Case Name: PAN-AMERICAN BANK & TRUST CO. et al. v. NATIONAL CITY BANK OF NEW YORK
Court: United States Court of Appeals for the Second Circuit
Jurisdiction: United States
Decision Date: 1925-02-09
Citations: 6 F.2d 762
Docket Number: No. 119
Parties: PAN-AMERICAN BANK & TRUST CO. et al. v. NATIONAL CITY BANK OF NEW YORK.
Judges: 
Reporter: Federal Reporter 2d Series
Volume: 6
Pages: 762–773

Head Matter:
PAN-AMERICAN BANK & TRUST CO. et al. v. NATIONAL CITY BANK OF NEW YORK.
(Circuit Court of Appeals, Second Circuit.
February 9, 1925.)
No. 119.
I. Contracts <@=>143 — Name given by parties to their contract does not determine its legal effect.
The legal effect of what men do is not determined by the names they affix to their deeds, but the essential nature of their acts determines, and the law has its own names for the results they achieve.
2. Guaranty <@=>4 — Agreement by one bank to reimburse another for the amount paid out on a letter of credit' issued on request of promisor held not a “guaranty.”
A contract between two banks, made by correspondence, helé not one of guaranty, though that term was used, but an agreement by one to reimburse the other for the amount paid out on a letter of credit issued at the promisor’s request.
3. Banks and banking <@=>191— Bank which procured issuance of letter of credit by another held bound to reimburse the latter for the amount paid out thereon.
•Where defendant bank, wishing to issue a letter of credit to a. customer, available to a shipper in Brazil, but, being unknown there, procured its issuance by plaintiff bank, which had a branch in Brazil, it was bound to reimburse plaintiff for the amount paid out thereon, which amount was recoverable in assumpsit.
4. Banks and banking <@=>191 — Agreement to reimburse another bank for amount paid out on a letter of credit issued at its request held not ultra vires.
Such transaction was in legal effect the issuance of the letter of credit by defendant itself, which was clearly within its powers, and its agreement to reimburse plaintiff was not ultra vires.
5. Bilis and notes <@=>144 — “Negotiation” of instrument defined.
An 'instrument is “negotiated,” when it is transferred from one person to another in such manner as 'to constitute the transferee the holder thereof.
[Ed. Note. — For other definitions, see Words and Phrases, First and Second Series, Negotiation.]
6. Banks and banking <@=232 — In business transactions between a national bank and its foreign branch, they deal as separate entities.
A national bank and its foreign-branch, organized under Act Dec. 23, 1913, § 25 (Comp. St. § 9745), are separate entities as relates to business, transactions between them, and a branch bank, which negotiates a draft drawn against a letter of credit issued by the parent bank becomes the legal holder thereof, and their respective rights in relation thereto are governed by the same rules as between unrelated banks.
7. Banks and banking <@=>191 — Insurance policies required to be attached to drafts drawn against a letter of credit may be in foreign money.
The fact that a letter of credit is in dollars does not necessarily require that policies of insurance required to be attached to drafts drawn against it must also be in dollars.
8. Banks and banking <@=>191 — Conditions of letter of credit; laws and usages of place of use may be followed.
Where, at the request of defendant bank, plaintiff bank issued a letter of credit against which drafts were to be drawn by a shipper in Brazil, in the absence of any requirement otherwise, it was permissible for plaintiff to accept documents required to be attached to the drafts which complied with Brazilian law and usage.
9. Banks and banking <©=»191— Letter of credit held irrevocable without seller’s consent.
Letter of credit, after notice to the person for whose use it was issued, held irrevocable without his consent.
Hand, Circuit Judge, dissenting.
In Error to the District Court of the United States for the Southern District of New York.
Action at law by the National City Bank of New York against the Pan-American Bank & Trust Company and others. Judgment for plaintiff, and defendants bring error.
Affirmed.
Plaintiff below (hereinafter called City Bank) is one of the largest financial institutions in this country, with numerous branch offices, and especially one in the city of Rio de Janeiro. It is and long has been engaged, inter alia, in the business of issuing commer: cial letters of credit and attending to the collection of the same.
