Case Name: William C. Murdock vs. James K. Mills & others; Samuel F. Coolidge & another vs. The Same
Court: Massachusetts Supreme Judicial Court
Jurisdiction: Massachusetts
Decision Date: 1846-03
Citations: 11 Met. 1
Docket Number: 
Parties: William C. Murdock vs. James K. Mills & others. Samuel F. Coolidge & another vs. The Same.
Judges: 
Reporter: Massachusetts Reports
Volume: 52
Pages: 5–16

Head Matter:
William C. Murdock vs. James K. Mills & others. Samuel F. Coolidge & another vs. The Same.
M. & Co., in Boston, wrote letters to B. in New Orleans, as follows: 1. “ You may have opportunities to make advances on cotton shipped to this port, and we should be willing to accept against shipments to us, the necessary papers accompanying the bills, for such sums as in your judgment may be safely advanced.” 2. “ We do not want cotton under Emits. Your advances ought not to exceed three quarters the value. Under these restrictions, you may go on, and your bills shall be duly honored, accompanied by bills of lading and orders for insurance.” B. showed these letters to C. and sold to him bills drawn on M. & Co. in favor of C.’s principals, and paid, with the money received from C., for cotton which he shipped to M. & Co., in his own name. No bills of lading or orders for insurance accompanied these bills, and M. & Co. refused to accept or pay them. Held, in suits by the payees, against M. & Co., as acceptors of the bills, and on their promise to accept and pay them, that they were not liable; that B.’s authority was limited and special, and that he had exceeded it by drawing the bills without accompanying them with bills of lading and orders for insurance; and that C., the payees’ agent, knowing the contents of M. & Co.’s letters to B., took the bills on his personal'confidence in B., and not on the obligation of M. & Co. to honor them.
When merchants in Boston authorize an agent to make advances on cotton at New Orleans, to be shipped to them for sale, at Boston, and promise to accept bills drawn on them to an amount not exceeding three fourths of the value of the cotton, the value at New Orleans is intended; and therefore, in a question as to the. amount for which the agent is authorized to draw, evidence of the value of cotton at Boston is not admissible.
These were actions of assumpsit. In the first of them, the plaintiff Murdock alleged that Henry F. Baker drew a bill of exchange, dated at New Orleans on the 8th of July 1843, addressed to the defendants, a firm doing business in Boston, requesting them to pay to said Murdock the sum of $770, in seventy days after said date ; and that the defendants, in consideration of the said sum of $770 to them paid by the plaintiff, promised him to accept and pay the said bill, accord’ mg to its tenor ; that the said bill was duly presented to the defendants for acceptance and payment, and that they refused to accept and pay it. There was another count upon the bill, as an accepted bill, and there were also the usual money counts.
In the second action, the plaintiffs Coolidge and Haskell alleged that Henry F. Baker drew a bill of exchange, dated at New Orleans on the 10th of July 1843, addressed to the defendants, requesting them to pay to the plaintiffs the sum of $2000, in seventy days after said date. There were two counts on this bill, like those on the bill in the first action, and the usual money counts were added.
