Hammond v. American Express Co.

68 A. 496, 107 Md. 295, 1908 Md. LEXIS 6

• Court: Court of Appeals of Maryland
• Decided: January 8, 1908
• Status: Published

Opinion

Schmucker, J.,

delivered the opinion of the Court.

This suit was instituted in the Baltimore City Court under the Rule Day Act by the appellee company against the appellant firm to recover alleged balances due on two foreign drafts or bills of exchange drawn by them. The two drafts are similar in form and for like amounts and they were both drawn on Arthur Hughes & Co. of Dublin against a consignment of wheat shipped by the Lord Dufiferin and to each draft was attached an order bill of lading for 8,000 bushels of the wheat. The drafts were in the following form:

“Sixty days after sight of this First Exchange (Second of the same tenor and date unpaid) pay to the Order of Ourselves Thirteen hundred and seventy-three Pounds % sterling.

bus.

wheat

■Value received and charge the same to account of Dcmts 8000 to be surrendered upon payment of this Bill before Lord maturity under discount on or before arrival of Dufferin vessel.

To Messrs. Arthur Hughes & Co.,

Dublin. Hammond, Snyder & Co.”

The drafts with the documents attached were sold and endorsed by the appellants to the appellee and were by it on November 5th, 1906, duly presented for acceptance to the drawees who accepted them in writing across the face of each draft the words ‘'accepted from Nov. 5th, 1906. Payable at Lloyds Bank London, Arthur Hughes & Co.” The grain arrived at Dublin on November 28th, 1906. The bills of lading attached to the drafts were not delivered to Hughes & Co. on the acceptance by them of the drafts but were retained by the appellee until the expiration of 60 days and three days of grace and were then presented for payment to Lloyd’s Bank in London and weré dishonored, of which their makers, the appellants, had due notice. The appellee then sold the grain represented by the bills of lading and, the net proceeds not proving sufficient to pay the drafts, it instituted the present suit to recover the deficiency.

The appellants as defendants below demurred to the nar. and their demurrer having been overruled they filed four pleas with appropriate affidavits of defense and certificates of counsel. The first and second pleas presented the general issue. The third plea alleged by way of equitable defense that the drafts sued on were the means employed by the defendants to collect from Arthur Hughes & Co. the price of grain sold to them under a contract, of the form of the London Corn Trade Association, which contained a clause requiring the grain to be paid for on or before the arrival of the vessel subject to discount, or at the seller’s option by buyer’s acceptance of shipper’s drafts at sixty days from the date of arrival in London of the drafts with documents attached. That under such contracts it had long been the custom of the trade for buyers of American grain to take up the drafts with the aocompaying documents on the arrival of the vessel with grace, if it arrived within sixty days from the-date of acceptance. That the plaintiff, having in the course of its business long been a purchaser of foreign drafts many of them drawn under contracts ■containing clauses such as that set out in the plea, knew or ■ought to have known of the said usage as to the maturity of the drafts and ought therefore to have presented them for payment on the arrival of the vessel with grace but it failed to do so .and held them until sixty days after their acceptance with grace and only then presented them for payment.

The fourth plea differed from the third in that it averred that by virtue of the presence on the face of the drafts of the memorandum there appearing, which was taken from the form of contract of the London Corn Trade Association, the appellee knew that the drafts matured on the arrival of the vessel with grace and it should have presented them for payment at that time, but it failed to do so.

The plaintiff joined issue on the first two pleas and demurred to the last two and the Court sustained its demurrer. The defendants then filed their fifth and sixth pleas also by way of equitable defense. The fifth plea differs from.the third in averring that the plaintiff knew that other bills of exchange drawn by the defendant in similár form matured and were retired on the arrival of the vessel with grace and that the plaintiff knew that it was its duty to so present these drafts for payment but failed to present them until the expiration of sixty days from their acceptance. The sixth plea differs from the fourth in averring that, by a usage covering more than fifteen years between the defendants, and the firm of Smith, Hammond & Co. who were their predecessors in business and those with whom they dealt in the corn trade, their drafts against shipments of grain had been uniformly drawn in the same form as those sued on in this, case and had been retired upon the arrival of the grain at its port of destination with grace, provided the vessel arrived within the period named in the bills, and that the plaintiff by reason of its dealing in such drafts should have had full knowledge of the usage, but it failed to present the drafts for payment on the arrival of the vessel with grace in accordance with the usage. These special pleas were rather long ones but we have stated their substance. ' '

The plaintiff demurred to the fifth and sixth pleas and the Court sustained the demurrer. The defendants thereupon withdrew their first and second pleas and_ the plaintiff took judgment against them by default for want of pleas-and affidavit of defense and, the judgment having been extended, the defendants took the present appeal.

