
    Commercial Bank of Albany vs. Hughes.
    A person is not incompetent as a witness because lie believes himself interested in the event of the suit; the court, and not the person called as a witness, must decide upon his compitency. Objections arising from a supposed moral or honorary obligation, go merely to the credibility of the witness.
    A drawer of a bill, or the endorser of a note, is not discharged from liability by the omission of the holder to make presentment or demand, or to give notice of non-acceptance or non-payment where it is clearly shown that no injury or damage has been sustained in consequence of the omission, 
    
    damage, however, will be presumed from the omission, until all possibility of injury from the laches of the holder is removed by proof.
    /There money paid into a bank, is passed generally to the credit of the owner, and not placed or received as a special deposit, the bank do not hold the money as bailees, but the relation of debtor and creditor is created, and the money may be applied by the bank to the payment of any demand they may have against the depositor; and if the money be lost, though without the fault of the bank the depositor is entitled to payment. 
    
    
      This was an action of assumpsit, tried at the Schenectady circuit, in October, 1834, before the Hon. James Vanderpoel. one of the circuit judges.
    The plaintiffs claimed to recover against the defendant as the third en orser of a bill of exchange drawn by Lucian Tuffs on Messrs. Rice & Co., for §1500, dated 1st March, 1834, payable thirty days after date, to the order of the drawer; and endorsed first by the drawer; secondly, by William Rice & Co.; and thirdly, by the defendant. On the part of the defence it, [95] was shown that on the 11th July, 1834, Tuffs presented at the counter of the Commercial Bank his check on that bank for $1502, and tendered $10 in cash, and demanded the bill of exchange, which the then cashier of the bank refused to deliver up. At the time of the presentment of the check, Tuffs had on deposit, in the bank, the sum of $1505‘04 provided that the bank was not authorized at that time to charge his account with $900, the amount of a draft drawn by him 7th October, 1833, on Messrs. Ridgeway & Leversee, of Philadelphia; the circumstances in relation to which are the following: The draft for $900, was payable ten days after date, was endorsed by one E. H. Cook, and discounted by the plaintiffs who paid the money therefor to Tuffs. The draft was never forwarded to Philadelphia, or presented to the drawees for acceptance or payment, and seems to have been overlooked until 7th June, 1834, when an interview took place' on the subject between Bartow, the then cashier of the bank, and Tuffs, the drawer. The cashier testified that in this interview, Tuffs told him that he had settled his accounts with Ridgeway & Leversee. and had withdrawn his funds from their hands; that the draft need not be sent on acceptance or payment and that he would call the next day and settle or arrange the matter; but that he had subsequently refused to do so. The defendant having executed a release to Tuffs, as the prior endorser upon the bill in a suit, called him as a Witness. The plaintiff’s counsel insisted that he was interested notwithstanding the release, and objected to his being sworn but the objection was overruled. The defendant then offered to prove by Tuffs that the draft for $900, was drawn and the money received thereon by Tuffs, for the benefit of Cook, he, Tuffs, having no beneficial interest in the matter; that he appropriated the money in the purchase of flour for Cook, shipped it to Messrs. Ridgeway & Leversee, who sold it and paid over the avails to Cook. The plaintiffs objected to this evidence, unless the defendant could bring knowledge of these facts home to the plaintiffs. The defendant disclaiming the ability to do so, the evidence offered was rejected by the judge Tuffs then testified, that he received his accounts from Ridgeway & Leversee about 1st February, 1834, showing a balance against him of 717-54. which he paid; the balance thus paid, Cook was bound to pay, as between him and Cook. When the account of Ridgeway & Leversee was received by him, he did not examine it particularly, but he handed it over to Cook, and did not again see it until June or July. He did not know that the draft had not been sent to Philadelphia, nor was he aware that it had not been paid until so informed by the cashier on 7th June. Cook was in good credit until the first day of April, when he failed and absconded. He further testified that between Albany, where he resided, and Philadelphia, communications could be had in 24 hours. In relation to the interview between him and the cashier on the 7th June, he testified that in answer to a question put to him by the cashier as to how he proposed settling the draft for $900, he told the cashier that if he was obliged to settle it he supposed he should have to do it; and that after advising with counsel he called at the bank and gave notice that he would not pay the draft. At the close of his testimony Tuffs stated on his cross-examination that the defendant in this cause had nothing to do with the $900 draft, and that if the plaintiffs recovered the whole of the $1500 draft, he, the witness, would lose $900 by Cook. The plaintiffs’ counsel thereupon insisted that it was now apparent that the witness had a direct interest in the result of the suit, and asked the circuit judge that his testimony be stricken from the case; which motion was denied. The judge thereupon charged the jury that if Tuffs had sufficient funds in the bank to meet the payment when he offered his check, the defence was sustained; that the bank had the same right as an individual to apply such funds to any demands they had against Tuffs, but not otherwise; that the only question for the jury to determine was, whether Tuffs made a promise to the bank to pay the $900 draft after he knew that it had not been presented to the drawees, and if he had not made such promise the bank had no right to charge it to his account. That the testimony upon that point was conflicting, and it would be their duty to determine whether the pro- [97] mise had been sufficiently proved. The jury found for the defendant. The plaintiffs ask for a new trial.
    
