21 F. Cas. 68 | U.S. Circuit Court for the District of Massachusetts | 1842
This cause has I been very ably argued. There is no count in
There are two questions properly arising upon the state of facts presented to this court. The first is: Where is the contract of the defendants to be deemed to be made? Or, in other words, is it, as to its obligation, construction and character, to be governed by the law of Massachusetts, where it was signed and executed by the agent of the defendants? Or, is it to be deemed a contract made in England, where the acceptance was to be made: in which ease, it is to be governed, in the like particulars, by the law of England, assuming that law to differ from the law of Massachusetts? The second question is: Whether a promise, contained in a letter of credit, written by persons, who are to become the drawees of bills drawn under it, promising to accept such bills' when drawn, which letter, although addressed to the persons, who are to be the drawers ot the bills, is designed to be shown to any and all person or persons whatsoever, to induce them to advance money on, and take the bills, when drawn, will be an available con-n-act in favor of the persons, to whom the letter of credit is shown, who advance money and take the bills on the faith thereof, or is void for want of. privity between them and the persons writing the letter of credit? 1 cannot say, that I entertain any serious doubts as to either question. As to the first, the letter of credit was executed in Boston, by the agent of the defendants, with full authority for the purpose; and it is, to all intents and purposes, the same, in legal effect, as if it had been there personally signed by the defendants themselves. It then created an immediate contract between the parties, in Boston, and it is to be governed, as to its obligation, construction, and character, by the law of Massachusetts, and not by the law of England; if, indeed, there be any distinction between them on this subject, which I am very far from believing there is. The contract was clearly valid and binding by the law of Massachusetts. It is true, that the contract is, to accept bills drawn on the defendants in London, and of course, the acceptance is there to be made. But that does not make it less obligatory upon the defendants to fulfil their promise to accept, although the acceptance, in order to be valid, must be made according to the requirements of the English law. Suppose a like letter of credit were executed in Boston, to accept bills payable in Paris in France, where an acceptance, to be binding, must be in writing, (although, by our law, it may be verbal,) there can be no doubt, that, unless there was a written acceptance in Paris, no remedy could be had upon any bill drawn in pursuance of the letter of credit, as an accepted bill. But there is as little doubt, upon principios of international law and public justice, that, in such a case, the contract, being made in Massachusetts, and being valid by the laws thereof, would be, and ought to be, held valid in all judicial tribunals throughout the world, and enforced equally in France, in England, and America, as a subsisting contract, the breach of which would entitle the injured party to complete redress for all the damage sustained by him. The case of Carnegie v. Morrison, 2 Metc. [Mass.] 381, is directly in point, upon this, very question; and I entirely concur in that decision.
The second question, is one. upon which, until I heard the present argument, I did not suppose that any real doubt could be raised, as to the law, either in England or America.
