Scottish Court of Session Decisions

Subject_1 BILL OF EXCHANGE.
Subject_2 DIVISION II.

The Porteur's Action against the Person upon whom the Bill is Drawn.
Subject_3 SECT. II.

Extraordinary Privileges of Bills.

Robert Smith
v.
Alexander Home

Date: 5 December 1712
Case No. No 92.

The possessor of a bill, to whom it was indorsed for value, was preferred to the indorser's creditor, who had arrested the money in the acceptor's hands, before indorsation.

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Alexander Forbes draws a bill upon two tenants, payable to Henry Gladstanes, at Lammas 1709, which the tenants immediately accepted. Henry Gladstanes indorses the bill to Robert Smith, who protests for not payment upon the 10th of August, and charges with horning upon the 22d of the same month.

Alexander Home, a creditor to Gladstanes, arrests upon the 17th of July, and pursues a furthcoming before the Sheriff of Berwick; in which the acceptors of the bill appear, and acknowledge the debt, and thereupon there is a decree of furthcoming upon the 4th, and a charge of horning upon the 23d of August.

The tenants suspend upon multiplepoinding; and though the subject of debate was very small, only L. 62 Scots, yet, for the preparative, the Lords appointed a hearing in their own presence, upon the question of preference betwixt the arrester and the possessor of the bill; and, after informations, the debate was more full on the bench than from the bar.

It was not much contraverted by the parties; and the reasoning of the Lords proceeded upon supposition, that bills of exchange required not the formalities of writers' names and witnesses; and that the indorsation wanting date, was presumed to be of the date of the bill, and so prior to the arrestment; and there was no necessity of intimating the indorsation; but the question remained, whether the presumption that the indorsation was prior could be elided by a contrary probation by the parties oath, that the same was posterior to the arrestment.

As to which, it was alleged by the arrester, That his diligence was nexus realis, and did affect the sum due to Gladstanes, his debtor, whose indorsation after the arrestment, could not put the arrester in any worse condition, seeing he had prosecuted his diligence duly, and obtained a furthcoming before the bill was protested; and it was offered to be proven, that the indorsation was not only posterior to the arrestment, but even to the summons and to the decreet of furthcoming.

It was answered for the possessor of the bill, That inland bills, by the act of Parl. 1696, had all the privileges competent to foreign bills; and the favour of commerce does require many privileges for the free course of bills of exchange: That any party seeing a bill in the hands of a possessor accepted by a solvent debtor, may rely upon an indorsation as current money; and there is nothing to be feared as to the transmission of that bill, upon the account of any exception that might be otherwise competent against the indorser; therefore compensation takes no place; as was expressly found lately in the case betwixt Campbell and Stewart (p. 1497.). In like manner, such is the favour of bills of exchange, that the Lords, the 12th day of Dec. 1711, in the case of Sir John Erskine contra William Thomson, No 91. p. 1501. found, that the receipts of a sum contained in an accepted bill not writ upon the bill itself, but contained in a paper a-part, did not affect the bill; but that the same bill being indorsed, the possessor had right to exact the full sum in the bill; reserving action to the acceptor who paid against the indorser; and the reason was, because bills are considered as bags of money, transmitted de manu in manum by indorsation; and for that reason, no exception can be admitted that appears not by inspection of the bill.

It was replied for the arrester, That the acts of Parliament 1681 and 1696, make nothing to the present question; for the first provides only for summar execution upon bills of exchange, and that the same shall bear annualrent; and since the act 1681, the Lords have been very favourable to foreign bills; but have not extended all the privileges of foreign bills to inland precepts; the supporting of public credit not requiring the, like privilege to inland precepts; on the contrary, Sir George M'Kenzie observes, it would be inconvenient to encourage inland precepts too much; for then all business would come to be transacted by inland precepts, and the ordinary security by bonds neglected.

2do, The arrester is precisely in the case of the act of Parliament 1621, in as far as he has duly affected the subject in competition, by arrestment before indorsation, and thereby is entitled to reduce that indorsation as posterior to his lawful diligence; for, albeit the indorsation be presumed to be anterior to the arrestment, yet a presumptive probation can always be elided by a positive probation in the contrary, and it is offered to be proven, by the oath of the possessor of the bill, that the indorsation was truly posterior.

3tio, This extention in favour of bills of exchange, would, in a great measure, take off the effect of the act of Parliament 1696, anent notour bankrupts; for bankrupts falling under the description of that act, might dispose of their effects, and take accepted bills for the value, and indorse them at their pleasure, in defraud of all diligence of their creditors, real or personal: And what hath been determined in the case of compensation, or payments by receipts a-part, not upon the bills, hath no influence upon the present question; for in these decisions no body was concerned but the acceptor of the bill personally; who, by acceptance, is justly understood to renounce compensation; and, for the favour and currency of bills, might justly be obliged to take receipts of payment upon the bill itself; but here the question is with a lawful creditor who has used diligence.

It was duplied for the possessor of the bill, 1mo, Law has provided the same privileges to inland precepts with foreign bills; neither have the Lords, by their decisions, made any difference; nor is there reason to extend the privilege of the one more than the other; for bills are the instruments of commerce, as well within the country as in foreign parts; and without these, traffick could not be carried on from one remote corner of the country to another, without carrying money in specie backward and forward, which would occasion great delays and hazard in transportation; neither can foreign commerce admit of that difference, because foreign dealers have their factors in Scotland; which factors cannot manage their business without depending on inland bills, which thereby have a great connection with foreign trade; and there is no inconveniency that parties may be left at their freedom to deal by bonds or bills; for where money is designed to lie for the benefit of interest, no body will take or give bills which require speedy negotiation and diligence.

As to the second reply, founded upon the act of Parliament 1621; that act does principally relate to diligence affecting lands; and tho' it mention also arrestments, that concerns only ordinary conveyances by diligence; but the favour of commerce may exeem indorsations of bills of exchange obtained bona fide from the possessor not knowing of any interveening diligence. But indeed the case would alter, if it could be alleged that the possessor of the bill did know of an interveening arrestment before indorsation; for there, there would be fraud upon his part; and the act of Parliament 1621 annuls deeds in defraud of creditors; but where the possessor of the bill did bone fide acquire, it would be a great inconveniency, and far from what was intended by that act, to prejudge his purchase.

3tio, As to the act of Parliament 1696, in the case of notour bankrupts, the law presumes the case of such bankrupts to be known to every person, præsumptione juris et de jure; and therefore the privilege of bills of exchange in that case behoved to cede.

4to, It is not pretended that the indorsation is gratuitous.

‘The Lords preferred the possessor of the bill, in respect it was not alleged that the arrestment was known to him, or the indorsation gratuitous in whole or in part.’

Fol. Dic. v. 1. p. 98. Dalrymple, No 93. p. 130. *** The same case is reported by Forbes:

In a competition for the sum, in a bill of exchange payable to Henry Gladstanes, Inn-keeper at Ginglekirk, betwixt Robert Smith, to whom it was indorsed for value, and, Alexander Home, who, as creditor to the indorser, had arrested the money in the acceptor's hand before indorsation:——The Lords preferred the indorsee or possessor of the bill; in respect it was not alleged, that the indorsation was gratuitous without an onerous cause; or, that the indorsee knew of the arrestment when the bill was indorsed to him.

Forbes, p. 641.