Carnegie v. Morrison

Shaw, C. J. A case, involving most of the same questions which arise in the present, was argued at a former term ; but having stood over for consideration, the court have been desirous of hearing the argument in this case, before giving an opinion in the former one. It has now been fully and very ably argued on both sides. It involves questions of much difficulty and of great importance to the mercantile community. It is an action of assumpsit, brought by Carnegie & Co. mercantile firm at Gottenburg, Sweden, against Messrs. Morrison, Cryder & Co. of London. The action is founded upon a letter of credit given by the defendants, by Mr. Oliver, their general agent residing in Boston, upon the application of Mr. John Bradford, in favor of the plaintiffs, and for the purpose of paying, in part, a large debt due from Bradford to the plaintiffs, for merchandise before shipped to him on credit. The letter of credit is of the following tenor : [The letter was here set out, as ante p. 381.] It appears by the evidence, that Oliver was the general agent of the defendants in Boston ; that this letter of credit, was obtain — 394 — ed upon the application of Bradford, and was immediately forwarded to the plaintiffs, at Gottenburg ; and that notice of it was given to the defendants, at London. Mr. Oliver knew the purpose for which Bradford wanted it. He had often had simi lar letters of credit from Mr. Oliver before ; all of which have been honored, except one other in favor of Scholfield & Co. which "s now "n controversy in this court. Mr. Bradford was accustomed to give satisfactory security, from time to time, to Mr. Oliver, and to pay the defendants a commission of one per cent. It also appears that upon the strength of this letter of credit, the plaintiffs drew a bill or bills on the defendants, according to the usual mode of drawing bills at Gottenburg on London, which the defendants declined accepting. Various other circumstances were given in evidence, but this is a sum mary of the leading facts in the case. This action, if it can be maintained at all, as between these parties, must be maintained on the letter of credit. But a question meets us at the outset, what law shall determine the rights of the parties in this transaction ? It is obvious that the undertaking of the defendants was, to do some act out of this country. The substance of that undertaking was, to'give Bradford a credit for the use and benefit of Carnegie & Co. ; in other words, the substance and effect of that undertaking was, to pay a sum of money to Carnegie & Co. in discharge of Bradford’s debt to them, by means of bills of exchange to be drawn by Carnegie & Co. on the defendants, in their own favor, or in favor of their appointee, for their use, in consideration of the promise of Bradford to provide funds to meet those bills, giving them satisfactory security, placed in the hands of their agent, and in further consideration of a commission of one per cent, paid by Bradford. In considering the nature of this transaction, the inquiry involves two questions ; first, whether the transaction in question constitutes a contract, in which the plaintiffs have an interest; and, secondly, whether the interest of the plaintiffs in this contract is of such a character, that they can maintain an action upon it, in their own names. The question, therefore, does not — 395 — depend exclusively upon the lex fori, although, as the action is brought in this Commonwealth, its laws must determine whatever relates to the remedy. Supposing that the lex loci contractus is also to have a bearing on the question, it must be considered, that some of the rules, applicable to the construction and effect of contracts, are founded in positive law, established by usage or by statute, which each country will establish for itself, according to its own views of convenience and policy, and have a local operation ; whilst others are derived from those great and unchangeable principles of duty and obligation, which are everywhere recognized amongst mercantile communities, and indeed amongst all civilized nations, as lying at the foundation of civil contracts, and must be considered as having the same effect, wherever by the comity of nations contrácts made in one country are allowed to be carried into effect by the laws of another. In some states, for instance, a bond made to one or his assigns, is regarded as a negotiable instrument, and creates an obligation to pay to the obligee or any person, who shall legally become the assignee of it. In others, a note for money, payable to one or order, creates a legal obligation to the payee only, and an indorsee cannot maintain a suit in his own name. Whether an instrument, made in a particular form, shall have the one or the other construction, will depend upon the positive law of the country which governs it; and such law therefore will determine the nature and legal obligation of the contract created by it; it is positive law, concurring with, and giving effect to, the act of the parties, which determines the nature and extent of such ■contract. But that a party entering into a formal stipulation to pay money, or do some other beneficial act to or for another, shall substantially perform that undertaking, is a great principle of moral as well as legal obligation, and of