Banco Nacional Ultramarino v. First Nat. Bank

• Decision Date: 16 April 1923
• Docket Number: 1428.
• Citation: 289 F. 169
• Parties: BANCO NACIONAL ULTRAMARINO v. FIRST NAT. BANK OF BOSTON
• Court: U.S. District Court — District of Massachusetts

289 F. 169

BANCO NACIONAL ULTRAMARINO v. FIRST NAT. BANK OF BOSTON

No. 1428.

United States District Court, D. Massachusetts.

April 16, 1923

Thomas C. Bachelder, of Boston, Mass., for plaintiff.

Blodgett Jones, Burnham & Bingham, and Norman W. Bingham, Jr., all of Boston, Mass., for defendant.

PETERS District Judge.

This is a suit on a bill of exchange drawn by Magalhaes & Co., of Rio de Janeiro, Brazil, on the First National Bank of Boston, in favor of the plaintiff, for $43,674.54 dated July 28, 1920, at 15 days' sight, protested for nonacceptance on August 30th, and for nonpayment on September 30th.

There are two counts in the writ. The first declares on the draft as an accepted draft by virtue of a promise to accept; the second, on the promise itself. The facts from which the plaintiff claims to recover for a breach of contract on the part of the defendant are substantially as follows:

On May 11, 1920, the Holbrook Grocery Company, of Keene, N.H., made a contract with Magalhaes & Co. for the purchase of some 300 tons of Brazil white crystal sugar, to be shipped from Rio to New York, about 100 tons in July and the balance a little later. The costs and freight to New York were to be paid by Magalhaes & Co., the sellers; insurance to be effected by Holbrook Grocery Company, the buyers, who agreed to take out a banker's letter of credit in favor of the sellers covering the shipments, under which drafts were to be drawn at 15 days' sight, with complete shipping documents attached.

On June 29, 1920, the defendant bank, at the request of the buyer, mailed to the British Bank of South America, at Rio de Janeiro, the following letter of credit:

'No. 8451. Letter of Credit Not Exceeding $45,000.00. Details of this credit were cabled to the British Bank of South America, Limited, Rio de Janeiro, Brazil.

'The First National Bank of Boston.

'Boston, Mass., U.S.A.,

June 29, 1920.

'Messrs. Magalhaes e Company, Rio de Janeiro, Brazil-- Dear Sir: We hereby authorize you to draw on the First National Bank of Boston, Massachusetts, at fifteen days' sight for any sum or sums not exceeding in total forty-five thousand dollars, for account of the Holbrook Grocery Company, for invoice cost of about 100 tons Brazil white crystal sugar 19 1/2Sec. per pound c. & f. New York, freight insurance here, including war risk, to be shipped from Rio de Janeiro, Brazil, to New York. Bills of lading for such shipments must be made to the order of the First National Bank of Boston, Boston, Massachusetts, and together with the invoices must accompany the drafts.

'A duplicate of such invoices with consular certificate attached, together with one copy of bills of lading and insurance certificates where required, must be sent by the bank or bankers negotiating drafts direct to Mr. E. H. Leland, Room 1800, 14 Wall street, New York City, by first mail, attaching to the draft a statement that such documents have been so forwarded.

'Bills of lading must be dated on or before September 15, 1920, and drafts must be drawn on or before September 15, 1920, and each and every draft under this credit must bear upon its face the clause 'Drawn under credit No. 8451, dated June 29, 1920, of the First National Bank of Boston, Boston, Mass.'

'The amount of each and every draft negotiated and date of negotiation must be indorsed hereon.

'We hereby agree with the drawers, indorsers, and bona fide holders of bills drawn and negotiated in compliance with the terms of this credit that said bills will be duly honored on presentation at our counter in Boston.

'Yours very truly,

The First National Bank of Boston,

'(Signed)

C. C. McCauley, Asst. Mgr. For Dept.

'(Signed)

Charles E. Spencer, Jr., Vice President.'

On the same day, prior to the mailing of the letter of credit, the defendant bank cabled to the British Bank of South America, as follows: 'June 29th, 19209

'To the British Bank of South America, Rio de Janeiro, Brazil:

'Open credit $45,000 favor Magalhaes e Company account Holbrook Grocery Co. drafts 15 days' sight drawn on us shipment about 100 tons Brazil white crystal sugar at 19 1/2 cents per pound c. & f. New York Insurance here war risk included bladings to our order one set documents to E. H. Leland 14 Wall street New York expires September 15th Number of credit 8451 notify beneficiary.'

