Case Name: WELSH v. GOSSLER
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1882-10
Citations: 11 Abb. N. Cas. 452
Docket Number: 
Parties: WELSH v. GOSSLER.
Judges: 
Reporter: Abbott's New Cases
Volume: 11
Pages: 452–461

Head Matter:
WELSH v. GOSSLER.
N. Y. Court of Appeals ;
October, 1882.
[Reversing 47 Super. Ct. (J. & S.) 104.]
Action to Recover Balance of Advances.—Advances on Bill of Lading.—Right to Receive Goods as Factor, upon Non-performance of Contract.—Substituting Telegram for Letter of Credit.—Effect on Existing Stipulation. ■
One who has made advances on a bill of lading on merchandise may, if the seller fail to comply with the conditions of his contract, in consequence of which the buyer refuses to accept the goods, receive the goods and sell as a factor to reimburse his advances.
Where a telegraphic credit is substituted for a letter of credit issued to provide for the price to be paid under an executory contract of sale, the omission from the telegram of a condition which was expressed in the executory contract and in the letter of credit,—in this case, that the goods should be delivered before a specified day, —does not alone alter the contract.
Plaintiffs, through their bankers, issued a letter of credit to enable a buyer to fulfill his contract for the purchase of merchandise to be shipped from a foreign port before the first of July. Subsequently, to save time, a telegraphic credit was sent by plaintiffs. The dispatch (which was drawn up by the seller) omitted the stipulation as to the time of shipment, and by its means the seller obtained payment upon a shipment in July. On arrival of the merchandise the plaintiffs received and sold it. Held, that doing so did not waive the stipulation, but they were entitled to do so as the factors of the seller, and recover the balance of their advances.
Appeal from a judgment of the general term of the superior court of the city of New York affirming a judgment dismissing plaintiffs’ complaint.
On May 8, 1877, the defendants sold to one Henry P. Finlay 600 hogsheads of St. Vincent sugars, “ May-June shipment,” at a specified rate, costs and freight. On Finlay’s application plaintiffs granted him a letter of credit on London in favor of appointees of the defendants for the price, the letter calling for the security of a bill of lading, with an abstract of invoice indorsed thereon, on receipt of which documents the bills would be duly honored, and providing “ This credit, if not used, to expire June 80, 1877.” Subsequently, the defendants expressing apprehension that the letter of credit could not reach St. Vincent in time for the contract, plaintiffs sent the following telegram to Klein-wort, Cohen & Co., their London bankers, its form and language being dictated or prepared by defendants.
“Open credit favor Schroeder, Walsh & Co., transferable St. Vincent friends. Cost 600 "hogsheads sugar; ninety days. Confirm.”
Plaintiffs’ written letter was surrendered and destroyed.
On receipt of this telegram, the bankers to whom it was directed issued their letter of credit to D. K. Porter & Co., transferees of Schroeder, Walsh & Co., on the Island of St. Vincent, who were to ship the goods.
On • July 6, 1877, D. K. Porter & Co. shipped a cargo of sugars to plaintiffs, the invoices and bills of lading being all made out to plaintiffs, and drew upon Kleinwort, Cohen & Co. for the price. Their drafts were accepted and paid.
On July 21, 1877, the cargo of sugars arrived at New York. Plaintiffs thereupon wrote defendants as follows:
“ New York, July 21, 1877.
“ Messrs. Gossler & Co.,
“Pearl St.:
“ Dear Sirs:—We received to-day from Messrs. D.' K. Porter & Co., St. Vincent, invoice and bill of „ lading for 619 bogheads and 7 barrels sugar per bark ‘ St. Vincent.’ We knew of no sugars to come from said gentlemen to our consignment, save the cargo of about 600 hogsheads of sugar sold by you to Mr. H. P. Fin-lay, on or about the 8th of May last, for shipment , either in that month, or in June last. As the documents for this cargo are dated July 6th, present, we cannot in Mr. Finlay’s absence agree to receive it, as under his contract with you. Mr. Finlay left for Baltimore last night, and before leaving expressed his unwillingness to receive the St. Vincent sugars bought of you if not shipped within the time specified in the contract. We expect him back early next week.
“We are, Dear Sirs,
“Yours truly
“ Sam’l & Wm. Welsh.”
Plaintiffs then telegraphed Kleinwort, Cohen & Co., their bankers, to withhold acceptance, but received an answer that under the credit as issued by them, they could not do so. They then wrote defendants as follows:
“New York, July 25, 1877.
