Court Opinion

ID: 8311924
Source: CourtListenerOpinion
Date Created: 2022-10-17 15:50:58.490336+00
Date Added: 2024-06-11T16:44:45.605173
License: Public Domain

STORY, Circuit Justice.
The first question naturally arising in this cause, is, as to the true construction of the circular of the plaintiffs, of the 1st of January, 1838, with reference to which the letter of credit in the present case was given and accepted by the testator, Lyman. By that circular, Messrs. Baring & Co. expressly stated, that “the banking commission on credits or bills, used east of the Cape of Good Hope (is) to be two per cent.” The question is, what is to be deemed in the sense of this circular a use of the bill of credit? Is it the mere drawing of any bill under the letter of credit, in favor of a third person, who, upon the faith of the letter of credit, takes and receives the same ‘for value, and is entitled to hold and use it on his own account? Or is it necessary to make the right to the commission attach, that it should be presented to Messrs. Baring & Co., and accepted and paid by them, or at least should be accepted by them? If it be necessary, that acceptance and payment, or, at least, that acceptance by them, should take place before the right to the commission attaches, it is very clear, that the present action is not maintainable; for there never has been any presentment of the bills, drawn in the present case. My opinion, however, is that neither presentment for acceptance to Messrs. Baring & Co., nor payment by them, is essential, under the terms of the circular, to give the right to the stipulated commission. In the sense of that circular, the bill of credit was used the moment any bills were drawn upon Messrs. Baring & Co. under the letter of credit to the testator, Lyman, and placed in the hands of holders, who took it for value upon the faith of the letter of credit, and thus became entitled, as such holders, to require an acceptance and payment thereof, according to their tenor, whether they were ever presented for acceptance and payment, or not. My reason is, that Messrs. Baring & Co. from the moment, that such bills were drawn and taken for value, became bound, as well to the holders, as to Lyman, to accept the bills upon presentment. and to pay them at maturity; and if they had refused, an action might have been *801maintained against them, upon the promise contained in the letter of credit, not only by Lyman, but by the holders. Indeed, if the bills were made payable at a certain time after date, instead of after sight, and were received by the holders upon the faith of the letter of credit, the holders might maintain an action thereon against Messrs. Baring & Co., as upon a virtual acceptance. Such was the decision of the supreme court in the case of Coolidge v. Payson, 2 Wheat. [15 U. S.] 66, following out the doctrine of the cases of Pillans v. Van Mierop, 3 Burrows, 1663, and Pierson v. Dunlop, 2 Cowp. 571, and Mason v. Hunt, 1 Doug. 296.
It is of no consequence, what were the nature and extent, or conditions, of the contract between the holders and Lyman, under which the bills were received, provided Messrs. Baring & Co. became for a single hour liable to accept and' pay the same to the holders; for every such contract would be res inter alios acta, with which Messrs. Baring & Co. could have nothing to do, and of which they could have no power to avail themselves, not standing in privity with the parties thereto. The question is not, what were the duties or liabilities between Lyman and the holders, under the bills and contract connected therewith; but whether Messrs. Baring & Co. were liable thereon. The use made of the bills by the holders for value, after receiving them, was of no consequence to Messrs. Baring & Co., or whether any use was made by them at all; but whether any responsibility attached to them for a moment, to accept or pay the bills under the letter of credit. The commission is, by the very terms of the circular, to arise from the use of the letter of credit, and not from the use afterwards made of the bills drawn under it. Suppose the bills had been unconditionally transferred to third persons, so as to become their absolute property, and after-•wards, upon a new negotiation, they had been delivered up and cancelled by the parties before acceptance, would not the right to the commissions have attached? Suppose the bills had been accepted by Messrs. Baring & Co., and afterwards and before the maturity, they had been taken up and paid by Lyman, would not the like right to the commission have attached? The commission was a commission, not accruing upon the payment of the bills, but designed as an indemnity and compensation for the risk run, and responsibility incurred by Messrs. Baring & Co. and their duty to accept and pay the bills, if drawn under the letter of credit. If ever there would be perfect justice in the application of the maxim, Qui sentit commodum sentiré debet et onus, the present case, under such circumstances, would seem to furnish a fit occasion to apply it. I agree, that if Messrs. Baring & Co. were never responsible to the holders of these bills at all, and that no right attached in favor of the holders, for a moment, to bind them to the acceptance thereof, then: they have no claim for the commission; for they have not earned it, and the letter of credit has not been used. On the other hand, if