Sargent v. Ranger & Co.

Opinion by Winkler, J. § 617. Letter of credit; how far maker of is liable for money advanced on faith of. On the 31st of August, 1866, Eanger & Oo. delivered to W. H. Eussell the following: “The bearer, W. PI. Eussell, Esq., is authorized to draw on us for six hundred dollars, specie. Eanger & Oo.” On the 3d of September, 1866, Eussell drew the following draft: “Messrs. Eanger & Oo., please pay to W. D. Sargent, three hundred and fifty ($350) dollars, specie. W. H. Eussell.” Eanger & Oo. refused to accept and pay this draft, because Eussell had already drawn the amount of the letter of credit. Sargent sued Eanger & Oo. Held, that whilst Eanger & Oo. would unquestionably be liable for and compelled to honor the drafts of Eussell to the full amount they had authorized Eussell to draw on them for, they cannot be required to go any further; and one who has made advances upon the faith of the written authority, must inquire whether the authority given has not already been exhausted, and if he make such advances without making such inquiry, he does so at the peril of losing the whole amount so advanced, if it should subsequently turn out that the authority given had in fact, before the time of his advance, been exhausted. [Ranger v. Sargent, 36 Tex. 26; Roman v. Serna, 40 Tex. 312.] Affirmed.