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 Fairholms, &c Merchants in Edinburgh,
v.
The Sun-Fire-Office at London, and John Puget

Date: 23 June 1761
Case No. No 155.

If the dishonour of a bill is not duly notified, recourse is not competent, altho' the bill be timeously protested for not payment, and although the person drawn upon has no effects of the drawer's in his hands.

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The Earl of Rothes was debtor to Captain Wilson of London, merchant, in four bonds, to the extent of L. 8,840 Sterling. One of them had been assigned by the Captain, in the 1748, to Claud Johnston, merchant in London; other two, in September 1750, to Alexander Hamilton, solicitor in London, as trustee for the Sun-Fire-Office; and the fourth bond, being for L. 1900 Sterling, was assigned in February thereafter to John Puget. These assignments were concealed from the Earl of Rothes.

Three days after this last assignment, Captain Wilson became bankrupt; and, in a multiplepoinding raised by the Earl, a competition ensued betwixt these voluntary assignees, and the assignees under the commission taken out upon Captain Wilson's bankruptcy, and certain other creditors of the Captain's who had used arrestments in the Earl of Rothes's hands; and the Court, in that question, preferred the voluntary assignees.

In December 1750, the Earl drew three several bills upon Captain Wilson, payable to Messrs Fairholms, which were accepted by the Captain or his clerk, but never paid. Two of these bills, to the extent of L. 1710, were formerly the subject of dispute before the Court of Session. The assignees, in stating the account of the balance due on the Earl's bonds assigned to them, had taken credit for these two bills as paid by the Captain. But the Earl and Messrs Fairholms objected, That the Captain, or his assignees, could not take credit for them, in order to enlarge the balance due on the bonds; because the bills, though accepted, had not been paid by the Captain, but returned under protest; and the Earl was liable in recourse to the porteurs of the bills, both in respect of the protest, and in respect that he had no effects in Captain Wilson's hands when he drew the same.

In that question, the Lords, 6th March 1759, found, “That Captain Wilson, or his assignees, are to have no credit for the bill of the 28th December 1750, for L. 1000 Sterling, or for the other bill of 3 1st Dec. 1750, for L. 710: 10: 0 Sterling, drawn by the Earl of Rothes upon, and accepted by Captain Wilson, to Messrs Fairholms, in respect they were not paid; but being duly negotiated, the Earl of Rothes is liable in recourse for the value of these two bills.”

The present question arose with regard to a third bill drawn by the Earl in December 1750, for L. 816: 2:6, payable to the Messrs Fairholms; of which there was a balance of L. 281: 9: O, still remaining due. This bill was indorsed to Innes and Clark, Messrs Fairholm's correspondents, and was accepted by Captain Wilson's clerk, according to the custom of London, and was duly protested within the days of grace, and the protest marked upon the back of the bill; but the protest was not extended, nor was the dishonour of the bill intimated to the Earl; But Innes and Clark having received sundry partial payments to account thereof from Captain Wilson, they at last took from him a draft upon Lord Cranston, for L. 819: 3: 2, for which they granted receipt; and, in their account current with Messrs Fairholms, stated Lord Cranston's bill to their, credit. This bill was not paid, and appears afterwards to have been given up to Captain Wilson.

Upon these grounds, some objections having been made for the. Captain's assignees, the Lord Justice Clerk, Ordinary, upon the 20th February 1760, pronounced this interlocutor:

“Having considered the foregoing debate, and that there was no due notice given to the Earl of Rothes of the dishonour of the bill in question, Finds no recourse lies against him for the balance due on said bill; and that no deduction can be made of the said balance, out of the sums on the Earl's bond assigned to the Sun-Fire-Office and John Puget.”

Pleaded in a reclaiming petition for Messrs Fairholms: The decision of the present question depends exactly upon the same principles which the Court followed in pronouncing the above interlocutor, in March 1759. The only difference betwixt the two cases lies in this circumstance, that the two bills for L. 1710:10:0, were duly negotiated, not only by a protest taken within the days of grace, but also by being duly intimated to the Earl; whereas, in the present case, the protest was timeously taken, yet the dishonour was not intimated in due time to the Earl.

If the Earl had had effects in Captain Wilson's hands, this might be objected as a bar to the recourse at Messrs Fairholm's instance. But if, upon the other hand, the Earl was debtor to the Captain, it could not be competent to him to object to the petitioner's recourse, that the dishonour of the bills had not been duly notified. The Earl could suffer nothing by the want of such negotiation, as he himself would have been liable to repay the sum to the Captain, if the bills had been paid; and, consequently, must be liable, in all events, to pay the same to Messrs Fairholms, from whom he received the money.

The only reason why recourse is denied upon bills not duly negotiated, is, that the drawer of the bill, on a correspondent possessed of his effects, means to retrieve the same out of his correspondent's hands; and, as he has reason to believe that his bill will be duly honoured, he cannot, after the draft, make any demand upon his correspondent, until the dishonour is notified to him. This notification, therefore, is incumbent on the porteur, in order to certiorate the drawer, that he may take the proper method to withdraw his effects; and, if the porteur fails, he is justly denied his recourse, because the drawer is, by his fault, deprived of the opportunity of recovering the effects he had lying in his correspondent's hands.

