Laudisi v. American Exch. Nat. Bank

• Decision Date: 19 December 1924
• Citation: 239 N.Y. 234,146 N.E. 347
• Parties: LAUDISI v. AMERICAN EXCH. NAT. BANK.
• Court: New York Court of Appeals Court of Appeals

239 N.Y. 234

146 N.E. 347

LAUDISI

v.AMERICAN EXCH. NAT. BANK.

Court of Appeals of New York.

Dec. 19, 1924.

Action by Lawrence Laudisi against the American Exchange National Bank. Judgment for plaintiff entered on order granting motion to strike out defendant's answer, and for summary judgment, and denying defendant's motion to dismiss complaint (122 Misc. Rep. 635, 203 N. Y. S. 432), was affirmed by the Appellate Division (209 App. Div. 906, 205 N. Y. S. 932), and defendant appeals.

Reversed with directions.

Crane, j., dissenting.

Lehman, J., dissenting in part.

Appeal from Supreme Court, Appellate Division, Second Department.

Edgar J. Nathan and Michael H. Cardozo, Jr., both of New York City, for appellant.

Ralph Stout, of New York City, and Adolph Ruger, of Brooklyn, for respondent.

HISCOCK, C. J.

The plaintiff, who lived on Long Island, made a contract with Grande-Di Paola, Incorporated, which was doing business in New York City, for the purchase of a quantity of Alicante Bouchez grapes which were to be shipped from California. As a method of paying for said grapes, he made a contract with the defendant for the issue to said vendor of a letter of credit under which the latter's drafts for the purchase price of the grapes were to be paid by defendant on presentation when accompanied by certain documents. Grapes were shipped to plaintiff from California in purported execution of this contract, and a draft for the purchase price thereof was paid by defendant on account of plaintiff, and on presentation therewitn of certain documents. The latter now claims that the grapes so shipped were much inferior to those which he had contracted to buy, and that the documents presented by the vendor did not so comply with the letter of credit issued in pursuance of his contract with defendant as to entitle it to pay said draft.

Most of the details of the contract between plaintiff and defendant and of the letter of credit are not material or involved in this controversy. In fact, the only provision which requires our consideration and interpretation is the one describing the documents to be presented with the draft as an authority for paying the latter on account of plaintiff.

The contract was in the form of a letter addressed by plaintiff to defendant, and, referring to drafts of the vendor to be paid on account of the purchase price of the grapes, it provided:

‘It is understood and agreed that you may accept and/or pay the draft and/or drafts under said letter of credit on presentation of one copy of bill of lading * * * together with copy of invoice and/or other documents as required by said letter of credit.’

The letter of credit issued in pursuance of said contract to the vendor provided for drawing of drafts against shipments to be made at a certain time of Alicante Bouchez grapes at a certain price from California to Long Island City. It then contained the following clause whose interpretation and application immediately encompass the dispute between these parties: ‘Invoice and nogotiable railroad bill of lading showing destination to Eighth street yard Long Island railroad, Long Island City, to accompany drafts.’

When the vendor presented the contemplated draft it presented therewith a bill of lading duly issued at the shipping point in California, but which described the article shipped not as Alicante Bouchez grapes but simply as ‘grapes,’ and an invoice made out by the vendor in New York instead of by the shipper at the shipping point which fully described the grapes as complying with the contract between plaintiff and his vendor. Thus the two instruments together showed a shipment of the articles which plaintiff's contract of sale called for and which fully warranted the payment of the draft, but the plaintiff says that this is not sufficient. He argues that the bill of lading by itself should have shown a shipment of the particular kind of grapes called for by his contract and specified in the letter of credit, and that the defect in the description contained in it cannot be remedied by the invoice made out by the vendor in New York City. He cites no case which, in our opinion, sustains the contention, nor are we aware of any such one, and the allegations of the affidavits presented on the application for judgment do not sustain such contention.

