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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Hood v. Stewart [1890] ScotLR 27_557 (19 March 1890)
URL: http://www.bailii.org/scot/cases/ScotCS/1890/27SLR0557.html
Cite as: [1890] SLR 27_557, [1890] ScotLR 27_557
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SCOTTISH_SLR_Court_of_Session
Page: 557↓
Court of Session Inner House Second Division.
[
v.
Facts:
By the Bills of Exchange Act 1882, sec. 31, it is provided (§ 4), “Where the holder of a bill payable to his order transfers it for value, without endorsing it, the transfer gives the transferee such title as the transferor had in the bill, and the transferee in addition acquires the right to have the endorsement of the transferor.”
In an action for the amount of a bill of exchange by the transferee for value against the acceptor, the defender pleaded that as the bill was an accommodation bill the pursuer had no higher right against him than the drawers of the bill who had given no value for it. The bill though held by the pursuer for value had not been endorsed on transference by the drawers, who had since become bankrupt.
Held (1) that under the 31st section of the Bills of Exchange Act 1882, the pursuer had a title to sue although the bill was not endorsed, and (2) that although the bill was an accommodation bill it was a good obligation binding on the defender as he had accepted it in order that the drawer might raise money upon it.
In 1887 John Hood, 57 Albert Drive, Pollockshields, in security of an alleged loan of £250, received from M'Guffle, Sillars, & Company, bonded storekeepers, Glasgow, a bill for £210 drawn by them and accepted by John Stewart, spirit merchant, Edinburgh. This bill was not met at maturity, and a bill for £220, dated 28th September 1887,
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and payable three months after, was drawn by M'Guffie, Sillars, & Company upon Stewart, and accepted by him. Through an omission on the part of M'Guffie, Sillars, & Company (as Hood alleged) the bill was not endorsed, but was simply handed by them to Hood in exchange for the previous bill. This said bill was transferred and delivered to Hood as security for the foresaid loan, in place of the bill for £210 which he had up to that time held. When the bill became due it was presented to Stewart for payment, but it was not paid. M'Guffie, Sillars, & Company became bankrupt, and their estates were sequestrated on 3rd February 1888, and a trustee was appointed. The estate paid five shillings in the pound. Mr Hood accepted his dividend of five shillings, but also brought an action against Stewart for the said sum of £220 contained in the bill accepted by him.
The defender answered—“Admitted that the bill for £220 produced was on 28th November 1887 drawn by M'Guffie, Sillars, & Company upon the defender, and was accepted by the latter. Explained that the said acceptance for £220 was one of a series of bills granted for the accommodation of M'Guffie, Sillars, & Company, no value being given for them, and that this was known to the pursuer at the time when (as alleged by him) he took delivery of it. Admitted that the bill is not endorsed.”
The pursuer pleaded—“(1) The pursuer being transferee for value of the bill in question, the defender is bound to make payment of the same to him, and the pursuer is therefore entitled to decree in terms of the conclusions.”
The defender pleaded—“(1) No title to sue. (3) The pursuer not being the transferee for value of the bill, the contents of which are sued for, and separatim, holding no other or higher right or title than that of M'Guffie, Sillars, & Company, the defender should be assoilzied. (4) The pursuer's right being at best no higher or other than the rights, if any, of M'Guffie, Sillars, &; Company to sue on the bill, the defender pleads that the bill was for the accommodation of the latter, and also compensation or set off.”
By the Bills of Exchange Act 1882, sec. 31, it is provided (§ 4), “Where the holder of a bill payable to his order transfers it for value, without endorsing it, the transfer gives the transferee such title as the transferor had in the bill, and the transferee in addition acquires the right to have the endorsement of the transferor.”
The Lord Ordinary ( Trayner) upon 10th July 1889 allowed a proof of the pursuer's averment that the bill in question was transferred to him for value, and to the defender a conjunct probation.