There was no error in overruling the demurrer to the declaration which on its face presented a good cause of action. It averred in proper detail, in reference to each draft, that the defendants thereby directed Arthur Hughes & Co. to pay to their order the amount therein stated and that the defendants endorsed to the plaintiff the draft with the bill of lading thereto attached, and then averred the presentation, acceptance and subsequent dishonor of the draft, and the due notice thereof to the defendants, the sale of the grain covered by the bill of lading and the failure of the net proceeds of the sale to pay the draft in full. Those facts if duly proven would have justified a verdict in favor of the plaintiff for the amount of the deficiency shown by the evidence.

The special pleas reveal the true theory upon which the appellants sought to defend the suit. That theory briefly stated was that by the terms of the contract for the sale of the grain, or the usage of the trade in the course of which the sale was made, the maturity of the drafts drawn against the proceeds of the grain was so accelerated that they became payable on the arrival at its destination of the vessel with the grain on board, if it arrived, as it in fact did, before the expiration of the period named in the draft itself for its payment. The theory further assumed that the appellee was so affected with knowledge of the terms of the said contract of. sale or usage of the grain trade, by the fact of its having frequently bought other drafts of like character or by the presence of the memorandum appearing on the face of the drafts in the present case, that it became .its duty to present the drafts for payment on the arrival of the vessel and that its failure to do so discharged the defendants as endorsers of the draft from all liability thereon. In other words the pivotal question presented by the appeal is whether the maturity of the drafts in the hands of the appellee was accelerated by the facts alleged in the pleas. Upon the answer to that question the case must turn.

The question is presented to us by the record in two phases. They are, whether, by the proper construction of the drafts themselves in their present form, it was the duty of the appellee to present them for payment on the arrival of the' vessel, and, if that be answered in the negative, whether its duty in reference to their presentation for payment was modified-by the terms, as alleged in the plea, of the sale of the grain against whose proceeds the drafts were drawn or the usage of the export corn trade.

It is plain that if the words “to be surrendered upon payment of this bill before maturity under discount on or before-arrival of vessel” did not appear on the face of the drafts, they would by their own terms fix their maturity at sixty days after sight and their holder would have been under no obligation to present them for payment before that time. Nor should the fact that they were drawn against the proceeds of the wheat and had the bill of lading for it attached to them change the date of maturity fixed by the drafts themselves. This would certainly be true if the bills of lading be regarded as having been attached to the drafts as collateral security. The function of such security is to furnish a guaranty for the performance of the terms of the principal obligation and not to effect a change in those terms, which, remain the same as if no security had been given for their performance. If on the other hand-the' drafts, in the hands of the appellee as a bona fide holder for value, are affected by the fact, alleged in the pleas, that they were the means employed by the appellants to collect the price of the wheat covered by the bills of lading, still the appellants themselves fixed the date when that price should fall due by drawing the drafts at sixty days after sight.

If we turn now to the memorandum appearing on the face of the drafts and inquire into its true significance we find that it simply provides for the surrender of the bills of lading attached to the drafts upon the payment of the latter under discount either on or before the arrival of the vessel. It is obvious from the memorandum, that the bills of lading were not intended to be surrendered until the payment of the drafts, because by its terms the obligation to surrender them is conditioned upon such payment. It cannot be successfully contended that this memorandum, whether it be held to operate as a condition or an agreement, should be construed to accelerate the maturity of the drafts, for by its express terms it relates only to the event of their payment “before maturity The contents of the memorandum suggest that the purpose of placing it upon the drafts was to warn their holders that they must have the bills of lading ready to surrender and must be prepared to submit to a discount on the drafts if the acceptor desired to exercise the option which it gave him of paying them before maturity. Admitting the right of the acceptor, in common with other debtors, to prepay his obligations in full, he could not, in the absence of the memorandum on the drafts, have exacted a discount from their face value for their prepayment.

