Snyder & Blankfard Co. v. Farmers' Bank

⁶⁰⁵ Parke, J., delivered the opinion of the Court. The Farmers Bank of Tifton, a corporation of the State of Georgia, brought an action in the Superior Court of Baltimore City against The Snyder & Blankfard Co., Inc., a corporation of the State of Maryland, which was carrying on in Baltimore City a wholesale fruit and vegetable commission business. A recovery was sought for damages alleged to have been sustained by the plaintiff because of the defendant’s refusal to pay fourteen drafts of the sum of §4050. A demurrer was sustained to the original declaration.

The amended declaration is in one count and the demurrer to it was overruled, and this action of the court gives rise to the first question on appeal. The declaration, after stating the names and status of the plaintiff and defendant, and the business of each, sets out the facts on which it relies. The substance of these allegations is to this effect. A certain H. J. Cox and H. J. Cox, Jr., trading under the name of H. J. Cox & Son, w7ere a wholesale shipper of fruit and vegetables.

On June 1st, 1938, this firm began the shipment of fruit and vegetables to the defendant and closed its shipments on June 10th, 1938. The shippers drew on the defendant for every shipment in an amount which corresponded with the estimated net value of the shipment to the shipper. The drafts were discounted by the plaintiff as the several shipments went forward. Between June 2nd and June 7th, the plaintiff discounted eight such drafts, which aggregated §2250.

Two of these drafts were for §250 each, and were drawn on June 2nd and paid by the defendant on June 8th. The second two drafts were for §200 and §400, and were dated on June 4th, and and similarly paid on June 8th. The third two drafts were for §300 each, and were dated on June 7th, and duly paid on June 10th. The fourth set of two drafts, in the total sum of §550, were dated June 7th, and were paid on June 13th.

These allegations of the declaration are the introduction of the further allegations that, in response to in ⁶⁰⁶ quiries made on June 10th by the plaintiff of the defendant, a telegram was received by the plaintiff from the defendant of the following tenor: “1938 Jun 10 AM 1158 “Baltimore, Md. 10 1148A “Farmers Bank of Tifton, Georgia “We have paid all drafts on us by H. J. Cox and Son and will honor their future drafts as in the past. “Snyder & Blankfard Co.” The pleader follows the insertion of this telegram with these averments: “Thereupon the plaintiff on the strength and credit of said telegram, and relying .upon the promise and guarantee of the defendant, as expressed therein, and while the same remained in full force and effect, unrevoked or withdrawn, discounted for and paid to H. J. Cox & Son the following drafts, all drawn by said H. J. Cox & Son on the defendant, The Snyder & Blankfard Co., Inc., all of said drafts covering fruit and vegetables shipped by H. J. Cox & Son to the defendant, namely: “Draft dated June 6, 1938, to the order of H. J. Cox & Son, amount, $350.00, and endorsed and negotiated by the payees.” The pleader then follows with the recital of thirteen similar items, mutatis mutandis, with dates and amounts of these drafts, and the averment that the drafts on the defendant were promptly and in due course presented for payment to the defendant, but that the defendant failed to live up to its promises and guaranty, and did not pay the listed fourteen drafts. It is for this asserted breach that the action was begun. After the demurrer was overruled, the defendant pleaded the general issue, and in specific denial that the telegram embodied in the declaration was sent by an authorized agent of the defendant. After appropriate pleading the parties were at issue and a trial had, which culminated in a judgment for the principal sum of the unpaid drafts.

In addition to the questions raised by the ⁶⁰⁷ demurrer, there are exceptions reserved to the rulings on the testimony and on the prayers. The declaration alleges that the plaintiff discounted for the consignor all of these fourteen drafts because of its reliance on the assurance given by the telegram which is reproduced in the declaration. Since the respective times of the discount of the dishonored drafts is not given by the declaration, and the language of the pleader is positive that every one of the drafts was discounted because of the plaintiff’s receipt of the telegram, and its inducement to the discount of all the drafts, the declaration is in wording sufficiently definite in this respect. What the testimony on this point may be is another question, which is not to be anticipated in the decision on the demurrer.