international as well as municipal law, recognized everywhere. Taking it as settled, in the present case, that the defendants became subject to a duty or obligation of some kind, the real subject of discussion is, not merely as to the remedy, but whether the facts now in proof constituted a contract between these parties, which may be enforced by an action- — 396 — The objection to such an action and the ground of this de fence are, that the immediate parties to the transaction were Bradford on the one side, and the defendants on the other; that to this transaction the plaintiffs were strangers ; and that as Bradford acquired some right under it, and had a remedy upon it against the defendants, their contract must be deemed to be made with him and not with the plaintiffs. But this positron presupposes that the same instrument may not constitute a contract between the original parties, and also between one or both of them and others, who may subsequently assent to, and become interested in its execution ; an assumption quite too broad and unlimited, which the law does not warrant. In a common bill of exchange, the drawer contracts with the payee that the drawee will accept the bill; with the drawee, that if he does accept and pay the bill, he, the drawer, will allow the amount in account, if he has funds in the drawee’s hands ; otherwise, that he will reimburse him the amount thus paid : He also contracts with any person who may become indorsee, that he will pay him the amount, if the drawee does not accept and pay the bill. The law creates the privity. So in the familiar case of money had and received, if A. deposits money with B. to the use of C., the latter may have an action against B., though they are in fact strangers. But if C., not choosing to look to B, as his debtor, calls upon A. to pay him, notwithstanding such deposit (as he may,) and A. pays him, A. shall have an action against B. to recover back the money deposited, if not. repaid on notice and demand. The law, operating upon the act of the parties, creates the duty, establishes the privity, and implies the promise and obligation, on which the action is founded. Hall v. Marston, 17 Mass. 575. So in regard to a very common transaction; when one deposits money in a bank to the credit of a third person, and forwards him a certificate, or other evidence of the fact, the bank is regarded as coming under an obligation to pay the money to the person to whose credit it is thus deposited. So it is held in England, when the depositary assents to receive the money, though there is no consideration moving from the plaintiff to the defendant. Lilly v. Hays, 5 Adolph. & Ellis. 548. — 397 — We think, therefore, it is no decisive objection to an action by the plaintiffs, that the act done constituted, at the same time, a contract between the defendants and Bradford, on which the latter might provisionally have had a remedy, in case the plaintiffs should not assent to, and enforce the contract, so far as it was intended for their benefit. From this view of the case, it is manifest that the question whether a particular transaction constitutes a contract, and between whom, upon which one party can have a remedy against another by judicial proceedings, must depend upon the law gov erning such contract, as well as the law of the forum where it is sought to be enforced. The remedy may be sought in the form of an action at law, or a bill in equity, or before any special tribunal, according to the law of the place where it is sought. But the question whether a particular act or instrument constitutes a contract, and between what parties, is previous in its nature, and must generally be settled before any question of remedy arises. What then is the law of the contract, or in other words, what law determines whether an act done constitutes a contract, and if so, between whom and to what effect ? The general rule certainly is, that the lex loci contractus determines the nature and legal quality of the act done ; whether it constitutes a contract ; the nature and validity, obligation and legal effect of such contract; and furnishes the rule of construction and interpretation. There may, perhaps, be exceptions to this rule; as where parties happen to meet on a desolate island in a savage country, where the principles of commerce and civilization do not prevail, or where a settled municipal law is not enforced or regarded. Perhaps such would be the construction of a contract between American or European merchants in China, who rather reside on the confines of that empire, than live under its government; and where they may be presumed to have reference, in their dealings," to the general laws and usages of the commercial world, without regard to the laws of the people with whom they temporarily reside. But a contract, made in one country, may contemplate the execution of deeds or other con — 398 — tracts, making payments or doing other legal acts, in another ; in regard to which, the law of the foreign country, where the act is to be done, will govern the contract; and the obligation of such contract will bind the contracting party to do all such legal acts, according to the law of the place where they are to operate, so as to have their full legal effect. As if a person in one country should contract to convey land in another ; the general