Defendant below (hereinafter called Pan-American) is an institution chartered by the laws of Louisiana, transacting business in New Orleans. At the times in question it had a capital and surplus not exceeding $1,-400,000. It had issued commercial and other letters of credit, and we are satisfied that the evidence showed conclusively that this branch of its activities had been, and was when this cause of action arose, in charge of . its vice president, one Wuerpel. The story of this ease begins May 15, 1920, when Pan-American cabled direct to the Rio branch of City Bank:
“We guarantee payment drafts Hermano Bareellos on W E Seago and Company eight hundred fifteen thousand dollars covering purchase two thousand tons Brazilian granulated sugar twenty two hundred forty pounds each shipment soon as possible not later than September price about eighteen dollars eighteen cents per hundred pounds e. i. f. New Orleans provide you cable us your guarantee for delivery of sugar.”
City Bank’s representatives in Rio cabled the home office inquiring who the Pan-American was, and stating that this unknown correspondent had “confirmed through us a commercial credit $815,000.” The home office replied that Pan-American was in good standing, stated that another cable after consultation with Pan-American would be sent, and advising the branch not to “guarantee delivery of sugar”- — something which the •branch had already refused to do by cable to New Orleans. Immediately on receiving the above inquiry from Rio the City Bank telegraphed the Pan-American that as the “amount is large we wish you would wire us full particulars.”
On May 18th Pan-American replied to this last telegraphic message, stating that negotiations were still pending as the Rio branch was “declining guaranty for delivery.” This was followed by a letter from Wuerpel to City Bank, repeating the telegraphic messages, confirming them, and adding that Selago (the person asking for the credit) was “perfectly responsible, we feel perfectly safe in making this guaranty.” The guaranty referred to is the proposition made by the cable to Rio of May 15th, supra.
On the day following, May 19th, Pan-American again cabled the Rio branch, referring to its message of May 15th, and stating : “Our guaranty remains good, provided shipper’s order bill of lading properly' indorsed and certificate insurance attached to drafts.” This is the first mention of any documents to be produced as a condition precedent to paying drafts. This exchange of requests and explanations amounted to nothing, no agreement was reached, and it is evident that the home office of the City Bank perceived that nothing could be done by a series of long distance talks between strangers, and it therefore telegraphed to Pan-American, on May 24th, as follows: “Refer recent interchange telegrams in view of probable difficulty negotiating your bills in Rio eight hundred thousand dollars where you aré not so well known we suggest you open confirmed sight credit through us here cash against documents in New York our rate one eighth of one per cent.”
On the following day, May 25th, Pan-American replied to City Bank by wire thus: “Refer your telegram yesterday credit your Janeiro branch we have cable from them today please cable them confirming sight credit favor Bareellos account Seago as originally advised without requiring their guaranty of delivery, provided, shipping documents properly indorsed are attached to drafts payable your New York office stop instruct-them to advise Bareellos that all is arranged stop your commission satisfactory.”
At the same .time Yice President Wuerpel wrote City Bank, repeating and confirming the telegrams and concluding: “As we now understand the matter we have opened for account of Seago & Co. a credit through you, with your Rio Janeiro branch, in favor of Hermano Bareellos for about eight hundred and fifteen thousand ($815,000) dollars, cov ering their purchase from Hermano Bareellos of about two thousand (2,000) tons Brazilian granulated sugar two thousand two hundred forty (2,240) pounds each, shipment soon as possible not later than September, at 18.18 per hundred pounds e. i. f. New Orleans subject to Brazilian government granting export license to shippers, provided that documents covering the shipment are properly indorsed and presented either to you in New York or to us here for payment. We have requested you in our telegram to have your Rio Janeiro branch to advise Hermano Barcellos of this credit and sincerely hope that everything now is in proper order.”
On the same May 25th, Pan-American cabled Rio that it had requested “your New York office to confirm credit without your; guarantee for delivery.” Thus by May 26th the matter was in substance concluded and affairs set in motion, for on that day City Bank cabled the Rio branch as follows: “Referring to your telegram 870 negotiate sight drafts up to $815,000 dollars U. S. Cyi on the National City Bank of New York, New York, drawn by Hermano Barcellos account of Seago Co. when accompanied by invoice consular invoice insurance certificate including war risk full set bills of lading to order of the National City Bank of New York, New York, covering 2,000 tons Brazilian sugar at about $18.18 per 100 pounds e. i. f. to New Orleans, credit in force for until September 30th notify beneficiaries promptly. Credit number is 17504 bill of lading order blank indorsed. Send one set documents to Whitney Central National Bank, New Orleans, on steamer carrying goods if possible. Confirm this credit to the beneficiaries.”
