Bank of the United States v. United States - 43 U.S. 711 (1844)
U.S. Supreme Court
Bank of the United States v. United States, 43 U.S. 2 How. 711 711 (1844)
Bank of the United States v. United States
43 U.S. (2 How.) 711
By a treaty between the United States and France, the latter agreed to pay to the former a certain sum of money, the first installment of which became due on the second of February, 1833.
The Secretary of the Treasury, under a power conferred by Congress, drew a bill of exchange upon the French government, which was purchased by the Bank of the United States.
Not being paid, upon presentation, it was protested and immediately taken up by bankers in Paris for the honor of the bank.
The bill is not liable to objection as being drawn upon a particular fund.
The United States, as drawers, are responsible to the bank for fifteen percent damages under a statute of Maryland, which allows that amount to the holder of a foreign protested bill.
When the bankers in Paris took it up and charged the amount of the bill to the bank in their account with it, the bank became thereby remitted to its original character as holder and payee.
Under the law merchant, the drawer of a foreign bill of exchange is liable, in case of protest, for costs and other incidental charges, and also for reexchange, whether direct or circuitous. The statute of Maryland allowing fifteen percent fixes this in lieu of reexchange to obviate the difficulty of proving the price of reexchange.
When the bank came into possession of the bill upon its return, the endorsements were in effect stricken out, and the bank became, in a commercial and legal sense, the holder of the bill.
The facts in the case were these:
By the second article of the Convention of 4 July, 1831, between the United States and France, which was ratified on 2 February, 1832, 25,000,000 of francs, with interest at the rate of four percent per annum, were payable, at Paris, in six annual installments, into the hands of such person or persons as should be authorized by the government of the United States to receive it, the first installment to be paid at the expiration of one year next following the exchange of the ratifications. It was further agreed, however, by the treaty that the sum of 1,500,000 francs should be reserved by France for purposes therein stated.
On 13 July, 1832, Congress passed an act by which it was made the duty of the Secretary of the Treasury to cause the several installments, with the interest thereon, payable to the United States in virtue of the said convention, to be received from the French government and transferred to the United States in such manner as he might deem best, and the net proceeds thereof to be paid into the Treasury.
In October and November, 1832, and January, 1833, a correspondence took place between Louis McLane, Secretary of the Treasury, and Nicholas Biddle, president of the Bank of the United States, upon the best means of transferring to the United States the first installment, which would become due on 2 February, 1833. Mr. Biddle offered to purchase the bill at the rate of five francs thirty-two and a half centimes to the dollar, which would have yielded to the government $912,050.77, but this offer was declined by the Secretary. Subsequently, on 30 January, 1833, a negotiation was concluded at the rate of exchange of five francs thirty-seven and a half centimes to the dollar, and the following bill was drawn:
"[L. S.] Treasury Department of the United States"
"Washington, February 7, 1833"
"Sir: I have the honor to request that at the sight of this, my first bill of exchange (the second and third of the same tenor and date unpaid), you will be pleased to pay to the order of Samuel Jaudon, cashier of the Bank of the United States, the sum of 4,856,666 francs and 66 centimes, which includes the sum of $3,916,666.66, being the amount of the first installment to be paid
to the United States under the convention concluded between the United States and France on 4 July, 1831, after deducting the amount of the first installment to be reserved to France, under the said convention, and the additional sum of 940,000 francs, being one year's interest at four percent on all the installments payable to the United States, from the day of the exchange of the ratifications to 2 February, 1833."
"I have the honor to be, with great respect,"
Your obedient servant,
"[Signed] LOUIS MCLANE"
"Minister and Secretary of State for the Department of Finance, Paris"
"E. 2682 -- Mem."
Total amount of indemnity payable to the U. states . . . 25,000,000.00
Less amount of indemnity to be reserved to France. . . . 1,500,000.00
1 year's interest from 2d Feb. 1832, to 2d Feb.
1833, at four percent . . . . . . . . . . . . . . . . 940,000.00
First installment payable to the United States . . . . . 3,916,666.66
Amount of the bill . . . . . . . . . . . . . . . . . . . 4,865,666.66
This bill was purchased by the Bank of the United States on 11 February, 1833, at the above-mentioned rate of exchange of five francs and thirty-seven and a half centimes to the dollar, and the amount of $903,365.89 carried to the credit of the Treasurer of the United States, which sum was increased on 9 March, by adding $200 for a short credit given, thus making altogether the sum of $903,565.89.
