Case Name: PIERRE ALBERT LAFARGUE et al., Respondents, v. HENRY D. HARRISON et al., Appellants
Court: Supreme Court of California
Jurisdiction: California
Decision Date: 1886-08-02
Citations: 70 Cal. 380
Docket Number: No. 8535
Parties: PIERRE ALBERT LAFARGUE et al., Respondents, v. HENRY D. HARRISON et al., Appellants.
Judges: 
Reporter: California Reports
Volume: 70
Pages: 380–390

Head Matter:
[No. 8535.
In Bank.
August 2, 1886.]
PIERRE ALBERT LAFARGUE et al., Respondents, v. HENRY D. HARRISON et al., Appellants.
Letter of Credit — Liability of Drawer—Guaranty of Credit to Third Person. — In 1877, John Mel & Sons, merchants of San Francisco, having a branch house at Bordeaux, France, and doing their banking business with the plaintiffs, obtained from the defendants, then doing business under the name of Falkner, Bell & Co., the following letter of credit: —
“ San Francisco, Sept. 20, 1877.
“ The Merchants’ Banking Company of London (Limited), 112 Cannon Street, London, —Dear Sirs: At the request of Messrs. John Mel & Sons of this city, we hereby authorize Messrs. A. Lafargue. & Co., of Bordeaux, to draw on you at sixty days’ sight for our account to thb amount of three thousand pounds sterling (£3,000).
“All drafts must be drawn at Bordeaux, and be accompanied by due advice. This credit to be in force for twelve months, from 31st October, 1877, to 31st October, 1878. We are, dear sir, yours faithfully,
“Falkner, Bell & Co.”
The plaintiffs and the bank were duly advised of the issuance of the letter, which was deposited by Mel & Sons with the plaintiffs as security for advances that might be made to them by the latter. During the period in which the letter of credit was to remain in force, and upon the faith and credit thereof, the plaintiffs advanced about nineteen thousand dollars to Mel & Sons, of which a balance of $13,441.54 remained unpaid. On the 10th of October, 1878, they drew a bill of exchange for three . thousand pounds on the Merchants’ Banking Company at sixty days’ sight, which they requested that bank to pay, and charge according to the terms of the letter of credit. The draft was accompanied by a letter of advice and notice, and was duly presented for acceptance and payment. The bank refused to accept or pay it, whereupon it was protested for non-acceptance and non-payment. The action was brought on the letter of credit to recover the amount of the draft. Held, that the defendants were liable, as the letter of credit was a guaranty by them of the credit of Mel & Sons during the time and for the amount therein specified, and of the acceptance and payment by the Merchants’ Banking Company of all drafts drawn by the plaintiffs in conformity with the letter.
Appeal from, a judgment of the Superior Court of the city and county of San Francisco, and from an order refusing a new trial.
The facts are stated in the opinion of Commissioner Foote.
Wilson & Wilson, for Appellants.
The letter of credit was special, and created no privity of contract between the plaintiffs and the defendants. (Edwards on Bills and Notes, 239; Robinson's Practice, 284; Daniel on Negotiable Instruments, 706-714; Taylor v. Wetmore, 10 Ohio, 494; Birckhead v. Brown, 5 Hill, 634; Union Bank v. Costa’s Ex’rs, 3 N. Y. 214; Bobbins v. Bingham, 4 Johns. 477; Walsh v. Bailie, 10 Johns. 180; Nat. Bank v. Grand Lodge, 98 U. S. 123.)
McAllister & Bergin, for Respondents.
The defendants are liable upon the letter of credit. (Lawrason v. Mason, 3 Cranch, 492; Dorland v. Mulhollan, 10 Ohio St. 192; Lonsdale v. Lafayette Bank, 18 Ohio, 126; Russell v. Wiggin, 2 Story, 213; Carnegie v. Morris son, 2 Met. 381; Barney v. Newcomb, 9 Cush. 46; Scott v. Pilkington, 15 Abb. Pr. 284; Monroe v. Pilkington, 14 How. Pr. 250; Union Bank v. Coster, 1 Sand. 563; S. C., 3 N. Y. 214; In re Agra and Masterman Bank, L. R. 2 Ch. 389.)

Opinion:
The Court
For the reasons given in the opinion filed herein December 30,1885, judgment and order affirmed.