CASES

ON

NEGOTIABLE INSTRUMENTS

TITLE I.

HISTORY OF THE LAW MERCHANT.

Dunlop v. Silver, 1 Cranch (App'x), (1801), 367.

The case was this: James Cavan made a promissory note, by which he promised to pay to Silver et al., or order, sixty days after date, $600 for value received, negotiable at the Bank of Alexandria. Silver et al. indorsed the note to Downing & Dowell in these words, "pay the contents to Downing & Dowell," who indorsed, "pay the contents to John Dunlop or order." Dunlop had obtained judgment on the note against Cavan, the maker, who was taken upon the execution, and took the oath of an insolvent debtor.

The declaration had two counts. Ist. A special count stating the making and indorsing the note, the suit, judgment, execution. and insolvency of Cavan, by reason whereof the defendant became liable, etc. 2d. Indebitatus assumpsit for money had and received. The plea was non assumpsit, and a verdict was taken for the plaintiff subject to the opinion of the Court, upon the point, whether the holder could maintain an action against the remote indorser of a promissory note. ****The principal question. then is whether this action could have been supported in England before the Statute of Anne.1

it

I. In order to ascertain how the law stood before that statute, be necessary to examine how far the custom of merchants,

may

'See text of this statute-Intro. Bunker's Neg. Ins. 18-20.

or the lex mercatoria, was recognised by the courts of justice and by what means the common-law forms of judicial proceedings were adapted to its principles.

A distinction seems to have been made, very early, between the contracts of merchants (especially of foreign merchants) and those of other people. Nearly six hundred years ago we find their "old and rightful customs" protected by the great charter of English liberties. (Magna Charta, c. 30.) Peculiar privileges were also granted them more than 500 years ago by the Statute of Acton Burnel, de mercatoribus II Edw. I., and the Statute of Merchants, 13 Edw. I. And in the reign of Edw. III., many statutes were made for their encouragement, in some of which, particularly 27 Edw. III., c. 19 and 20, the law merchant is expressly recognised. In 13 Edw. VI., 9, 10 (cited by Malloy, book 3, c. 7, § 15), it is said, that "a merchant stranger made suit before the king's privy council, for certain bales of silk, feloniously taken from him, wherein it was moved that this matter should be determined at common law; but the lord chancellor answered, that this suit is brought by a merchant who is not bound to sue according to the law of the land nor to tarry the trial of twelve men." The custom of merchants is mentioned in 34 Hen. VIII., cited in Bro. Abr., tit. Customs, pl. 59, where it was pleaded, as a custom between merchants throughout the whole realm, and the plea was adjudged bad, because a custom throughout the whole realm was the common law. And for a long time, it was thought necessary to plead it as a custom between merchants of particular places, viz., as a custom among merchants residing in London and merchants in Hamburg, &c. By degrees, however, the courts began to consider it as a general custom. Co. Litt. 182, 2 Inst. 404. And in the time of James I., Ch. J. Hobart, in the case of Vanheath v. Turner, Winch 24, said that "the custom of merchants is part of the common law, of which the judges ought to take notice." It was still, however, deemed necessary to set forth the custom specially; and in that form the precedents continued, for some time after. Indeed, the pleadings continued in that form, long after the courts had decided it to be unnecessary. Lord Coke in his Commentary on Littleton (first published in 1628), folio 182a, speaking of the lex mercatoria says, "Which, as hath been said, is part of the laws of this realm." See also 2 Inst. 404.

But after this, in the year 1640, in Eaglechild's case reported in Hetly 167 and Litt. 363, 6 Car. I (it was said to have been

ruled in B. R.), that upon a bill of exchange between party and party, who were not merchants, there cannot be a declaration upon the law merchant, but there may be a declaration upon assumpsit, and give the acceptance of the bill in evidence." This decision seemed to confine the operation of the law merchant, not to contracts of a certain description, but to the persons of merchants: whereas, the custom of merchants is nothing more than a rule of construction of certain contracts. Jac. Law Dict. (Toml. edit.), tit. Custom of Merchants. Eaglechild's case, however, was overruled in 18 Car. II B. R. (1666), in the case of Woodward v. Rowe, 2 Keb. 105, 132, which was an action by the indorsee against the drawer of a bill of exchange. "The plaintiff counted on the custom and law of the realm that if any man writes a bill to another, then if he to whom the bill is directed do not pay for the value received by the maker, the maker of such bill should pay." "It was moved in arrest of judgment, that this count is ill, the general custom being the law; and it doth not appear to the court that there is any such law. Sed curia, contra, that by the common law, a man may resort to him that received the money, if he to whom the bill was directed refuse." It was afterwards moved again, that this "is only a particular custom among merchants, and not common law; but, per curiam, the law of merchants is the law of the land; and the custom is good enough, generally, for any man without naming him merchant; judgment pro plaintiff, per totam curiam, and they will intend that he, of whom the value is said to be received by the defendant, was the plaintiff's servant.

