DANIEL CORBIT, (acting assignee of David Wilson,) vs. THE PRESIDENT, DIRECTORS AND COMPANY OF THE BANK OF SMYRNA, 2 Harr. 235

Mr. Justice Black delivered the opinion of a majority of the court. Black, Justice. The prominent facts set forth in the case stated are briefly these: On Monday, 24th March, 1834; about noon, D. Corbit, as an assignee of David Wilson, received from George Biddle, agent of Anri Ford, $1,5Í0 of the notes of the Bank of Maryland, and $160 of the Bank of Cohens, in Baltimore.

On the same day he enclosed them to Presley Spruance, to be deposited in the Bank of Smyrna to his credit, stating, that if the bank would so take them; they should remain on depositó for one year, or until a certain suit by George Houston should me ended; On the same day, but after banking hours, Mr. Spruance handed the letter and notes to the cashier of the bank, who told Spruance he would take the money and pass it to Mr. Corbit’s credit as desired, and that Spruance could write to Mr.

Corbit that the bank had received the money, which Spruance did by the mail of the next day, and infofmed him that no objection had been made to the paper. On the next morning, (the 25th,) the cashier passed the whole amount of the notes, $1670, to the credit of Mr. Corbit, on the books of the bank, in the usual way of deposit^ as cash. On the morning of Monday, the 24th, the Bank of Maryland stopped payment, and has ever since remained closed, and is unable to pay its debts» Until that morning its notes had been current in Baltimore.

At the time of this deposit^ both plaintiff and defendant were alike ignorant of the failure of the bank, or of any suspicion of such failure. On Wednesday the 26th, the cashier of the bank received information from a traveller that the Bank of Maryland had failed. On Thursday the 27th, the directors met and resolved to keep the notes in question by themselves, and directed him to inform Mr. Corbit that the money which had been thus deposited to his credit was received as a special deposit^, and that the identical notes w e r e*t o, t h e m s e 1 v e s, and would remain subject to his order.

On the afternoon of the latter day, the 27th, this notice was given Mr. Corbit. Such are the material facts of this case, and we are called upon to say upon which of these parties, under the circumstances disclosed, does the law place the loss which has arisen from the failure of the* Bank of Maryland. Bank notes constitute a large and convenient part of the currency of our country, and, by common consent, serve to a great extent all the purposes of coin.

In themselves they are not money, for they are not a legal tender; and yet they are a good tender, unless specially objected to as being notes merely and not money. Miller vs. Race, 1 Burr. 457; Bank of United States vs. Bank of Georgia, 10 Wheat. 333; Handy vs. Dobbin, 12 Johns. 220; Wright vs. Reed, 3 Term, 554. They subserve the purposes of money in the ordinary business of life, by the mutual consent (express or implied) of the parties to a contract, and not by the binding force of any common usage; for the party to whom they may be tendered has an undoubted right to refuse accepting them as money.

It would seem, therefore, that they do not in themselves possess, under any circumstances, the abstract legal character of money; nor are they of themselves the complete representatives of the legal currency of the country. Bank notes, however, well as the negotiable notes of individuals, which pass by delivery and not by indorsement, have by judicial determinations, acquired to a certain extent and under certain circumstances, a character as money, which may with propriety be termed a legal character.

This arises not from the intrinsic character or worth of the notes, but from the circumstances under which, and the objects for which, they are transferred and accepted. They may be transferred either with or without an agreement or understanding. The agreement may make them money or not money; but if there be no agreement or understanding express or implied, the rules of law and not any general usage or any assumed conventional regulation, determine when and in what cases they are money and when they are not.

This, according to our apprehension, depends on the effect or operation which, according to legal principles, has been produced by the transfer of the notes. If they have worked payment or satisfaction, actual or legal, they are in such case considered as money, and equivalent to so much coin. But if such effect be not produced, then in that case they are not held as money.

In deciding the present case, it is not essential that we should determine whether the character which bank notes have obtained as money be one that is intrinsic or conventional; but the question may properly be disposed of by applying to it those principles of law which have been settled in relation to the transfer of negotiable notes payable to bearer, whether issued by banks, other corporations, or individuals. It may be proper, however, briefly to advert to the position that has been urged upon us, that the character of bank notes as money is purely a conventional regulation.

Chancellor Walworth, in the case of the Ontario Bank vs. Lightbody, 13 Wend. 104, states that the receiving bank notes as money is not a legal but conventional regulation, and obtains only so long as the bank redeems its notes in specie; that while thus redeemed, they are considered as money and are taken at the risk of the receiver; but that the moment it ceases to redeem its notes, they cease to be the conventional representative of the legal currency of the country, whether the holder be aware of the fact or not; and if they are afterwards passed off by him. he must sustain the loss which has already occurred.

However highly we respect the decisions of that able judge, we must hesitate yielding assent to the position he has assumed, if it is to be one of universal application; if it is to be applied to contracts and debts of all classes — to cotemporaneous as well as pre-existing debts. He has adduced no authorities in its support, and it seems to us to be at variance with prior decisions both in this coutftry and in England.

The character which bank notes, or any other negotiable notes, have as money; the legal effect of a payment in them, and the agreement implied on receiving them; seem not to arise from or to be established by any conventional regulation. The community may, for the facilities of business, by what may be assumed to be common consent, or a conventional regulation, receive bank notes; they may receive them with an express agreement or without any agreement, or may refuse them altogether, for they are not a legal tender: and so may each member of the community.

But if they be received without any agreement or understanding as to liability, the law regulates their operation, and settles how far they are to be considered as money. Judicial decisions, therefore, and not conventional regulations, we apprehend, have settled and must continue to settle the point, how far and when bank notes or other negotiable notes, when passed away, are to be deemed money and operate as money. If they are passed in payment of a precedent debt, courts of justice have settled their character in such case, and their legal operation.

