L. 1909, ch. 43

Notice of Dishonor

88181, 182

Executor.-An executor cannot waive notice of dishonor of an instrument, so as to bind the estate of the indorser. Matter of Mandelbaum, (1913) 80 Misc. 475, 141 N. Y. S. 319, affirmed 159 App. Div. 909, 144 N. Y. S. 1128. Pleading. In an action by the holder of a note against an indorser thereof, if the holder relies on a waiver of notice of dishonor, it is necessary that he set out in his complaint the facts constituting the alleged waiver, for such facts cannot be proved under a general allegation stating presentment of the note and protest and that notice thereof was given to the indorser. Bird v. Kay, (1899) 40 App. Div. 533, 58 N. Y. S. 170.

Where the waiver is

§ 181. Whom affected by waiver. embodied in the instrument itself, it is binding upon all parties; but where it is written above the signature of an indorser, it binds him only.

This section was derived from the Negotiable Instruments Law of 1897, § 181.

Waiver of notice of dishonor: see supra, § 180. Waiver of presentment: see supra, § 142.

§ 182. Waiver of protest. A waiver of protest, whether in the case of a foreign bill of exchange or other negotiable instrument, is deemed to be a waiver not only of a formal protest, but also of presentment and notice of dishonor.

This section was derived from the Negotiable Instruments Law of 1897, § 182.

Waiver of presentment: see supra, § 142; Waiver of notice of dishonor: see supra, § 180. When protest required: see infra, §§ 189, 260.

Declaratory of prior rule.- Prior to the enactment of this section, it was held that a waiver of "protest" imported a waiver both of demand and of notice of dishonor. Coddington v. Davis, (1848) 1 N. Y. 186; Hood v. Hallenback, (1876) 7 Hun 362.

"The term protest in a strict technical sense is not applicable to promissory notes. The word, however, as I apprehend, has by general usage acquired a more extensive significance, and in a case like the present includes all those acts which by law are necessary to charge an indorser. When among men of business a note is said to be protested, something more is understood than an official declaration of a notary. The expression would be used indifferently to indicate a series of acts necessary to convert a conditional into an absolute liability, whether those acts were performed by a mere clerk or a public officer." Coddington v. Davis, (1848) 1 N. Y. 186.

"Protested" implies demand.-A statement in a notice of dishonor that a note has been "protested " for nonpayment sufficiently states that the note was presented and payment was demanded. Youngs v. Lee, (1855) 12 N. Y. 551.

Allegation of "protest."-A complaint in an action on a note which alleges the due presentation of the note for payment and the demand and refusal thereof and that the note was duly protested for nonpayment, of all of which the maker had notice, does not sufficiently allege that notice of dishonor was given to an indorser, for the averment that notice was given to the maker tends to exclude the idea of an allegation that notice was given to the indorser. Cook v. Warren, (1882) 88 N. Y. 37.

$ 183

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L. 1909, ch. 43

§ 183. When notice dispensed with. Notice of dishonor is dispensed with when, after the exercise of reasonable diligence, it can not be given to or does not reach the parties sought to be charged.

This section was derived from the Negotiable Instruments Law of 1897, § 183.

Necessity of notice of dishonor, in general: see supra, § 160. Excuse of delay in giving notice: see infra, § 184. Due diligence to find maker for presentment: see supra, § 136.

Due diligence as an excuse for non-service.-"It is well settled, that where the indorser has no place of residence which the reasonable diligence of the holder can enable him to discover, the law dispenses with giving regular notice." Hunt v. Maybee, (1852) 7 N. Y. 266. Facts examined and held that due diligence was not used to ascertain the location of the indorser. University Press v. Williams, (1900) 48 App. Div. 188, 62 N. Y. S. 986, reversing 28 Misc. 52, 59 N. Y. S. 817.

"Where personal service is relied upon, the evidence must show either actual personal service or ordinarily intelligent, diligent effort to make personal service upon the indorser either at his place of business during business hours, or at his residence if he have no place of business; but if he be absent it is not necessary to call a second time, and the notice may, in that event, be left with anyone found in charge, or if there be no one in charge, or no one there, then the giving of notice is deemed to be waived." American Exch. Nat. Bank v. American Hotel Victoria Co., (1905) 103 App. Div. 372, 92 N. Y. S. 1006.

Inquiry of maker. If the residence of an indorser is unknown to the holder of a note, due diligence requires that he make inquiry of the maker. Lawrence v. Miller, (1857) 16 N. Y. 235.

Ignorance of notary protesting note. The law requires diligence of the holder of an instrument; and, if the holder knows the residence of the indorser. the indorser is entitled to notice, although the notary protesting the instrument does not know the residence of such indorser. Lawrence v. Miller, (1857) 16 N. Y. 235.

Inquiry at place of employment.- Reasonable diligence is not exercised where the holder of an instrument inquires for the indorser only at the place where he was employed at one time, and, upon being told that he is not known there, makes no other inquiry. Silver v. Loucheim, (1914) 147 N. Y. S. 29.