“ Opinion.—I have no doubt the pursuer has a title to sue the defender on the bill in question, although it has not been endorsed. The 31st section of the Bills of Exchange Act 1882 expressly confers such a title. A more difficult question is raised by the defender's fourth plea, viz., whether the transferee for value of an unendorsed bill is open to all the exceptions and objections pleadable against the transferor. I am inclined to think he is not, because the statute does not expressly so provide as it does (sec. 36) with reference to the taking of a bill overdue or which has been dishonoured. But it is not necessary, probably, to decide that question here, because the defence set forward, as one pleadable against the transferor is not one which I think can be pleaded_ against any transferee for value. It is said that the bill in question was an accommodation bill, for which the acceptor received no value. Assuming it to be so, and that the transferee was aware of the fact, it is still a good obligation, binding upon the acceptor, because the very purpose of giving an accommodation bill is that money may be raised upon it. Therefore if the transferee of the bill gives value for it he is just doing that which the acceptor intended should be done upon the security of the bill which he granted. This is expressly provided by the 28th section of the Act above referred to. But it is provided with regard to the “holders” of a bill for value and the pursuer as transferee of a bill not endorsed does not come within the statutory definition of a “holder.” I cannot think, however, that the absence of the endorsement makes any material difference, especially as the transferee of a bill has the right to demand an endorsation. The difficulty in the present case of getting or enforcing an endorsation is that the transferors of the bill have become bankrupt. The bankrupts cannot, after bankruptcy, do anything to make their creditor's position better than it was before; while, on the other hand, it might be said that the endorsation was only the fulfilment of a prior obligation. These questions, however, may, I think, all be saved. The pursuer is the actual holder of the bill, that is, he is in possession of it. If he holds it (in that sense) for value, I think he is entitled to recover the amount from the acceptor, even although it was originally an accommodation bill. This does the defender no injustice, seeing that he gave the bill in order that some one might advance money thereon to the drawer. I shall allow the pursuer a proof of his averment that he holds the bill for value (which is denied), and if that is established, will give decree against the defender.”
Upon 19th July the Second Division, on a reclaiming-note, remitted to the Lord Ordinary to allow parties a proof of their averments.
At the proof the pursuer deponed—“I went and saw Mr M'Guffie, and he gave me, in security for the £250, a bill for £210 (No. 12) drawn by his firm upon the defender John Stewart. The bill is dated 25th August. I made the loan upon the 27th. Mr M'Guffle told me I was not to discount the bill, but to keep it as security till the loan was repaid. At that time I had a trade account with M'Guffie, Sillars, & Company, upon which they were due me £177, 7s. 3d. To account of that I received a payment of £100 upon 17th September, when
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Alex. M'Guffie, of the firm of M'Guffie, Sillars, & Company, deponed—“I applied to the pursuer for a loan of £250, and got it. I gave him an I O U for the amount when I received it, and a few days afterwards I gave him in security a bill for £210, drawn upon and accepted by the defender. The £250 went into the general business of M'Guffie, Sillars, & Company, and was applied to the purposes of the firm. It is passed through our books in the ordinary way. No arrangement was made between me and the pursuer as to his not discounting the bill. (Q) You don't recollect any?—(A) I don't recollect any. I don't recollect him asking me not to discount it. If he says I did, I have no reason to doubt his word. I had other bill transactions with defender. The bill for £210 was one of a series… . These bills originated in this way, that we sold goods to defender, and drew upon him for the amount in the invoice, and he sold goods to us and drew upon us. When these bills fell due they were renewed by both parties down to the date of our sequestration. The two bills for £210 and £220 were just part renewals of the original sums in these transactions. When the £210 bill became due, I handed the pursuer the £220 bill, receiving from him the other bill in return. The £220 bill was not endorsed. I did not abstain intentionally from endorsing it; it was a mere oversight. I would have endorsed it if I had been asked to do so by the pursuer prior to our sequestration. The bills which I got from defender were for the purpose of raising money, and were discounted with the bank. I suppose he, on his side, raised money by our bills Cross.—… The £210 bill forms one of a series of three acceptances we got from defender—£400, £450, and £210—on 26th August. I believe we had on the previous day sent our acceptances to him for exactly the same amount, in three bills for £500, £460, and £100. The £210 bill was therefore a cross bill, for which we gave no value except our own acceptances, and all he gave for our bills was his acceptances. (Q) They had nothing to do with trade transactions between you?—(A) Not in that transaction. I think defender and we started this system of raising money in February 1886. At that time we were due him £957, 1s. 3d., and he was due us £956, 13s. 4d. In the first transaction delivery orders were granted and the goods delivered. I think the goods were principally whisky. (Q) Were they not just fictitious transactions to raise money?—(A) Well, there was a delivery order granted, and we got deliveryof his goods, and he got delivery of ours, but believe it was to raise money. We were accommodating each other with goods when we had goods, and with bills when we had not goods. After that all the transactions were really cross bills. The £220 bill was just in the same position as the £210 bill as between defender and us. When I handed these bills to pursuer, I did not tell him they were merely accommodation bills.”
Upon 8th January the Lord Ordinary pronounced this interlocutor:—“Decerns against the defender for payment to the pursuer of the sum of £165 sterling, with interest, as concluded for: Finds the defender liable in expenses.
