Ross v. Pleasants
Ross v. Pleasants, Wythe 10 (1788-95), was a case that wound a complicated path through the Virginia court system and involved disputes over the proper way to value a contract priced in tobacco and how to apply payments to a debt.
In February 1780, David Ross, the plaintiff, bought land from defendants Pleasants, Shore & Co., and William Anderson. The price was to be paid in an amount of tobacco to be set by a group of referees. Around this time, Ross also bought some tobacco from the defendants.
In May and June of 1780, Ross made a partial payment in tobacco and in pounds sterling to Anderson. On November 2, 1780, Ross gave a bill of exchange (somewhat like a modern-day check) to Thomas Pleasants, who was acting as an agent for Pleasants, Shore, & Co., that was supposed to be applied towards the land purchase at a rate of 20 shillings per hundred pounds of tobacco, but Thomas Pleasants never applied the payment. (In Wythe's day, 20 shillings = 1 pound sterling.)
On April 18, 1781, Ross and the defendants met with the four referees to determine the price. The referees issued a report stating that Ross still owed Anderson 110,538 pounds of tobacco and Pleasants, Shore & Co. 93,004 pounds of tobacco. In coming up with these figures, the referees credited Ross's partial payment of May-June 1780 and his tobacco when determining the amount Ross owed. The referees also valued the land using the same scale of pounds sterling to tobacco that they used to determine how much Ross's payments in mid-1780 were worth. The defendants objected, saying that the referees were only supposed to determine how much the land was worth. During 1780, the value of money printed in Virginia and of tobacco was rapidly dropping, so even a difference of a couple of months could significantly affect the tobacco's value.
The defendants filed suit in the General Court of Virginia in September of 1782 to collect payment from Ross. A jury in the General Court found that Ross owed Pleasants, Shore & Co. 339,891 pounds of tobacco and Anderson 119,370 pounds of tobacco.
Ross filed a bill with the High Court of Chancery to enjoin the General Court's decision.
The Chancery Court's Decision (May 1788)
When the Chancery Court heard this case in 1788, Edmund Pendleton and John Blair sat on its bench along with Wythe.
On May 13, the court set aside the referees' valuation and designated a new group of referees to assign a value to the land based on the price of tobacco in February 1780, and ordered the referees not to consider the payments Ross made in May or June of 1780. Wythe dissented from the part of the decision that appointed new referees to determine the value.
The referees determined that the land Ross bought was worth 609,600 pounds of tobacco using tobacco prices from February 1780.
The Chancery Court's Decision (June 1789)
In June 1789, now sitting as the sole chancellor on the court, Wythe rejected the new referees' report and reinstated the first referees' valuation from April 1781. Because the referees referred to pounds sterling and the price of tobacco in April 1781 in their report, Wythe interpreted the first valuation as an attempt to set a value for the land in pounds sterling based on the price of tobacco in April 1781. The referees determined that tobacco was selling for ten shillings per hundred pounds at that time. Using this scale, the first valuation set the land's worth as 959,205 pounds of tobacco, or £4796. Wythe did not credit Ross's payment from November of 1780 against the land purchase because Thomas Pleasants never applied it there.
The defendants appealed Wythe's decision to the Supreme Court of Appeals of Virginia.
The Supreme Court of Virginia's Decision (December 1790)
In an unpublished opinion issued December 1790, the Supreme Court of Virginia reversed Wythe's June 1789 decision as well as the Chancery Court's May 1788 decision. The Supreme Court set aside the second valuation, set the land's value in pounds sterling at £4796, and ordered the Chancery Court to hold a trial to determine what the value of tobacco was on April 18, 1781, and use that figure to determine the land's price in tobacco.
The Supreme Court said that because Ross and the defendants had already agreed upon referees to determine the land's value, the Chancery Court had no power to replace those referees with new ones. Because Ross's and the defendants' contract did not specify what date they would use to determine the price of tobacco for valuation purposes, they should have used April 1781, when the referees were setting the land's value. The referees went beyond their permitted powers when they credited Ross's May and June 1780 payments against the price of the land. Furthermore, by using the same conversion rate to translate the land's value and Ross's payments into pounds sterling, then converting back into tobacco prices to determine what Ross owed, the referees erroneously inflated the value of Ross's tobacco payments. When a contract calls for payment in tobacco as this one did, one pound of tobacco will always equal one pound of tobacco. There was no provision in Virginia law that deflated the value of contracts priced in tobacco as there was for contracts priced in pounds.
Wythe's Discussion of the Supreme Court's December 1790 Decision
Wythe's commentary on this case analyzed the Supreme Court's December 1790 decree on practically a line-by-line basis.
Wythe said that the value of "annual fruits of the earth" such as tobacco tended to vary more than other items, such as precious metals. Therefore, when a contract involves those fruits of the earth, the parties will surely be thinking about what time they will use to determine the fruits' value. It seems most likely that the parties had in mind the time payment was first due, May 1780, when thinking about setting the tobacco's value, because Ross promised to begin paying interest if he did not pay by then. Wythe could think of no reason why the parties would choose April 1781 as the date to use to determine the tobacco's value instead.