And on May 27th followed it up by writing a letter to Pan-American thus: “In accordance with your favor of May 19, and interchange of telegrams, we established by cable through the medium of our Rio de Janeiro branch for account of Seago & Co., New Orleans, La., our confirmed commercial letter of credit No. 17504, for $815,000.00 (eight hundred fifteen thousand dollars) United States currency, in favor of Hermanos Bar-cellos, as per inclosed application and agreement, both of which kindly return to us duly signed by your clients and your good selves as guarantors. Kindly note that, as your, letter stated ‘insurance certificates/ we have made this credit available against marine anc( war risk insurance certificates, which kindly confirm.”
The “application and agreement” referred to in this last letter consisted of:
(1) A request, addressed to the City Bank, to establish a “confirmed documentary letter of credit under our guaranty” on specified terms -and conditions, which had been already substantially communicated to Rio, ut supra.
(2) A copy of the letter of credit itself, which was an authorization to Barcellos to value on City Bank for account of Seago up to “an aggregate amount” of $815,000 by sight draft, when accompanied by bills of lading “for merchandise” invoiced to read two thousand tons Brazilian sugar at about $18.18 per one hundred pounds c. i. f. New Orleans.
(3) A letter, addressed to City Bank, stating that in consideration of the issuance of said “confirmed letter of credit” the signatories agree “to its terms” and bind themselves to “pay the amount of each draft drawn under it.” This letter also stated that “neither you nor your correspondents in Rio de Janeiro shall be responsible for any loss arising from any difference in. quality or character of merchandise imported under this credit from that stipulated and expressed in the invoice accompanying the drafts, nor for correctness or genuineness of documents, nor for delay or deviation from instructions in regard to shipment, nor for any other cause beyond our control.” It concluded with the statement that “this letter of credit can only be revoked with the consent of ¿11 parties interested.”
These documents were signed, No. 1 by the Pan-American Bank, No. 2 by Seago and the Pan-American Bank, and No. 3 by Seago only. These signatures were plainly irregular. Both No. 1 and No. 3 had printed or stamped at the foot the following: “In consideration of the opening of the above credit we hereby guarantee the faithful performance of this obligation” — and this clause had never been signed by anybody.
Just when the signatures above stated were made we cannot ascertain, and it is not material; but after the documents had been returned to New Orleans, with a specific request for signature of the clause last quoted, the documents were returned to New York on June 10th, in or with a letter by Vice President Wuerpel, stating: “We now return the guarantee in the credit for account of W E Seago & Co. drily signed by ourselves” — although no such signature was ever actually affixed. But of this nothing further was ever said.
Meanwhile the Rio branch, which evidently did not think well of Barcellos, had received additional instructions to go ahead with the business, and that branch on June 5th formally wrote Barcellos in Rio, stating that they had received cable instructions from New York (substantially as per above quoted message) and added: “Please note that in accordance with the above instructions the credit will be in force only when you obtain the required government license for the export of the sug’ar. For your guidance please note that the polarization certificate must be issued by the Laboratorio Nacional de Analyses and the insurance certificate by a company approved by this bank. In ease you are unable to follow the above instructions, please communicate with us before making the shipment of the merchandise, inasmuch as the payment will be made only under the specified conditions.”
On the next day Barcellos replied to the Rio branch, agreeing to all the terms and conditions stated and accepting the credit. These documents, written in Rio de Janeiro, were in Portuguese, and, as translated, one portion of Barcellos’ letter is as follows: “I understand that for me to avail of said credit I must deliver all of the above-mentioned documents not later than September 30th next, on which day, if export license has not' been granted to me, the credit may become without effect. Until that day meanwhile, in conforming with the statements in the telegram copied by you, said credit in question will be considered in force.” This closed the transaction so far as Barcellos was concerned.
On the 12th of August following, Pan-American cabled City Bank in New York: “Seago cannot accept now. Cancel credit.” To this City Bank replied that the credit had been “confirmed at your request and cannot be canceled without beneficiary’s consent.” This started a lengthy and immaterial correspondence, m the course of which, referring to the impossibility of revoking the letter of credit after confirmation, Pan-American wrote that “we carefully note what you say and confirm your understanding of the matter.” Efforts were made through the Rio branch to cancel the credit, but Barcellos insisted upon it. Finally, on September 4th, Pan-American wrote City Bank, inclosing copies of cable messages showing trouble between Barcellos and Seago, and adding: “In view of these cables, we must positively decline to honor any drafts of Hermanos Bar-cellos against this credit.”
