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
MR. JUSTICE CATRON delivered the opinion of the Court.
To a just comprehension of the legal questions arising in this
cause, it becomes necessary that the facts be stated in the form
and sense they present themselves to the Court.
The first transaction giving rise to the controversy was a bill
of exchange in the following words:
"Exchange for 10,000 dollars."
"Lexington, October 12, 1818"
"One hundred and twenty days after date of this my first of
exchange, second and third of same tenor and date unpaid, pay Henry
Daniel, or order, ten thousand dollars at the office of discount
and deposit of the Bank of the United States in New Orleans, for
value received of him, which charge to the account of yours,
&c."
"ROBT. GRIFFING"
"To Mr. JAMES DANIEL "
Page 37 U. S. 49
James Daniel duly accepted the bill, and it was endorsed by
Henry Daniel, Isaac Cunningham, and Samuel Hanson, to the
president, directors, and company of the Bank of the United
States.
When it was made and accepted, the drawer, Griffing, and James
Daniel, the acceptor, resided and were in Kentucky, where the
transaction took place. The endorsers, Henry Daniel, Cunningham,
and Hanson, also resided there.
The bill was transmitted to New Orleans for payment, but not
being paid, it was regularly protested and returned, and the bank
looked to the drawer, acceptor, and endorsers for the payment of
principal and interest thereon from 9 February, 1819, the time it
fell due, together with charges of protest and ten percentum
damages on the principal. Griffing, the maker, and James Daniel,
the acceptor, believing the claim for damages to be legal, paid the
bank July, 1819, the sum of three thousand three hundred and thirty
dollars and sixty-seven cents on account of the aggregate amount
due and supposed to be due, and for the balance Griffing and James
Daniel executed their negotiable note for eight thousand dollars,
payable sixty days after date, to William Armstrong, to which
Cunningham, Hanson, and Henry Daniel were parties either as
co-drawers or endorsers, and which was discounted by the office of
discount of the Bank of the United States at Lexington for the
benefit of Griffing and James Daniel, upon the express agreement
between the parties making and endorsing the note with the bank
that the proceeds should be applied to the payment of the balance
due on the bill.
Griffing and James Daniel were the principal debtors, and
Cunningham, Hanson, and Henry Daniel sureties. The principals paid
five hundred dollars in part discharge of the note, and in August,
1820, Griffing, James Daniel, Henry Daniel, Cunningham, and Hanson,
executed their joint note to the bank for seven thousand five
hundred dollars, payable sixty days after date, for the balance.
Griffing having died and the note for seven thousand five hundred
dollars not having been discharged when due, the bank sued James
Daniel, Cunningham, Henry Daniel, and Hanson in the Circuit Court
of the United States for the District of Kentucky and recovered a
judgment at law for the principal and interest, at what time does
not precisely appear.
In 1827, the defendants to the judgment at law filed their bill
in equity, in the same court and, after setting out the facts
substantially as above, further alleged
"they were advised the bank was
Page 37 U. S. 50
not entitled to ten percentum damages on said protested bill of
exchange inasmuch as the drawer and acceptor thereof both lived in
Kentucky at the date and maturity of said bill, and that therefore
so much of said eight thousand dollar note as exceeds the balance
due on said bill for principal, interest, and damages, after
deducting said payment of three thousand, three hundred and thirty
dollars, sixty-seven cents, was included in said note by mistake,
as to the legal liability of said Griffing and James Daniel for
said ten percent damages and as to said excess said note was
executed without any consideration whatever."
The complainants also alleged that the failure of consideration
on which the note for seven thousand five hundred dollars was
grounded, being partial, relief against the excess in the note and
judgment could only be had in a court of equity, and prayed the
bank might be restrained by injunction from the collection of one
thousand five hundred and fifteen dollars, the excess that entered
into the judgment because of the mistake.
At the November term, 1827, an injunction was ordered by the
court restraining the bank from proceeding to collect one thousand
five hundred and fifteen dollars, part of the judgment, until the
hearing.
The bank answered admitting the statements of the complainants
in reference to the liquidation of the bill of exchange and the
part payment and renewal of the eight thousand dollar note, and
further averred that, on the return of the protested bill, the sum
of one thousand dollars, being ten percent on the amount thereof,
was claimed by the respondents as their damages, and the claim was
assented to by the complainants with a full knowledge of the facts
upon which it was founded and all the principles of law upon which
it was asserted, and in pursuance of such assent the amount of said
bill, with interest and the one thousand dollars damages was
liquidated and discharged by complainants in manner alleged, but
aver respondents cannot admit
"this was done under any mistake, either as to fact or law;
indeed two of complainants were lawyers of celebrity and of
deservedly high rank, and respondents cannot impute to them
ignorance of the law, and ignorance of the facts is not
pretended."
