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. IV.

Of Bills with clauses stipulating Annualrent and Penalty.

William Douglas and Patrick Lindsay, Merchants in Edinburgh,
v.
Alexander Brown, Merchant in Edinburgh

Date: 15 November 1757
Case No. No 32.

A bill bearing interest from the date found null.

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In the ranking of the creditors of Robert Brown of Whitecroft, Alexander Brown produced, as his interest, a bill for L. 76: 5: 5 Sterling, dated in 1725, accepted by the common debtor, payable at a certain day, and bearing in it a stipulation of interest from the date. It appeared to have been taken for the amount of an account of goods, which was discharged at the time of the acceptance. Inhibition was executed upon this bill in the 1726, and followed by an adjudication.

Objected by Douglas and Lindsay, competing creditors, That the stipulation of interest from the date contained in the bill, renders it void and null; because bills are not intended to be subsisting securities for sums lent out upon interest; but are considered as bags of money passing like specie from hand to hand. The law has provided, that they shall bear interest against the acceptor from the term of payment, only in pænam of his neglect of making payment at the precise term; and no interest is, ex lege, due upon them, when accepted, between the date and the term of payment, as till then the acceptor is not in mora. Where other stipulations are intended, the precise form of executing and testing an effectual obligation is directed by statute; and as bills, whether foreign or inland, make a singular exception from the general rule, wifely calculated to prevent frauds and forgeries, their privilege is lost by any material deviation from the known and established form of bills used in this and other countries: And, a fortiori, should it be so in a case like this, where a condition is introduced inconsistent with the very end and intention of bills.

Answered for Brown; 1mo, The bill in question was accepted for full value received; and it would be very hard to forfeit a lawful onerous creditor, on account of a trivial mistake in drawing the bill. 2do, It has all the known requisites of a bill jure gentium; and therefore cannot be annulled without the force of a statute. 3tio, This addition to the bill cannot change it into a writ of another kind, not entitled to the privileges of bills; 1st, because there is nothing unlawful in a creditor's taking interest from the date of his security on a debt then subsisting; nor is such a stipulation foreign to the nature of bills, especially inland ones, which, in general, were only intended to be securities for lent money, or debts; and, 2dly, if it were foreign, it could not have the effect, by law, to vitiate a bill, otherwise good; but the condition must be held pro non adjecta. 4to, Supposing this Writ could not be sustained as a bill entitled to the privileges of the acts 1681 and 1696; yet it ought to be held as a probative and privileged writ, and as such allowed to be a sufficient document of debt, and ground of action, in the same manner as missive letters in re mercatoria, and other privileged writs. And, 5to, It was, for many years before and after the date of this bill, the general practice, to draw bills with such a condition in them; and such bills were sustained by many decisions since the 1725, when this bill was drawn: And therefore, whatever may be the fate of new bills, this ought, ex æquitate, to be sustained; otherwise the decision must have a severe retrospect.

Replied, 1mo, The bill's being onerous, cannot support it against a legal objection; especially in a question with creditors equally onerous: For were it gratuitous, it would be set aside on that single ground. 2do, It is not the practice of other nations, to make bills with this condition in them. By the French King's ordinance 1673, interest on bills is only due from the date of the protest for not-payment, when accepted. And the same rule is established by the regulations of Holland; and the trading cities of Hamburgh, Frankfort, Augsburg, and Leipsic, in Germany; and Bologna in Italy; which proves, that there interest could not be exacted or stipulated from the date, in case of acceptance. The acts 1681 and 1696, only support bills executed according to the custom of nations; and consequently, by declaring this writ null, the Court will not forfeit the creditor of a valid obligation, or assume legislative powers; but only find, that the writ founded on does not fall within the description of what is intended to be privileged by those statutes; and is therefore null at common law, as wanting the sorm and solemnities of attestation requisite to other obligations by the acts 1579 and 1681. 3tio, This addition renders it not a proper bill; because the nature of a bill implies, that the creditor has no use for his money till the term of payment; so that he cannot even be obliged to take payment sooner; and consequently his exacting interest from the date is unjust, as well as informal. Neither can this clause be held pro non adjecta; as it is not a superfluous addition, like a stipulation of interest from the term of payment, but an unlawful condition; which must vitiate the writ, and have the same effect as an usurious stipulation in a common contract or obligation. Inland bills never were intended as lasting securities more than foreign ones; but were authorised by the act 1696, for the benefit of inland commerce, upon the same footing as foreign bills. 4to, If this writ is not a bill, it is good for nothing; because it wants all the requisites for constituting a valid obligation at common law. Missives, in re mercatoria, are held probative, in respect to the practice of nations, and benefit of commerce; and other writs have been privileged from different considerations, that do not apply to such writs as the present; which can only derive validity, in so far as authorised by statute, in exception from the common rules of law; and where they do not come up to the exact nature of the writs intended to be privileged as bills, they must be altogether ineffectual. And, 5to, No evidence appears of its having been a general practice to draw bills in this country after this manner. It is true, some such bills were formerly sustained; but this bill was drawn before any of those decisions; and therefore the drawer could not have relied on them. Besides, an erroneous practice, when discovered, cannot be too soon corrected. The decisions since the 1738, have uniformly sustained the present objection; and in doing so they do not make a new law, having a retrospect, but only declare what is now found to have been originally an intrinsic nullity.

