Emerson v. American Exp. Co.

• Decision Date: 17 July 1952
• Docket Number: No. 1218.,1218.
• Parties: EMERSON v. AMERICAN EXP. CO.
• Court: D.C. Court of Appeals

90 A.2d 236

EMERSON v. AMERICAN EXP. CO.

No. 1218.

Municipal Court of Appeals for the District of Columbia

Argued June 9, 1952.

Decided July 17, 1952.

E. Paul Yaselli, New York City, with whom Walter Armstrong, Washington, D. C., was on the brief, for appellant.

C. Frank Reifsnyder, Washington, D. C., with whom Howard Boyd, Washington, D. C., was on the brief, for appellee.

Before CAYTON, Chief Judge, and HOOD and QUINN, Associate Judges.

CAYTON, Chief Judge.

In Naples, Italy in November, 1946, Claude L. Emerson purchased from American Express Co., S. A. I., correspondent of American Express Company (appellee in this case) fifty-one travelers checks having a total face value of $5010. As is usual in such transactions, he signed an application for the purchase of the checks and, at the company's office at the time of purchase, signed each check in the upper left-hand corner. Immediately thereafter, and contrary to his written agreement to countersign the checks "only at time of encashment and in the presence of the payer," he proceeded to countersign in the lower left-hand space thirty of the checks, of the value of $3000. Within a very few hours these thirty checks were lost, or stolen from him. He gave verbal and written notice of the loss to the Express Company but when the checks were ultimately presented for payment that company redeemed them. Appellant sued for the amount of the checks and after a trial by the court, finding and judgment were entered for defendant. That judgment is now here for review.¹

The trial judge made written findings of fact substantially as we have just recited them. He also made conclusions of law in which he ruled among other things that by countersigning the thirty checks as he did, plaintiff had breached his contract; that plaintiff's failure to insert the name of the payee in the space provided did not render the checks incomplete or prevent their negotiation by holders in due course; that plaintiff had no right of countermand; and that the Express Company was legally obligated to honor the checks when presented by holders in due course.

Appellant's Rights under Contract Law.

Appellant takes the position that the law of negotiable instruments does not govern this situation and that the case must be decided on principles of contract law. If that be so we think it plain that he cannot prevail. The contract between the parties obviously consisted of the application signed by the appellant and the exchange of his money for travelers checks. In signing the application appellant, who is a lawyer, expressly agreed that he would countersign each check only in the presence of the "payer" to whom he was negotiating it. He also agreed that if he should "default or fail to observe any of the foregoing obligations; any and all risk, loss and expense shall be for the account of the undersigned and the American Express Company and its agents shall not be liable or accountable therefor in any respect." Nevertheless he proceeded at once to countersign the thirty checks in question and in that state they were lost by or stolen from him in a very few hours. Thus we have an express contract and a clear breach thereof by appellant. It requires neither argument nor citation to demonstrate that such breach stood in the way of his recovery under principles of contract law.

But he builds an argument to the effect that the Express Company was derelict in its duty after he notified them of the loss of the checks. He says they should have circularized their agencies with notices to withhold payment of the lost or stolen checks. But in view of the fact that the checks were admittedly countersigned and in view of what we shall say later it seems rather plain that such circularization would not have had any practical effect, for it is well-known that travelers checks are cashable all over the world. The Express Company could hardly have been expected to reach and cover every possible bank, steamship, hotel and other business establishment to forestall negotiation of the checks.

Appellant also says that his making of an application for refund on the company's application blank "involved a corresponding legal duty on defendant to pay that claim." We think that argument answers itself. There is nothing in the contract and no legal principle here applicable which would make the refund automatically grantable.

Another ground on which appellant seeks to charge the Express Company with liability is based on the words of the application which provide that if he fails to observe any of his obligations (including of course the obligation not to countersign in advance), "any and all risk, loss and expense shall be for the account of the undersigned and the American Express Company and its agents shall not be liable or accountable therefor in any respect." Appellant would have us read this to mean that because the Express Company had the right to charge him with the expense of investigating the loss or theft such right implied a duty to make such an investigation and that its failure to do so amounted to a breach of contract. This we think would be a highly strained construction for it would be converting a permissive or discretionary right into a mandatory duty. We must hold that no liability can be based on such ground.

Next, appellant argues that a fiduciary relation existed between him and the Express Company and that on principles of equity he was entitled to recover. We find it difficult to follow this argument. No facts were presented in the trial court to show that any special relationship of trust and confidence was involved in the initial transaction — the purchase of the checks. As was said by Rugg, C. J., in Paulink v. American Express Co., 265 Mass. 182, 163 N.E. 740, 741, 62 A.L.R. 506: "No fiduciary relation existed between the parties. The defendant did not receive the money of the plaintiff in any trust capacity. The transaction was purely contractual in its nature. It related to the subject of negotiable instruments, which is governed by statutes and general commercial usages and had no connection with the subject of trusts." Nor were any facts presented which would seem to have required the Express Company after notice of the loss or theft of the already-countersigned checks to do other than it did. We have already commented on the probable futility of such action. Appellant says the Express Company should have surrendered the checks to him after they had been redeemed but he presented no evidence in the trial court to show that he had suffered by the failure to receive the checks. We conclude that plaintiff did not make out a case for recovery under contract law.

Applicability of Negotiable Instruments Law.

We think the rights of the parties are to be determined under the law of negotiable instruments, for such these checks undoubtedly were. Each of them was in the following form:

                U. S. Dollar Travelers Cheque
                When countersigned below with
                      this signature
                __________________________ Before cashing write city, and date 19__
                                           ________________________________________
                                 AMERICAN EXPRESS COMPANY
                                  at its paying agencies
                Pay this Cheque from our
                Balance to the Order of ____________________________________________ $100.00
                   In United States                         In All Other Countries
                 One Hundred Dollars                        At current buying rate
                                                      for Bankers' Cheques on New York
                Countersign here in presence of person cashing
                _______________________             ____________________________________
                                                                       Treasurer
                

This cheque is redeemable only at the company's offices and bankers in United States

We have not been cited to any reported case involving this exact situation (where travelers checks have been lost or stolen after being countersigned) nor has our own search disclosed any. We turn first to a consideration of how instruments of this kind may be defined or classified. Williston states that such checks are a development from letters of credit and serve the dual purpose of a letter of credit and a draft on the issuing agency. Williston, Negotiable Instruments, 287-293 (1933). In Ogden, Negotiable Instruments, § 254 (3d ed. 1931), such checks are referred to as negotiable instruments. In 7 Am.Jur. 909, we find the statement that such checks are foreign bills of exchange and are negotiable instruments, citing Paulink v. American Express Co., 265 Mass. 182, 163 N.E. 740, 62 A.L.R. 506.

In a comparatively recent Federal case the function and status of these checks were well-stated thus: "The essential value and purpose of a traveler's cheque is that it is a cashier's cheque payable by a bank or other corporation of unquestioned financial standing and integrity which is placed by the issuing bank in the hands of agent banks for delivery to any person who will pay the face value plus a small premium. It is payable to such individuals without identification and merely upon corresponding signatures. They are freely accepted not only by banks but in remote rural communities. That they are cheques which are intended to be and are freely negotiable cannot be gainsaid. Refusal of payment by the issuing bank or trust company because of defenses ordinarily available would be practically destructive of the entire business of placing such cheques in circulation. The special attributes and functions of these cheques have long been recognized." Peoples Say. Bank v. American Surety Co., D.C., W.D.Mich.1936, 15 F.Supp. 911, 913. The United States Circuit Court of Appeals for the 8th Circuit held that such instruments are essentially cashier's checks in the...