The statute of Maryland of 1785, in its terms, does not embrace
a bill of exchange drawn on a foreign government.
A bill of exchange in form, drawn by one government on another,
as this was, is not and cannot be governed by the law merchant, and
therefore is not subject to protest and consequential damages.
This case was a continuation of the same case between the same
parties, which was reported in
43 U. S. 2 How.
711.
Being sent back to the circuit court, it came up for trial in
November, 1844, when the jury, under the instructions of the court,
found a verdict for the defendants below,
viz., the
bank.
At the trial, the following bill of exceptions was filed, which
brought the case again to this Court.
"
Bill of Exceptions"
"Be it remembered that at the sessions of April, A.D., 1838,
came the United States of America into the Circuit Court of the
Page 46 U. S. 383
United States for the Eastern District of Pennsylvania and
impleaded the president, directors, and company of the Bank of the
United States in a certain plea of trespass in the case, &c.,
in which the said plaintiffs declared (
prout narr.), and
the said defendants pleaded (
prout pleas). And thereupon
issue was joined between them."
"And afterwards, to-wit, at a session of said court held at the
City of Philadelphia before the Honorable Archibald Randall, judge
of the said court, on the day of November, A.D., 1844, the
aforesaid issue between the said parties came to be tried by a jury
of the said district, duly empanelled (
prout jury), at
which day came as well the plaintiff as the said defendant, by
their respective attorneys, and the jurors aforesaid, empanelled to
try the issues aforesaid, being also called, came and were then and
there in due manner chosen and sworn or affirmed to try the said
issues, and upon the trial the counsel of the said plaintiffs
stated their demand to be for $170,041.18, with interest -- the
balance unpaid due to the plaintiffs as holders of 66,692 shares of
the capital stock of defendants of $3.50 per share, being the
amount of a dividend of half-yearly profits declared by the
defendants in the month of July, A.D., 1834. And to maintain the
said issue on the part of the plaintiffs, proved that they were
then the holders of said shares of stock, and gave in evidence a
resolution of the directors of the said defendants made on 7 July,
1834
(prout), and their advertisement in one of the daily
newspapers of Philadelphia
(prout), and the account of the
said defendants in their books with the plaintiffs for the first
half-year of 1833
(prout)."
"And the defendants, to maintain the said issue on their part,
gave in evidence a bill of exchange, drawn and dated at the
Treasury Department of the United States, Washington, 7 February,
1833, by the Secretary of the Treasury on the Minister and
Secretary of State for the Department of Finance of the Kingdom of
France for 4,856,666 66/100 francs, payable at sight to the order
of defendants' cashier (
prout bill); and the several
endorsements thereon,
(prout); and a writing of the same
date with the said bill, under the seal of the United States and
hand of the President, dated at Washington
(prout); and
the presentment and refusal of payment and protest of said bill, at
Paris, on 22 March, 1833
(prout); protest, and a notice
thereof by defendants, through their cashier, to the said Secretary
of the Treasury, in a letter of 26 April, 1833
(prout);
and the return of said bill and protest to the said Secretary of
the Treasury, in a letter from the said defendants' cashier dated
13 May, 1833, with an account annexed, in which letter and account
demand was made of the payment of the principal of the said bill,
with costs and charges of protest and interest thereon, and damages
on said principal, at fifteen percent (
prout letter and
account); and proved the then rate of exchange to have been as
Page 46 U. S. 384
therein stated; and gave in evidence a statute of the State of
Maryland
(prout), passed in 1785, and an article of the
commercial code of France
(prout); and the correspondence
(prout) between the Secretary of the Treasury and the
defendants concerning said bill before and after the drawing
thereof, and proved the allowance by the Secretary of the Treasury
of a credit for, and payment thus made, of the principal of said
bill, and further proved the presentment to the accounting officers
of the Treasury, and their rejection and disallowance of a claim on
the part of the defendants, for a credit of the said fifteen
percent thereon, and said cost and charges of protest
(
prout exemplification); and the said defendants claimed
on the said trial a credit for and to set off defalk., the same
claims being, as they alleged, in amount equal to the claim of the
plaintiffs."
"And the said plaintiffs, to rebut the aforesaid claim of the
said defendants to a setoff, relied upon and gave in evidence a
convention between the United States of America and France made 4
July, A.D., 1831, and ratified 2 February, A.D., 1832
(
prout same), together with an act of Congress passed 13
July, 1832
(prout), by the seventh section of which it was
made the duty of the Secretary of the Treasury"
"to cause the several installments, with the interest payable
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 a manner as he may deem
best, and the net proceeds thereof to be paid into the
Treasury."
"And also a letter of Edward Livingston, Department of State,
dated Washington, 8 February, 1833, to Nathaniel Niles, Esq., Paris
(
prout same)."
"And the counsel for the said plaintiffs requested the learned
judge to charge the jury:"
" 1. That the evidence in the cause does not show a contract
between the government and the bank for the sale of a bill of
exchange, but an undertaking on the part of the defendants, as the
agents of the plaintiff, to transfer to the United States the first
installment due under the treaty with France, and that the bill was
only one of the instruments for carrying the same into effect. And
further, that the question of agency is for the jury to
decide."
" 2. That the act of Maryland of 1785, under which the
defendants claim damages, does not extend to the United
States."
" 3. That the bill in question, being drawn by one government
upon another, and upon a particular fund, is not a bill of exchange
within the legal meaning of the terms, and is not embraced by the
statute."
" 4. That the defendants, being endorsers of the bill, and not
the holders or owners at the time of protest, are not entitled to
the damages, since they have not paid them."
