Bank of Buchanan County v. Continental Nat. Bank of Los Angeles

• Decision Date: 05 December 1921
• Docket Number: 5551.
• Citation: 277 F. 385
• Parties: BANK OF BUCHANAN COUNTY v. CONTINENTAL NAT. BANK OF LOS ANGELES.
• Court: U.S. Court of Appeals — Eighth Circuit

277 F. 385

BANK OF BUCHANAN COUNTY v. CONTINENTAL NAT. BANK OF LOS ANGELES.

No. 5551.

United States Court of Appeals, Eighth Circuit.

December 5, 1921

Charles H. Mayer, of St. Joseph, Mo. (Charles F. Strop, of St Joseph, Mo., on the brief), for plaintiff in error.

R. E Culver and Benjamin Phillip, both of St. Joseph, Mo., for defendant in error.

Before CARLAND and STONE, Circuit Judges, and MUNGER, District Judge.

MUNGER District Judge.

This was an action upon a written guaranty. At the close of the evidence both parties requested a directed verdict. The court directed a verdict in favor of the plaintiff, and from the judgment this error proceeding is prosecuted. The J. L. Price Brokerage Company were engaged in business at St. Joseph Mo., as commission merchants. Hicks, Sutherland & Co. were engaged in a similar business at Los Angeles, Cal. The St Joseph company had made some prior purchases from the Los Angeles company, but, contemplating further purchases, it procured the defendant, hereafter called St. Joseph Bank, to send to the Los Angeles Trust & Savings Bank a telegram reading as follows:

'St. Joseph, Mo. 9 31 A June 8, 1917.

'Los Angeles Trust and Savings Bank, Los Angeles, Calif. We guarantee J. L. price Brokerage Co. will pay draft drawn by Hicks Sutherland Co. when accompanied with certificate of weights and original bill of lading covering five cars new potatoes sacked draft to be drawn on basis three twenty five cwt. for what the car contains and decking charge ten dollars per car.

Bank of Buchanan Co.'

Upon receipt of the telegram the addressee ascertained that Hicks, Sutherland & Co. were not among its regular customers, but transacted their business with the plaintiff, the Continental National Bank of Los Angeles. The addressee advised the plaintiff of the contents of the telegram, and on the same day, June 8th, the Los Angeles Trust & Savings Bank mailed a letter to the St. Joseph Bank acknowledging receipt of the telegram and advising that the Hicks-Sutherland Company was not a client of that bank, but had given the writer the name of their Los Angeles bankers. The letter then continued:

'We called up the Continental National Bank and explained the situation and they stated it would be agreeable to them to negotiate drafts as outlined in your telegram, and requested that we send them your telegram, which request we are pleased to grant. Trusting there will be no objection to the manner in which we have disposed of the matter, and that you appreciate our position, we are,

'Yours truly,

Ralph Day, Assistant Cashier.'

About four days are ordinarily required for a letter mailed at Los Angeles to reach a St. Joseph addressee. The St. Joseph Bank received this letter, but made no reply. Between June 14th and June 19th Hicks, Sutherland & Co. loaded and shipped five carloads of new potatoes, consigned to the J. L. Price Brokerage Company on straight bills of lading. At the same dates Hicks, Sutherland & Co. drew five drafts, each addressed to J. L. Price Brokerage Company and signed by Hicks, Sutherland & Co. and payable on demand to the order of the Continental National Bank of Los Angeles for amounts stated. The originals of the bills of lading were attached to these drafts with invoices showing the car, the date of shipment, the consignor, the weight and value of the potatoes, and the charge for decking. These drafts were delivered to the Continental National Bank, which paid Hicks, Sutherland & Co. the amount of the face of the drafts and then sent them with the attached papers to the St. Joseph Bank. No certificates of weights were attached or sent with the drafts. On June 25th or 26th an attorney for the Continental National Bank was informed at a meeting with officers of the St. Joseph Bank and of the J. L. Price Brokerage Company that payment of the drafts was refused, because the guaranty was not addressed to the Continental National Bank, and because no certificates of weights were attached to the drafts and bills of lading. The cars had arrived at St. Joseph at dates between June 21st and 25th, and the potatoes had been sold by the railway company on dates from June 22d to June 27th, for freight and demurrage charges and as perishable goods. The attorney for the Continental National Bank on June 26th requested his client to procure the certificates of weight and upon obtaining them he exhibited them to the St. Joseph Bank on July 9th and again demanded payment of the drafts which was refused.