The bill was accompanied by a power from the President of the United States authorizing Samuel Jaudon to receive the amount of the bill and to give full receipt and acquittance to the government of France.
The bill was endorsed:
"Pay to the order of Messrs. Baring, Brothers and Co., of London."
"[Signed] S. JAUDON"
"Cashier of the Bank of the United States"
"Pay to the order of N. M. Rothschild, Esq., value received."
"[Signed] BARING, BROTHERS and Co."
"London, 19 March, 1833"
"Pay to Messrs. De Rothschild, Brothers, or to their order, value in account."
"[Signed] N. M. ROTHSCHILD"
"London, 19 March, 1833"
It was presented for payment on 22 March, 1833, at the office of Mr. Humann, the laws of France not allowing any days of grace. The answer of the cashier of the central money chest of the public treasury was
"that having had the orders of the minister, Secretary of state for the department of finance, he was instructed to say that diplomatic treaties, which impose engagements on the French treasury to be discharged, do not become obligatory upon it until the chambers have sanctioned the financial dispositions which are therein embraced. Therefore the treaty concluded with the United States, not being yet sanctioned by the legislature, the Minister of Finance cannot at present make any payment to avail upon the obligations contracted by the said treaty."
The notary further states that immediately after the protest Messrs. Hottinguer & Co., bankers, intervened for the account of Mr. Samuel Jaudon, cashier of the Bank of the United States, and agreed to pay the amount of the bill and costs.
On 30 March, 1833, Hottinguer & Co. made up the following account against the bank:
"Statement of the payment and charges made by Hottinguer & Co., of Paris, on a bill of 4,856,666.66, drawn by the Secretary of the Treasury of the United States upon M. Humann, Minister of Finance, protested for nonpayment, and which they paid for the honor of the signature and for account of S. Jaudon, cashier of the Bank of the United States of America."
F. 4,856,666.66 amount of the bill
24,283.33 commission half percent
27.65 protest and translation
14.45 second and third of protest and legalization
35.00 paid to American consul at Havre, expenses for
the document to be copied upon his books
"Say four million eight hundred and eighty-four thousand four hundred and twenty-seven francs and ninety-nine centimes, which we place to the debit of the Bank of the United States, due 22 March, 1833."
"Errors excepted. HOTTINGUER"
"Paris, 30 March, 1833"
On 26 April, 1833, the bank received information of the fate of the bill, and on the same day informed the Secretary of the Treasury that they would hold him responsible for principal, interest, costs, damages, and exchange.
On 13 May, 1833, the bank forwarded to the Secretary the following account:
"Bank of the United States, May 13, 1833"
Account of return, with protest for nonpayment, of a bill of exchange drawn by Louis McLane, Secretary of the Treasury, dated Treasury Department of the United States, Washington, February 7, 1833, at sight, to the order of Samuel Jaudon, cashier of the Bank of the United States, on M. Humann, Minister and Secretary of State for the Department of Finance, Paris:
Principal due, March 22, 1833 . . . . . . . . . . fr. 4,856,666.66
Costs of protest, as per Messrs. Hottinguer and
Co.'s account of charges herewith, exclusive
of their commission, which is covered by the
damages charged below . . . . . . . . . . . . . 3,748.00
Interest from March 22d (the date of protest)
to May 13th fifty-two days. . . . . . . . . . . 42,121.25
Damages on fr. 4,865,666 66 at 15 percent . . . . 728,500.00
Which, at 5.30, the current rate of exchange for a bill, at sight, on Paris, is $1,062,408.66, due in cash this day, with interest until paid.
On 16 May, 1833, the Secretary replied that the proceeds of the bill had not been brought into the Treasury by warrant, and therefore he had it in his power to return the amount immediately to the bank; which was accordingly done, and on 18 May the bank debited the United States upon its books with the sum of $903,565.89, being the exact sum for which the bill had been bought.