Both actions were submitted to one jury, at the same time. The plaintiffs produced the bills declared on, and the protests for non-payment of them. They also called H. F. Baker, the drawer, as a witness, who testified to the following effect:
That he resided at New Orleans, from November 1842 to July, or August 1843; that he received letters while there, from the defendants, authorizing him to procure consignments of cotton from that place to them in Boston, for sale, and to make advances by drawing bills upon them, as he should find opportunity, which bills they therein engaged to accept; that he thereupon procured to be consigned to them various lots of cotton, viz. 1054 bales by the ship Edward Everett, 1090 bales by the Edmund Perkins, and 48 bales by the Isaac Allerton; that he forwarded to the defendants,"by mail, the bills of lading of all cotton so consigned, with directions to insure to about the full value, and also forwarded invoices; that the cotton was shipped in the name of the witness, but for account of various persons, who were the owners thereof, and to whom he made advances, in order to procure the consignment to the defendants; that, to raise funds from which to make such advances, he drew various bills, in his own name, on the defendants, which he sold to persons having funds to be transmitted to the North; that the bills in suit in these actions were drawn by him for that purpose; that Isaac Bridge, having funds of the plaintiffs in these suits, purchased for them these two bills ; that said Bridge called on the witness to ascertain what authority he had to draw; that the witness showed to him the aforesaid letters received from the defendants, and that Bridge then purchased the bills; that, except in two instances, (not those of the bills in suit,) the witness drew his bills generally, and not against any particular shipment or parcel of cotton, and they were not accompanied by bills of lading and orders to insure; that he furnished the funds thus obtained to the several persons who were purchasing the cotton to be shipped, according to their necessities and convenience; that he advanced to each owner'nearly the amount of the invoice price of his cotton — a little short of that amount; that, in the early stages of the business, viz. on the 6th of June 1843, he drew a bill on the defendants for $4500, payable at sixty days’ sight, which was returned to him, at New Orleans, protested for non-acceptance, and which he was obliged to take up; that to enable him to do this, he drew other bills upon the defendants; and that the bill for $2000, in the action of Coolidge & Haskell, was one of those drawn for that purpose ; that he advised the defendants of his drawing these bills for that purpose, and duly advised them of his other bills, as he disposed of them.
The witness produced a schedule, showing all the bills drawn by him, as above stated, (except that for $4500, which he took up,) and which of the bills had been protested, and which were unpaid by the defendants. This schedule also showed the amount realized for said bills, the names of the owners of the several parcels of cotton, the number of bales owned by each, and the amount advanced to them respectively. Three of the bills in this schedule were drawn in favor of the plaintiff Murdock, and had been paid by the defendants.
The witness produced the letters aforesaid, received by him from the defendants, bearing date April 26th, and May 2d, 10th and 23d, 1843. (The contents of these letters are stated by Hubbard, J. in giving the opinion of the court.)
The witness testified that the cotton shipped by him, as above, would average, in quality, what is called “ middling fair.” On his being inquired of, by the plaintiffs’ counsel, what was the value of such cotton in Boston, in July and August 1843, the question was objected to by the ‘defendants’ counsel, and the witness was not permitted to answer it.
The defendants put into the case several letters received by them from said Baker, the invoices of the cotton consigned to them, as above stated, and a schedule of the bills drawn by him on them, and which they had paid, showing the times when the same were accepted, and when paid.. They also put into the case the original bills, so accepted and paid by them.
The case was taken from the jury, by consent of the parties, to be submitted to the decision of the whole court, under an agreement that the court might direct a nonsuit, default, or trial by jury, as, in their opinion, law and justice might require. It was further agreed that all the letters and papers produced at the trial might be used at the argument, and be exhibited to the court.
These cases were argued at the last March term.
H. H. Fuller, for the plaintiffs.
The plaintiffs, having purchased the bills on the faith of the defendants’ letters to Baker, can well maintain these actions. Carnegie v. Morrison, 2 Met. 381. Russell v. Wiggin, 2 Story R. 213.
Bridge, who saw the plaintiffs’ letters, might well regard . the instructions concerning the quality and price of the cotton as giving a discretionary power to Baker, who was not restricted to an exact price or quality, so as to deprive those with whom he dealt of their claim on the defendants, although his discretion might not have been exercised in the best manner. When there are restrictions and limitations of authority, which are known only to the agent, and he exceeds his authority, third persons are not affected thereby, though the agent may be answerable to his principal. Story on Agency, § 73. U. States Bank v. Binney, 5 Mason, 176. North River Bank v. Aymar, 3 Hill, 262.
Authority given in letters, and in other informa ways, is construed more liberally than when contained in sealed instruments ; and though it is misunderstood by the agent, yet the principal is bound. Story on Agency, § 74. Brown v. M'Gran, 14 Pet. 479.
B. R. Curtis, for the defendants.
Baker was not the agent of the defendants, but acted under a letter of credit. He was not to receive any pay from them. He acted as a broker, in New Orleans, and doubtless had his commissions from the sellers of the cotton. He shipped the cotton in his own name, and he, as consignor, had the legal property; and he did not inform the defendants, until the rights of the holders of the bills were fixed, how the proceeds were to be appropriated. He drew all the bills in his own name, and not as agent.
