
    Francis S. Coghlan, Plaintiff and Respondent, v. William B. Dinsmore, President of the Adams Express Company, Defendant and Appellant.
    I. In an action against bankers or collecting agents, to recover damages for their neglect to present a note intrusted to them for collection or give • notice of non-payment to the indorsers, the burden of proof is on the defendants to show the insolvency of the indorsers, if they rely on that fact as a defense.
    2. Whether the burden of proof is upon the plaintiff to show the insolvency of the maker ? Query.
    
    3. In such an action it appeared that before the maturity of the note, the maker, who was indebted to the indorsers, paid them a part of the amount of the note, upon their promise to pay the note at maturity and give him further credit, and this transaction was unknown to the other parties.
    
      Held, that this payment was not available as a defense, pro tanto, in favor of the collecting agents, it not being a payment for the use or benefit of the holder of the note.
    
      Held, further, that the payment and promise having been unknown to the holder of the note until after the commencement of his action against the collecting agents; «such facts did not amount to a waiver, on the part of the indorsers, of demand and notice of non-payment, which would exonerate the defendant from any consequences of their neglect to make such demand and give such notice.
    4. It seems that an indorser of a note, who, being informed by the maker that he will be unable to pay the note, receives from him, without the holder’s knowledge, a part of the amount of the note, promising to pay the note at maturity and give the maker further time, does not thereby waive demand and notice of non-payment.
    (Before Robertson, White and Barbour, J. J.)
    Heard, June 11;
    decided, October 6, 1862.
    This was an action for damages for failing to take proper steps to charge the parties to a note left with the defendants for collection.
    The note was dated the 17th of June, 1860, and was for $1,922.34, drawn by Q-. W. Hichols, payable ten months after its date, to the order of Saltus & Co., at the office of Payne & Harrison of Hew Orleans, with current rate of exchange on Hew York at maturity. It was indorsed by Saltus & Co., and also by Mrs. Anna Saltus.
    The defendants signed a receipt, dated the 6th of April, 1861, of such note from the plaintiff for collection, proceeds to be returned with exchange on Hew York, in which it was expressed that if not honored, it “ was to be returned, and “ all charges for protest, express service, &c., to be paid by the consignor.” The note was afterwards returned unprotested and the plaintiff refused to receive it, no notice having been given to the indorsers.
    ' The complaint alleged the defendants to be a joint stock company, doing business as collection agents, set out the ownership of the note in question by the plaintiff, its making by ¡Nichols, and the indorsements, and the undertaking by the defendants to collect the note or charge the parties thereto, and their failure to perform it, by not protesting the note, and omitting to notify the indorsers. The answer denied every allegation in the complaint, except the making and indorsement of the note "in question, and averred that the maker paid the plaintiff, after the maturity thereof, on account of such note $1,000, in consideration whereof the plaintiff had agreed to extend the time for the payment of the residue, for a definite period, and thereby discharged the indorsers.
    On the trial the defendant read in evidence a complaint in an action brought by the present plaintiff against the indorsers of such note, which was only signed by the plaintiff’s attorneys, and not signed or verified by the plaintiff, in which it was alleged that the maker of such note deposited with Saltus & Co., the indorsers of it, $1,000, to be applied on such note when it became due, and the defendants in that suit had notice that it would not then be otherwise paid, and the then defendants, Saltus & Go., agreed, for themselves and Mrs. Saltus, of whom they were agents, to apply such money on such account; and it was also further alleged that such note was duly presented and notice of non-payment given to the indorsers. Such action was pending at the time of the trial of this action.
    The maker of the note, (Nichols,) testified that on the 12th of April, 1861, he wrote a letter to Saltus & Co., in which he stated “ that he would send them a draft for “ $1,000 if they would protect the note, and give him twelve “months ” in which to pay the residue. The letter itself was not produced, having been mislaid. Saltus & Co. sent an answer to such letter, to the maker, in which they stated that the letter of the 12th was received, and requested him to send them by return mail his draft on his bankers in New Orleans, at one day’s sight, for $1,000, advising them of the same; and if they had no funds there, a draft for the same amount on his house in Shreveport, and at the foot was written: “ If possible by return mail.” Nichols further testified that he gave Saltus & Oo. the $1,000, and they agreed to relieve him from that note and give him credit for the balance for twelve months, and he notified them it was impossible for him to pay it at maturity. On cross-examination he admitted that Saltus & Oo. held other notes of his at that time. He also stated that it was understood that Saltus & Oo. should take up the note; their agreement was that they would protect it; and being a second time cross-examined, he stated that it was understood between them that the note would have to be protested. He further testified that, at the time this note matured, he was not able to provide for it; and on the 12th of April he understood it had gone forward and could not be prevented from being protested. Theodore Saltus, one of the firm of Saltus & Co., being examined as a witness, testified that the $1,000 was received on account of the debts owing them by Nichols.
    The maker of the note, (Nichols,) also stated the condition of his affairs. He did not think a forced sale of his property at the north would pay his debts, although it might. He did not consider himself insolvent. He owed $7,200 for merchandise and $9,000 for mortgages on houses, and the estimated value of his property was $20,000 to $25,000. When the political troubles broke out, he had merchandise amounting to $20,000 in Texas, which had been confiscated by the Bebel Government, and he also had a rental of $6,000 a year in Shreveport and Texas. He had not attempted to sell his real estate here; his creditors had agreed to advance him money to finish certain houses he was building, and it was agreed that the rents should be applied to extinguish his debts. He expected to get his property south. He never had the means to pay this note in money.
    Mrs. Anna Saltus testified that she supposed Saltus & Co. to be solvent at the time and still supposed so, which testimony was objected to by the defendant.
    