There is, however, another ground for the demurrer. While the acceptance of a bill must be in writing and signed by the drawer, it may be written on a paper other than the bill. If so, it does not bind the acceptor, except in favor of the person to whom it is shown, and who, on the faith thereof, receives the bill for value. Again, an unconditional promise to accept a bill before it is drawn is deemed an actual acceptance in favor of every person who, upon the faith thereof, receives the bill for value.

Code 1939, art. 13, secs. 151, 153, 154. The exaction that the acceptance or the promise to accept must be in writing is gratified by a telegram to that effect over the name of the party to be bound. Infra, and 5 Uniform Laws Annotated, Negotiable Instruments, secs. 134, 135, pp. 804, 805; Trevisol v. Fresno Fruit Growers Co., 195 Iowa 1377 , 192 N. W. 517 ; Commercial Bank v. Morgan City First Nat. Bank, 147 La. 925 , 86 So. 342 ; Wallace State Bank v. Corn Exchange Bank, 220 Mo.

App. 1062 , 282 S. W. 86 ; Selma Sav. Bank v. Webster County Bank, 182 Ky. 604 , 206 S. W. 870 ; Farmers’ Bank of Morrill v. Stapleton, 118 Kan. 755 , 236 P. 828 ; James River Nat. Bank v. Thuet, 135 Minn. 30 , 159 N. W. 1093 ; Bulliet v. Allegheny Trust Co., 284 Pa. 561 , 131 A. 471 . ⁶⁰⁸ By the Negotiable Instruments Act an acceptance is either general or qualified. Thus a general acceptance assents without qualification to the order of the drawer.

A qualified acceptance varies in express terms the effect of the bill as drawn. One of the forms of a qualified acceptance is a conditional acceptance, which occurs where the payment by the acceptor is made dependent upon the fulfilment of a condition stated in the acceptance. Code 1939, art. 13, secs. 158-160. Similarly a promise to accept a bill to be drawn is either general or qualified, accordingly as the promised acceptance is to be either general or qualified.

Lewis v. Kramer & Rahn, 3 Md. 265, 289 ; Franklin Bank v. Lynch, 52 Md. 270, 278, 279 ; Flora First National Bank v. Clark, 61 Md. 400 ; Citizens, Bank v. Henry J. Perkins Co., 250 Mass. 156 , 145 N. E. 280 ; Central Savings Bank v. Richards, 109 Mass. 413 ; Sigel-Campion Live Stock Commission Co. v. Davis, 69 Colo. 511 , 194 P. 468 ; Iowa State Sav. Bank v. City Nat. Bank of Tipton, 183 Iowa 1347 , 168 N. W. 148 ; Oil Well Supply Co. v. MacMurphey, 119 Minn. 500 , 138 N. W. 784 ; Hall v. Emporia First Nat. Bank, 133 Ill. 234 , 24 N. E. 546 , affirming 35 Ill.

App. 116 ; Ulster County Bank v. McFarlan, 5 Hill, (N. Y.) 432, 434, affirmed 3 Denio, (N. Y.) 553; Coolidge v. Payson, 2 Wheat. 66, 75 , 4 L. Ed. 185 . In Franklin Bank v. Lynch, 52 Md. 270 , the court had under consideration the sufficiency of a Saturday dated telegram, “You may draw on me for seven hundred dollars,” to constitute an acceptance of a bill of exchange drawn on the following Monday on the sender of the telegram by its recipients for the sum of §700 and made payable at sight to their own order. The bill of exchange, with the telegram, was presented to a bank, which, after the endorsement by the makers, and on the faith of the authority given by the telegram, gave the drawers credit for the amount of the draft and duly forwarded it for collection, but the drawee refused to pay the draft and it was protested for nonpayment. In an action brought by the bank against the drawee, it was held that re ⁶⁰⁹ covery could not be had against the drawee on the draft as “the telegram does not point to or designate the draft; only the amount for which” the drawers “were authorized to draw is mentioned, but in all other respects the telegram is silent, not specifying on what time the draft is to be drawn.” 52 Md. page 279.