'Every one has a right to select and determine with whom he will contract, and cannot have another person thrust upon him without his consent. In the familiar phrase of Lord Denman, 'You have the right to the benefit you anticipate from the character, credit and substance of the party with whom you contract.' ' Arkansas Smelting Co. v. Belden Co., 127 U.S. 379, 387, 8 Sup.Ct. 1308, 32 L.Ed. 246. Was this telegram a special guaranty intended only for the addressee or was it a general guaranty which could be accepted by other banks? The rule has often been stated that a guaranty which is addressed to a particular person is a contract limited to the person addressed. Myers v. Edge, 7 Term 254, 256; Strange v. Lee, 3 East 484, 490; Dry v. Davy, 10 A. & E. 30, 31; Grant v. Naylor, 4 Cranch (U.S.) 224, 235, 2 L.Ed. 603; Robbins v. Bingham, 4 Johns. (N.Y.) 476, 477; Walsh v. Bailie, 10 Johns. (N.Y.) 180, 182; Penoyer v. Watson, 16 Johns. (N.Y.) 100, 101; Evansville Bank v. Kaufmann, 93 N.Y. 273, 288, 45 Am.Rep. 204; Birckhead v. Brown, 5 Hill (N.Y.) 634, 643, Id., 2 Denio, 375; Smith v. Montgomery, 3 Tex. 199, 208; Allison v. Rutledge, 5 Yerg. (Tenn.) 193, 194; Johnson v. Brown, 51 Ga. 498, 500; King v. Batterson, 13 R.I. 117, 119, 43 Am.Rep. 13; Holmes v. Small, 157 Mass. 221, 224, 32 N.E. 3; Jordan-Marsh Co. v. Beals, 201 Mass. 163, 164, 87 N.E. 471; Lyon v. Van Raden, 126 Mich. 259, 262, 85 N.W. 727; Morris & Co. v. Lucker, 158 Mich. 518, 520, 123 N.W. 21; Schoonover v. Osborne, 108 Iowa, 453, 458, 79 N.W. 263; Black v. Albery, 89 Ohio St. 240, 245, 106 N.E. 38; Lyon & Co. v. Plum, 75 N.J.Law, 883, 884, 69 A. 209, 14 L.R.A. (N.S.) 1231, 15 Ann.Cas. 1019, 127 Am.St.Rep. 858; Saunders v. Ducker, 116 Md. 474, 479, 82 A. 154, Ann. Cas. 1913C, 817; 2 Dan.Neg.Inst. § 1774.

The most common application of the principle in the cases cited is to guaranties addressed to one individual and acted upon by another and to guaranties addressed to one firm which has been succeeded by another organization, or in which some change has occurred by addition or withdrawal from the membership and the claim was made that the guaranty extended to the later firm or company. In the case of Grant v. Naylor supra, the Supreme Court of the United States by Chief Justice Marshall held that a letter of credit carried by the writer's son to England and addressed by mistake of the writer to 'Messrs. John & Joseph Naylor & Co.,' guarantying the engagements of a firm in which the writer's son was a partner, did not bind the writer to pay for goods sold by a firm engaged in business at Wakefield, England, under the name of John & Jeremiah Naylor & Co., although the sale was made upon the faith of the letter of credit, and there was no commercial house at Wakefield of the name of John & Joseph Naylor, Co., and the letter was really designed for John and Jeremiah Naylor, because the letter was not ambiguous and was not addressed to the firm that acted upon it. It is to be observed that in most of the cases cited the intention of the guarantor to confine his engagement to the person named is shown not only by the formal address or superscription at the beginning of the writing, but is also shown by the use of some pronoun in the body of the guaranty in phrases such as 'if you will furnish' or 'which you may supply.' While such definiteness affords a facile means of interpretation of the contract, it is not lightly to be inferred that a guaranty is to be taken as general because it is addressed to one person in the superscription only. The guarantor may have selected the particular addressee as the only person whom he would trust to deal with his principal, for the reasons stated by Lord Kenyon in Meyers v. Edge, supra, that the guarantor thought that that dealer would use due diligence in enforcing payment from the principal regularly, as goods were sold him, and that at least, the courts cannot say that the guarantor would have given the same credit to some other person than the one he did select. Others of the cases cited say that the guarantor has the right to select the person whom he trusts to supply his principal with funds or goods, because he may have confidence in his prudence in dealing with his principal or in his lenience with the guarantor if the principal makes default and so the character of the addressee selected is a material ingredient in the engagement. There are many obvious reasons why a bank may select a particular bank correspondent as one whom it will guaranty in a case like this. There may be such a relation of credits between them that, if called upon to pay the guaranty, the guarantor may offset the claim by mere entry of credit; there may be such common business interests between the banks that there is a mutual advantage anticipated from the transaction; the guarantor may have confidence in the bank which it...