rule being that the lex loci rei sitae furnishes the rule which regulates titles and conveyances of real estate, the true construction and legal effect of such contract would be, that the conveyance should be executed in such form as effectually to transfer the title, according to the law of the place where the land lies. If the land were in Massachusetts, where the law requires the execution and acknowledgment of a deed, it would bind the contracting party to execute and acknowledge such deed, though made in a country where, by its municipal law, a deed would not be necessary. If the stipulation be, that the drawee shall accept a bill in a foreign country, and the law of that country require that a valid acceptance shall be in writing, though not required by the law of the place where drawn, it is a contract that the drawee shall accept the bill in writing. That the transaction now in question constituted a good contract to some purpose, and between some parties ; that it was made on a good, valuable and adequate consideration, and made m Massachusetts, is not contested. Then the rule prima, facie is, that the construction and legal effect of this transaction are to be determined by the law of Massachusetts. That is the law which must be regarded, in the first instance, in deciding whether the act done constituted a contract, and if-so, between whom, and to what effect, and must prevail unless the case falls within some exception to the general rule ; and the question is, whether it does. It is true that the parties to this suit are both foreigners, one residing in Sweden, and the other in England. This, however, is immaterial, and only respects the question who may sue and be sued in our courts. By the comity of nations, alien friends are allowed the benefit of our courts in seeking their civil rights, as plaintiffs ; and the defendants, by placing — 399 — their property under the control and protection of our government, place themselves within the jurisdiction of our courts. But the immediate actors in the transactions were here. Bradford, the prime mover, who opened and conducted the negotiation, paid the consideration, and caused the obligation to be entered into, was a resident citizen of Massachusetts ; and though in legal strictness he might not be considered as the agent of the plaintiffs, before they had assented to and adopted his act, yet still he so far acted for them, as to procure a stipulation, which, if executed, would enure to their benefit. The other party, though domiciled abroad, were here for the purpose of conducting mercantile and financial business, by their regularly constituted resident agent. The money was paid, or the security given, in Boston, which constituted the consideration for the defendants’ undertaking. The negotiation, which terminated in giving the letter of credit, was commenced and completed in Boston. That some things are referred to foreign laws and usages, in this agreement, is manifest in the instrument itself. The words, “ on the usual terms and conditions ” are obviously of this character. They refer to the laws and usages both of Sweden and England. All parties of course knew that the credit was to be given by the defendants, by means of bills of exchange, although this is not expressed in terms. Supposing that the object was, that this credit should be afforded by means of bills of exchange, to be drawn by Carnegie & Co. in Gottenburg, on Morrison & Co. in London, the instrument refers to the laws and usages of Sweden, for the mode of drawing, and to those of England for the mode of acceptance ; and the legal effect and obligation of the contract in Boston are, that the parties will respectively conform to those laws and usages, in the performance of their respective acts. But it is not as to the non-observance of any of these, that the question arises. The gravamen of the complaint is, that the defendants have violated the obligation of their contract, in its entire substance. It becomes therefore necessary to inquire, and ascertain more exactly, what that contract, in its legal effect and operation, was. The substance of — 400 — the undertaking of the defendants may, we think, be simplified and expressed thus : Whereas John Bradford is indebted to Messrs. Carnegie & Co. of Gottenburg, in the sum of £3000, and has requested us to pay them that amount for him, by means of bills of exchange to be drawn on us at London ; we hereby, for value received of him for that purpose, to our satisfaction, promise to accept their bills to that amount, payable to themselves or their order, and pay them accordingly. The question is, supposing a general failure in the performance of this undertaking, who is entitled to a remedy for such breach, and by what law shall this question be determined ? The assurance or promise is in terms made to Bradford ; but the substantial benefit to be derived from the performance of it would be the plaintiffs’, and therefore they are damnified by the breach. Bradford had procured the defendants to pay his debt for him to the plaintiffs, for a satisfactory pecuniary consideration, and immediately gave notice thereof, and remitted the contract to the plaintiffs, who assented to and accepted it. It may be fairly presumed, that but for this transaction, Bradford would have adopted some other mode of