"But the court refused to instruct the jury as requested by the
plaintiffs' counsel, and charged them as follows, to-wit:"
" It is admitted that if this was a suit between individuals and
the
Page 46 U. S. 385
defendant was the actual owner of a bill of exchange drawn by
the plaintiff on a foreign country and protected for nonpayment, he
would be entitled to the damages now claimed by the bank; but it is
contended, 1st, that the evidence in this cause does not show a
sale of the bill of exchange to the bank, but an agency on the part
of the bank to assist in procuring the transfer of the funds to the
United States. The whole of the evidence on this subject is in
writing, and therefore a matter of law, and in my opinion
establishes a clear and unequivocal sale by the United States and
purchase and payment for the bill by the bank, and that in the
endeavors to collect it there was no other agency than always
exists between the owner and other parties to a bill of exchange.
Again it is said that if this was a purchase of the bill by the
bank, yet the defendants cannot set off this claim, because the act
of Maryland of 1785 does not extend to bills drawn by the
government of the United States. When the United States, by its
authorized officer, become a party to negotiable paper, they have
all the rights, and incur all the responsibility, of individuals
who are parties to such instruments; there is no difference, except
that the United States cannot be sued; and from the unavoidable use
of commercial paper by the United States, they are as much
interested as the community at large in maintaining this
principle."
"In the present case, the United States does not sue for a debt
due to it as a government, but as stockholders or co-partners for
its proportion of the profits accruing on the use of its money,
which it has invested in the stock of the corporation, and is to be
treated in all respects like any ordinary stockholder, which would
be bound to pay a debt due to the bank before it could sustain an
action for its dividends."
"The remaining objections are that if the Maryland act of 1785
does embrace bills drawn by government, then this, being a bill
drawn on a particular fund, is not a bill of exchange in the legal
meaning of the term, and that if it is such a bill, the bank was
not the holder or owner of it at the time of protest, and therefore
is not entitled to the damages given by the statute."
"These questions appear to me to have been determined by the
Supreme Court of the United States in the present cause in favor of
the defendants; whether they were rightly determined it is not for
us to inquire; that determination is binding on us, and until
reviewed by itself must be considered the law of the land. If I
have mistaken its views on this or erred in any other point of the
cause, it will be corrected by a reexamination of the case in that
Court, but a construction of its opinion, given by the jury, is
only capable of being reexamined in this Court, which may lead to a
new trial and lengthened litigation, to the disadvantage of all
parties, as it will undoubtedly be only finally determined in the
court of the
Page 46 U. S. 386
last resort. This being, then, my view of the law, in my opinion
the defendants are entitled to the verdict."
And thereupon the counsel for the plaintiffs excepted.
Page 46 U. S. 394
MR. JUSTICE CATRON delivered the opinion of the Court.
The United States sued the Bank of the United States for a
dividend on stocks held by the government in the bank, and the
defendant pleaded and relied in defense on a setoff, being the
damages claimed by the defendant of fifteen percent on a protested
draft in the form of a bill of exchange, drawn by the government of
the United States on the government of France, for a sum of money
due from the latter government to the former, by treaty
stipulations, to obtain possession of which the draft was drawn.
The bank was the payee and original holder. The
Page 46 U. S. 395
holders at the time of protest (Messrs. Rothschilds of Paris)
caused it to be protested for nonpayment, and Hottinguer & Co.
intervened immediately after, and took up the draft for the honor
of the bank. The corporation refunded to Hottinguer & Co. the
amount advanced, including interest and charges, together with
one-half percent commissions, and thus again became possessed of
the draft.
The circuit court, on a former trial, held that the damages
claimed as a setoff depended on a statute of Maryland of 1785; that
by the statute the holder at the time of protest alone could demand
damages from any previous party to a bill, and that if he failed to
do so, and recovered less from any previous endorser, the latter
could only recover the amount actually paid (with interest and
charges accruing subsequently) from the drawer, and therefore the
bank could set up no claim by force of the statute of Maryland,
taking its own assumption to be true, that this was a legal bill of
exchange, and properly subject to protest. This instruction
altogether rejected the defense relied on, and the jury found for
the plaintiffs, and from that decision the defendants prosecuted a
writ of error to this Court. When the cause came before us in 1844,
43 U. S. 2 How.
711, this single question was presented for our determination; nor
could this Court decide any other question, and such was the
unanimous opinion of the court, although the judges then present
differed as regarded the true construction of the statute of
Maryland; the majority holding the construction of the circuit
court to have been erroneous, and that the bank, as payee, on
taking up the draft from Hottinguer & Co., had the same right
to demand damages under the statute that the holder had at the time
of protest. The court, however, when giving its opinion, threw out
some suggestions on the structure of the bill, first remarking
that
"before we consider the rulings of the court excepted to, it may
not be improper to notice the structure of the bill, which has been
much commented on by the counsel, though, not having been excepted
to by the government, it is not a matter for decision."
The instruction given cut off every other question the
government might have raised in opposition to the setoff claimed,
and as this Court, when acting as a court of errors, can only
legitimately revise the questions of law that have been raised and
decided in the circuit courts, it must of necessity, on a second
writ of error being prosecuted, have power to revise such rulings
of the court below on the second trial as effect the merits of the
controversy, and to pass on the questions not previously presented,
as open questions, in the particular cause. However high the regard
of judges that did not concur may be for the views entertained and
expressed by other judges on a question of law not brought up for
decision, still it is impossible to recognize such views as binding
authority, consistently with the due administration of justice, as
by doing so the merits of
Page 46 U. S. 396
the controversy might be forestalled without proper examination.
