Bank of Montreal v. Recknagel

• Decision Date: 05 June 1888
• Citation: 17 N.E. 217,109 N.Y. 482
• Parties: BANK OF MONTREAL v. RECKNAGEL et al.
• Court: New York Court of Appeals Court of Appeals

109 N.Y. 482

17 N.E. 217

BANK OF MONTREAL

v.RECKNAGEL et al.

Court of Appeals of New York.

June 5, 1888.

Appeal from general term, superior court, city of New York.

The plaintiff is a Canadian banking corporation, having agencies in London and in New York city. The defendants are a firm doing business in the latter city, under the name of Recknagel & Co. On December 1, 1881, the defendants requested the plaintiff's New York agents to open by telegraph a credit in favor of Vogel & Co., of Hong Kong, China, in the following communication, in writing: ‘DECEMBER 1, 1881. Please telegraph authority to Vogel & Co., Hong Kong, to draw at 6 mos. for our account against consular invoice, and full set bills of lading of 2,500 bales Manilla hemp, p. Robinson, at the rate of 4 pounds p. bale, on a basis of 8 shillings sterling, freight filled up in bill of lading, reducing advance, if higher.’ The same day, plaintiff sent the following telegram to Vogel & Co.: ‘ Vogel, Hong Kong: Credit 608, six months, issued Recknagel ten thousand pounds, documents, 2,500 bales Manilla hemp, per Robinson, at four pounds per bale if freight eight shillings, or reduced advance if freight higher.’ On the following day the plaintiff delivered to the defendants a letter of credit in favor of Vogel & Co., which was addressed to the plaintiff's agents in London, and which authorized Vogel & Co. to draw ‘against goods shipped per Robinson, * * * at six months' sight, for any sum or sums, not exceeding 10,000 pounds sterling, to be used as they made direct, for invoice cost of 2,500 bales of Manilla hemp, * * * to be purchased for account of Recknagel & Co., of New York, or whom it may concern, and to be shipped to New York. The bills must be drawn in Hong Kong, or in some port in _____, prior to the 1st day of June, 1882, and advice given to you in original and duplicate; such advice to be accompanied by bill of lading, filled up to order of agents of the Bank of Montreal, New York, with abstract of invoice indorsed thereon, for the property shipped as above. All the bills of lading issued, except the one mailed to us and the one retained by the captain of the vessel carrying the cargo, are to be forwarded direct to you. The original invoice, properly certified, to be also forwarded to us.’ On the margin was written: ‘This credit opened by cable direct, 1st December, 1881.’ Upon the receipt of this letter of credit, the defendants, the same day, executed an agreement consenting to its terms, obligating themselves ‘to provide for all bills which shall be drawn and accepted under the same,’ etc., and providing as to security for the payment of their indebtedness. On December 14th and 19th, the London agents were advised by cable, and by mail, of the telegraphic credit extended to Vogel & Co. Between December 3 and 13, 1881, Vogel & Co. drew three drafts on the plaintiff's London agents; all of the same being of like form to the following, which was the first one drawn, and differing only in dates and figures: ‘No. 13, 8248. EXCHANGE FOR 2,400 POUNDS. HONG KONG, 3d December, 1881. At six months after sight of this first exchange, (second and copy unpaid,) pay to the order of ourselves two thousand four hundred pounds sterling, value received, and place the same to account against s-m., 600 bales hemp, p. ‘R. Robinson,’ under tel. cr. 608. 10,000 pounds. Dated New York, 1st December, 1881. VOGEL & CO. To the Bank of Montreal, London.' The three drafts amounted, in the aggregate, to £8,080. The other two drafts were against 500 and 920 ‘bales of hemp,’ respectively. To each draft was attached a bill of lading for ‘bales of merchandise,’ ‘weight and contents unknown;’ and there was indorsed by Vogel & Co. upon each bill of lading, after it had been signed by the captain, but without his knowledge or consent, an abstract of invoice for ‘bales of Manilla hemp.’ The draft was accompanied by a letter of advice, describing the shipment as ‘bales of hemp.’ These drafts were drawn under the telegraphic credit, and had been accepted by plaintiff's London agents before Vogel & Co. had received the letter of credit mailed by defendants to them. The drafts were paid at maturity. Upon arrival of the ship Robinson in New York, it was discovered that there were only 500 bales of Manilla hemp on board, and the remaining 1,520 ‘bales of merchandise’ were composed of rolls of matting. Vogel & Co. were bankrupt, and had absconded. The plaintiff seeks to recover of the defendants for the amount of its acceptance of drafts of Vogel & Co. It had judgment, upon the defendants' offer, for the amount of the draft, which was accompanied with the bill of lading for the bales which actually were Manilla hemp; but, as to the other drafts, it was held below that it could not recover, as they were not accompanied with bills of lading and invoice for Manilla hemp, and because the bales identified by the bills of lading were not Manilla hemp. From the judgment of the general term, affirming the judgment at special term, the plaintiff appeals to this court.