Excuse of one party as excuse for another. While under section 163 a notice of dishonor given by one party may inure to the benefit of another, an excusable failure of one party to give notice after an exercise of due diligence does not excuse another indorser who has more knowledge or means of ascertaining the place to serve the notice. Beale v. Parrish, (1859) 20 N. Y. 407, 75 Am. Dec. 414.

Examination of directory.-The mere examination of a city directory is not due diligence in ascertaining the residence of an indorser and does not excuse the failure of the holder to make the service. McGrath v. Francolini, (1915) 92 Misc. 359, 156 N. Y. S. 981. See also Greenwich Bank v. DeGroot, (1876) 7 Hun 210. Under chapter 416 of the Laws of 1857, relative to the service of notice of dishonor on an indorser, it was held that merely looking into a directory and not pursuing the inquiry any further to ascertain the residence or place of business of one to be served with a notice, was not a sufficient inquiry. Cuming v. Roderick, (1898) 28 App. Div. 253, 50 N. Y. S. 1053, affirmed on opinion below (1901) 167 N. Y. 571, 60 N. E. 1109. See also Baer v. Leppert, (1878) 12 Hun 516. And see Bacon v. Hanna, (1893) 137

66

§§ 184, 185

N. Y. 379, 33 N. E. 303, 20 L. R. A. 495, wherein the court, referring to the examination of a directory, said: Merely looking into a directory is not enough. The sources of error on that process are too many and too great. Such books are accurate enough in a general way, and convenient as an aid or assistance, but they are private ventures, created by irresponsible parties and depending upon information gathered as cheaply as possible and by unknown agents."

Although the examination of a directory may not be sufficient diligence to ascertain an indorser's residence, if the notary endeavors to ascertain the address from the makers of the note and tries to reach other parties who he thinks may have some knowledge of the indorser and spends three-quarters of an hour in a search for his location, and then finally resorts to the information afforded by the last issue of the standard city directory, the notary has used due diligence and the indorser is not discharged, although the notice is sent to the wrong street address in New York city and is never received by the indorser. McGrath v. Francolini, (1915) 92 Misc. 359, 156 N. Y. S. 981. Cited. Howard v. Van Gieson, (1900) 56 App. Div. 217, 67 N. Y. S. 620; Fonseca v. Hartman, (1903) 84 N. Y. S. 131.

§ 184. Delay in giving notice; how excused. 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. When the cause of delay ceases to operate, notice must be given with reasonable diligence.

This section was derived from the Negotiable Instruments Law of 1897, § 184.

Necessity of notice of dishonor in general: see supra, § 160. Service of notice excused: see supra, § 183.

What constitutes reasonable time: see supra, § 4.

Ignorance of place to serve notice.-Although ignorance of a proper place to serve a notice of dishonor may excuse the service so long as such ignorance continues, the duty arises when knowledge is acquired, and negligence thereafter may release the indorser from liability. Beale v. Parrish, (1859) 20 N. Y. 407, 75 Am. Dec. 414.

Delay occasioned by indorser.-Where the indorsers of a note shortly before its maturity, knowing that default would be made in its payment and that the holder would take the necessary steps to fix their liability, ask the holder to wait a few days to see if he can fix up the note, the indorsers cannot take advantage of the delay to the prejudice of the holder. Bush v. Gilmore, (1899) 45 App. Div. 89, 61 N. Y. S. 682.

War. The existence of war arrests all commercial intercourse and communication between the citizens of the contesting states; and so long as the war continues it is not necessary to serve a notice of dishonor upon an indorser residing in an enemy state; but the notice must be sent when the interruption of intercourse ceases. Harden v. Boyce, (1870) 59 Barb. 425. Cited. Howard v. Van Gieson, (1900) 56 App. Div. 217, 67 N. Y. S. 620.

§ 185. When notice need not be given to drawer. Notice of dishonor is not required to be given to the drawer in either of the following cases:

1. Where the drawer and drawee are the same person;

2. Where the drawee is a fictitious person or a person not having capacity to contract;

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3. Where the drawer is the person to whom the instrument is presented for payment;

4. Where the drawer has no right to expect or require that the drawee or acceptor will honor the instrument;

5. Where the drawer has countermanded payment.

This section was derived from the Negotiable Instruments Law of 1897, § 185.

Necessity of notice of dishonor in general: see supra, § 160. When notice of dishonor is excused: see supra, § 183. When delay in giving notice of dishonor is excused: see supra, § 184. When notice need not be given to indorser: see infra, § 186.

Payment of check stopped by drawer.-In an action against the drawer of a check, it is not necessary that the complaint should allege that notice of dishonor was given to the drawer, where it is alleged that the drawer stopped or countermanded the payment thereof. Scanlon v. Wallach, (1907) 53 Misc. 104, 102 N. Y. S. 1090.