      A motion was made for a nonsuit, upon the ground of want of proof of non-presentment for payment, and of non-notification of the indorsers, which was refused. Another motion was made for leave to amend the answer, by setting up a special agreement between the indorsers and maker of the note in question, to the effect that the indorsers would protect the note at maturity, thereby waiving notice and demand, which was refused; but the Court permitted the defendants to give evidence of waiver of notice of non-payment and protest.
    At the conclusion of the trial, the Court charged that there was no proof of such waiver of notice of protest by the indorsers as, between the plaintiff and defendant, would discharge the defendants from performing their agreement to protest the note in question, to which the defendant excepted. The counsel for the defendant then requested the Court to charge that the plaintiff could not recover unless the Jury should believe, from the evidence, that the maker of the note was insolvent, which was refused and an exception taken. The Court then directed a verdict for the plaintiff for the amount claimed, for which judgment was entered, and an appeal taken therefrom. No motion was made for a new trial.
    
      C. A. Seward, for defendant, appellant.
    I. The primary inquiries are:
    1. Wliat was the contract between the parties ?
    2. What are the plaintiff’s rights, if such contract was not performed?
    1. The contract was “ a mere contract of agency, which left the plaintiff all his rights and remedies for the recovery of his debt as against other parties, and only rendered the agent liable for the actual or probable damages which his principal sustained in consequence of the negligence of the agent.” (Allen v. Suydam, 20 Wend., 327.)
    2. Assuming that the contract was not performed, what are the actual or probable damages which the plaintiff has sustained ? This must be decided by the light of conceded analogies, and the force of positive precedent.
    To entitle the plaintiff to recover against the defendant, he must prove, as elements of damage, first, the insolvency of the maker of the note, and, second, the solvency of the indorsers; and such proof must be submitted to the Jury. (Russell v. Palmer, 2 Wils., 325; Arnold v. Commonwealth, 8 B. Monr., 109; Clark v. Smith, 10 Conn. R., 1; Varril v. Heald, 2 Greenl., 91; Wolcott v. Gray, Brayton’s R., 91; Potter v. Lansing, 1 Johns., 215; Van Wart v. Wooley, 5 Dowl. & Ryl., 374; Allen v. Suydam, 20 Wend., 327; Warren Bank v. Parker, 8 Gray, 222 ; Bank of Utica v. McKinster, 11 Wend., 473; Smedes v. Bank of Utica, 20 Johns., 372; Mechanics’ Bank v. Merchants’ Bank, 6 Metc., 13; East River Bank v. Gedney, 4 E. D. Smith, 582; Stowe v. Bank of Cape Fear, 3 Dev., 408.)
    Upon the evidence, Uichols, the maker of the note, was solvent and able to pay it.
    II. The Court erred in deciding that the evidence on the part of the defendant did not amount to proof of waiver of notice of non-payment and notice of protest by Saltus & Co., the first indorsers of the note, and was not sufficient to discharge the Company from the performance of its agreement.
    The neglect to give notice of protest, was justified, in this case, by the acts of the indorser. (Citing and commenting on Phipson v. Kneller, 1 Starkie, 116; Bond v. Farnham, 5 Mass. R., 170; Mechanics’ Bank v. Griswold, 7 Wend., 165; Coddington v. Davis, 3 Denio, 16; Taylor v. French, 4 E. D. Smith, 458; Seacord v. Miller, 3 Kern., 58; Burke v. McKay, 2 How. U. S. R., 66; Ilsley v. Jewett, 3 Metcalf, 434; Marshall v. Mitchell, 35 Maine, [5 Red.,] 221; Boyd v. Cleveland, 4 Pick., 525; Mechanics’ Bank v. Griswold, 7 Wend., 168.)
    III. It is immaterial whether Anna Saltus was charged as an indorser; because,
    1. As between her and Saltus & Co., the note was to be paid by them; and,
    
