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Browsing: Legal Papers of John Adams, Volume 1


Docno: ADMS-05-01-02-0005-0001-0001

Editorial Note

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.
1. See the bills, protest, writ, and Inferior Court judgment in SF 100780. The bills were in identical amounts, payable to James Warden or order, one at 32, the other at 33, days after sight. The declaration contained a count on each bill, setting forth the instrument and alleging that on the
“8th day of June A.D. 1765 at Boston aforesaid the said James Warden before the payment of the said sum or any part of it, made his Indorsement on the said Second Bill of Exchange [i.e. second copy of this bill] and thereby for value received ordered and directed the said sum of one hundred and ninety three pounds six shillings and eight pence New York currency to be paid to the said Joseph Alcock, and afterwards, viz, on the Sixteenth day of September A.D. 1765, at New York aforesaid, the said Second Bill of Exchange was presented to the said John Alexander & Company [the drawee] and they were then and there requested to accept the said Second Bill of Exchange and to pay the said sum ... to the said Joseph Alcock according to the tenour of the said Bill of Exchange and indorsement, and the said John Alexander & Company then and there refused to accept the said Second Bill of Exchange or to pay the said sum ... tho the said first Bill [i.e. the first copy] was not accepted or paid, wherefore afterwards, that is to say on the same sixteenth day of September A.D. 1765 the said Second Bill of Exchange was for want of acceptance and payment at New York aforesaid in due form protested, and of all this the said James Warden at Boston aforesaid by the same Joseph Alcock had notice and thereupon became chargeable to the said Joseph Alcock for the said sum ... equal to the sum of one hundred forty five pounds lawful money with all damages costs interest and charges whatever amounting with the principal to the sum of two hundred pounds lawful money, and in consideration thereof the said James Warden then at Boston aforesaid promised the said Joseph Alcock to pay him the same sum ... on demand.” Ibid.
 The form is very similar to that given in Joseph Chitty, A Treatise on the Law of Bills of Exchange 239–241 (London, 1799).
2. As to the common law rule, see note 186 below. For interest and re-exchange see Chitty, Bills of Exchange 213–218; Brannan's Negotiable Instruments Law 1263–1264 (Cincinnati, 7th edn., F. K. Beutel, 1948); John W. Daniel, Treatise on the Law of Negotiable Instruments, 3:1749–1762 (N.Y., 7th edn., T. H. Calvert, 1933).
3. For the rule in other colonies, see note 175 below. The practice was not followed in England, except for bills returned from India. See Chitty, Bills of Exchange 217.
4. See note 142 below.
5. Min. Bk. 81, SCJ Suffolk, Aug. 1766, N–4; SCJ Rec. 1766–1767, fols. 93–94. The verdict was for £336 17s. 6d. and costs of £7. This figure was the sum of the face value of the bills, £290; 10 percent of the sum, £29; and interest at 6 percent from the date of protest, £17 17s. 6d.
6. For the statutes, see note 186 below. Although damages could be had on an inland bill under these Acts in England, re-exchange would not have been included, because there was no currency exchange factor in the transaction. See John Bayley, A Short Treatise on the Law of Bills of Exchange 45–46 (London, 1789). The flat percentage used in Massachusetts was not tied to re-exchange, however, so that on a broad reading it could have been awarded as damages even on an inland bill. But compare note 9 below. Since there was a difference between the currencies involved, when the bill was payable in another province, such a rule was not inequitable in this case, whether the bill was called “inland” or “foreign.”
7. See Grimshaw v. Bender, 6 Mass. 157, 161 (1809):