If they are parted with in exchange or sale, the rules of law as to each of these being the same, (2 Black's. Com. 446,) their character and effect have in like manner been fixed by the determinations of courts. These rules do not depend on, nor are they affected by the solvency or insolvency of the makers of the notes, nor are they based on any conventional regulation. When such notes are transferred from hand to hand, they pass, not according to what may be assumed to be a conventional regulation, but according to the legal rules or principles which courts have applied to such transfers.

If the community or any individual wishes to get rid of the principles that courts have thus fixed, or to avoid their application, it is not to be effected by what may be considered a conventional regulation, but by adopting such a course of conduct where bank notes are tendered (either refusing them, having an agreement, or taking a guarantee) as will prevent the application to the transaction of the established rule.

Test the principle that by the conventional regulation, bank notes cease to represent the legal currency of the country from the moment payment of them in specie is refused, and all loss thereafter falls on him who passes them, by the course of our banking institutions and the business transactions of our country during the last twelve months: none of the banks paid their notes in specie; no debts or contracts between individuals were discharged in specie, and yet the only currency was bank notes. Is this conventional regulation to be applied to all transactions during the period of suspension ?

Were no contracts legally fulfilled nor debts discharged? Are those who passed bank notes responsible for the difference in value between them and specie? This will not be pretended. Although the suspension of specie payments was universal on the part of the banks, it was not during that period the conventional regulation that their notes did not pass as money, for they were almost universally received as such by banks and individuals.

It does not, therefore, follow, that because a bank has suspended specie payments that her notes no longer pass or operate as money; nor that the person who may afterwards pass them bona fide is necessarily a guarantor of their solvency. That depends upon the purpose to which they are to be applied, whether to pay a pre-existing debt, or to fulfil a contract made at the time. In the case of Cammidge vs. Allenby, 13 Com.

Law, 201, Littledale, justice, says, “ I thinx there is no guarantee implied by law in the party passing a note payable on demand to bearer, that the maker of the note is solvent at the time when it is so passed.” Bayley, J, in the same case, says, that if the notes (those of a banker who had failed on the day of the sale) had been delivered at the time the corn was sold, instead of some hours after, the person receiving the notes would have been without remedy, as the notes would have operated as payment. In Young vs. Adams, 6 Mass.

Rep. 182, Judge Sewall, in delivering the opinion of the court, says, “ The responsibility of the bank, when the bills are true and genuine, is, we believe, at the risk of the receiver, except when paid after a known failure, if the fact be known to the payer, and the payee may be supposed to be ignorant of the fact” .In Whitbeck vs. Vanness, 11 Johns. 409, justice Spencer, in commenting on the case of Maride vs.

Hatfield, 2 Johns. 455, which was decided while he was a member of the Supreme Court, declares his opinion, that if a bank note has been passed away for a cotemporaneous debt, there is no liability on the person passing it, although the bank had at the time failed, if both parties were equally ignorant of the fact.

From the language of chief justice Kent, in the case of Markle vs, Hatfield, such would seem at that time to have been the inclination of his mind, for he says, “ The negotiable note of a third person and a bank note are equally promissory notes forlhe payment of money; and if the receiver may be presumed in tlie one case and not in the other to have taken upon himself the risk of the solvency of the drawer, there is no presumption in either case that he takes upon himself the risk of forgery.” If the rule laid down by chancellor Walworth, was intended by him only to be applied to cases of “ antecedent debts,” which was the case before him, and decided by him on that ground, there is perhaps no discrepancy betweén his opinion and those which we have cited; but if it was designed by him to go further, it is at variance with the cases referred to, and is not sustained by authority.

It has, however, been urged with great ingenuity by the counsel for the defendants, that as to bank notes and the negotiable notes of third persons, payable on demand, the rule of law is the same, whether they be given in payment of a “ precedent debt,” or for goods bought at the time the note is given in payment, and which have been denominated cotemporaneous debts. To this position, after a close examination of the authorities cited, we cannot yield assent. A distinction has existed in England for more than a century.

In the latter case, the notes operate as payment and are, therefore, held to be the same as money, and the risk of the solvency of the maker of the note is upon the person receiving, for no debt strictly is created; no credit is given to the person, but it is given to the note accepted ; it is a sale or exchange. In the former case they are not payment, and therefore, not held as money, and the risk is upon the person faying, for there a personal credit had been given, a debt created; unless in either case, an agreement to the contrary, express or implied be established.

If at the time of contract, a negotiable bill or note payable on demand, either of an individual or corporation, be transferred and received without indorsement, or any agreement or understanding as to risk, whether in exchange for goods sold and delivered, or for other bills or notes, m^nby or credit; it is a sale of such bill or note by the party delivering7t, and a purchase of it with all risks by the party receiving it.

It is considered in the same point of view as exchanging money for money, and the law implies, in the absence of proof to the contrary, that it was part of the original contract, that such note or bill was taken in absolute payment: for if such had not been the understanding, the receiver would either have refused the note or taken some guarantee of its goodness. This rule was first laid down by chief justice Holt, in 1699, in the case of the Bank of England vs. Newman. It prevailed in England through the last century, and is recognized as recently as the year 1837, in the case of Cammidge vs.

Allenby, to which we have before referred. If the notes be given at the time the contract is made and executed, the person taking them has no remedy against the person from whom he receives them, although it may afterwards appear that they were at that time of no value. But if the notes be given subsequently to the contract (though but a few hours, as in the case last referred to) in payment of a “ precedent debt,” the risk of solvency is not on the person receiving, but on him who gave it in payment. To sustain these positions we refer to the following cases: Bank of England vs.