The court likewise held there could not be a recovery on the general money counts. On the other hand, the court, while critical of its technical form, held that the first count of the declaration was in case and that the plaintiff could recover on the theory that an obligation to pay arose from the authority conferred by the telegram upon the maker of the draft to negotiate it, within a reasonable time, and with an implied promise from the sending of the telegram to accept and pay the draft to the payee and to the person who, in reliance upon the implied promise to pay embodied in the seen telegram, took the paper for value and in good faith. In the later decision of Flora First National Bank v. Clark, 61 Md. 400 , the earlier ruling in Franklin Bank v. Lynch, supra, that the drawee in that case was not bound as an acceptor under the doctrine of an implied acceptance was, with reason, criticized, but followed on the other theory that a recovery is permitted on the promise to accept. As stated in the second case, “It is a liability therefore founded on agreement constituting a valid contract between the promisor and promisee, inuring to the benefit of a third party who has been induced to advance money on the faith of the agreement.” 61 Md. page 407.

Brown, Graves & Co. v. Ambler, 66 Md. 391, 398 , 7 A. 903 , and supra. The pleader in the instant appeal did not declare against the defendant on the drafts as an acceptor, but in case on its liability in damages for its breach of a promise to accept. The promise alleged is that the defendant “will honor their (sic) future drafts as in the past.” The promise is clearly not absolute but qualified. It does not bind to accept and pay drafts when and as ⁶¹⁰ made, with or without funds.

On the contrary, it imposes a limitation. Thus the drafts within the promise are those which are subsequent to the date of the telegram. Again, in respect of such drafts the promise is not to honor, that is, accept and pay, them unqualifiedly, but to accept and pay them “as in the past.” So there is created the condition that these drafts are not bound to be accepted and paid except it be as prescribed. The effect to be accorded this phrase depends upon the meaning of “as” in this context.

It is an adverbial use of the word with the significance of in that degree, to that extent, so far, in like manner. The meaning of the phrase is referable to the past similar transactions of the drawer, the holder and the drawee. It is to say that as the manner, course and degree of the acceptance and payment of prior drafts has customarily been in the past, so shall the promisor accept and pay future like drafts. Subject to this qualification, the drawee promised to honor the drafts, and further than this it was not engaged.

The phrase therefore incorporated in the agreement a qualification whose meaning was to be sought and found in the former dealing of the parties in similar transactions. This is a permissible qualification and made a condition of the acceptance and payment of every future draft. Unless the condition be presently fulfilled, the promisor is not bound to accept and to pay, and until then there is no breach by it of its contract, and, so, no liability in damages. It follows that the promisee can have no demand, as there can be no breach, until the condition prescribed by the contract is performed or waived.

Hence, the general rule in such cases is that the condition should be shown by the plaintiff in the declaration, and its performance averred. 1 Poe, Pl. & Pr., sec. 565; Gill & McMahon v. Weller, 52 Md. 8, 9, 14 ; International Finance Corp. v. Calvert Drug Co., 144 Md. 303, 314-316, 323 , 124 A. 891 ; Crane Co. v. Druid Realty Corp., 137 Md. 324, 330 , 112 A. 621 ; 10 C. J. S., Bills and Notes, sec. 572, p. 1192, sec. 588, p. 1214; Moore v. United States, 196 U. S. 157, 166 , 25 S. Ct. 202 , 49 L. Ed. 428 ; ⁶¹¹ Harris v. Vandeveer’s Excr., 21 N. J. Eq. 424, 428; Monsen v. Macfarland & Co., [1895] L. R. Q. B. D. 562. The declaration at bar ignores the conditional nature of the defendant’s promise and treats it as an absolute contract to accept and pay to the holder the drafts here involved. Accordingly, the averments do not set forth the condition of the defendant’s promise to honor the drafts, nor does the declaration aver its performance. The pleader has not appropriately shown the former condition for the acceptance and payment of prior similar drafts by the defendant.

It is merely stated that they were paid and that the later drafts sued on were duly presented for payment to the defendant which “failed to live up to its promise and guarantee and did not pay said drafts.” Thus the pleader neglects to show the customary mode and course involved in the acceptance and payment by the defendant of earlier drafts and their performance with reference to the drafts in action. Neither does he aver that the custom was for the defendant to honor like drafts in the past by their acceptance and payment merely on presentation. In the absence of these or similar alternative allegations and of any averment, in the words of the promise of the telegram, that the plaintiff presented the drafts for acceptance and payment as in the past, and the defendant did not so honor them, the declaration fails to state a breach of contract by the defendant. For the reasons given, the demurrer should have been sustained. 1 Poe, Pl. & Pr., sec. 565; Brown, Graves & Co. v. Ambler, 66 Md. 391, 396, 397 , 7 A. 903 ; Gill & McMahon v. Weller, 52 Md. 8, 9 ; 14 Am. & Eng.

