Pan-American Bank & Trust Co. v. National City Bank

• Decision Date: 09 February 1925
• Docket Number: No. 119.,119.
• Citation: 6 F.2d 762
• Parties: PAN-AMERICAN BANK & TRUST CO. et al. v. NATIONAL CITY BANK OF NEW YORK.
• Court: U.S. Court of Appeals — Second Circuit

6 F.2d 762 (1925)

PAN-AMERICAN BANK & TRUST CO. et al. v. NATIONAL CITY BANK OF NEW YORK.^*

No. 119.

Circuit Court of Appeals, Second Circuit.

February 9, 1925.

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Rounds, Hatch, Dillingham & Debevoise, of New York City, Eugene J. McGivney, of New Orleans, La., and Francis E. Neagle, of New York City (Ralph S. Rounds, Eugene Congleton, and Raymond E. Cook, all of New York City, on the brief), for plaintiffs in error.

Shearman & Sterling and Carl A. Mead, all of New York City (John A. Garver and Justus Sheffield, both of New York City, on the brief), for defendant in error.

Before HOUGH, MANTON, and HAND, Circuit Judges.

HOUGH, Circuit Judge (after stating the facts as above).

At the very threshold of this matter the parties disagree as to its nature. Pan-American describes it as an action "upon a commercial letter of credit," while the other side insists that it is brought on an agreement by Pan-American to reimburse City Bank for whatever it paid out on such promise of reimbursement. The difference is more than a technicality, for the nature of any legal procedure is determined by the pleading. That pleading may be bad, but, good or bad, the pleas dominate the evidence, and define or delimit the scope of the pleader's efforts.

Thus measured, the City Bank is right in its characterization of the proceeding, for the complaint sounds solely upon the request of Pan-American that City Bank issue a certain letter of credit. Compliance with that request is then averred, and the pleader concludes by resting on the legal implication that Pan-American should pay the cost of compliance with request. Our first inquiry, therefore, is as to what promise or agreement was made by Pan-American. There is here no question of fact as to what was said or done; everything is in writing; such differences as exist arise from differing interpretations of written words.

It is true that in the exchange of letters and telegrams the word "guarantee" is continually used; we may even assume that, if the men of affairs who composed the various writings had been asked (before the price of sugar fell and counsel were consulted) what they had done, the answer might have been that Pan-American had guaranteed payment by some one of a letter of credit. But it is clear that the legal effect of what men do is not determined by the names they affix to their deeds. The essential nature of their acts determines, and the law has its own names for the results they achieve. Border Bank v. American Bank (C. C. A.) 282 F. 73; Second National Bank v. Columbia, etc., Co. (C. C. A.) 288 F. 17, 30 A. L. R. 1299. Undoubtedly the names by which men describe their acts are evidence of the nature of their doings, often strong evidence; but acts control names, and that deeds speak louder than words is good law.

We can therefore unhesitatingly hold that the result of the paper writings in evidence was not that Pan-American guaranteed anything; i. e., agreed to answer for the performance of some obligation in the case of another's default. On the contrary, it did undertake and promise to pay City Bank whatever it lawfully paid, the premises considered, plus one-eighth of 1 per cent. This holding renders unnecessary consideration of the cases regarding guaranties by corporations and especially by banks operating under either the National Banking or Federal Reserve Acts. See Border Bank Case, supra; People's Bank v. National Bank, 101 U. S. 181, 25 L. Ed. 907; Cochran v. United States, 157 U. S. 286, 15 S. Ct. 628, 39 L. Ed. 704; Coal & Iron Bank v. Suzuki (C. C. A. 2d), 3 F.(2d) 764, opinion filed November 3, 1924.

More specifically, we hold that the legal relation of parties is quite fairly summarized in Pan-American letter to City Bank of May 25th, declaring that "We have opened for account of Seago & Co. a credit through you," meaning that Pan-American had given Seago credit, by means of asking City Bank to use its Brazilian branch to put the arrangement through, while the drafts drawn against the credit might be presented for payment either "to you in New York or to us here" — in New Orleans. The essential nature of the transaction becomes plain, and even simple, when its development is noted; for what Pan-American wanted to do for its customer, Seago, was to issue its own letter of credit available to Barcellos in Brazil. It yielded to the obviously truthful suggestion that its own promise for so large a sum was hardly available in Rio de Janeiro, and it therefore procured City Bank to do for it what business, not legal disabilities, prevented its doing for itself. A plainer reimbursement contract, enforceable in assumpsit, it is hard to imagine.