they are entitled to any commission,, they are entitled to the whole commission,, for there can be no apportionment of the-contract at law. If the bills have been subsequently withdrawn, or paid by Lyman,, that cannot vary the rights of Messrs. Baring & Co., if any rights once attached. It is a mere waiver by the holders and Lyman, of the right to require an acceptance and payment of the bills, instead of Lyman’s, providing for a subsequent reimbursement, after payment thereof by Messrs. Baring & Co. In the receipt of Lyman, of the 7th of June, 1838, he acknowledges the receipt of the letter of credit, and among other things, he promises “to provide, in London, sufficient funds to meet the payment of whatever may be negotiated by virtue thereof, at the maturity of the bills.” Now, it seems to me, that the word “negotiated” is here used in precisely the same sense, as the word, “used” in the circular. A bill is properly-said to be negotiated, when it has passed into the hand of the payee, or indorsee, or other holder for value, who thereby acquires a title thereto.
In my judgment, therefore, the whole case turns upon the consideration, whether these bills were, at any time, in the hands of the holders, valid subsisting bills, taken by them for value, and held, either absolutely, or as security, for advances made to Forbes on account of Lyman; or whether they were merely lodged in the hands of Russell & Co., not-to give a present title of any sort thereto, as-security, or otherwise, but merely as a future-springing, contingent title, dependent upon: future occurrences, and in the meantime to-be held as a mere special bailment in trust and for the benefit of Forbes or Lyman. In-other words, the question seems to me (as I intimated at the argument), to resolve itself into this point, whether the bills were in the-hands of Russell & Co. upon a condition-precedent, or a condition subsequent. If the ■ former be the true view of the facts, them they took no title whatsoever in the bills, except in the event, that Lyman should refuse-to ratify the acts of Forbes, as to the advances and arrangements made for the benefit of Lyman, in lieu of the bills. On the-other hand, if the latter be the true view of the facts, then a present title to the bills; passed to Russell & Co., subject to be divest: ed by the acceptance and ratification by Lyman of the acts and arrangements of Forbes, And to the consideration of this point I shalT. now address myself. It is not an unimportant circumstance, in examining this point,., that Forbes, the agent of Lyman, and a partner in the house of Russell & Co., through' whom the whole transaction was negotiated,, and who certainly stands before the court as a disinterested witness, explicitly states im *802Ms deposition, tliat “the bills were held by Russell & Co. as their security for the advances they had made. They had no orders to advance funds for Hr. Theodore Lyman; but, thinking it was for his benefit,* they did it, and held the bills then as their security.” Now, if this statement is to be relied upon, as the true exposition of the transaction, it puts an end to the controversy; for if the bills were held by Russell & Co., as a present security for their advances, they had a present title to them, and a present right, against Messrs. Baring & Co., to demand the acceptance and payment thereof; otherwise they would be no security at all. Still, Forbes may mistake in the matter; and, therefore, we are led to examine, whether the actual transactions, as disclosed in the correspondence, and other transactions in Canton at the time, do, or do not. confirm his recollection and interpretation thereof. And 1 must say, that upon a full examination of all the acts and correspondence of the parties, it seems to me, that Forbes is fully borne out and confirmed in his statement by them; and that every other view thereof would be somewhat forced and strained, if not unnatural. In the first place, the bills were actually indorsed and sent by Russell & Co. to their agent in Boston, to await the final decision of Lyman, and if he did not confirm the proposed arrangement, then to be used and forwarded to London. Certainly, this would seem to be the exercise of a virtual authority and title over the bills, as owners, and could, in no just sense, be deemed a mere agency for the drawer, or for Lyman. It vested a title to the bills in favor of the agent at Boston, good against Messrs. Baring & Co., and against Lyman, and indeed against all the world, except Russell & Co. The natural effect of the indorsement, was that of an in-dorsement, conferring a present legal title to the agent, to hold and use the bills for the benefit of Russell & Co., and not a mere right to hold the same, as bailee, for the benefit of Lyman, until he had done some future act to transfer the title to Russell & Co. In point of fact, also, although Lyman’s executor, (he having died on the 24th of May, 1839, before the advices were received,) assented to the arrangement, made by the agent, Forbes, when the advices were received, and this assent was immediately made known to the agent of Russell & Co., in Boston; yet the bills of exchange were not thereupon surrendered, but they remained in the possession of the agent of Rus-rsell & Co. in Boston, (as appears by his letter •of that date,) up to the 11th of July, 1840; and, indeed, it is stated, that the bills