remittance. Regarding it as a question of principle and not of technical law, it was an undertaking, in which the plaintiffs had an interest, nearly or quite as direct and as great, as if the promise had been in terms to them, or the negotiation had been with them ; or as if the instrument had been a promissory note, procured by Bradford to be made payable to them, in consideration of money paid and security given by him, and such note afterwards remitted to and received by them. Upon these facts, the court are of opinion that the construction, the obligation, the legal effect and operation of this transaction are to be governed by the law of Massachusetts. So far as this transaction constituted a legal and binding contract at all, it was, we think, by force of the law of the place of contract, operating upon the act of the parties, and giving it force as such. The undertaking, it is true, was to do certain acts in England, to wit, to accept and pay the plaintiffs’ bills ; but the obligation to do those acts was created here, by force of the law of this State, giving force and effect to the undertaking of the — 401 — defendants’ agent, and making it a contract binding on them Supposing the law of England had provided that no letter ot credit should be issued, unless under seal, or stamped, or attested by two witnesses, or acknowledged before a notary ; is it not clear, that as no such formalities are required by our laws, a letter of credit, made here, would be held good, without such formalities ? We think it would be so held even in England, under the authority of the general rule, that a contract, valid and binding at the place where made, is binding everywhere. There is no reference, tacit or express, in this instrument, to the laws of England, which can raise a presumption, that the parties looked to them as furnishing the rule of law, which should govern this contract. It was, therefore, in our opinion, in legal effect, a contract made in Massachusetts, by parties both of whom were here by their agents, or persons acting for their benefit and in their behalf, and therefore the nature, obligation and effect of this contract must be governed by the law of this Commonwealth. 2. We are then brought to the question, whether by the law of Massachusetts the plaintiffs are entitled to maintain an action upon this contract. In the case of money had and received, it is conceded, as a settled principle, that if A. receive money of B. to the use of C., though there is no communication between A. and C. and no privity, other than that which arises from the duty of paying, an action will lie in behalf of A. But the consideration, in that case, moves from a stranger. In the case already cited, Lilly v. Hays, 5 Adolph. & Ellis, 548, it seemed to be considered, that a consideration moving from the plaintiff is not necessary to support an assumpsit; and that a consideration, moving from another person, and adopted by the plaintiff, is sufficient. The money was sent by one Wood to the defendant, to be paid to the plaintiff, and the defendant had admitted to a third person, that he had so received it; but he had had no communication with the plaintiff. Mr. Justice Patteson said, “ there is a consideration moving here, through the instrumentality of Wood, the original debtor, to the defendant, as agent for the plaintiff ” — 402 — Lord Denman thought that the defendant had made himself the plaintiff’s banker, to the amount received. I do not intend to go into a full consideration of all the authorities on this subject; but it may be proper to refer to a few of the leading cases. It seems to have been regarded as a settled point, ever since reports have been published in this State, rather than as an open question to be discussed and considered. The position is, that when one person, for a valuable consideration, engages with another, by simple contract, to do some act for the benefit of a third, the latter, who would enjoy the benefit of the act, may maintain an action for the breach of such engagement. In Felton v. Dickinson, 10 Mass. 287, the case was, that a father made a special agreement with a person for the employment of his son, till twenty-one years old1; whereupon the employer promised to pay the son $ 200, when he should come of age. The promise was, in terms, to the father ; but being for the benefit of the son, it was held that the son might maintain an action upon it. Perhaps the relation of father and son might have had some influence, and been supposed to bring the case more exactly within the principle of the familiar case of Dutton v. Poole, 1 Vent. 318. But the position is laid down broadly by the court, in general terms, that where a promise is made to one for the benefit of another, he for whose benefit it is made may bring an action for the breach of it. And this position is supported by a citation from Comyns’s Digest and Rolle’s Abridgment. Hall v. Marston, 17 Mass. 575, is a leading and decisive case for the proposition, that where one receives money from another, to the use of a third, the latter may maintain an action for it, though there has been no communication between the depositary and the person for whom it was received, and no assent, on the part of the party receiving it, to pay it over, except that which is to be implied from the act of receiving it with