The opinion of the court was delivered by: Mr. Justice Thompson delivered the opinion of the Court.
This cause was argued by Mr. Webster and Mr. Jones,*fn1 a
for the plaintiff in error, and by Mr. Key,*fn2 b
for the defendants in error.
This case comes up on a writ of error to the Circuit Court of the District of Columbia; and by the record it appears, that the action in the Court below was prosecuted against Renner, the plaintiff in error, as en orser of a promissory note, drawn by James Foyles, and discounted at the Bank of Columbia. The note bears date on the 9th day of January, 1817, for 4600 dollars, and is payable sixty days after date. In the declaration it is averred, that demand of payment of the maker was made on the 14th of March, which was on the fourth day after the expiration of the sixty days, which the note had to run.
Several questions, arising out of the record, have been presented for the consideration of the Court. The principal one, however, is that which relates to the time of demand of payment of the maker of the note, and grows out of a bill of exceptions taken upon the trial. This has been pressed upon the Court as a question of great importance, and the decision of which, in its application to the concerns of the Bank, will have a very wide and extensive effect.
We shall proceed to the consideration of this point, in the first place, leaving the others, which are of minor importance, to be noticed hereafter.
The testimony given at the trial was for the purpose of showing that the Bank of Columbia had, from its first establishment, in 1793, adopted the practice of demanding the payment of notes discounted by it, on the fourth day after the time limited for the payment thereof, according to the express terms of the note. And that such was the universal custom of all the banks in Washington and Georgetown. That this custom was well known and understood by the defendant, when he endorsed the note in question. After this testimony had been received, without objection, the counsel for the defendant below called upon the Court to instruct the jury, that upon the evidence so given by the plaintiffs, of a demand upon the maker of the note, on the fourth day after the time limited by the note for the payment, the defendant was not liable on his endorsement; which instruction the Court refused give, and a bill of exceptions was thereupon taken.
This Court must, therefore, assume as established facts, (and, looking at the evidence before the jury, no doubt could be entertained on the subject,) that the custom of the Bank of Columbia, and all the other Banks in Washington and Georgetown, from their first institution, had been, to demand payment of notes due them, on the fourth day after the time limited therein; and that this custom was known and well understood by the defendant, Penner, when he endorsed the note in question: and it may be added, with full knowledge and expectation, that this note was to be dealt with in the same way; for it was a renewal of a discount, continued for a considerable time before, on other notes similarly drawn and endorsed, some of which had been demanded in like manner, and protested, and afterwards paid and taken up by himself. Under such circumstances, it would seem, that nothing short of some positive and unbending principle of law, could shield the defendant from responsibility. But, so far from trenching upon any such principle, we think his liability completely established, by well settled rules of law.
It seems to be assumed as the settled law of promissory notes, that in order to charge an endorser, demand of the maker must be made on the third day after that limited in the note; and that this is so stubborn a rule, that parties are not permitted to violate it, even by their mutual agreement.