      R. P. Bates and J. Van Buren, for the plaintiffs.
    S. Stevens, for the defendant.
    
      
      
         Dolfus v. Frosch, 1 Denio, 367 : Bickerdike v. Bollmar, 1 T. R. 405 ; Dickens v. Beal, 10 Peters, 572. See 3 Kent’s Comm. 110, and note c to 7th edition. The courts are inclined ratuer to restrict than enlarge this exception to the rule requiring notice to be given. 3 B. & Ald. 623; 6 Bingham, 623. The exception applies only to the drawer and not to an endorser. Kent’s Comm, ubi supra and cases there cited. Agan v. McManus, 11 Johns. 180 ; Chitty on Bills, 357. So in the case where the maker has made an assignment of all his property to secure the endorser. Bond v. Farnham, 5 Mass. Rep. 170; Barton v. Baker, 1 Serg. & Rawle, 334; Mech. Bank v. Griswold, 7 Wend. 165; Durham v. Rice, 5 Serg. 300; Kelly v. Mayor of Brooklyn, 4 Hill, 263. It is supposed that this rule will apply to the case of a note made for the accommodation of the endorser. See Chitty on Bills, 356 ; Story on Prom. Notes, § 257, 268. The progress of the cases on this subject is stated in Brown v. Maffey, 15 East, 171. Where the place of payment is not designated in the bill or note, the holder will be excused from presenting and demanding payment if the maker have absconded or removed from the state, or if after sufficient diligence has been used in inquiring, the maker’s residence can not be found. Taylor v. Snyder, 3 Denio, 151, and cases there collected. Justice Beardsley says (on p. 151). “ Thus where the maker has absconded that will ordinarly excuse a demand, and notice of the fact is sufficient to hold the endorser. (1 Ld. Raym 443, 743; 3 Kent, 96 ; Putnam v. Sullivan, 4 Mass. 53 ; Lehman v. Jones, 1 Watts & S. 126; Chitty on Bills, 10th Am. ed. 354 n 1: Story on Prom. Notes, § 237).” Reedy v. Seixas, 2 Johns. C. 337 ; Bank of Rochester v. Gould, 9 Wend. 279 ; Downer v. Remer, 21 Wend. 10; Cayuga Co. Bank v. Warden, 1 Coms. 413 ; Dole v. Gold, 5 Barb. 490, 499. In this last case the court in discussing this very question and referring to Taylor v. Snyder, say, the rule “ simply requires the bolder, in such language as he may choose to adopt to inform the endorser of the fact that the maker on being called upon, has neglected to pay the note.” It must state that he has been called upon but not the manner of calling upon him.
    
