Scottish Court of Session Decisions

Subject_1 BILL OF EXCHANGE.
Subject_2 DIVISION IV.

Possessor's recourse against the Drawer and Indorser.
Subject_3 SECT. II.

Negotiation of Bill.

Messrs Charles and Robert Falls, Merchants in Dunbar, Chargers,
v.
Alexander Porterfield of Fulwood, Merchant in Glasgow, Suspender

Date: 17 June 1766
Case No. No 158.

A bill payable at three days sight, was allowed to lie some time in the hands of the drawee, neither accepted nor protested. This, though regarding a bill at sight, was an undue delay, and recourse was lost.

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Ten pieces of Madeira wine, the property of Mr Porterfield, were, at Charlestown South Carolina, shipped on board the Black Prince, a ship of the Messrs Falls, bound to Dunbar, and consigned to the care of the Messrs Falls. The vessel arrived at Dunbar 1st April 1764, which the Messrs Falls, by a letter of 3d April, notified to Mr Porterfield, and desired to know to whom they should apply, at Edinburgh, for payment of the freight, duty, and other charges, of the extent of which, they said, they would, in a few posts, send Mr Porterfield a note.

On the 24th April, the Messrs Falls transmitted to Mr Porterfield an account of the duty, freight, and charges, amounting to L. 129:1:0 Sterling; and added, “For which you will send us, in course, an order on Edinburgh, as you know the duties are money down.”

Mr Porterfield, on the 3d May, transmitted to the Messrs Falls, a bill, dated 2d May, drawn by Thomas Johnston, merchant in Glasgow, on William Borthwick, merchant in Edinburgh, for L. 129: 1s. Sterling, payable three days after sight, to Mr Porterfield, or order, bearing value received, and indorsed by Mr Porterfield to the Messrs Falls, who, on the 7th May, acknowledged receipt of the bill, Which they sent to Mr Borthwick, the person drawn on, to be accepted and returned to them.

Mr Borthwick happened not to be in town at the time Messrs Falls letter, with the bill, reached Edinburgh; but his clerk wrote Messrs Falls, 11th May, that Mr Borthwick was soon expected home, when he should present the bill, and doubted not but he would honour the same.

Upon 26th May, the Messrs Falls sent a clerk to Edinburgh, to require Mr Borthwick either to return or accept the bill, when Mr Borthwick desired the bill might be left with him a few days longer, when he should either accept it, or return it protested for not acceptance; but the bill not being returned, Messrs Falls, on 5th June, again sent a clerk, with orders either to get the bill accepted, or to protest it. Mr Borthwick delivered the bill to Messrs Falls clerk, with a protest taken against himself, on 31st May, for not-acceptance, and against the drawer and indorser for recourse, &c. And, on 6th June, Messrs Falls clerk took a new protest, not only against the drawer and indorser, but against Mr Borthwick for not-acceptance, and not payment, and damages, &c. on account of keeping up the bill without accepting it, or returning it with a protest for not-acceptance.

Messrs Falls, on the 7th June, wrote Mr Porterfield, acquainting him of what had happened, and inclosing the bill, with the two protests, and desiring to be reimbursed of their money, in respect the draught had not been answered; and, on 14th June, Mr Porterfield returned the bill and protests, and refused payment, on account of the bills not being properly negotiated; and, at same time, informed Messrs Falls, that Johnston, the drawer of the bill, had stopt payment on the 5th June. On receipt of that letter, Messrs Falls caused registrate the protest, and charge Mr Porterfield for payment; and suspension being presented, the question came before Lord Coalston as Ordinary, who took the cause to report to the Court.

Pleaded for the suspender: The laws and practice of all mercantile nations, require the most exact diligence in the regular negotiation of bills; they must be presented quam primum for acceptance, and, when due, for payment; and very fatal consequences may ensue from the smallest neglect or delay in the regular negotiation of them. It may, in some very particular cases, happen, that accidents occur, which must prevent the taking of those steps of negotiation, which are in general required, and that without the holder of the bill being to blame; and, in such cases, it would be unjust he should forfeit his recourse; but, where the delay proceeds from his own neglect or fault, be must answer for the consequences; and, in this case, the chargers have been grossly negligent in the negotiation. Their entrusting the bill to Borthwick himself; leaving it in his hands for such a space of time, without inquiring whether he had accepted or not; indulging him in a farther time to deliberate; neglecting to inquire after that time was elapsed; the bill itself still allowed to remain in his hands, though protested by him on the 31st May; no protect taken by the chargers till 6th June, the day after Johnstone had failed; no notice given the suspender of these proceedings before 7th June, evince in the strongest manner, not only an undue negotiation, but even a negligence not common among men of business in their own affairs; and, so sensible were the chargers of the irregular negotiation of this bill, that, in the instrument of protest taken against Borthwick, by them, they set forth the irregularity of his proceedings, and protest against him for damage, &c. on that account.