On July 8th the British Bank of South America wrote Magalhaes & Co., at Rio, advising them of the receipt of the cable message and inclosing a copy.

On July 30th the British Bank of South America, having received the letter of credit of June 29th, from the defendant bank, mailed it to Magalhaes & Co., at Rio.

Meanwhile, on July 28, after the cablegram had been received, but before the letter of credit had arrived, Magalhaes & Co. drew on the defendant bank by the draft in question, discounted it with the plaintiff bank, and received credit for the proceeds, being a regular customer of that bank. No documents accompanied this draft which was sent by the plaintiff by mail to its agents or branch in New York.

On July 29th Magalhaes & Co. shipped from Bahia about 100 tons of sugar consigned to the defendant at New York. Certain shipping and other documents were prepared on account of this shipment and mailed by the plaintiffs' agents or branch at Bahia to the plaintiffs' branch in New York, where they were received on August 28th and forwarded to the National Shawmut Bank of Boston, to which bank, also, had been forwarded just previously the draft itself. Thereupon the Shawmut Bank, on August 30th, presented to the defendant bank for acceptance the draft in question, accompanied by the following supporting documents:

(1) A negotiable bill of lading, with the usual conditions, showing shipment at Bahia for New York, to the order of the First National Bank of Boston, of 1,693 bags of sugar, with no other description, except that in a descriptive indorsement the same bags appear to be marked 'G' and to weigh 101,580 ks.

(2) A consular invoice showing sale by Magalhaes & Co. to Holbrook Grocery Company, to be shipped from Bahia to New York, consigned to First National Bank of Boston, '1,693 bags, sugar 101,580ks,' marked 'G.' 'Price per unit, 22.44.' Total, with charges, $43,674.34.

(3) A commercial invoice, showing similar sale, with description as follows:

'Mark 'G'-- 1,693 bags with 101,580 kilos sugar crystal equal to 223,972 lbs. Price per pound, $19.50. $43,674.54.'

(4) A certificate, called 'certificate of quality,' from the office Ministry of Agriculture, Industry and Commerce, at Bahia, referring of the to this shipment of sugar, and describing it as crystal sugar of superior quality; date of certificate, July 27, 1920.

(5) A paper, apparently from the office of the inspector of municipal hygiene, the translation of which is as follows: 'Inspection of Municipal Hygiene.

'Department of Chemical Analysis and Bacteriology.

'Number of Entry, 24432.

Analysis.
Saccharose for polarisation ....	99.5
Impurities ......................	0.5
	------
	100.00

'Kind of sample: White crystal sugar, lot of 1,693 bags from Factory S. Lourenco, with the mark G; shipped by firm Magalhaes & Co. for New York by English Steamer Virgil.

'The sugar is of first quality.

(Signed) Signature. 'Bahia, July 28, 1920. '(Signed) The Manager.'

The draft itself presented for acceptance with the documents mentioned was refused and protested, the entry in the notice of protest reading:

'Refuse. Shipment from Bahia, instead of Rio de Janeiro. Invoice does not call for Brazil white crystal sugar. Our customer refuses consent to our acceptance.'

On September 30 the draft was presented for payment, accompanied by the same papers with the addition of a memorandum by a warehouse administrator to the effect that from his books it appeared that 1,693 bags of superior crystal sugar, marked 'G,' went forward in the steamer Virgil bound for New York.

Payment was refused, and the draft protested for nonpayment, the reason as given in the notice of protest being, 'Same reason existing for nonpayment as for nonacceptance.'

It should be mentioned that, on August 30, 1920, E. H. Leland, 14 Wall street, New York City, agent in New York of the defendant, and referred to in the letter of credit, received by mail a nonnegotiable copy of the bill of lading and a copy of the consular invoice.

This action being for the breach of a contract, it is important at the outset to consider what the contract is, and with whom made.

1. Taking these questions in inverse order, with whom was the contract made?

The obligation of the defendant is contained in a cable message of June 29. The more full and detailed letter of credit, in common form and sent by mail, did not reach the beneficiary until after the negotiation of the draft which was negotiated, according to the testimony of the plaintiff's submanager, wholly on the strength of the cablegram and information received from its branch at Bahia that the shipping documents were in order. The only function of the...