We therefore feel ourselves at liberty to treat of the structure
and character of the instrument before us as an open question. And
so also we deem the question open whether the statute of Maryland
subjected to protest and damages a government. The statute
provides
"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
shall have a right to so much money as will purchase a good bill of
the same time of payment, and upon the same place, at the current
rate of exchange of such bills, and also fifteen percent damages
upon the value of the principal sum mentioned in such bill, with
costs of protest, together with legal interest,"
&c. The United States refunded to the bank, on the return of
the draft, the principal sum, together with all the charges
actually incurred by the bank, and the interest accruing from the
date of drawing to the time when the money was refunded, but
refused to pay the fifteen percent damages claimed by the bank.
This refusal was not founded on the true construction of the
Maryland statute, the government insisting it had no application to
the transaction, but that the drawing was of nation upon nation,
and not governed by the law merchant; and that the form of one of
the instruments making up the transaction did not and could not
alter its character or legal effect, so as to bring it within the
law merchant. That the government was only bound to do equity to
the bank to the extent of the amount refunded to Hottinguer &
Co. And these conflicting assumptions make up the question we are
now called on to determine, as will be seen by referring to the
third and fourth instructions asked to be given to the jury, on
part of the plaintiffs, on the second trial; they are as
follows:
"3. That the bill in question, being drawn by one government
upon another, and upon a particular fund, is not a bill of exchange
within the legal meaning of the terms, and is not embraced by the
statute."
"4. That the defendants, being endorsers of the bill, and not
the holders or owners at the time of protest, are not entitled to
the damages, since they have not paid them."
Being refused, the judge stated to the jury, that "these
questions appear to me to have been determined by the Supreme Court
of the United States in the present cause in favor of the
defendants," and further remarking that "if I am mistaken in their
views on this, it will be corrected by a reexamination of the cause
in that court."
That the judge was mistaken as regarded the questions arising on
the third instruction we have already stated, but in regard to the
fourth instruction, the charge was proper, as the question
presented by it had been decided.
Page 46 U. S. 397
Suppose, then, a bill of exchange could be drawn by the
government of Maryland, or by the government of the United States
in this district, as the successor of Maryland, on the government
of France; would the statute of Maryland give damages to a holder
in case the bill was dishonored by France, and formally protested?
The statute provides for damages upon all foreign bills drawn in
that state, "on any person, corporation, company, or society."
Is the government of France either a person, corporation,
company, or society within the meaning of the act? If it is, and
was indebted, and could be drawn on and protested, then it follows
that the drawer of the bill (in such instance as this), on taking
it up and paying the damages, could lawfully demand from France, as
drawee, the damages paid, and rightfully enforce the demand by the
sword if payment was refused, as the demand would be a perfect
right, and this the ultimate remedy. In our opinion, Maryland, by
her act of 1785, never contemplated the idea that a foreign
government should be subject to be drawn upon by bills of exchange,
and to protest and damages as incidents, like individual persons,
or trading companies, or corporations, but that the statute had
reference to the latter only, and that therefore this bill, on its
face, "is not embraced by the statute" in the language of the
rejected instruction.
The second consideration arising on the instruction involves the
structure and character of the instrument, not so much in form as
in substance, for the name of the instrument cannot change its
nature and character. The draft was drawn by one government on
another, and of necessity accompanied by other documents, and the
question is was it a negotiable bill of exchange in the legal
meaning of the terms. The circuit court held that it was, and this
is the prominent legal point in the cause, or at least has been so
treated at the bar, and on which this Court has bestowed much
consideration.
A bill of exchange is an instrument governed by the commercial
law; it must carry on its face its authority to command the money
drawn for, so that the holder, or the notary, acting as his agent,
may receive the money and give a discharge, on its face its
authority to command receiving payment, or, if payment is refused,
enter a protest, from which follows the incident of damages. But if
no demand can be made on the bill standing alone, and it depends on
other papers or documents to give it force and effect, and these
must necessarily accompany the bill and be presented with it, it
cannot be a simple bill of exchange, that circulates from hand to
hand as the representative of current cash.
The draft in question was drawn for 4,856,666.66 francs; being
moneys owing and shortly to become due from France to the United
States, according to a treaty stipulation, and these facts are
distinctly set forth on the face of the draft and by endorsements
on it.
Page 46 U. S. 398
The paper was signed by the Secretary of the Treasury of the
United States, and addressed to the Minister and Secretary of State
for the department of Finance of the Kingdom of France, and was
payable to the order of Samuel Jaudon, cashier &c. The mere
signature of our Secretary of the Treasury could not be recognized
by the French government as conferring authority on the holder to
demand payment. The transaction being one of nation with nation, he
who demanded payment must have had not only the authority of this
nation before he could have approached the French government, but
that authority must have been communicated by the head of this
government through the proper department carrying on our national
intercourse, which was the State Department. Accordingly, of even
date with the draft (7 February, 1833), an instrument was drawn up
reciting the fact of indebtment, and cause thereof; the amount due;
the authority conferred by an act of Congress on the Secretary of
the Treasury to apply for the money in such manner as he might deem
best; the fact and manner of drawing for it; and then comes the
official authority to the payee to receive the money, in these
terms:
"Now therefore, be it known that I, Andrew Jackson, President of
the United States, do ratify and confirm and approve the drawing of
the said bill by the Secretary of the Treasury aforesaid, and do
hereby authorize the said Samuel Jaudon, or his assignee of the
said bill, to receive the amount thereof, and on receipt of the sum
therein mentioned, to give full receipt and acquittance to the
government of France for the said first installment, and the
interest due on all the installments, payable on the said second
day of February, by virtue of the said convention, and I, Andrew
Jackson, President as aforesaid, do hereby ratify and confirm all
that may be lawfully done in the premises."
