Case Name: Chicago Roller Skate Company, Plaintiff, v. New York Produce Exchange Bank, Defendant
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1911-11-03
Citations: 146 A.D. 818
Docket Number: 
Parties: Chicago Roller Skate Company, Plaintiff, v. New York Produce Exchange Bank, Defendant.
Judges: 
Reporter: Appellate Division Reports
Volume: 146
Pages: 818–823

Head Matter:
Chicago Roller Skate Company, Plaintiff, v. New York Produce Exchange Bank, Defendant.
First Department,
November 3, 1911.
Banking — bills and notes — agreement to accept draft --- termination of liability.
Ah English company having contracted to purchase certain roller skates in this country, made arrangements with a New York bank to honor drafts drawn by the vendor when accompanied by a bill of lading. The vendor wrote the New York bank a letter asking about the credits used, to which the bank replied stating the amount of the credit and that the same could be availed of by sight drafts drawn by the vendor on the English firm when ¿ccompanied by bills of lading covering the shipment of merchandise for the same amount. After some shipments had been made, the English firm became dissatisfied with the quality of the goods and canceled the credit in the bank. Under its agreement the bank was subject to the control of its London correspondent in opening and canceling credits, although this was unknown to the vendor. Later a draft, duly accompanied by bills of lading, was presented to the New York bank for payment and payment was refused. The draft and bill of lading were returned to the vendor and finally retained by it: Correspondence between the vendor and the English company ensued, and finally the vendor directed the express company which held the goods covered by the bill of lading to turn them over to the English company for sale. The vendor never,received payment for these goods and sued the New York bank to establish its liability for the amount of the draft which it had rejected. It was conceded that the defendant never had any property belonging to the English company except the credit established through the. company’s London bankers. ■
Held, that, if it were conceded that the letter of the New York bank to plaintiff constituted a contract to honor the drafts, its liability was limited to such as were accompanied by bills of lading covering goods to the amount thereof;
That when plaintiff finally retained the bill of lading attached to the last draft and directed the disposition of the goods covered thereby, it ter-' minated any right of recourse it might have had against the bank, for it thereby deprived it of the security to which it was entitled against any advances made on the account of the English company.
Submission of a controversy upon an agreed statement of facts pursuant to section 1279 of the Code of Civil Procedure.
Theodore L. Bailey, for the plaintiff.
Ambrose G. Todd, for the defendant.

Opinion:
Dowling, J.:
Prom the agreed statement of facts herein it appears that plaintiff, a foreign corporation, having its office at Chicago, in the State of Illinois, contracted prior to March 30, 1909,. to sell to A. H. Selwyn, Ltd., of London, Eng., certain merchandise, consisting of roller skates of the value of about $1,100, and subsequently and prior to May 14, 1909, contracted for other merchandise of the same character to the further amount of about $230. It was agreed between plaintiff and Selwyn that as each shipment was made by the former it was entitled to draw a sight draft on the latter, with bill of lading attached, for the amount of the shipment, which draft Selwyn would arrange ta have paid by defendant at New York, upon presentation thereof with the bill of lading attached. In pursuance ,thereof the London City and Midland Bank, acting on behalf of Selwyn, on March 20, 1909, instructed defendant to pay plaintiff the amount of its drafts on Selwyn not exceeding $800, when accompanied by bill of lading, and authorized defendant to debit the account of the London bank with the amount of the payment. Thereafter, on March 31, 1909, the amount of the payments so authorized was increased by the sum of $550, making a total authorized disbursement of $1,350. The defendant duly acknowledged the receipt of these advices from the London bank. On April 9, 1909, plaintiff wrote defendant: "We have been instructed by our agents, A. H. Selwyn, Ltd., of 35-37 Noble S't.,London, who have ordered from us some seven hundred pans of skates, which will amount in the neighborhood of from $1,000 to $1,100, to draw sight drafts accompanied with bill of lading on you for the above amount. We write to know if we ship these goods to you if you will accept our sight draft in the above firm's name and pay for these goods f. o. b. cars New York, less -2%. As the shipment is about ready we would thank you for an immediate reply." To this the defendant replied as follows, on April 12, 1909: "Replying--to your esteemed favor of the 9th inst.,' we take pleasure in advising you that there have been opened credits aggregating' $1,300 to be availed of by sight drafts drawn by your. good selves on Selwyn, Ltd., accompanied by bill of lading-covering shipment of merchandise for same amount. It will be in order for you to draw in accordance with these terms on through bill of lading to London." Thereafter plaintiff (relying on the letter of April twelfth) on April 16 and 28, 1909, presented sight drafts to defendant drawn on A. H. Selwyn,' Ltd., for $498.95 and $299.88, respectively, accompanied by bills of lading covering the shipment to Selwyn at London of merchandise to such amounts, and defendant paid the drafts and accepted the through bills of lading for the goods which •had been forwarded to London via the American Express-Company. On May 14, 1909, still relying on the same letter, plaintiff mailed a third sight draft on A. H. Selwyn, Ltd., to defendant, amounting to $529.02, and accompanied by a bill of lading for goods to that -amount which had on the day prior been shipped by plaintiff to Selwyn. Before this draft was presented to defendant, and before it had any knowledge of this third shipment, it had received a cablegram, dated May 14, 1909, from the London City and Midland Bank as follows: " Cancel credit favor Chicago Roller Skate Company a¡c Selwyn." Defendant thereupon refused to pay the draft in question, and on May seventeenth telegraphed plaintiff, "Yours, fourteenth. Credit cancelled. Instruct what to do with documents, " and followed this by a letter on May eighteenth, returning the draft and bill of lading to plaintiff and advising it that as the credit established by defendant's London correspondent had been can- ' celed it could make no further advances under the same. It is conceded that under the agreement between.the London bank and defendant, the latter was subject to the control and direction of the former in the opening and- canceling of credits, ' although plaintiff had no knowledge of such agreement. Plaintiff declined to retain the draft and bill of lading returned to it, and the same were returned and again presented to defendant by plaintiff on May twenty-first, being once more returned to plaintiff on May twenty-fourth. It appears that disputes had arisen as to the condition in which the first two shipments of skates had arrived at London, and Selwyn claimed that they were not only rusted, but defective in many particulars, and that it had paid for goods in no way up to the contract requirements. Hence their direction to cancel the credit and refusal to pay for the third lot, which finally reached London after plaintiff had endeavored in vain to stop it in transit. Correspondence ensued between Selwyn and plaintiff, in the course of which Selwyn on June 15, 1909, wrote to plaintiff, referring to the goods covered by the third bill of lading: " We*would now suggest that the last lot of six cases invoiced on the 14th May should be delivered to us by the American Express Company, you instructing them in Chicago to do so. We will then go ahead and if we can dispose of the skates without buffing at a reduction, we will do so, otherwise we will have them buffed up at your expense.