“ Messrs. Gossler & Co.,
“ Pearl St. :
“Dear Sirs.Mr. H. P. Finlay having refused to accept, and having forbidden us to accept on his account, the cargo of 619 hogsheads and 7 barrels of sugars per St. Vincent,’ he alleging, as the reason therefor, that the said sugars were not shipped as re quired by his contract with yourselves, and we having issued or caused to be issued credits for the said sugars, which credits are enforcible against us, we now notify you that we shall enter said sugars and sell and dispose of the same to protect and cover said credits, and we shall look to you for any loss or deficiency arising upon or out of such sale.
“Very truly yours,
“ Sam’l & War. Welsh.”
To this defendants replied as follows:
“New York, July 28, 1877. “Messrs. S. & W. Welsh,
Present:
“ Dear Sirs:—We have your favor of the 25th instant.
“We recognize no responsibility in the matter, and can only leave you to take, at your own risk and peril, such action as you may be advised.
“Yours truly,
“ GrOSSLER & Co.”
In August, 1877, plaintiffs paid the duties and other charges on the sugars, and sold them for the gross sum of $84,941.94, which, after deducting the charges and plaintiffs’ commissions, left a net balance of $51,280.31.
Plaintiffs paid Kleinwort, Cohen & Co., $76,341.07 on their letter of credit, and brought this action to recover $22,937.31, the balance over the amount realized on the sale.
At the close of plaintiffs’ case, the court granted a nonsuit on the ground that plaintiffs, having sold the cargo and applied the proceeds, could not sue the defendants, as their act in so doing constituted an acceptance of the cargo in discharge of defendants’ obligations. That in order to recover, plaintiffs should have made an unconditional offer to return the merchandise. The general term affirmed the judgment on substantially the same grounds [see both opinions reported in 47 Super. Ct. (J. & S.) 104], and from the judgment of affirmance this appeal was taken.
Edward Patterson, for appellants.
Elliott & S. Sidney Smith, for respondents.
See also Baker v. Holt (Wisconsin), 14 Northw. Rep. 8, where it was held that a telegram to a vendor, saying, “Have written you; will take land at your figures; answer," did not waive a condition expressed in the letter referred to as having been written,

Opinion:
Finch, J.
Reflection and study have changed our first impression of this case, and led us to the conclusion that the nonsuit was improperly granted, and the plaintiff should have recovered. The facts, which seem complicated, are not really so, and create no difficulty when accurately understood.
The defendants, Glossier & Co., doing business in New York,. entered into an agreement with one Finlay to sell him a quantity of sugar, to be sent from St. Vincent, and to be "May-Juné shipment." The purchase money was to be paid at the port of departure, and to accomplish this, Finlay applied to the plaintiffs for a letter of credit to their correspondents in London, through whom the funds could be transferred to St. Vincent, and used to pay for the sugar. The plaintiffs gave Finlay the desired letter of credit, who, in turn, delivered it to Glossier & Co., as a means of payment for the purchase. By its terms, this credit expired, unless used on June 30. It also required a May or June shipment, and bills of lading to the order of the plaintiffs. The letter of credit harmonized with the contract, and by its express terms would have been unavailable for any shipment later than June 30. But at the request of Glossier & Co., a credit by telegraph was substituted in its place, the form and language of which was dictated and prepared by them. That credit was sent forward. The necessary brevity of the dispatch excluded details, and it contained no prohibition of use later than June. It is not pretended that the terms of the contract between Glossier & Co. and Finlay were at all changed. It was still a May-June shipment which the latter was to receive, and for which alone the credit was to be used to pay. What had happened was only this: that the form of the telegraphic credit enabled dossier & Co., or their representatives in St. Vincent, who were to ship the sugar in their behalf, to use the credit after June 30, and for a later shipment. They gained no right to do so, but found in the form of the order an opportunity and a possibility of getting the money upon an unauthorized delivery. That is exactly what they did. June went by without any shipment. The right to utilize the credit upon the contract was gone. The money it represented was no longer Finlay's unless by Ms further choice. He ceased to be liable for it under the contract. He had not used the credit so as to become liable, and no one was authorized to use it for him upon a new and different contract. The money, therefore, on the morning of July 1, was not Finlay's, and could not be applied on a succeeding shipment on his account. It was solely and only the money of the plaintiffs, to be returned to them by the cancellation of an unused credit, and for which no lawful use remained since the contract for which it was issued had expired and was dead. For it is not to be doubted that Finlay was not bound to accept or pay for sugars shipped in July (Russel v. Nichol, 3 Wend. 112 ; Catlin v. Tobias, 26 N. Y. 217; Rouse v. Lewis, 2 Keyes, 352). Now Glossier & Co. were the vendors of the sugars, and the letter of credit when made was delivered upon their direction, and when paid was a payment to them. They dealt as principals, disclosing no agency, and indicating thfe existence of none. The written contract shows them to have been the vendors, and no pretense of any agency appears until one of the defendants was sworn on the trial. While he testifies that they were not the owners in fact of the sugars, they must be treated as such as between themselves and Finlay on the one