To this Pan-American answers that the undertaking was on its part ultra vires, a defense which we will assume may be presented, though it appears for the first time in an amended answer served some months after action begun, and bears no relation to the reasons advanced on September 4th for Pan-American's anticipatory breach of any and all contracts giving rise to liability on the Barcellos credit. Examination of this defense reveals two branches thereof; one that Pan-American as a bank could not contract, and the other that Wuerpel as representing the bank had no authority to contract.

The first objection is disposed of by the above analysis of the contract made, for it is undoubted that Pan-American had perfect chartered authority to issue its own letter of credit to Barcellos; no legal reasons existed against such action, and that course was plainly the original intent of the New Orleans parties concerned. If, then, Pan-American could issue its own letter, it could agree with City Bank to reimburse payments made by the latter on the letter actually issued; a document not differing legally from that originally proposed, but from a business standpoint more available where Pan-American wished it used. This was the commercial as well as the legal relationship with each other voluntarily assumed by the parties hereto, a position very different from that recently discussed in Nowell v. Equitable, etc., Co., 249 Mass. 585, 144 N. E. 749, a decision upholding the defense of ultra vires to an action upon a plain and inescapable guaranty.

The second objection we reject on the facts, which uncontradictedly show a course of business by which for purposes of commercial credit Mr. Wuerpel had full authority to act for Pan-American. Discussion of evidence would yield no legal rules; there was not enough testimony impugning Wuerpel's authority to submit to a jury. His judgment in selecting customers like Seago was and is immaterial. The method or means of fulfilling the contract now fully described required consideration.

The Rio branch of City Bank existed under the Act of December 23, 1913, and its amendments (U. S. Comp. Stat. § 9745). That statute requires, inter alia, that national banks having foreign branches "shall conduct the accounts of each foreign branch independently of the accounts * * * of its home office, and shall at the end of each fiscal period transfer to the general ledger the profit or loss accrued at each branch as a separate item." That is, the branch is not a mere "teller's window"; it is a separate business entity.

To such a branch the home office gave instructions by the cable of May 26th to "negotiate sight drafts" as drawn by Barcellos, if accompanied by proper documents. The word "negotiate" is technical, it has received much exposition (see Words and Phrases, First and Second Series); but the result is expressed in the Negotiable Instruments Law (section 60 of N. Y. Act Consol. Laws, c. 38), which sums up judicial exposition by declaring that an "instrument is negotiated when it is transferred from one person to another in such manner as to constitute the transferee the holder thereof." Consequently, when the Rio branch, in fulfilling instructions, acquired from Barcellos his drafts drawn on the home office in New York, it "negotiated" them, and became (as no one doubts) the holder thereof, and a holder for value.

But the Rio branch, in so becoming a holder of the drafts, and then sending them to New York for collection, assumed the same relation to its home office that any other bank or person that had similarly negotiated the paper would have assumed. In fact, as the evidence shows, the drafts and accompanying documents went from the Rio branch to the New York home office with a demand for credit; i. e., a demand for payment, and payment by the demanded credit was given the branch. This was just what the cited act of Congress in effect requires, and illustrates the rulings that, in respect of the collection of forwarded paper, branches and a parent bank are to be considered as separate entities. Woodland v. Fear, 7 E. & B. 519; Clode v. Baylay, 12 M. & W. 579; McNeil v. Wyatt, 3 Humph. (Tenn.) 125, considering the point generally; U. S. Bank v. Goddard, 5 Mason, 366, Fed. Cas. No. 917, under the statutes regulating the Bank of the United States; and Chrzanowska v. Corn Exchange Bank, 173 App. Div. 285, 159 N. Y. S. 385, affirmed 225 N. Y. 728, 122 N. E. 877, under statutes regulating banks chartered by the state.

Thus the case presents a legal problem identical with the common one resulting from discount by any indifferent dealer in commercial paper of such a draft as Barcellos', and presentation by such dealer of the draft to the drawee for payment. An instance is International, etc., Corp. v. Irving Bank (C. C. A.) 283 F. 103. We think it unnecessary to go over again the rules laid down regarding drafts drawn under commercial credits and accompanied by documents evidencing a c. i. f. transaction. Our views as to these rules and the meaning of "c. i. f." have been stated in the case last cited, and in Klipstein v. Dilsizian (C. C. A.) 273 F. 473, Harper v. Hochstim (C. C. A.) 278 F. 102, 20 A. L. R. 1232, American, etc., Co. v....