The Bank of the United States Appellants v. James Daniel Et Al Appellees

• Decision Date: 01 January 1838
• Parties: THE BANK OF THE UNITED STATES APPELLANTS v. JAMES DANIEL ET AL. APPELLEES
• Court: U.S. Supreme Court

37 U.S. 32

12 Pet. 32

9 L.Ed. 989

THE BANK OF THE UNITED STATES APPELLANTS v. JAMES DANIEL ET AL. APPELLEES.

January Term, 1838

The statute of limitations is a bar in a case where, at the time of the return of a bill of exchange, payable in New Orleans, and drawn in Kentucky, protested for nonpayment, the parties to it, in 1819, paid as damages, on the bill, ten per centum on the amount; and did not until 1827 claim that, by the law of Kentucky, no damages were payable on such a bill. In 1819, the parties to the bill paid three thousand three hundred and thirty dollars and sixty-seven cents, on account of the bill of ten thousand dollars, the cost of protest, and damages; and gave their note for eight thousand dollars, for the balance of the bill, which was discounted, and the proceeds, by express agreement; applied to the payment of the bill. If no damages were payable on the bill for ten thousand dollars, an action to recover back the same, as included in the payment of the three thousand three hundred and thirty dollars and sixty-seven cents, could have been instituted in 1829.

AN appeal from the circuit court of the United States for the district of Kentucky.

On the 29th day of October, 1827, the appellees, James Daniel, Henry Daniel, Isaac Cunningham and Samuel Hanson, filed a bill in the circuit court of Kentucky, stating, that on the 12th of October, 1818, at Lexington, Kentucky, Robert Griffing, since dead, drew a bill of exchange on James Daniel, one of the complainants, for ten thousand dollars, payable one hundred and twenty days after date, at the office of discount and deposite of the Bank of the United States at New Orleans. The bill was drawn in favour of Henry Daniel, Isaac Cunningham and Samuel Hanson, and being accepted by James Daniel, was endorsed to the Bank of the United States by the drawees. At the time the bill was drawn, Robert Griffing and James Daniel lived and were in the state of Kentucky; and all the parties to the bill, were, at the time it was drawn, and ever since have continued to be residents in that state.

The bill of exchange, so drawn and endorsed, was, by the Bank of the United States, transmitted to New Orleans, and not being paid, was regularly protested and returned to Kentucky; the holders claiming the amount of the same from the parties to the bill, with damages, at the rate of ten per cent. on the amount. James Daniel, the acceptor of the bill, believing the demand of damages to be legal, paid to the Bank of the United States, in June or July, 1819, three thousand three hundred and thirty dollars and sixty-seven cents, on account of the whole amount due on the bill, consisting of principal, interest, charges and the damages; and for the balance of the bill, the drawers of the bill, Robert Griffing and James Daniel, gave their negotiable note, payable sixty days after date, with Cunningham, Hanson and Henry Daniel, as co-drawers in favour of William Armstrong, which note was discounted by the bank, and the proceeds, by express agreement, were appropriated to the payment of the balance due on the bill of exchange. The sum of three thousand three hundred and thirty dollars and sixty-seven cents, and the note for eight thousand dollars, were delivered to the bank at the same time; and all the complainants, except James Daniel, were only sureties for the payment of the note, having become co-drawers of the same for that purpose only. In August, 1820, Griffing and the complainants, gave another note to the Bank of the United States, for seven thousand five hundred dollars, Griffing and James Daniel having paid five hundred dollars on account of the first note; and the note for seven thousand five hundred dollars having become due and protested, a suit has been instituted on it and a judgment obtained, on the law side of the circuit court of the United States for the Kentucky district.

The bill states, that the Bank of the United States are not entitled to damages on the bill of exchange payable at New Orleans, inasmuch as all the parties to it resided in the state of Kentucky, at the date and maturity thereof; and, therefore, so much of the note for eight thousand dollars, as includes the ten per cent. on the bill, amounting to one thousand five hundred and fifteen dollars, ought to be deducted from the judgment; and the bill therefore prays, that the defendant may be restrained by an injunction from collecting the said sum of one thousand five hundred and fifteen dollars, part of the judgment; and at a final hearing on the bill, the injunction may be made perpetual.

