Rozema v. National City Bank

292 F. 913, 1923 U.S. App. LEXIS 3031

• Court: Court of Appeals for the Ninth Circuit
• Decided: October 29, 1923
• Docket: No. 4072
• Status: Published

Opinion

RUDKIN, Circuit Judge

(after stating the facts as above). [1, 2] It will be seen from the foregoing statement that the letter of credit issued by the Chicago bank on account of the Montgomery Ward & Co. purchase called for standard white sugar; that the original letter of credit issued on account of the John. Sexton & Co. purchase called for standard white granulated sugar; that the letter of credit issued by the defendant in error called for standard white granulated sugar; and that the certificates of analysis show that the shipment actually contained, granulated white sugar, and sugar (direct polarization) 98.5 per cent. In other words, the sugar shipped by Kelley & Co. did not satisfy the requirements of either the Montgomery Ward & Co. contract or the John Sexton & Co. contract. At least we are justified in so assuming, in the absence of any explanation as to what is meant by standard white sugar, called for by the Montgomery Ward & Co. contract, and granulated white sugar and sugar (direct polarization) 98.5 per cent, as shown by the certificate of analysis. Under these circumstances, if' the obligation of the defendant in error is measured by the letter of credit as issued, the plaintiff in error is not entitled to recover for two reasons: Eirst, because the defendant in error could not accept the draft in part and dishonor in part; and, second, if the defendant in error should, have refused to accept or pay the draft on account of the John Sexton & Co. purchase it should, for the like reason, have refused to accept or pay the draft on account of the Montgomery Ward & Co. purchase, because, as already-stated, the sugar did not satisfy or comply with the requirements of either contract as to quality; and had the defendant in error stood upon the strict letter of its contract, it would have refused to accept or pay the draft in its entirety, and in that event there would have been no sales and no profits. In view of the situation here disclosed the trading company could not ratify what was done in part, and disaffirm in part; it could not claim the benefits under one contract and repudiate the burdens under the other. But it is claimed that the Montgomery Ward & Co. transaction and the John Sexton & Co. transaction were separate and distinct; that separate and distinct letters of credit should have been issued; that there should have been separate and distinct drafts; and that the defendant in error should have accepted and paid the one, and should have refused to accept or to pay the other. Whether the two transactions were lawfully combined in a single letter of credit and in a single draft depends upon the relationship existing between the parties and the authority vested in Waterhouse & Co.

It will be remembered that there were no contractual relations between the defendant in error and the trading company. The former had expressly refused to- extend credit to or deal with the latter. The contract of the trading company was with the Waterhouse & Co. Waterhouse & Co. agreed to assist the trading company in obtaining letters of credit and to remit two-thirds of the net profits as soon as the deals were consummated and closed. There was no understanding or agreement as to how the letters of credit should be obtained, or as to their number, and whatever else may be said of the relationship existing between the parties, Waterhouse & Co. was necessarily invested with implied authority to do whatever was necessary or proper to obtain the letters of credit in the usual and customary way. It was under obligation to obtain letters of credit covering two different transactions,. but in favor of the same partnership or corporation, and we do not think that it exceeded its authority when it authorized the combination of the two transactions in a single letter of credit. Nor did it exceed its authority in executing the guaranty. The defendant in error had refused to issue the letters of credit for the trading company with the bills of lading as sole security, and the parties necessarily understood that there must be further security on the part of Water-house & Co. The guaranty and the'lien were reasonable and,suitable security to the end in view, and were therefore within the contemplation of the parties.

For these reasons we are of opinion that the rights of the parties must be measured by the letter of credit as written; that the defendant in error has no money or property in its possession or under its •control belonging to the trading company, and that the judgment of the court below should be affirmed.

. It is so ordered.