Scottish Court of Session Decisions

Subject_1 BILL OF EXCHANGE.
Subject_2 DIVISION I.

Of the Object, Nature, and Requisites of Bills.
Subject_3 SECT. III.

Of Gratuitous Bills.

James Adam
v.
Thomas Johnstone

Date: 2 December 1782
Case No. No 18.

A bill was granted by a donor, mortis causa, to a confident person, on purpose to effectuate the donation, by means of that person's interposing his bill to the donee. The transaction was supported by the Court.

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John and William Russel, in the name of Adam, their indorsee in trust, sued Johnstone for payment of two bills, as having been drawn by them severally upon, and accepted in their favour, by Johnstone's deceased father, for the purpose, as they avowed, of making donations mortis causa to his widow; who was their sister, and Johnstone's step-mother; and to his children by her; the Russels, on the other hand, having granted equivalent bills to the donees. By these means the legacies seemed not to be immediately constituted by the donor's bills.

Pleaded for the pursuer; Donations, it is admitted, or legacies, cannot be constituted by bill of exchange; so that, had the bills in question been granted immediately to the donees, they would, no doubt, have been ineffectual. But to the Russels, they do not constitute any donation; having been given for a specific value; which was the equivalent bills accepted by them in favour of the donees; in the same manner, as if money itself had been paid to the latter. That objection therefore would be misapplied, if urged on the present occasion. Nor does it make any difference in the case; that the persons to whom the Russels granted the equivalent bills, were their own sister, and her infant children.

Answered; It is that very circumstance, which seems decisive of the cause. The pursuers must admit farther, that a bill of exchange is equally invalid, as a document of donation; whether it be granted through the medium of a trustee, or immediately to the donee himself. Now the avowed object of the whole transaction above-mentioned; and especially of the interference of the Russels; being to effectuate donations to their sister and her children; their character of trustees, is apparent; notwithstanding that the mode they adopted, of discharging the trust, was by interposing their own bills. Even apart from their avowal, that they did this, with an intention so very opposite, to that of persons who truly, or bona fide, bargain; exchanging a quid pro quo; the law would have presumed simulation, from the close connection, in which they and the donees stand to each other; all conjunct and confident persons in the strictest sense. The mere appearance, then, of bills of exchange; a circumstance evidently, or confessedly calculated, to elude the law; cannot in reason merit any regard. Plus valet quod revera agitur, quam quod simulate concipitur.

Accordingly, if, in practice, effect were to be given to such a proceeding, independent of the true object of parties; those salutary regulations of statute that require, to effectuate a donation, other vouchers than bills of exchange; which, for facilitating commercial dealings only, are exempted from the prescribed solemnities, would assuredly avail but little. For let it be supposed, that fraud in this matter is intended; and then, it is likely, two or more bills conceived in favour of different persons, associates in the crime, may be as easily produced as one. On the pursuer's hypothesis, however, the result must be strange. Though any one of those bills alone would not; yet the whole together, will necessarily become, legal documents of donations or legacies; not less effectual, than the most formal and regular deeds; since all that is necessary to their complete efficacy, is the mutual interchange amongst the associates, of bills equivalent to those containing the pretended gratuities. Thus, for example, if the associates A and B hold each of them a bill for L. 100; to give full effect to their scheme, A needs only to frame an equivalent bill as granted by him to B, and B again to do the same thing respecting A. They will then be furnished with precisely the same argument, as is urged by the pursuer; that the bills in their favour were given for value, contained in those, which they mutually accepted in favour of each other. So that were that plea to be a successful one; it could hardly hereafter be said with propriety; that donations or legacies might not be constituted by bill of exchange, as well as by bond or latter will.

Observed on the Bench, Prior to the late act of Parliament, limiting to six years the commencement of action on bills of exchange; as they might have been brought in suit, at any time within the period of the long prescription; there was evidently a much greater danger of frauds being committed by means of them; than there has been since that enactment. Hence those documents are to be construed, with less suspicion and strictness, now than formerly.

The Court, in general, seemed to adopt the argument of the pursuer; which they did not consider as obviated by that of the defender.

The Lord Ordinary had repelled the defence; and on advising a reclaiming petition, with answers,

The Lords adhered to the Lord Ordinary's interlocutor.

Lord Ordinary, Westhall. Act. Hen. Erskine. Alt. W. Steuart. Clerk, Hume. Fol. Dic. v. 3. p. 75. Fac. Col. No 74. p. 113.