"In testimony whereof, I have caused the seal of the United
States to be hereunto affixed. Given under my hand, at the City of
Washington, the seventh day of February, in the year one thousand
eight hundred and thirty-three, and of the independence of the
United States of America the fifty-seventh."
"ANDREW JACKSON"
"By the President: EDW. LIVINGSTON"
"
Secretary of State"
This accompanied the draft and was placed in the hands of the
payee, and no doubt passed through the hands of the different
endorsees. Still, neither the power more than the draft could be
presented to the French government by a mere individual who was
holder, or by a notary public, and therefore, on the next day after
the draft and power bear date, the Secretary of State of our
government addressed a dispatch to our charge d'affaires and
representative at the French court in the following terms:
Page 46 U. S. 399
"
Department of State, Washington, 8 February,
1833"
"Nathaniel Niles, Esq., Paris."
"SIR: The Secretary of the Treasury, in conformity with the
provision of a law of the last session of Congress, yesterday drew
a bill upon the Minister of State and Finance of the French
government for the first installment and the interest thereupon,
and for the interest upon the remaining installments, which
interest is stipulated to be paid by that government to this in
twelve months from the date of the exchange of the ratification of
the late convention between the United States and his Majesty the
King of the French. The bill is drawn in favor of Samuel Jaudon,
Cashier of the Bank of the United States, or order, and will go
accompanied, to the assignee thereof in France, by a full power
from the President, authorizing and empowering him, upon the due
payment of the same, to give the necessary receipt and acquittance
to the French government, according to the provision of the
convention referred to."
"You will take an early opportunity, therefore, to apprize the
French government of this arrangement."
"I am, Sir, respectfully, your obedient servant,"
"EDW. LIVINGSTON"
Until the French government was thus officially advised, the
bill and accompanying power combined were valueless in the hands of
the holder as against France.
It follows, as we suppose, from the character of the drawer and
the drawee and the nature of the fund drawn upon that this
transaction could not be governed by the commercial law, much less
by a statute of Maryland, which happened to be in force in the
District of Columbia, where the draft was drawn.
But it is insisted, and with much plausibility, that as between
the bank as payee, and the United States as drawer, no such
objections can be alleged by the United States, they having assumed
the draft to be a bill of exchange, and dealt with it as commercial
paper, are bound by the assumption. Still, the question meets us
that no form of draft could authorize a legal demand upon the
drawee (France) on the face of the draft. So far from being a
simple paper, carrying its authority to receive the money with it,
the parties now before the court conceded, at the time the drawing
took place, by obtaining the power, that the right to receive the
money did mainly depend, and must depend, on the power signed by
the President and countersigned by the Secretary of State, with the
seal of the United States attached, and the communication of the
facts in official form, and through the proper channel, to the
government of France -- that is, through its Department of Foreign
Affairs. These were the conditions and contingencies with which the
draft was encumbered. They were legal consequences, apparent
Page 46 U. S. 400
on its face, and are yet more apparent by the accompanying facts
that took place at the time of drawing.
Again, this controversy is between the original parties; the law
governing the dealing each was bound to know; the facts they did
know equally well, and if a mutual mistake was made in supposing
that a negotiable commercial instrument could be founded on our
claim against France, this mistake cannot change the commercial
law, which in our opinion could not be made to apply to the subject
matter of drawing, nor in any form of instrument founded on the
subject matter.
The principal argument adduced to sustain the setoff claimed is
founded on the fact that by an act of Congress, the Secretary of
the Treasury had a discretion to adopt any appropriate means to
obtain the money, and that a bill of exchange was an appropriate
means. To this assumption it may be answered that France was not
bound by the act of Congress, but by the treaty; it stipulated
"that the indemnity of twenty-five millions of francs should be
paid, in six annual installments, into the hands of such person or
persons as should be authorized to receive it."
We repeat that this authority was to come from our government to
the French government; was to pass through the Department of State
here, and through the Department of Foreign Affairs there, and thus
only could it reach the Minister of Finance, M. Humann. Our
Secretary of the Treasury could not communicate with the Minister
of Finance, nor with any other functionary of the French
government, and therefore the bill drawn by Mr. McLane on M.
Humann, standing alone, was idle as waste paper, notwithstanding
the act of Congress, insofar as the French government was
concerned. Nor had M. Humann any power to pay the money, had it
been in the Treasury, until instructed to do so by the Department
of Foreign Affairs.
1. For these reasons, we are of opinion that the question on the
structure of the bill is an open question because for the first
time presented to this Court for decision.
2. That the statute of Maryland, of 1785, in its terms, does not
embrace a bill of exchange drawn on a foreign government.
3. That a bill of exchange in form, drawn by one government on
another, as this was, is not, and cannot be, governed by the law
merchant, and that therefore it is not subject to protest and
consequential damages.
And on these grounds we order that the judgment of the circuit
court be
Reversed, and that the cause be remanded to that court for
another trial thereof on the principles stated in this
opinion.
MR. CHIEF JUSTICE TANEY filed the following memorandum:
THE CHIEF JUSTICE withdrew from the bench in the argument of
this case, having given an official opinion when he was Attorney
General of the United States, against the claim made by the
Page 46 U. S. 401
bank, and concurring altogether with the above opinion given by
the court.