“But the rule of damages, established by the law-merchant [i.e. interest, charges, and re-exchange], is in our opinion absolutely controuled by the immemorial usage in this state. Here the usage is, to allow the holder of the bill the money for which it was drawn, reduced to our currency at par, and also the charges of protest, with American interest on those sums from the time when the bill should have been paid; and the further sum of one tenth of the money for which the bill was drawn, with interest upon it from the time payment of the dishonoured bill was demanded of the drawer. But nothing has been allowed for re-exchange, whether it is below or at par. This usage is so ancient, that we cannot trace its origin; and it forms a part of the law-merchant of the commonwealth. Courts of law have always recognized it, and juries have been instructed to govern themselves by it in finding their verdicts.”
8. The statute provided 5 percent damages if the bill was drawn on a country not in Asia or Africa, otherwise 20 percent. See Act of 4 March 1826, c. 177, §1, Mass. Laws, 1826, p. 315–316. For the practice in other states, see Brannan's Negotiable Instruments Law 150, 200–201, 1263–1264; Theophilus Parsons, A Treatise on the Law of Promissory Notes and Bills of Exchange, 1:655–661 note (Phila., 2d edn., 1876); Annotation, 27 A.L.R. 1189 (1923).
9. See 1 Dane, Abridgment 420 (1823): “The amount recovered on a protested bill.... This sum in Massachusetts [before the 1819 Act, note 10 below] was principal, interest, ten per cent, damages, and costs on foreign bills generally, and interest and costs on inland bills, and this rule extends to bills drawn in one State on merchants and others in another State.” The split of authority was finally resolved by Buckner v. Finley, 27 U.S. (2 Peters) 586 (1829), holding an interstate bill “foreign” for purposes of a statute limiting federal circuit court jurisdiction of choses in action to foreign bills. See also 3 Kent, Commentaries 63 note (N.Y., 1828). Massachusetts soon followed Buckner. Phoenix Bank v. Hussey, 12 Pick. (Mass.) 483 (1832) (Interstate bill is “foreign” and drawers could not be charged without a protest). The rule was expressly adopted in the Uniform Negotiable Instruments Law. NIL, §129; Mass. G.L. (Ter. edn., 1932), c. 107, §152. See William E. Britton, Handbook of the Law of Bills and Notes 583–585 (St. Paul, 2d edn., 1961).
10. The Massachusetts Act of 1819, ch. 166, Mass. Laws, 1819, p. 263–264, was entitled “An Act regulating Damages on Inland Bills of Exchange.” Its terms embraced “any Bill of Exchange drawn or endorsed within this Commonwealth” and payable in another state, which had been “regularly protested.” For practice in other states, see sources in note 8 above.
11. See Mass. G.L., c. 107, §§9, 11, repealed effective 1 Oct. 1958 by Acts, 1957, c. 765, §2. No case has been found construing or applying c. 107, §11, the interstate bills provision. As to §9, the overseas provision, see Foreign Trade Banking Corp. v. Cosmopolitan Trust Co., 240 Mass. 413, 134 N.E. 403 (1922).
12. Uniform Commercial Code, §1–103, Mass. G.L., c. 106, §1–103 (as amended, 1957) The Code shows an intent to abandon distinctions between interstate and intrastate instruments by requiring protest only for bills drawn or payable outside the United States. The holder of other kinds of instruments may protest at his option, however. UCC, §3–501(3). There would thus seem to be no obstacle to an award of damages on an interstate bill if some rule of law expressly provided for it. The Code provisions limiting the drawer's and endorser's undertakings to the face of the instrument merely adopt prior provisions of the NIL, which in Massachusetts, at least, had existed side by side with the damages provisions until 1958. See UCC, §§3–413, 3–414; NIL, §§61, 66, Mass. G.L. c. 107, §§84, 89. See also Carmen v. Higginson, 245 Mass. 511, 140 N.E. 246 (1923). According to a leading commentator, the question of damages on foreign bills of exchange was relegated to the Law Merchant by NIL, §196 (Mass. G.L. c. 107, §22), the predecessor of UCC, §1–103. Brannan's Negotiable Instruments Law 1263.

