Bank of United States v. Daniel
37 U.S. 32

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U.S. Supreme Court

Bank of United States v. Daniel, 37 U.S. 12 Pet. 32 32 (1838)

Bank of United States v. Daniel

37 U.S. (12 Pet.) 32

Syllabus

A bill of exchange was drawn at Lexington, Kentucky, on James Daniel, on 12 October, 1818, by Robert Grilling, payable at one hundred and twenty days after date at the bank of deposit of New Orleans. The bill was accepted

by the drawee and was endorsed by H.D., I.C. and S.H. All the parties to

the bill resided in Kentucky. The bill was discounted by the Branch Bank of the United States in Kentucky and was transmitted to New Orleans for payment. It was there regularly protested for nonpayment, and was returned to Kentucky for payment of principal and interest from 9 February, 1819, the time it fell due, together with charges of protest, and ten percent damages on the

principal. The maker and acceptor of the bill paid the bank, in July, 1819, three thousand three hundred and thirty dollars and sixty-seven cents on account of the aggregate amount due and supposed to be due, and gave a promissory note for eight thousand dollars, the balance, to William Armstrong, to which H.D.,

I.C. and S.H. were parties, as co-drawers or endorsers. This note was discounted at the office of discount of the Bank of the United States at Lexington, Kentucky, upon the express agreement that the proceeds should be applied to the payment of the balance due on the bill. Afterwards, a payment of five hundred dollars was made on this note and a note for seven thousand five hundred dollars given which not being paid, and Griffing having died, suit was brought by the bank on the note and a judgment obtained against all the other parties to it. In 1827, the defendants in the judgment at law, filed their bill in the Circuit Court of Kentucky, claiming that by the law of Kentucky, the bank was not entitled to ten percent damages on the bill, as all the parties to it lived in Kentucky, and that therefore, the amount of the damages, one thousand dollars, had been included by mistake, in the note for eight thousand dollars, and as there was no legal liability for damages, the note, to the amount of the damages, was given without any consideration whatever. The bill prayed for an injunction to stay proceedings on the judgment, to the amount of the damages, and the interest on the same. In 1827, that amount was one thousand five hundred and fifteen dollars. A decree of the Circuit Court of Kentucky, allowed the injunction at November term, 1836, and the amount of the damages and interest; from July, 1819, which the three thousand three hundred and thirty dollars sixty-seven cents included and was paid in that sum, was at the time of the decree of the circuit court, two thousand and forty dollars.

The act of Congress provides that appeals shall be allowed to the Supreme Court from the final decrees rendered in the circuit courts in cases of equity jurisdiction where the matter in dispute, exclusive of costs, shall exceed the sum or value of two thousand dollars. The expression "sum or value of the matter in dispute" has reference to the date of the decree below, alike in case of appeals in equity and writs of error at law; they are each grounded on the original process of this Court, operating on the final decree or judgment, and are limited to the sum or value then in controversy, and of which the decree or judgment furnishes the better evidence, should it furnish any. The matter in dispute in the circuit court, was a claim to have deducted from the judgment at law, one thousand dollars, with interest thereon, after the rate of six percentum, from 8 July, 1819, up to the date of the decree, in November, 1836; being upwards of seventeen

Page 37 U. S. 33

years, and the circuit court decreed the reformation to be made of the judgment at law by expunging therefrom, and as of its date, the one thousand dollars, with the interest. The effect was to cut off the interest that had accrued on the one thousand dollars from the date of the judgment in 1827 to that of the decree in 1836, interest on the principal sum recovered being an incident of the contract by the laws of Kentucky, as well after judgment as before. The practical consequence of the decree will immediately be manifest when the bill is dismissed by the order of this Court; the appellants will then issue their execution at law and enforce the one thousand dollars, with the accruing interest, from 8 July, 1819, until payment is made. It follows that upon the most favorable basis of calculation, and disregarding the statute of Kentucky of 1789, giving ten percent damages in addition to legal interest on the sum enjoined, the amount to which the decree below relieved the appellees, and deprived the bank of the right of recovery, was two thousand and forty dollars -- that is, one thousand dollars principal, with seventeen years and four months of interest, this being the aggregate amount in dispute, and enjoined by the decree, of course, the Supreme Court has jurisdiction of the writ of error.

This Court, in accordance to a steady course of decision for many years, feels it to be an incumbent duty carefully to examine and ascertain if there be a settled construction by the state courts of the statutes of the respective states where they are exclusively in force, and to abide by and follow such construction when found to be settled.

A bill of exchange drawn, accepted, and endorsed by citizens of Kentucky, and there negotiated, payable at New Orleans, was not, by force of the statute of Kentucky of 1798, subject to the payment of ten percent damages.

Whether a bill of exchange drawn in one State of this Union, payable in another, is a foreign bill involves political considerations of some delicacy, although of no intrinsic difficulty, at this day. The respective states are sovereign within their own limits and foreign to each other, regarding them as local governments, and consequently foreign to each other in regard to the regulation of contracts; it follows a bill drawn in one payable in the other is a foreign bill.

The place of payment of the bill on which the suit was brought in the circuit court being within a jurisdiction foreign to Kentucky subjected the acceptor to the performance of the contract according to the laws of Louisiana, where it was payable, to every extent he would have been had he become a party to the bill at New Orleans, and the effect of the contract on all the parties to it does not vary from the one sued on in Buckner v. Finley & Van Lear, 2 Pet. 586. Being a foreign bill and not having been affected by the statute of Kentucky, of course, the holders, by commercial usage, were entitled to reexchange when the protest for nonpayment was made.