such direction. And yet it seems obvious, from other established principles, that the person, for whose use and benefit the money has neen so received, is under no obligation to call on the deposita — 403 — ry, but may look to his debtor for payment, as if he had made no such deposit for his benefit. And it seems equally clear, that when the original debtor has thus paid, upon notice to the depositary that the purpose for which the money was placed in his hands has failed, and that the person, for whose use it was deposited, has been paid, and is no longer entitled to it, the depositor, after demand and refusal, could maintain an action for th^ amount. In such case, the same undertaking on the part of the paity receiving the money would give a cause of action, in the first instance to one, and if he should not assent to and adopt it, then to another. But a case more directly in point, in support of the general proposition, is that of Arnold v. Lyman, 17 Mass. 400. A debtor, in failing circumstances, placed property, consisting of securities and goods, in the hands of the defendant, and took from him a written agreement, reciting such deposit, and promising to pay certain debts enumerated, and amongst them, that of the plaintiff. After an able argument for the defendant, it was decided that the action was maintainable. The court considered that the consideration was good, although it moved from the debtor of the plaintiff, and not from the plaintiff himself ; and although the debtor might have maintained an action upon this promise, had he been compelled to pay his debt to the plaintiff, yet the plaintiff might maintain an action in the first instance, if he elected to affirm the act done in his behalf by the debtor, and avail himself of the promise of the defendant, made for his benefit. The court affirm the general proposition, that he, for whose interest a promise' is made, may maintain an action upon it, although the promise be made to another and not to himself. There are several other cases in which this doctrine is recognized. The court are of opinion that the promise of the defendants, made by the letter of credit, in the present, case, comes within the principle of the cases cited. Bradford was indebted to the plaintiffs, and was desirous of paying them ; and he must resort to some mode of remittance. He had funds, either in cash or credit, with the defendants, and entered into a contract with them to — 404 — pay a sum of money for him to the plaintiffs : And upon the faith of that undertaking, he forebore to adopt other measures to pay the plaintiffs’ debt. He gave the plaintiffs notice of what he had done, and sent them the instrument as authentic evidence of the fact: They assented to and affirmed it, as an act dine in their behalf, and gave the defendants notice thereof, and, conformably to the terms of the letter of credit, drew their bills on the defendants. The refusal to accept was a breach of the promise thus made, and, in the event that happened, (the insolvency of Bradford,) the plaintiffs lost their debt. It would be in vain to say, that this promise was not made for the benefit, or (according to the terms of some of the cases) for the interest of the plaintiffs. The result shows that by a compliance with the plain, literal terms of their promise, on the part of the defendants, the plaintiffs would have received their debt. By a refusal to perform that promise, they have lost it. They are therefore damnified to the full amount of the sum for which the credit was given. 3. In putting this decision upon the authority of American cases, and an established course of practice in this Commonwealth, it has become unnecessary to consider, with much attention, the opinions of Sir Frederick Pollock and Mr. Hill, in their depositions taken for this cause, or to determine accurately how far the testimony of learned and eminent counsel is to be considered, in connexion with, or to the exclusion of, the authorities usually cited as evidence of the common law of England. It is undoubtedly a general rule, that the customary, unwritten law of a foreign country, is to be proved by the testimony of witnesses. But the peculiar relation in which we stand to the common law of England may require some modification of this rule. Had it been necessary to ascertain precisely what the present state of the law of England is, upon the point we have been discussing, the opinions of the learned and very eminent counsel, whose depositions have been taken, would be entitled to the highest respect. It would also be necessary to examine, with more care than we have thought it necessary to do, the case upon which those opinions were given, in order to — 405 — be assured that the cuse stated to them precisely corresponds, in all its essential particulars, with the case actually in judgment, before the court. In a complicated state of facts, it not unfrequently occurs, that the omission or insertion of a circumstance, apparently slight, on a superficial consideration, may have a material influence on the result. Supposing the law to have settled down in England, as stated by these gentlemen, the point must be considered as, at least, having been long doubtful; as there are respectable authorities the other way. The question is, whether a third person has a right of action on a promise made to another, for his benefit. See the earlier authorities collected, 1 Vin. Ab. Actions of Assumpsit, Z. The question was greatly considered, and decided in the affirmative, in Dutton v. Pool, 1 Vent. 318, and reported in several other books. In that case, the promise was made to the father for the benefit of a daughter, and the consideration moved from the father. The near relation of the parties was considered as having some influence, though that circumstance does not seem to be relied upon in the digests, where the case is stated as an authority for the general principle. 