Ranger v. Sargent

Ogden J. The primary question presented in the record in this cause, for our consideration and determination, is the proper construction of the following instrument of writing: “ The bearer, William H. Russell, Esq., is authorized to draw “ on us for six hundred dollars specie. (Signed) “ Ranger & Co. “ Houston, Aug. 31, 1866.” On the 3d day of September, 1866, William H. Russell presented the above instrument to Daniel Sargent, who, on the faith of the same, advanced him three hundred and fifty dollars, and took his draft on Ranger & Co. for the amount, and on. presentation of the draft, Ranger & Co. refused to pay the [38] amount specified, for the reason that they had, since giving the authority to Russell, paid to him and his order more than the sum specified in the letter, and that he had thereby exhausted the authority to draw; and they claimed that they were no longer bound to honor or pay his drafts. That the written authority of Ranger & Co. to Russell, to draw on them for six hundred dollars, may be classed under the general appellation of a letter of credit, there can be no doubt; but whether it be a general or special letter of credit, as defined in the text-hooks, is not so easily determined, for the reason that the authorities have failed to agree as to what shall constitute the distinguishing characteristics of a general or special letter of credit; and for the further reason that the instrument under consideration is peculiar to itself alone—having most of the characteristics of a general and special letter of credit combined. It is general, in that it is directed to no one and is limited to no time or place, and it is a special or particular letter ,of credit, because it is written for the especial benefit of the person in whose favor it is drawn, and it binds the drawee to pay to Russell, if he should see fit to demand it, or to his order, the- sum of six hundred dollars. But there can be no doubt that the instrument was intended as a letter of credit for a limited sum or amount, and must be construed as such. This character of mercantile or commercial paper has been in use for many centuries, and the usual form of all letters of credit is to limit the holder to a certain amount, for which he is entitled to draw; and the question presented in this record for our decision is, will such a limitation be good and binding against the parties and the public generally ? As to the parties themselves, whether it be the maker, the party addressed, or the party to whom the credit is given, there can be no doubt; for, with them, the letter is the best evidence of the object and extent of the credit conferred. But it is contended that the public are not bound by the facts of the case, or the intentions of the parties; and that unless the letter of credit bears the evidence that the authority has [39] been exhausted, the holder may draw for the full amount specified in the limitation for an indefinite number of times, and the maker has no protection but in the revocation of the authority. If this be true, then a letter of credit would be a dangerous thing indeed, and every person who gave an instrument of this kind would place himself, financially, entirely within the power of the person who received the credit. These letters of credit were introduced into use for the express purpose of being used in a foreign or distant country, and if the doctrine established by the judgment of the District Court in this case be the law of the land, then Russell, on receipt of the letter in this case, had he been so disposed, could have gone to New York or elsewhere and drawn for every dollar of property appellants ever owned or possessed. And yet this is a very common form of letter of credit or authority to draw, used by travelers, merchants of every grade and character, shippers, lawyers, and agents generally. And while our law reports are quite full of cases growing out of the use of letters of credit, yet we have not been able to find a case where the doctrine held by the District Court in this case has been enunciated or attempted to be enforced. We have been able to find but few cases where this question has been discussed or decided, and in each case where that question is raised or referred to, the authorities appear uniform in holding to the doctrine that would relieve appellant from all liability beyond the six hundred dollars. (Birckhead v. Stewart, 5 Hill, 634; Ulster County Bank v. McForlan, 5 Hill, 432; Russell v. Wiggin, 2 Story, 214; Aldricks v. Higgins, 16 Sargent & Rawle, 212.) In the last case, the court says : “ It (the letter of “ credit) was intended as an introduction to business in New “ York, for Aldricks, binding the signers in an amount not ex- “ ceeding seven hundred dollars. It can hardly be supposed that “ they intended a credit unlimited in time for that amount.” The other cases are not all so directly upon the question at issue, but they most clearly recognize the right of a party in a letter of credit to limit his responsibility, not only as to time [40] and place, but also as to the extent. We have examined the authorities referred to in appellee’s brief so far as they are accessible to us, and from them we have formed a different opinion as to the law in this case, to that to which appellee’s counsel have come. This letter is a peculiar one, and not in the usual form of a letter of credit, as it is directed to no one, and asked credit for the bearer of no particular person, but simply declares that Russell has credit with the house of Ranger & Co., to the amount specified; and is in the nature of a personal promise to pay to Russell or his order; and he who should make advances on the same would do so at his peril, unless he retained possession of the letter of credit to present with his draft; and even then he should know that the authority had not been, exhausted. This letter, when executed and delivered, became the property of Russell,-* and Ranger & Co. had no power or authority to recall it. And though they might have published a revocation of the authority, yet, according to the doctrine held by the lower court,-if Russell could have got beyond the reach of the notice of revocation by publication, he could still have used the letter, and Ranger & Co. would have been responsible for the use to an unlimited extent. It is claimed by counsel that drafts drawn on this letter of credit should have been endorsed on the same, and as none were endorsed, then Ranger & Co. should be held responsible. But it should be remembered that the letter, and the power to require an endorsement, had passed from the hands of Ranger & Co., and this rule would still place them at the mercy of Russell. And even if the letter of credit had required that all drafts drawn on the credit of that letter should be endorsed on the same, still this would be an unsafe rule to follow, as Russell held the letter and, would have in his power the endorsements and the evidences of the responsibility of Ranger & Co. We are of the opinion that the instrument of wxitifig here exhibited as the authority of Russell to draw on the house of Ranger & Co. partakes very much of the nature of a promissory [41] note after maturity; and consequently, the party who made advances on the credit of the same, was bound to make the necessary inquiry to learn that the same had not been paid, nor the authority to draw exhausted. We are therefore of the opinion that there was error in the charge of the court, and that the same may have misled the jury. The judgment is therefore reversed, and the cause remanded, to be proceeded in, in accordance with this opinion. Reversed and remanded.