Allen v. Merch. Bank of New York.

the bill took no part in their selection or appointment, and such agents, in general, are responsible only to their employers. Story on Agency, 15, 16, 189, 208. The holders of the bill surely are not compelled to resort to them for their remedy, and it is even questionable whether they could have sustained an action against them. 3 Barn. & Adolph. 354. The benefit received by the bank, in obtaining a credit in Philadelphia, in the way of exchange to the amount of the bill, was a sufficient consideration for its undertaking. It is no excuse that by the law merchant, as understood in Philadelphia, it was not necessary that notice of non-acceptance should be given. The contract having been made in New-York, the lex loci contractus governed, and the bank should have given the necessary instructions to its agents in Philadelphia. A bank with which a note is left for collection, is liable for neglect or for the employment of an incompetent agent, Smedes v. Utica Bank, 20 Johns. R. 384, and is consequently answerable for the omission of its agents to give notice of non-acceptance. 3 Barn. & Cres. 439. The case of the Bank of Washington v. Triplett & Neale, 1 Peters, 50, decides nothing as it respects the question here involved. The court there only held that the Bank of Washington was liable, but said nothing as to the Bank of Alexandria. The proof of usage in this case, was sufficient to charge the defendants, 20 Johns. R. 378.

After advisement the following opinions were delivered :

By the CHANCELLOR. The questions arising upon the writ of error in this case, are of very great importance to the mercantile community, and I regret that the very great press of business in this court has allowed us so little time to examine them in all their various bearings. The object of the suit is to charge the defendants with the amount of a bill of exchange left with them for collection, and which has been lost to the plaintiffs in consequence of an imperfect negotiation of it, whereby the endorser was discharged from his liability to them as the endorsees.

It is the settle law of this state that a bill of exchange which is payable on a day certain, or a certain number of

Allen v. Merch. Bank of New-York.

days after date, need not be presented for payment before it becomes due in order to charge the drawer or endorserand such is also the law of England, and of Scotland, and of France, although it is the duty of an agent who holds such a bill for the purpose of negotiation, to endeavor to obtain the acceptance thereof without delay, for the benefit of his principal, who has an interest in having it accepted immediately. But if such a bill is actually presented for acceptance before it becomes due, and the drawee refuses to accept, notice of the dishonor of the bill must be immediately given to the drawer and endorsers, or they will be discharged. 17 Wend. Rep. 368; 1 Durn. and East Rep. 712; 2 Peters' Rep. 170; Morr. Dict. of Decis. 1494, 1558; 2 Pardes, Droit Com. 417, No. 358; 3 Kent's Comm. 82; 1 Chitty, Jun. on Bills, 38, 46; Muir on Bills, 22; Bayles on Bills 102. It appears by the testimony in this case, however, that by the mercantile law of Pennsylvania it is not necessaay to give notice of the non-acceptance of a bill of exchange, whether it is payable on a day certain or otherwise; and one ground of the plaintiff's claim in this case is, that the defendants neglected to inform the bank of Philadelphia, to whom the bill was sent for negotiation and collection, that by the law of this state notice of the non-acceptance of the bill would be necessary to charge the drawer and endorsers who resided here.

A great portion of the mercantile law of this country as well as of England, has been derived from mercantile usages, which have from time to time incorporated themselves with and finally become settled rules of the common or unwritten laws of both countries. But the court below was unquestionably right in charging the jury that the opinions of merchants and men of business, as to the legal liability of the banks in New-York, for the neglect of the foreign bank in duly negotiating bills sent to them for collection, was not legal evidence to prove mercantile usage. The custom of merchants or mercantile usage does not depend upon the private opinions of merchants as to what the law is, or even upon their opinions publicly expressed-but it depends upon their acts: Or, as the learned chief justice

Allen v. Merch. Bank of New-York.

very correctly says, the inquiry in such cases is not after the opinions of traders and merchants in respect to the law upon a mercantile question, but for the evidence of a fact, to wit, the usage or practice in the course of mercantile business in the particular case. In the case of Carvick v. Vickery, 2 Dougl. Rep. 653 n., the offer of the counsel for the defendant was not merely to prove the understanding of mercantile men as to the necessity of a note being endorsed by all the payees of a bill, who were not copartners, in order to render it negotiable; but to prove the universal usage and understanding of bankers and merchants. That is, to show by their acts, in refusing to receive or pay bills which were not endorsed by both payees, the usage and understanding of the mercantile community on the subject. It was this usage or practice of merchants and bankers which the witness in that case was called to prove; and which the special jury of merchants, who were empanelled to try the cause, declared they knew to exist, as stated by the counsel. The evidence of merchants or of other persons engaged in a particular trade or business, is frequently resorted to by courts of justice for the purpose of ascertaining the sense in which certain words or mercantile terms are used in commercial contracts. And accordingly in Powell v. Horton, 2 Hodge's Rep. 16, justice Vaughan says: "evidence has always been received to show in what sense mercantile terms are used." But this is not a case of that description.