Geo. De Forest Lord, for appellant.

Chas. M. Da Costa, for respondents.

GRAY, J., ( after stating the facts as above.)

If Vogel & Co., in drawing upon plaintiff's London agents, complied with the terms and conditions of the cable credit, then the defendants are liable to the plaintiff; for that credit was extended in pursuance of the terms of their request. But if Vogel & Co., in any material matter, failed to comply with those terms and conditions, the plaintiff's London agents accepted the drafts at their peril, and defendants could not be held liable, unless these were in fact consignments of Manilla hemp, or unless, by the provisions of the letter of credit and the defendants' agreement respecting the same, the terms of the preceding request and of the cable credit were modified or changed in such wise as to allow of drafts by Vogel & Co., without such restrictions or conditions. The defendants' request was to ‘telegraph authority to Vogel & Co. to draw at 6 months for our account, against consular invoice, and full set bills of lading of 2,500 bales Manilla hemp, per Robinson, at 4 pounds per bale,’ etc.; and the telegram to Vogel & Co. was: ‘Credit 608, six months, issued Recknagel 10,000 pounds, documents, 2,500 bales Manilla hemp, per Robinson, at 4 pounds per bale,’ etc. There is no doubt that both bankers and shippers plainly understood the word ‘documents,’ used in the telegraphic credit, as calling for consular invoices and bills of lading; for the former cabled on the basis of the defendants' written request to that effect, and the latter sent forward their drafts accompanied by such documents. The difficulty has arisen from the failure to specify in the bills of lading the kind of merchandise which the defendants had authorized the plaintiff to accept against for them, and in the acceptance of drafts which were not against shipments of that kind of merchandise at all. We do not see that the letter of credit, and the agreement to provide for acceptance and to indemnify, alter the conditions imposed by the cable credit, or change the relative obligations of the parties. The letter of credit authorized Vogel & Co. to draw on plaintiff's London agents, ‘against goods shipped per Robinson, for 10,000 pounds,’ to be used for invoice cost of 2,500 bales of Manilla hemp, at 4 pounds per bale, filled up in a bill of lading, etc. It required the advice of the bills drawn ‘to be accompanied by bill of lading, * * * with abstract of invoice indorsed thereon for the property shipped as above.’ The agreement of indemnity was to provide for bills ‘drawn and accepted’ under the letter of credit.

Letters of credit are governed by the same general legal principles as are all contracts. In Orr v. Bank, 1 Macq. H. L. Cas. 513, Lord BROUGHAM said of them: ‘I am inclined to think that there is no very great novelty or peculiarity in letters of credit to take them out of the general law applicable to mandates. I am not aware that there is anything in the mercantile law, or the custom of merchants, to distinguish letters of credit from any other authority to pay money.’ In this case the peculiarity of the credit extended by the plaintiff to Vogel & Co., at the defendants' request, is that, besides being special, in that it was addressed to a particular banking agency, was confined to it, and gave no other party a right to act upon it, it restricted the drafts drawn under it to a particular purpose, which should be vouched for in a certain manner to authorize acceptance and payment. Under the agreements effected between the plaintiff and the defendants for the extension of the credit to Vogel & Co., the defendants only became liable to plaintiff to provide for drafts accepted by its London agents within the precise terms upon which the credit was opened. The credit was...