MR. JUSTICE McLEAN.
I dissent from the opinion of the Court. No point is made in
this case which was not elaborately discussed and substantially
ruled in the same case, reported in
43 U. S. 2 How.
711. It is true the structure of the bill, and the liability of the
government to the damages claimed, not being points made in the
former bill of exceptions, were not authoritatively adjudged. But
these points were so connected with the construction of the
Maryland statute, the question then before the Court, that neither
the counsel nor the Court could escape their consideration. No
other instrument than a foreign bill of exchange is embraced by the
statute, and if the government be not liable to damages on a
protested bill, no decision could have been given against it.
The points were as fully and as ably argued then, as they have
been at the present term. The addition of one learned counsel at
the bar is the only change in the advocates. But the changes on the
bench show the uncertainty of life, and the emptiness of human
hopes. Two judges, distinguished for their great learning and
ability, who participated in the former judgment, have gone to
their account; ill health causes the absence of another, and the
opinions of the two now present remain unchanged. We submit, as we
are bound to do, to the views of our four learned associates who
now decide this case.
It is insisted that the bank did not purchase the bill of
exchange from the government, but acted as its agent, using the
bill as an instrument through which to perform its agency.
By the fifteenth section of its charter, the bank, when required
by the Secretary of the Treasury, was bound "to give the necessary
facilities for transferring the public funds from place to place
within the United States or territories, without charge." But this
duty was limited to transfers within the Union, and did not extend
to foreign countries.
The correspondence between the Secretary of the Treasury and the
president of the bank in relation to this bill shows a purchase of
it by the bank. In his first letter to the bank, dated 31 of
October, 1832, the Secretary of the Treasury states the amount due
under the French treaty; that it was made his duty to have the
amount transferred to the United States, and the views of Mr.
Biddle as to the mode of transfer were solicited. In his answer,
Mr. Biddle says -- "The simplest form would be the sale of a bill
on Paris, drawn by the Secretary of the Treasury"; that
"the bank has already in Paris a larger sum than it has any
immediate use for, yet it is not indisposed to increase it, because
it may hereafter have occasion for the fund, and because it is
believed that if
Page 46 U. S. 402
the terms can be made acceptable, the purchase of the whole by
the bank would be the best operation for the government."
The rates of exchange are then stated, and a proposition to
purchase the bill at a certain percent.
On 26 January ensuing, the Secretary says he is ready to draw
the bill, and adds -- "I presume the bank is still disposed to
purchase, and on the terms offered in your letter of 5 November."
And also he says, "It is desirable that the credit be given to the
treasurer by the bank, on receiving the bill."
To this letter Mr. Biddle replies that the rate of exchange has
declined between England and France, and that the bank could not
take the bill on the terms at first proposed. On 6 February, the
new terms were accepted, and on the following day the bill was
transmitted and its proceeds were placed on the books of the bank
to the credit of the government.
These facts show a proposal to sell the bill by the Secretary,
and an agreement to purchase it by the bank at a certain percent;
that the bill was drawn and forwarded to the bank, and that for the
amount of it a credit was entered to the government. In the face of
these statements, which show a purchase of the bill beyond all
doubt, it is extraordinary that the fact should be
controverted.
It is contended that the bill, "under the circumstances stated
in the record, is not a bill of exchange, and is not embraced by
the Maryland statute of 1785."
The Secretary of the Treasury proposed to sell a bill of
exchange to the bank, and the bank agreed to purchase a bill. On
its face, it is called a bill of exchange, and it was negotiated as
such by the bank to Baring, Brothers & Co., of London, and by
them to N. M. Rothschild, who endorsed it to Messieurs D.
Rothschild, Brothers, of Paris. When the bill became due, a demand
of payment was made on the drawee, and a protest for nonpayment,
which was followed by due notice to the drawer. The government paid
the cost of protest and other expenses to the bank, and also the
commissions charged by Hottinguer & Co., who took up the bill,
supra protest, as the agents of the bank; but the fifteen
percent damages given by the Maryland statute were refused. And in
a letter the Secretary of the Treasury, the Attorney General
says,
"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,"
&c. "The account," he says,
"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."
But now it seems that these eminent civilians and bankers were
ignorant of the legal import of this instrument -- men who had been
all their lives conversant with bills of exchange, and who had used
them in their moneyed operations annually to an amount equal to,
if
Page 46 U. S. 403
not greater than, the revenue of this government. Yet these men,
the richest and most experienced bankers in the world, were
mistaken in calling and treating this paper as a bill of exchange.
And the government, too, were reprehensible for paying the costs of
protests, for such costs could be charged only on a bill of
exchange.
Against all this knowledge, experience, and action, it is now
contended that the paper is a mere assignment, or anything else
than a bill of exchange. That designation is repudiated not the
less zealously for having been the result of second thought.
But what are the new lights shed upon this question?
Two documents are found in the present record which were not
before the court at the former argument, and these, it is said,
have a material bearing on the case. The first is a letter dated 8
February, 1833, from the Secretary of State to Mr. Niles, our
charge d'affaires at Paris, informing him that a bill had been
drawn on the French government for the first installment and
interest under the treaty in favor of Samuel Jaudon, cashier of the
Bank of the United States, and requesting that notice should be
given of the arrangement to the French government.
This is nothing more than a letter of advice, which usually
precedes a bill of exchange, of which the payee in this instance
had no knowledge. It, however, conduces to show the nature of the
transaction, as not only the substance of a bill of exchange was
regarded, but also its form and accompaniment.