Assuming, however, that there is a total want of privity between the parties in the present suit, the conclusion, to which these learned jurists have arrived, may be admitted fairly to follow as a result of the doctrine of the common law, although I entertain great doubt, whether, under such circumstances, a court of equity would not, and ought not, to administer complete relief, as a case of constructive fraud upon third persons. But my difficulty is in the assumption, that, in the present case, there is no privity of contract between the plaintiffs and the defendants. It appears to me, that this is an inference not justly deducible from the facts; and I know of no authority in English jurisprudence, which countenances, far less any, which establishes it, under circumstances like the present. On "the contrary, I have understood, and always supposed, that, in the commercial world, letters of credit of this character were treated as in the nature of negotiable instruments; and that the party, giving such a letter, held himself out to all persons, who should advance money on bills drawn under the same, and upon the faith thereof, as contracting with them an obligation to accept and pay-the bills. And I confess myself totally unable to comprehend, how, upon any other understanding, these instruments could ever possess any general circulation and credit in the commercial world. No man is ever supposed to advance money upon such a letter of credit, upon the mere credit of the party, to whom the letter is given; and I venture to affirm, that no man ever took bills on the faith of such a letter, without a distinct belief, that the drawee was bound to him to accept the bills, when drawn, without any reference to any change of circumstances, which might occur in the intermediate time between the giving of the letter of credit and the drawing of the bills under the same, of which the holder, advancing the money, had no notice. Any other supposition would make the letter of credit no security at all. or, at best, a mere contingent security, and the money would, in effect, be advanced mainly upon the credit of the drawer of the bills, which appears to me to be at war with the whole objects, for which letters of credit are given. Let me state one or two cases to illustrate the doctrine, which, it seems to me, is applicable to letters of this sort Suppose the present letter of credit had contained an express clause, by which the defendants should directly promise any and all persons, who should advance money and take bills on the faith thereof, that they would accept and pay the bills, so drawn, in their favor; can there be any doubf that the promise would be available in favor of the persons-making such advances, and create a. direct privity of contract between them and the person who gave the letter of credit? If there could be no doubt in such a case, then it seems to me, that the circumstances of the present case, and, indeed, of all cases of letters of credit of a similar character, do naturally and necessarily embody an implied promise to the same extent, and, therefore, ought to be. governed by the same rule; for there can, in the intendment of the law, be no just distinction between cases of an express promise and cases of an implied promise, applicable to transactions of this sort. Again, suppose, when the plaintiffs were about to advance their money on their bills, with the letter of credit before them, a partner, or authorized agent, of the firm of Wig-gin & Co. had stood by, and said, “Take these bills on the faith of this letter of credit, and our house will duly accept and pay them,” and, upon the faith of that statement, the money was advanced, and the bill was taken, could there be a doubt, that there would be a privity of -contract created directly between the plaintiffs and the defendants, and that they might compel the defendants - to accept 'and pay the bills, or indemnify them for the breach thereof? And yet, stripped of its mere external form, that is the very case before the court. The letter of credit was drawn to be carried abroad, and to be shown to any person or persons, who would advance funds thereon to the drawers, and it imported, that, if any persons, to whom it was shown, should advance the money, and take the bills on the faith thereof, the defendants would accept and pay the bills. Their letter of credit spoke this language to all the world, as expressively, as if they had stood by, and repeated it by their agent.
Take the case of a common letter of guaranty, where the guarantor says, in general terms, in a paper addressed to A. B., the party, for whose benefit it is given, “I hereby guaranty to any person advancing money, or selling goods, to A. B., not exceeding £100, the payment thereof, at the expiration of the credit, which shall be given therefor.” Can there be a doubt, that any person, making the advances, or selling the goods, upon the faith of the letter, is entitled to treat the pa