The usage attempted to be established in the case now under consideration, is a usage that the bank in which a note. or bill payable at a distant place is deposited for collection, shall be answerable for the neglect of the foreign bank or agent, to whom the bill or note is sent to be collected, in duly negotiating the same. But how can such a usage be established unless the question has before arisen, by a claim for compensation for such a loss, and by the acquiescence in such claim on the part of the bank. Evidence showing that a bank had paid such a loss in a single case, is not sufficient to establish a commercial usage.. Proof of the general usage of the banks to make compensation for such

Allen v. Merch. Bank of New-York.

losses, or of the receipt by them of a compensation, in the nature of a del credere commission, upon the assumption that they are liable for the negligence of their corresponding banks or agents, appears to be the only way in which such a customary or implied liability can be established, in the absence of any general rule of commercial law upon the subject.

It is a general rule of law, that banks and other corporations, as well as individuals, are liable for the acts or omissions of their general officers and servants, in relation to any business entrusted to the corporation or individual to be transacted. But this rule does not apply to a case where from the nature of the business to be performed, it cannot be done by any of the ordinary officers or servants of the corporation or individual, but must be entrusted to a subagent employed for that special purpose; or where by the usages of trade it is customary to employ a special agent for the purpose of transacting the business. Here, from the very nature of the business to be transacted, and from the general usage in such cases, it was necessary to employ a bank or other agent in Philadelphia for the special purpose of negotiating this bill of exchange, and of receiving the payment thereof, if it should be duly honored. Prima facie the risk of the neglect of such foreign bank or other special agent to negotiate the bill properly, should be upon the owner of the bill who has impliedly authorized the employment of such special sub-agent. I admit that if it had been the custom of the banks to receive a commission or compensation for the collection of such bills and notes, beyond the difference of exchange between the two places and the aetual expenses of negotiation, it might very properly have been considered as in the nature of a del credere commission, so as to render such banks legally liable for the loss which might be occasioned by the negligence or misconduct of their corresponding banks or agents. The incidental benefit which the bank in New-York might receive, in having the money collected through that institution, from the chance of its remaining there as a deposit for a short time after it was collected, was undoubtedly a sufficient consid

Allen v. Merch. Bank of New-York.

eration for an implied agreement on the part of the bank, that the bill should not be lost to the plaintiffs by reason of any negligence on the part of the bank or of its officers or servants; and such was the decision of this court in the case of The Bank of Utica v. McKinster, 11 Wendell, 473. But it certainly would be going very far to say that this mere chance of benefit to the bank was in fact a del credere commission, from which an agreement to warrant the plaintiffs against loss from the mistakes and negligence of the corresponding bank or agent, could legally be inferred. I therefore conclude, that there was nothing in the law or in the facts of this case, which could entitle the plaintiffs to recover against the defendants, on the ground that the bank in NewYork was answerable for the negligence of the Philadelphia bank or its notary to give notice of the dishonor of the bill, when it was returned to that bank, on the day of its presentment noted for non-acceptance.

It was probably the duty of the defendants when they sent the bill for negotiation and collection to a state where they did not know the law to be the same as ours in relation to notices and protests, to have given the necessary instructions to their correspondent bank on the subject, so that the drawer and endorsers might be duly charged according to our laws, in case of the dishonor of the bill. Where the owner of a bill endorses it and delivers it to another for collection, or delivers it to him for collection after it has been previously endorsed in blank, he thereby constitutes the person who receives it his agent, for the proper negotiation of the bill, as well as to receive payment thereon when it becomes due; and the law implies a corresponding duty on the part of the agent who receives it. If the bill, therefore, has not been accepted, it is the duty of the agent to see that it is presented for acceptance, and that the proper protests and notices are given in case of its dishonor, as well as as to see that it is presented for payment when it becomes due. Poth. Traite du Contr. De Change, ch. 4, No. 82. And such was the decision of this court in the case of these same plaintiffs against Boyd & Suydam, at the last December term of this court. 20 Wendell, 321. Where VOL. XXII.

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