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.

Hodgson and Donaldson
v.
Bushby

Date: 18 July 1782
Case No. No 168.

Recourse was not lost by failure to intimate the dishonour of a bill to an indorser; the holder being ignorant of the indorser's place of residence.

The Lord were of opinion, though they did not find it necessary to decide, That a receipt by the holder of a bill of exchange, of a partial payment from the acceptor, after a protest taken for not payment, does not liberate the drawer and indorsers. The same opinion was expressed in the House of Lords upon appeal.

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Mr Bushby of Ardwell in Scotland, when in London, adhibited his name as indorser to a bill accepted by Benjamin Graham, delivered to Hodgson and Donaldson, and payable in London, two months after date. This bill, when it became due, was regularly protested against the acceptor for not payment; but the indorser having left London, and the holders being unacquainted with his place of residence in Scotland, no intimation of the dishonour was sent to him for twenty-one days thereafter.

In a process, at the suit of the holder, for recourse against the indorser, who objected the want of due notification, the Lord Ordinary, 3d July 1781, repelled the defence, “in respect it was admitted, that the defender left London, the then place of his residence, before the bill became due, and left on notice where he might be found, or wrote to.”

The defender reclaimed; and

Pleaded: That the obligations upon drawers and indorsers of bills of exchange, may be attended with the least possible inconveniency or hazard to them, and terminated within a period suited to the security they are intended to create, universal practice has imposed a necessity upon the holders, to notify the dishonour within a limited time, under the penalty of forfeiting their recourse against; those to whom such intimation is not given. Hence, a professor of bills must inform himself of the place at which intimation of the dishonour may be given to those against whom he means to come for his payment; and if, by neglecting this precaution, timely notification is not sent, he alone must suffer thereby. In this case, the holders, upon inquiry, would have been informed, that the defender was only occasionally in London, and resided ordinarily on his estate of Ardwell in Scotland, at which place they might have acquainted him, within the usual time, of the bill's not having been paid.

The Lord Ordinary's interlocutor has taken for granted, that a person having set his name to a bill, at any place, must, upon leaving it, give notice to the holders where he may be found or wrote to. But in what manner can that be done? A bill may pass through a thousand hands, or it may be transmitted to a foreign country. How is it possible for the drawers or indorsers, in such instances, to comply with this regulation? It is accordingly unknown in practice; and, if introduced by a precedent in this case, would be attended with the most pernicious consequences to trade. A question of a similar nature was lately decided by the Court, One Bell indorsed a bill to Grant, who indorsed it to a banking company at Glasgow. The bill having been dishonoured, and the dishonour intimated to Grant, the last indorser, who proved unable to pay, an action of recourse was brought against Bell, the prior indorser, to whom no intimation had been given. In support of this action, the holders urged the impossibility of their knowing all the prior indorsers of a bill, and that it was therefore sufficient to intimate to the last indorser, whose duty it was, to acquaint his author with the dishonour. But in answer to this, it was successfully maintained, that the holder of a bill accepted of it upon the credit of the indorsers he knew, not of those of whom he was ignorant; that if he knew them, it was his business to have acquainted them with the acceptors not having retired the bill; and, if he knew them not, there was no hardship in denying him recourse against them; Elliot contra Bell, 14th February 1781, No 167. p. 1606.

Answered for the pursuers:—The necessity of intimating the dishonour of bills is not disputed. But in this, and in every other case, where a condition, introduced in favour of any person, is disappointed by his fraud or negligence, it is held in law to be fulfilled, and the obligation, to which it is annexed is thereby purified. The bill in question was accepted, indorsed, and payable in. London. The indorser, by leaving London before it was exigible, without as quainting the holders whither intimation of the dishonour might be sent, rendered the execution of that formality impracticable in the ordinary way. But the holders made immediate inquiry at the persons at whose entreaty they advanced money for this bill, and according to the earliest intelligence of the defender's residence, they registered the bill, and used a charge of horning against him upon it. In the case quoted, the Court did not determine what circumstances excused the holder of a bill from giving intimation within the usual period, but found, that intimation to the last indorser did not, per se, preserve re-course against the prior indorsers.

Upon advising this argument, the Lords seemed agreed to alter the Lord Ordinary's interlocutor, and to assoilzie the defender; but, it having been separately contended by the pursuers, that, at the delivery of this bill, they had made special inquiry after the indorser's place of residence, and had been informed that it was in a particular street in London, where they had accordingly fought for it when the bill became due, the Lords ordered a condescendence of facts to be given in, and allowed a proof.

Fac. Col. No 56. p. 88.

*** This case was appealed.—The House of Lords Ordered and Adjudged, That the appeal be dismissed, and the interlocutors complained of reversed; and that the interlocutor of the Lord Ordinary of 3d July 1781 be affirmed.

12th May 1783, Journals of the House of Lords.

*** Follows sequel of the same case:

1782. Dec. 2. In this case, the Lords having been of opinion, on the principles stated in the above report, 18th July 1782, that it was not incumbent on a person, upon leaving the place where he had indorsed a bill of exchange to acquaint the holders where he was to be found or written to; Hodgson and Donaldson offered a proof, that, in this instance, they had inquired after Mr Bushby's place of residence in London, and had endeavoured, when the bill became due, to find him there.

Mr Bushby then offered this new defence, that the pursuers having, after protest, received a partial payment from the acceptor, they could not resort to the drawer or indorsers; in support of which he

Pleaded: At any time before protest, the holder of a bill of exchange may receive a partial payment, and, by marking the sum on the back of the bill, and protesting for the remainder, may secure his recourse for what is unpaid; Marius, p. 86. 87.; Scarlett, p. 126. 127. § 8. But, as a dishonoured bill ought to be returned immediately to those liable in recourse; if after taking protest for not payment the holder shall receive the smallest sum from the acceptor, this imports an abandonment of his claim of relief.——Lord Raymond, vol 1. p. 743.

Answered: If the holder of a bill of exchange has made regular intimation of the dishonour, no reason can be given, why his receipt of a partial payment, which is highly beneficial to those liable in recourse, by diminishing the extent of that obligation, should forfeit his claim against them. Accordingly, this defence, which rests entirely on the authority of Lord Raymond, unsupported by any precedent, is contradicted by the decision, Brown contra Hume, 14th November 1705. No 126. p. 1546.

No precise judgment was given on the merits of this defence, though some of the Judges expressed their opinion that it was ill founded; and as a decision sustaining it would at once have superseded any further proceeding, the interlocutor of the Court, allowing a proof of the circumstances alleged by the pursuers, and determining on the import of it, may be considered as an indirect rejection.

Upon advising the proof adduced by the pursuers, which did not seem to support their averments, the Lords ‘altered the Lord Ordinary's interlocutor and found, That no recourse lay against the defender, as indorser of the bill in question.’

Lord Ordinary, Elliock. Act. Elphinston. Alt. Ilay Campbell. Clerk, Orme. Fol. Dic. v. 3. p. 89. Fac. Col. No 73. p. 112.

*** This interlocutor was reversed, in the House of Lords, by the judgment mentioned above.