The same principle was, two years afterwards, recognised in an Anonymous case (but believed to be Milton's Case, vide 1, Mod. 286) in the Exchequer, reported in Hadres 485, Mich. 201 Car. II (1668), where the plaintiff declared on the custom of England, and after verdict, Offley moved in arrest of judgment, because the "plaintiff had declared that per consuetudinem Anglia, &c., which he said was naught, because the custom of England is the law of England, and what the judges are bound to take notice of; and that, therefore, the consuetudo Anglia ought to have been omitted." But the Chief Baron said, "but for the plaintiff's inserting the custom of the realm into his declaration here, I hold that to be mere surplusage and redundancy, which does not vitiate the declaration." And again he says, "it were worth while to inquire, what the course has been amongst merchants; or to direct an issue for trial of the custom among

merchants; yet, all their customs we cannot know, but by information." Afterwards, in declaring their opinions, the court said "that this course of accepting bills being a general custom amongst all traders, both within and without the realm, and having everywhere that effect to make the acceptor subject to pay the contents, the Court must take notice of that custom.”

Notwithstanding these decisions, the question was again made, about twenty years afterwards, in the case of Carter v. Downish (1 W. & M. Anno 1688), I Show. 127, in the Exchequer, on a writ of error from the king's bench. The defendant had covenanted to pay all bills which should be drawn on him, in favor of the plaintiff, on account of 1000 kentals of fish, and the breach assigned was, the non-payment of a certain bill. The defendants pleaded, that the plaintiff by indorsement on the bill, according to the custom of merchants, appointed the payment to Herbert Aylwin, or his order, who indorsed it to Tassel, to whom the defendant paid it. To this plea there was a demurrer and joinder. One of the errors assigned was, that the defendant had not set forth a particular custom, to warrant the indorsement. To which it was answered "that the law and custom of merchants warrant the indorsement of foreign bills of exchange, and for that, all the book cases on foreign bills are a proof; and that such indorsement doth really transfer the property of the money, or contents, in such bills to the indorsee, and that all this law of merchants is part of the law of the land, and the judges are obliged to take notice of that as well as of any other law." ***

Three years after this, however, the point was again made, in the case of Mogadara v. Holt (3 W. & M.), 1 Show, 318 and 12 Mod. 15, 16 (Anno 1699), where it was held by Holt, Chief Justice, and the whole court, "that the law of merchants is jus gentium, and a part of common law, and ergo, we ought to take notice of it when set forth in pleading." And "though the plaintiff hath alleged a custom contrary to fact, yet that is but surplusage; and he needed not to have alleged a custom." Jud. pro quer.

Not satisfied with these adjudications, the question was again agitated two years afterwards, in the exchequer, on a writ of error from the king's bench, in the case of Williams v. Williams, Carth. 269 (Pasch. 5 W. & M., Anno 1693) where "the only error insisted on was that the plaintiff had not declared on the custom of merchants in London, or any other particular place (as the usual way is) but had declared on a custom through all England, and if so, 'tis the common law, and then it ought not to

be set out by way of custom; and if it is a custom, then it ought to be laid in some particular place from whence a venue might arise to try it. To which it was answered, that this custom of merchants, concerning bills of exchange, is part of the common law of which the judges will take notice er officio, as it was resolved in the case of Carter v. Downish; and therefore, it is needless to set forth the custom specially in the declaration, for it is sufficient to say, that such a person secundum usum et consuetudinem mercatorum, drew the bill; therefore, all the matter in the declaration concerning the special custom was merely surplusage and the declaration good without it. The judgment was affirmed." 串 * * Again, in Hilary term (B. R. 8 and 9, Wm. III, Anno 1697) Pinkney v. Hall, 1 Ld. Raym. 175, the exception was taken, "that the declaration being per consuetudinem Angliæ, &c., was ill, because the custom of England is the law of England, of which the judges ought to take notice, without pleading. Sed non allocatur. For the custom is not restrained to any particular place."

The same principles were, in the same term, in the common pleas, held, in the case of Bromwich v. Loyd (Hilary term, 8 Wm. III) 2 Lutw., 1585, where Treby, Chief Justice, said, “That bills of exchange, at first were extended only to merchant strangers, and afterwards to inland bills between merchants trading one with another here in England; and after that, to all traders and dealers, and of late, to all persons trading or not; and there was no occasion to allege any custom: and that was not denied by any of the other justices."

In 10 Wm. III, Anno 1698 B. R., Hawkins v. Cardy, 1 Ld. Raym. 360, an action was brought on a promissory note, made by the defendant, and indorsed by the payee to the plaintiff for part only, who declared on the custom of merchants for such an indorsement. But on demurrer it was adjudged ill. "For a man cannot apportion such personal contract, for he cannot make a man liable to two actions, where by contract he is liable but to one." And Holt, Chief Justice, said, "This is not a particular local custom, but the custom of merchants, of which the law takes notice; and therefore the court cannot take the custom to be so. Judgment for defendant.

Four years after this, in the case of Buller v. Crips, 6 Mod. 29 (B. R. 2 Ann., Anno 1702) Lord Holt said, “I remember when actions upon inland bills of exchange did first begin; and there they laid a particular custom between London and Bristol, and it was an action against the acceptor * * * And in my Lord North's time it was, said, that the custom in that case was