Newman, 1 Lord Raymond, 422, and 12 Modern, 241; Hartop vs. Hoare, 3 Atk. 51; Ward vs. Evans, 2 Lord Ray’d. 930; Fydell vs. Clark, 1 Esp. Ca., 447; Emly vs. Lye, 15 East, 12; Hornblower vs. Proud, 2 Barn. & Alder. 327; Cammidge vs. Allenby, 13 Com. Law, 20; Stedman vs. Gooch, 1 Esp. Ca. 3; Puckford vs. Maxwell, 6 Term, 52; Bytes on Bills, 91; Whitbeck vs. Vanness, 11 Johns. 409.

In what we have said in relation to the rule that has been adopted, and the distinction that has been taken, we are to be understood as speaking of cases Which are free from fraud, and where the notes are genuine and such as they purport to be; for* if they prove to be counterfeit, or if there be misrepresentation, concealment, or fraud of any kind, a transfer of such notes, or genuine notes under such circumstances, will not in either case be held to be payment. Jones vs. Ryde, 5 Taunt. 488; 1 Com. Law, 166; Markle vs. Hatfield, 2 Johns. 459; Willson vs. Foree, 6 Johns. 110.

Our conviction that the distinction to which we have referred being at this time the settled law has not been shaken by the cases brought forward by the counsel for the defendants. The existence of the rule and its propriety are different questions. If we find it established we are bound to yield to it. In Lightbody vs.

The Ontario Bank, 11 Wend. 11, which was the case of a note of a bank that had failed being given in payment of a “ precedent debt,” and was expressly decided by the court on that point, chief justice Savage seems to doubt rather than deny the distinction that has been taken,' and to make the law as to cotemporaneous debts depend on the proof that may be made of what was the understanding or agreement of the parties at, the time of the transaction; without, however, determining what is the rule of law where there is no evidence of any understanding.

The authorities cited by the chief justice which we will proceed to notice, do not deny the distinction between cotemporaneous and precedent debts, but rest on principles altogether distinct frotn this question. In Owenson vs. Morse, 7 Term. 60, and in Roget vs.

Merritt & Clapp, 2 Caines, 117, the contract had not been completed; it remained executory ; there had not been a delivery either of the goods sold or of the note which was to be received in payment; and under these circumstances it was held, that as the consideration had failed by the insolvency of the maker of the note, before the goods had been delivered or the note tendered, the vendor was not bound to deliver the articles sold, nor to answer in damages for their non-delivery, upon a tender of the note being made.

Both these cases depended on the point of delivery and the right to stop goods in transitu, where there had occurred a failure of consideration before the contract had been carried into execution. Puckford vs. Maxwell, 6 Term, 52, was a case of payment to an antecedent and not of a cotemppraneous debt; and so too, from the language used by Lord Kenyon, would seem to have been the case of Stedman vs. Gooch, Esp. 3. Markle vs. Hatfield, 2 Johns. 455, was the case of a counterfeit note. Johnson vs.

Weed, 9 Johns. 3Í0, turned on a fact which was controverted, viz: whether there was any agreement or understanding between the parties, at the time of the transfer as to the note being indorsed or taken without recourse. In Whitbeck vs. Vanness, 11 Johns. 409, judge Spencer cites with approbation the decisiohs of chief justice Holt establishing the distinction referred to. He assented to the judgment given by the court in Markle vs. Hatfield; but says the reasoning of the chief justice went further than he or his associates intended. It does not seem to have been necessary in the case of •Lightbody vs.

The Ontario Bank, to have decided whether there existed such a distinction; for that was the case of a note that had been given in payment of an antecedent debt, and as to such cases it had never been doubted that the risk of solvency rested on the person who transferred the note. In the same case, when taken to the Court of Errors, 13 Wend. 101, chancellor Walworth confines himself to antecedent debts, and rules as to these, that bank notes, or the notes of third persons, when given in payment, are taken at the risk of the party paying, unless there be an agreement to the contrary.

Senator Van Scha'ck, who delivered an opinion in the same case, (page 111,) coincides with the view taken by the chancellor, and in the principles pronounced by him in relation to antecedent debts.

Chief Justice Savage says, (11 Wend. p. 11,) he “ apprehends there has generally been some circumstance in each case by which the court and jury could ascertain what was the agreement between the parties as to who should run the risk of the solvency of the note transferred in payment of goods.” Now if there be no such circumstance, what rule does the law apply to the case 1 For it is in such cases that the law is called upon to furnish a rule, and not where there is an agreement or a circumstance that will satisfy the court and jury that there was an agreement.

Unquestionably, that the note given at the time in payment for goods sold is at the risk of the person receiving ; in the absence of proof of any agreement, or of circumstances showing an agreement, as to the matter of risk.

In the case of the Ontario Bank, we can perceive no circumstance from which any agreement as to who should bear the risk of solvency can be collected, except the mere fact that the bank paid out, on a check drawn on it, the note of a bank that had stopped payment: now this is not such a circumstance as will establish an agreement one way or the other; or else on the same principle, in every case in which a note had been passed off, which proved not to be of specie value, a like agreement would be inferred, and the person passing it be held a guarantor of the note, because he passed it: nor did the court decide that case on such a ground, but on the principle that the, note paid out by the bank did not discharge the debt which the bank antecedently owed to Lightbody.

Judge Sutherland, in delivering the opinion of the court in Porter vs. Talcott, 1 Cowen, 333, questions the propriety of the distinction, but not the fact of it having been taken.

