Court Opinion

ID: 7893508
Source: CourtListenerOpinion
Date Created: 2022-09-08 21:51:05.537763+00
Date Added: 2024-06-11T16:31:59.482198
License: Public Domain

Bartol, C. J.,
delivered the opinion of the Court.
This suit was brought by the appellants, bankers of New York, against the appellees, as drawers of a bill of exchange, dated May 22d, 1868, at sixty days sight, on Joseph and Charles Sturge, Birmingham, England; drawn against a cargo of red wheat, per brig “Ocean Belle,” and payable in London.
Upon the day of the date of the bill, the appellees sold and endorsed the same to the appellants, and on the same day, by letter of hypothecation, “lodged the bill of lading for the cargo with the appellants as collateral security for the acceptance and payment of the bill, and authorized the appellants, in case they thought it necessary, to place said red wheat on arrival in the hands of the appellants’ brokers for immediate sale, and to apply the proceeds in or towards payment of the bill.”
The bill of exchange was sent by the plaintiffs in due course of mail, together with the-collateral documents, to the Union Bank of London, and was by it transmitted to the “ Birmingham and Midland Bank,” Birmingham, to procure *600acceptance. The drawees, Joseph and Charles Sturge, declined to accept the bill, considering themselves not bound to do so by their contract with Hall & Loney, the drawers, unless they were put in possession of the bill of lading of the cargo against which it was drawn. The Union Bank of London, the agent of the plaintiffs, considering that by the letter of hypothecation, it was entitled to hold the bill of lading as “ collateral security for the payment of the draft,” retained possession of the same.
The bill was protested for non-acceptance, and notice thereof was transmitted to the defendants, the drawers.
Upon the dishonor of the bill, the cargo was sold under the direction of the London agents of the appellants, and the net proceeds applied towards payment of the amount of the bill; but being insufficient, this suit was brought to recover the deficiency arid statutory damages; after notice of all the facts to the appellees, and demand of payment from them.
At the ti'ial of the case, one prayer was offered by the plaintiffs which was rejected, and an instruction was given to the jury “ that there was no sufficient evidence in the case, from which they could find due presentment for acceptance of the bill of exchange offered in evidence, and that the plaintiffs were not entitled to recover.”
It appears from the proof that the presentment was made by the notary’s elerlc to a clerk in the employ of Messrs. Joseph and Charles Sturge, at their counting house or place of business. The clerk of the notary was competent to act, as was decided in Munroe vs. Woodruff & Robinson, 17 Md., 159, and Fulton vs. Maccracken, 18 Md., 528. But it is objected that the presentment ought to have been made to the Messrs. Sturge, and that a presentment to their clerk was not sufficient. But this depends upon whether the clerk was their agent in the premises duly authorized to accept or refuse. Such authority may be proved by parol; and “the proof may, as in other cases of agency, be circumstantial and indirect.” 1 Parsons on Bills and Notes, 349; Nelson vs. *601Fotterall, 7 Leigh, 179; Stainback vs. The Bank of Va., 11 Grattan, 260.
We think that in this case there was evidence, competent and sufficient to be submitted to the jury to prove, that the clerk of the drawees was authorized to refuse acceptance of the bill; and therefore the instruction given to the jury was erroneous.
But in the view we have taken of this case, it is not important to discuss this question further, because we are of opinion that under the circumstances stated in the testimony, the defendants were not entitled to require formal presentment for acceptance and notice of non-acceptance of the bill of exchange.
There can be no doubt of the correctness of the appellants’ position, that the effect of the delivery of the bill of lading to them, together with the letter of hypothecation as collateral security, both for the acceptance and payment of the bill of exchange, was to entitle them to hold the same till the bill should be paid; they were not legally bound to surrender the security, upon the acceptance of the bill, and to trust to the personal liability of the acceptor's, for its payment. This exonerated the drawees from their obligation to accept; because under their contract with the defendants, the latter were authorized to draw, only against the cargo of wheat to bo shipped by the “Ocean Belle,” and they were therefore not bound to accept without the delivery to them of the bill of lading. Allen vs. Williams, 12 Pick., 297; Bank of Rochester vs. Jones, 4 Coms., 497; Craig vs. Sibbett, 15 Penn., 238; Shepherd vs. Harrison, 4 L. R., (Q. B.,) 496.
Thus it is clear that the defendants, after drawing the bill of exchange, placed it in the power of the plaintiffs, and gave them the legal right, to retain in their own hands until the maturity of the bill, and to withhold from the drawees, the muniment of title to the shipment, without the receipt of which the latter were under no obligations to accept the bill.
*602The question is whether this state of facts is sufficient to dispense with the necessity of a due presentment and notice of non-acceptance.
In Rhett vs. Poe, 2 How., 457, it was held that “ where a drawer of a bill has no right to expect the payment of it by the acceptor; where, for instance, the drawer has withdrawn, or intercepted funds which were destined to meet the bill, or its payment was dependent upon conditions which he must have known he had not performed, such drawer cannot claim to be entitled to notice of the non-payment of the bill.” .
The same rule applies to the non-acceptance of a bill. Eichelberger vs. Finley, 7 H. & J., 386.
The rule of law applicable to this subject has been laid down by this Court in Orear & Berkley vs. McDonald, et al., 9 Gill, 350.
The result of the decisions is, that the right of notice of dishonor does not turn absolutely upon the fact, whether the drawers of the bill of exchange actually had funds in the hands of the drawees; but whether they had a reasonable expectation that the bill would be accepted and paid. To quote the language of the Court in the case last cited: “If the drawers, at the time when the bill should have been presented, had the right to expect, reasoning upon the state of facts connected with the transactions as they then existed between the drawees and themselves, that their bill would be honored, they were entitled to demand and notice.” We refer also to Claridge vs. Dalton, 4 M. & S., 230; Kinsley vs. Robinson, 21 Pick., 328, and Dickens vs. Beal, 10 Pet., 577.
Applying the rule deduced from these cases to the one before us, we are of opinion that by the course pursued by the appellees, in parting with the bill of lading and pledging it as collateral security to the appellants, both for the acceptance of the bill of exchange and for its payment at maturity, they violated their contract with the drawees, and had no reasonable ground to expect that they would accept the bill. Such a proceeding was equivalent to intercepting the fund *603upon which the bill was drawn, and brings the case within the principle of Rhett vs. Poe, 2 How., 457.
(Decided 21st June, 1872.)
There is no doubt that in this case the appellees acted in good faith, and that they honestly expected or hoped that the bill would be accepted; but the rule of law requires that they should have had a reasonable ground for their expectation; that is, that it should have been based upon a promise or engagement of the drawees to accept, or an authority derived from them to draw the bill; and a performance of the contract or condition on the part of the defendants upon the performance of which the acceptance of the bill depended.
They must be charged with knowledge of the legal consequences of their own acts, and cannot • be heard to say that they were ignorant of the construction and effect of their contract of hypothecation. And having thus failed to comply with their contract by transmitting to the drawees the muniment of title to the cargo, against which alone the bill was drawn, they cannot be said to have had such reasonable grounds to expect that the bill would be honored, as to entitle them to insist upon due presentment and notice of its nonacceptance.
Being of opinion that the Circuit Court erred in its instruction given to the jury, and that the appellants are entitled to have an instruction given to the jury in conformity with the views herein expressed, we reverse the judgment and order a new trial.

Judgment reversed and new trial ordered.

Stewart, J., dissented.