      2. The plaintiff, having a remedy against the maker and the first indorsers, cannot be said to have been injured by a failure to charge the other indorser.
    IV. The motion for a nonsuit was improperly denied.
    There is no proof in the case that demand of the note was not made and notice of its non-payment not given. On the contrary, there is proof in the case that payment of the note was duly demanded and that notice of its nonpayment was duly given to its indorsers. Those facts are averred in the complaint in the suit brought by the plaintiff against the indorsers, and there is no evidence contradicting them.
    Even if Nichols was insolvent, and even if the agreement between him and Saltus & Co. did not amount to a waiver of demand and notice, still the decision of the Court that the evidence adduced by the defendant did not discharge the Express Company from the performance of its' agreement, was erroneous; because, the decision fastened upon the defendant a liability to the full amount of the face of the note, when the proof showed that the extent of the plaintiff’s loss was only the difference between the amount of the note and the $1,000 paid thereon by Nichols to Saltus & Co.
    The extent of the plaintiff’s loss is the measure of the liability of the defendant; and the $1,000 paid by Nichols, belonged, of right, to the plaintiff, and should have been held by the Court as diminishing pro tanto the liability of the defendant.
    
      William Allen Butler, for plaintiff, respondent.
    I. The motion for a nonsuit at the close of the plaintiff’s evidence, was properly denied.
    The burden of proof was on the defendants to show that the note had been protested.
    The averment of the complaint in the suit brought in the name of plaintiff against Saltus & Co., and Anna Saltus, as indorsers, that the note had been protested, &c., is immaterial. The complaint, being unverified, was the act of the attorneys and not of the plaintiff, and is of no effect as an admission or otherwise. (1 Starkie on Ev., 450; Boileau v. Rudlin, 2 Exch., 665; S. C., 12 Jur., 899; Church v. Shelton, 2 Curtis, 271, and cases cited on p. 275.)
    And the defect, if any, was cured by the further testimony on the part of the defendants; and the motion was not renewed at the close of the evidence on both sides.
    IT. The Court correctly decided that the evidence, admitted under the ruling on defendants’ application to amend the complaint, did not amount to proof of waiver of notice of non-payment and notice of protest, by Saltus & Co., and was not sufficient, as between the parties to this action, to discharge the defendants from the performance of their agreement, to cause the note to be protested; and further, that there was no sufficient evidence to go to the Jury, of any waiver of notice of non-payment or notice of protest, ou the part of Anna Saltus.
    Hothing short of the clearest evidence of assent on the part of indorsers will amount to a waiver of notice of protest. The cases in which indorsers have been held to a waiver from the fact that they had received fun^s or security from the maker before maturity, are cases in which they either expressly agreed to waive notice, or did some act by which the holder was induced to omit protest, or when by taking into their possession 'all the property of the maker, by assignment, for the express purpose of meeting his liabilities, the indorsers have obtained everything which the notice was intended to enable them to obtain.
    
