Court Opinion

ID: 8790769
Source: CourtListenerOpinion
Date Created: 2022-11-26 13:49:52.597848+00
Date Added: 2024-06-11T17:03:20.283584
License: Public Domain

HAND, District Judge,
(after stating the facts as above). The seventh article of the petition alleges that the drawer represented to the purchaser that the “drafts were drawn pursuant to agreement existing between” the drawer and the drawee. The petition in the tenth article alleges that it was a well-known and established custom in such cases for the New York banker to deposit against these drafts specific security, and that of this custom the purchaser had knowledge and relied upon it. The representation must therefore be interpreted as equivalent to the drawer’s statement as an inducement to the purchaser that the drawee had agreed to accept the drafts and that the drawer had deposited collateral against the acceptances. I do not think that the drawer should be thought to have said this only to persuade the purchaser that the drawee would accept because he had agreed to accept, but also to persuade him because securities had been deposited against the acceptances. The turning point of the case then becomes this: Should this representation as to the collateral be limited to the period after acceptance, or should it be interpreted as extended on the purchaser’s behalf so as to cover the whole period during which the draft was outstanding?
The Court of Appeals of the State of New York, in Muller v. Kling, 209 N. Y. 240, 103 N. E. 138, in the case of an express representation that the acceptance would be secured, has held that the security inured as well to the purchaser before acceptance as after. In that case Judge Gray suggests that the interview between the drawer and the purchaser must have meant something relative to the purchaser’s proposed action. It must have been intended to induce him to buy the draft by assuring him that at some time he would have the benefit of the collateral. That the period which he should have that benefit should include the time before acceptance I think is clear, for the following reasons: Be*968fore acceptance the holder has the security only of the drawer; after acceptance he has the security of both drawer and drawee. To assure the holder that he may rely upon the drawer’s collaterals can hardly in reason be interpreted as covering only that period when he has the credit of both drawer and drawee. That would be to secure him while he has the security of two names and leave him unsecured while he has but one of the two, which is a most unlikely purpose to attribute to the parties. I can well understand how the contrary might be true, if acceptance relieved the drawer, and so left the holder with the obligation only of a foreign acceptor about whom he might be supposed to know little; but I dan see no reason why, when the drawer is representing that there are securities against his own obligations,'he should be thought to intend those obligations only during a time when they were already secured by the added obligation of the drawee. Any purpose to induce the purchaser to buy on the faith of the collateral ought to include, I should think, the whole time when he held them.
As I view the case, therefore, it does not present the question of a drawer securing the drawee and selling the draft without any representation. It is therefore not. necessary to consider the propriety of the ruling in Watts v. Shipman, 21 Hun, 598, which seems to go to the extent of allowing the holder recourse against, the collateral in that case. Marine Fire Insurance Bank v. Jauncey, 3 Sandf. 257, is not to the contrary. In the first place, the drawee had accepted, and the purchaser was of course entitled to the security if there was security. The only question was whether the cotton was general assets or specifically pledged, and the court held it was general assets which the drawee might apply generally on his account, as he did. I can hardly think that any general questions of equity arise, or that Hurley v. Atchison, Topeka & Santa Fe Ry., 213 U. S. 126, 29 Sup. Ct. 466, 53 L. Ed. 729, has any application. The question is, of the interpretation of the parties’ intention, and is equitable only in the sense that all such interpretations involve questions of equity. The case depends, I think, upon the fact that the drawer represented to the purchaser, among other things, that the draft was secured, and that this representation should be construed as the Court of Appeals construed it in Muller v. Kling, supra.
The report is affirmed, with costs.