If this action had been brought at any time before the case ofMerritt v. Todd (23 N.Y., 28), the law, as it was understood to be settled in this State, would have required a judgment for the defendant. That case is understood to be a departure from every case in this State previously decided upon the same point, and to have laid down a new rule. However much we may differ with the learned judge who wrote the opinion in that case, as to the propriety of the rule laid down by him, it is better to adhere to it than to unsettle the law by bringing that decision in question. When, however, it shall come to be understood among commercial men that, as against an indorser, this decision means that a demand note will never become due, however long the lapse of time, until payment has actually been demanded of the maker, very few persons will be found willing to indorse such notes, and they will substantially go out of use.
But the case of Merritt v. Todd did not undertake to lay down any rule to govern actions by the holder of a demand note against the maker, and it recognized a distinction between such an action and an action against the indorser. The indorser can be made liable only after a demand of the maker; and as no time for the demand is specified in the note, according to that decision, it may be made at any time at the option of the holder. But as against the maker, no *Page 595 demand is necessary before suit. As to him, it is due, and may be sued at any time without previous demand. Such notes are usually temporary shifts, the common understanding being, that the holder may demand payment at any time, and the maker may pay at any time. They are given, not to be paid immediately, but with the understanding that they are to run a brief period for the convenience of the parties. Hence the courts have held that such notes are not dishonored at once, but that they may run a few days, a few weeks or a few months, depending upon the circumstances of each case, before they shall be deemed dishonored, so as to let in a defence on the part of the maker which he could not set up against a bona fide holder who took the note before it was dishonored. It might have been a better, and would have been a more certain rule to have held these notes due and dishonored at once, so that they could not be transferred at any time so as to cut off any defence of the maker. But the rule has been settled otherwise and acted upon in this State from the foundation of our government, and it is better to adhere to the rule than to unsettle the law by making a new one.
I have thus far alluded to the law as settled before the case of Merritt v. Todd, and I have noticed the fact that that case did not profess to change the rule as against the maker of such a note. I will now call brief attention to the cases bearing upon this point, decided in this State since that case. In the case of Payne v. Gardiner (39 Barb., 634 and 29 N.Y., 146), the action was upon an instrument, as follows:
"[$1,000.] NEW YORK, 9th of May, 1848.
"Received from Captain William H. Payne, one thousand dollars, which is to his credit on our books at six per cent interest.
SLATE, GARDNER HOWELL."
It was held that the receipt was evidence of a deposit of money, and that the money thus deposited, like any other *Page 596 mere deposit, could not be recovered until after demand of payment. In Scovil v. Scovil (45 Barb., 634), the action was upon a promissory note, payable on demand with annual interest. The defence was, the statute of limitations. Judges MORGAN, MULLIN and BACON wrote opinions, and the two former, assuming that the statute commenced to run at the date of the note, held that it was not barred; but Judge BACON held that the statute did not begin to run until the payment of the note had actually been demanded. He professed to follow a decision in the third judicial district which is supposed to be the case which we are now called upon to decide. He laid stress upon the fact that that note was payable on demand with annual interest, and inferred that the parties intended that the note should run at least one year. But it does not appear that the other two judges concurred with him. In Howland v. Edmonds (24 N.Y., 307), it was held that a note, payable on demand, might be prosecuted immediately without a demand, and hence, that the statute of limitations began to run on such a note at its date. In Hirst v. Brooks (50 Barb., 334), the action was upon two promissory notes payable on demand,with interest, dated, one in 1841 and the other in 1842. The action was commenced in May, 1866. No demand of payment upon the notes had been made until just previous to the commencement of the action. Interest had been paid upon the notes in 1844, more than twenty years before the action was commenced. The defence was the statute of limitations, and the court held that the statute upon such notes begins to run from the date of the notes and sustained the defence. These are all the cases decided in this State since the case of Merritt v. Todd, to which our attention has been called, and it will be seen that none of them go far enough to sustain the decision of the General Term in this case.
I do not perceive how the fact, that the note is payable with interest, can make any difference with the question we are now considering. A note simply on demand will not draw interest. (Bishop v. Truffin, 1 Daly, 155; Purdy v *Page 597 Phillips, 1 Kernan, 406; Edwards on Bills, 712; Smith's Merc. L., 526; 2 Parsons on Notes and Bills, 393.) As demand notes are always expected by the parties to run for a brief time, the sole object of making them payable with interest is to save the interest. To hold that the words "with interest" makes that a continuing security which without them would not be, is to give these words an unnatural meaning and an effect beyond the purpose of the parties. In Morey v. Wakefield (41 Vermont, 24), decided in 1868, it was held that a promissory note payable on demand with interest and negotiated to an innocent holder for value, two months after its date, was past due when negotiated and subject to all defences that would have been available if the suit had been by the original payee.
I am, therefore, of the opinion that the order of the General Term should be reversed and that the defendant should have judgment upon the verdict, in his favor.