office at Winifred for collection, but on the second day of October, 1925, four days after he received the check, mailed it to the bank at Lewistown, in an opposite direction from Winifred, a distance of about forty-five miles, and under the general rule covering negotiable instruments the plaintiff was grossly negligent in delivering the check and presenting the same. (2 Daniel on Negotiable Instruments, sec. 1592; Lewis Hubbard Co. v. Montgomery Supply Co., 59 W. Va. 75, 4 L.R. A (n.s.) 132, 52 S.E. 1017; Hamlin v. Simpson, 105 Iowa, 125, 44 L.R.A. 397, 74 N.W. 906; Edmisten v. Henry Herpolsheimer Co., 66 Neb. 94, 59 L.R.A. 934, 92 N.W. 138; First Nat. Bank v. Miller, 37 Neb. 500, 40 Am. St. Rep. 499, 55 N.W. 1064; Holmes v. Briggs, 131 Pa. St. 233, 17 Am. St. Rep. 804, 18 A. 928; Gifford v. Hardell, 88 Wis. 538, 43 Am. St. Rep. 925, 60 N.W. 1064.) "Forwarding a check by a circuitous route may as a general rule be said to constitute negligence except where the check reaches its destination as soon as if sent direct to the bank." (8 C.J. 543, sec. 754.) Appellant contends that the decision of this court in the case of Clarke v. National Bank of Montana, 78 Mont. 48, 252 P. 373, is controlling in this case.
Further, it is the contention of the appellant that he was discharged on the check by reason of the failure of the respondent, or his agent, the Winifred bank, to give notice of the dishonor of the check after the presentment thereof had been made.
Sections 6108 and 6109, Revised Codes of 1921, are held by this court and the supreme court of the United States to be statutes adopting the so-called Massachusetts Rule with regard to the transmitting of checks for collection. ( Jensen v. Laurel Meat Co., 71 Mont. 582, 583, 230 P. 1081; Federal Reserve Bank of Richmond v. Malloy, 264 U.S. 160, 31 A.L.R. 1261, 68 L.Ed. 617, 44 Sup. Ct. Rep. 296.) The Massachusetts Rule is that the bank of deposit which transmits the check for collection has authority to and does appoint the bank to which it transmits the check as a subagent of the owner of the check, and likewise the succeeding banks to which the check may be sent are subagents, and that each bank is accountable direct to the owner of the paper for its own wrongdoing. Where a check is sent for collection direct to the bank on which it is drawn, the drawee bank is thereby acting as a subagent for the owner of the check. (7 C.J. 608; Lowenstein v. Bresler, 109 Ala. 326, 19 So. 860; Exchange Bank of Wheeling v. Sutton Bank, 78 Md. 577, 23 L.R.A. 173, 28 A. 563.)
The Negotiable Instrument Law requires notice of dishonor to be given to the drawer of a check. (8 C.J. 636; Bacigalupo v. Parrilli, 112 N.Y. Supp. 1040; Cassel v. Regierer, 114 N.Y. Supp. 601.) It became the duty of the Winifred bank, which was the agent of the respondent, either to give notice to the drawer of the check or to give notice to its principal, the respondent. Section 8501 of the Revised Codes of 1921 provides that "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 receipt of such notice, has himself the same time for giving notice as if the agent had been an independent holder." However, no notice was given to the drawer of this check under the admitted facts in this case until after the fourteenth day of October, 1925. The time within which notice of dishonor must be given is provided by sections 8510 and 8511, Id. It will be observed upon an examination of these statutes that the notice if given was long after the expiration of the time allowed by law. Therefore the drawer of the check, the defendant in this case, was discharged from all liability to pay the check.
We are unable to see any distinguishing facts between the case of Blackwelder v. Fergus Motor Co., 80 Mont. 374, 260 P. 734, and the case at bar.
Plaintiff brought this action to recover the face value of a check drawn by defendant on the First National Bank of Winifred, Montana, payable to J.C. Gossett and by the latter indorsed and delivered to plaintiff, for value. By appropriate pleadings the issue was presented as to whether the check had been paid and discharged by reason of the delay of plaintiff in presenting the check for payment and in giving notice of dishonor and nonpayment. The cause was tried to the court without a jury. Judgment was entered for plaintiff and defendant appealed.
The only question presented by the appeal is whether the evidence is sufficient to support the judgment.