“ Note.—Referring to my former opinion in this case, I am now prepared to hold it established that the pursuer is the holder of the bill sued on for value. It appears, however, that the pursuer has surrendered his right to claim on the estate of the drawers of the bill. Their estate has already paid 4/8 per £, and is expected to yield a few pence more. What it may actually yield is not at present ascertainable, but the parties have agreed to hold the entire dividend payable by the drawers' estate as at 5/ per £. That dividend falls to be deducted from the pursuer's claim, because by his surrender of the right to claim it he has deprived the defender from being recouped to that extent. I have therefore given decree for the amount of the bill (£220), less £55, the dividend thereon at 5/ per £.”
The defender reclaimed, and argued—It was admitted, after the evidence that had been led at the proof, that the pursuer, the holder of the bill, had given value for it. This would have entitled him to recover without question, because he had acquired the bill in the circle, but the question of law was raised upon the fact that the bill had not been endorsed, and could not now be endorsed because the drawers were bankrupt. It was maintained that an unendorsed bill, even if given for value and acquired during the currency, gave only the same title as the cedent or transferor had, and if this was so Hood was bound to recognise the fact that M'Guffie, Sillars, & Company were debtors to Stewart, and that he had a set-off against them. If this view was sound, then Stewart, the reclaimer, ought to be assoilzied, because the claim of Hood under this bill was no better than if M'Guffie, Sillars, & Company had been claiming payment from the defender.
The respondent argued — The defender had argued that the transference of the bill without endorsation had the effect, under the Bills of Exchange Act of 1852, of divesting M'Guffie, Sillars, & Company of all rights in this bill. If then, they were totally divested, the result was the complete investiture of Hood with their title, and as
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At advising—
I concur with the Lord Ordinary in holding that the bill was transferred by the drawer to the pursuer for value. Indeed that fact was not seriously disputed. Hence by virtue of the section of the Act to which I have referred, the transfer gives the pursuer such title as the transferor had in the bill.
As I read the statute, the transfer divests the transferor of all title to the bill, and invests the transferee with the title of the transferor. The divestiture and investiture are both completed by the act of transference. Henceforward the title of transferor is in the transferee, not in the sense that the latter is entitled to make use of a title which is still in the transferor, but in the sense that the title of the transferor is in the person of the transferee. Nor is the title of the transferee incomplete. It would not be a title if it were. It is as complete in his person as the title of the transferor was in his. In other words, he has a title equivalent to a duly intimated assignation.
It was urged that the change of title to a debt could not be complete without intimation to the debtor. The simple answer is that the statute gives the title to the transferee by the act of transference, and gives him not an incomplete but a completed title. Nor is there anything in this contrary to legal principle. The contract contained in a bill of exchange is of that nature that the jus crediti under it is transferable without notice to the debtor. For endorsement at once divests the endorser and invests the endorsee.
But the title obtained by transference is not necessarily the same as the title obtained by endorsement. It is well known that an endorser may confer on an endorsee a better title than he himself possessed. This cannot happen in the case of mere transference. The transferee acquires the title of the transferor and nothing more. Hence such exceptions may be stated to the pursuer's title as might have been stated against the title of transferor, as in an assignation, utitur jure auctoris, and if the title of his author is bad his own is no better. But no case of this kind arises here. It is not said that the title of the transferor was bad, and hence no objection can be stated to the title of the pursuer.
The true purpose of the defender is to plead compensation, and this plea might have been good if the pursuer had no title in himself, but was only availing himself of a title which still remained in the transferor. But as I have already said, the title of the pursuer was complete from the date of the transference, and as it is trite law that compensation does not operate ipso jure, there is no ground for saying that by reason of the fact that the defender was at the date of the transference a creditor of M'Guffie, Sillars, & Company to an amount equal to the sum contained in the bill, there was no debt to transfer. Compensation must be pleaded in order to be effectual, and as that plea cannot be urged against an assignee holding a duly intimated assignation, so it is equally unavailing against the pursuer. It is equally clear that debts subsequently contracted by M'Guffie, Sillars, & Company to the defender cannot be pleaded against the pursuer.
For these reasons I think that the interlocutor of the Lord Ordinary should be adhered to.
Page: 561↓
The Court adhered.
Counsel for the Reclaimer— Rhind— M'Kechnie. Agents— Menzies, Bruce Low, & Thomson, W.S.
Counsel for the Respondent— R.V. Campbell— Salvesen. Agent— D. Lister Shand, W.S.