      (Oswego Bank v. Knower, Lalor’s Supp. to Hill & D., 122; Coddington v. Davis, 1 N. Y. R., 186; Spencer v. Harvey,. 17 Wend., 491; Leonard v. Gary, 10 Id., 504; Mechanics’ Bank v. Griswold, 7 Id., 165; Taylor v. French, 4 E. D. Smith, 458.)
    The taking of security, or receiving funds in part pay- ' ment, by the indorsers, does not operate as a waiver, nor can a waiver be implied in any case, from the transactions between the maker and the indorsers, unless the latter assume an unqualified liability to pay the note at maturity, and abandon their recourse against the maker. (Seacord v. Miller, 13 N. Y. R., [3 Kern.,] 55; Kramer v. Sandford, 4 Watts & S., 328.)
    In the present case there was no such assumption of liability on the part of Saltus & Co., nor any waiver of their recourse against Hichols. The indemnity received by them was partial, and they did no act, and came under no obligation dispensing with the demand and notice which were the conditions precedent to their liability as indorsers.
    As to Anna Saltus, the other indorser, there was no evidence whatever of any implied waiver. She' was not a party to the alleged agreement with Hichols; Saltus & Co. were not her agents or attorneys. She was, therefore, liable to plaintiff on her distinct contract of indorsement. Seneca Co. Bank v. Neass, 3 Com., 443; Mohawk Bank v. Corey, 1 Hill, 513; Cayuga Bank v. Warden, 2 Seld., 19.)
    The only exception on this point was taken to the entire ruling of the Court; and if either proposition was correct, the exception must fail entirely.
    III. The Court correctly refused to charge the Jury, as requested, that even though the plaintiff had lost his recourse against the indorsers, through the defendants’ negligence, the plaintiff could not recover unless the Jury should believe, from the evidence, that Hichols, the maker of the note, was insolvent.
    There was no conflicting evidence on this .subject to submit to the Jury.
    The plaintiff was not bound to prove insolvency on the part of the maker (the point requested to be charged) in order to entitle him to a recovery.
    The ground of the action was the negligence of the defendants. All that the plaintiff was required to show was failure on their part to perform the duty undertaken by them. This raised the presumption of their liability for any loss sustained by the plaintiff by reason of their neglect. (Walker v. Bank of State of N. Y., 5 Seld., 582; Bank of Utica v. Smedes, 3 Cow., 662; Bank of Utica v. McKinster, 11 Wend., 475.)
    
      The plaintiff further showed that the maker of the note was unable to pay it at maturity, and that such inability continued up to the trial.
    The burden of proof was then on the defendants to show, in reduction of damages, that the maker had ample funds to pay, if called upon, or any other fact showing that plaintiff had sustained no actual loss. (Allen v. Suydam, 20 Wend., 321, 329.)
    The defendants gave no proof to reduce the amount of damages below the whole amount of the note, and made no request for any ruling in reference to damages. The plaintiff was entitled to nominal damages at all events, (Allen v. Snydam, 20 Wend., 330,) and the ruling requested could not, therefore, have been granted. Even if it had been a request to charge that only nominal damages could be recovered, unless the Jury believed that Nichols was insolvent, it would have been equally objectionable. The plaintiff would have had a present and immediate right of action against the indorsers had the defendants done their duty. This was lost by their neglect, and they could not compel the plaintiff to await a liquidation of the affairs of the maker, or to resort to a sale of his mortgaged real estate, with its attendant delays and right of redemption, or to abide the event of the rebellion, and the release of his confiscated property.
   Robertson, J.

