James Douglass v. Reynolds, Byrne Company

• Decision Date: 01 January 1833
• Citation: 8 L.Ed. 626,7 Pet. 113,32 U.S. 113
• Parties: JAMES S. DOUGLASS and others, Plaintiffs in error, v. REYNOLDS, BYRNE & COMPANY, Defendants in error
• Court: U.S. Supreme Court

32 U.S. 113

7 Pet. 113

8 L.Ed. 626

JAMES S. DOUGLASS and others, Plaintiffs in error, v. REYNOLDS, BYRNE & COMPANY, Defendants in error.

January Term, 1833

[Syllabus from pages 133-115 intentionally omitted] ERROR to the District Court of Mississippi. This was an action on the case, instituted in the district court, by Reynolds, Byrne & Company, against the defendants, on a letter of credit or guarantee, signed by them, and addressed to the plaintiffs in the following terms:

'Messrs. REYNOLDS, BYRNE & Co.

Port Gibson, December 1827.

'Gentlemen:—Our friend, Mr. Chester Haring, to assist him in business, may require your aid, from time to time, either by acceptance or indorsement of his paper, or advances in cash; in order to save you from harm by so doing, we do hereby bind ourselves, severally and jointly, to be responsible to you at any time, for a sum not exceeding eight thousand dollars, should the said Chester Haring fail to do so. Your obedient servants,

JAMES S. DOUGLASS.

JOHN G. SINGLETON.

THOMAS GOING.'

This letter of credit was delivered to the plaintiffs; and upon the faith of it, they were in the habit of accepting and indorsing bills, and making advances for Chester Haring; and they, from time to time, received partial payments and consignments of cotton, to be sold by them and the proceeds placed to his credit. The transactions between Chester Haring and the plaintiffs commenced after the receipt of the letter of guarantee, and continued until March or April 1829.

The first count in the declaration, after setting out the letter of credit, charged, that the plaintiffs did, on the faith of that letter, 'accept and indorse the drafts or paper of said C. Haring, to a large amount, to wit, the sum of $8000, upon certain terms, and payable at the times expressed in said drafts and paper of the said C. Haring; which said drafts and paper of the said C. Haring, so accepted and indorsed by the plaintiffs as aforesaid, they, the plaintiffs, became liable to pay, and in consequence of their said acceptances and indorsements, did take up, pay and discharge the same, at the maturity thereof.' The count then charged the failure of Haring to discharge or pay the paper so indorsed and accepted by the plaintiffs, &c. and concluded with a general breach of the guarantee of the defendants, &c. The second count was indebitatus assumpsit, for money lent, had and received, &c. and the defendants pleaded the general issue.

The evidence upon which the questions of law arose, and which were decided by the court, is fully stated in the opinion.

The case was argued by Jones, for the plaintiffs in error; and by Taney, for the defendants.

The counsel for the plaintiffs in error cited in the argument, 12 East 227; 2 Camp. 214; 3 Ibid. 220; Kirby v. Duke of Marlborough, 2 Maule & Selw. 18; 3 Barn. & Ald. 593; 8 Johns. 119; 1 Mason 323-4; 3 Wheat. 150, 154; 1 Mason 368; 2 Taunt. 306; 7 Wheat. 13; 1 Mason 323; 9 Wheat. 720; 1 Stark. 111; 2 Ves. jr. 540; 18 Ibid. 20; 3 Meriv. 211; 1 Pothier on Obligations 236, 260; 1 Domat, Civil Law 205; Civil Code of Louisiana 954; 1 Cranch 181; 3 Ibid. 311; 6 Ibid, 253; Pet. C. C. 262; 1 Mason 368; 4 Greenl. 525; 2 H. Bl. 613; 1 Bos. & Pul. 419; 2 Cranch 92; 16 Johns. 67; 17 Ibid. 134; 2 Taunt. 306; 3 Johns. 68, 248; 8 Ibid. 384, 109; 7 Mass. 449; 11 Johns. 449; Ibid. 180; 5 Mass. 170; 1 Serg. & Rawle 334.

Taney, for the defendants in error, cited, 2 Cranch 413; 12 East 227; 2 Camp. 29; 3 Ibid. 220; 12 Wheat. 518; 1 Mason 324-5, 336, 368, 370; 7 Cranch 69; 5 Pet. 626-7; 1 Bos. & Pul. 418; 3 Wheat. 101; 20 Johns. 365-6; 3 Wheat. 154; 12 Ibid. 186; 5 Cranch 253; 1 Bos. & Pul. 421; 8 Johns. 389; 8 Eng. Com. Law 10, 78; 1 Desauss. 315; Fell on Guarantee 202; 12 Mass. 154; 3 Kent's Com. 78; 9 Greenl. 207, 210; 1 Wheat. 186; 12 Ibid. 186, 556; 11 Ibid. 75-6.

STORY, Justice, delivered the opinion of the court.