He says, “ a distinction is sometimes taken as to notes of third persons, whether given at the time of making the contract or for a precedent debt; but I apprehend, in neither case is it payment, unless it is agreed to be so taken, and if agreed to be so taken, it is equally payment in either case.” Unquestionably the settled rule of law as to responsibility may, ia either case, be prevented from applying to the transaction by an agreement of the parties. If one purchases an

article and delivers in payment for it a note, which is received without objection and nothing said about it, can it be said that there has been any agreement respecting its solvency, either express or implied between the parlies'? Certainly not. There being then no agreement, the law has to furnish the rule by which the transaction is .to be governed. It settles what is to be taken as the legal consequence, effect or implication arising from the naked facts.

If, however, an agreement be established, the law will carry out the agreement, and not apply to the case a rule regulating cases where no agreement has been made.

In the absence of evidence of any agreement, or of circumstances from which an agreement can be ascertained as to who should bear the risk of solvency, repeated judicial decisions have settled it as a legal principle, inference or implication, that when the note of a corporation or of a third person is given for a precedent debt, the solvency of the maker rests on him who passes it; because such debt cannot be discharged except by actual payment; paper, in itself, not being payment unless it produces money or its equivalent: but that, when such note is given at the time of contract, sale or exchange, in good faith, either for goods, money, bills, notes or credit, the responsibility of the solvency of the note rests on the person who receives it.

In the latter case, if there be no agreement established, nor any circumstance indicating an agreement or understanding, is not the fact of the note being accepted without objection, or agreement or indorsement, pregnant evidence of the understanding of the parties, that the note was received in absolute payment and as so much money? Does not the law rightly conclude that he was satisfied and voluntarily assumed the risk of solvency, when he had the power, which he declines exercising, of preventing all question or doubt on the subject, by refusing the note, or requiring an indorsement or guaranty of it?

The distinction between precedent and cotemporaneous debts has prevailed in England ever since 1699, and has been recognized in the state of New York, by the courts of that state ; or why in stating the rule of law as to the cases in which notes do not operate as pay* ment or so much money, have those courts confined it to “notesgiven in payment of antecedent debts,” if they considered that it was also applicable to notes given at the time of making the contract?

By applying it to one class of debts, is it not a necessary inference, that they did not design to apply it to the other, but recognized a distinction between them. That the rule has been so restricted will appear from 5 Johns. 68 ; 11 Johns. 410, 520; 12 Johns. 411; 3 Johns. Cases, 72; 13 Wendall, 104. No case like the one before us, so far as we can ascertain, has ever been brought before the courts of this state: the only one bearing any analogy to it is the case of Jefferson and Jefferson vs. Holland, decided by the late chancellor Ridgely, in Sussex county, at the March term 1820.

In that case the complainants had sold to the defendant a tract of land, who gave his bond for the purchase money. In January 1818, Holland paid one-half the purchase money in bank notes, and promised to take them back if there should be any difficulty in passiiig them. On the 1st of July, 1818, about noon, Holland paid the complainants the second moiety of the purchase money in notes of the Bank'of Somerset and Worcester, at Snow Hill, to the nominal amount of $720, in discharge of his bond. Jefferson observed at the time of this payment, that he supposed it was good money, and Holland answered that it was.

The notes of the Snow Hill bank had been depreciated since the 10th of June, 1818, when the bank stopped specie payments, but they circulated at a discount at the place of this payment until the evening of the 1st of July, 1818. The complainants believed those notes to be good at the time they took them, but finding that the notes would not pass, they offered to return them to the defendant on the 6th of July, and on the 11th of July presented them at the bank, where payment in any way was refused.

The chancellor decreed in favor of the complainants, saying: “ the justice of this case is entirely with the plaintiff, and I cannot do better than to adopt the opinion of chief justice Kent, in the case of Markle vs. Hatfield, 2 Johns. Rep. 455. This, indeed, is rather stronger on the part of the complainants. It may be doubted whether the defendant had not knowledge of the state of the Snow Hill note's at the time of the payment: at any rate he assured the plaintiff that they were good.” That case varies essentially from the one before us, and cannot have any influence or weight in our present decision. 1.

The notes in that case were given in discharge of an antecedent debt, and did not operate payment. 2. There were suspicions of fraud against the defendant; that he passed the notes, knowing their depreciated state. 3. That he passed them with an assurance to the complainants that they were good.

We have not heard or seen any thing in the course of the argument of this case, or in the authorities produced, which inclines us to unsettle a rule of law long established in that country from which our principles of jurisprudence have been drawn : and after considering the questions presented for discussion by the case stated, and examining the authorities cited as well as some others, and weighing the arguments of the counsel on both sides, who certainly discussed this case with great ability, our conclusion is— That when a bank note is given bona fide and received without objection, in exchange for goods, money, notes or bills; or on general deposite by a bank, and there is no agreement or understanding, express or Implied between the parties, as to which of them shall stand the risk of the then or future solvency of the bank issuing such note; the party thus receiving such note assumes all the risk of its solvency, and is without remqdy against the person from whom he thus received it, although it may afterwards appear that the bank issuing such note, had at the time of the transaction failed.

It is not pretended in this case that there was any express agreement or understanding between the parties that the solvency of the bank notes deposited, was to be at the risk of the plaintiff: the only circumstance relied on to show that such agreement or understanding is to be implied, is the mere fact, that the defendants received those notes from the plaintiff as cash, and that on the morning of the day they were so received, the Bank of Maryland had closed its doors, being then insolvent: a circumstance equally unknown to both the parties at the time of the deposite.

The law will not imply such agreement from the mere fact of insolvency. Are there not, however, some circumstances, some intrinsic evidence, arising from the nature and course of the transaction between these parties, from which an agreement or understanding directly to the contrary might fairly and legitimately be implied ? The plaintiff in his letter to Mr. Spruance inclosing the notes, and which was laid before the cashier, shows an anxiety to get rid of these notes and to be free from responsibility concerning them.