The plaintiff was entitled to the security of the liability of all the parties to the note in question who were originally liable, and the defendants were bound to take all necessary steps to secure that liability. For any failure to take such steps the defendants were liable to the extent of any damages suffered by the plaintiff. The maker, of course, is liable at all events; and if he is solvent no damage has been suffered; if not, the defendant is liable for not charging the indorsers, unless they never were Bable or were insolvent and worthless. In such case it is not necessary for the plaintiff to prove any solvency of the indorsers; Ms derefiction of duty casts the burden on the delinquent agent, of disproving their solvency. (Walker v. Bank of State of New York, 5 Seld., 582; Bank of Utica v. Smedes, 3 Cow., 662; Bank of Utica v. McKinster, 11 Wend., 475; Allen v. Suydam, 20 Id., 329, Per Chancellor Walworth.) The fact that in some cases the plaintiff introduced evidence to prove the insolvency of the maker or solvency of the drawer, does not affect the rule. (Bank of Utica v. McKinster, 11 Wend., 473; Smedes v. Bank of Utica, 20 Johns., 372; Mechanics’ Bank v. Merchants’ Bank, 6 Metc., 13; East River Bank v. Gedney, 4 E. D. Smith, 582.) Possibly the burden may lie on the plaintiff to prove the insolvency of the maker, but in this case that was prima facie established. The plaintiff is not bound to wait forever for a chance of collecting from the maker: his money is due forthwith. The attempt to show that Mrs. Saltus was never responsible failed.

The defense, therefore, of the defendants rest in the continued liability of Saltus & Co., on the note, and their waiver of demand and notice; and they also claim that the .$1,000 paid by the maker to Saltus & Co. should go in mitigation of damages. Ho such partial defense as the last is set up in the pleadings, nor was any application made to amend them for the purpose; and if it had been made, it would have been untenable. There is no evidence that the maker of the note paid such sum to the indorser to be paid over to the holder; he paid it to him as his creditor on a general promise to take up the note and protect him. It became the indorsers’ money; no action lay for it in the plaintiff’s favor. The indorsers promised, in consideration of its payment, to take up the note and give the maker credit for the residue of what was due, for a year, which the latter promised to pay, the note to be retained as an evidence of debt. Any other person might have made the same promise, and yet not have discharged the defendants from liability on a contract made before such promise. Ho such secret collateral agreement could discharge them.

The only remaining question is, if Saltus & Co. are

liable as indorsers. They may have been liable to the plaintiff on their new undertaking to pay the note, although made to a third person, (Del. & Hud. Can. Co. v. Westchester Co. B'k, 4 Denio, 97,) and so might any other person on a similar promise, but no such liability is set up in the pleadings, and the relation in such case is different. The real question here is, whether knowledge by the indorser of the inability of the maker to pay, his notice to them that he would not pay, and their promise to pay, amounts to such waiver of notice as to make them liable as indorsers. It has been held that where the indorser takes upon himself the duty of inquiring if a note is paid, (Phipson v. Kneller, 1 Stark., 116,) or has an assignment of all the maker’s property, (Mechanics' B'k v. Griswold, 7 Wend., 175,) or is preferred in a general assignment, (Coddington v. Davis, 3 Denio, 16; Taylor v. French, 4 E. D. Smith, 458,) or becomes otherwise the party to take up the note as between him and the maker, by taking security, (Seacord v. Miller, 3 Kern., 58,) or releases the maker, (Burke v. McKay, 2 How. U. S. R., 66,) or when.he is furnished by the maker with all the funds he has, or equal to the amount of the note, and agrees therewith to pay the note, (Ilsley y. Jewett, 3 Metc., 434,) either of such acts operates as a waiver; and so even a promise to take up a note if not paid by another. (Boyd v. Cleveland, 4 Pick., 525; Marshall v. Mitchell, 35 Maine, [5 Red.,] 221.) It is undoubtedly true, as a general rule, that where any steps to charge the indorser are prevented by some acts of his which puts the holder off his guard, the latter is excused, (Bruce v. Lytle, 13 Barb., 163; Spencer v. Harvey, 17 Wend., 489,) but I am not prepared to say that, therefore, a promise to the maker, not known to the holder, would be sufficient. The fact that the maker is thrown off his guard in preparing to pay the note, does not affect the relations of the holder dnd maker; it does not operate either as an estoppel or contract between them. But when the latter promises the former to pay absolutely and unconditionally, he has a right to assume that the duty of notifying the indorser of a failure on the maker’s part is dispensed with, and that he need not rely upon the maker at all. Notwithstanding a promise by the indorser to the maker, the former may not be able to pay and still not lose his right of proceeding forthwith against the maker, to secure himself, which is the object of the notice. When the promise is made only privately to the maker-of the note, the indorser does not expect the holder to rely upon it, because it is not made to him. A promise to pay, unconditionally, does not operate as a contract but as an estoppel, and when made to the holder is an admission that the indorser will suffer no injury for want of demand and notice, which is the test applied by Judge Nelson, in Mechanics’ Bank v. Griswold, (7 Wend., 168.) I cannot, therefore, subscribe to the reasoning in Marshall v. Mitchell, (ubi sup.,) which makes a promise to the maker equivalent to a promise to the holder as a waiver; and no other case goes so far.