"If you deliver this shipment now to hand without collect, this will mean an allowance of 529 of the total shipment, by which we make 1,321 pairs. This will work out at an allow-of 400 per. pair, and should the loss be less than this we will remit you the difference; should it be more we will have to charge you up with the amount of the difference.
"The American Express Company here are writing their Chicago office to cable them if you accept the above proposition, so that there may be no delay in settling this question, and so save the market by disposing of this bad stock, so that yóur giving instructions to the American Express Company in Chicago to deliver us the goods, we shall hear within a day or two."
' Thereafter plaintiff instructed the American Express Company at London to deliver the goods in question to Selwyn, and wrote the latter, on July 9, 1909: "We instructed, the American Express Company to turn over the six boxes of skates which they have in London. Sell these at whatever figure you can and remit- to us what is due us. The skates which we ship you hereafter will be polished and we feel sure that you will have absolutely no complaint as to their finish."
The Chicago office of the American Express Company was the one which was advised to turn over the goods to Selwyn, and having communicated the instructions to its London office, the agent óf the latter wrote Selwyn on July 10, 1909: "We confirm our telephone message of to-day, to the effect that we have received a wire from America indicating that the proposition to the Chicago Roller Skate Company had been agreed to, viz., that they release the six cases covered by their invoice of May 14th, through bill of lading 8415 without payment, and that you will sell the skates you have on hand to the best advantage. We are therefore delivering to you the six cases covered by BL8415 in'accordance with our cable authority." Selwyn sent to plaihtiff a letter on the same date containing- the following: "We had this pleasure last, on-the 30th ult., and now hear from the American Express Company, that they have had a cable from their Chicago office informing them that you agreed to the proposition contained in our letter to you dated the 15th June, 1909. They are accordingly delivering us the six cases without payment, and we should suggest that you write to the New York Produce Exchange Bank, New York, and inform them that you have settled with us, and, therefore, you do not require the payment from them, as they do not like the way this transaction has taken place, as they always expect when they advance money for their customers that the manufacturers deliver salable goods in accordance with instructions." The plaintiff has never been paid anything by Selwyn on account of the goods in question.
Plaintiff seeks to establish the defendant's liability for the amount of the draft in suit.on the ground that the latter's letter of April twelfth constituted a contract between them by which, in any event, defendant was bound to pay the amount of the draft upon presentation, when a bill of lading representing goods to an equal amount accompanied it, and that regardless of the disposition thereafter made of the goods defendant is liable, as plaintiff shipped the goods relying on' the alleged contract. Ooncededly defendant never had any property of any kind belonging to Selwyn applicable tb the. payment of its obligations, save in so far as the London bank had established a credit for Selwyn with defendant.- The bat anee of this credit would have been sufficient to have met the third draft, hut before it was presented the London bank canceled the remainder of the credit as it has the undoubted right to do, and defendant then had no funds whatever applicable to Selwyn's credit against which to charge the' amount of the draft, if paid. It is not claimed that defendant has been guilty of any fraud or duplicity,, or that the credit was collusively canceled. The reason for cancellation appears in the dissatisfaction with the first two shipments which had been paid for prior to delivery and before examination by the vendee.
Treating plaintiff's letter of April ninth and defendant's reply of April twelfth as a contract,' as" plaintiff insists it is, then defendant agreed to honor plaintiff's drafts only when it was protected in their payment by the delivery into its possession of bills of lading for goods to an equal amount, so that the control of the goods furnished security for the advances made. In the case'at bar plaintiff itself violated what it claims to have been the contract by finally retaining the hill of lading, by dealing with the goods as its own, by treating with Selwyn directly for a settlement of the dispute over the purchase price; by reaching an arrangement with it and by finally asserting its full ownership of the goods by directing the carrier to deliver them to Selwyn.
Defendant has not disregarded any right of plaintiff. The statements contained in its letter were correct in- every particular. It concealed no material fact from the plaintiff. It was guilty of no laches, but promptly advised plaintiff of the cancellation of Selwyn's credit. When plaintiff retained the hill of lading for these goods and undertook to direct their disposition it effectually terminated any right of recourse against the defendant, whom it had thus deprived of the security it was entitled to have as against any advances it made on Selwyn's account.
Judgment must be directed in favor of defendant, with costs.
Ingraham, P. J., Laughlin, Scott and Miller, JJ., concurred.
Judgment ordered for defendant, with costs. Order to he settled on notice.