    
      
       Chapman v. White, 2 Selden, 412.
    
   By the Court,

Cowen, J.

There is no foundation for saying that Tuffs is not a competent witness on being released. It is simply the common case of a first, endorser, released by and offered as a witness by his endorsee. It is doubtful whether he was not competent without any release (Barretto v. Snowden, 5 Wendell, 181).

The objection that Tuffs was discharged by the non-presentment of the bill for $900, is one of more difficulty. Neither presentment for acceptance (Chitty on Bills, 300, Am. ed. 1836; De Bert v. Atkinson, 2 H. Black. 336), nor notice of non-acceptance or non-payment (Chitty on Bills, 355, and the cases there cited), is necessary, provided the drawee never had any effects of the drawer in his hands (Chitty on Bills, 355, 6, 7, and the cases there cited), or have withdrawn them before the day of payment, without giving notice of the bill (Valk v. Simmons, 4 Mason, 113). It is otherwise where there are effects (id.), and the reason is that the drawer may protect himself by withdrawing them or withholding the farther accumulation of effects in the drawee’s hands (Chitty on Bills, 355). Formerly it was necessary, in order to complete the defence, that the drawer should prove damage to himself arising from the holder's laches; but now it will be presumed (Chitty on Bills. 355). Yet the presumption is not conclusive. If it appear in truth that no damage could arise, the necessity for presentment or notice does not exist. One instance is the common one already mentioned, of no effects with the drawee, or their being withdrawn. Beside, notice of demand and non-payment is equally necessary to the endorser of a bill or note, who is but another drawer. The reason here is the same, and it may be added in respect to both, that the notice is required for the additional [98] reason that the parties may take their remedy over against other parties who are liable to them. But this is not necessary where there is no loss and no liability in the case, and that fact is clearly shown by the holder to whom the laches is imputed. One case is an assignment, by the maker, of all his property to secure the endorser, before the note falls due (Bond v. Farnham, 5 Mass. Rep. 170). So if the. endorser has accepted a general assignment of the maker’s estate and effects (Barton v. Baker, 1 Serg. & Rawle, 334). These cases are recognized and acted upon as sound law, in Mechanics’ Bank of N. Y. v. Griswold, 7 Wend. 165, wherein a similar point was decided. A full indemnity to the endorser excuses both demand on the maker and notice to the endorser (Durham v. Rice, 5 Yerg. 300); otherwise it would be but partial (Brunson v. Napier, 1 id. 199). Several other cases have gone upon the same distinction (Mead v. Small, 2 Greenl. 207, and see Prentiss v. Danielson, 5 Conn. R. 175). It has been held in some cases that if the endorser know of the maker’s absolute and recorded insolvency, at the time of the note falling due (Clark v. Minton's adm'x, cited 2 Const. R. 682, Kiddell v. Ford, id. 678), that is enough. But any insolvency short of that will not do (id.); and our own cases have not yet gone so far (7 Wend, 169, and Jackson v. Richards, 2 Caines, 343) In the Mechanics' Bank of New York v. Griswold (7 Wend. 168), Mr. Justice Nelson said: “ Upon the maxim, that when the reason for the rule of law does not exist, it ought not to be applied, it has frequently been decided, that in the cases where the n n-payment by the maker and failure of notice to the endorser can not possibly operate to the injuiy of the endorser, the omission will nol discharge him. Thus where the endorser is himself the debtor, as where the note is discounted for his accommodation and the money raised upon it is received by'him, and therefore he ultimately holden to pay it, it is obviou.* that the reason of the rule can not apply;” and to this he cites several cases. It is no confusion of terms to take this reasoning and apply it directly to-this case. An endorser is a drawer in every sense of the word et sic e converso (Chitty on Bills, 218, 219). Here we certainly have a very strong [99] current of authority for saying, that where the endorser or drawer has plainly suffered nothing, and can sustain no mischief for want of demand and notice, none need be made or given; and it accords with the true and only reason why such demand and notice are called for. The question seems merely to be one of evidence. The drawer or endorser is presumed to have been injured by the omission, until the plaintiff, by proof on his side, remove all chance of damage.

