Case Name: Sherwin & Co. v. Brigham
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1883-01
Citations: 39 Ohio St. 137
Docket Number: 
Parties: Sherwin & Co. v. Brigham.
Judges: 
Reporter: Ohio State Reports, New Service
Volume: 39
Pages: 137–141

Head Matter:
Sherwin & Co. v. Brigham.
1. In order to render the writer of a letter'of credit liable, either upon an implied acceptance or an agreement to accept drafts taken on the faith-of such letter, the drafts must be taken for a valuable consideration.
2. A promise to have the drafts discounted, and to take up notes on which the persons taking the drafts are liable as indorsers, is not a valuable consideration.
3. If a letter of credit provides that drafts drawn under its authority shall be used only for the purpose of being discounted at a particular bank, persons taking such drafts, with notice that they'have been offered to the bank for discount and refined, cannot recover thereon.
Error to the District Court of Cuyahoga county.
In the year 1875, C. A. Brigham was doing business in Cleveland, under the name of Cleveland Furniture Company, and íd August and September of that year, the plaintiffs doing business under the name of Sherwin, Williams & Co., for the accommodation of C. A. Brigham, indorsed his two promissory notes, for $500, due November 16, and $1,500 due November 17, respectively, which were discounted at the Merchant’s National Bank.
In October of the same year, C. A. Brigham had become embarrassed in business, and his brother, D. H. Brigham, the defendant, who resided in Springfield, Massachusetts, being informed of his situation, wrote to him as follows :
“ Springeield, October 29, 1875.
“ Dear Brother :
I have been in New York this week — returned this morning — father laid your letter on my desk for repty, and in answer would say I wish we had known it before, but as it is, when you find yourself close up, draw on D. II. B. & Co. at the longest time your bank will discount the draft. Make it four months if they will, if not, three months, and we will honor it — one or two $1,000, drafts and trust it will make yon easy.
“ Trade fair, weather cool, and watery to-day.
“ Tours in haste,
“ D. IT. Brigham.
“ Father says he need not write now, as he wrote Sunday.”
The initials D. II. B. & Go. in the letter, were understood by all parties to mean the firm of D. II. Brigham & Co., of which the defendant was a member, doing business in Springfield. On November 15, 1875, when the two promissory notes indorsed by plaintiffs were nearly due, C. A. Brigham called upon E. P. Williams, one of the plaintiffs; showed him the letter from D.' IT. Brigham, and requested said Williams in behalf of the plaintiffs to take two drafts drawn by C. A. Brigham on D. II. Brigham & Co.,for $1,000 each, payable ninety days after date to the order of Cleveland Furniture Company, and dated respectively November 12 and November 15, 1875. Williams w'as informed that the National Gity Bank, at which C. A. Bingham kept his account, had refused to discount the drafts, but on the strength of the letter agreed to take them and have them discounted at the Merchant’s National Bank, and take up the two promissory notes indorsed by plaintiffs. The drafts were left with plaintiffs in accordance with that arrangement, they giving therefor the following receipt:
“ Cleveland, November 15, 1875.
“ Received of Cleveland Furniture Company two thousand dollars, two drafts on D. II. Brigham & Go., Springfield, Massachusetts, to take up one note of $500 due November 15, and one of $1,500 due November 17.
“ $2,000. Sherwin, Williams & Co.”
The same afternoon the plaintiffs noticed that the drafts were indorsed “ Pay to the order of J. F. Whitelaw, Cashier, Cleveland Furniture Company,” and thereupon returned them to C. A. Brigham, with the request that he wmuld make new ones like those returned, omitting the indorsements, which he promised to do that afternoon. The next day, November 16, C. A. Brigham made a general assignment for the benefit of his creditors, and afterwards delivered the new drafts to the plaintiffs, at the same time notifying the defendant of the assignment.
The drafts were not discounted, and were not accepted. The two notes indorsed by the plaintiffs were paid by them when due; The plaintiffs brought their action to recover the amount of the two drafts. No testimony was given to prove . any other material facts, on the trial of the action in the court of common pleas, and thereupon at the request of the defendant, the court instructed the jury “ that no evidence had been offered tending to prove a cause of action in the party plaintiffs, and that they should render a verdict for defendant.” To this instruction the plaintiffs excepted, and the jury having returned a verdict for the defendant, judgment was rendered thereon, which judgment was affirmed by the district court. This proceeding is prosecuted to reverse the judgment of the district court.
Samuel E. Williamson, for plaintiffs in error.
Prentiss efe Voroe, for defendant in error.

Opinion:
Upson J.
The plaintiffs ash that the judgment of the district court, affirming that of the court of common pleas, may be reversed, on the ground that the court of common pleas erred in directing the jury to render a verdict for the defendant. There was no evidence tending to prove that the defendant was indebted to C. A. Brigham, or that there was any consideration, between them, for the defendant's offer to honor his brother's drafts. The defendant was to become an accommodation acceptor, and to sustain, in fact, the relation of a surety for C. A. Brigham. In order to render the defendant liable, either upon an implied acceptance of the drafts described in the petition, or upon an agreement to accept the same, it was necessary for the plaintiffs to prove that the drafts were drawn in accordance with the terms of the authority given by the defendant, and that the plaintiff's took them, for value, upon the faith of the letter of credit. It is doubtful whether the defendant's letter can properly be called a letter of credit, - or was intended to be shown for the purpose of giving credit to drafts drawn by C. A. Brigham; but it is clear from its language that the defendant intended the drafts to be used only for the purpose of being discounted at the bank at which C. A. Brigham did business, the National City Bank, and the transfer of them to the plaintiff, with notice that the bank had refused to discount them, was in violation of the rights of the defendant, who is bound only by the very terms of his contract, and he is under no legal obligation to accept or pay such drafts. Stone v. Vance, 6 Ohio, 246; Clinton Bank of Columbus v. Ayres, 16 Ohio, 283.
But even if we were to regard the defendant's letter as ageneral letter of credit, and the drafts held by the plaintiff, as being within its exact terms, it must still be proved that the drafts were taken for a valuable consideration. We are unable to find in this case any evidence tending to prove that any benefit accrued to the defendant, or to C. A. Brigham for whose accommodation the drafts were to be honored ; or any evidence tending to prove that any loss or disadvantage accrued to the plaintiffs by reason of their taking the drafts described in the petition.
The testimony relied on to show a consideration is, that C. A. Brigham made an arrangement with the plaintiffs to take the two drafts, have them discounted at the'Merchants National Bank, and take up the two notes mentioned in the petition, on which they were indorsers ; that the drafts were left with them in accordance with that arrangement, and that they paid the notes when due. The receipt given to C. A. Brigham by the plaintiffs is also referred to.
Prom this evidence it is clear that no new obligation was incurred by the plaintiffs. They did not have the drafts discounted and become liable thereon as indorsers. They gave no additional security, incurred no new responsibility and paid no money on the faith of the defendant's promise. What they agreed to do in respect to the notes indorsed by them, and what they did, was no more than they were bound, by their contract, to do, before the defendant's letter was written ; and when they paid the accommodation notes, they paid only the amounts, and at the times, therein specified.
We think the court of common pleas did not err in directing the jury to render a verdict for the defendant.
Judgment affirmed.