Nor do we think that the terms of the contract of sale of the wheat against whose proceeds the drafts were drawn can be imported into the drafts or held to modify or control their plain language merely because the bills of lading for the wheat were attached to the drafts. This is quite a different case from that of the Nat'l Bank of Commerce v. Merchants Nat'l Bank, 91 U. S. 92, which was much relied on in argument before us by the appellants. In that case the question was whether, when a plain time draft, without any memorandum on its face, had been drawn against a consignment of cotton to order and had been forwarded to an agent for collection with the bill of lading for the cotton attached without any further instructions, it was the duty of the agent to deliver the bill of lading to the drawee of the draft upon its acceptance by him or to hold the bill until the payment of the draft. . It was there held that the agent could not expect the consignee of the cotton to accept the draft for its price unless he was furnished with the bill of lading in order to obtain possession of the cotton. The Court there held that it was to be inferred from the facts of the case before it that the transfer of the bill of lading to the agent had not been made to secure the payment of the draft. It was moreover distinctly held in that case that if the owner of the draft had instructed the agent to retain the bill of lading until the payment of the draft and he had surrendered it upon the acceptance of the draft he would have been liable to the owner for a breach of duty.

In the present case not only are we dealing with a bona fide owner for value of the drafts, instead of a mere agent for their collection, but it is manifest, both from the nature of the memorandum on the face of the drafts and from the fact that their drawee accepted them without demanding or receiving the bills of lading, that it was the intention of the parties that the appellee should retain the bills of lading until the payment of the drafts, in other words, the bills of lading were attached to the drafts as collateral security for their payment.- Under these circumstances the bills of lading must be regarded as having been attached to and transferred with the drafts to secure the performance of the terms of the latter and their presence should not be held to have the effect of modifying or changing those terms. The drafts were the primary obligations to which the bills of lading were merely incidental and collateral.

Neither do we think the existence, if such there were, of a .trade usage or custom of the kind set up in the pleas could be shown to accelerate the maturity of the drafts. .By their own terms expressed in plain language the drafts did not mature ¡until the expiration of sixty days after sight i. e., after acceptance. That fixed the date upon which the holder was bound to present them for payment and at which, if they'were dishonored, he was to notify the prior parties thereto if he wished to hold them liable on the drafts. The liability of those parties being secondary and contingent upon proper presentation of the drafts and notice of their dishonor it was essential that there should be no uncertainty as to the date of their maturity. To permit a custom or usage to be shown fixing a different maturity from that plainly appearing upon the face of the drafts would be to introduce into the contracts made by the drafts a provision inconsistent with one of the most vital of their express terms. It is well settled that this cannot be done. Denton v. Gill and Fisher, 102 Md. 407; Foley v. Woodside & Mason, 6 Md. 49.

The drafts having been drawn in Maryland upon a drawee residing in Dublin who accepted them payable in London, the English law, as the lex fori, would regulate the method of their payment and the matters incident thereto, but in the absence from the record of any allegation that the general propositions of the English law applicable to the subject differ from those in force here, they will be presumed to be the same. State v. P. & C. R. Co., 45 Md. 46; Dickey v. Pocomoke Bank, 89 Md. 297.

The Court below, acting under the authority conferred by ch. 443, of the Acts of 1890, allowed the plaintiff’s attorney a counsel fee of $50. The provisions of the Act are as follows: “If the defendant shall dispute the whole or any part of the plaintiff’s demand in any action brought under the provisions of the three foregoing sections and upon trial of the case the plaintiff shall recover a judgment for any portion of his demand so disputed, then the plaintiff shall be allowed, in addition to the costs of the suit, reasonable counsel fees, to be fixed by the Court; said fees not to be less than $25 nor more than $100.”

We see no error in the allowance of this fee. No issue of' fact was made up and heard in the case, it is true, but the real controversy between the parties was disposed of upon the issues of law made by the demurrers which were argued by counsel and determined by the Court. The fact that at the end of the proceedings the defendants withdrew their pleas and allowed judgment by default to go against them, did not deprive the case of its controversial character. The defendants disputed the plaintiff’s claim and forced its counsel to try the issues arising from the dispute. It is not material that the pleadings resulted in issues of law upon which the defendants elected to make their final stand in the Court below. There was in our opinion a “trial of the case” within the meaning of the.law.

The judgment appealed from will be affirmed.

Judgment affirmed with costs.