The circuit court, in November, 1827, granted an injunction, according to the prayer of the bill, until further order. The defendants, in May, 1836, having proceeded to answer the bill, stated, that one thousand dollars, being ten per cent. on the bill for ten thousand dollars, had been allowed, as damages, on the return of the bill from New Orleans, with a full knowledge of all the facts of the case, and of all the principles of law on which the same was claimed. The respondents do not admit that this was done under a clear mistake of the law; indeed, two of the complainants were lawyers of celebrity, and deservedly of high rank; and no ignorance of the law can be imputed to them. The respondents allege, that their claim to damages is within the provisions of the statute of Kentucky; and, if not so, they are entitled to damages to the amount, for the allowed non-payment of the draft at New Orleans; and they resist the claim to set aside the allowance of damages fairly and voluntarily made by the complainants.

The respondents also say, that all the grounds of equity, alleged in the bill, occurred to the complainants more than five years next before the commencement of the suit, and are barred by lapse of time; and they further allege, that the damages were liquidated, assented to, and discharged, more than five years next before the commencement of this suit: and all claim to relief, on account of the same, is, therefore, barred by the statute of limitation.

The cause came on for a final hearing in November, 1836, and the circuit court decreed, that the plaintiffs be perpetually enjoined from taking out execution for the sum of one thousand dollars, the amount of damages charged on the bill, with the interest charged on the said sum of one thousand dollars, up to the time of the judgment. The defendants appealed from this decree.

The case was submitted to the court on printed arguments, by Mr. R. Wickliffe and Mr. Johnson, for the appellants; and by Mr. Ousley, Mr. Turner and Mr. Allen, for the defendants.

For the appellants, it was contended, in the argument of their counsel, that the decree of the circuit court was erroneous, on the following grounds:

1. Because the complainants were liable to ten per cent. damages, under the statute of Kentucky.

2. They were liable to damages, under the law merchant, independently of that statute.

3. Their agreement, upon a full knowledge of all the facts, to pay these damages, is binding; and they cannot be relieved, on account of their mistake of law.

In 1819, when the agreement was made to pay the damages, the statute of Kentucky had not received a judicial construction. Two decisions have since been given upon it; but, at that time, the parties were left to their own interpretation, with such light as the words, the spirit, and the object of the statute afforded. This interpretation, the complainants contend, is shown to be erroneous by these subsequent decisions. In the question of mistake, we conceive it proper that this Court should look to the same lights the parties themselves had, and refuse relief, unless it shall appear they did in truth commit an error. The question is not, what the courts have since decided, but whether the parties, in 1819, mistook the law, when they believed this bill bore damages. Were it purely a question of the construction of a Kentucky statute, we admit the Kentucky decision, however erroneous, would be followed. But the question is one of mistake, and no decision can have such retrospective power as to convert what was once truth into falsehood. It would be as mischievous as an ex post facto law, to permit a subsequent decision to overturn the fair compromises and contracts of individuals, made under a different and a correct view of law. If there was mistake, the mistake was committed in 1819. If right to relief exists, it existed as early as 1819. Now, if the Court regards these subsequent decisions as conclusive, then they will in substance decide, that, although no mistake existed when the contract was made, and at that time the agreement was fair and binding; yet some two years afterwards, a Kentucky decision created a mistake, and annulled a previous contract that was legal and valid. Under our constitution, no statute can have such a power of dissolving the obligation of contracts, and certainly a decision cannot go higher. We believe, then, we may safely conclude, that the complainants cannot show a mistake as early as 1819; or, in other words, must show it by the true construction of the statute itself, giving to these decisions the weight they deserve, and no more.

The statute is in these words, viz:

'If any person or persons shall draw any bill or bills of exchange, upon any person or persons out of this state, on any other person or persons within any other of the United States of North America, and the same being returned back unpaid, with legal protest, the drawer thereof, and all others concerned, shall pay the contents of the said bill, together with legal interest from the time said bill was protested, the charges of protest, and ten pounds per cent.advance for the damages thereof, and so proportionably for greater or smaller sums.'

The complainants contend, that, as James Daniel, the drawee, was a citizen and resident of Kentucky, at the drawing and negotiating of the bill, it did not come...