Drawer not in funds.— If the drawer of a check has no funds in the hands of the drawee wherewith to pay the check, presentment and notice of dishonor are not essential in order to charge the drawer. Grant v. MacNutt, (1895) 12 Misc. 20, 33 N. Y. S. 62; Cassel v. Regierer, (1908) 114 N. Y. S. 601. It has been the established rule for many years that, where there are any funds in the hands of the drawee so that the drawer has the right to expect that the bill will be paid, or where there are not any funds, yet if the bill was drawn under such circumstances as induced the drawer to entertain a reasonable expectation that the bill would be accepted and paid, the person so drawing it is entitled to notice of the dishonor. Robinson v. Ames, (1822) 20 Johns. 146, 11 Am. Dec. 259.

Insolvency of bank.—If the payment of a check is refused because of the insolvency of the bank on which it is drawn, the payee must give notice of the dishonor to the drawer. Bacigalupo v. Parrilli, (1908) 112 N. Y. S. 1040. But see Grant v. MacNutt, (1895) 12 Misc. 20, 33 N. Y. S. 62, holding that, where a bank on which a check is drawn suspends payment within the time required for the presentation thereof, notice of dishonor is not essential in order to charge the drawer.

Instrument drawn on drawer.-A complaint in an action on a check is sufficient where it alleges that the defendant gave the plaintiff her check payable at a certain bank and "that when the said check was presented for payment, payment thereof was refused by the defendant herein," for notice of dishonor is not necessary where the drawer is the person to whom the instrument is presented for payment. Adler v. Levinson, (1909) 65 Misc. 514, 120 N. Y. S. 67.

Burden of proof. The general rule requires notice of dishonor, and if notice is unnecessary under this section the burden is upon the holder to show the facts excusing the necessity for the notice. Cassel v. Regierer, (1908) 114 N. Y. S. 601.

Cited.-Matter of McIntyre, (1912) 198 Fed. 579.

§ 186. When notice need not be given to indorser. Notice of dishonor is not required to be given to an indorser in either of the following cases:

1. Where the drawee is a fictitious person or a person not having capacity to contract, and the indorser was aware of the fact at the time he indorsed the instrument;

L. 1909, ch. 43

Notice of Dishonor

§§ 187, 188

2. Where the indorser is the person to whom the instrument is

presented for payment;

3. Where the instrument was made or accepted for his accommodation.

This section was derived from the Negotiable Instruments Law of 1897, § 186.

Necessity for notice of dishonor in general: see supra, § 160. Waiver of notice: see supra, § 180. Service of notice excused: see supra, § 183. Delay of notice excused: see supra, § 184. When notice need not be given to drawer: see supra, § 185.

Prior rule." Prior to the Negotiable Instruments Law the decisions in this state were to the effect that demand and notice were unnecessary where the indorser was himself the principal debtor, where he had taken a general assignment of the maker's property, where the indorser had expressly or by implication waived demand and notice, and where the failure to make demand and give notice to the indorser could not possibly operate to his injury." Brooklyn First Nat. Bank v. Gridley, (1906) 112 App. Div. 398, 98 N. Y. S. 445.

Indorser as principal debtor. The payee of a note is entitled to show that an apparent indorser of a note is in fact the principal debtor and consequently that presentment and notice of dishonor are not necessary in order to sustain his liability. Witherow v. Slayback, (1899) 158 N. Y. 659, 53 N. E. 681, 70 A. S. R. 507.

Partnership of maker and indorser.-When the maker and indorser of an instrument are partners, and, individually and as partners, they are adjudicated bankrupts, and the same trustee is appointed for both, individually and as partners, notice to the trustee of the dishonor of the instrument is not required in order that the holder shall have a claim against the estate of the indorser. Matter of McIntyre, (1912) 198 Fed. 579.

Corporate officer as indorser.-Notice of dishonor of a corporate note is not required to be given to the indorser, when such indorser is the officer who signed the note on behalf of the corporation and to whom presentment was made and who knew that the note would not be paid at maturity. William S. Merrell Chemical Co. v. Root, (1915) 152 N. Y. S. 368. See also supra,

§ 180, as to the waiver of notice by a corporate officer.

Cited. Haddock v. Haddock, (1908) 192 N. Y. 499, 85 N. E. 682, 19 L. R. A. (N. S.) 136.

§ 187. Notice of non-payment where acceptance refused. Where due notice of dishonor by non-acceptance has been given, notice of a subsequent dishonor by non-payment is not necessary, unless in the meantime the instrument has been accepted.

This section was derived from the Negotiable Instruments Law of 1897, § 187.

§ 188. Effect of omission to give notice of non-acceptance. An omission to give notice of dishonor by non-acceptance does not prejudice the rights of a holder in due course subsequent to the omission.

This section was derived from the Negotiable Instruments Law of 1897, § 188.