He had received them on that day; sends them forthwith to the bank, and urges an answer by the mail of the following day, that he may make some other arrangement, if the Bank of Smyrna should decline taking them on deposite. In his letter he intimates a doubt whether, under ordinary circumstances, the bank would receive Baltimore notes. Why this doubt, if the notes of the banks in Baltimore were above all doubt or suspicion? Do not the banks of this state at all times eagerly lay hold of the bank notes of the neighboring cities of Philadelphia and Baltimore, whose credit is not questioned?

In order to obviate this apprehended difficulty, he proposes to the-bank, that if it will receive the notes transmitted and credit him with their amount, the sum thus credited may remain on deposite for one year, or until a certain suit between George Houston and the assignees of David Wilson is decided.

Why this unusual feature in this deposite; why give the bank the use of the sum deposited for at least one-year, to remain undrawn for a year; the plaintiff not to be at liberty to use his deposite for such a length of time, nor to receive any interest for it; why give the bank a premium of not less than six per cent, for taking these notes; why give the bank what was equivalent to more than $100; for by loaning or discounting on them (had they proved solvent,) for the period the credit was to remain .untouched, a profit to this extent could have been realized?

For all this was there to be no consideration on the part of the bank ; was the plaintiff to be restricted from touching his deposite for a year, and also to be held as guaranteeing the solvency of the notes?

In making bis proposition not to draw the money for a year, he must have had some object in view, and the bank must have so understood him : we cannot suppose that the mere transmission of the notes to Baltimore, and the receiving cash for them could have been the object of the plaintiff, or the consideration expected from the bank for permitting the deposit^ to remain ; for this could have been done by the plaintiff sending a messenger to Baltimore at an expense not exceeding probably $10 ; and yet the bank was offered what was equal to $100.

Is it not, therefore, the reasonable and fair inference from these facts, that the design of the plaintiff in making his proposition was to be relieved from all responsibility in relation to these notes, and to effect this tendered the credit on the deposite; and that the defendants must have so understood him when they accepted his offer, and by accepting it became bound by that implied understanding or agreement. In a case like that before us, the law implies that the bank took the notes at its own risk, no agreement or understanding express or implied being established to the contrary.

The facts in this case would also lead us to infer that such was the understanding of the parties: but at all events, these facts do not lead us to the belief or conclusion that there was between the parties at the time the transaction took place, any agreement or understanding express or implied, that there was to be any responsibility on the part of the plaintiff, for the then or future solvency of these notes.

There is not a single fact or circumstance in the case stated, to bring the mind to such conclusion ; and the case, therefore, is to be governed by the principle of law which has been established in relation to notes given at the time the contract is made. . There is another view of this case, on which it might be decided •on principles well settled. The solvency of bank notes or the notes of individuals may, by agreement be assumed either by the party paying or the party receiving them: admit, for the argument, that the solvency of the bank notes in question was distinctly assumed by the plaintiff.

When the failure of the Bank of Maryland became known to the defendants, what was their incumbent duty; what does the law require to be done in like cases by the person receiving such notes, to enable him to resort to the person passing the note? Why, it requires the holder to give reasonable notice of the insolvency of the maker of the note, to the person from whom he received it, or that person will be discharged in law, from the responsibility he assumed. Tindall vs. Brown, 1 Term, 167; Cammidge vs. Allenby, 13 Com. Law, 203; 1 Wash. C. C. Rep. 156; Byles on Bills, 163.

It has been thought in some cases, that the notice should go further and apprize the party, that the holder looks to him for payment of the note. We doubt if this be essential, as it might be properly inferred from the notice. See Bank of U. S. vs. Carneal, 2 Peters, 553. Knowledge is not notice. Legal notice is required. To be legal it must be given by a party to the instrument or his agent, or by one through or to whose hands it has passed. Stewart vs. Kennett, 2 Campb. 177; Byles on Bills, 163; Ex parte Barclay, 7 Vesey, 597; Chitty on Bills, 225-6; Tindall vs.

Brown, 1 Term, 167; 3 Kents Com. 93, 104, 108, 110. There must be positive proof of the fact of notice, not probable evidence. The onus probandi lies on the party holding the note; he must show that notice was given and in due time. Lawson vs. Sherwood, 1 Stark. Cases, 251. The plaintiff in this case may have acquired a knowledge of the failure of the Bank of Maryland as early as the officer^ of the Smyrna Bank, and in the same way; but such knowledge or any other knowledge of this fact, unless communicated by the bank or its agents, is not enough.

The law requires that notice of the fact of insolvency be given by the holder, in order that the person from whom the note was received, and who was the guarantor of its solvency, may be apprized that the holder stands on his legal rights, and looks to him for payment. It does not appear from any thing in the case stated, that notice of the insolvency of the Bank of Maryland was ever given to the plaintiff by the defendants.

The only notice stated to have been given was that contained in the letter of the cashier of the 27th of March, which merely apprized the plaintiff that the money passed t® his credit on the 25th of March, “ is received as a special depositand that the notes would be kept by themselves subject to hi? order. This is no notice of the “ insolvency” or stoppage of the Bank of Maryland, but merely notice that the bank had arbitrarily done what the plaintiff knew they had no right to do, and might well disregard as not being

an act that could affect his rights. If the plaintiff assumed the responsibility of the solvency of these notes, the bank had the right in the event of the failure of the Bank of Maryland, to call on him to make good their loss. This was their legal right and all their right, and was to be enforced according to the rules the law has prescribed; one of which imperatively demands that notice of the insolvency be given or else the liability is discharged.

It did not necessarily follow, because the bank had changed the der".. posite from a general to a special one, that it was done in consequence of the Bank of Maryland or the*Bank of Messrs. Cohens having failed. No such reason nor intimation of such fact is given in the letter addressed by the cashier to the plaintiff; nay, the latter bank had not failed, nor has it since failed. The plaintiff might have inferred from the notice, that the banks whose notes he had deposited, had stopped payment; but it would have.been only an inference, and a wrong one too as to one of those banks, that of Cohens.

