Eddowes v. Niell , 4 U.S. 133 ( 1793 )

4 U.S. 133 (____) 4 Dall. 133

Eddowes et al.
versus
T. Niell.

Supreme Court of United States.

Tilghman, and Bowie, for the plaintiffs.

Ingersoll, Smith, and Duncan, for the defendant.

By the COURT:

Letters of credit are a common, and useful, instrument in the course of commerce. They are, however, of a very serious nature; and the writer is bound to comply with the contents, according to their genuine and honest import. In order to render them obligatory as a contract, it is not necessary, that they should be answered, if credit is given upon them. Like the case of transmitting a bond in a letter, acquiescence and acceptance are implied, in the silent receipt of the instrument.

It has been urged, that the lapse of nineteen years, without notice of a default in payment by the principal, is a virtual abandonment of all recourse to the surety; on the principles applicable to bills of exchange, and to other negotiable instruments. But there is no analogy between the cases; for, the engagement of the letter of credit extends, in its very nature, to various future transactions, without reference to time, or amount. It is true, however, that the gross negligence of a creditor, even of the obligee in a bond, may operate to discharge a surety; as where the obligee is requested by the surety to proceed against the principal, in order to save the debt; if he neglects or refuses to do so, the surety, both in law and equity, will be exonerated; and this is the case in 2 Brown's Chancery Reports, 579. But does the evidence in the present action, justify an adoption of the rule? From the years 1771 and 1772, when the shipments were made, until the year 1775, when payments were first suspended, there could be no reason for calling on the defendant. From 1775, till the peace of 1783, the debtor was guilty of no default, which would warrant an application to the surety; for, he was prevented, by the war, from corresponding with the creditor, and making any payment, or remittance, on account of the debt. As soon as the peace had restored the intercourse between the parties, the creditor applied for payment to the debtor, who acknowledged the debt; claimed an abatement of interest; and made some overtures for a settlement; but died in the next year, without affecting any thing in that respect. The agent of the plaintiffs then addressed the defendant, not as surety, but as executor, of his brother; and, indeed, it does not appear, that the agent knew of the letter of credit, till sometime afterwards.

On this review of the facts, we cannot perceive any culpable negligence, on the part of the plaintiffs, in pursuing their original debtor: nor is it clear, that they had any right to call upon the defendant, as a surety, until they had failed in their endeavours to recover from the principal; or the principal had become notoriously insolvent. The want of notice, therefore, in such a case, and under such circumstances, does not, in itself, furnish a bar to the demand; and although, in some instances of debts, a lapse of time will warrant a presumption of payment; yet, from the nature of this contract, no such presumption can arise here.

Verdict for the plaintiffs.^[(1)]

NOTES

[(1)] This cause was tried at York-Town, Nisi Prius, on the 22d of May 1793, before SHIPPEN and BRADFORD, Justices.