2 Coventry & Hughes Dig. 1025. The same general principle was asserted and recognized by Lord Mansfield, in Martyn v. Hind, Cowp. 443. 1 Doug. 146. And in the case of Marchington v. Vernon, reported in a note, 1 Bos. & Pul. 101, which was an action by the holder of a bill of exchange, against the assignees of the drawee, on a promise made by the bankrupt to the drawer, that he would honor the bill, Mr. Justice Buller said, that, “ independent of the rules, which prevail in mercantile transactions, if one person makes a promise to another for the benefit of a third, that third person may maintain an action upon it.” These and similar authorit'es no doubt had their influence in settling the law here, before the period at which the Massachusetts Reports commence. But a considerable coarse of practice, on both sides of the water, may have insensibly led the judicial tribunals, respectively, to different results, and may account for the diversity of the present law of the wo countries, though flowing from a common origin. — 406 — In one respect, the present law of England, as stated by the learned gentlemen in thsir depositions, is at variance with what seems to be the law of this country ; to wit, that an agreement to accept a bill, either made or about to be made, and so specifically described and designated, as to identify it and distinguish it from all others, shall be deemed an acceptance and may be declared on as such. It is only necessary to refer very generally to the American authorities. Wilson v. Clements, 3 Mass. 1. Storer v. Logan, 9 Mass. 55. Coolidge v. Payson, 2 Wheat. 66. McEvers v. Mason, 10 Johns. 207. Goodrich v. Gordon, 15 Johns. 6. Schimmelpennich v. Bayard, 1 Pet. 264. Boyce v. Edwards, 4 Pet. 121. Williams v. Winans, 2 Green, 339. But this point is not material to the present case ; for although the general question was discussed in the argument, whether an agreement to accept, made before or aftei a bill is drawn, may be treated in mercantile law as an acceptance ; yet upon careful examination, there was no serious ground to contend that the undertaking of the defendants, Morrison & Co., was such an agreement to accept a particular specified bill, as to bring it within the authority of the American cases. 4. It has been contended as another and distinct ground of defence, that the plaintiffs have precluded themselves from the right of recovering against the defendants in this case, by having proved their debt, as a debt due from Bradford, under a commission of insolvency issued against him, under St. 1836, c. 238. But the court are of opinion that the plaintiffs have not waived their claim against the defendants, by that course of proceeding against Bradford. It appears by the facts proved, that the plaintiffs had a larger debt due from Bradford, and would, therefore, at all events, be creditors under his commission ; that as to this sum of £ 3000, they made a provisional claim only, that is, they claimed to prove that amount against Bradford’s estate, in case they should fail of recovering it of the defendants ; and saving their rights in that respect, "such a.provisional and alternative claim, we think, was not a waiver of their rights against the defendants. It is obvious that it was not so designed ana understood by them ; and if it had the effect contended for, it was — 407 — against their intention. But according to the view which we have taken of the rights of the plaintiffs, they did not take the letter of credit in satisfaction and discharge of their debt, but as a means of obtaining payment, pro tanto. When satisfied, it would become payment, and would then discharge Bradford, and enure to his benefit, by paying his debt; but not till then. The case of a creditor, holding several persons liable for the payment of the same debt in solido, is faihiliar. The cases of promisors and indorsers, of principal and several sureties, are obvious instances. In general, in cases of bankruptcy, persons ¿o holding several persons liable for the whole amount may prove the whole against the estate of each debtor, taking care to receive but one satisfaction. In such case, proof against one is no waiver of the claim against another ; and a fortiori, when the claim is conditional only, not waiving the claim against others. It does not appear whether Bradford has obtained his discharge under the St. of 1836, c. 238 ; but if he has, we think it would not operate to the discharge of the defendants. The act provides, § 8, that “ no such discharge shall release any person, who may be liable for the same debt, as a partner, joint contractor, indorser, acceptor or surety, for or with the debtor.” The case is clearly within the equity, if not within the letter, of this provision of the statute.