1 U.S. 194 (1787)

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U.S. Supreme Court

GERARD v. LA COSTE, 1 U.S. 194 (1787)

1 U.S. 194 (Dall.)

La Coste et al.

Court of Common Pleas of Philadelphia County

June Term, 1787

This case came before the Court on a special verdict, and, after argument, the following judgment was pronounced by the President.

Shippen, President.

This action is brought against the acceptors of an inland Bill of Exchange, made payable to Bass and Soyer and indorsed by them, after the Acceptance, to the Plaintiff for a valuable consideration. The Bill is payable to Bass and Soyer, without the usual words 'or order' 'or assigns', or any other words of negotiability. The question is, whether this is a Bill of Exchange, which, by the law merchant, is indorsable over, so as to enable the indorsee to maintain an action on it against the acceptors, in his own name.

The Court has taken some time to consider the case, not so much from their own doubts, as because it is said eminent Lawyers, as well as Judges, in America, have entertained different opinions concerning it. There is certainly no precise form of words necessary to constitute a Bill of Exchange, yet from the earliest time to the present, merchants have agreed upon nearly the same form, which contains few or no superfluous words, terms of negotiability usually appearing to make a part of it. It is indeed generally for the benefit of trade that Bills of Exchange, especially foreign ones, should be assignable; but when they are so, it must appear to be a part of the contract, and the power to assign must be contained in the Bill itself.

Page 1 U.S. 194, 195

The drawer is the lawgiver, and directs the payment as he pleases; the receiver knows the terms, acquiesces in them, and must conform. There have doubtless been many draughts made payable to the party himself, without more, generally perhaps to prevent their negotiability: Whether these draughts can properly be called Bills of Exchange, even between the parties themselves, seems to have been left in some doubt by the modern Judges. Certainly there are draughts, in the nature of Bills of Exchange, which are not strictly such, as those issuing out of a contingent fund; these, (say the Judges in 2 Black. Rep. 1140.) do not operate as Bills of Exchange, but, when accepted, are binding between the parties. The question, however, here, is not whether this would be a good Bill of Exchange between the drawer, payee, and acceptor, but whether it is indorsable. Marius's Advice is an old book of good authority; in page 141 he mentions expresly such a Bill of Exchange as the present, and the effect of it, and he says, that the Bill not being payable to a man or his Assigns, or Order, an assignment of it will not avail, but the money must be paid to the man himself. In 1 Salkeld 125, it is said, that it is by force of the words, 'or order' in the Bill itself, that authority is given to the party to assign it by indorsement. In 3 Salk. 67 it is ruled, that where a Bill is drawn payable to a man, 'or order,' it is within the custom of merchants; and such a Bill may be negotiated and assigned by custom and the Contract of the Parties. And in 1 Salk. 133 it is expressly said by the Court, that the words 'or to his order,' give the authority to assign the Bill by indorsement, and that without those words the Drawer was not answerable to the indorsee, although the Indorser might. An argument of some plausibility is drawn in favor of the Plaintiff from the fimilarity of Promissory Notes to Bills of Exchange. The statute of 3 & 4 of Ann appears to have two objects; one to enable the person to whom the Note is made payable, to sue the drawer upon the Note as an instrument (which he could not do before that Act) and the other to enable the Indorsee to maintain an action in his own name against the drawer. The words in this Act which describe the Note on which an action will lie for the Payee, are said to be the same as those on which the action will lie for the indorsee, namely, that it shall be a Note payable to any person, or his Order; and it appearing by adjudged cases, that an action will lie for the Payee although the words 'or order' are not in the note, it follows (it is contended) that an action will also lie for the Indorsee, without those words. If the Letter of the Act was strictly adhered to, certainly neither the Payee, nor Indorsee, could support an action on a Note, which did not contain such words of negotiability as are mentioned in the Act; yet the construction of the Judges has been, that the original payee may support an action on a Note not made assignable in terms. The foundation of this construction does not fully appear in the cases, but it was probably thought consonant to the Spirit [1 U.S. 194, 196]

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