Foreign Trade Banking Corp. v. Cosmopolitan Trust Co.

• Decision Date: 06 March 1922
• Citation: 134 N.E. 403,240 Mass. 413
• Parties: FOREIGN TRADE BANKING CORPORATION v. COSMOPOLITAN TRUST CO.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

240 Mass. 413

134 N.E. 403

FOREIGN TRADE BANKING CORPORATION

v.COSMOPOLITAN TRUST CO.

Supreme Judicial Court of Massachusetts, Suffolk.

March 6, 1922.

Report from Superior Court, Suffolk County; George A. Sanderson, Judge.

Action by the Foreign Trade Banking Corporation against the Cosmopolitan Trust Company on account of protested checks or foreign bills of exchange purchased by plaintiff from defendant. Reported from the superior court without decision. Judgment for plaintiff, in accordance with the opinion.

The first count was for money had and received. Counts 2 to 14, inclusive, each alleged defendant's delivery to plaintiff of its check or draft, payable in Milan or Genoa, Italy, the presentation thereof, refusal of payment because the commissioner of banks had taken possession of defendant's property and business on or about September 25, 1920, and had ordered the drawee not to pay it, and protest of the check or draft. Each of such counts sought to recover the value in dollars of the number of lire called for by the draft on September 25, 1920, with interest from that date at 6 per cent. and damages at the rate of 5 per cent. thereon. Count 15 sought to recover on all the drafts the value in dollars on the respective dates of demand, with interest from such dates at 6 per cent., and damages at the rate of 5 per cent. The parties agreed on a statement of the facts, which, so far as the purchase of the drafts, demand for payment, refusal to pay, protest, and the date when the commissioner of banks took possession of defendant's property and business, were as alleged by plaintiff.

1. Banks and banking k189-Damages for dishonor of foreign bills of exchange sold by bank not recoverable.

A purchase from a trust company of checks or foreign bills of exchange constituted a sale of credit, the checks or bills of exchange being a means of establishing or transmitting the credit, which were completed contracts, the obligation of which was broken by the dishonor of the checks or bills of exchange, and the amount paid could not be recovered in an action for money had and received; the consideration not having failed.

2. Banks and banking k189-Principal and damages recoverable on dishonored foreign bill fixed by rate of exchange on date of protest.

Under R. L. c. 73, s 9, now G. L. c. 107, s 9, providing that the party liable on a foreign bill of exchange duly protested shall pay it at the current rate of exchange on the date of demand, with interest from that date and damages on the principal at the rate of 5 per cent., the damages are recoverable only on establishment of the liability by demand, protest, and notice; and there is no exception in cases where demand, protest, and notice may be excused, and hence, though the commissioner of banks had taken possession of the drawer's property and business and stopped payment before presentation, the principal and damages are determined by the current rate of exchange on the date of demand.

3. Banks and banking k189-Principal of protested foreign bill calculated by average rate of exchange on date protested.

Under R. L. c. 73, s 9, now G. L. c. 107, s 9, requiring the party liable on a foreign bill of exchange duly protested to pay it at the current rate of exchange on the date of demand, with interest and damages, where the current rate of exchange on the date of demand fluctuated, the principal should be calculated at the average rate on that date.

Warner, Stackpole & Bradlee, of Boston, and Frank M. Patterson, of New York City (John G. Palfrey, of Boston, of counsel), for plaintiff.

Henry O. Cushman and Daniel L. Smith, both of Boston, for defendant.

RUGG, C. J.

This is an action of contract, brought against the Cosmpolitan Trust Company after disallowance by the commissioner of banks, in possession of its business and property, of a claim presented by the plaintiff. G. L. c. 167, §§ 22 to 36. The plaintiff at various times, beginning with August 28, 1920, and ending with September 17, 1920, paid to the trust company a total of $177,051.60 for checks or foreign bills of exchange drawn by the trust company upon the Credito Italiano, a bank in Italy, payable without specification of date to the order of the plaintiff or to the order of that bank for the plaintiff's account. On September 25, 1920, which was before any of these were presented for payment, the commissioner of banks closed the defendant trust company by virtue of authority conferred upon him by the statute, and payment of the checks was countermanded. From time to time thereafter these checks or foreign bills were presented in due course for payment at the bank on which they were drawn, payment was refused and they were protested for nonpayment. The current rate of exchange was substantially lower at the time of presentment and protest than when the trust company was closed.

[1] The several transactions between the parties constituted a sale of credit by the trust company to the plaintiff, the checks or bills of exchange issued being a means of establishing or transmitting the credit. They were completed contracts. The dishonor of the checks or bills of exchange constituted a breach of the obligation, for which the plaintiff is entitled to such damages as the law allows, and it cannot recover the amount paid...