Utley v. Donaldson

28 F. Cas. 857

• Court: U.S. Circuit Court for the District of Eastern Missouri
• Decided: March 15, 1874
• Status: Published

Opinion

DILLON, Circuit Judge.

From the foregoing facts, the court is of opinion that the contract by telegrams was to sell and deliver genuine bonds, the delivery to be in futuro, and payments to be made upon delivery. The tender of delivery was accompanied with the express condition set forth in the letter from the defendants to the plaintiffs of date May 25th, 1871, to the effect that the bonds, as to genuineness, should, if accepted, be at the sole risk of the plaintiffs, and giving the latter opportunity for examination of the bonds before accepting them, staCng the reasons why the defendants would not deliver the bonds except on the terms that the plaintiffs should assume the risk of their being genuine.’ This letter was received by the plaintiffs before the bonds were tendered to them, and they paid for the bonds, and telegraphed the defendants that they were all right. Before the contract made by the telegrams was executed by the delivery of the bonds, the defendants said, in substance, to the plaintiffs: “We will not deliver the bonds, except at your risk as to genuineness. You. may examine and satisfy yourselves on this point, but we will not make any other kind of delivery.” The plaintiffs would have had the right to refuse to accede to any such modification of the contract made by the telegraphic dispatches, and to have refused to accept the deliveiy on the terms proposed in the letter of May 25th, and to have held the defendants for damages for the non-delivery in compliance with the contract. But by not refusing to receive the bonds upon the conditions named in this letter, and by acting upon that letter, and by assuring the defendants, in response to it, that the bonds were all right, in consequence of which the latter paid their vendor for the bonds, the plaintiffs must in law be taken to have assented to the modification of the contract of sale made by the telegrams, and to have accepted the bonds in performance of it, or the plaintiffs are estopped to insist that the letter of May 25th does not affect the transaction or the rights of the parties to the contract, and this although there was no distinct consideration for the modification.

The loss in the transaction has arisen from the want of due precaution or diligence on the plaintiffs' part, after receiving the letter, to ascertain whether the bonds were genuine, and as no fraud was practiced by the defendants the loss must fall upon the plaintiffs; and this on the familiar principle that, where a loss must fall upon one of two innocent persons, it must be borne by him whose conduct occasioned it. In the absence of a contract to the contrary, it is undoubtedly true that there is an implied warranty of the genuineness and legal validity of bonds, notes, or ehoses in action sold by a private person or public broker. Jones v. Ryde, 5 Taunt. 488; Westropp v. Solomon, 8 C. B. 345; Gompertz v. Bartlett, 2 El. & Bl. 849; Watson v. Chesire, 18 Iowa, 203, and cases cited; Young v. Cole, 3 Bing. N. C. 724; Lambert v. Heath, 15 Mees. & W. 486; Merry v. Nickalls, L. R. 7 Ch. App. 733; Flynn v. Allen, 57 Pa. St. 482; Rieman v. Fisher, 4 Am. Law Reg. (O. S.) 433. Bnt in this case the plaintiffs assumed the risk of genuineness. This is its distinguishing character. Such an assumption or contract is not void because it is against public policy. And in our judgment it cannot be deduced from the facts that it was void because of fraud, express or implied.

[Reversed in 94 U. S. 29.]