U.S. Supreme Court
Edmondston v. Drake & Mitchel, 30 U.S. 5 Pet. 624 624 (1831)
Edmondston v. Drake & Mitchel
30 U.S. (5 Pet.) 624
A letter of credit was written by Edmondston of Charleston, South Carolina, to a commercial house at Havana in favor of J. and T. Robson for $50,000, "which sum they may invest through you in the produce of your island." On the arrival of Thomas Robson in Havana, the house to whom the letter of Mr. Edmondston was addressed was unable to undertake the business, and introduced Thomas Robson to Drake & Mitchel, merchants at that place, exhibiting to them the letter of credit from Mr. Edmondston. Drake & Mitchel, on the faith of the letter of credit and at the request of Thomas Robson, made large shipments of coffee to Charleston, for which they were, by agreement with Thomas Robson, to draw upon Goodhue & Co. of New York, at sixty days, where insurance was to be made. Of this agreement Edmondston was informed, and he confirmed it in writing. For a part of the cost of the coffee so shipped, Drake & Mitchel drew bills on New York, which were paid, and afterwards, in consequence of a change in the rate of exchange, they drew for the balance of the shipments on London. This was approved of by J. and T. Robson, but was not communicated to Edmondston. To provide for the payment of the bills drawn on London by Drake & Mitchel, the agents of J. and T. Robson remitted bills on London, which were protested for nonpayment, and Drake & Mitchel claimed from Edmondston, under the letter of credit, payment of their bills on London. Held that Mr. Edmondston was not liable for the same.
It would be an extraordinary departure from that exactness and precision which is an important principle in the law and usage of merchants if a merchant should act on a letter of credit such as that in this case and hold the writer responsible without giving notice to him that he had acted on it.
The leading facts in this case, from the record, were: Messrs. John and Thomas Robson, of Columbia, in the State of South Carolina, being desirous of making a speculation in coffee, and Thomas Robson, one of the firm, being about to proceed immediately to Havana in execution of this purpose, procured from Charles Edmondston, of Charleston, the plaintiff in error, a letter of credit dated 16 April, 1825, to Castillo & Black of Havana, in the Island of Cuba, in these words:
"Charleston, 16 April, 1825"
"Messrs. Castillo & Black -- Gentlemen -- The present is intended as a letter of credit in favor of my regarded friends,
Messrs. J. and T. Robson, to the amount of $40,000 or $50,000, which sum they may wish to invest through you in the purchase of your produce. Whatever engagements these gentlemen may enter into will be punctually attended to. With my best wishes for the success of this undertaking, I am, &c., C. Edmondston."
With this letter, Thomas Robson sailed for Havana the day after its date; upon his arrival, he presented his letter of credit to Castillo & Black who were then engaged in the execution of a similar contract, and could not act on this. Mr. Black, one of the partners, introduced Mr. Robson to Messrs. Drake & Mitchel, the defendants in error, merchants residing in Havana, at the same time showing, but not delivering to them Edmondston's letter of credit. After this interview, an agreement was entered into between Drake & Mitchel and the Robsons, the particulars of which are exhibited in a letter dated 28 April from Thomas Robson to Drake & Mitchel.
"Havana, 28 April, 1825"
"Messrs. Drake & Mitchel -- Gentlemen -- I intend sailing tomorrow morning, in the schooner Felix, bound for Charleston, South Carolina, wind and weather permitting. I will thank you to execute the following order at your earliest convenience, provided you feel yourselves warranted in so doing from the letter of credit I produced, viz., two to 3,000 bags of prime green Havana coffee, provided the same can be had at prices from eleven to $13, and for extra prime, large lots, thirteen and a half. Bills on New York at sixty days at two and a half to five percent premium, and to be governed in said purchase by the rise or fall in foreign markets, exercising your better judgment thereon. Said coffee to be forwarded by first good opportunity to Charleston, South Carolina, on board of a good, sound and substantial vessel, addressed to the care of Boyce and Henry, Kunhart's Wharf, Charleston. Bills of lading to be immediately forwarded to New York, and insurance ordered thereon to the full amount. Invoice of coffee, with duplicate bills of lading, to be made out in the name of J. and T. Robson, and forwarded with advice of drafts to the care of Boyce and Henry, Charleston.
Wishing you success in said purchase, and claiming your particular attention thereto; I am, gentlemen, your obedient servant, Thomas Robson."
"Please inform me the name of the house to whom the bills of lading, &c., will be addressed."
Notice of this arrangement was communicated by Drake & Mitchel to Charles Edmondston, in the following letter.
"Havana, 29 April, 1825"
"Charles Edmondston, Esq. -- Dear Sir -- In virtue of your letter of credit to Messrs. Castillo & Black in favor of Messrs. J. and T. Robson, and at their request, we have consented to purchase 2,000 bags of coffee, to be consigned to Messrs. Boyce and Henry of your city, the insurance to be effected by Messrs. Goodhue & Co. of New York, upon whom we are to draw for the amount, by reason of the facility of negotiations, Mr. Robson or his friends remitting the money to these gentlemen to meet our drafts. Mr. Robson, who carries this, will no doubt explain to you in person this negotiation, and we trust that there will be no demur in forwarding the necessary funds, with the cost of insurance. We are, &c., Drake & Mitchel."
On the 25th of May, Charles Edmondston acknowledged the receipt of this letter in these words:
"Charleston, 25 May 1825"
"Messrs. Drake & Mitchel -- Gentlemen -- In acknowledging the receipt of yours of 29 April, I cannot help expressing my grateful feelings at the manner you treated my letter of credit in Robson's favor. I am, &c., Charles Edmondston."
The shipment of coffee for the Robsons was completed by 17 May, and in conformity with the agreement with the Robsons, Drake & Mitchel, on 21 May, drew bills on New York for nearly $25,000, which were all regularly paid.
On that same day on which they drew their last bill on New York, they determined to alter the mode of reimbursement, as agreed on by the Robsons and themselves, and instead chanroblesvirtualawlibrary
of drawing on New York, to draw on London for four thousand pounds sterling. Their determination to do this, and their probable motive for doing it, appear by the following letter from them to Boyce and Henry, of Charleston.
"21 May, 1825"
"Gentlemen -- We crave reference to our last respects per brig Catharine, which vessel we hope is safely arrived at this date. We have this day received accounts from your city and from New York announcing to us the decline in the price of coffee; it is therefore well that we had not gone to the full extent of the instructions of Mr. Robson. We also note the decline of your exchange offee; it is therefore well that we had not gone to the full extent of the instructions of Mr. Robson. We also note the decline of your exchange o