On September 18th and 28th Barcellos tendered to the Rio branch drafts with accompanying c. i. f. documents, which practically exhausted the credit. Down to this time, Pan-American had never given any reason for refusing to honor Barcellos’ drafts, except that the latter had committed some breaches of contract with Seago. Barcellos’ documents were accepted, his drafts negotiated, and in due time presented to the home office of the City Bank and there paid. The sugar came forward, so far as appears, in safety, but by the time it arrived sugar speculation was at an end. The sugar, instead of being worth 18 cents a pound, was sold for a small fraction of that amount. -Seago was insolvent, and the Pan-American refused to pay. "Whereupon, in December, 1920, this action was begun. Its technical nature and the defenses thereto and some further facts will be adverted to in the opinion. After a lengthy trial a verdict was directed for the City Bank, and Pan-American took this writ.
Rounds, Hatch, Dillingham & Debevoise, of New York City, Eugene J. McGivney, of New Orleans, La., and Francis E. Neagle, of New York City (Ralph S. Rounds, Eugene Congleton, and Raymond E. Cook, all of New York City, on the brief), for plaintiffs in error.
Shearman & Sterling and Carl A. Mead, all of New York City (John A. Garver and Justus Sheffield, both of New York City, on. the brief), for defendant in error.
Before HOUGH, MANTON, and HAND, Circuit Judges.
Certiorari denied 46 S. Ct. 18, 69 L. Ed. —.

Opinion:
HOUGH, Circuit Judge
(after stating the facts as above). At the very threshold of this matter the parties disagree as to its nature. Pan-American describes it as an action "upon a commercial letter of credit," while the other side insists that it is brought on an agreement by Pan-American to reimburse City Bank for whatever it paid out on such promise of reimbursement. The difference is more than a technicality, for the nature of any legal procedure is determined by the pleading. That pleading may be bad, but, good or bad, the pleas dominate the evidence, and define or delimit the scope of the pleader's efforts.
Thus measured, the City Bank is right, in its characterization of the proceeding, for the complaint sounds solely upon the request of. Pan-American that City Bank issue a certain letter of credit. Compliance with that request is then averred, and the pleader concludes by resting on the legal implication that Pan-American should pay the cost of compliance with request. Our first inquiry, therefore, is as to what promise or agreement was made by Pan-American. There is here no question of fact as to what was said or done; everything is in writing; such differ enees as exist arise from differing interpretations of written words.
It is true that in the exchange of letters and telegrams the word "guarantee" is continually used; we may even assume that, if the men of affairs who composed the various writings had been asked (before the priee of sugar fell and counsel were consulted) what they had done, the answer might have been that Pan-American had guaranteed payment by some one of a letter of credit. But it is clear that the legal effect of what men do is not determined hy the names they affix to their deeds. The essential nature of their acts determines, and the law has its own names for the results they achieve. Border Bank v. American Bank (C. C. A.) 282 F. 73; Second National Bank v. Columbia, etc., Co. (C. C. A.) 288 F. 17, 30 A. L. R. 1299. Undoubtedly the names by which men describe their acts are evidence of the nature of their doings, often strong evidence ; but acts control names, and that deeds speak louder than words is good law.
We can therefore unhesitatingly hold that the result of the paper writings in evidence was not that Pan-American guaranteed anything; i. e., agreed to answer for the performance of some obligation in the case of another's default. On the contrary, it did undertake and promise to pay City Bank whatever it lawfully paid, the premises considered, plus one-eighth of 1 per cent. This holding renders unnecessary consideration of the cases regarding guaranties by corporations and especially by banks operating under either the National Banking or Federal Reserve Acts. See Border Bank Case, supra; People's Bank v. National Bank, 101 U. S. 181, 25 L. Ed. 907; Cochran v. United States, 157 U. S. 286, 15 S. Ct. 628, 39. L. Ed. 704; Coal & Iron Bank v. Suzuki (C. C. A. 2d), 3 F.(2d) 764, opinion filed November 3, 1924.
