U.S. Supreme Court
The Floyd Acceptances, 74 U.S. 7 Wall. 666 666 (1868)
The Floyd Acceptances
74 U.S. (7 Wall.) 666
1. The government of the United States has a right to use bills of exchange in conducting its fiscal operations, as it has the right to use any other appropriate means of accomplishing its legitimate purposes.
2. When the government becomes a party to such a bill, it is bound by the same rules in determining its rights and its liabilities as individuals are. chanrobles.com-red
3. As the United States can only become a party to a bill of exchange by the action of an officer or other authorized agent of the government, the authority of the officer or agent may be inquired into as in the case of the agent of an individual.
4. This authority, in case of bills of exchange, depends upon the same principles that determine such authority in other contracts, and is not aided by the doctrine that when once lawfully made, negotiable paper has a more liberal protection than other contracts in the hands of innocent holders.
5. Under our system of government, the powers and duties of all its officers are limited and defined by laws, and generally by acts of Congress.
6. As there is no express authority to be found for any officer to draw or accept bills of exchange, such authority can only exist when these are the appropriate means of carrying into effect some other power belonging to such officer under his prescribed duties.
7. It does not follow that because an officer may lawfully issue bills of exchange for some purposes, he can in that mode bind the government in other cases where he has no such authority.
8. As under existing laws there can be no lawful occasion for an officer to accept drafts on behalf of the government, such acceptances cannot bind it, though there may be occasions for drawing or paying drafts which may bind the government.
9. The acceptances known as the "Floyd acceptances" -- (certain acceptances on long time, made by the Hon. J. B. Floyd, Secretary of War, of drafts drawn on him by army contractors before the services contracted for were received or the supplies to be furnished were delivered) -- were mere accommodation loans of the credit of the United States without authority, and therefore void.
10. If they had been given and received as payment (which they were not), they were payments in advance of the services rendered and supplies furnished, and were void because forbidden by the Act of January 31, 1823, 3 Stat. at Large 723.
The facts, as found by that court, were thus:
Russell Majors & Waddell had contracts for supplies and transportation to be furnished to the army in Utah. By these contracts, they were to be paid either by the quartermaster at St. Louis or by his drafts on the assistant treasurer of the United States in New York. In all the contracts except one, these payments were to be made on the final delivery of the supplies in Utah, but in one contract there was an agreement that partial payments should be made when the trains were started. In all cases, such payments chanrobles.com-red
were to be made upon certificates of the proper quartermaster.
The performance of these contracts required a very large outlay of money, and Russell & Co. finding it difficult to advance this and wait for its return until they were entitled to receive payment under their contracts, made an arrangement with the Secretary of War under which they should draw time drafts on him, payable to their own order at the Bank of the Republic in New York, which should be accepted by the Secretary. On these drafts they were then to raise the money necessary to enable them to perform their contracts, and as the money for the transportation and supplies became due, they were to receive it and take up the acceptances of the Secretary before or at maturity. Under this arrangement, the Secretary accepted drafts to the amount of $5,000,000, most of which were taken up by Russell Majors & Waddell, as agreed, but over a million of dollars in amount remain unpaid.
The drafts, with unimportant verbal differences and differences of date, were in this form:
"$5000 WASHINGTON, November 28, 1859"
"Ten months after date, for value received, pay to our own order at the Bank of the Republic, New York City, five thousand dollars, and charge to account of our contract for supplies for the army in Utah."
"RUSSELL, MAJORS & WADDELL"
"Hon J. B. FLOYD, Secretary of War"
"RUSSELL, MAJORS & WADDELL"
"WAR DEPARTMENT, November 28, 1859"
"Accepted: JOHN B. FLOYD, Secretary of War"
The drafts passed into the hands of different holders, among them T. W. Pierce, the Dover Five Cent Saving Bank, E. D. Morgan, and the Boatmen's Saving Institution, and Mr. Floyd having retired from the War Department, chanrobles.com-red
and the department refusing to pay the acceptances, Pierce, by his separate bill, and the other parties in a proceeding treated by the Court of Claims as one in substance, brought suit in that court. The petition of Pierce averred:
"That the said Floyd, as Secretary of War and in behalf of the United States, and as the principal officer of an executive department, had authority to accept the drafts, and that in accepting them he acted in his official capacity and in behalf of the United States. And that he, in behalf of the United States, as such Secretary of War, was authorized to accept drafts of such and the like tenor and effect as the drafts aforesaid, and that the said Pierce, relying upon the apparent as well as upon the actual authority of the said Secretary of War to make such acceptances, and upon the fact of his acceptance of the bills, became the holder and owner of them in a regular course of business before they severally matured and for valuable consideration."
Similar averments were made in the petitions of the other three parties. And by an amended petition they set forth the further facts:
That when the bills were accepted, and when they became due, the government owed the contractors a larger sum than the amount of them.
That at that time the army in Utah was in imminent danger from cold and starvation; that it was the duty of Floyd, as Secretary of War, to save it; and that to so save it he authorized the drawing of the bills and accepted them.
That as Secretary, he had authority by law to make advances to the contractors after their trains were ready to start, and that their trains being ready to start, he did what was done.
That he had authority by law to ascertain and determine the debt of the United States to the contractors, and did so determine; that there was due them the sums specified in the bills; and that the bills so drawn and accepted were conclusive evidence of the debt as against the government.
These same additional matters were considered by the chanrobles.com-red
court below in the case of Pierce. The general issue was pleaded in all the suits.
To present the case more completely, it must be stated that by statute of 31 January, 1823, [Footnote 1] it is enacted:
"That from and after the passage of this act, no advance of public money shall be made in any case whatever, but in all cases of contracts for the performance of any service or the delivery of articles of any description for the use of the United States, payment shall not exceed the value of the service rendered, or of the articles delivered previously to such payment."
The Court of Claims -- upon a full history of the facts, as presented by evidence introduced by the government, and whose introduction was opposed by the petitioner, Pierce -- the admission being one of the errors alleged by Pierce himself -- dismissed all the cases, holding, in the case of Pierce that the Secretary had no power to bind the United States by the acceptances; that the acceptances were to be regarded as within the act of 31 January, 1823, and as an attempt to avoid it, and were therefore void; that no decision of the Supreme Court authorized such acceptances; that the evidence failed to establish any usage in the different departments by which the Secretary of War was authorized to accept in behalf of the United States the bills in suit, and that if such usage or practice were established, it could not avail the claimant, because forbidden by law.
And finding, in the other three cases, that though it is and has been the practice of heads of departments to accept drafts or bills of exchange for the transmission of funds to disbursing officers, or the payment of those serving in distant stations, or for services rendered, the cases were still substantially the same as the case of Pierce, and, like it, to be dismissed.
The record did not show that anything remained due to the contractors, or was due when the bills matured, no evidence on the state of the accounts being given on either side. chanrobles.com-red