THIS action was instituted in the Circuit Court of the United States, for the Southern district of New-York, upon nine several bills of exchange, drawn at Baltimore, at sixty days sight, by John C. Delprat, on the plaintiffs, carrying on business under the firm of N. & J. & R. Van Staphorst, merchants in Amsterdam, and endorsed by the defendants.
The cause was tried in April, 1825, and a verdict taken for the plaintiffs, for $32,275 95, being for the whole amount of their claim; subject to the opinion of the Court, upon a case agreed.
The Judges of the Court below, having divided in opinion on the following points, the same were certified to this Court, and the cause was argued upon the case agreed, and the points upon which there was a division of opinion, by the Judges of the Circuit Court.
1. Whether the authority of J. C. Delprat, to draw upon the plaintiffs, did or did not amount to an acceptance of the bills?
2. Whether the bills paid by the plaintiffs, supra protest, for the honour of the defendants, were drawn and negotiated, in conformity to the authority and instructions of the plaintiffs, to John C. Delprat?
3. Whether the plaintiffs were bound to accept and pay the bills in question, and whether the same having been paid by the plaintiffs, supra protest, for the honour of the defendants, the plaintiffs are entitled to recover the amount of the defendants?
4. Whether J. C. Delprat was a competent witness?
5. Whether the letter, offered by the plaintiffs in evidence, and rejected, ought to have been admitted?
6. Whether the plaintiffs are entitled to a judgment, on the verdict of the jury?
All the facts, with the correspondence between the parties, which were considered by the Court as necessarily connected with a full development of the case, are stated in the opinion of the Court.
The cause was argued by Mr. Ogden and Mr. Oakley, for the plaintiffs, and by Mr. Webster, and Mr. Ogden Hoffman, for the defendants.
This action is upon bills of exchange, drawn by Delprat, and accepted, supra protest, and paid by the plaintiffs, as they allege, for the honour of the defendants, who were the endorsers on the bills. It is admitted that the plaintiffs, being drawees of the bills, could accept and pay in this form; but it is claimed, that the bills were drawn under the arrangement between them and Delprat, and they were bound to accept them; that arrangement being a promise so to do.
This is the same question, as if the defendants in this suit had brought an action against the plaintiffs, on those bills, as accepted bills.
Does the authority to draw, create a promise to accept? It is admitted that the law of France is, that acceptance shall be on the face of the bill. The law of France is the law of Holland. We deny that the contract between the plaintiffs is such a promise to accept, as that, even if all its provisions and conditions had been complied with, any third party could have taken advantage of it.
As it related to the parties themselves, it was a good promise, when Delprat conformed to the provisions of the arrangement; but strangers had no right to avail themselves of this. The promise in the contract was made to Delprat, and was not assignable in its very nature.
It is only when the promise points to some bill drawn, or to be drawn, with such minuteness and certainty as to sums, time, and parties, as that it may be considered a complete transaction, and a finished agreement, that the promise can avail to the use of third parties; and then it does not so avail as a promise to accept, but as an actual acceptance.
There is no case of a parol promise to accept, being considered as an acceptance; and the doctrine has been already carried too far, so as to become the subject of regret. But there is no case which goes as far, as the plaintiff claims in this.
Cases cited, 3 Bur. 1663. 1 East, 98. 4 East, 57. Wynne vs. Raikes, 5 East, 54. Cooledge vs. Pavson, 2 Wheat. 66. Starkey, 411.
All those cases rest on the express promise to accept. Goodrich vs. Gordon, 15 John. 6. Why, if the authority to draw was a promise to accept, say, there was also a promise to accept?
The case of Cooledge vs. Payson, 12 Wheat. 66, before this Court, settled all the principles relative to an obligation to accept; and this case does not come within the rules of law there established. The principles decided by the Court in that case, were in the language of the Court:
'Upon a review of the case, this Court is of opinion, that a letter, written within a reasonable time before or after the date of a bill of exchange, describing it in terms not to be mistaken, and promising to accept it, is, if shown to the person who afterwards takes the bill on the credit of the letter, a virtual acceptance, binding the person who makes the promise.'