Direct and explicit notice of the failure or ' insolvency of the Bank of Maryland should have been given on the part of the defendants to the plaintiff to fix his liability for the insolvency of its notes which he had deposited, even if he had assumed their solvency, and this not having been given by the bank, it has been guilty of such laches as, according to the settled principles of law, discharges the plaintiff from responsibility for the solvency of the notes in question. One question remains to be disposed of.

It is contended by-the defendants counsel, that there is no sufficient consideration to support the present action, as the Bank of Maryland had failed before the deposit/ was made, and its notes were then of no value. Whether the receipt by the Smyrna Bank of these notes, in the manner they were received and credited, is a sufficient consideration to maintain this suit, depends upon the determination of the question, on which of the parties did the responsibility of the solvency of these notes rest. If it rested upon the plaintiff, then there is not a sufficient consideration for this action.

But if it rested on the defendants, then there is a sufficient consideration. If in law these notes are to be considered as having been taken at the risk of the bank, or if they are to be held as taken at the risk of the plaintiff, and the defendants by their laches have discharged him from that responsibility, then there arose a legal obligation upon the bank to pay the plaintiff the amount of the deposite. A legal obligation to do a thing is a sufficient consideration for a promise to do it. 2 Kent’s Com. 465.

The law having established ihe obligation to pay, a promise to make the payment would necessarily be implied. The law never imposes an obligation or legal duty' to do

an act unless there exists a sufficient consideration for it. In our judgment the risk of the solvency of the notes of the Bank of Maryland rested, according to established legal principles.»upon the defendants; and those principles imposed upon the defendants, as a consequence of the deposite accepted by them, an obligation or legal duty to pay the plaintiff the amount of the notes thus taken by them as cash; and give to the plaintiff a legal right to recover such amount.

It necessarily follows, therefore, that there exists a sufficient consideration for such recovery; for otherwise the duty or obligation to make such payment would not have been created by law. The deposite of a check to the credit of a person was held, in the case of Bolton vs. Richard, 6 Term 139, to be equivalent to the transfer of so much monéy in the hands of the person receiving the deposite to the credit of the person making the deposite. In the case of the Bank of Kentucky vs.

Wistar, 2 Peter’s, 318, a deposit^ in that bank of the notes of the bank which were at the time passing in" the country at one-half of their nominal amount, entered generally to the credit of the person for whose benefit the deposite was made, and not as a special deposit®, was considered by' the Supreme Court of the United States as equivalent to depositing so much gold or silver. In the case before us, the deposit^ was not a special one, but general, as so much cash. We, therefore, adopt the lan-mage used by justice Story, in the suit by the Bank of the United States vs.

The Bank of Georgia, reported in 10 Wheaton, 333: “ Considering, then, the credit in this case as a payment of the notes, the question arises whether after a payment the defendants would be permitted to recover the money back; if they would not, then they have no right to retain the money, and the plaintiffs are entitled to a recovery in the present suit.” With the views which we entertain of the law applicable to the case before us, the defendants could not, under the circumstances of it, have recovered back from the plaintiff the amount of the notes in question, even had they paid the same in com to the plaintiff, instead of receiving them as they did from him on general deposite; and, therefore, the plaintiff is entitled to a recovery in the present suit of the amount with which he was credited on the books of the bank at the time the notes were deposited.

In answer to the argument which was urged on this point by the defendants counsel, and to support the view we have taken of it, we would refer to the three cases last cited; and also to that of Levy vs. The Bank of the United States, reported in 1 Binney, 27, and in 4 Dallas, 234. It is, therefore, the opinion of a majority of the court: 1.

That there is no evidence, direct or circumstantial, disclosed to us in the case stated, to lead us to the conclusion, that there'was between the parties to this cause at the time of the deposit^ made by the plaintiff in the Bank of Smyrna, of the bank notes in controversy, any agreement or understanding, express or implied, that the plaintiff was to be answerable to the defendants for the solvency of the notes deposited. 2.

That, the facts set forth in the case stated are such as to lead to the belief or inference that the defendants, when they received those notes, did so with the understanding that they received them as so much coin, and that they voluntarily took upon themselves the risk of the solvency of the notes. 3.

That in the absence of evidence of any agreement or understanding express or implied, those bank notes, according to the well established principles of law, are to be considered as having been ireceived by the Bank of Smyrna as money at its own i-isk, and that the plaintiff is not responsible either for the then or future solvency of those notes; they not having been deposited to discharge any pre-existing debt, but parted with on deposite and to obtain a credit in the bank to be futurely used by the plaintiff. 4.

That even if they had been taken by the Bank of Smyrna at the express risk of the plaintiff as to their solvency, his liability was discharged by the laches of the bank in not giving him due and distinct notice of the insolvency or failure of the Bank of Maryland. 5.

That the risk of the solvency of these notes being fixed upon the defendants by settled legal principles, a legal obligation attached to them, to pay to the plaintiff the amount credited to him on the books of the bank at the time of the deposite, and that there is therefore a sulficient consideration to support the present action; and that judgment should be entered for the plaintiff for the whole amount deposited by him.

Layton, Justice. — I have been unable to take the same view of the law applicable to this case, that the other members of this court have taken, for the following reasons— This is an action of assumpsit for money had and received: an action which has been well compared to a suit in equity. It is founded on the principle that what a man cannot in equity and good conscience retain, he shall be compelled to refund: and consequently, where the plaintiff has no claim in equity and conscience to the funds in the hands of the defendant, he shall not be permitted to recover.