Baker’s authority was a limited one. The necessary papers, and orders. for insurance, accompanying the bills,,, were conditions on which the defendants promised to honor them. The authority was also limited as to the amount to be drawn for, viz. to three fourths of the value ; and this, of course, was the price at New Orleans, and not at Boston. See Story on Agency, §§ 74, 75. Loraine v. Cartwright, 3 Wash. C. C. 151.
When a limited authority is shown to third persons, they are bound to know its extent. Schimmelpennich v. Bayard, 1 Pet. 290. Snow v. Perry, 9 Pick. 542. Fenn v. Harrison, 3 T. R. 757. And where an authority is not held out as general, it is to be construed according to its real nature and extent; and the party dealing with the agent must take the risk. Story on Agency, § 133. Attwood v. Munnings, 7 Barn. & Cres. 278.
In the case cited for the plaintiffs from 3 Hill, 262, the agent had a general authority to act for the principal, and a third party could not know that the agent would apply the money to his own use.
It is a sufficient defence in the case at bar, that the drafts were not accompanied with bills of lading, &c. without insisting that those who sold the cotton to Baker should have ascertained that he had not overdrawn three fourths of its value. The defendants were justified in dishonoring the draft for $4500, as the letters and state of the accounts show. Parsons v. Armor, 3 Pet. 429.
In England, a promise to accept a non-existing Dill cannot now he treated as an acceptance: and it seems that an action by a third person will not lie, even on a promise to accept. Bank of Ireland v. Archer, 11 Mees. & Welsb. 383. And if the defendants were liable to these plaintiffs, the declaration should have averred a conditional promise, and a performance of the condition. Langston v. Corney, 4 Campb. 176. Whitaker v. Smith, 4 Pick. 83.

Opinion:
Hubbard, J.
The bills of exchange, in these cases, were drawn by Henry F. Baker, in New Orleans, by virtue of certain letters written by the defendants to him, which were shown to Isaac Bridge, who purchased the bills as agent for the several plaintiffs. The actions depend, substantially, on the same facts, and have been argued and may be considered together.
It is now a well settled principle of American mercantile law respecting bills of exchange, that when a party holds the written authority of another to draw bills on him, with a promise to accept them when so drawn, a third person, purchasing such bills for a valuable consideration, upon the faith of such written authority, can maintain an action against the writer in his own name, upon the breach of such promise to accept. Coolidge v. Payson, 2 Wheat. 66. Goodrich v. Gordon, 15 Johns. 6. Boyce v. Edwards, 4 Pet. 111. Carnegie v. Morrison, 2 Met. 381. But, to justify such a recovery by the holder, the party drawing the bill must pursue and conform to the authority given, or the writer will not be answerable on his promise.
In the present case, the general principles of the law on this subject are not so much called in question, as the construction to be given to the letters out of which the transactions have arisen. And it will, therefore, be necessary to state the substance of the letters bearing on the case. The etter of April 26th 1843, from the defendants to Baker contained an order to buy five hundred bales of cotton on their account, trusting in his judgment as to price, and giving liberty to pass bills on them for the amount; to which is added a postscript saying, " it has occurred to us that you may have frequent opportunities to make advances on cotton shipped to this port. We can sell the article as well as any house here, and should be willing to accept against shipments to us, the necessary papers accompanying the bills, for such sums as in your judgment may be safely advanced. Our charge will be five per cent, including a guaranty, as all cotton is sold here on a credit." This letter was followed by another, under date of May 2d 1843, doubling the order for the purchase, making it one thousand bales, and adding, " we also authorized you to make advances on shipments of cotton to us for sale, which we now confirm, enjoining you to be cautious not to overvalue the cotton." Again they wrote on the 10th of May 1843, on the subject of the order for the purchase of cotton, referring to the two letters of April 26th and May 2d; and after speaking of the stock of cotton, and that in their judgment prices would not advance, they add, " the same remarks will apply- to advances made on consignments. We do not want cotton under limits. Your advances ought not to exceed three quarters the value. Under these restrictions you may go on, and your bills shall be duly honored, accompanied by bills of lading and orders for insurance.'''' On the 23d of May 1843, they acknowledge a letter of May 13th from Baker, advising the receipt of their letters of the 26th of April and 3d of May, and of a purchase of 750 bales of cotton for their account, and that he had drawn on them, and was shipping the cotton on that day; and after saying " cotton will go lower," they add, " in such a state of the markets, we shall not expect consignments ; and if any should offer we again repeat our caution about over advances."