But, be the English doctrine as it may be, the present case must be governed, not by that law. but by the commercial law of America, where the contract was entered into. And it is perfectly clear, at least, in the jurisprudence, which is enforced in the supreme court of the United States, that a letter written within a reasonable time, either before or after the date of a bill of exchange, describing it in terms not to be mistaken, and promising to accept it, is, if shown to the person, who afterwards takes the bill on the credit of the letter, a virtual acceptance, binding upon the person, who makes the promise. This was expressly so held by the supreme court in Coolidge v. Payson. 2 Wheat. [15 U. S.] 60. 75. and has been fully recog-nised and established by that court in every subsequent ease, which has arisen on the subject. and especially in Schimmelpennich v. Bayard, 1 Pet. [26 U. S.] 284, and Boyce v. Edwards. 4 Pet. [29 U. S.] 111. Now, it is plain, that, if such a promise becomes, as it were, a circulating promise to accept the bill, when drawn, in favor of. and to any party, who shall take the bill upon the faith of such promise, and operates as an acceptance of the bill, it must be. because the promise to accept, in such a case, is a promise by in-tendment of law made to the party, who takes the bill, and then, at his election, it may be treated as an acceptances or as a promise to accept. This, therefore, alone, would establish the point of a privity of contract between the party, giving the letter of credit, and the party, advancing the money, and taking the bill on the credit thereof; and it is manifestly founded on a sufficient consideration. Now, I know of no just or reasonable ground, upon which a distinction can be maintained between an implied acceptance. in favor of the person, who makes advances, and takes the bill under such circumstances, and a promise to accept the bill. In each case it enures as a direct contract with the party, founded upon the intent and the object of the letter of credit, or the written promise; and he has, and ought to have, his election, either to treat it as a positive acceptance, or as a promise to accept made directly to him, through the open letter of credit addressed to him, either specially or generally, for that purpose. Such is the doctrine, which, for many years, I have constantly supposed to be well established in the practice of the commercial world, and, therefore, never questioned in courts of justice; and, upon this very doctrine, my judgment proceeded in the recent ease of Baring v. Lyman [Case No. 983]. It does not, however, rest upon my single opinion; but it has been fully recognized by the supreme court of the United States. In Townsley v. Sumrall, 2 Pet. [27 U. S.] 170, 181, the court said: “If a person undertake, in consideration, that another will purchase a bill already drawn, or to be thereafter drawn; and, as an inducement to the purchase, to accept it, and the bill is drawn and purchased upon the credit of such promise, for a sufficient consideration; such promise to accept is binding upon the party. It is an original promise to the purchaser, not merely a promise for the debt of another; and. having a sufficient consideration to support it, in reason and justice, as well as in law, it ought to bind-him. It is of no consequence, that the direct consideration moves to a third person, as, in this case, to the drawer of the bill; for it moves from the purchaser, and is his inducement for taking the bill. He pays his money upon the faith of it, and is entitled To claim a fulfilment of it. It is not a case falling within the objects or the mischiefs of the statute of frauds. If A says to B, “Pay so much money to C, and I will repay it to you,” it is an original, independent promise; and. if the money is paid upon the faith of it. it has been always deemed an obligatory contract, even though it be by parol; because there is an original consideration, moving between the immediate parties to the contract. Damage to the promisee, constitutes as good a consideration as benefit to the promisor. In cases, not absolutely closed by authority, this court has already expressed a strong inclination not to extend the operation of the statute of frauds, so as to embrace original and distinct promises, made by different persons at the same time, upon the
It is unnecessary for me to add, that my own judgment is persuasively governed by these decisions, not merely as authorities, (although that would be a decisive ground), but upon principle, as tending to further and establish commercial confidence, and to give that sanctity, circulation, and faith, to letters of credit, which constitute the very foundations, upon which they were first built, and by which alone they can be sustained in the business of modem commerce. My judgment, therefore, is, that the plaintiff is entitled to recover the amount of the damages sustained by the refusal of the defendants to accept the bill in controversy.
-WTiat should those damages be? Should they cover all the money actually paid upon the protested bills by the plaintiffs, including re-exchange, together with interest; or should the re-exchange be excluded? It is clear, that the acceptor is not. ordinarily, bound to any holder to pay re-excliange, upon his refusal to pay the bill; but only to pay the principal and interest. But, here, the draw-ees (the defendants) have promised to accept and pay the bill upon a sufticient consideration; and I do not perceive any ground why the defendants should not be bound to indemnify the plaintiffs against all losses, including re-exchange, which have been the natural and necessary consequence of their refusal to perform their contract made with the plaintiffs. The defendants are not sued as acceptors: but as special contractors, who have broken their contract: by which bread) the plaintiffs have been compelled to pay the very moneys, including re-exchange, which they now seek to recover back. It seems to me, that they are entitled to the full amount 1'jaid by them, and interest upon the same from the time when it was paid.’ That interest should be the interest of the place, where the money was payable by the plaintiffs, and. of course, where they were to be reimbursed. The case of Riggs v. Lindsay. 7 Cranch [11 U. S.] 500, seems to me a clear and satisfactory authority, that the plaintiffs are entitled to a full reimbursement of all the sums paid
For these reasons I am of opinion, that the whole damages and costs, and exjjenses paid by the plaintiffs, including re-exchange, with interest, are to be included in the judgment for the plaintiffs.