As to the facts of this case, the parties are agreed. It is admitted, that they were equally innocent of any knowledge of the failure of the Bank of Maryland, at the time the notes were deposited with the defendant. The question is, which of these innocent parties shall sustain the loss which has occurred. “Upon principles of justice and honesty,” in the language of chief justice Savage, in the case of Lightbody vs.

The Ontario Bank, “ it would seem that whoever parts with that which is valuable should receive value for it; and he who receives value should give value in return.” At the precise time these notes were deposited with the defendant, the bank which issued them had failed; and they had ceased in fact and in law, to be any part of the circulating medium of the country. The conventional regulations of the commercial world only sustained them, as they do all other bank notes, so long as they could sustain themselves.

The moment the bank failed, its notes, which were but promises to pay, became valueless as a currency, from the inability of the bank to redeem its promises. For all practical purposes, as a circulating medium, they are now little better than so many spurious or forged bills. The time, therefore, of the failure of the bank, is the time which, upon principles of the soundest policy, fixes the character of its notes, and ascertains upon whom the loss consequent upon its failure shall fall. It is a period which can be readily ascertained, and which closes the door to a multitude of frauds.

A distinction has been taken in the argument of this cause founded upon some adjudged cases, between a payment made on account of a pre-existing debt, and one made upon a present and cotemporaneous transaction. This, however, is a distinction without a difference. The principle has nothing to sustain it either in justice or sound policy; and, I apprehend, it is not to be relied on as the settled doctrine of the courts.

So far as I have been able to examine and understand the author!-' ties cited in the argument of this cause, I think the most, if not the whole of them, may be reconciled on this point, upon the ground, that the agreement of the parties at the time of receiving the paper, or notes, whether on account of pre-existing debts, or for goods sold at the time, precluded them from looking beyond their contract.

As if a party receiving promissory notes in payment of goods sold at the time, expressly agrees to accept them in satisfaction of those goods, he is bound by his agreement, although the notes may turn out to be valueless. It is admitted on all sides, that a payment of such notes, on account of a pre-existing debt, would not discharge that debt till the notes themselves had been paid. And yet it will not be denied, that if the creditor expressly undertook to accept those notes in satisfaction, and to run all risks, he could not afterwards escape from his agreement.

In both classes of cases the agreement of the parties gives character to the transaction; and, in the absence of any express agreement, the law will not create an agreement by implication, In the absence of an express agreement on the subject, the transfer or payment of such notes could never operate as a bona fide consideration for value received ; and it would be iniquitous for the party to retain a valuable commodity when he had given no value in exchange. The case of Owenson vs. Morse, 7 Term Rep. 60, is full to this point.

The principle there established is this: “If the seller of goods take notes or bills for them, without agreeing to run the risk of the notes being paid, and the notes turn out to be worth nothing, this will not be considered as payment.” The whole court, who delivered their opinions seriatim, recognized and relied upon this 'sound and equitable principle. Lord Holt, in the case of The Bank of England vs. Newman, 1 Lord Raymond Rep. 442, (which has been, as to this point, mainly relied on by counsel for the plaintiff,) appears to'have acted on this principle.

He considered that transaction as a plain sale of the bill for a discount, and that the seller, from the nature of the case, did not become a new security. ^ But this case of The Bank of England vs. Newman has, I think, been too much relied on, and does not warrant the inferences and principles which appear, by some subsequent decisions, and by the counsel in thjs cause, to have been deduced from it. As this is the leading case ob this subject, it requires examination to ascertain its precise signification, and the true point which was determined by it.

The report of that case states, that “ Bellamy signed a bill payable to Newman or bearer. Newman came to the Bank of England and asked how much money they would give him for this bill. They took the bill, and gave him so much money, allowing so much for discount. After that the bank received £10,000 of Bellamy, and afterwards they send a man to' demand the money due upon this bill of Bellamy; and a demand was made of Bellamy’s servant, who did not pay the money.

And afterwards Bellamy fails, and the bank sue Newman for the money which he had received of them for this bill, as for so much mohey lent by them.” Upon the general issue pleaded, the verdict was for the plaintiff against Lord Holt’s opinion. And a new trial was granted, “because this was a plain sale of the bill.” “For, per Holt chief justice, if a man has a bill payable to him or bearer, and he delivers it over for money received, without indorsement of it, this is a plain sale of the bill; and he who sells it does not become a new security.

But if he had indorsed it, he had become a new security, and then he had been liable upon the indorsement.” But upon a new trial the jury found for the plaintiffs. Here was a plain sale by Newman to the Bank of England of a bill drawn by Bellamy, which bill at the time of its sale ivas good, on which £10,000 were received afterward, but which subsequently became valueless by the failure of Bellamy. The question was not before the court as to what would have been Newman’s responsibility if he had negotiated this bill subsequent to Bellamy’s failure, of which failure the bank was ignorant at the time.

Upon a fair construction of that case, we may safely deduce this general principle, that at the time of the negotiation or sale of the bill, the vendor undertook to warrant the present value thereof, but was not to be considered as becoming in any way responsible for any subsequent failure of the drawer of the bill. This principle is sustained by other decisions of Lord Holt; as in the case of Tassell & Lee vs. Lewis, 1 Lord Raymond’s Rep. 743-4, and of Ward vs. Evans, 3 ib. 928. Such being the general principle of the case of The Bank of England vs.

Newman, it would appear that any decision which has carried that case beyond its legitimate determination, is not to be relied on as an authority. But the case of a deposit^of money in a bank by one of its customers cannot, in my judgment, without the most forced and violent construction, and the most strained legal fiction, be considered as a sale of the money so deposited by the depositor. The very term itself, a deposit^ contradicts any such conclusion. In point of fact, it is a loan made to the bank, to be repaid at the pleasure of the creditor.

