Scottish Court of Session Decisions

Daniel Swanston, spirit dealer in Kelso, was in the practice of purchasing spirits from Alexander Smith, the traveller of Stewart, Pott, and Co. merchants in Glasgow, who drew bills on him for the price, per procuration of Stewart, Pott, and Co. Smith discounted these and other bills while on his travelling circuit, and, from time to time, remitted the proceeds, not of each bill separately, but of several bills slumped together, in round sums, to Stewart, Pott, and Co. After his return to Glasgow, Smith allocated these remittances in the books, to the several transactions to which they referred. Smith left the service of Stewart, Pott, and Co. or was dismissed from it, in October, 1835, and he died in November following. In a few days afterwards, Swanston wrote to Stewart, Pott, and Co. that he had granted two acceptances to Smith, on 14th and 15th September, which were then on the circle, and amounted to £184, 6s. 8d.; that these were drawn by Smith per procuration of Stewart, Pott, and Co., but that no value, beyond an accommodation of £40, had been received by him (Swanston) for them, as Smith stated that he desired the amount in order to make up a certain sum, and remit it to his employers, Stewart, Pott, and Co. They answered that they knew nothing whatever of the transaction, and that Smith had no powers to draw bills, excepting in the ordinary course of trade, and for real transactions, as was the case with all other travellers.

On 14th September, Smith had remitted from Kelso £300 to Stewart, Pott, and Co. through the Commercial Bank of Scotland. He had discounted the two acceptances of Swanston, of 14th and 15th Sept. with the National Bank, who protested them when due. The protest set forth that the bills were drawn by Smith per procuration of Stewart, Pott, and Co. The bills were then retired by Stewart, Pott, and Co. who gave a charge to Swanston, He presented a bill of suspension, which was passed on caution. Under the investigation which followed, it appeared that Smith had repeatedly drawn bills on Swanston, not for real transactions, but, as Swanston alleged, for making up a sum which Smith said he required to remit without delay to Stewart, Pott, and Co. It also appeared that Swanston himself received partial accommodation out of these transactions. But it did not appear that any of these bills came to the knowledge of Stewart, Pott, and Co. before Smith's death, or that they had ever recognized a power of drawing, as per procuration of them, except for real transactions. In the circumstances of the case several special questions arose. (1.) The suspender pleaded that, as the protest by the bank, which was the foundation of the diligence, set forth that the bills were drawn by Smith, per procuration of the chargers, the chargers, as assignees of the bank, could not insist in that same diligence while maintaining the plea that Smith had no procuration to draw these bills. The chargers answered that Smith did hold a procuration to draw bills on customers for real transactions; that the bills in question were drawn in that form, and were effectual, in the hands of the bank, who knew nothing of the transaction, and who had previously discounted bills of similar form, but for real transactions. The protest was accordingly correctly taken by the bank, in the form in question, and the chargers, being onerous assignees to the diligence, might use every plea competent to the bank. Besides, the plea of the chargers was, not that Smith held no power of procuration, but that he had committed an illegal abuse of his power of procuration to which Swanston was privy, or which he was bound to have known, as the transaction was not in the ordinary course of business, or within the ordinary powers of a traveller. (2.) The suspender pleaded that, as both parties alleged the bills not to be granted for a real transaction, but to be of the nature of accommodation bills, there was no primary liability attaching to him as acceptor, and it became a mere question whether the evidence aliunde showed the proceeds to have been received by the chargers or by the suspender. But as £300 were remitted to Stewart, Pott, and Co. from Kelso, on 14th September, that sufficiently instructed that the proceeds of at least that acceptance, which was dated on 14th September, were received by the chargers. And the proceeds of the other acceptance must be held to have been included in the next remittance by Smith. The chargers alone, therefore, had received value under these acceptances, except to the admitted amount of £40, and the suspender, in a question with them, was free of all liability. The chargers answered that Smith was in the habit of making frequent remittances to them, in round sums, arising out of real transactions, as he proceeded on his travelling circuit; that there were real transactions sufficient to account for the whole remittances made to them; and that, in the circumstances, it did not appear that any part of the actual proceeds of either of these two bills had ever been transmitted to them, but seemed more probable that the whole had been otherwise appropriated by Smith. And as Swanston admitted that £40 was due by him, and he had been repeatedly accommodated by Smith in their private dealings with each other, it was impossible to relieve Swanston from the legal liability primarily attaching to his acceptances.

The Lord Ordinary found “that no reference to the oath of the chargers had been made by the suspender; repelled the reasons of suspension: found the letters orderly proceeded, and decerned: and found the suspender liable in expenses.”

Swanston reclaimed.