The other document was under the seal of the United States, and
signed by the President and Secretary of State. It stated the
substance of the treaty; the act of Congress authorizing the
Secretary of the Treasury to have the installments, as they became
due, transferred to the United States, and that the Secretary had
drawn a "bill on the Minister and Secretary of State for the
department of Finance of the French government, payable at sight,
for four millions eight hundred and fifty-six thousand six hundred
and sixty-six francs and sixty-six centimes, being the amount of
the first installment, payable to the United States, under the said
convention, on the second of the present month of February, and of
the interest which is payable at the same time, which bill is
payable to Samuel Jaudon," &c., and the President ratifies the
act of drawing the bill, and the receipt which shall be given,
&c.
Now this paper is supposed to take away from the bill of
exchange its character as a commercial instrument. It can have no
other effect than to show that the Secretary had authority to draw
the bill. It was no part of the bill of exchange, and indeed was
not necessary to its negotiability. The endorsement of Jaudon
implied an undertaking that he was the cashier of the bank and that
the bill was genuine and would be paid. No one can doubt that the
payment of the money by the French government on the bill, without
any additional evidence, would have been good. The bill upon its
face
Page 46 U. S. 404
was perfect, and authorized the holder to receive and receipt
for the money.
At most, the document can only be considered as authenticating
the law under which the Secretary acted in drawing the bill. And
this was all that the French government under any circumstances
could require. But suppose this paper was a power of attorney,
signed by the President, authorizing the Secretary to draw the
bill; would that change or in any way effect its commercial
character?
Any person may draw, accept or endorse a bill by his agent. A
partner may endorse for the firm. And this authority may be by
parol or writing not under seal. So a corporation may draw by its
agent. Banks are in the constant practice of drawing bills through
their cashiers. And has it ever been supposed that if evidence
accompanied or was attached to the bill of the authority of the
drawer, it impaired its commercial properties? Mr. Chitty says, in
his Treatise on Bills (p. 27),
"Where a bill is not signed by the party himself, the party
taking it must first satisfy himself that the agent had power so to
act for the supposed principal."
In the case of
East India Company v. Tritton, 3 Barn.
& C. 280, three bills upon the East India Company were payable
to Hope or order; they got into possession of Card, who endorsed
them for Hope. Card had a power of attorney from Hope, but it was
not sufficient to warrant these endorsements. This power being seen
by the holders of the bill, they were bound by it as having notice
of its extent.
But a bill drawn by an agent under a power was never supposed to
be less a bill than if it had been drawn by the principal. And in
such cases the assignee has only to satisfy himself that the drawer
acted under a proper authority. This no more vitiates the bill than
evidence of the genuineness of the signature of the drawer. The
bill in question was complete upon its face, and it is
inconceivable to me how the paper signed by the President can
affect it.
In the argument it is supposed that in drawing this bill, the
government acted in its sovereign capacity. The idea of attaching
sovereignty to all the agencies of the government, however
exercised, is as novel as it is unconstitutional. Cover every
transaction of the agents of the government by the attributes of
its sovereignty, and a despotism characterized by the grossest acts
of injustice and oppression must result.
A bill of exchange derives all its properties from the
commercial law. It is a most convenient instrument for the transfer
of funds from one country to another. And its chief and only value
in this respect arises from the legal principles with which it is
invested and which regulate the duties and liabilities of those who
become parties to it. In negotiating such an instrument, the
government does not act in its sovereign capacity. It becomes
subject, like all other parties to the bill, to the commercial
principles which govern it.
Page 46 U. S. 405
In the case of
United States v.
Administratrix of Baker, 12 Wheat. 559, it was held
that
"whenever the government of the United States, through its
lawfully authorized agents, becomes the holder of a bill of
exchange, it is bound to use the same diligence in order to charge
the endorser as in a transaction between individuals."
And in that case the endorser was held to be discharged by the
negligence of the government. And again, in
United
States v. Bank of the Metropolis, 15 Pet. 392, the
Court said
"When the United States, by its authorized officer, become a
party to negotiable paper, they have all the rights and incur all
the responsibility of individuals who are parties to such
instruments. We know of no difference except that the United States
cannot be sued."
These decisions and many others that might be referred to put an
end to the assumption that a bill of exchange drawn by the
government is an act of sovereignty or anything different in
principle from a bill drawn by an individual. Whether drawn by the
government or an individual, a bill of exchange is the same
commercial instrument and subject to the same law. No principle is
better settled than this by the decisions of this Court.
But it is supposed that there is something in the character of
the drawee, the French government, which destroys the commercial
character of the bill. This position is as unsustainable as that of
the character assumed for the drawer. The bill was drawn on M.
Humann, the Minister of Finance of the French government. The money
was due, and the payment of it was subject to no contingency from
the face of the bill nor from any circumstance connected with it.
The drawer guaranteed the payment of the bill on presentation by
the holder, under all the responsibilities which the law attached.
A demand, protest, and notice were the only conditions on which the
responsibilities were to become fixed. These conditions have been
performed by the bank, and the government has acknowledged its
liability by paying a part of the damages claimed. But throwing
itself upon its sovereignty, the government refuses to pay the
damages claimed under the statute of Maryland on the ground that
the instrument is not a bill of exchange. If this ground be true,
the costs of protest should not have been paid by it.