were not cancelled until December, 1840, after the last remittance had reached Canton. Now, if the bills were intended to take effect solely in the case of Lyman's refusal to assent and •confirm the arrangement of Forbes, and not before, as soon as Lyman had so assented to and confirmed it, they ought to have been given up. But the parties did not so act upon the case; nor did Lyman require the bills to be then given up. On the contrary, they were retained without any objection; and this can scarcely be accounted for, except upon the supposition, that they were retained as security for the due fulfilment on the part of Lyman, of the arrangement with Forbes by repayment at Canton, of the moneys advanced by Russell & Co. In this view, the retainer of the bills assumes a natural character. In any other view, it would seem inconsistent with the true rights and duties of the parties. Now, let us suppose, that after Lyman had acceded to the arrangement of Forbes, the moneys advanced by Russell & Co. had never been repaid to Russell & Co., either by the death of Lyman, or by the remittance being lost on the voyage, or in any other manner, would it not be clear, that the bills would ' be valid and obligatory against Messrs. Baring & Co., in the hands of the agent of Russell & Co., as well as against Lyman? If so, how can they be said not to be a security for the due fulfilment of the arrangement of Forbes? And if they were a security, must they not be so from the time they .were actually drawn and delivered to Russell & Co. up to the time, when the advances were repaid in Canton by Lyman? If they were designed as a security in this way, is it not equally clear, that Russell & Co. were, in the meantime, holders of the legal title for value?
Let us, in the next place, see, how the case stands upon the correspondence. The first letter of Russell & Co. to Lyman, of the date of the 18th of March, 1839, at Canton, says; “Your funds, under the credit of £25,000 at five shillings per dollar, with proceeds of rice and specie, we estimate, after deducting expenses of the ship, at about $106,000, which will not fill the ship by about one hundred tons. Freight could not be procured at over twenty dollars per ton; and if we had authority to fill up with freight for Boston, at market rate, we should doubt the expediency of so doing, fearing it might interfere with her ultimate destination. There is no demand, whatever, for exchange at the very unfavorable rate at which we have concluded to place your bills; and we have obtained a loan for the purpose of getting your ship away. But as our Mr. Forbes had no orders to resort to this, he authorizes us to draw your bills at the market rate, and to give you your choice of paying for them in London, or returning the proceeds of the £25.000 to us in dollars, without delay, paying at the rate of nine per cent, per annum, interest, until the amount is refunded. We shall, in either case, charge our usual commission of one per cent, for drawing, and shall send the bills and letter of advice to our agent in Boston, to be cancelled, upon your agreeing to replace the funds, or to bo forwarded to London for our account, if you conclude to meet them there." Again, on the 4th of May, 1S39, they wrote to *803Lyman as follows: “In our letter of tlio 18th ult. (meaning the 18th of March), we indicated the course, which we then thought of pursuing with regard to your funds. The present aspect of affairs, and the prospect for the future, is much changed since that date, and a different disposition of your bills would now be much more for our interest. But we confirm, what we then said, and now recapitulate more distinctly the arrangement, which we authorize our agent, (Mr. John M. Forbes,) to carry into effecr. Our R. B. Forbes has drawn on Messrs. Baring Brothers & Co. under this date, the following bills (enumerating them), proceeds to your credit at five shillings per dollar, making £25,000 sterling. These bills will be forwarded to Mr. T. W. Forbes, Boston, accompanied by the letters of advice. Should you determine to provide for them in London, they will be sent forward immediately. But should you prefer to replace the amounts to your debit, as per statement, annexed in this place, paying interest at the rate of nine per cent per annum from this date, you can do so,” &e. “When the remittance is realized in Canton at the market value, we shall consider your charge of interest at an end, and not till then.” The letter of advice of Russell & Co. to their agent in Boston, of the same date, which accompanied the bills, also of the same date, says: “On receipt of this letter, you will please call on Mr. Lyman, or his agent, and offer him a choice of the two plans indicated in our letter to him, one of which is, to allow the bills to be disposed of, as you may deem most for our interest, by selling them in the United States, and investing the proceeds in specie for our account, or forwarding them to London, to be there invested in specie for our account; or on the other hand, to cancel the bills in the United States, upon Mr. Lyman’s giving you full security, that the amount advanced to him, as per memorandum at foot, shall be returned to us in specie, the interest at the rate of nine per cent, per annum from this date, (May 4th,) to be charged, until the loan is realized in Canton, the dollars being disposed of at the market rate.”