The decision of the Supreme Court of New-York, recognises the same principles. That case was––
Gordon was sending a sloop from New-York to Savannah, during war. Hogan wrote a letter of instructions, viz. 'should he be captured, ransom the vessel, as low as possible, not to exceed 2,000 dollars, and your draft on me will be duly honoured.' He was captured, and drew the bill, for ransom, within the sum, and gave the letter, with the bill.
Chief Justice Marshall says, 'the testimony is full evidence that this letter, at all times, accompanied the bill–that the bill was drawn on the faith of it;–and that it was on the faith of this letter that the plaintiff, who was an endorser, took the bill from the first endorser–and it would be a gross want of faith, now, to disclaim the captain's authority.
The arrangements between the plaintiffs and Mr. Delprat, were personal to him, and could have no effect upon the transactions of others. They were to operate on the general business to be carried on between them, and their main object was, consignments to the plaintiffs. Mr. Delprat might purchase parts of cargoes, and they were willing to 'facilitate' all such commercial operations of his, as 'they could without prejudice to themselves.'
Under this arrangement, Mr. Delprat purchased and shipped goods, drew for them, and the proceeds of the shipments were carried to his account, and the bills paid, and charged to him. The defendants were not parties in those transactions, and they stood as mere purchasers of the bills in the market.
These transactions are similar to many others in the United States, and have never been considered as involving an obligation to accept the bills, of which a purchaser can take advantage. Such a responsibility, on the part of the drawees of a bill, would give to it a greater effect, when in the hands of an assignee, than it had before the transfer.
There is no usage making the authority to draw an acceptance. There is no case in which it has been ever so held; and it is inconsistent with the negotiable nature of bills.
The question, therefore, which has been raised, is met in its most imposing form, with an answer in the affirmative; when acting under such an arrangement as that between the plaintiffs and Mr. Delprat, could the plaintiffs take the goods shipped to them, and refuse to pay to a third person, the bills drawn upon those goods? It is considered they could; such is the mercantile law, and it cannot be otherwise.
Bills of exchange are purchased on the faith of the names upon them, and not under an expectation that there is a collateral obligation to pay them, on the part of the drawee. There is always an expectation, that the bills will be paid; but this expectation does not constitute a legal right against the drawee. In reference to the present bills, it appears from the testimony, that the defendants actually charged Mr. Delprat a commission for endorsing them, without which, they could not have been advantageously negotiated.
It is said, that the shipments were made in trust to pay these bills, and that the plaintiffs could not take the property free from the trust. Let this be so; but who can enforce the trust? Certainly not the assignees, as the trust is not assignable. To the drawer only, would the parties under such circumstances be answerable. The agreement made by the plaintiffs and Delprat, was never performed by him, in any case; and thus the danger is manifested, of giving to a stranger, rights which Delprat would not have had himself. No lien existed on the goods, by which the payment of the bills could have been enforced; no such lien has ever been supposed to exist; all liens require possession in the party or his agent. The goods in this case went to Holland; the bills were sent to England; where is the possession to maintain the lien?
If the bills had been drawn upon particular shipments, and the invoices and bills of lading of the goods had been delivered with the bills, the plaintiffs being so advised, by Delprat; then they must have opened a particular account with the party holding the bills, and have paid them out of the shipments.
As to the suggestion of an equitable lien on the goods, for the payment of those bills; it cannot be contended, that the holder of the bills could follow the goods and enforce it. The law of Russia, gives a party a right to follow goods until he is paid, but this is not the law here. The policy of the English law, and that of all commercial countries, is, that the paper is disconnected with the property.
It is well settled law, that where goods are carried, under a permission to draw, the bills of lading being remitted fixes the property in the consignee, against the creditors of the consignor, although they get the goods. 1 Bos. & Pul. 563. 3 Chitty, 550. If A sends goods to B, and directs him to pay the proceeds to C, this creates no lien in favour of C. 1 Starkey, 123. 143. 14 East, 558. Chitty, 550.
Mr. Delprat was not the agent of the plaintiffs, under the contract, to draw the bills. He stood in no other relation to them, than that of a corresponding merchant, with like powers. He did not draw the bills as agent; they were said to be on his own account, nor did he pretend to bind the plaintiffs, by his acts, as his principals. Bayley on Bills, 156. 64. 3 Term Rep. 757. Chitty on Bills, 31. Agency may be inferred from analogous acts, but they must be of that character. There is no proof that similar bills were ever paid by the plaintiffs.