This case comes before us upon a writ of error to a judgment of the district court of the district of Mississippi, in which the plaintiffs in error are defendants in the court below. The original action is founded upon a guarantee, given by Douglass and others in favor of one Chester Haring, by the following letter:

'Messrs. REYNOLDS, BYRNE & Co.

Port Gibson, December 1807.

'Gentlemen:—Our friend, Mr. Chester Haring, to assist him in business, may require your aid, from time to time, either by acceptance or indorsement of his paper, or advances in cash. In order to save you from harm by so doing, we do hereby bind ourselves, severally and jointly, to be responsible to you, at any time, for a sum not exceeding eight thousand dollars, should the said Chester Haring fail to do so. Your obedient servants,

JAMES S. DOUGLASS.

THOMAS G. SINGLETON.

THOMAS GOING.'

The declaration contains two counts. The first alleges that, upon the faith of the letter, the original plaintiffs accepted and indorsed drafts or paper of Haring to the amount of $8000, which they were obliged to pay and did pay, at the maturity thereof; and of which they gave due notice to the defendants. The second count is for money lent, and money had and received. But this may be laid entirely out of the case, since it is very clear, that, upon a collateral undertaking of this sort, no such suit is maintainable.

At the trial, upon the general issue and the plea of payment, the plaintiffs, who are resident merchants at New Orleans, offered evidence to prove the payment of five promissory notes, dated on the 1st of May 1829, payable to Daniel Greenleaf or order, and indorsed by him, viz: one note due on the 20th of November 1829, for $4000; one due on the 20th of December 1829, for $4500; one due on the 20th January 1830, for $5500; one due on the 20th of February 1830, for $5500; and one due on the 20th of March 1830, for $5500, in the whole amounting to $25,000; and that the notes had been discounted, with the plaintiffs' indorsement thereon, and were taken up by them, at maturity.

It also appeared in evidence, that soon after the letter of guaranty had been received, acceptance had been made of the drafts of Haring, by the plaintiffs, to the amount of $8000; and that other large transactions of debt and credit took place between them, upon which, on the 1st of May 1829, there was a balance of principal, of $22,573.23, besides interest, due to the plaintiffs, and credits to a larger amount than $8000 had come into possession of the plaintiffs. And on that day, the foregoing notes were received, and the following receipt written on the account containing the balance.

'Received, Port Gibson, May 1, 1829, in part and on account of the above account, and interest that may be due thereon, the following notes, to wit [enumerating them], amounting in all to twenty-five thousand dollars, which notes, when discounted, the proceeds to go to the credit of this account.

REYNOLDS, BYRNE & CO.'

There was a good deal of other evidence in the cause, but it does not seem necessary to state it at large, since no part of it becomes important to a just understanding of the merits of the controversy, as it now stands before us.

In the progress of the trial, the depositions of several witnesses, who were clerks in the counting-house of the plaintiffs, were read, in which they stated, that they knew that the letter of credit was considered by the plaintiffs as covering any balance due by Chester Haring to the plaintiffs, for advances from that time to the extent of $8000; and that advances were made, and moneys paid by them, on account of Haring, from the time of receiving the said letter of credit, predicated on the said letter always protecting the plaintiffs to the amount of $8000, whenever the said amount or less might be uncovered; and that it was considered in the said counting-house of the plaintiffs as a continuing letter of credit, and so acted upon by the plaintiffs. To the admission of this part of the depositions, the defendants objected; but the court overruled the objection, and permitted the evidence to be read to the jury as evidence of the reliance of the plaintiffs upon the letter of credit, to the amount of the $8000, for acceptances, payments, advances and indorsements made to Haring. The defendants excepted to this admission of the evidence; and the propriety of this ruling of the court constitutes the first question in the case.

We are of opinion, that the evidence was rightly admitted, in the view, and for the purposes stated by the court below. It was not offered to explain or establish the construction of the letter of credit (See Russell v. Clarke, 3 Dall. 415, S. C. 7 Cranch 69), whether it constituted a limited or a continuing guarantee; and was not thus open to the objection, which has been relied on at the bar, that it was an attempt by parol evidence to explain a written contract. It was admitted simply to establish, that credit had been given to Haring upon the faith of it, from time to time, and that it was treated by the plaintiffs as a continuing guarantee; so that if, in point of law, it was entitled to that character, the plaintiffs' claim might not be open to the suggestion, that no such advances, acceptances or indorsements had in fact been made upon the credit of it; an objection which, if founded in fact, might have been fatal to their claim. nothing can be clearer upon principle, than that if a letter of credit be given, but in fact no advances are made upon the faith of it, the party is not entitled to recover for any debts due to him from the debtor, in whose favor it was given, which have been incurred subsequently to the guarantee, and without any reference to it.

The other exceptions are to certain instructions prayed by the defendants, and refused by the court. They are as follows:

1. That the said letter of credit sued on is not a continuing guarantee, but it is a limited one; and that when an advance or advances, acceptance or acceptances, indorsement or indorsements, had...