It is contended that as the question is now here, between the
original parties to the bill, the bank may be supposed to have
taken the bill under a full knowledge that it might not be paid by
the French government, and could not be paid by it unless the
chambers should make an appropriation. And from this knowledge it
is inferred that the bank took upon itself the risk of the punctual
payment of the bill. This assumption is shown to be unfounded by
the fact that the government, on being notified of the protest,
immediately returned the money to the bank which it had paid on
account of the bill. Now if there had been any understanding,
express or implied, such as is presumed in regard to the punctual
payment of
Page 46 U. S. 406
the bill, would the government have done this? There can be but
one answer to this question.
There was no doubt in the minds of the original parties to this
bill that it would be paid on presentation. What was the language
of this government on receiving notice of the protest? Was the
failure of the French Chambers to make the appropriation received
as an apology for the dishonor of the bill? That government was
informed in terms not to be misunderstood that no excuse for a
delay of payment could be received. That the obligation of the
French government was absolute and in no degree dependent on the
will of the Chambers, and an immediate payment was required. The
bank, shortly after the receipt of this bill, endorsed it to
Baring, Brothers & Co. in London. This affords the highest
evidence that the bank believed the bill would be honored.
It is argued that the French government did not subject itself
to a bill of exchange and consequently to the payment of damages on
a default of payment. This may be admitted, and yet it does not
reach the question. The bill was not presented until the money was
due, and by drawing it, our own government undertook that it should
be paid. This is as well settled as any other principle in the
commercial law.
It seems to be considered that the case might have been stronger
against the government had it been made by an endorsee of the bill.
This cannot be correct. Every endorsee, from the face of the bill,
had all the notice which can be charged against the bank.
But it is contended that the bill was drawn on a particular
fund, and therefore was not a bill of exchange.
It is admitted if the payment of the bill is made to depend upon
any contingency it is not a bill of exchange. In the language of
Mr. Chitty -- "If the payment is to depend on the sufficiency of a
particular fund, the bill or note will be invalid." The case of
Jenny v. Herle, 2 Ld.Raym. 1361, was much relied on in the
argument.
"Herle sued Jenny upon a bill drawn by him upon Pratt, and
payable to Herle, as follows:"
" Sir, you are to pay Mr. Herle 1945 out of the money in your
hands belonging to the proprietors of the Devonshire mines, being
part of the consideration money for the purchase of the manor of
West Buckland."
"Herle had judgment in the Common Pleas, but upon a writ of
error, the Court of King's Bench held that this was no bill of
exchange, because it was only payable out of a particular fund
supposed to be in Pratt's hands, and the judgment was accordingly
reversed."
The decision in that case did not turn upon the words on the
face of the bill, "being part of the consideration money for the
purchase of the manor of West Buckland", but on these -- "You are
to pay Mr. Herle out of the money in your hands belonging to the
proprietors of the Devonshire mines." The former words here cited
in effect are the same as those used in the French bill,
showing
Page 46 U. S. 407
the consideration on which it was drawn; but in
Herle's
Case, these words constituted no objection to the bill, and
were not referred to by the court. The case turned exclusively on
the direction to "pay out the money in your hands belonging to the
proprietors of the Devonshire mines." Had these words been omitted,
the bill would have been good. So that the
Case of Herle,
so much relied on by the plaintiffs' counsel, does not show the
invalidity of the French bill.
The bill in
Herle's Case, in the language of the court,
was payable out of money supposed to be in Pratt's hands.
Consequently it was payable out of no other fund. And if the fund
supposed to be in Pratt's hands was not there, then the bill was
not payable. Compare this with the French bill:
"Sir, I have the honor to request you to pay at sight of this my
first of exchange &c., to the order of Samuel Jaudon, cashier
of the Bank of the United States, the sum of four millions eight
hundred and fifty-six thousand six hundred and sixty-six francs
sixty-six centimes, which comprises the sum of 3,916,666.66 francs,
constituting the amount of the first payment to be made to the
United States, by virtue of the convention concluded between the
United States and France, 4 July, one thousand eight hundred and
thirty-one (deduction made of the amount of the first payment,
reserved to France by said treaty), and the additional sum of nine
hundred forty thousand francs for a year's interest at four percent
upon the entire sums payable to the United States, dating from the
day of the exchange of ratification to the second of February,
1833."
Now there is not on the face of this bill any intimation out of
what fund the French government should pay it. It specifies on what
account the bill was drawn, showing the amount was due, but this
does not affect the character of the bill. The installment "was
referred to," in the language of Mr. Chitty, "in order to show the
consideration, and not to render the payment contingent."
In
Burchell, Administrator v. Slocock, 2 Ld.Raym. 1545,
the action was on a promissory note, whereby the defendant promised
to pay to A. B. �101 12
s. in three months after the date
of the said note, "value received out of premises in Rosemary Lane,
late in the possession of G. H. The court, on demurrer, held this
to be a promissory note within the statute." And so in
Hausoullier v. Hartsinck, 7 T.P. 733, the defendant
promised to pay _____, or bearer, �25, being a portion of a value
as under deposited in security for the payment thereof. Upon a
special case's being reserved, the court said it was clearly of
opinion that though, as between the original parties to the
transaction, the payment of the notes was to be carried to a
particular account, the defendants were liable on these notes,
which were made payable at all events.
The question is whether the payment of the bill is made to
depend
Page 46 U. S. 408
upon any contingency. Now it is clear this is not done in the
French bill. It is made payable absolutely, without any condition
expressed or implied.