hand, and the plaintiffs on the other, since to neither did they assume any other position than that of owners and principals. The letter of credit was delivered to them : the telegraphic credit was sent upon their order and to their appointees, and the latter in dealing with it must be deemed the agents of the defendants, acting on their behalf and responsibility. What then did these agents or appointees do with the funds placed within their reach % They appropriated them to a July shipment. Through them dossier & Co. took the funds in payment for July sugars. In substance they took the money of plaintiffs upon a forced loan or advance, without right or lawful authority, and shipped to the plaintiffs the sugars with bills of lading to their order. The transaction at this point was one of two things: Finlay might accept the sugars notwithstanding the delay. He might waive the provision of the contract which required a. June shipment. If he did, the appointees of dossier & Co. were rightfully in possession of the money as paid upon the latter's contract of sale. But if he did not, if he refused to accept and stood upon the terms of the contract, then dossier & Co were in the position of appropriating plaintiffs' money as a loan or advance upon the faith of the sugars shipped to the plaintiffs to séll on commission. Putting one side Finlay's contract as no longer existing, the agents and appointees of dossier & Co. could not take the money as Finlay's, or under his contract. They could only take it as plaintiffs' money, and as an advance upon the consignment of the sugars to them to be sold on commission. With the end of Finlay's contract, the facts raised a new contract, and created a new relation between dossier & Co. and the plaintiffs, upon which the rights of the latter can rest.
Two cases, to which our attention is specially di rected by the learned counsel of the respondents, tend to sustain the view we have thus taken of the relations of the parties. In Cornwall v. Wilson (1 Ves. 509), the defendant, a merchant in London, sent orders to the plaintiffs in Riga to buy for him, as his factors, a quantity of hemp at a fixed and limited price. The plaintiffs exceeded their authority and bought at a larger price. On the arrival of the hemp the defendant refused to receive it under his contract, but did take it and dispose of it. Lord Habdwicke said: "That a merchant here refusing goods sent over by his factor in a foreign country, who exceeded the authority, having advanced and paid his money on these goods, may be considered as having an interest as a pledge, and may act thereon as a factor for that person who broke his orders." The chancellor then held that defendants did not act as factors, although they might have done so, because instead of selling the hemp as factors and in the customary way, they took the risk of transporting the hemp to Portsmouth and selling it there. Upon the doctrine of this case, if the sugars had been shipped to Finlay, who had made advances, the latter might have refused them under the contract, but received them and sold them on commission as factor of the shippers. Much stronger is the case as applied to the present plaintiffs. They had made no contract of purchase. Finlay had refused to receive the property, and forbidden them to accept it for him. They could not and they did not receive the sugars on his behalf. They expressly so declared. They could receive them, however, as factors for Gossler & Co., and to sell on commission. Just that they did. They explained their attitude carefully. They gave Gossler & Co., in their character of shippers and owners, opportunity to take the whole cargo and sell it themselves upon repaying the advances. Upon their refusal, the plaintiffs sold the goods in the usual and ordinary way, as commission merchants, applied the proceeds upon the advances, and now call upon the shippers for the unpaid balance. The other case referred to is that of Chapman v. Morton (11 M. & W. 534). The sale by the purchaser, who repudiated the contract in words, was held on all the facts to have nullified his refusal. Lord Abingee admitted that the act of sale was in itself equivocal. Parke, B., stated its equivocal character more strongly, saying, " There might be circumstances under which he might have disposed of the goods as agent of the vendor; but it might be also that he meant to take the property, having recourse to his cross remedy." In the present case the sale by the plaintiffs was in no respect an equivocal act. Finlay had refused to accept; and they had refused to accept for him. N o contract of sale and purchase remained. The omission to ship in June authorized Finlay to treat it as rescinded (Siepel v. Int. Life, 84 Pa. 47; Graves v. White, MSS., January, 1882). Nothing remained except the facts of the advances made by plaintiffs in invitum and against their wish ; the shipment of sugars to them as commission merchants having a lien upon the proceeds for their reimbursement, and their sale accordingly.
The error of the courts below thus becomes apparent. Their conclusion went upon the ground that plaintiffs received and sold the goods as agents of Fin-lay, and, therefore, they could not rescind the contract without an unconditional offer to restore the sugars. We think the contract was already rescinded by the act of the defendant; that the plaintiffs did not receive the goods as agents of Finlay, since that had become impossible, and was expressly refused; and that they did receive them upon commission, and upon a new contract of that character between themselves and the defendants, springing up from and growing out of the facts and circumstances of the shipment and advances.
It follows from these views that the judgment should be reversed and a new trial granted, costs to abide the event.
All the judges concurred.
Reported 87 N. Y. 463.