Decatur Bank v. St Louis Bank

• Decision Date: 01 October 1874
• Citation: 21 Wall. 294,22 L.Ed. 560,88 U.S. 294
• Parties: DECATUR BANK v. ST. LOUIS BANK
• Court: U.S. Supreme Court

88 U.S. 294

22 L.Ed. 560

21 Wall. 294

DECATUR BANK v. ST. LOUIS BANK.

October Term, 1874

ERROR to the Circuit Court for the Southern District of Illinois.

In the autumn and winter of 1869, P. E. Frederick—who, according to his own account, was at that time 'engaged in buying and shipping stock in St. Louis'—intending to purchase cattle there and ship them to a business connection of his in Chicago, named J. S. Talmadge, who was to receive and sell them, and honor Frederick's drafts given in payment for the same—applied to the First National Bank of Decatur, Illinois, for a letter of credit on some bank in St. Louis. The bank at Decatur accordingly gave him a letter on its correspondent, the Home Savings Bank of St. Louis.

The letter was in these words:

FIRST NATIONAL BANK,

DECATUR, ILL., September 13th, 1869.

H. C. PIERCE, ESQ., Cashier, St. Louis, Mo.

SIR: We beg herewith to accredit with you P. E. Frederick, Esq, whose drafts on shipments of cattle to J. S. Talmadge Chicago, are herewith guaranteed to the amount of ten thousand dollars for thirty days from date.

Yours respectfully,

J. H. LIVINGSTON.

Pierce answered thus:

HOME SAVINGS BANK,

ST. LOUIS, September 18th, 1869.

J. H. LIVINGSTON, ESQ., Cashier.

DEAR SIR: Mr. Frederick has to-day presented your letter of credit for $10,000 of 13th at thirty days. Permit me to inquire, in case his drafts for $10,000 or less on Talmadge are paid, does your letter mean that we may take his draft again up to same amount, and so on for your limit, thirty days? That is to say, do you guarantee us for thirty days on Frederick's drafts on Talmadge for $10,000?

Yours respectfully,

H. C. PIERCE, Cashier.

And on the 21st of September, 1869, the cashier of the Decatur bank replied as follows, viz.:

FIRST NATIONAL BANK,

DECATUR, ILL., September 21st, 1869.

H. C. PIERCE, ESQ., Cashier, St. Louis, Mo.

DEAR SIR: Your favor of the 18th is received. Yes, we guarantee you on Frederick's drafts on Talmadge for $10,000 for thirty days from September 13th, 1869.

Yours respectfully,

J. H. LIVINGSTON.

The thirty days limited in the last letter being on the eve of expiration, the Illinois bank renewed and extended its guarantee by the following communication, viz.:

FIRST NATIONAL BANK,

DECATUR, ILL., October 20th, 1869.

H. C. PIERCE, ESQ., Cashier, St. Louis, Mo.

DEAR SIR: The guarantee given for Mr. Frederick, please consider extended for thirty days from expiration.

Yours, &c.,

J. H. LIVINGSTON.

And again, when the limit fixed by the last letter had expired:

FIRST NATIONAL BANK,

DECATUR, ILL., November 22d, 1869.

H. C. PIERCE, ESQ., Cashier, St. Louis, Mo.

SIR: The letter of credit given you for Mr. Frederick is hereby extended for thirty days from expiration last date.

Respectfully,

J. H. LIVINGSTON, Cashier.

Accredited with the letters thus given, Frederick went to St. Louis, and—having just previously to the 10th of December, 1869 (that is to say, within the term embraced by the letter of November the 22d), shipped hogs to his correspondent at Chicago, Talmadge—drew drafts to the amount of $8000 against them. Talmadge failed before the drafts came due; and the bank at St. Louis now came upon the bank at Decatur for payment under the guarantee. This latter bank set up that its guarantee was of drafts drawn against shipments of cattle, and that the drafts sued on were against shipments of hogs, and that these were not cattle, which term, as understood in the transaction, was confined to animals of the bovine species. The Decatur bank did not allege that any injury had accrued to it by the fact that the shipment was of hogs, which would not have accrued if the shipment had been of animals of the bovine species; or that there was any want of good faith on the part of the St. Louis bank or of Frederick in the transaction.

There was also a plea:

'And for a further plea, &c., the defendant says actio non, because, it says, that it is not true that the defendant, by its cashier, executed the alleged letters of credit, or written guarantee, or any of the same in said counts mentioned and described; and this the defendant prays may be inquired of by the country, &c.'

But this plea was apparently abandoned.

The court below charged 'that the contract of guarantee was contained in the letter of J. H. Livingston, dated September 21st, 1869, and the extension thereof, and that the defendant would be bound to pay drafts drawn by Frederick upon Talmadge within the limits of the said letter and the extensions thereof, as to time and amount, no matter whether such drafts were drawn upon shipments of cattle or not.' To this instruction the defendant excepted, and verdict and judgment having been given for the plaintiff the defendant brought the case here. The bill of exceptions set out all the evidence in the case.

Mr. J. B. Hawley, for the plaintiff in error:

It is obvious that the court erred in assuming that the letter of September 21st made the credit. That letter plainly refers to the original letter—the letter of the 13th—and explains a doubt which was in the mind of the cashier of the St. Louis bank as to whether, by its terms, the guarantee was a continuing guarantee; but the new letter in no way abandons the old one. Now, that letter shows that the Decatur bank regarded it as important that the drafts to be drawn by Frederick should be drawn upon shipments of cattle. Hogs do not, in the parlance of stockdealers or of banks familiar with the trade of that sort of persons, as both the banks here were, or in fact in any common parlance of anybody, come within the term 'cattle.' It is of no use to cite books of natural history or of lexicography, or even to cite statutes and decisions to show that in certain senses hogs may be included within the term 'cattle.' The question is, what did the parties here before the court mean? And no one familiar with the language of the region where the transactions occurred, or of the country generally, will suppose that when the parties spoke of cattle they meant hogs, any more than that they meant deer.

The Decatur bank having consented to be bound only in case cattle were shipped, no liability attaches to it if they were not shipped. Talmadge may have had great facilities for dealing in 'cattle,' and none at all in dealing in hogs.

Again: There is nothing to be found in the National Currency Act, or in any other law, giving authority to National banks to issue letters of credit. They have power to exercise 'all such incidental powers as shall be necessary to carry on the business of banking; by discounting and negotiating promissory notes, drafts, bills of exchange and other evidences of debt; by receiving deposits; by buying and selling exchange, coin, and bullion; by loaning money on personal security; by obtaining, issuing, and circulating notes according to the provisions of this act.'¹

Among these powers the power to issue letters of credit is not found, neither is it incidental to any of the powers granted.

Mr. F. W. Jones, contra.

Mr. Justice DAVIS delivered the opinion of the court.

The basis of this suit is the letter of credit of 13th September, 1869. The subsequent correspondence, on any rational interpretation of it, did not have the effect to change the terms of this the original letter, nor was it intended to do so except in two particulars, which are not the subject of controversy.

The defence now made, technical though it be, is sufficient to defeat the action if the condition of the guarantee was not observed, and this fact renders necessary a construction of the instrument.

Like all other contracts it must receive the construction which is most probable and natural...