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.

David Elliot
v.
John Bell

Date: 14 February 1781
Case No. No 167.

Found, that notification of dishonour to the last indorser, was not, per se, sufficient to preserve recourse against prior indorsers.

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William Bell granted to John Bell his promissory note for L. 560. John Bell indorsed this note to John Grant, by whom it was again indorsed to David Elliot.

Elliot not having recovered payment from William Bell, the granter of the note, intimated the dishonour to Grant, the last indorser, but made no intimation to John Bell, the prior indorser; against whom, however, he raised an action for recourse.

Pleaded for John Bell: Timeous notification of dishonour must be made to every indorser, whether prior or posterior, upon whom recourse is to be had. It is admitted, that regular intimation to the last indorser is necessary to preserve any recourse, even against him; but this intimation cannot, per se, have the effect to save recourse against the prior indorsers. Mercantile practice has not established such a consequence, in itself so unreasonable. An opinion, given by one of the most eminent merchants in Britain,* is produced in process; from which it appears, that the practice is to notify to all the indorsers upon whom recourse is claimed; to the last indorser, within the legal time; to the prior, within a space as yet unsettled, but such as is not protracted by any undue delay. Timely intimation affords means of operating relief, which, it is evident, delay may often frustrate. Besides, without such intimation, a prior indorser is naturally put off his guard against an unforseen demand; a circumstance that loads, with a grievous additional hardship, the power of making the demand. For what limits in point of time, can be set to this power? It is indeed no other than the long prescription; for that introduced among bills, by the late act of Parliament, extends not to the ground of debt. Hence, at any moment, and to any extent, however enormous, a merchant might be surprised with formidable claims, rising out of old bill transactions, of which he had not even the least remembrance. Such would be the unavoidable consequences of the pursuer's doctrine. On the other hand, no inconvenience results from that of the defender. A person gives value for a bill on the credit of such names only appearing upon it, as he knows, not of those he is ignorant of; and, of course, it must be easy for him to make the requisite notification.

With respect to authorities, there occur no decisions of the Court on this point; nor are any of the decisions given in England precisely applicable. see, however, Forbes on Bills, cap. 6. § 16.; and in Cuning. Abridg.; strange, 707; Pepys versus Sir John Lambert; also, ibid. § 9. p. 16.; scarlet on Bills, § 5. cap. 19. see likewise Ordinance of France respecting bills of exchange.

Answered: It is an undisputed point, that every person who, either as drawer or as indorser, puts his name upon a bill, thereby, to the extent of the sum it contains, pledges his security to every posterior holder; unless he chuses to avoid this consequence, by subjoining to his subscription the words, ‘without recourse.’ From the nature of that obligation, it is evident, no necessity arises to the holder to give any other notification than his own discretion should dictate. The expediency of commerce, indeed, may prescribe, and has prescribed certain limits to this freedom; as, by the appointment of intimation itself, and the regulation of the time within which it is to be given to the last indorser. But no additional obligation has been created to force notification to any prior indorser. Making intimation

* Sir Robert Herries.

thus necessary to every one of a numerous train of persons whose names appear on bills, but many, or most of whose additions or designations may be unknown to the holder, would mightily embarrass mercantile transactions. It is a mistake to suppose that a merchant never trusts to the security of persons of the latter description. He may be ignorant of their designations, or of the places of their residence, yet well enough acquainted with their character, in respect of credit. He may, even though uninformed of all these circumstances, properly place confidence in names, strange to him, when he sees that certain prior holders whom he knows have already trusted to them. Hence, it appears, that the obstruction to the usefulness of bills which would follow, were the opposite doctrine to prevail, consists not only in a tedious and burdensome incumbrance, but even in an actual diminution of the security which they afford; while the inconvenience stated by the defender is almost imaginary, since it can occur only in a very few Angular instances, like the present. For, it is plain, the sense of his own interest must instantly prompt the last indorser to communicate the notice of dishonour to the immediately preceding one, who, in the same manner, will give it to the second, he to the third, and so retro up to the drawer. Here, then, a disadvantageous consequence, which of necessity can but rarely happen, is set in opposition to others likewise pernicious, which, as necessarily, must be continually occurring.

Though there are no decisions of the Court on this point, yet the pursuer's plea is supported by Erskine, 3. 2. 27.—33.; and by Stat. Geo. III. 12. cap. 72. And, with respect to the law of England, by Stat. Wil. III. 9. 10; Burrow's Rep. vol. 2. p. 669.

The Lords ‘found, that notification to the last indorser was not, per se, sufficient to preserve or establish recourse against the prior indorsers.’

Lord Ordinary, Alva. Act. Il. Campbell, H. Erskine, et Arch. Campbell. At. A. Crosbie et Alex. Ferguson. Fol. Dic. v. 3. p. 88. Fac. Col. No 36. p. 65.