In. the case at bar, the $900 bill was not remitted, in consequence of which, instead of sustaining any loss himself, the drawer tells us he got the money out of the hands o'f the drawees. In reply, it was proposed to prove that Tuffs drew the $900 bill for the accommodation of Cook, who had become insolvent; that the avails were invested by Tuffs in merchandise shipped to the drawees, from whom Cook received the proceeds of the shipment; that Cook continued in good credit till the 1st of April, 1834, when he failed and absconded. In February, preceding, Tuffs had received his account from Ridgeway & Leversee, the drawees, stating a balance of about $700, which Cook was bound to pay; but Tuffs did not examine the account so as to learn whether the draft was charged to him. It was handed over to Cook, nor did he learn that it had not been paid till told so by the cashier in June. It was also proposed to prove by Tuffs that he should have taken measures against Cook, had his attention been drawn to such a state of his account as the additional §900 would have presented. Some of this evidence was expressly overruled, all was objected to, some portion was heard, but all virtually excluded by the judge in his direction to the jury. He put the whole question on a subsequent premise by Tuffs. That all the testimony offered and given in respect to any loss through Cook would have amounted to any thing in the mind of the jury, we can not say. Should the jury be unable to say clearly that no loss through Cook arose from the want of a presentment, I am not prepared to hold that the rule dispensing with notice would be satisfied. Had the bill been presented, the difference of balance in the account of the drawees might very well have aroused Tuffs’ atten- [100] tion, and led to greater vigilance in respect to Cook; yet Tuffs’ loss in that quarter was a consequence quite remote, and if it arose from mere omission to look over the account, would seem to savor of gross negligence. All this was, however, shut out, and perhaps properly; and the plaintiffs complain that Tuffs was holden to be discharged while he held the very funds which he drew, merely for want of sending on the bill. Non constat that he had suffered any damage—nay he could not have suffered. He held the money for the use of the plaintiffs, and good faith would require him to pay it. Such is the result of the evidence as it stood before the jury. I think on the whole that Tuffs must be taken to have been a debtor to the bank as drawer, or as for money had and received, on the day when he drew for his deposit money to the amount of the $900.

But it is insisted that if he was thus indebted, yet the plaintiffs had no power to apply his deposit money to the payment of the $900 draft, any more than to the payment of the bill now in question; that the $1502 on deposit, were in the hands of the plaintiffs as his servant or agent, from whom he might take it as from his own chest, and pay and apply it on what debt of his own he pleased; and that his direction to apply it on the bill in question was binding on them; that it was for him to pronounce on the debt, to pay which, the money should be applied. I apprehend this is a mistaken view of the matter. The case is not one which comes within the rule as to the appropriation of payments. Had the money been in Tuffs’ hands, or in the hands of the plaintiffs as his servants or bailees, that would have perhaps been so. For instance, had the $1502 been placed in a keg or bag, and specifically receipted by the plaintiffs to be delivered on demand, the question would have arisen. But I understand these deposits to create the relation of debtor and creditor. The bank takes the money in the nature of a gratuitous loan, and charges itself with a debt absolutely due to the depositor. It is not the case of a technical bailment. Should the money be lost without the fault of the bank, it would be liable. The transaction is called a [101] deposit; and formerly, perhaps, was so in fact, and may still be made so. But such is not the course of business. Tuffs and the plaintiffs then, were mutually indebted to each other; and he could only call as a matter of right for the balance due him, which would be his $1502 less the $900. So much he had a right to appropriate to the bill in question by his check; but no more. Between two persons mutually indebted, the balance is the debt.