Docno: ADMS-05-01-02-0005-0001-0002

Author: Adams, John
Date: 1766-08

Adams' Report of the Argument1

Suffolk Superior Court, Boston, August 1766

Alcock vs. Warden.
On a Bill of Exchange, drawn on N. York, protested.
Q. made was whether Bill on N. York was a foreign Bill? So as to { 172 } carry 10 Per Cent damages and 6 Per Cent Interest, as a Bill on London.
Fitch reminded Court of the Case of Wimble and Bayard, in which he Said 10 Per Cent was allowed, upon Argument.2 Auchmuty recollected the Case by Pratts introducing a little Book, which no Body else knew. It was Marius on Bills of Exchange, which Holt calls a good Book.3 Winthrop, Price, Goldthwait &c. were enquird of and agreed that 10 Per Cent was allowd.
Otis. Viner. Title, Bills of Exchange. Goldsmith's Note indorsed, is a Bill of Exchange.4 We dont find any Distinction, between inland and foreign Bills, even in England, and the Inconvenience which is the Reason, is greater, in the Case at Bar, than in a Bill in Eng[lan]d protested in any Part of Europe.
Auchmuty. The Custom is not the same in all the Provinces. In Phyladelphia, they allow, 20 Per Cent.5 Here 10.
{ 173 }
Bacons Abridgment. Title Merchant and Merchandize. Of Inland Bills. Page 603.6
Cunninghams Law of Bills of Exchange.7
Gridley. The Foundation of this Damage is, that no Proscess runs from one Kingdom to another—and the Disappointment. Bills of Exchange, saving the Risque and Expence of Carriage, are of such Convenience that the whole commercial World is come into it.8
Court all of a Mind that 10 Per Cent should be allowed. Lynde thought this was not an Inland Bill.
1. In JA's hand. Adams Papers, Microfilms, Reel No. 185.
2. Wimble v. Bayard was an action by the payee against the drawer of a bill for £10 drawn in Boston, which had been dishonored by the drawee at New York in June 1754. The endorsee, who had presented the bill, protested, and the payee paid him £12 2s. at New York. In the Superior Court at the Feb. 1755 term, with Auchmuty and Fitch (but not Prat) as counsel, the jury awarded the payee £12 8s., which would seem to be damages of £2 (20 percent) and interest of 8s. (6 percent for eight months). SCJ Rec. 1755, fol. 22. Min. Bk. 69, SCJ Suffolk, Feb. 1755, N–39. If this analysis is correct, it may be that the award was based on the actual damages sustained by the payee in reimbursing the endorsee under New York practice, which provided a 20 percent premium. See note 175 below. Wimble thus recognized the principle of a flat percentage recovery on a New York bill. Fitch erred in his recollection of the actual figures in the case, but the clerks (text at note 4 above) were probably correctly testifying as to the usual practice in Massachusetts.
3. John Marius, Advice Concerning Bills of Exchange, first published at London in 1651, was considered one of the leading treatises from the practical point of view. See 8 Holdsworth, History of English Law 155–158. For Holt's comment, see Ward v. Evans, 2 Ld. Raym. 928–929, 92 Eng. Rep. 120–121 (Q.B. 1703); compare 3 Kent, Commentaries *125–126. Its later editions were published as part of the 1656, 1685, and 1686 editions of Gerard Malynes, Consuetudo vel Lex Mercatoria (published in Islip), a leading treatise on maritime and mercantile law. 1 Sweet & Maxwell, Legal Bibliography 523–524. JA's copy of the 1686 edition of Malynes, which had belonged to Jeremy Gridley, thus contained the 1684 edition of Marius. Catalogue of JA's Library 158–159. Prat may have cited the work for another purpose, but it does assert the general rule that the drawer or indorser is liable for “Rechange and Costs” on protest for nonacceptance. Marius, Bills of Exchange 28 (London, 4th edn., 1684).
4. 4 Viner, Abridgment, tit. Bills of Exchange, Notes, &c., A, pl. 3: “Goldsmiths Bills are govern'd by the same Laws as other Bills of Exchange, and every Indorsement is a new Bill,” citing Holt's opinion in Hill v. Lewis, 1 Salk. 132, 91 Eng. Rep. 124 (K.B. 1693). Otis' point seems to have been that bills drawn on London goldsmiths, although necessarily inland bills, were not distinguishable from foreign bills. In the cited case Holt had actually been dealing with the questions of the liability of an endorser upon the default of the drawer and the length of time that should be allowed the holder before presentment.
5. The rule in Philadelphia was established for bills drawn or endorsed upon England or Europe by the Act of 27 Nov. 1700, c. 70, 2 Pa. Stat. 86, which provided that when such bills were returned “unpaid with a legal protest,” the parties liable should pay the face of the bill, “together with twenty pounds per cent advance for the damage thereof.” See Francis v. Rucker, Ambl. 672, 27 Eng. Rep. 436 (Ch. 1768); Morris v. Tarin, 1 Dall. 147 (Pa. C.P. 1785). Similar practice seems to have been followed in Rhode Island by statute and in New York by custom. The premium in the former colony was 10 percent, and in the latter 20 percent. See Brown v. Van Braam, 3 Dall. (3 U.S.) 344, 346–348 (1797); Hendricks v. Franklin, 4 Johns. (N.Y.) 119 (1809); Herbert Alan Johnson, The Law Merchant and Negotiable Instruments in Colonial New York, 1664 to 1730 39–40 (Chicago, 1963)
6. 4 Bacon, Abridgment 603: “Inland Bills of Exchange are those drawn by one Merchant residing in one part of the Kingdom, on another residing in some City or Town within the same Kingdom; and these also being found useful to Trade and Commerce, have been established on the same Foot with foreign Bills: but at Common Law they differed from them in this, that there was no Custom of protesting them, so as to subject the Drawer to Interest and Damages in Case of Non-payment, as there was on foreign Bills.” Bacon went on to quote at length the statutes, 9 & 10 Will. 3, c. 17 (1698), and 3 & 4 Ann., c. 9, §§4–8 (1704), which remedied the latter “Inconveniency” by providing for the payment of “costs, damages, and interest,” by the drawer on bills over £20 if protest was duly made. Since the Act of 9 & 10 Will. 3 was expressly limited to bills drawn in England, Auchmuty is apparently arguing on the assumption that the common law rules as to inland bills still applied in Massachusetts. As to the effect, see note 6 above. See generally J. Milnes Holden, The History of Negotiable Instruments in English Law 52–55 (London, 1955).
7. Timothy Cunningham, The Law of Bills of Exchange (London, 2d edn., 1761). At p. 15–20 Cunningham quoted Bacon, note 186 above, and stated a case construing the statutes. Since much of Cunningham's text is similarly drawn from Bacon, Auchmuty may have cited him here merely by way of confirmation.
8. Compare the dictum of Parker, C.J., in Adams v. Cordis, 8 Pick. (Mass.) 260, 265–266 (1829): “The ground upon which the original usage and the statute provisions have been adopted [i.e. those in note 8 above], is the great inconvenience and derangement of business which may occur, in consequence of the disappointment in regard to funds relied upon, where a bill is drawn upon a foreign country.”
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