The record shows that plaintiff is a merchant residing at Christina, in Fergus county, which is about fifteen miles south of Winifred and twenty-five miles north of Lewistown. At the time in question here he was also postmaster at Christina. Defendant at the time of the transaction here involved was engaged in buying cattle in the vicinity of Winifred and received his mail at Christina. Christina is located on a branch line of the Milwaukee Railroad, extending from Lewistown to Winifred, and has no banking facilities. At the times in question here there was train service between Lewistown and Winifred on Mondays, Wednesdays and Fridays of each week, the train leaving Lewistown at 9 o'clock in the morning, arriving at Winifred at 1 o'clock in the afternoon and returning to Lewistown on the same day. On Tuesdays, Thursdays and Saturdays of each week a stage carrying first-class mail left Winifred at 9 o'clock in the morning, arriving in Lewistown about noon and leaving at 3 P.M. for Winifred. The American Express Company maintained an office in Winifred for the transaction of business in September and October, 1925, and as a part of its business for compensation presented checks for collection upon the bank in Winifred. The check in question was issued on September 29, 1925. Plaintiff received it from Gossett on October 2 and on the same day mailed it to the National Bank of Lewistown where he did his banking business, and requested the bank to send him the money by registered mail. This the bank did, and the money was turned over to Gossett. The Lewistown bank received the check and mailed it to the Winifred bank for payment on October 2. The check left Lewistown on the stage on Saturday, October 3, and arrived at the Winifred bank the same day about 4 o'clock in the afternoon.
It appears that, had the Winifred bank returned the check unpaid at the close of business on Monday, October 5, it would have reached the Lewistown bank on October 6 and in due course would have reached plaintiff at Christina on October 7. The Winifred bank closed its doors at the close of business on October 10. The check in question was not paid by the Winifred bank. Between September 29 and October 6, inclusive, the Winifred bank paid all checks drawn on it and presented over the counter in person, but plaintiff had no knowledge of that fact at the time. Between September 29 and October 6, inclusive, the Winifred bank had in its vaults sufficient money to pay the check in question, and defendant had on deposit in the Winifred bank to his credit between September 29 and October 10 sufficient money to pay the check.
At the time in question it was customary for the Lewistown bank to collect items drawn on outside banks in Fergus county, and present them for collection and payment, by mail to the bank upon which they were drawn. Plaintiff received the check from Gossett after the train had gone to Winifred on October 2. On October 6 or 7 plaintiff first learned that the check had not cleared, by receiving a letter from the cashier of the Lewistown bank. After learning that the check had not cleared, plaintiff made inquiries to ascertain the whereabouts of defendant and learned that he was going from place to place in the Winifred country buying cattle and was unable to locate him. Defendant at no time between October 2 and October 14 called for his mail at Christina. On October 15 plaintiff saw defendant at the former's place of business and informed him that the check had not cleared. The Lewistown bank, upon returning the check, charged plaintiff's account with the amount of the check.
There is a conflict in the record regarding some of the [1] foregoing facts, but the facts in conflict have been resolved by the trial court in favor of plaintiff, and our province is but to determine whether there is any substantial evidence to support the judgment, and we must accept that as true which plaintiff's evidence tends to prove, even though it is contradicted. ( Matthis v. Campbell, 84 Mont. 195, 274 P. 501; Sawyer v. Somers Lumber Co., 86 Mont. 169, 282 P. 852.)
Counsel for plaintiff contend that, since there is evidence that plaintiff received the check on October 2, and since the court found in his favor, we must accept that fact as established even though it is contradicted by evidence offered by the defendant that plaintiff actually received it on September 29, the date it was issued. Conceding plaintiff's contention in this respect, it does not solve the problem here presented.
By section 8593, Revised Codes of 1921, "a check must be [2] 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." Here the action is against the drawer, and as to him the requirement of the statute is that the check must have been presented within a reasonable time after its issue. The rule is that transfers of a check to successive indorsees do not extend the time within which it must be presented so far as the drawer is concerned. (Daniel on Negotiable Instruments, 6th ed., sec. 1595; 8 C.J. 544; 5 R.C.L. 507; Gordon v. Levine, 194 Mass. 418, 120 Am. St. Rep. 565, 10 Ann. Cas. 1119, 10 L.R.A. (n.s.) 1153, 80 N.E. 505; Watt v. Gans, 114 Ala. 264, 62 Am. St. Rep. 99, 21 So. 1011.)