But even if it were so, the defendants in this action ought not to be allowed to avail themselves of a private agreement, unknown to the plaintiff, and first disclosed on the trial; and that, too, where the evidence of the parties concerned is conflicting as to the whole transaction. The result, perhaps, might be, that in this action the plaintiff would fail to recover against the defendants, by the view the Jury would take of the testimony; and in the action by him against the indorsers he might also fail from a different view taken of the same testimony, and thus fail altogether by the defendants’ neglect of duty. I think, in such case, the evidence must bring home knowledge to the holder, at least before the commencement of the action, of the existence of such waiver, if not his actual presence when it was made, before he can be deprived of his right to recover.

The plaintiff is of course not entitled to a double satisfaction, and the defendants are, therefore, probably entitled to subrogation to his rights to the extent of whatever part of the note they may pay. If they pay the whole ' note, they may proceed against the indorsers, and enforce. their liability if they can establish it.

The decision *of the Court that no waiver of demand and none had been proved, and its refusal to charge that the plaintiff could not recover unless Kichols was insolvent, "were correct. The counsel for the -defendants did not require any other facts to be submitted to the Jury; the motion for a nonsuit was properly denied, and there was, therefore, no error in the charge or exclusion of evidence.

The judgment should be affirmed -with costs.

White, J., concurred in affirming the judgment)

Barbour, J., (dissenting.)

The measure of damages, in a case of this kind, is the amount which the owner of the note has lost by the failure of the carrier or agent to perform his duty by protesting the note. (Van Wart v. Wooley, 5 Dowl. & Ryl., 374; Allen v. Suydam, 20 Wend., 327; Warren Bank v. Parker, 8 Gray, 222; Bank of Utica v. McKinster, 11 Wend., 473; Stowe v. Bank of Cape Fear, 3 Dev., 408; and see also, Russell v. Palmer, 2 Wilson, 325; Clark v. Smith, 10 Conn. R., 1; Varril v. Heald, 2 Greenleaf, 91; Wolcott v. Gray, Brayton’s B., 91; Potter v. Lansing, 1 Johns., 215.) In order to sustain his case, it was incumbent upon the plaintiff, therefore, to show, first, that the maker was insolvent, which was done; and, secondly, that the indorsers, or one -of them, were good, which he did prove; and, thirdly, that, because of the failure of the defendants to protest, the indorsers, or the only good one, were legally exonerated from the payment of the note-or some part of it. In regard to this, he proved that Anna Saltus was good) and was thus exonerated. But he failed to show that Saltus & Co., who were able to pay, were so reléased or discharged -from liability. On the contrary, dt appears from' the evidence, :that the ¡firm of Saltus & Co.’had received from the principal: obligor in the note, $1,000, as.a payment to that -extent; and that, in consideration of such payment, made in advance, they undertook and agreed to protect, %. e., to pay, the note. The payment and agreement Hichols swears to positively. That SI,000 must be considered, under a well known rule of law, as having been received by Sal tus & Co., in trust for the plaintiff; and he can as readily collect the same from them as he could have recovered against them upon the note, if it had been duly protested and notice sent to them. This is sufficient to show that the .Judge erred in directing the Jury to find a verdict for the whole amount of the note, without considering the question as to whether the undertaking to protect the note was supported by a sufficient consideration, or is good, not being in writing, under the statute of frauds.

The judgment should be reversed, and a new trial granted.

Judgment affirmed.  