The maker of a note promised to pay "A. B. eight pounds, so much
being to be due from me to C. D., my landlady, at Lady-day next,
who is indebted in that sum to A. B." was held not to be
conditional. Chitty on Bills 139. Now in this instrument, the
consideration is stated, but that did not vitiate the note. The
French bill states nothing more than that the amount drawn for was
due by treaty. And yet this is supposed to destroy its negotiable
character. A decision to this effect would, in my judgment,
introduce a new principle into the law governing bills of
exchange.
Is the bank entitled, under the statute of Maryland, to the
fifteen percent damages?
The argument that the State of Maryland did not intend to
subject her sovereignty to the provisions of the statute is
entitled to but little consideration. The interest involved does
not reach the sovereignty of the state, and it is sufficient to say
there is no exemption of the interests of the state in the statute,
and in passing it, the legislature intended, as in the enactment of
every other law, that all legal effect should be given to it.
The words of the statute are, "that upon all bills of exchange
hereafter drawn in this state on any person, corporation, company,
or society in any foreign country," &c., and it is intimated
that these words do not embrace a foreign government. In answer to
this it may be said the bill is drawn on M. Humann, and is
literally within the statute.
From the cases above cited, it is clear that the government, in
drawing or negotiating a bill of exchange, subjects itself to all
the liabilities of an individual; consequently it is liable to the
fifteen percent damages under the Maryland statute if the bank is
entitled to them. These damages were considered by this Court in
the former decision as designed by the statute to cover
re-exchange. This construction is opposed, and it is argued that
re-exchange is provided for in the statute, where it declares that
the holder of a protested bill
"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
bill."
And the fifteen percent damages in this view are considered as a
penalty.
Instead of covering re-exchange by the above provision, the
legislature intended to give the holder of the protested bill the
money he paid for it, varying only as the rate of exchange should
be at the time. If the rate of exchange at the protest of the bill
was lower than when it was purchased, the holder, under the
statute, would recover less than he paid for it; but if exchange
had risen, he would recover more. Now this exchange is limited to
this
Page 46 U. S. 409
country, and therefore cannot have been intended as re-exchange.
Re-exchange is a bill drawn at the place of payment of the
protested bill, which shall sell for the amount of such bill. The
holder of the French bill, on its protest, was entitled, on
commercial principles, independently of the statute, to a bill on
this country which would sell at Paris for the amount of the
protested bill. This would be a very different sum from that which
was paid for the bill in this country. The re-exchange depends upon
the state of trade between the two countries, direct and
circuitous, the money market, always regulated by the demand and
supply, and other circumstances of a local character, which show
that the price at which the bill was purchased in this country can
never be the price at which a bill on this country would sell at
Paris, or in any foreign country. This fact being known to the
Legislature of Maryland, they could not have intended by the above
provision to cover re-exchange. The statute gives to the purchaser
of the bill the amount he paid for it, with the small variation
stated, and nothing more. The fifteen percent damages were given in
lieu of re-exchange, and not as a penalty. This is the view taken
by the court in its former decision.
It is said that the bank, not having paid damages on the bill,
is not entitled to them. The bank, having negotiated the bill, was
responsible for its payment, with damages. And after the protest,
the agents of the bank supervened, and paid the amount of it to the
holder. The propriety of this payment is not questioned. By this
act, the bank became the holder of the bill, not as endorsee, but
as the original payee. In effect, this ownership obliterated and
annulled the endorsements on the bill. The bank, as the holder,
could look to no one but the government for payment. And payment to
the bank in this country was made, shortly after notice of protest
was received.
But the damages given by the statute have been withheld. Had the
bank never negotiated the bill, and made a demand of payment, the
protest for non payment, with regular notice, the right to the
damages claimed could not have been contested. And this is the
precise condition of the bank. It is the holder, having paid the
amount of the bill at Paris.
The large amount of the damages claimed has been adverted to in
the argument. This should have no influence on the legal questions
that arise.
Suppose the bank had not taken up the bill after protest; is
there any doubt that the holders could have recovered damages from
their endorsers, and they from the bank? This would have subjected
the bank to the payment of the damages given by the law of the
place where the bill was first endorsed. But this circuitous course
was prevented by the payment of the bill. It thus appears that the
bank paid this large sum of money in Paris, unexpectedly,
Page 46 U. S. 410
which in the nature of things must have subjected it to great
inconvenience and loss. By the payment, the credit of the
government, as the drawer of the bill, was sustained, and the
eventual liability of the bank for principal and damages
anticipated.
Now as between individuals, this would entitle the holder of the
bill to the fifteen percent damages. And it is equally clear and
just that the bank should receive the same. There has been paid to
it by the government the principal, costs of protest, and the
commission charged by Hottinguer & Co. as the agents of the
bank, who took up the bill, but not one cent has been paid to the
bank for the advance of the money at Paris. On the principles of
equity, independently of the statute, the bank is entitled to the
difference in value of the sum paid by it in Paris and the sum
received by it from the government in this country. This is
re-exchange, which the fifteen percent, in my opinion, was intended
to cover. Of this opinion was the court which formerly decided this
case.
I think the judgment of the circuit court should be
affirmed.
MR. JUSTICE WAYNE also dissented from the opinion of the
court.
MR. JUSTICE WOODBURY, having given an official opinion as
Secretary of the Treasury against the claim of the bank in this
case, did not sit.
Order
This cause came on to be heard on the transcript of the record
from the Circuit Court of the United States for the Eastern
District of Pennsylvania and was argued by counsel. On
consideration whereof it is now here ordered and adjudged by this
Court that the judgment 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 award a
venire facias de novo and for
further proceedings to be had therein in conformity to the opinion
of this Court.