In June 1765 at Boston, James Warden endorsed two bills of exchange drawn on a New
York mercantile house and delivered them to Joseph Alcock of Portsmouth, New Hampshire.
In September the bills were presented on Alcock's behalf to the drawee in New York,
who refused to accept or pay them. Alcock's New York correspondent immediately procured
a “protest,” the affidavit of a notary public to the presentment and refusal. At the
April 1766 term of the Inferior Court at Boston Alcock sued Warden in an action of
assumpsit on the bills. The court ruled for Warden on a sham demurrer to the defendant's
plea of the general issue.
1
Alcock appealed to the Superior Court, where, at the August term 1766, the case was
tried to a jury, with James Otis and Jeremy Gridley as counsel for Alcock, and Robert
Auchmuty arguing for Warden. Adams was not involved, but was present to make what
amounts to a report of the
{ 169 } argument and decision on an interesting point of law which the case raised. Alcock
had asked for damages beyond the face amount of the bills. In England, upon protest
special damages could be awarded in an action against a drawer or indorser for nonpayment
of a “foreign” bill, that is, one drawn on a merchant or banker outside the realm.
No such recovery was allowed on an “inland” bill (one drawn on an English house),
at least at common law. The damages on a foreign bill were not very clearly defined
in the authorities, but they consisted principally of interest and what was called
“re-exchange,” the cost to the holder of procuring a new bill for the same amount
in the drawee's country.
2
In the colonies a practice had developed of allowing the plaintiff on a foreign bill
an additional flat percentage of its face value in lieu of re-exchange,
3 and this had been the custom in Massachusetts. Although there were no written reports
of decisions to rely on, the court in Alcock's case was able to follow its own precedents
on this point. Samuel Fitch, whose role in the case is unclear, because he was not
counsel of record for either party, pointed out that the local practice had been approved
in a case on a New York bill argued in 1755. Samuel Winthrop, Clerk of the Superior
Court, Ezekiel Price, a notary public, who had been Clerk pro tem in 1755, and Ezekiel
Goldthwait, also a notary and Clerk of the Inferior Court, confirmed the custom.
4
Argument followed on the question whether the percentage should be allowed in this
case. It was urged by Otis and Gridley that no distinction was made in England between
foreign and inland bills as to damages, or that in the alternative a bill drawn on
New York should be treated as a foreign bill, the same considerations of distance
and difference in practice being present. Auchmuty contended that there was a distinction
at common law but does not seem to have argued directly on the question whether New
York bills were to be regarded as foreign.
The court decided that 10 percent should be allowed, and the jury brought in a verdict
which complied with this ruling.
5 According to Adams' note, Justice Benjamin Lynde found that the bills involved were
not inland bills. It is not clear whether he was articulating the opinion of the court
on this point, or whether the majority held that damages were available regardless
of the nature of the bill. This would have been the
{ 170 } result by statute in England, but it was doubtful that the Acts in question applied
in the colonies, and the issue does not seem to have been raised in argument.
6
Alcock v. Warden was consistent with later developments in the American law of negotiable instruments.
In 1809 the Massachusetts Supreme Judicial Court, in an opinion by Chief Justice Theophilus
Parsons, recognized the rule of damages followed here as “a part of the law-merchant
of the commonwealth,” and applied it in the case of a protested bill payable in England.
7 A similar rule, awarding percentage damages on bills drawn or endorsed within the
Commonwealth and payable outside the United States, was adopted by statute in 1826,
and many other states followed suit.
8 The question of damages on a protested bill drawn in one state and payable in another
was rendered doubtful in the first years of the 19th century by a split of authority
as to whether such a bill was “foreign” or “inland.” No early decision on this point
has been found in the Massachusetts
Reports, but in view of
Alcock v. Warden an ambiguous passage in Dane's
Abridgment should probably be read to mean that damages could be had, whatever the label applied
to the bill.
9 An Act
{ 171 } of 1819 settled the matter, providing that on bills drawn in Massachusetts and payable
in another state a percentage varying according to the distance of the state from
Massachusetts should be awarded as damages. Similar rules were adopted by statute
and at common law in other states.
10
Although somewhat atrophied in use, the Massachusetts statutes just referred to remained
in force until 1958, when they were repealed in the adoption of the Uniform Commercial
Code.
11 The Code does not deal expressly with the question of damages raised here, but it
does provide that “Unless displaced by the particular provisions of this chapter,
the principles of law and equity, including the law merchant ... shall supplement
its provisions.”
12 Perhaps
Alcock v. Warden is again good law in Massachusetts.