Second Nat. Bank v. M. Samuel & Sons, 50.

• Citation: 12 F.2d 963
• Decision Date: 10 May 1926
• Docket Number: No. 50.,50.
• Parties: SECOND NAT. BANK OF TOLEDO v. M. SAMUEL & SONS, Inc.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

12 F.2d 963 (1926)

SECOND NAT. BANK OF TOLEDO v. M. SAMUEL & SONS, Inc.

No. 50.

Circuit Court of Appeals, Second Circuit.

May 10, 1926.

Morris, Plante & Saxe, of New York City (Merton E. Lewis, of New York City, of counsel), for appellant.

Morris D. Kopple, of New York City (Herbert D. Cohen, of New York City, of counsel), for appellee.

Before ROGERS, MANTON, and HAND, Circuit Judges.

ROGERS, Circuit Judge (after stating the facts as above).

It appears that the War Department of the government of the United States on October 17, 1922, sent to dealers in metal scrap material a circular letter soliciting bids for the purchase of about 1,880 gross tons of Stokes trench mortar shells scrap and trench mortar fuse bodies scrap, then at the Ordnance Reserve Depot at Toledo, Ohio. It required all bids to be presented at the Toledo depot on or before November 13, 1922. The defendant submitted its bid within the specified period, and its bid was accepted, and the material was awarded to the defendant.

In the circular letter inviting bids the defendant was fully advised that the material was to be sold "`as is, where is,' and that quantities, condition, description, weight, etc., are in no wise guaranteed by the government." The circular letter also advised that before the submission of a bid the bidder should inspect the material. He was also informed that full opportunity to make such inspection would be given. It also advised him that the successful bidder would be required to furnish an irrevocable letter of credit in an amount equal to 90 per cent. of his bid.

The defendant on November 17, 1922, applied to the Irving National Bank of the city of New York for a letter of credit in the sum of $28,527.12 in favor of G. S. Lavin, then the commanding officer of the Ordnance Reserve Depot at Toledo, against drafts to be drawn by said commanding officer at sight within 60 days from the date thereof, upon invoices in payment of the purchase price of the 1,880 gross tons of scrap, the letter of credit to expire on January 17, 1923. On the day following this application the Irving National Bank issued the letter of credit found in the margin.¹

On November 23, 1922, the War Department accepted the defendant's bid and awarded to it the shells scrap and fuse bodies at the agreed price of $16.86 per gross ton. Thereupon defendant paid to the War Department $3,169.68 and also delivered to it the letter of credit above mentioned, and thereafter from time to time defendant took over and disposed of the material which had been awarded to it. The Irving National Bank, acting under direction of defendant, extended the expiration date of the letter of credit from January 17, 1923, to and including February 1, 1923. It at the same time notified the commanding officer at the Ordnance Reserve Depot at Toledo of the fact of the extension.

The defendant, having received a large quantity of the scrap which had been delivered to it by the commanding officer at the Reserve Depot at Toledo, drew a draft for $20,049.52 in accordance with the terms of the letter of credit, which was purchased by plaintiff at its par value, forwarded to the Irving National Bank for payment, and paid. On January 31, 1923, all the scrap contracted to be sold to defendant had been delivered, and the commanding officer at the Toledo depot presented to plaintiff his draft, dated that day, for $8,038.73, drawn on the Irving National Bank in accordance with the letter of credit, and requested plaintiff to purchase the same, which the plaintiff did, paying him the face amount thereof.

Upon the same day plaintiff purchased the draft it forwarded by mail to the Irving National Bank at New York in a sealed, stamped, and properly addressed envelope, which it deposited prior to 5:30 o'clock in the afternoon in the general post office at Toledo. Mail so deposited was, as plaintiff knew, due to arrive in New York at 9:40 o'clock in the morning of the following day, and was customarily delivered to the bank and paid prior to 3 o'clock in the afternoon of the same day; but on this occasion it happened that the draft was not delivered to the bank until the morning of February 2, 1923, which was the day after the letter of credit expired. It is alleged that on receipt of the draft on February 2d the Irving National Bank at once communicated with defendant and requested its authority to pay the amount thereof to the plaintiff, but that defendant declined to consent thereto, and it was returned unpaid to the plaintiff, and is now held by it.