Courts of chancery will not relieve for mere mistakes of law. This rule is well established, and the Court will only repeat what was said in the case of Hunt v. Rousmanier, 1 Pet. 15,

"that whatever exceptions there may be to the rule, they will be found few in number, and to have something peculiar in their character, and to involve other elements of decision."

Courts of equity are no more exempt from obedience to statutes of limitations than courts of common law.

It is generally true that the giving of a note for a preexisting debt does not discharge the original cause of action unless it is agreed that the note shall be taken in payment.

The statute of limitations is a bar in a case where at the time of the return of a bill

Page 37 U. S. 34

of exchange, payable in New Orleans and drawn in Kentucky, protested for nonpayment, the parties to it, in 1819, paid as damages, on the bill ten percentum on the amount, and did not until 1827 claim that, by the law of Kentucky, no damages were payable on such a bill. In 1819, the parties to the bill paid three thousand three hundred and thirty dollars and sixty-seven cents on account of the bill for ten thousand dollars, the cost of protest, and damages, and gave their note for eight thousand dollars for the balance of the bill, which was discounted, and the proceeds by express agreement applied to the payment of the bill. If no damages were payable on the bill for ten thousand dollars, an action to recover back the same, as included in the payment of the three thousand three hundred and thirty dollars and sixty-seven cents, could have been instituted in 1829.

On the 29th day of October, 1827, the appellees, James Daniel, Henry Daniel, Isaac Cunningham and Samuel Hanson filed a bill in the Circuit Court of Kentucky stating that on 12 October, 1818, at Lexington, Kentucky, Robert Griffing, since dead, drew a bill of exchange on James Daniel, one of the complainants, for ten thousand dollars, payable one hundred and twenty days after date at the office of discount and deposit of the Bank of the United States at New Orleans. The bill was drawn in favor of Henry Daniel, Isaac Cunningham, and Samuel Hanson, and being accepted by James Daniel, was endorsed to the Bank of the United States by the drawees. At the time the bill was drawn, Robert Griffing and James Daniel lived and were in the State of Kentucky, and all the parties to the bill were at the time it was drawn and ever since have continued to be residents in that state.

The bill of exchange so drawn and endorsed was by the Bank of the United States transmitted to New Orleans, and not being paid, was regularly protested and returned to Kentucky, the holders claiming the amount of the same from the parties to the bill, with damages at the rate of ten percent on the amount. James Daniel, the acceptor of the bill, believing the demand of damages to be legal, paid to the Bank of the United States in June or July, 1819, three thousand three hundred and thirty dollars and sixty-seven cents on account of the whole amount due on the bill, consisting of principal, interest, charges and the damages, and for the balance of the bill, the drawers of the bill, Robert Griffing and James Daniel gave their negotiable note, payable sixty days after date, with Cunningham, Hanson, and Henry Daniel as co-drawers in favor of William Armstrong, which note was discounted by the bank, and the proceeds, by

Page 37 U. S. 35

express agreement, were appropriated to the payment of the balance due on the bill of exchange. The sum of three thousand three hundred and thirty dollars and sixty-seven cents, and the note for eight thousand dollars, were delivered to the bank at the same time, and all the complainants except James Daniel were only sureties for the payment of the note, having become co-drawers of the same for that purpose only. In August, 1820, Griffing and the complainants gave another note to the Bank of the United States for seven thousand five hundred dollars, Griffing and James Daniel having paid five hundred dollars on account of the first note, and the note for seven thousand five hundred dollars having become due and protested, a suit has been instituted on it and a judgment obtained on the law side of the Circuit Court of the United States for the Kentucky District.

The bill states that the Bank of the United States is not entitled to damages on the bill of exchange payable at New Orleans inasmuch as all the parties to it resided in the State of Kentucky at the date and maturity thereof, and therefore so much of the note for eight thousand dollars as includes the ten percent on the bill, amounting to one thousand five hundred and fifteen dollars, ought to be deducted from the judgment, and the bill therefore prays that the defendant may be restrained by an injunction from collecting the said sum of one thousand five hundred and fifteen dollars, part of the judgment, and at a final hearing on the bill the injunction may be made perpetual.

The circuit court in November, 1827, granted an injunction according to the prayer of the bill until further order. The defendants, in May, 1836, having proceeded to answer the bill, stated that one thousand dollars, being ten percent on the bill for ten thousand dollars, had been allowed as damages on the return of the bill from New Orleans, with a full knowledge of all the facts of the case, and of all the principles of law on which the same was claimed. The respondents do not admit that this was done under a clear mistake of the law; indeed, two of the complainants were lawyers of celebrity and deservedly of high rank, and no ignorance of the law can be imputed to them. The respondents allege that their claim to damages is within the provisions of the statute of Kentucky, and if not so, they are entitled to damages to the amount for the allowed nonpayment of the draft at New Orleans, and they resist the claim to set aside the allowance of damages fairly and voluntarily made by the complainants.

Page 37 U. S. 36

The respondents also say that all the grounds of equity alleged in the bill occurred to the complainants more than five years next before the commencement of the suit and are barred by lapse of time, and they further allege that the damages were liquidated, assented to, and discharged more than five years next before the commencement of this suit, and all claim to relief on account of the same is therefore, barred by the statute of limitation.

The cause came on for a final hearing in November, 1836, and the circuit court decreed that the plaintiffs be perpetually enjoined from taking out execution for the sum of one thousand dollars, the amount of damages charged on the bill, with the interest charged on the said sum of one thousand dollars up to the time of the judgment. The defendants appealed from this decree.

Page 37 U. S. 48

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