The respondents further alleged that by a statute of Kentucky,
bills of exchange drawn by a person in that state on another out of
the state, when returned protested, bore ten percent damages
besides interest, and independently of the statute the bill for
Page 37 U. S. 51
ten thousand dollars was subject to damages for reexchange and
expenses; that the effect of the statute was to reduce to
uniformity and certainty the amount to which the holders were
entitled in consequence of the money's not being paid at the place
agreed upon and the loss arising from difference of exchange and
expenses. It is insisted the claim for damages comes within the
statute; yet, if not within it, that respondents are entitled to
equal damages with those given by the statute, their risk and loss
being the same.
In bar of the claim, the respondents say that all the grounds of
equity alleged in the bill accrued to complainants more than five
years next before the commencement of the suit, and are barred by
the lapse of time; they further allege that the damages were
liquidated, assented to, and discharged more than five years next
before the commencement of the suit, and claim to relief is barred
by the statute of limitations.
The allegations in the complainants' bill, not responded to, are
admitted. To which answer a general replication was filed. The only
evidence in the cause was an agreement of facts entered into by the
parties, to-wit:
"It is agreed that the statements contained in said bill as to
liquidation of the bill of exchange of ten thousand dollars, are
true. It is also agreed that this liquidation was on 8 July, 1819,
and that no interest was charged up to that time except upon ten
thousand dollars. It is also admitted that such renewals of the
eight thousand dollar note were made as are stated in said bill,
and that the judgment at law was on one of the notes given in
renewal."
Upon the pleadings and admissions, the court proceeded to a
hearing of the cause at the November term, 1836, and decreed:
"That a credit be entered on the judgment at law, obtained by
the defendants against the plaintiffs, as set forth in the bill for
one thousand dollars, the amount of damages charged on the
protested bill, with all interest charged on said sum up to the
time of the judgment, and that the defendants be perpetually
enjoined from taking out execution on said judgment, for the sum
thus decreed to be credited, but the decree not to affect the
balance of the judgment."
From which decree, the president, directors and company of the
Bank of the United States appealed to this Court.
The first question raised on the facts, and in advance of the
merits is whether the matter in controversy in the circuit court
was of sufficient dignity to give this Court jurisdiction by
appeal.
Page 37 U. S. 52
The act of Congress provides that appeals shall be allowed to
the Supreme Court from 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 below
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 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 sums
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.
The second question raised by the record, rests mainly on the
pleadings in the cause. It is alleged the bank was not entitled to
ten percent damages on the protested bill, inasmuch as the drawer
and acceptor both resided in Kentucky; that the eight thousand
dollar note included the damages of one thousand dollars through
mistake; and so far it wanted consideration.
Page 37 U. S. 53
The defendants deny this was done through either mistake of the
fact or law; insist they were entitled to ten percent damages by
the statute of Kentucky; but if the statute did not apply, they
were entitled to damages, for reexchange, and charges, and that the
statute was justly referred to for the rule settling the measure of
compensation.
As no mistake of the facts is positively alleged, and if
impliedly stated is directly and positively denied, we must take it
no such mistake existed, and such is manifestly the truth. In
regard to the mistake of law, however, the pleadings can settle
nothing; they make an issue and refer it to the court for decision
on the local and general laws governing damages on bills of
exchange of the character of the one set forth.
The statute by force of which the bank claimed damages,
declares
"If any person or persons shall draw or endorse any bill or
bills of exchange upon any person or persons out of this state on
any person or persons within any other of the United States of
North America, and the same being returned back unpaid, with legal
protest, the drawer thereof, and all others concerned, shall pay
the contents of said bill, together with legal interest from the
time said bill was protested, the charges of protest, and ten
pounds percent advance for the damages thereof, and so
proportionally for greater or smaller sums."
In 1821, the Court of Appeals of Kentucky, gave a construction
to their statute in the case of
Clay v. Hopkins, 3
Marshall 488, where it was holden that where the drawer and
acceptor were both of Kentucky, and the transaction took place
there, the statute did not apply, although the bill was made
payable in Baltimore. That and this case are alike in all their
features.