The plaintiff thereupon commenced this suit, alleging that it had no adequate remedy at law, and that a court of equity should compel the defendant either to deliver up and surrender to it the merchandise covered by the invoice accompanying the draft at the time the draft was presented to the Irving National Bank for payment, and which was of the value of $8,038.73, which merchandise defendant would not have obtained, except for the purchase of the draft by the plaintiff, or in the alternative the defendant should be required to account to the plaintiff for the proceeds of the sale in the sum of $8,038.73, with interest thereon from January 31, 1923.

The defendant in its answer alleged that it paid the government of the United States for the merchandise purchased from it by the payment of $3,169.68 cash and the delivery of the letter of credit in the amount of $28,527.12. It further alleged that the purchase by plaintiff of the draft of $8,038.73 was solely for plaintiff's own use and accommodation in the course of its own business, and for its own profit, and not for the defendant's accommodation. It specifically denied that it refused to permit the Irving National Bank to pay the draft herein involved, and alleged that the said bank was at liberty to pay it, if it chose so to do, and it alleged that the plaintiff's remedy, if any, is against the Irving National Bank, which issued the letter of credit.

The letter of credit was issued, not to the defendant, but to the commanding officer of the Toledo Ordnance Reserve Depot. It authorized him to draw at sight on the Irving National Bank for any sum or sums not exceeding the amount named therein, and the bank thereby expressly agreed "with the drawers, indorsers, and bona fide holders of the drafts, drawn under and in compliance with the terms of this credit, that the same" would be duly honored by it on presentation and surrender of the documents.

The plaintiff is a bona fide holder of a draft drawn by the commanding officer of the Toledo Ordnance Reserve Depot. He had the right to draw it, and the plaintiff purchased it from him, paying him the face amount thereof. It thereby acquired good title to the draft and was entitled to the payment thereof from the Irving National Bank on its presentation to it under the conditions specified in the letter of credit, as modified subsequently by extending the credit "until February 1st." The draft was not presented to the bank, however, until the morning of February 2d, although it was deposited in the mail on January 31st, and would have been delivered to the bank on the following day, before the close of banking hours on February 1st, and so within the time specified in the contract, had it not been for the unusual and unexpected delay in the transmission of the mail, and for which the plaintiff was in no way responsible.

The question which this state of facts raises is whether this unexpected and unforeseen delay in the transmission of the draft by mail, and which was not occasioned by the plaintiff's negligence, and for which it was in no way responsible, excuses the failure to make presentment of the draft on February 1st.

In Windham Bank v. Norton, Converse & Co., 22 Conn. 213, 56 Am. Dec. 397, a case decided in 1852, a bill of exchange was drawn at Norwich, Conn., on the defendants, and was payable at a bank in Philadelphia, Pa. The bill had been accepted by defendants, and they procured the plaintiff bank to discount it, and they had indorsed and delivered it to the bank. The bank deposited the draft in the post office, to be forwarded to Philadelphia. The officials at the post office, by mistake, deposited the mail intended for Philadelphia in mail bags marked for Washington, and while the mail arrived in Philadelphia in time, it was not delivered there, but was carried on to Washington. Then the mistake was discovered, and the Philadelphia mail was sent back to that city. It arrived too late to permit the presentation of the draft on the day it was due. The court held that the failure to make presentment in time was due to an accident not attributable to the holder, and that presentment on the day following was therefore sufficient, and that plaintiff was entitled to judgment. This was an action at law, the plaintiff having sued in assumpsit.

In 6 C. J. 682, the law is stated as follows: "The general rule is that the failure to present a bill or note in due time for payment and to give notice of its nonpayment will be excused by accident or misfortune not attributable to the fault or voluntary act of the holder, that makes it impracticable or impossible to perform such acts, provided the holder makes presentment or gives notice as soon afterward as he is able. * * * However, an accident, a mistake, or an unwarranted interference by mail authorities with a notice passing through their hands in due course of mail is a good excuse for delay, as where by mistake a postmaster misdirects the package of mail matter containing the bill or the note; but if the delay is caused in part by the holder's mistake in addressing the drawee, presentment in proper time will not be excused."

The rule as above laid down is supported by the authorities. Windham Bank v. Norton, 22 Conn. 213, 56 Am. Dec. 397; Young v. Exchange Bank, 152 Ky. 293, 153 S. W. 444, Ann. Cas. 1915B, 148; Labadiole v. Landry, 20 La. Ann. 149; Jex v. Tureaud, 19 La. Ann....