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Entered, according to Act of Congress, in the year 1858, by

R. FARNHAM, In the Clerk's Office of the District Court of the District of Columbia.

hee March 11, 1868

STEREOTYPED BY MEARS & DUSENBERY.

PRINTED BY C. SHERMAX & BON.

OPINIONS

OF

HON. CALEB CUSHING, OF MASSACHUSETTS:

APPOINTED MARCH 5, 1853.

GOVERNMENT DRAFTS.

As a general rule, when the Government, by its authorized agent, becomes a

party to negotiable paper, it has all the rights, and incurs all the responsi

bilities, of other parties to such instruments. But exceptions to this rule may become established in the practice of different

departments of the Government.

ATTORNEY GENERAL'S OFFICE,

July 10, 1856. GENTLEMEN : Your communication of the 7th instant calls for my opinion on two points of law, regarding which you differ, in the case of George Whitman. (See my opinion of June 25th, 1856.)

The material facts of the case are stated by you as follows:

The Postmaster General, on the 11th of August, 1838, sent to Whitman, in payment of services rendered as mail contractor, a draft for $12,000 upon W. H. Kerr, postmaster at New Orleans. Accompanying the draft was a circular in these words : “Please date and sign the annexed acknowledgment, and return it by the first mail to this office. The draft must be presented for payment before the expiration of ninety days." No other directions were given, and Mr. Whitman acknowledged the receipt of the draft, under date of August 29, 1838. On the presentation of the draft, payment was refused by the drawee, and Whitman then obtained a discount upon it at the Bank of Orleans.

No notice of non-payment of the draft was given by Whitman,

Government Drafts.

or other holder of the draft, to the Post Office Department, nor does it appear that any demand was made by the Bank of Orleans or other party, till about the 4th of September, 1839, when payment was requested by the holder and refused by the Postmaster General, under date of September 9, 1839. The Bank of Orleans subsequently called upon Whitman to take up the draft; and $2000 of Kerr's funds in the bank having been applied towards its payment, the balance was paid early in 1843, by Whitman, who has ever since owned the draft.

Mr. Kerr, the postmaster at New Orleans, charged the draft, as if paid, in his report to the Department for September, 1838, and was allowed a credit upon the amount.

Meanwhile, it subsequently appeared that Mr. Kerr was a defaulter, and as alleged, notice of the dishonor of the draft would have put the Department on its guard and prevented the loss of the money.

Upon which state of facts you present the following questions:

“ 1. Does the law merchant, so far as it requires protest, or notice of dishonor, for non-acceptance or non-payment of drafts, or bills of exchange, in order to hold the drawer responsible, apply generally to drafts drawn by authorized agents of the Government upon other agents or depositaries ?

“2. If the law merchant, in regard to notice and protest, be of general applicability to Government drafts or bills of exchange, does it apply, under the foregoing state of facts, to the case of George Whitman now before us?"

I. As to drafts drawn by an authorized agent of the United States on another agent or official holder of the funds of the Government.

It is well settled that bills drawn by one government on another government, as, for instance, by the United States on France, or by the Mexican Republic on the United States, are not commercial drafts, or subject to the rules of municipal law regarding notice, damages on protest, and the like. (The United States v. The Bank of the United States, v Howard 352. See also opinion of November 25, 1855, Sen. Docts. 34th Cong. 1st Ses. No. 57, p. 30.)

But, as a general rule, other drafts, to which the United

Government Drafts. States are a party, are subject to the law merchant. The rule on this point is distinctly stated in the case of The United States v. The Bank of the Metropolis, as follows:

“When the United States, by its authorized officer, become a party to negotiable paper, they have all the rights and incur all the responsibility of individuals who are parties to such instruments. We know of no difference, except that the United States cannot be sued. But if the United States sue, and a defendant holds its negotiable paper, the amount of it may be claimed as a credit, if, after being presented, it has been disallowed by the accounting offices of the Treasury, and if the liability of the United States upon it be not discharged by some of those causes which discharge a party to commercial paper, it should be allowed by a jury as a credit against the debt claimed by the United States. * * *

From the daily and unavoidable use of commercial paper by the United States, they are as much interested as the community at large can be, in maintaining these principles. (xv Peters 377, 392.)

The same principle is enunciated in various other cases. (See The United States v. Barker, xii Wheat. 559; S. C. iv Wash. C. C. R. 464; The United States v. Dunn, vi Peters 51.)

In each of these reported cases, the general rule of the law merchant, as to notice on drafts, is applied with rigor to paper to which the Government is a party; and the rule is laid down as defining the rights, not less than the duties, of the Government.

Indeed, the diversified and numerous business contracts, to which the United States are a party, are governed by the same established rules, which govern contracts between other parties : with exception of the general fact, that action cannot be brought against the United States. Meanwhile, the United States are frequently placed in the legal condition of a defendant, as in the case of credits claimed by an alleged debtor of the Government. And their subjection to ordinary doctrines of law, as to both rights and obligations, is apparent in the daily action of the Court of Claims.

But, does the general doctrine apply to the case of bills

Government Drafts.

drawn by agents of the Government on other agents, or on depositaries, of the Government ?

I reply that all the dealings of the United States are by and between the agents of the Government. The United States are not a natural person. They act only by agents. They draw by the instrumentality of agents. They draw on other agents, the collectors or depositaries of the moneys of the United States. To say that drafts by and upon agents of the United States shall not be subject to the general law, as respects notice or other incidents of a bill, is to say that those incidents do not apply to the dealings of the Government. But we have already seen the general doctrine to be settled, namely, that the ordinary rules of law do apply to these transactions of the Government.

It is said that it is so obviously for the interest of the holder to return a dishonored bill of the Government's, that it may be assumed he will do this of course, without his being required to give notice. But is it not equally, nay more, the interest of a merchant to return the dishonored bill of another merchant ? Clearly. Yet the general law requires notice; and for a very good reason, namely, to guard against loss to the drawer, by the negligence of the holder.

Lord Ellenborough observes that notice to a drawer of the dishonor of his draft is “peculiarly requisite" in those cases 66 where the drawer has a fluctuating balance in the hands of the drawee.” (Blackham v. Doren, ïi Camp. 503). This reasoning is directly applicable to drafts on collecting agents of the Government.

But may there not be exceptions to the rule of law as adjudged by the courts,—exceptions in particular cases, or in particular branches of the Government ? Undoubtedly there may.

You state that it appears, by the certificate of the Chief Clerk of the Treasurer of the United States, that the drafts of the Treasurer on the several local depositaries are always paid when returned unpaid by the depositary, and this without regard to time, and without question of notice, such drafts, however

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