‘The Lords sustained the objection to the bill, and found the same null.’

Act. Dav. Rae. Alt. Ja. Burnett. Fol. Dic. v. 3. p. 75. Fac. Col. No 57. p. 94. *** Lord Kames reports the same case:

Some years ago it was an usual practice, when bills were taken for an antecedent ground of debt, to make them bear interest from the date; and this practice was authorised by a number of decisions, of the Court of Session, prior to the 1740. After that period a different opinion prevailed. To stipulate interest was reckoned not strictly conformable to the nature of a bill; and such bills at present are therefore annulled.

Robert Brown of Whitecroft was debtor to George Brown merchant in Edinburgh, in a shop account of L. 76 Sterling, for which a bill was granted 19th April 1725, stipulating interest from the date. And with the bill was produced in process an account of the furnishings taken from the drawer's books, amounting precisely to the sum in the bill, and coming down to within a few days of the date of the bill. In November 1726, the bill was protested for not payment, and inhibition past in December thereafter. A horning was raised and executed in July 1730; and an adjudication was led in June 1740.

In the ranking of Robert Brown's creditors, it was objected against the adjudication, That the bill, upon which it proceeded, was null and void, as bearing interest from the date; and the Court accordingly sustained the objection.

It occurred at advising, 1mo, That the act 18th, Parl. 1621, allows, at the lending of money, a year's interest to be added in the bond. The act gives no authority for the like practice in bills; and yet this is allowed in bills, by the authority of custom. And if this practice be good by custom; much more the practice of stipulating interest from the date; because no instance can be given in law, where the greater liberty is lawful and the less liberty unlawful. 2do, Here was a debt of L. 76, for which a bill was taken. It was at that period the duty of the debtor, if he could not pay the debt, to pay at least interest for it. Now, it is inconceivable that any objection should lie against a bill, or any writing, containing a stipulation for payment of interest, which the debtor in conscience was bound to pay independent of the stipulation. 3tio, The pactioning interest, from the date of the bill, if it annulled the bill, did not certainly forfeit the anterior debt. Supposing the bill to be invalid as a literarum obligatio, it is at least a good evidence of the debt. Therefore, instead of finding the bill null, it was proposed, but without success, to remit the cause to the Ordinary, in order to give an opportunity to astruct the debt by further evidence.

In advising a reclaiming petition for the adjudger, it was urged, That the bill was taken anno 1725; when, by the decisions of the Court, it was published to the nation, that bills with interest from their date were legal securities; and therefore, to cut down this bill is showing a sovereign contempt to the decisions of the Court of Session, as not in the least degree to be trusted or regarded. I proposed, therefore, that the bill should be sustained upon this particular medium, of being granted by the authority of the Court; and that an act of sederunt should be made against such bills in time coming. The interlocutor notwithstanding was adhered to; a lasting reproach upon the Judges who voted for it, as being insensible, or blind, to the grossest act of injustice, viz. the forfeiting a man for doing what was declared, at the time, lawful by the Sovereign Court of the kingdom.

Select Dec. No 136. p. 192.