The plaintiffs sent to the defendants their contract with Mr. Delprat, to show that they had granted him the credit. In their letter to the defendants, they do not say any thing about the authority to draw; in reference to the credit, they desired the defendants to supervise the transactions of Delprat; in reference to any bills he might draw, they would take care of themselves, by refusing to accept them.
There is an answer to all the allegations, as to lien, and to an alleged liability to accept. The bills, it is manifest, were not taken on the credit of the drawees.
Mr. Oakley, for the defendants.
The mercantile house of the plaintiffs, at Amsterdam, were desirous to extend their business in the United States; and they employed Mr. Delprat, giving him authority to draw upon them, according to particular directions, and with a credit of 40,000 dollars, with the defendants. He acted under this arrangement for four years, and then failed; and the question is, who shall sustain the loss arising in the course of his transactions, out of bills drawn by him, upon the plaintiffs. The business between Mr. Delprat and the plaintiffs, was not confined to the contract, nor were his acts in conformity to it; and yet the plaintiffs went on, without communicating to the defendants; who were deeply connected with them in mercantile business, and who had been particularly invited to an agency in their arrangements with Mr. Delprat; that their confidence in Mr. Delprat, their agent, had diminished, or they proposed to withdraw the agency from him.
They suddenly break off the relations between them and Mr. Delprat, and refuse to pay bills, drawn on property which had been shipped to them, and which were to provide for the payment of the bills; taking the funds, the proceeds of the goods, to the credit of their general balance, arising out of their several transactions; and they then pay the bills, supra protest, for the honour of the defendants, who were endorsers on the bills. Can this be done?–can they take the goods, and not pay the bills?
Had the plaintiffs a right to accept the bills supra protest, for the honour of the defendants?
He who gives an acceptance for the honour of a party, must do it before he accepts generally, 'or any ways engages or obliges himself thereto.' 1 Lex. Merc. (Malyn) Marius advice concerning Bills of Exchange, 30, 31. In 1 Lord Raymond, 88, Lord Holt says, 'an acceptor for honour of drawer, is when a stranger, having no effects of drawer, accepts out of respect to the drawer.' The principle there, is that there can be no acceptance supra protest, for the honour of any party, when the acceptor is under any obligation, legal or equitable, as it respects that party to accept generally. This results from the nature of acceptance supra protest.
1. An acceptor supra protest, may demand a recompense, for the credit given him, for whose honour he accepts, Beawes's Lex. Mere. f. 44; and if he re-draws, his bill ought to be readily complied with, besides a grateful acknowledgment of the favour.
2. Where a bill is paid supra protest, the payee may re-draw, with addition of commission, and it ought, in gratitude, to be punctually complied with. Ibid. pl. 63, 64.
Such acceptance must therefore be gratuitous, with a just motive; and without connexion with, or reference to the interests of the acceptor.
To examine this case, according to these principles.––
1. As between the plaintiffs and the defendants, were those bills such as should be considered as accepted bills; or bills which the plaintiffs were 'in any ways obliged to accept?'
They were; because they were drawn by Mr. Delprat:––
1. In pursuance of his written authority.
2. If not in pursuance of a general authority, this authority was to be inferred from the general course of business. An authority to draw a bill, is virtually an acceptance of the bill, drawn in conformity to it. 9 Mass. 11. 2 Wheat. 72. 2 Gallison, 238.
2. A promise to accept a bill, is an acceptance, if the holder has taken the bill on the faith of the promise; although the bill is for a pre-existent debt, or whether the promise be before or after the bill is drawn. This is also the law, although the promise be obtained from the drawee fraudulently.
3. A general authority to draw bills, is equivalent to an acceptance of all bills drawn; or to a promise to accept all.
The facts in this case, were:––
By the agreement of January 11, 1818, between the plaintiffs and Mr. Delprat, he was their agent–1. To form commercial connexions. 2. To promote consignments. 3. To act as directed in the agreement. As the plaintiffs' agent, Mr. Delprat was bound–1. To act for no other persons in procuring consignments, either from himself or from others. 2. To use his utmost efforts, for the benefit of the plaintiffs.
The plaintiffs were bound–1. To facilitate Mr. Delprat's commercial operations, without ...