But none of these things can apply to the case where a bill is drawn upon a person who has no effects of the drawer's in his hand; in such case the drawer is truly the principal debtor, who must be bound ultimately to pay his own debt; and the acceptor stands in the place of the cautioner, who, if he pays, has recourse against the drawer; and if he does not pay, the drawer suffers no damage, and can make no objection, that he was not sooner informed that the sum had not been paid by his cautioner, to whom he must have repaid it, if it had.

The application of this to the present case is obvious: For, as the Earl had no effects in the Captain's hands, which he could have recovered upon the intimation, it was of no moment whether the dishonour was intimated to him or not, February 1731, M'Kenzie of Inchcoulter contra Urquhart, No 137. p. 1561.

With regard to what the assignees have pleaded, That Messrs Fairholms had given up their recourse against the Earl, by accepting sundry partial payments from Captain Wilson, and by their taking a bill upon Lord Cranston for payment of this debt:

It proceeds upon an erroneous supposition, as if the Earl had been creditor to Captain Wilson, in sums which ought to have been applied in payment of this bill: But, as the Earl was truly the Captain's debtor, and liable to repay him the sum in the bill, if he had honoured it, it is absurd to speak of the Messrs Fairholms giving up their recourse against the Earl, by their taking partial payments from the Captain, or a bill of Lord Cranston's, out of which they might expect to recover it. These were steps which were beneficial to the Earl, and the Captain's assignees, as they are entitled to take credit for the sums, of which the Messrs Fairholms, or their correspondents, recovered payment. At any rate, it is equally proper to speak of losing recourse against the Earl, because of not recovering the full debt from Captain Wilson, as it would be to speak of the creditor's losing his action against the principal debtor, because be had not done the utmost diligence to recover the debt from the cautioner.

Pleaded for the Sun-Fire-Office and Puget:—Bills are juris gentium; and the negotiation of these is matter of public law, depending upon fixed principles which cannot change.

In this contract, there are reciprocal obligations undertaken. On the part of the porteur of the bill, he becomes bound timeously to present the bill for acceptance; and, in case of dishonour, either by non-acceptance or, non-payment, he is obliged to protest the bill, and to notify the dishonour thereof quamprimum; and, where there is no failure in these particulars, the drawer of the bill is undoubtedly liable to make good the damages which the creditor sustains through the bills being dishonoured; but a failure, or neglect, in any one of the above particulars, forfeits that recourse which otherwise would be competent against the drawer. For it is the acceptor, of the bill, not the drawer, who is the principal debtor; and the drawer is but subsidiarie liable, where, the bill being duly negotiated, the acceptor fails to pay.

These forms law and practice have deemed essentially necessary to found the recourse: And no case did ever occur, where, if a protest was not taken for nonpayment, recourse was allowed against the drawer: For, in such case, the porteur is understood o rely upon the acceptor, who, by his acceptance, is bound to pay, whether he had the drawer's effects in his hands or not.

In the case of M'Kenzie of Inchcoulter, there was this material difference from the present case, that the bill was duly protested for non-payment within the days of grace. And the only objection against the recourse was, That the dishonour was not notified to the drawer so soon as it might have been. But, in the present case, he bill was either never protested for not-payment, or, if it was protested, the protest was never extended, and was thereafter departed from; nor was, there ever any notice given of the dishonour of the bill to the drawer, which was in every respect the same thing as if no protest had ever been taken; and, at any rate, this is but a single decision.

2do, It was pleaded for the Sun-Fire Office, &c.—Recourse is not competent, not only as no notification of the dishonour was given to the drawer; but also, that sundry partial payments were accepted of from Captain Wilson himself by which the pursuers agreed to hold Captain Wilson as their sole debtor for the contents of the bill. Vid. Tessal and Lee versus Lewis, vol. I. of Lord Raymond's Reports, p. 743. where it is laid down in express words, That, if the indorsee of a bill accepts but twopence from the acceptor, he can never after resort to the drawer. And this authority directly applies to the present case, which has been, in several instances, already adjudged to concern English debts, and consequently must be governed by the laws of that country, where both Captain, Wilson and the Earl resided at the time, and where the debts were contracted.

That, besides all this, Messrs Innes and Clark, the pursuers' correspondents, got from Captain Wilson, a bill on Lord Cranston, for payment of this very debt; and they must be presumed to have got payment out of that separate fund. But whether they did or not, they could not lawfully return that bill to Captain Wilson, if they meant to preserve their recourse against the Earl.

For supposing the Messrs Fairholms had recurred against the Earl himself, they must have assigned him to Lord Cranston's bill, which they had got for security and payment of Captain Wilson's acceptance; but, if the Earl himself would have been entitled to demand an assignment to Lord Cranston's bill, the defenders, as assignees to Lord Rothes's bonds, must a fortiori be entitled to demand the like assignment to Lord Cranston's bill: But, as the pursuers had disabled themselves to grant such assignment, by the re-delivery of that bill to Captain Wilson, this, of itself, is sufficient to bar the recourse.

The Lords ‘adhered to the Lord Ordinary's interlocutor, and refused the petition in respect of the answers.’

Act. Ferguson. Alt. Lockhart. Fol. Dic. v. 3. p. 89. Fac. Col. No 41. p. 86.