No other letters of the defendants are put into the case, which bear on the question of consignments of cotton. Their letter of May 10th was acknowledged by Baker on the 23d.
The first letter of Baker, which advises of any consignments of cotton, bears date June 2d 1843, directing insurance and annexing a bill of lading of cotton shipped on board the Edward Everett. It advised of certain bills being drawn on them, on account of the consignment. The largest of these hills was noted for non-acceptance. Other shipments were made and bills drawn, some of which were noted when received, but were afterwards paid. None of the bills were accompanied by bills of lading, agreeably to the directions. Baker first notices the protest of his bills in a letter of June 24th, expressing his mortification, as in two instances he says, " the bills of lading contained in the letter were more than sufficient .to cover the drafts." One bill of $4500 was refused acceptance and payment, and was returned under protest.
The bill of $770, which is the subject of Murdock's suit, was drawn on the 8th of July 1843, of which Baker informed the defendants by letter of the same date, but without advising on what account it was drawn. The draft of $2000 in favor of Coolidge & Haskell was drawn on the 10th of the same July, and on the 11th Baker advised the defendants of it, and that it was to enable him, in part, to take up the draft of $4500 which had been returned protested. These two drafts were protested for non-acceptance and non-payment, by the defendants, and in consequence thereof the present suits were brought.
The rule stated by the counsel for the plaintiffs, that where a general power is conferred, though there are limitations and qualifications which may affect the conduct of the agent, and make him responsible to his employer, yet they do not lessen the liability of the principal to a third person, is no doubt in many instances correct; but in our judgment it is not applicable to the state of facts existing in the present case. The agency or authority granted, instead of being general, was confined within certain defined limits, beyond which the agent had no power to bind his employers. The first letter, dated April 23d, while it reposed confidence in his judgment as to the amount that' might be safely advanced, required, as a condition of acceptance upon shipments, that the necessary papers should accompany the bills. And if any doubt might have been raised, as to what the necessary papers were, that doubt was removed in the letter of May 10th, which says that the " bills shall be duly honored, accompanied by bills of lading and orders for insurance." The next letter, of May 2d, merely confirms the former, with a caution against overvaluing the cotton. And in the letter of May 10th, received before any bills were drawn, there is a further limit on the authority, viz. that the cotton is not to be "under limits," and that "the advances ought not to exceed three quarters the value; " and the last letter, May 23d, merely repeats the caution against over valuation.
Whatever name is given to Baker, whether he is called an agent, or a correspondent acting under a letter of credit, his authority was limited and special. It was an authority to draw bills upon shipments of cotton to the consignment of the defendants, not under limits, the bills of lading of the cotton and orders for insurance accompanying the bills drawn. The value of the cotton shipped was left to his judgment; and though instructed not to advance beyond three fourths of that value, yet so far as third persons might be concerned, (there being no collusion,) the defendants would have been bound by his estimate, though it might in fact exceed three fourths the value. But this authority was not pursued. The bills of lading and orders for insurance did not accompany the drafts. The bills, therefore, were taken by Bridge on his personal confidence in the drawer, and not on the obligation of the defendants to accept them.
If the written authority were of doubtful construction, and the language susceptible of a meaning favorable to the plaintiffs' views of a general authority to draw for the purpose of raising money to procure the consignments, they would be entitled to the benefit of it. But that is not the fact. Neither was there any intrinsic difficulty in executing the orders by accompanying the drafts with bills of lading and orders to insure. This is a practice common among merchants, when an authority is given to draw upon the making of consignments.