More specifically, we hold that the legal relation of parties is quite fairly summarized in Pan-American letter to City Bank of May 25th, declaring that "We have opened for account of Seago & Co. a credit through^ you," meaning that Pan-American had given Seago credit, by means of asking City Bank to use its Brazilian branch to put the arrangement through, while the drafts drawn against the credit might be presented for payment either "to you in New York or to us here" — in New Orleans. The essential nature of the transaction becomes plain, and even simple, when its development is noted; for what Pan-American wanted to do for its customer, Seago, was to issue its own letter of credit available to Barcellos in Brazil. It yielded to the obviously truthful suggestion that its own promise for so large a sum was hardly available in Rio de Janeiro, and it therefore procured City Bank to do for it what business, not legal disabilities, prevented its doing for itself. A plainer reimbursement contract, enforceable in assumpsit, it is hard to imagine.
To this Pan-American answers that the undertaking was on its part ultra vires, a defense which we will assume may be presented, though it appears for the first time in an amended answer served some months after action begun, and bears no relation to the reasons advanced on September 4th for Pan-American's anticipatory breach of any and all contracts giving rise to liability on the Barcellos credit. Examination of this defense reveals two branches thereof; one that Pan-American as a bank could not contract, and the other that Wuerpel as representing the bank had no authority to contract.
The first objection is disposed of by the above analysis of the contract made, for it is undoubted that Pan-American had perfect chartered authority to issue its own letter of credit to Barcellos; no legal reasons existed against such action, and that course wasplainly the original intent of the New Orleans parties concerned. If, then, Pan-American could issue its own letter, it could agree with City Bank to reimburse payments made by the latter on the letter actually issued; a document not differing legally from that originally proposed, but from a business standpoint more available where Pan-American wished it used. This was the commercial as well as the legal relationship with each other voluntarily assumed by the parties hereto, a position very different from that recently discussed in Nowell v. Equitable, etc., Co., 249 Mass. 585,144 N. E. 749, a decision upholding the defense of ultra vires to an action upon a plain and inescapable guaranty.
The second objection we reject on the facts, which uneontradictedly show a course of business by which for purposes of commercial credit Mr. Wuerpel had full authority to act for Pan-American. Discussion of evidence would yield no legal rules; there was not enough testimony impugning Wuerpel's authority to submit to a jury. His judgment in selecting customers like Seago was and is immaterial.. The method or means of fulfilling the contract now fully described required consideration.
The Rio branch of City Bank existed under the Act of December 23, 1913, and its amendments (TL S. Comp. Stat. § 9745). That statute requires, inter alia, that national banks having foreign branches "shall conduct the accounts of each foreign branch independently of the accounts of its home office, and shall at the end of each fiscal period transfer to the general ledger the profit or loss accrued at each branch as a separate item." That is, the branch is not a mere "teller's window"; it is a separate business entity.
To such a branch the home office gave instructions by the cable of May 26th to "negotiate sight drafts" as drawn by Bar-cellos, if accompanied by proper documents. The word "negotiate" is technical, it has received much exposition (see Words and. Phrases, First and Second Series); but the result is expressed in the Negotiable Instruments Law (section 60 of N. Y. Act [Consol. Laws, c. 38]), which sums up judicial exposition by declaring that an "instrument is negotiated when it is transferred from one person to another in such manner as to constitute the transfereé the holder thereof." Consequently, when the Rio branch, in fulfilling instructions, acquired from Bareellos his drafts drawn on the home office in New York, it "negotiated" them, and became (as no one doubts) the holder thereof, and a holder for value.
But the Rio branch, in so becoming a holder of the drafts, and then sending them to New York for collection, assumed the same relation to its home office that any other bank or person that had similarly negotiated the paper would have assumed. In fact, as the evidence shows, the drafts and aeeompa-' nying documents went from the Rio branch to the New York home office with a demand for credit; i. e., a demand for payment, and payment by the demanded credit was given the branch. This was just what the cited aet of Congress in effect requires, and illustrates the rulings that, in respect of the collection of forwarded paper, branches and a parent bank are to be considered as separate entities. Woodland v. Fear, 7 E. & B. 519; Clode v. Baylay, 12 M. & W. 579; McNeil V. Wyatt, 3 Humph. (Tenn.) 125, considering the point generally; U. S. Bank v. Goddard, 5 Mason, 366, Fed. Cas. No. 917, under the statutes regulating the Bank of the United States; and Chrzanowska v. Corn Exchange Bank, 173 App. Div. 285, 159 N. Y. S. 385, affirmed 225 N. Y. 728, 122 N. E. 877, under statutes regulating banks chartered by the state.