Under section 8478, Revised Codes of 1921, presentment of a bill of exchange is sufficient "if made within a reasonable time after the last negotiation thereof." And the fact that under section 8592 it is provided that "except as herein otherwise provided, the provisions of this Act applicable to a bill of [3] exchange payable on demand apply to a check" does not alter the rule that so far as the drawer of a check is concerned it must be presented within a reasonable time after its issue, regardless of the time of the last negotiation thereof. (8 C.J. 544, note 62.) But conceding that the check was not presented within a reasonable time after its issue, it does not necessarily follow that the drawer has been discharged from liability thereon, for under section 8593 he is only discharged "to the extent of the loss caused by the delay."
Plaintiff had the right to present the check in the manner here shown ( Jensen v. Laurel Meat Co., 71 Mont. 582, 230 P. 1081), even though a personal presentment over the counter might have been productive of more satisfactory results, since, as shown here, the plaintiff did not know of that fact and, so far as the record shows, knew nothing of the precarious condition of the bank. ( Blackwelder v. Fergus Motor Co., 80 Mont. 374, 260 P. 734.) It was presented at a time when defendant had funds in the bank to meet its payment and when the bank had sufficient money in its vaults to pay it. It does not appear that the bank would have paid the check if presented in the same manner immediately after its issue. Rather it affirmatively appears that the same result would have followed by a more timely presentation of the check, for it is a fair inference from the record that the bank was paying checks between September 29 and October 6 which were presented over the counter only. The loss sustained by defendant, on the record here presented, was due to the wrongful acts and the unreasonable practice of the bank in honoring checks presented in person over the counter only, rather than to the delay in presenting the check for payment.
Defendant asserts also that the check was paid and defendant's obligation thereon discharged by reason of the fact that the [4] Winifred bank held it more than twenty-four hours after presentment and for that reason is deemed to have accepted it. The cases of Clarke v. National Bank of Montana, 78 Mont. 48, 252 P. 373, and Blackwelder v. Fergus Motor Co., supra, are relied upon in support of this argument. This contention cannot be sustained, on the record here presented, for there is no evidence showing how long the check was retained by the Winifred bank, or whether the twenty-four hour period was extended by the holder under section 8544, Revised Codes of 1921.
The evidence shows that the Winifred bank received the check at 4 P.M. on Saturday, October 3. The record does not show when the check was returned to the Lewistown bank. The evidence shows that plaintiff received a letter from the cashier of the Lewistown bank on October 6 or 7, informing him that the check had not cleared, and on October 14 he received the check. So far as appears from the record, the Winifred bank may have returned the check to the Lewistown bank within twenty-four hours after its presentation. Since the defendant had the burden of proving that the check was paid and his obligation discharged, and since the record does not show that the check was retained by the Winifred bank for more than twenty-four hours, his contention on this phase of the case must fail.
It is contended by defendant that the check was not accepted [5] by the Winifred bank upon presentation, but was by it dishonored, and that plaintiff failed to give notice of dishonor as required by section 8496, Revised Codes of 1921, and within the time provided in sections 8510 and 8511. Regarding this contention the general rule is that unless the drawer of the check has sustained loss or damage by reason of the delay in giving notice of dishonor or nonpayment, such delay is of no consequence. (5 R.C.L. 516, note 1; Holmes v. Briggs, 131 Pa. 233, 17 Am. St. Rep. 804, and cases cited in the note on page 810, 18 A. 928.) Here any notice given after October 7 would not have aided the defendant in preventing loss. Also, under section 8519 "notice of dishonor is dispensed with when, after the exercise of reasonable diligence, it cannot be given to or does not reach the parties sought to be charged." And by section 8520 "delay in giving notice of dishonor is excused when the delay is caused by circumstances beyond the control of the holder, and not imputable to his default, misconduct, or negligence."
The evidence shows that even if plaintiff had presented the [6] check for payment sooner, or if it had been presented the day after its issue, notice of dishonor could not have been given to defendant before October 7, for, according to his own evidence, he was on the road to Sioux City, Iowa, and return, between September 29 and October 7, with a shipment of cattle. Plaintiff made inquiries to locate the defendant after he learned that the check had not cleared on October 6 or 7, but was unable to do so until about October 15. These circumstances were sufficient to warrant a finding excusing the giving of notice of dishonor sooner. (8 C.J. 684, 685.)
There is substantial evidence supporting the judgment, and it is affirmed.
MR. CHIEF JUSTICE CALLAWAY and ASSOCIATE JUSTICES MATTHEWS, GALEN and FORD concur.