On 24 May, 1833, the Attorney General of the United States addressed the following letter to the Secretary of the Treasury:
"Attorney General's Office, May 24, 1833"
"Sir -- I have carefully examined the claims presented by the Bank of the United States on account of the protest of the bill of exchange drawn by you on the French government for the first installment and interest due the United States under the convention with France of July 4, 1831."
"The account stated by the bank, if supported by proper vouchers, appears to be correct, with the exception of the claim of fifteen percent damages on the amount of the bill. This item, in my opinion, has no foundation in law or in equity, and ought not to be paid by the government. The bank is entitled to indemnity and to nothing more."
"I will take another occasion to state to you the reasons on which my opinion is formed, and"
"Am very respectfully, your obedient servant,"
"[Signed] R. B. TANEY"
"To the Secretary of the Treasury."
On 7 July, 1834, the bank declared a dividend of three and a half percent on its capital stock, which, upon 66,692 shares held by the United States, amounted to $233,422.
On 10 April, 1835, the Secretary of the Treasury drew upon the bank for the difference between this sum and the amount which the bank claimed to hold for the purpose of paying itself the damages on the protested bill, being as follows:
Amount of dividend . . . . . . . . . . . . . . . . $233,422.00
Claimed by the bank on that day. . . . . . . . . . 170,041.18
Amt. drawn for by Secretary of the Treasury. . . . $ 63,380.82
On 29 July, 1837, the First Auditor of the Treasury stated an account with the bank, in which he sanctioned the principle of all the claims of the bank, except that for fifteen percent damages, saying that the costs and charges for stamp, protest &c., together with the charge of Hottinguer for commission, were disallowed "for want of vouchers merely," but if properly vouched, would be admissible.
The United States brought a suit against the bank on the second of March, 1838, for the withheld portion of the dividend, being $170,041.18, with interest. The bank claimed a setoff as follows:
Amount claimed in letter of 13 May, 1833 . . . $1,062,408.66
Refunded by the United States. . . . . . . . . 903,565.89
Amount of setoff. . . . . . . . . . . . . . . $158,842.77
with interest from 13 May, 1833
The bill having been drawn in that part of the District of Columbia where the laws of Maryland, anterior to the cession, were in force, the following statute of that state, a knowledge of which is necessary to understand the points raised in the bill of exceptions, is transcribed:
"November, 1785 -- Chap. 38"
"An act ascertaining what shall be recovered on protested bills of exchange and to repeal an act of assembly therein mentioned."
"Be it enacted by the General Assembly of Maryland that upon all bills of exchange hereafter drawn in this state on any person, corporation, company, or society in any foreign country and regularly protested, the owner, or holder of such bill, or the person or persons, company, society, or corporation entitled to the same shall have a right to receive and recover so much current money as will purchase a good bill of exchange of the same time of payment, and upon the same place, at the current exchange of such bills, and also fifteen percent damages upon the value of the principal sum mentioned in such bill, and costs of protest, together with legal interest upon the value of the principal sum mentioned in such bill from the time of protest, until the principal and damages are paid and satisfied, and if any endorser of such bill shall pay to the holder or the person or persons, company, society, or corporation, entitled to the same the value of the principal and the damages and interest as aforesaid, such endorser shall have a right to receive and recover the sum paid, with legal interest upon the same, from the drawer or any other person or persons, company, society, or corporation liable to such endorser upon such bill of exchange."
The court, after instructing the jury that the case was to be governed, in respect to the setoff or credit claimed by defendants, by the enactments of the said statute in Maryland and that if they had been the holders of the said bill at the time of its protest, they would, under the said statute, have been entitled to the setoff or credit claimed, the damages being in such case made by the provisions of the said statute a part of the debt as much as the principal, to which they were admitted to be entitled, proceeded further
to instruct the jury that by the endorsements and protest given in evidence, defendants did not appear to have been such holders of said bill at the time of its protest; that their position was that of endorsers, who had taken it up or paid it; and that whether they had so paid it in the place where it was payable or elsewhere, they could not sustain their claim to the damages in question unless by proof that they had themselves paid such damages to the holder of the bill, and that the verdict on this point ought to be in favor of the plaintiff.
Whereupon the counsel for the defendants excepted to the opinion of the court.
The jury found for the plaintiffs and assessed the damages at $251,243.54.