Scottish Court of Session Decisions

Subject_1 PART I.

BILL OF EXCHANGE.

Messrs Mansfield, Hunter, & Co. Merchants in Edinburgh,
v.
Donald M'Ilmun, Merchant in Glasgow

Date: 10 March 1770
Case No. No. 2.

Privilege of an onerous indorsee.

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Upon the 15th November 1768, M'Ilmun accepted a bill for £ 788. to Ebenezer Macculloch & Co. payable 14 months after date. This bill was indorsed by Macculloch & Co. to Anderson & Davidson of London, who again indorsed it to Mansfield & Hunter; by whom it was discounted, and the full value paid to the prior indorsees.

Upon the 18th January 1770, when the bill became due, it was protested against M'Ilmun the accepter for not payment, and against the drawers and indorsers for recourse; upon which M'Ilmun presented a bill of suspension; wherein he stated, That he was under double distress, in so far as Macculloch & Co. the drawers, having become bankrupt, a multitude of arrestments had been used in his hands by their creditors; and in order that he might pay with safety, he had executed a summons of multiplepoinding; That although, where a bill was indorsed for ready money, the indorsee would be preferred to the arresters; yet as it might be alleged in this case, that these indorsations were granted by the bankrupts in security of former debts within 60 days of bankruptcy, which would be sufficient ground for setting them aside; and as the arresters might further say, and be able to prove, that the indorsations were intended in whole or in part for behoof of the drawers, the suspender was not in safety to pay till the arresters had an opportunity of inquiring into these facts.

In their answer, the chargers set forth, That the bill had been indorsed to them for immediate value; and that they could not therefore be affected by any arrestments that had been used by the creditors of the drawers. All that could be done was to ascertain the onerosity and fairness of the indorsations by their oath; and as they were willing to depone that they had paid value for the bill, and that it was not indorsed in security of a former debt, nor stood in their persons in trust for behoof of the original drawer, the suspension should be refused.

The Lord Ordinary having passed the bill, the question was brought before the Court, and the interlocutor adhered to. The chargers reclaimed; and the petition having been answered, the point, as one of very considerable importance, underwent the most deliberate consideration.

The circumstance which chiefly weighed with their Lordships, to induce them to pass the bill, was the bankruptcy; and as the arresters might thereby have an interest to object to the payment of this bill, and to cut it down altogether it was contrary to principle to decide upon their right when they were not in the field. If they were in the field, they might perhaps be able to produce evidence in writing that the bill was a trust, and that they would not make a reference to the charger's oath; both of which pleas, unless the bill was passed, they would be deprived of. Though the interest of commerce was no doubt to be regarded, it should be done sub modo, not when it struck against established rules of law; but if the charger's argument was gone into, it would destroy the diligence of arrestment altogether.

The judges for refusing the bill rested their opinion upon the bad effects the contrary mode of procedure would have upon the interests of commerce; the infringement that would thereby be made upon the nature and privileges of bills, without which trade could not be carried on; and the embarrassment and discouragement that would be given to the discounting of bills, a measure equally expedient and necessary for these important purposes.

One of the Judges suggested the following expedient: When the sum in a bill is arrested, that the suspension should be intimated to all concerned; and within a limited time thereafter, the Lord Ordinary on the Bills should examine the holders upon oath on all pertinent interrogatories; and if from them it appeared that the bill had been indorsed for money instantly paid, the suspension should be refused; if not, that it should be passed.

The Court was almost equally divided; but it was carried to alter the former interlocutor; so that the bill of suspension was refused.

Lord Ordinary, Hailes. Clerk, Tait. For Mansfield & Co. Macqueen. For M'Ilmun, Maclaurin.

*** Upon the 11th of December 1770, the same point occurred in a question betwixt Mansfield, Hunter, and Co. and William Douglas; when the Lords were unanimously of opinion that the former decision should be adhered to. No special interlocutor, however, to that import was pronounced. The question was remitted simpliciter to the Ordinary to do as he should see cause; it being understood that his Lordship was to take the oath of the charger as to the onerosity of the indorsation; and if that was property instructed, the bill of suspension was to be refused.

For Mansfield & Hunter, Macqueen. For Douglas, Maclaurin. Clerk, Ross. Fac. Coll. No. 31. p. 85.