Smith & Ferguson v. Ledyard, Goldthwaite & Co.

B. F. SAFFOLD, J. — The Revised Code provides, that “No person within this State must be charged as the acceptor of a bill of exchange, unless his acceptance is in writing, signed by himself or agent ” (§ 1840) ; and that an unconditional promise in writing, to accept a bill before it is drawn, amounts to an actual acceptance. § 1841. These sections “ must not be construed to impair theright of any person to whom a promise to accept a bill has been made, and who, on the faith of such promise, has negotiated the bill, to recover damages of the person making such promise, on his refusal to accept such bill.” § 1844. The letter of Tarleton, Ledyard & Co., dated October 29, 1866, was a solicitation of business for their own advantage. It was made in view of a well known usage of trade, that a buyer of cotton would pay his vendors out of the proceeds of a draft, or bill of exchange, drawn on those to whom he consigned it, which he sold to some banker. Without a previous agreement, the drawees would not accept the bill, unless they chose to do so after receiving the cotton. Therefore, such an [282] agreement is usually made. Their letter of January 3, 1867, was a renewed solicitation. These letters contain an express and unqualified promise to Johnston, to accept his bills for the purchase of any cotton shipped to them. He could, unquestionably, sue them for damages, on their refusal to accept such bills, negotiated by him on the faith of the promise. It was in the contemplation of these parties, that some other person was to become interested in the bills, because without a negotiation with some other they would be of no use. Whoever gave a proper consideration for them, on the faith of the promise, necessarily became a participant in the benefits of the promise equally with Johnston. A written promise, made to one person, may enure as a promise in favor of another person, who gives credit on the footing of that promise, where the terms of the letter are such as prove that it was intended to be shown, and to produce that very credit. Adams v. Jones, 12 Peters, 207, 213; Carnegie v. Morrison, 2 Met. R. 381, 395. In Laurason v. Mason (3 Cranch, 492), the promise was contained in a note, as follows : “We will become your security for one hundred and thirty barrels of corn, payable in twelve months.” Judge Marshall said, “ The note was certainly intended to give a credit to the person addressed. The defendants are bound by every principle of moral rectitude and good faith to fulfil those expectations which they thus raised, and which induced the plaintiff to part with his property. The evidence was clear that the credit was given upon the faith of the letter.” To the same effect are Boyce v. Edwards, 4 Peters, 121; Story on Bills of Exch. § 462, and notes 1 and 2. The case of Blakeston v. Dudley (5 Duer (N. Y.) R. 373) is not good authority, because it confines the benefit of the promise to the person to whom it was directly made, or who negotiated the bill, meaning thereby one who passed it merely. He who receives the bill for value, negotiates it as well as he from whom it is received. It requires at least two to make a negotiation. Webst. Diet. There is no reason why the plaintiffs should have actually seen the letters of credit. The possession of them by Johnston, and the credit given on their faith, make out the liability. The sight of them would be only additional proof that the credit was given on the faith of them. 2. The defendants were the same persons who, with Tarleton, composed the firm of Tarleton, Ledyard & Co. They continued the same business, were cognizant of the arrangement with Johnston, and accepted its benefits. They encouraged the plaintiffs to discount the bills by accepting and paying them. They expressly authorized Johnston, by the letter of [283] March 21, 1867, to draw on them at a greater margin than he had previously been doing. The next day (March 22) they promised him to accept the bill in question, with a larger margin. These acts show both their construction of the letters of credit and their ratification of them. Whose fault was it that loss was sustained in these transactions ? It was caused by the decline in the price of cotton. No bad faith is alleged against Johnston or the plaintiffs. The defendants never did revoke the authority to draw on them, except in respect to the greater margin required on the very day, and after the bill in controversy was drawn and delivered, and by the refusal to accept the bill. Even after their refusal to accept it absolutely, they agreed to accept it for a less amount. If they could have applied their terms of March 21, 1867, to this bill, the transactions between the parties would not have ceased when they did. The charges given were not in conformity with the views herein expressed. It is unnecessary to consider those refused. The judgment is reversed, and the cause remanded.