In a subsequent cause of
Wood v. Farmers and Mechanics' Bank
of Lexington, 7 Monroe 284, the same court held that a bill
addressed to "Mr. J. J. Wood, New Orleans," was within the statute,
and drew after it ten percent damages on protest, distinguishing
Wood's Case from that of
Clay and Hopkins,
because the acceptor was addressed at the foot of the bill as of
New Orleans, although in fact he was of Kentucky.
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,
Page 37 U. S. 54
and to abide by and follow such construction when found to be
settled.
Looking to the two adjudications in Kentucky on the construction
of the statute of 1798, in the spirit of the rule we have laid down
for our government, and without any reference to the misgivings we
may entertain of the correctness of the construction, declared to
be the true one in
Hopkins and Clay, we have come to the
conclusion that
Wood's Case did not overrule the former.
It is therefore declared by this Court that the bill of exchange
for ten thousand dollars drawn by Robert Griffing, although payable
at a bank in New Orleans, did not, by force of the statute of
Kentucky, subject the drawer or others bound to take it up to the
payment of ten percent damages.
Not having been entitled by the statute, the appellants insist
they were authorized to charge damages by commercial usage and that
the statute prescribed a fair measure.
The assumption that the holder could lawfully demand damages
depends on the fact whether the bill was foreign or inland; if
foreign, then the bank had the right to redraw from New Orleans to
Lexington, for such amounts as would make good the face of the
bill, including principal, reexchange and charges, with legal
interest; the law does not insist upon actual redrawing, but the
holder may recover the price of a new bill at the place of protest.
Had a jury been called on to assess the amount due, proof of the
exchange against Lexington would have been necessary to the
recovery of damages on the ground of reexchange, but the parties
themselves having liquidated them at the rate the statute of
Kentucky allowed, in cases very similar, we must presume, at this
distant day, aside from any proof to the contrary, that ten percent
was fair compensation; it may have been less; of this, however, the
parties were the proper judges. Kent's Com. Lecture 44.
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, we apprehend, 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.
27 U. S. 2 Pet.
586. Kentucky and Louisiana, as political communities, being
distinct and sovereign and consequently foreign to each other in
regard to the regulation of contracts, it follows, a bill drawn in
one payable in other is a foreign bill, and so this Court adjudged
in the cause of
Buckner v. Finley & Van Lear,
Page 37 U. S. 55
27 U. S. 2 Pet.
586. The bill in that case was drawn at Baltimore by citizens of
Maryland on Stephen Dever at New Orleans, whereas the one in this
case was drawn and accepted in Kentucky, but payable at a bank in
New Orleans. Yet we think the place of payment, being within a
jurisdiction foreign to Kentucky, subjected the acceptor, James
Daniel, to the performance of the contract, according to the laws
of Louisiana, to every extent he would have been, had he became a
party to the bill at New Orleans, and that 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. Story's Conflict of Laws, secs.
from 281 to 286. 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, and those bound to take it up having paid, or agreed to
pay the damages, with a full knowledge of the facts, and a presumed
knowledge of the law, voluntarily giving the bank a legal
advantage, it would be going far for a court of chancery to take it
away; the equities of the parties being equal, to say the least, it
cannot be against conscience for the appellants to retain their
judgment.
The main question on which relief was sought by the bill -- that
on which the decree below proceeded and on which the appellees
relied in this Court for its affirmance -- is can a court of
chancery relieve against a mistake of law? In its examination, we
will take it for granted, the parties who took up the bill for ten
thousand dollars, included the damages of a thousand dollars in the
eight thousand dollar note, and did so believing the statute of
Kentucky secured the penalty to the bank and that, in the
construction of the statute the appellees were mistaken. Vexed as
the question formerly was, and delicate as it now is from the
confusion in which numerous and conflicting decisions have involved
it; no discussion of cases can be gone into without hazarding the
introduction of exceptions that will be likely to sap the direct
principle we intend to apply; indeed, the remedial power claimed by
courts of chancery to relieve against mistakes of law is a doctrine
rather grounded upon exceptions than upon established rules. To
this course of adjudication we are unwilling to yield. That mere
mistakes of law are not remediable is well established, as was
declared by this Court in
Hunt v.
Rousmanier, 1 Pet. 15, and we can only repeat what
was there said, "that whatever exceptions there may be to the rule,
they will be found few in
Page 37 U. S. 56
number, and to have something peculiar in their character," and
to involve other elements of decision. 1 Story's Ch. 129.
What is this case, and does it turn upon any peculiarity?