Wythe disagreed with the Supreme Court's statement that a price set in tobacco cannot be adjusted for inflation or deflation; they could not merely say it was the rule and leave it at that. Even the Supreme Court itself scaled the tobacco price in their decision by ordering the referees to use the value of tobacco on April 18 because the value of tobacco had dropped significantly between the time the contract was formed and the time the referees set a value for the land. At any rate, Ross and the defendants agreed to use the price set by the referees, so when the referees used pounds sterling to set the land's value then convert the price in pounds to tobacco, the parties effectively agreed to use that method to determine the land's value.
The Supreme Court said that there was no precedent for the referees in April 1781 to convert the land's value from tobacco to pounds and back to tobacco, and that the referees' action was inequitable. But, Wythe said, by overriding the valuation given by referees whom Ross and the defendants chose and ordering a jury to assign a value instead, the Supreme Court also took an inequitable action with no legal precedent to support it. Evidence presented to the court at an earlier stage proved that no tobacco was traded in the area on April 17, 1781, or any nearby dates, so how will a jury determine the price for that day? How is the Chancery Court supposed to act if the jury says "we have no idea what the price would have been on that day"? Wythe quoted from Virgil's Ecologues and said that anyone who could figure out the solution to such a dilemma "shall be my great Apollo" - i.e., would be Wythe's better.
The Chancery Court's Decision (March 1795)
The parties waived a jury trial in favor of having a committee of five merchants determine the land's value. In March of 1795, after receiving the committee's report, Wythe handed down his final decree in the case. He said that according to Virginia law, Ross should have the right to apply debts that the defendants owed him on other transactions to the price of the land. To hold otherwise would be unjust on principle and would run counter to Virginia law.
Wythe rejected the committee's proposed method of determining how to apply interest to Ross's payments. The committee said that the Merchants Rule should be applied, but Wythe rejected that because it would have effectively turned the defendants from creditors into debtors. Wythe went into painstaking detail describing his formula for applying a debtor's payments, which was basically to apply the payments first to interest on the debt owed, then the principal, rather than letting interest accumulate on the payments from the time the payment was made. Several decades later, the U.S. Supreme Court adopted Wythe's formula in the case of Story v. Livingston
Wythe ordered Ross to pay Pleasants, Shore & Co. 216,091 pounds of tobacco, ordered Pleasants, Shore & Co. to pay Ross £360 in Virginia currency, and ordered Anderson to pay Ross 15,930 pounds of tobacco.
- George Wythe, Decisions of Cases in Virginia by the High Court of Chancery with Remarks upon Decrees by the Court of Appeals, Reversing Some of Those Decisions, 2nd ed., ed. B.B. Minor (Richmond: J.W. Randolph, 1852): 10.
- The Virginia Assembly passed an act in 1781 formalizing the devaluation of Virginia currency. Virginia pounds in February 1780 were worth 1/45 the same amount in pounds sterling. By May 1780, a Virginia pound fetched 1/60 pound sterling; in June 1780, 1/65. Ch. 22, 10 Hening 471 (Nov. 1781 Session). For more information on Virginia's financial situation during the Revolutionary War, see [Richard G. Doty, "Promises to Pay, Promises Unkept: How We Won a War and Lost Our Shirts", Colonial Williamsburg Journal (Summer 2003)].
- Not that Wythe refers to himself by name when mentioning this; he notes that "(o)ne of the court. . .dissented from so much of this decree as appointed other valuers, for the reason stated in the next opinion and decree by himself, when. . .he remained sole judge." Wythe 16.
- "...erit mihi magnus Apollo." Wythe 25, quoting Virgil, Ecologue 3.104. Virgil's third Ecologue involves a singing competition. To conclude the competition, one shepherd (Damoetas) tells the other (Menalcas) that "you shall be my great Apollo" if Menalcas can solve Damoetas's riddle. Menalcas counters with a riddle of his own. In the end, the third party judging the competition declares a tie. See [Barry B. Powell, "Poeta Ludens: Thrust and Counter-Thrust in Ecologue 3", Illinois Classical Studies (1976) 1: 113-121].
- The defendants objected to the formula the committee used to set the price of tobacco to be used, but Wythe overruled their objection. The defendants filed an appeal with the Supreme Court of Virginia, but the Supreme Court upheld Wythe's decision. Pleasants v. Ross, 1 Va. (1 Wash.) 156 (1793).
- Wythe is referring to Ch. 33, Sec. 6, 6 Hening 85 (Oct. 1748 Session), although he cites it as "chap. 27, sect. 6 of the edit. 1769". Hening's Preface to the sixth volume of his Statutes at Large explains why the two compilations used different chapter numbers to describe the same law. William Walter Hening, The Statutes at Large: Being a Collection of all the Laws of Virginia (Richmond: Printed for the editor at the Franklin Press, 1819), 6: iii-iv.
- The Merchants Rule was an informal method merchants used to settle debts on multiple transactions with the same person. It works well enough in the short term (usually under one year), but when applied over the long term to a single debt it can have perverse effects, such as having the interest on partial payments ballooning and exceeding the amount owed, resulting in the seller owing the buyer money. A brief description of the formula is available in [George Wentworth and David Eugene Smith, Complete Arithmetic, Part 2 (Boston: Ginn and Co., 1909): 52]. M.R. Neifeld, Neifeld's Guide to Instalment Computations (Eastern, PA: Mack Publishing Co., 1951): 316-17, briefly mentions the Merchants Rule's appearance in Ross v. Pleasants.
- 38 U.S. 359, 371 (1839).