Scottish Court of Session Decisions

Subject_1 BILL OF EXCHANGE.
Subject_2 DIVISION I.

Of the Object, Nature, and Requisites of Bills.
Subject_3 SECT. VIII.

Indorsation.

Thoirs
v.
Fraser

Date: 3 December 1730
Case No. No 64.

An indorsation found to be a relative writ, which must stand or fall with the bill.

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A bill was drawn for payment of a sum, ‘with annualrent and penalty.’ It had been indorsed to John Fraser, whose creditor, Thoirs, arrested in the hands of George Fraser, who was debtor to John. George brought a suspension, on this ground, That the bill being null, as bearing annualrent and penalty, the indorsation, being but a relative writ, must stand or fall with the bill; therefore was likewise null.

The Lord Ordinary ‘found the bill and indorsation void and null.’

Pleaded, in a petition: The indorsation bears expressly to be for value received. The nullity alleged against the bill is, that it stipulated a penalty and annualrent from a term preceding the date. It is acknowledged, that by a decision, Innes against Flockhart, in 1727, (No 19. p. 1418.), such bills are found to be null; and therefore no action is competent against the acceptor upon them: but it cannot be allowed, as a consequence, that if a bill, bearing penalty, should be drawn payable to a porteur for value received of him, the porteur would have no recourse against the drawer. The reason of the decision was not on account of defect of evidence in the writ, but because the Court would not sustain a writ of that nature for penal obligations. There is a strong feature of distinction between an onerous porteur and an acceptor. The drawer suffers no material prejudice, by annulling the acceptor's obligation; for, if a debt be truly due, he canstill enforce payment by an action. But the porteur, who pays his money solely upon the faith of the bill given him, has no other evidence or security for it. From the nature of the thing, then, the obligation upon the drawer for recourse and upon the acceptor for payment, are quite different; and proceed upon different principles. The porteur ought to have recourse the more, on the very account, that no action is competent to him against the acceptor. It follows, that, although it has been decided, that a bill bearing penalty is null, as to the acceptor, yet recourse upon it ought to regain, against the drawer.

If a writ be found null, as not probative, it can have no effect whatever. But where the nullity arises from the nature of the obligation, or any circumstance not proceeding from defect of evidence, a writ may be null as to some effects and good as to others; thus adjudications, null in other respects, may be sustained as securities.

But this case is still stronger than if John Fraser had been merely the porteur. The recourse is founded on an indorsation, which is a separate writ, and does not depend on the bill. It is a distinct obligation on the indorser. It is in fact a new bill. The short expression, ‘Pay the within contents,’ extended at length would be, ‘Pay the within L. —Sterling, to——or order, value of him.’ The only use made of the relative word ‘within,’ is to denote what the contents are. Thus, although there had been no bill, but only an account, the words, “Pay the within contents,” would have amounted to a bill for the sum; and the indorsee would have had recourse on the indorser or drawer. So in the case of Alison against Crawford, (voce Writ,) indorsation upon a bond, was sustained as a bill for the contents; the bond being evidence what the contents were, and that there was value in the debtor's hands. In the case Grierson against E. of Sutherland, No 63. p. 1469. it was found, that an obligation to pay, contained in the body of a bill, was indorsable by the acceptor, after payment of the bill; upon this sole principle, that all obligations are in some sense indorsable; since every indorsation is a new bill; and the obligation, which is indorsed, serves to show for what sum it was drawn. If, then, indorsation be a new bill, there can be no question, but that recourse is competent to the indorsee; whatever be contained, in the bill indorsed. It may indeed be argued, supposing the indorsation to be a new bill, that, as in the present instance, it was a bill for the contents; these contents being a sum with annualrent and penalty, the indorsation, or new bill, laboured likewise under the nullity arising from that circumstance. But both annualrent and penalty might, to the indorsee, be held to be a principal sum; the indorsation itself bearing value received: In fact, however, the word ‘contents,’ ought to be understood to relate to no more than the principal obligation; the penalty being conditional, and exigible only is case of delay.

If the indorsation were to be considered as a mandate, it ought to be held to be a mandate or procuratory in rem suam; by which the mandatarius is commissioned to receive the money due by the acceptor for his own behoof; and if so, from the nature of mandates it must follow, that if he has no action for recovery of the money, upon the right of the mandant, the actio contraria mandati, ought to be competent to him, upon that very ground. It would be unreasonable to suppose, that because the contract betwixt the mandant, and the person upon whom the order is given is null; therefore the contract, betwixt him and the mandatarius, constituted by all the forms required by law, should be also void.

Let it even be supposed, that an indorsation is nothing, but the conveyance of a bill, as an assignation is of a bond; still as indorsation includes absolute warrandice, the indorsee must have recourse. Suppose a bond assigned, with absolute warrandice; although that bond should want writer's name or witnesses, or be otherwise null; undoubtedly the assignee would have recourse upon the assigner. The law has as much established an indorsation probative writ, and valid transmission, of a bill; as, an assignation, of a bond.

Answered: The distinction between drawer and indorser, can have no effect. In the case Innes against Flockhart, the bill was not reduced as to the penalty only, but in toto; because not being a good bill, it was no probative writ, as wanting the requisite solemnities. In that situation, a bare subscription can no more prove the indorsation, than it can the acceptance, It must be null and ineffectual in all respects. It would be strange, to hold the same paper to be null, in respect to drawer and acceptor; and yet valid and obligatory, betwixt drawer and indorsee. Not being a proper bill, the assignation of it by indorsation, must be as little probative or obligatory, as the bill itself.

If the writing sounded on is any thing, it is of the nature of a bond, as bearing annualrent and penalty; but as such, not having writer's name and witnesses, it is not probative.

The argument, that the indorsation is a new bill, will not serve the petitioner's cause; for the words ‘pay the contents’ are equivalent to a repetation of the whole bill; consequently, of the stipulation for a penalty. As a new bill, therefore, it is equally invalid as the relative one.

It is in vain for the petitioner to argue, that the indorsation has all the requisites, which by law indorsations are required to have; for so had the acceptance all the requisites of an acceptance, viz. a bare subscription; yet it was rendered of no avail, in consequence of the illegal stipulation for a penalty; for the same reason the indorstation must be equally ineffectual. If an irregular writing were to be sustained at all; it ought to be so against the acceptor, rather than any one; because he knowingly put his name to it; and thereby bound himself to the drawer, or his order, for the contents.

The nullity insisted on, is urged with the more favour, that the bill is of a very old date.

The Court refused the petition; and adhered to the Lord Ordinary's interlocutor, finding the indorsation, as well as the bill, null.

A second petition was presented, which was likewise refused; and without answers.

In that second petition, it was argued, that the decision Innes against Flockhart, was erroneous. It was urged, that a bill ought not to be accounted entirely null, because of a clause stipulating for a penalty. Much stress was laid on the decision Alison against Crawford, (voce Writ,) where an indorsation of a bond, in the words, ‘pay the contents,’ was held to be good, as being in effect a new bill.

Lord Ordinary, Grange. For Petitioner, Geo. Ogilvie. For Respondent, Wm Grant. See No 21. p. 1419. Session Papers in Advocate's Library.