No credit was here intended to be given to the mere name of Baker, as a drawer; but the credit was given upon the shipment and consignment of the property itself, and of which the party required the proof by the proper documents. Not conforming to his instructions, Baker assumed the hazard of the protest of his drafts, when the drawees might doubt as to their own security; and the purchasers of the bills took the same risk. If the bills had been delivered to the consignors of the cotton, the liability of the defendants would have rested on different grounds.
The bills, in most instances, were drawn generally, and to the drawer's own order, so that the defendants could not distinguish whether they were drawn against distinct shipments or generally on account, and it was the duty of Baker to have made his drafts upon the respective shipments. He was not bound to procure consignments, nor chargeable with neglect in not attempting to procure them. But, undertaking to act upon his instructions, he was bound to conform to them.
It is of the greatest importance that such orders should be adhered to with fidelity; for while they are to be liberally construed, they cannot be departed from with safety to the mercantile community.
'To follow out the argument for the plaintiffs, in this case, to its results, the defendants would in fact be compelled to accept as many bills as Baker might have chosen to draw, on the mere exhibition of those letters, without any corresponding consignments of cotton to sustain them. That is to say, he might have raised money for the avowed object of making advances upon consignments, and then have diverted the funds thus raised to other purposes. Such a general and unlimited power might have been given; and, if given, would have bound the defendants. But the instructions were limited and express, and though they accepted most of the bills, on the belief that the consignments would cover them, yet such acts laid them under no obligation to accept other bills, not drawn agreeably to the directions given. Parsons v. Armor, 3 Pet. 413. The party dealing with a specia. agent must inquire as to the nature and extent of his agency, and keep within the limit. On this subject the rules of law are clear. See Fenn v. Harrison, 3 T. R. 757. Schimmelpennich v. Bayard, 1 Pet. 264. Attwood v. Munnings, 7 Barn. & Cres. 278. Chit. Con. (6th Amer. ed.) 218, and cases there cited. Snow v. Perry, 9 Pick. 539.
In the case of the plaintiff Murdock, the bill was drawn by Baker after a knowledge of the refusal of the defendants to accept all of his bills, and that some of them were protested for non-acceptance. If Bridge saw all the correspondence, he would have understood that the defendants would not accept the bills without the security of property consigned specially to meet them. And if he did not see the whole correspondence, the defendants are not to suffer because he did not call for it; the authority, as shown by the first letters, being clearly a limited one.
In respect to the bill purchased for account of Coolidge & Haskell, the other plaintiffs, the case is still stronger. It was drawn by Baker to put him in funds to pay, in part, one of his returned bills. There was no warrant for such a course on his part, and no obligation on the defendants to accept it. If the defendants unjustly refused to accept the draft of $4500, in consequence of which Baker was injured in his credit, and pat to expense in procuring funds to take it up, his remedy was in a special action upon the case against the defendants, for a breach of promise, and not by redrafts on them.
When a party is misled by the acts of the principal, he will have his remedy against him, though the agent may have exceeded his authority. Schimmelpennich v. Bayard, 1 Pet. 290. But in this case, the defendants, by their noting bills for non-acceptance, gave Baker warning, and all others who negotiated with him on the faith of the defendants' letters, that they should not hold themselves bound to accept bills drawn generally, without accompanying documents, unless fully protected by previous consignments.
We think the evidence as to the value of cotton in the Boston market, at the time of the drawing of the bills, was rightly ruled out. It is evident from the correspondence, as well as from the nature of the case, that the drafts were to be graduated upon the value of the cotton at the home market, where the party drawing could judge for himself, at the time of his negotiation, and not upon a value at a distant port, in regard to which he could not judge with accuracy. If the value at the foreign market had been contemplated, the defendants, who resided there, would themselves have given the limits to their correspondent and have acted upon their own judgment, and not have left it to his; as he had hut imperfect means of judging. But taking the value at New Orleans as the standard, they confided in his judgment to make the proper estimate.
Plaintiffs nonsuit