Encyc. of Pl. & Pr., p. 529 (9); Ralli v. Sarell, D. & R. p. 33, n., 171 Eng. Reprint, 908; Byles on Bills, ¹⁹⁴. As this conclusion with reference to the ruling on the demurrer will require a reversal and remand, the remaining questions on the bills of exception will be considered. A summary of the testimony is necessary for this purpose.

In the first place, the intention of the parties to the contract as expressed in the telegram ⁶¹² which has been quoted excludes from consideration some of the drafts. It is clear that the telegram is limited in its application to the drafts drawn after the time of its delivery to the plaintiff. No act of the plaintiff may be said to have been done in reliance upon the promise set forth in the telegram until its terms were made known to the plaintiff, which was upon its delivery at mid-day of June 10th, 1938. It is further clear that the telegram asserts that all drafts drawn on the defendant by the shipper had been paid, and that the defendant follows this statement with the promise that it “will honor their (its) future drafts as in the past.” In order to ascertain the undertaking of the defendant in thus promising qualifiedly to honor the future drafts of the shipper, it becomes imperative to learn what were the circumstances attendant upon the acceptance and payments by the defendant of the former drafts, since these are intended to be the conditions upon which future drafts were to be accepted and paid.

The statement of the telegram that all former drafts had been paid leaves open to inquiry what were the requisites of such acceptance and payment, since the intention is expressed that these requisites must exist for future drafts to be honored, and since the mere fact of payment does not exclude the pre-existence of conditions to such payment. So, the particular course of dealing of the commission merchant in regard to the acceptance and payment of former drafts is an important consideration in the construction of what the defendant promised. Booth v. Irving Nat. Exchange Bank, 116 Md. 668, 672, 673 , 82 A. 652 ; Penrose v. Page, 145 Md. 14 , 20 125 A. 553 ; First National Bank of Baltimore v. Gerke, 68 Md. 449, 456 , 13 A. 358 ; 3 Williston on Contracts, (Rev. Ed.) sec. 629; Phoenix Pad.

Mfg. Co. v. Roth, 127 Md. 540, 544 , 96 A. 762 ; Abuc Trading etc. Corp. v. Jennings, 151 Md. 392, 405-408 , 135 A. 166 ; Brownstein v. N. Y. Life Ins. Co., 158 Md. 51, 56-58 , 148 A. 273 ; Henry v. Jones, 65 Cal. App. 323 , 224 P. 104 , In its fundamental nature, the telegram was an offer of a promise on a condition whose terms were to be fixed ⁶¹³ by the past usage of the offeror in reference to the acceptance and payment of former drafts of the shipper.

The offer of this promise became a contract, subject to the prescribed condition, when the holder bought a draft in acceptance of the offer. So what the customary course of the dealings of the drawee was in reference to the subject matter became a term of the contract to be established and found from the proof. The written contract without the qualification “as in the past” would not be the same contract as it is with the qualification. The contrast points the vital difference.

The defendant is a corporation engaged in the commission business in Baltimore City. It procures for the reward of a commission wholesale purchases for fruit and vegetables delivered to it for sale by its patrons. The partnership of H. J. Cox and H. J. Cox, Jr., trading as H. J. Cox & Son, was a shipper of these products by wholesale, and its place of business is in the State of Georgia. The firm shipped by motor truck, and began on June 1st, 1938, to forward its fruit and vegetables to the defendant for sale on commission.

As every truck load went forward the shipper would estimate the probable net return in money of the sale of the truck load for its benefit and prepare a draft on the commission agent for the estimated return, and transfer the draft to the plaintiff bank for the face value of the draft and deposit the amount with the bank to the credit of the shipper. The bank would then forward the draft to its correspondent in Baltimore to present the draft for acceptance and payment by the commission house. In the declaration the drafts are stated to have been “discounted” by the bank, and consequently this word has been used in this opinion in the consideration of the demurrer. The testimony is that the drafts were not discounted but bought.

The difference is not important. See Lazear v. Nat. Union Bank, 52 Md. 78, 128 ; Black v. Bank of Westminster, 96 Md. 399, 428 , 54 A. 88 . Beginning