Thus the case presents a legal problem identical with the common one resulting from discount by any indifferent dealer in commercial paper of such a draft as Bareellos', and presentation by such dealer of the draft to the drawee for payment. An instance is International, etc., Corp. v. Irving Bank (C. C. A.) 283 F. 103. We think it unnecessary to go over again the rules laid down regarding drafts drawn under commercial credits and accompanied by documents evidencing a e. i. f. transaction. Our views as to, these rules and the meaning of "e. i. f." have been stated in the case last cited, and in Klipstein v. Dilsizian (C. C. A.) 273 F. 473, Harper v. Hochstim (C. C. A.) 278 F. 102, 20 A. L. R. 1232, American, etc., Co. v. Irving, etc., Bank (C. C. A.) 266 F. 41, and Old Colony, etc., Co. v. Lawyers', etc., Co. (C. C. A.) 297 F. 152.
Thus the question is this: Did the Rio branch obtain with Bareellos' draft the papers and all of them evidencing a c. i. f. sale as required by the cable of home office to Rio of May 26th, supra, viz. invoices, private and consular, insurance certificate, and bills of lading? This cable is practically the letter of credit; neither the piece of paper called credit 17504, nor a copy of it, could have gotten to Rio before Bareellos was notified and the transaction closed, so far as contract making was concerned. To vary the statement, we think the point may accurately be put as follows: If John Doe had negotiated Bareellos' draft and received his papers, and Doe should have recovered from City Bank on the draft, then the bank can recover from Pan-American on the latter's reimbursement contract.
This view affords to plaintiff in error opportunity to object to the sufficiency of every paper presented, and to most of those objections we shall not advert; they have been observed, and that is enough. The correctness of the ruling below depends, in our judgment, on two arguable matters: (1) Were the bills of lading accepted such as the letter.of credit required; and(2) was the insurance of the sort demandable?
The bills of lading in Portuguese recite: "Loaded by the Senhor Hermano Bareellos on board of the steamer Tocantins, at present anchored in the port (or in another steamer belonging to the Lloyd Brasilero or chartered by them), the packages noted on the margin to be transported to New Orleans." The policies of insurance distinctly cover only sugar on the Tocantins, and are expressed in Brazilian currency "equivalent to (so much) American gold at the exchange rate of 5 $720 per dollar."
It is obvious that, taken literally as translated, the bills of lading say no more than that the sugar is on board some steamer of the line, not necessarily the Tocantins, while the insurance is invalid unless the sugar was on the Tocantins. There is a further objection to the insurance, to the effect that it is not "dollar" insurance. On this last point we are of opinion that the contract did not require insurance expressed in any particular eurrehcy; it impliedly demanded sufficient insurance and that by the evidence was afforded by the policies complained of. We are not impressed by the suggestion that, because the credit was in dollars, the insurance must be in dollars; it is enough at present to say that we see no indication in this transaction of any such intent of parties. Scott v. Barclay's Bank, 14 Lloyds List, 89 and 142.
As to the rest of the objection, it is not accepted as an answer that the goods did in point of fact go on the Tocantins, that it was plainly the intent to put them there, and that before drafts were presented in New York the legal relation of the sugar and the Tocantins was exactly what it would have been under an ordinary "received on board" bill. The legal rights of parties must rest on the papers, and on nothing else, because it was a part of the agreement that the psupers to accompany the drafts were to show a c. i. f. sale.
The question whether by usage "received for shipment" bills of lading may be accepted, or whether the drawee may insist on "received on board" bills, received much consideration in Vietor v. City Bank, 200 App. Div. 557, 193 N. Y. S. 868. The present case is unlike the one last cited, because the bills .here are not "received for shipment" bills at all; they recite actual lading on some vessel of the carrying line; they are "on board" bills of some vessel, but not (it is said) of any particular vessel.
