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.

William and John Harrisons,
v.
Edward Chippendale, Trustee on the sequestrated Estate of Macalpine and Company

Date: 9 December 1794
Case No. No 179.

Found, that when a debtor in a bill becomes a bankrupt, and a claim is made for it on his estate before the term of payment, the want of due negotiation cannot be objected by his creditors.

When a bill has passed through the hands of a person who is neither drawer, acceptor, nor indorser of it, no recourse lies against him, if it be afterwards dishonoured.

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William and John Harrisons, and Macalpine and Company, had been accustomed to accommodate each other by a mutual exchange of bills.

The latter became bankrupt in May 1788, and at that time bills to a large amount were in the circle, accepted by the Harrisons, and which they were afterwards obliged to discharge.

The Harrisons had in their possession, at the time of the failure, bills to the same amount delivered to them by Macalpine and Company, by whom some of them were drawn, but others were neither drawn, accepted, nor indorsed by them. The debtors in all these bills had become bankrupt, and claims had been lodged on their estates before the terms of payment.

The Harrisons entered a claim on these bills on the sequestrated estate of Macalpine and Company, and produced, in support of it, on the one hand, the bills they themselves had accepted, retired; and, on the other, the bills they had got from Macalpine and Company, dishonoured; an account-current attested by Macalpine, after his bankruptcy; and a copy of certain proceedings in the Court of Chancery, relating to these bills, in consequence of a claim entered for them on the English estates of the bankrupts. They also referred to the mutual books of the parties.

The trustee on Macalpine and Company's estate

Objected, 1mo, The claim, in so far as it is founded upon the bills drawn by Macalpine and Company, cannot be supported, because they have not been duly negotiated.

2do, It is equally groundless, in so far as it proceeds on the remaining bills. He who discounts a bill trusts solely to the credit of those whose names are upon it; and when the person receiving the money for the bill does not indorse it, this can only have happened from the discounter's not requiring his credit, and his wishing to keep himself free of the obligation of recourse; but, independently of the bills, there has been no legal evidence of the debt produced. Indeed, the nature of the transaction, which was a mere exchange of paper, does not admit of any separate claim, any more than if it had consisted in an exchange of goods, which might vary in their value, according to circumstances.

Answered, 1mo, It is a settled point in the law of England, where the bills in question were payable, that when the debtors in a bill become bankrupt, and claims are entered on their estates before the term of payment, negotiation is unnecessary, 21st January 1792, Creditors of Macalpine and Company against Parsons and Govett, No 176. p. 1617.

2do, supposing no claim to lie on the bills themselves, as they were delivered in security merely, and not in extinction of the debt due to the claimants, it is competent to prove its amount aliunde, and sufficient evidence has already been produced.

The Lord Ordinary reported the cause on informations.

The Court considered the first point to be completely settled in favour of the claimants, by the case of Parsons; and that, as to the second, although upon the general grounds stated for the trustee, no claim lay on the bills, the debt might be proved aliunde.

The Lords repelled the first objection; and, as to the second, moved by what was said as to a separate proof of the debt, they remitted to the Lord Ordinary to hear parties farther.

Lord Ordinary, Henderland. Act. John Clerk. Alt. Honyman. Clerk, Sinclair. Fol. Dic. v. 3. p. 89. Fac. Col. No 141. p. 324.