It has been argued for the chargers, That this being a bill payable three days after sight, they were not bound to present it for acceptance quam primum; and, in support of this argument, reference was made to two decisions. Innes contra Gordon, 7th February 1735, No 138. p. 1562.; and William Andrew contra Syme, 21st November 1759, No 152. p. 1584. In the first of these cases, the delay of presenting the bill was very small; all that could be alleged being that, if it had been transmitted for acceptance, in course of post, it might have been exigible four days before the acceptor broke; whereas, by neglecting a post, the acceptor broke before it was exigible. In the other case of Syme, the delay of presenting the bill for acceptance was occasioned by unavoidable accidents, the porteur of the bill being detained by contrary winds on his passage to Holland; by which means the bill could not be presented till about the time the Dunlops of Rotterdam, on whom it was drawn, broke; which is a very different case from the present. Some latitude may be allowed as to presenting bills at sight for acceptance; but it is impossible to maintain that such bills are totally exeemed from the common rules of negotiation; and, after being presented for acceptance, which ascertains the term of payment as precisely as if the bill had been drawn payable at a day certain, it is absurd to maintain that the same exact diligence is not requisite in the after-steps of negotiation, as in the case of other bills; this is a distinction no lawyer ever thought of, for which no reason can be assigned, nor precedent produced.

Another defence was maintained by the chargers, that the bill in question being indorsed to them, not for value instantly received, or in solutum of what the suspender owed them, but in security of a prior debt, for which, when paid, the suspender was to have credit, they were not bound to do diligence; and, in support of this plea, reference was made to the decision, William Alexander contra Robert Cuming, No 150. p. 1582. The suspender has no occasion to contest the authority of that decision, the circumstances of which were very different from what occur in this case; and a similar question occurred in a much later case, between Murray and Grosset, No 156. p. 1592.; where Grosset, contending that no recourse was competent against him, in respect of the undue negotiation of a bill transmitted by him to the receiver-general, who, on the other hand, pleaded, as the chargers here do, that it was but a deposit or pledge for a prior debt, to be credited when paid, and that an assignee in security was not bound to diligence; and though this Court, in February 1762, sustained the receiver-general's defence, the judgment was, in March 1763, reversed upon an appeal, and the receiver-general found liable for the contents of the bill; but, in the present case, the bill was not indorsed to, or deposited with the chargers, as a security for a prior debt, but as an immediate remittance for replacing the money debursed by the chargers on the suspender's account.

Answered for the chargers: Bills, when first introduced, were always drawn payable at a day certain; so that the drawer or indorser had reason to expect the money to be paid, and their obligation to be extinguished at that precise day; and, if it was not so, it was equitable that the holder of the bill should be obliged to take a protest, and give due notice to the indorser or drawer, to enable them to take the proper steps for their relief. But bills are sometimes intended for the conveniency of the person to whom they are indorsed or made payable, who being uncertain of the time he can demand acceptance or payment, gets the bill made payable at sight; and such bills are, in effect, no other than letters of credit, which the porteur may use sooner or later according to his conveniency; and, on this principle, the Court determined in the case mentioned above, 7th February 1735, that bills drawn on sight did not require the same negotiation with bills payable on a certain day; and so was again determined, William Andrew contra Syme, 21st November 1759. In order to get free of the weight of this decision, the suspender argued, that, though the porteur had a discretionary power as to presenting a bill on sight, yet, after it was presented, he became liable to the same exact negotiation as is required in the case of bills payable on a day certain. But the chargers can see no foundation for this distinction. It seems strange, that the porteur should put himself in a worse condition by presenting his bill, than if he had taken no step at all. If he could not forfeit his recourse by not presenting it, neither can he do so by lodging the bill sooner than he needed to do.

The negotiation of bills of every kind must depend on circumstances; where an accident prevents exact negotiation, the creditor will not forfeit his recourse. The chargers transmitted the bill to Borthwick the very day they received it; it was owing to the accident of his absence, and their residing at a distance, that they were so long in getting his final answer. It is a common practice to send bills to merchants on whom they are drawn, if the porteur does not reside in the same place. The bill, by its nature, did not lay them under any obligation for using exact negotiation to secure their recourse, of which they cannot be deprived by the supervening unexpected event of Johnston the drawer's bankruptcy. The negotiation used would have founded both the chargers and suspender in recourse upon Johnston; and, as the chargers have been guilty of no lata culpa, there is no ground in law for throwing the whole loss occasioned by Johnston's bankruptcy upon them.

The chargers accepted of this bill, not in payment, but in security of the debt due them by the suspender; they were not to pass it to his credit till it was actually paid, and, as indorsees in security, were not bound to exact diligence; so was determined, Alexander contra Cuming, (mentioned above.) In the case of Murray contra Grosset, founded on by the suspender, many specialities occurred upon which Grosset pleaded, to show, that, in that circumstantiate case, the indorsee bad taken the risk of the bill entirely upon himself.

“Upon report of Lord Coalston, and having advised the informations given in by each party, the Lords found, that the chargers, Messrs Charles and Robert Fall, have no recourse against the suspender, Mr Porterfield, for the contents of the bill charged on; and therefore suspend the letters simpliciter, and decern.”

Fac. Col. No 109. p. 374.