[1][2] The relation which arises between a customer and a bank in respect of a letter of credit issued by the latter for the account of the former is a familiar one and in its general aspects well understood. As a convenient method of paying for goods which he may purchase, the customer authorizes the bank to issue a letter of credit providing for the payment of drafts drawn by the vendor on such conditions as he may elect. He may authorize the bank to pay drafts without any accompanying documents; he may authorize payment on a bill of lading and invoice, as in this case; he may prescribe much more stringent limitations upon the power of the bank. But in any case the bank has the power and is subject to the limitations which are given and imposed by this authority. If it keeps within the powers conferred it is protected in the payment of the draft. If it transgresses those limitations it pays at its peril. A customer having the right to prescribe and phrase limitations as he desires, it is our duty to give to language its ordinary and sensible meaning which will neither destroy the protection which the customer has exacted, nor, on the other hand, impose upon the bank some obligation not fairly warranted by the language which has been adopted by the parties.

Following these principles we find nothing in the description of the documents which were to accompany the drafts when presented for payment which, in our judgment, places upon the bill of lading the requirement of so describing all of the characteristics of the article shipped that it alone will show that such article is the one described in the letter of credit. The paramount purpose of a bill of lading is to show the shipment of goods which, so far as appears, conform to necessary requirements as stated in the letter of credit. If it affirmatively shows the shipment of goods which do not comply with the requirements of a letter of credit, a bank would not be justified in acting upon it. If it describes the goods shipped by a nomenclature different than that employed in the letter of credit, a bank would be justified in refusing to make payments on the strength of it and thereby incurring the possible burden of establishing in litigation that the different terms meant the same thing. Such, in the case of a guaranty, was our decision in Bank of Italy v. Merchants' National Bank, 236 N. Y. 106, 140 N. E. 211. If a customer in his contract with the bank and by the letter of credit requires that the bill of lading shall by itself and on its face show that certain described goods have been shipped, a bank will not be protected which pays on the faith of a bill which does not comply with this requirement. Such in its fundamental features and in its theory was the decision of this court in Bank of Montreal v. Recknagel, 109 N. Y. 482, 17 N. E. 217, especially relied on by the plaintiff.

[3] But when we pass these particular cases and others which perhaps might be cited we think that a bank permitted to pay drafts on ‘invoice and negotiable bill of lading showing destination’ to a certain point is justified in acting on a bill of lading which, so far as its description goes, shows the shipment of required goods, and is then supplemented by a proper invoice which completes the description and shows that the goods are the ones mentioned in the letter of credit. Such seems to us to be the natural and compelling interpretation of the clause which was used in this case. Even if we could be justified in straining the natural meaning of words in such a letter of credit so as to meet some call of policy or to secure some element of greater and proper safety to the one on whose account the draft is being paid, we do not see how we could find those conditions existent here. A bill of lading in this case, even if it specified the shipment of the particular kind of grapes ordered by the plaintiff would be no guaranty of the fact of such shipment. Of course nobody would expect a railroad company to open and examine the contents of 1,240 boxes of grapes and see that they all complied with the description in the letter of credit. In such a case it inevitably would take from the shipper the description of the goods which were being transported as indicated by the marks on the packages or by other statements and would then protect itself from inaccuracy or mistake by the clause ordinarily found in bills of lading and included in this particular one, ‘contents and condition of contents of packages unknown,’ and which, we have held, does protect a railroad company from inaccuracy in its description of goods being transported. Dworkwitz v. New York Central R. Co., 230 N. Y. 188, 129 N. E. 650.

Then, passing to the contention made by defendant that the indeterminate description employed by the bill of lading in this particular case was so supplemented by the description of the invoice that the defendant was authorized to find a conformity of the shipment with the letter of credit, the plaintiff urges that the invoice was made in New York instead of California, that its correctness was not authenticated or certified by any outside party, and that it was, therefore, merely a self-serving declaration of the vendor which furnished no authority for payment by the defendant. Again we find nothing which justifies these criticisms of the plaintiff or prevents the invoice from being regarded as a proper and sufficient supplement to the bill of lading. We certainly should not feel authorized in the absence of sufficient provision to that effect, or of facts not appearing on this motion, to hold that an invoice may not be made...