1828. the delay. In 7 Cowen, 176., Judge Woodworth intimates a doubt August Term whether a demand in the case of a check is necessary at all; thus showing that he did not consider drawers of bills and endorsers of notes as standing in the same situation. III. But if this check is to be considered as completely assimilated to a bill of exchange, the situation of the bank dispensed with a demand and notice. The rule is, that when the drawer has no funds in the hands of the drawee at the maturity of the bill, (although there might have been effects at the time when the bill was drawn) then notice is dispensed with. Is there any difference in principle, whether the funds are actually withdrawn, or whether they are locked up by an injunction? In the ordinary cases of insolvency on the part of the drawee, ademand and notice are not dispensed with, because the bill may be paid by other means; asby the assistance of friends, ora special appropriation. In this case the reason cannot operate; for a payment of the check would have been a violation of the injunction, and would have subjected the party to punishment. The defendant then has had no effects in the bank at any period within a reasonable time for presenting the check, which could have been applied to his draft. He has not been injured by a want of demand and notice; because such demand would have been totally unavail ing, unless made at the earliest possible moment after the check was drawn. This extraordinary promptness is not required of the plaintiffs, and they were merely bound to use ordinary diligence, or to avoid all neglect. No laches in this case can be imputed to them, and they are entitled to recover, either upon the second count, or on the insimul computassent. JONES, C. J., after stating the facts of the case, observed, that the questions arising upon the facts were, first, whether proof of the presentment and demand of the check and notice of its dishonour were, under the circumstances of the case, indispensable prerequisites to a recovery on the check? and secondly, whether the balance, for which the check appeared to have been given, Cromwell and Wing. V. 1828. August Term was recoverable on the count, upon an account stated or not. These questions were considered by him at large upon the geCromwell and neral principles of law applicable to the case; but his opinion upon Wing. v. Lovett. the other points, they involve, is omitted, and that portion of his observations alone given, which relates to the legal effect and operation of the injunction upon the right of the parties; and which branch of the subject was considered by him only. After expressing his opinion on the other question in the cause, the Chief Justice proceeded as follows: But if the general rules of law or the usage of merchants required the presentment of the check and the demand of the money, as prerequisites to the right of action against the drawer; and if the insolvency of the bank, or the temporary suspension of its payments, would not excuse the neglect of demand of payment and notice of dishonour, and if even proof of the due observance of these formalities should be held necessary to entitle these plaintiffs in other circumstances to sustain an action upon the antecedent debt, for which the check was given, yet this case would not, in my view of it, come within the rule. This case does not stand upon the insolvency of the bank, or its suspension of payment solely. The stronger ground is, that the bank was under a legal restraint, and disabled by process of law from applying the deposits of the drawer to the payment of the check: and if such was the case, a demand could not have been of any possible avail to the drawer, and the reason given for requiring a demand upon a bankrupt fails; since the officers of the bank could not be expected under such circumstances to interpose with their own moneys to pay the drafts of the dealers. How far a mere temporary restraint by an injunction at the suit of a party, praying for it as a precautionary measure, and which is liable to be dissolved or modified, would excuse the necessity of a demand, may perhaps be questionable: for in such case the deposits of the drawer, on which he values remain entire, and it may be, that the obstacle to their application to the payment of the check will be speedily removed. But was this such an injunction, or was it not the remedial process authorised by the act of the 21st of August Term April, 1825. "to prevent fraudulent bankruptcies by incorporated companies, and to facilitate proceedings against them, and for Cromwell and other purposes?"(a) 1828. Wing. v. Lovett. By the 17th section of that act, the court of Chancery is authorised and required, -upon the application of the attorney general, or a creditor of any incorporated bank or company, and upon proof that such company is insolvent, or that it has violated any of the provisions of the act incorporating it, or of any other act, which shall be binding upon it, -to issue an injunction restraining such company and its officers from exercising any of the privileges or franchises granted by the act incorporating such company, or by any other act, from the collecting or receiving any debts, and from paying out or in any way transferring any of the monies or effects of such company, until such court shall otherwise order; and the act provides, that it shall be lawful for such court to appoint a receiver of the monies, property and effects of such company, and to distribute the same amongthe fair and honest creditors thereof. The legal effect of this proceeding is to dispossess the officers of the bank of all power and control over the money of the bank, and to make