And the depositor is the creditor, and the bank the debtor in that transaction. A deposite of forged bills or notes, unless under peculiar circumstances, as in the case of the United States Bank vs. The Bank of Georgia, would not be such a loan as could be recovered by the depositor. Nor would a deposite of base, adulterated coin, create a liability upon the bank to pay, in exchange, in a sound currency.

I am aware that many of the authorities speak of payments made upon pre-existing debts, and of payments made for goods sold at the time; whence one might infer, that they recognized an essential distinction, in principle, between the two. But, as before remarked, I think the courts have considered in all the cases of payment for goods sold, that the parties agreed to receive the paper in payment at the time the goods were sold, or made it their own by the act of negotiating it. In the case of Johnson vs. Weed, 9 Johns.

Rep. 311, the court held, as the concurrent authority of the books, “that there must be a clear and special agreement, that the vendor shall take the paper absolutely as payment, or it will be no payment if it afterwards turns out to be of no value.” The only case that has been decided in this state, of which I have any knowledge, that bears upon the one now before the court, is that of Jefferson & Jefferson vs. Holland, at the March Term, 1820, of the Court of Chancery in Sussex. That case has already been adverted to by Judge Black, and need not again be recited.

It is true that case was to recover money paid on account of a pre-existing debt; but, in my judgment, a debt created upon a cotemporaneous transaction is as much a debt in equity and in law, and as binding on the conscience of the debtor, as though it were one of fifty years standing. And I cannot appreciate the justice, or the policy of creating a distinc ion between them. The consideration passing at the time of the transaction, ought to be a good and valuable consideration, whether it be in reference to a present or a precedent debt. The case of the Bank of the United States vs.

The Bank of Georgia, 10 Wheat Rep. 333, is not an authority in point, and does not affect this case. That was a case of the receipt of forged paper by the bank against whom the forgery had been committed; and the decisión turned upon the point that the bank was bound to know its own paper; and also, that after the receipt of it, the Bank of Georgia had been guilty of a neglect of duty, and had not given due notice of the facts to the plaintiff Upon the general principles deducible from this case, and applicable to this form of action, I think the case of Lightbody vs.

The Ontario Bank, 11 Wendell, 9, and 13 Wendell, 101, is in point. For, although that was a payment on account of a pre-existing debt, the reasons assigned, and the principles there decided, apply with great force to this case.

As to the allegation of a want of notice to the plaintiff, by the defendants in this action, of the failure of the Bank of Maryland, and the charge of the defendants being guilty of laches, I think a full answer to that part of the argument, (and which, by the way, was pressed with much force, and discussed with great ability,) is to be found in the fact, that these matters form no part of the case stated.

The only question presented for the consideration of this court in the case stated, is this, “ the plaintiff submits it to the court, that by the cashier’s act of receiving the said notes as cash as aforesaid, and in consequence of the entry to that effect on the books of the bank, the said bank had made the notes their own, and must bear the loss.” There is not only no want of notice alledged, but, in my opinion, the whole case, upon a fair view of it, is a clear waiver of notice.

The very terms of the case stated show that the plaintiff had notice, and took notice of the facts of the case, by the receipt of the letter from the cashier, under date of March 27, 1834, and in the conversation which, it is agreed, took place between the plaintiff and the said cashier, immediately upon the receipt of that letter.

The plaintiff evidently considered this paper his own, and proposed to commence a suit against the person from whom he had received it, “ if the bank should deem that course best.” The case states, “ The plaintiff then informed the cashier that he mould go and see the man that had passed upon him this paper, and if he refused to take it back, he (Corbit) would willingly commence suit against him if4,he bank should deem that coufse best.” If he did not consider the paper as belonging to him, and virtually in his possession, how could he, without the greatest absurdity, speak of commencing a suit against the individual from whom he had received it?

There was no difficulty or contest at the time about this matter, but the plaintiff appeared to consider himself bound to become an actor in the business in whatever way the bank should deem best. The plea of a want of notice, therefore, is not sustained by, nor is it to be found in the case stated. It is an idea introduced into the cause, subsequently to the making out and submitting the case to the consideration of the court.

It is a point, however, which from the great ingenuity and ability with which it was pressed, was well calculated to produce embarrassment; and which, if true in point of fact, would have been, I think, sufficient to carry the judgment of this court for the plaintiff But on. a more careful view of the case, I find it was only the argument of counsel, aifd not the facts as agreed upon by the parties themselves. The idea then* of laches on the part of the defendant, falls to the ground.

Such being my conviction of the law, and the facts of this case, I give it as my opinion, in answer to the question submitted by the parties, that “ the said Bank of Smyrna had not made the said notes their own by the cashier’s act of receiving the said notes as cash as aforesaid, and in consequence of the emry to that effect on the books of the bank ;” and that the Bank of Smyrna ought not to bear the loss of them.” The parties, however, have agreed that, in any event judgment maybe rendered against the defendant, in favor of the plaintiff, “ for the amount of the said notes of the said bank of J. J.

Cohen, jr. & Brothers, to wit: for the sum of one hundred and sixty dollars. My opinion, therefore, is that the plaintiff should recover, and judgment be entered in his favor against the defendant for that sum and no more. Implied promises arise from this general intendment of law, “ that every man hath engaged to perform what his duty or justice requires.” 3 Blk.

Com. 160, (Archb. ed.) Promises “ will be implied under the following circumstsnces, 1st, where the consideration consists in the plaintiff’s having been compelled to do that to which the defendant was legally compellable ; and, 2dly, where the defendant has adopted and enjoyed the benefit of the consideration.” Smith's selection of leading cases, Law Lib. No. 55, p. 55, in note to Lampleigh vs. Brathwait. It would be difficult to apply these principles in favor of the plaintiff in this cause.