Royal Card & Paper Co. v. Dresdner Bank

• Decision Date: 20 August 1928
• Docket Number: No. 246.,246.
• Citation: 27 F.2d 791
• Parties: ROYAL CARD & PAPER CO. v. DRESDNER BANK.
• Court: U.S. Court of Appeals — Second Circuit

27 F.2d 791 (1928)

ROYAL CARD & PAPER CO. v. DRESDNER BANK.

No. 246.

Circuit Court of Appeals, Second Circuit.

August 20, 1928.

Spiro & Abrams, of New York City (Edmund L. Mooney and Wilber W. Chambers, both of New York City, of counsel), for plaintiff in error.

Sullivan & Cromwell, of New York City (E. H. Sykes, of New York City, of counsel), for defendant in error.

Before MANTON, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

SWAN, Circuit Judge.

In order to facilitate the purchase of goods in Germany, plaintiff procured from Irving National Bank of New York a letter of credit running to Samuel Baron, or assigns, drafts thereunder to be drawn against documents for merchandise to be shipped to New York not later than August 31, 1920. On February 28, 1920, Baron assigned this letter of credit to Gebruder Kratzmann, a Hamburg commission firm, and indorsed upon the face thereof:

"Assigned to Gebr. Kratzmann, Hamburg, Germany, in accordance with my letter of February 28, 1920."

The letter referred to stipulated that "this letter of credit is to provide payment only for goods shipped on orders placed by me, and signed by me, but not for any other merchandise." It also stated that the letter of credit was to be negotiated through the defendant. It is asserted by Baron, though his testimony is disputed, that, in consideration of his agreeing to have the letter of credit negotiated only through the Dresdner Bank, the latter orally agreed to honor drafts thereunder only after checking invoices against orders, in order to see that the drafts were negotiated in accordance with the terms of the assignment as well as of the letter of credit. For the breach of this alleged oral contract the present action was brought. The jury's verdict is equivalent to a finding that such a contract was actually entered into. The damages claimed are those alleged to have resulted from the failure of defendant to check invoices against orders, thus permitting payments to be made for goods which did not correspond completely with plaintiff's orders, or for which plaintiff had signed no order.

To insure against fluctuations in the rate of exchange, plaintiff requested the Irving National Bank to amend the letter of credit by permitting Baron to draw one-half the credit and establish a so-called "mark fund" therewith. This was agreed to, the Irving Bank cabling to defendant that Baron was authorized to draw as requested, "provided you hold marks and pay only against shipping documents in accordance with terms of credit." The defendant accordingly honored Baron's draft for $47,000 on April 23, 1920, and established a fund of 2,820,000 marks. Under Baron's testimony, the jury might have found that the oral agreement as to checking invoices against orders applied to the mark fund, as well as to the original letter of credit. The creation of this fund does not, therefore, affect the nature of the obligation sued on. It is set out only because the complaint alleges two causes of action, the first involving drafts drawn against this mark fund, and the second dollar drafts negotiated through the defendant.

On the first cause of action the jury rendered a special verdict, awarding damages of $60.44 for overcharges, $40.76 for overshipments, and $4,897.10 for merchandise not in accordance with orders — a total of $4,998.30.

The second cause of action alleges a breach of the contract in honoring two drafts drawn in payment for silks (invoice 37) and furs (invoice 43), for which orders had neither been placed nor signed by Baron. The jury returned a verdict for $15,713.48 on this cause of action.

The court then directed a general verdict for the total amount awarded on both causes of action, at the same time reserving decision upon defendant's motions to set aside the verdict and for a nonsuit; the latter motion having been seasonably made and consideration thereof reserved until after verdict. Upon these motions the court thereafter set aside the verdict and dismissed the complaint, on the grounds that (1) the evidence was overwhelmingly against the existence of the alleged oral contract, and (2) the plaintiff failed to prove damages.

For the purpose of this appeal it may be assumed that the contract sued on was in fact entered into between Baron and an authorized representative of the defendant. Discussion will be limited to the proof of damage.

As to the "overcharge" item of $60.44, plaintiff claims that the invoice price was more than the price specified in Baron's signed order for certain sets of dominoes, and that by failing to check invoice against order defendant, contrary to its contract obligation, permitted payment of a draft which included payment for these domino sets at an unauthorized price. Baron's order (signed also by Gebr. Kratzmann) instructed Kratzmann to place orders for the purchase by plaintiff of a large number of articles, including the dominoes, at specified prices. It contains the following notation:

"The above prices are to-day's prices, which are only as a basis on the order. The prices at time of shipment will be invoiced. Possibility of delivery reserved. We have noted the order for you under the above conditions, and will include in our invoice our expenses and our commission of 5 per cent. Payment as agreed against your letter of credit. If prices advance, do not pay more than 20 per cent. additional."

It will be observed that there was no contract to furnish plaintiff goods at any price. The order merely placed a limitation beyond which Kratzmann had no authority to go in placing orders for plaintiff. If the commission broker exceeded that authority by sending goods at a price greater than 20 per cent. above that stated, his acts constituted an offer of the goods to plaintiff at the price invoiced. If plaintiff by its conduct accepted these goods, as it will hereafter be shown to have done, it accepted them at the invoice price. The items for overshipments and merchandise not in accordance with orders must be dealt with in the same way. Excess shipments and shipments unauthorized in other respects gave plaintiff the privilege of rejection, but, if it accepted the goods, it was obliged to pay the invoiced prices. Williston, Sales, § 461. Therefore, even though defendant's payments of drafts were a breach of contract, where the invoices did not correspond with signed orders, plaintiff cannot complain, unless it rejected the goods shipped without its authority. See Lunn v. Guthrie, 115 Iowa, 501, 88 N. W. 1060.

Hence it is necessary to determine whether, as between plaintiff and Gebr. Kratzmann, or the sellers, if Kratzmann was but a broker, the evidence showed an acceptance by plaintiff of the...