it unlawful for them to pay any order or checks upon them. And when the process of injunction is accompanied with or followed by the appointment of a receiver, the effect upon the depositors is to divest them of the right to withdraw their deposits, and it effectually operates as a statutecountermand of their checks. The terms of the act are peremptory, that the monies, property and effects of the company shall be distributed among the fair and honest creditors of the institution; and the depositors and billholders are equally creditors of the corporation, and the deposits make part of the monies of the bank distributable amongst the creditors generally. The money which a dealer deposits is not kept distinct and separate in the vaults, for the use of the depositor to be specifically returned to him upon demand; but it is intermingled with the other monies of the institution, and makes part of its general (LN. Y. 1828. 48th Sess. c. 325. August Term fund for the common benefit, and only entitles the deposit or to a 1828. credit upon the bank to the amount of his deposit: giving him a Cromwell and right to draw upon the bank to that amount at pleasure, in Wing. v. Lovett. checks payable upon presentation. When therefore the bank subjects itself to the provisions of the statute, and the injunction issues and a receiver is appointed, all right of every creditor to payment, other than by the ultimate receipt of the distributive share of the assets wholly ceases. The depositors and the bill-holders are alike deferred to the final settlement of the affairs of the bank for their dividend. The fund for the payment of checks is abstracted by the force of the statute, and the check can no longer be paid by the cashier, however great his desire may be to pay it. Can a demand be necessary under such circumstances ? or must not the entire change in the state of things absolve the holder of the check from the obligation of presenting it for payment to drawers, who would incur a contempt by paying it, and moreover act in their own wrong, perhaps, and render themselves liable for the whole amount of the money to the creditors. Is not the transfer of the fund, upon which the check was drawn, from the officers of the bank to the receiver by the operation of law, equivalent to the withdrawal of the money, by the drawer of the check, and must it not equally dispense with the necessity of a presentment, or the formal demand of the money? The Supreme Court of the State of Massachusetts in the case of Hale v. Burr, [12 Mass. R. 86,] decided that no demand of payment upon the personal representatives of a deceased promissor, or notice of nonpayment was necessary, under the laws of that state, to charge the indorsers; because an administrator is not obliged to pay any debt of the deceased, except such as are privileged until the lapse of a year from his appointment, and because, in case of a deficiency of assets to pay the debts, a general distribution takes place among all the creditors, with the exception only of those who fall within the privileged classes. A demand therefore upon the administrator would be nugatory, and a mere troublesome formality, and it would be idle to require it. The court in that case admit the rule to be otherwise in England; but they take the distinc 1928. Cromwell and tion that in England the executor or administrator is at liberty to August Term pay any debt he pleases, in preference to others of the same degree, and to the total exclusion of all others of the same class, provided the residue of the assets are sufficient to discharge those of a higher grade, and that he may in such case discharge himself, by showing that he has fully administered. In England, therefore, the administrator may pay the bill when called upon; and the other parties upon it have a right to the chance that he will. But in the state of Massachusetts, where the estate is insolvent, there is no reason to presume, or to suppose, that a demand would be effectual. This distinction appears to me to rest upon a solid foundation; and considerations equally powerful apply to the case of a bank, whose operations are arrested by these peculiar statuteprovisions existing in our state, and whose affairs are to be wound up and settled by a receiver. Such a case must form an exception to the general rule. No principal of law, nor any mercantile usage, can require so vain a ceremony, as a formal demand of payment upon a party, who is by a public statute divested of the means and the authority to pay. If, therefore, it sufficiently appears that the injunction in this case did issue under that statute, no demand of the check could be necessary, nor any notice of non-payment. The case is deficient in clearness on this point, and it will be difficult to collect the character of the injunction from the fact it discloses. But the nature of the proceeding against the bank is a matter of notoriety. We cannot shut our eyes to the fact. The bank was a public institution located in this city. The injunction, which suspended its operations, emanated from one of the highest judicial tribunals in the state, and was openly and publicly announced at the bank. It was accompanied, or promptly followed by the appointment of a receiver, who immediately entered upon the duties of his office, and displaced the officers of the bank; and whose appointment, with the powers vested in him thereby, were published in the gazettes of the city. Acts so public, and proceedings so decisive in their character, and so open and efficient in their operation, were calculated to attract the attention of the citizens generally; and the debtors and creditors of the bank, in common with its FOL. L 9 |