On the whole, there must be a new trial upon the sole ground that, as the case was put to the jury, it supposed and distinctly presented the drawer taking back the very fund, originally devoted to answer the bill for which he had received value. I admit the liability of the drawer or endorser is, in general, conditional, and depending on demand and notice; and that ihe rule should be strictly adhered to. Without demand and notice, he is prima facie discharged. He is conclusively discharged, unless it appear, and that clearly, that he could suffer no injury from the laches of the holder. Such I take this case to be, if we lay out of view the relation which arose between Tuffs and Cook, and the loss alleged by Cook’s insolvency in consequence of Tuffs being put off his guard. That being inadmissible, the case is a clear one. Usually, the inquiry as to loss, has been confined to the fund with the drawee, acceptor or maker. Has the drawer or endorser lost by him ? I do not know how we can look into losses from dealings or speculations with the fund as between the drawer or endorser and third persons. It would open an uncertain and impracticable inquiry. But we are not called on to decide the question.

One word further may be due to the question of competency. After Tuffs was released, he still appears to have been left under an impression that he was interested. He said if the plaintiffs recovered the whole amount due on the bill in question, he should lose $900 by Cook; and this was pressed upon us as an objection upon the ground of incompetency. We wish it understood, if it be not so already, upon plain and full authority, that the witness is not to be received as the judge upon this question of competency. Credibility is another matter. Mental interest, or moral, or honorary obligation, [102] may go to the jury; but legal technical interest alone, is to govern the presiding judge. The distinction was necessarily involved in almost all the numerous cases which have overruled the objection of apparent interest, and seems perfectly at rest in England (1 Phil. Ev. 53. 7th ed.) I confess I had supposed the distinction equa.ly well settled in this state, and have always acted on it. I find, however, it is left in some obscurity by The Trustees of Lansingburgh v. Willard (8 Johns. R. 428), the case now mainly rel ied on by the plaintiffs’ counsel; and it must be confessed the American authorities have been singularly vascillating. When I say so, I mean upon the point of fancied legal, not honorary obligation. The following are some of the cases which exclude for that imaginary legal interest: The Trustees of Lansingburgh v. Willard, already cited, may be set down as one case. To which, add Richardson's ex'r v. Hunt. 1 Munf. 148; Skillinger v. Bolt, 1 Conn. Rep. 147); Plumb v. Whiting. 5 Miss. Rep. 518; M'Veaugh v. Goods, 1 Dall. 62, cited and approved; 2 Dall. 50; Freeman v. Luckett, 2 J. J. Marsh. 390. The following and better considered cases, are the other way: Fernsler v. Carlin, 3 Serg. & Rawle, 130; Rogers v. Burton, Peck, 108; Long v. Baille, 4 Serg. & Rawle. 222; State v. Clark, 2 Tyl. 373; Stinimel v. Underwood, 3 Gill & John. 282; Havis v. Barclay, 1 Harp. 63. On the other hand, a witness really interested, shall not be received, because he thinks he is not so (Doe ex dem. Stales v. Bragg. Ry. & Mood. N. P. Cas. 388). These latter decisions are in harmony with the cases, which are quite uniform, that a mere honorary obligation shall not disqualify a witness. Wells v. Lane, 8 Johns. 462; Gilpin v. Vincent, 9 Johns. 219; Moore v. Hitchcock, 4 Wendell, 292, with many other American cases, all one way. Mr. Phillips, after reviewing the numerous English cases, which receive a witness, though he still appear to be interested in the question merely, adds: “ The witness in those cases would probably have admitted that he believed himself interested; and it was upon the supposition of this fact that the objection must have been founded. Those cases, therefore, in which [103] such objections were overruled, appeared to have determined this point, that a witness will not be incompetent merely on the ground of his believing himself interested” (1 Phil. Ev. 53, 7th ed.) American cases of the same sort, have multiplied to an almost infinite variety.

New trial granted; costs to abide the event.  