We admit, in the most unqualified manner, that the usage of making the demand on the third day of grace, has become so general, that Courts of justice will notice it ex officio; and in the absence of any proof to the contrary, will presume that such was the understanding of all parties to a note, when they put their names upon it. But that this rule has any attributes so inviolable, as not to be touched by the parties to negotiable paper, cannot be admitted. It has its origin in custom, and that custom, too, comparatively, of recent date; and is not one of those, to the contrary of which the memory of man runneth not, and which contributed to make up the common law code, which is so justly venerated. So far from this, that the allowance of any days of grace, is in derogation of the common law rule, applicable to other contracts. They are, emphatically, the mere creatures of usage, varying in different countries, to suit the views and convenience of men in business, originally gratuitous, and not binding on the holder. The common law would require payment on the last day limited by the contract, and would also give to the maker the whole of that day. It is a settled principle of the common law, applicable to all contracts, that a party has until the last day limited by his agreement, to perform his engagement, and even until the last hour of the day. The common law knows of no fractions of a day; custom, however, and that introduced, too, principally by banks, has limited the day to a few hours of business. But this, and whatever other rules have been adopted by consent, and merely for the convenience of commercial men, are departures from the common law doctrine. When, therefore, the allowance of only three days of grace, is said to be the law of the contract, by bills of exchange and promissory notes, nothing more can be intended, than that custom has so long sanctioned this rule, that all dealers in paper of this description, are understood to govern themselves by it. The law of the contract, properly speaking, is to pay when due; and that time is to be ascertained, either from the contract per se, or that taken in connexion with some known custom, which the parties are presumed to have tacitly consented, should be made a part of the contract. And it is in this view only, that three days of grace are allowed, where that custom is recognised as the rule; for a note, which upon its face has sixty days to run, is in truth and in fact, a contract for sixty-three days, and interest is taken for that time. And how is it ascertained that it is a note for sixty-three days, but by looking out of the contract, and finding what was the undorstanding of the parties? Where the custom has existed for a long time, and has become general, Courts of justice, as before observed, will notice it ex officio; and where it has not, it is matter of proof. If this is not the light in which these transactions are to be considered, all banks are chargeable with usury; for all take interest beyond what is allowed by law, if time is to be determined by the note itself. The general rule of law is, that demand of payment must be made of the maker, when the note falls due; and that time, as now settled, is on the last day of grace; and even this rule is of recent date, for in the King's Bench in England, as late as the year 1791, about coeval with the institution of this bank, and the custom established by it, we find (Leftly v. Mills, 3 T. R.) Lord Kenyon and Mr. Justice Buller differing on this very point: the former holding that, by analogy to other contracts, the acceptor of a bill of exchange had the whole of the third day of grace to pay the bill, and that a demand on the fourth day was not too late. Mr. Justice Buller thought the demand ought to be made on the third day of grace; that the nature of the acceptor's undertaking, was to pay the bill on demand, on any part of the third day of grace; and he inferred this, from its having been, as he said, the practice to make the demand on that day. If it was a doubtful question in England, so late as the year 1791, whether the demand ought to be made on the third day of grace, or the day after, this bank is not chargeable with any culpable innovation upon long established rules of law or usage, by adopting the practice of making the demand on the fourth day
It is said, however, that the effect of this testimony is, to alter and vary, by parol evidence, the written contract of the parties. If this is the light in which it is to be considered, there can be no doubt that it ought to be laid entirely out of view; for there is no rule of law better settled, or more salutary in its application to contracts, than that which precludes the admission of parol evidence, to contradict or substantially vary the legal import of a written agreement. Evidence of usage or custom is, however, never considered of this character; but is received for the purpose of asscertaining the sense and understanding of parties by their contracts, which are made with reference to such usage or custom; for the custom, then, becomes a part of the contract, and may not improperly be considered the law of the contract; and it rests upon the same principle as the doctrine of the lex loci. All contracts are to be governed by the law of the place where they are to be performed; and this law may be, and usually is, proved as matter of fact. The rule is adopted, for the purpose of carrying into effect the intention and understanding of the parties. That the note in question was be paid at the Bank of Columbia, and to be governed by the regulations and custom of the institution, and so understood by all parties, cannot admit of a doubt.
It would be a waste of time, to go very much at large into an examination of the various usages and customs, that are admitted in evidence and recognised in Courts of justice, both in England and in this country, in almost every branch of business, and especially in commercial transactions, for the purpose of ascertaining the meaning and interpretation of contracts. A few only will be noticed, that are somewhat analogous to the present case.
In the case of Cutler v. Powell, (6 T.R. 320.) where was brought under consideration the legal effect of a promissory note, given to the mate of a ship for a certain sum of money, provided he proceeded on her voyage, and continued to do duty to the port of destination. The legal construction to be given to this note was clear, and so considered by the Court, that nothing was due, unless the mate continued to do duty to the port of destination. He having died, however, on the voyage, the Court directed an inquiry into the usage of merchants in such cases, declaring that if it sanctioned an allowance for the time the service was performed, the plaintiff should recover according to such usage.
No intimation is here given, that such proof would be repugnant to the contract, although it was against the legal import of the note, if construed without reference to the usage; and although the usage ...