Virginia Volunteers, detained as hostages for Captain Dusky and Lieutenant Varner, now at hard labor in the penitentiary at Albany on conviction of breaking into a post-office. The Confederate authorities claim these two latter as prisoners of war; state they were regularly mustered into the Virginia State service; assume the act as done by competent order of superiors and upon this footing clearly place Dusky and Varner as prisoners of war entitled to exchange. The readiest mode of releasing Captain Gramm and Lieutenant Wade is to accept this explanation of the Confederate authorities and exchange the men. Please obtain the direction of the Secretary of War on these two cases. I may add that a demand has been made for the sheriff of Barbour County but of course with no such alternatives as presented by Governor Peirpoint.

I am, very respectfully, your obedient servant,

WM. H. LUDLOW,

Lieutenant-Colonel and Agent for Exchange of Prisoners.

[First indorsement.]

OFFICE COMMISSARY-GENERAL OF PRISONERS.

May 18, 1863.

Respectfully referred to the Secretary of War and I would respectfully suggest that the interference of any other authority than that of the War Department in the control and treatment of prisoners cannot but lead to much embarrassment.

W. HOFFMAN.

Colonel Third Infantry, Commissary-General of Prisoners.

[Second indorsement.]

WAR DEPARTMENT, May 21, 1863

Respectfully referred to the Judge-Advocate-General for report.

By order of the Secretary of War:

ED. R. S. CANBY,

Brigadier-General.

[Third indorsement.]

JUDGE-ADVOCATE-GENERAL'S OFFICE, June 5, 1863

Respectfully, returned to the Secretary of War.

The recommendation of Colonel Ludlow, agent for exchange of prisoners in reference to accepting the terms of the Confederate agent in case of exchange of Dusky and Varner for Captain Gramm and Lieutenant Wade is concurred in. The proceedings of Governor Peirpoint in seizing and confining suspected rebels in his vicinity, placing them in a chain gang and holding them at hard labor until certain civilians and officers of West Virginia are released and exchanged by the enemy is certainly an interference with the disposition and treatment of prisoners of war which must needs be very embarrassing to those officers to whom the control of prisoners and their exchange has been expressly delegated by the War Department. Unless some special authority has been given to Governor Peirpoint by the War or State Office to act in this matter he should be advised that he cannot without embarrassing the Government transcend the ordinary police power which he is authorized as Governor to exercise over rebels within his jurisdiction, and that by taking it upon himself to hold rebel prisoners for exchange for Union men he necessarily interferes with the formal arrangements