Griffing sold a bill to the United States Bank at Lexington for ten
thousand dollars, endorsed by three of the complainants and
accepted by the other, payable at New Orleans; the acceptor, J. D.,
was present in Kentucky when the bill was made, and there accepted
it; at maturity it was protested for nonpayment and returned. The
debtors applied to take it up, when the creditors claimed ten
percent damages, by force of the statute of Kentucky. All the
parties bound to pay the bill were perfectly aware of the facts; at
least the principals, who transacted the business, had the statute
before them, or were familiar with it, as we must presume; they and
the bank earnestly believing (as in all probability most others
believed at the time) that the ten percent damages were due by
force of the statute, and influenced by this opinion of the law,
the eight thousand dollar note was executed, including the one
thousand dollars claimed for damages. Such is the case stated and
supposed to exist by the complainants, stripped of all other
considerations standing in the way of relief.
Testing the case by the principle, "that a mistake or ignorance
of the law, forms no ground of relief from contracts fairly entered
into, with a full knowledge of the facts," and under circumstances
repelling all presumptions of fraud, imposition, or undue advantage
having been taken of the party, none of which is chargeable upon
the appellants in this case; the question then is were the
complainants entitled to relief? To which we respond decidedly in
the negative.
Lastly, the appellants rest their defense on the statute of
limitations. If the thousand dollars claimed as damages were paid
to the bank at the time the bill of exchange was taken up, then the
cause of action to recover the money (had it been well founded)
accrued at the time the mistaken payment was made, which could have
been rectified in equity or the money recovered back by a suit at
law. The courts of law and equity have concurrent jurisdiction, and
the complainants having elected to resort to equity, which they had
the right to do, were as subject to be barred by the statute in the
one court as in the other. In such cases the courts of equity act
in obedience to the statutes of limitation, from which they are no
more exempt than courts of law.
Page 37 U. S. 57
This suit having been brought more than five years after the
bill was taken up; to apply the bar, it becomes necessary to
inquire whether the damages were then paid. The complainants allege
that they paid in July, 1819, three thousand three hundred and
thirty dollars and sixty-seven cents, on account of the whole
amount due, consisting of principal, interest, charges, and
damages; and for the balance of the amount of the bill, Griffing
and James Daniel executed their negotiable note for eight thousand
dollars, payable sixty days after date, to William Armstrong, to
which Cunningham, Hanson, and Henry Daniel were parties as
endorsers or co-drawers, which note was discounted by the bank for
the benefit of Griffing and James Daniel, and upon the express
agreement between them and the bank, and the other parties to the
note, that the proceeds of said eight thousand dollar note, should
be applied to the payment of the balance due on said bill of
exchange. The parties to this suit agreed in writing, that the
statement above set forth was true, and the bill was liquidated by
the proceeds of the note, and the three thousand three hundred and
thirty dollars and sixty-seven cents.
If the preexisting debt due the bank and evidenced by the bill
of exchange was extinguished when the bill was taken up; then the
remedy of the bank was gone, and the right to recover the one
thousand dollars of excess arose. It is generally true that the
giving 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;
10 U. S. 6
Cranch 264. In reference to this principle, it is insisted for the
appellees, that the eight thousand dollar note given to the bank,
and the renewals of it afterwards, furnished mere evidence of the
continuance of the original liability, from which they should be
relieved, because the notes covered too much by a thousand dollars,
with interest; so the court below thought, and decreed the
abatement.
This Court thinks the facts do not involve the principle
referred to. We are not told by the appellees that the eight
thousand dollar note was taken in payment of the balance of the
bill of exchange, but that three thousand three hundred and thirty
dollars and sixty-seven cents in cash was paid, and the note
discounted, the money obtained upon it, and "by express agreement,
applied to the payment of the balance due on said bill of
exchange." The debtors raised the cash and paid the bill; nor did
the eight thousand dollar note enter into the transaction further
that that the proceeds were applied to the
Page 37 U. S. 58
extinguishment of the preexisting debt. Payment was therefore
made on 8 July, 1819, and the thousand dollars could have been sued
for then, as well as in 1827, when the bill of injunction was
filed. It follows the act of limitations is a bar to the appellees,
aside from any other grounds of defense.
This cause came on to be heard on the transcript of the record
from the Circuit Court of the United States for the District of
Kentucky and was argued by counsel, on consideration whereof it is
now here ordered, adjudged and decreed by this Court that the
decree of the said circuit court in this cause be and the same is
hereby reversed, and that this cause be and the same is hereby
remanded to the said circuit court with directions to that court to
discharge the injunction at law and to dismiss the bill in this
cause at the cost of the complainants.