Now, it seems to me manifest, that this correspondence, in its very terms and imports, demonstrates, that the parties understood the bills to be in the hands of Russell & Co. as the true owners thereof for value, as a present, immediate, and continuing security, for the advances made by them under the letter of credit, and the instructions for the voyage; that an option was intended to be given to Lyman to reimburse Russell & Co., by a remittance of the amount, in specie, to’Canton; and when that amount was received in Canton, and not till then, the interest was to cease, and the bills were to be cancelled. In this view, the correspondence amply confirms the deposition of Forbes, (the agent of Lyman,) that the bills in the intermediate time were in the hands of Russell & Co., as their security; and, of course, were their property, and were negotiated to them. Indeed, the language of the correspondence shows, that Russell & Co. treated the bills as their own in point of right and power of disposal, and only offered an option to Lyman to deliver them up, upon his acceding to another proposed arrangement, which was in the nature of a condition subsequent. It can make no legal difference in the case, that the drawing of the bills was never notified to Messrs. Baring & Co. That was not necessary to give them a legal validity, or to bind the latter to accept and pay them. It is sufficient, that they were bills drawn and negotiated for value under the letter of credit, and that the letter of credit was “used” for this purpose. Suppose, after the acceptance of the proposals by Lyman’s executor, the terms had not been complied with, can there be a doubt, that Russell & Co. could have enforced their rights under the bills against Messrs. Baring & Co.? They had nothing to do with the new proposals to Lyman, nor with his acceptance or refusal of them. Nor would it have been any justification of their refusal to •accept the bills, if Russell & Co. and Lyman had differed on the point, whether the proposals were accepted or not, or what was the true interpretation thereof. If the bills were once negotiated for value, to Russell & Co., conditionally or otherwise, as a present subsisting security, until they were actually can-celled by agreement of the parties, Messrs. Baring & Co. were bound by them. And I cannot but think, that the whole correspondence shows, that so all the parties understood the matter.
It was suggested at the argument, that R. B. Forbes, having become a partner in the house of Russell & Co. at the time, when the bills were drawn and delivered to Russell & Co., might vary the ease favorably to Lyman. I am wholly unable to perceive, how any such effect can arise. R. B. Forbes was still Lyman’s agent, and the bills were drawn as a security, not to Forbes alone, but to the firm; and the other members had a vested title in the same. There is nothing in the law, which disables any partner in a firm from being the agent of a third person, in drawing bills in favor of the firm, for advances made to such third person, under an express authority. A firm may negotiate its own paper to one partner, and the latter will thereby become the owner thereof; and on the other hand, a firm may take a separate negotiable security from one of its partners, and hold and use the same for its own purposes. A fortiori, the firm may do so, where he acts as agent of a third person.
Upon the whole, upon the best reflection which I have been able to bestow upon this subject, my opinion is, that the plaintiffs, upon the facts, are entitled to recover the full amount of the commissions; and that they ought to have judgment accordingly.