It is doubtless true that, when the parties hereto agree, as they did in the United States, that certain documents were to be the test of a transaction (d. e., negotiation in Brazil), it was their intent that the documents should correspond and comply with Brazilian law and usage. Furthermore, the parties agreed with reference to a particular nexus of trades; i. e., the shipping and sugar trades. At this bar, Pan-American argues that it at least had the right to have a jury find that it was aware of any usage or custom to which the (e. g.) bills of lading might conform, or by which they might be validated. This is incorrect; Pan-American agreed that City Bank should do certain things, and that necessarily implied that the bank should act in accordance with such laws, customs, and usages as it encountered in the place or places where the promise was to be and was fulfilled. Neer v. Lang, 252 F. 575, 164 C. C. A. 491; Eames v. Claflin, 239 F. 631, 152 C. C. A. 465.
Doubtless it might have been made a condition precedent to the payment of any draft under the credit letter that the c. i. f. documents must conform to some particular legal standard; e. g., that of New York. Such requirement would possibly have been no more onerous than those actually inscribed in the credit litigated in American, etc., Co. v. Irving Bank, supra; but nothing of the kind was here done. Obviously such an obligation would markedly restrict the availability of commercial credits in the very places where they are most needed, and bankers wish to sell them. Consequently, if a bill of lading (e. g.) is required as a document, it means a bill good by law for its intended purposes where it is issued, and/or by custom of the trade to be served, which custom may and usually does cover transit from shipping port to delivery point. It follows that we ¿eat these documents as measurable by the results of investigating the law of Brazil and the custom of the trade as proven.
As for the suggestion that this case turns on the sufficiency .of the tender in N.ew York, when the draft was there presented, we observe that such doctrines (taken literally), seems to let in inquiry as to what the papers meant at time of presentation, and then the sugar was undoubtedly on the Tocantins en route for New Orleans; but much more important is the result, above enlarged upon, that no one negotiating a draft to be so interpreted can, by any reasonable exercise of intelligence, know whether what he buys in Tokio or Rio will be good in New York or London, and this makes a mere trap out of What is intended to be an aid to commerce.
The Brazilian law, therefore, we treat as a fact to be proven, including the effect of usage or custom under or on that law, and we regard it as proven beyond peradventure that the bills of lading here in question were in universal use in Rio de Janeiro, were the standard form of the Lloyd Braziliero, and were recognized as valid under local law. In the export trade, also, it is proven that bills such as these were the only bills known at the American end of Brazilian trade, and were commonly used and accepted in e. i. f. transactions.
Applying the foregoing to this case, it is to be remembered that by special agreement between the parties "neither the City Bank nor its correspondent in Brazil [was] responsible for the correctness or genuineness of documents," and Bareellos tendered together the bills of lading in the form above given and the insurance covering on sugar on board the Tocantins, and "the bills were printed forms, except for the word "Tocantins" written in.
The Bio branch was then justified in what it did by the usage of the place and trade, and by the representations of documents furnished by Bareellos, which, considered together, represented to even a most cautious mind that the sugar was on board the Tocantins; for Bareellos offered a set of papers which in terms asserted that Bareellos had put it there. No other interpretation could be given to such a bill confirmed and explained by the insurance policy. It may be granted as immaterial that the representations were substantially true, or that, when the goods sailed and the drafts arrived in New York, the papers were perfect muniments of title to sugar actually on the Tocantins. We hold that, under contract made, the usages of. the trade, and Brazilian law, the Bio branch, regarded as an independent purchaser of the drafts, bought a good claim against the City Bank, and that therefore that bank has a good claim against the Pan-American.
If, as is argued for defendant below, this lays down a measure of liability on the part of City Bank, which it would be loath to assume, were not the negotiator its own branch, answer is that the remedy is in its own hands; it may insert conditions in credit letters which will both safeguard its own coffers, and limit its sale of credit to those learned in legal intricacies.
We have observed one other. contention of defendant below, that the credit tq Bareellos was conditional and was revoked, We are of opinion that by express agreement it became irrevocable as soon as the Bib branch communicated its terms to Bareellos; from that moment Bareellos had contractual rights against City Bank. What would have been the position of the Bio branch, if it had refused to negotiate, is not before 'us for decision.
To conclude, the evidence given was of such a nature that any verdict for Pan-American should have been at once set aside; therefore the direction for plaintiff below is correct.
Judgment affirmed, with costs.
This decision resulted in new trial conducted presumably in accordance with directions given. The resultant judgment for plaintiff was affirmed without opinion in 206 App. Div. 664, 199 N. Y. S. 955, and 237 N. Y. 538, 143 N. E. 733.