Howard v. Ives, 1 Hill 263 (N.Y. Sup. Ct. 1841)

When a negotiable instrument is sent to an agent for collection, the agent may forward notice of dishonor to their principal, and the principal then has a reasonable time to forward notice to the party to be charged, even if this process takes longer than direct notification.

Summary

Howard sued Ives on a dishonored promissory note. The note was endorsed to a bank for collection, and the bank notified Howard of the dishonor. Howard then notified Ives. Ives argued that the notice was untimely because it took longer than if the bank had notified him directly. The court held that the notice was sufficient because the bank acted as an agent for collection and Howard forwarded the notice within a reasonable time after receiving it from the bank. This case clarifies the permissible chain of notification for dishonored negotiable instruments when using collection agents.

Facts

1. Howard held a promissory note.
2. Howard endorsed the note to a bank for collection.
3. The note was dishonored (not paid) at maturity.
4. The collecting bank notified Howard of the dishonor.
5. Howard then notified Ives, the endorser of the note.
6. Ives argued the notice was untimely.

Procedural History

The case originated in a lower court. The Supreme Court reviewed the lower court’s judgment concerning the sufficiency of the notice of dishonor provided to the defendant, Ives.

Issue(s)

Whether the notice of dishonor to the endorser (Ives) was timely, considering that the note was sent to a bank for collection and the notice was relayed through the bank to the holder (Howard) before being sent to the endorser.

Holding

Yes, the notice was timely because the bank served as an agent for collection, and Howard forwarded the notice within a reasonable time after receiving it from the bank.

Court’s Reasoning

The court reasoned that when a note is forwarded to an agent (like a bank) for collection, the agent can notify their principal (the holder), who then has a reasonable time to notify the party to be charged (the endorser). The court distinguished the present case from a prior one (Howard v. Ives) by stating: “Whether the note was forwarded under the indorsement of the plaintiff or that of the defendant, the transaction, when explained, amounts only to the creation of an agency for the purpose of collecting the note.” The court emphasized the agency relationship, holding that sending the notice through the agent (collecting bank) was acceptable as long as each party in the chain acted diligently in forwarding the notice. The court referenced prior case law, including its holding that “where the note matures on Saturday the notice need not be mailed until Monday; and, thirdly, that, in the case of a circuitous notice, it will be in time if the intermediate party forwards it the next day after he receives it.” Ultimately, the court concluded the defendant had been duly charged.