Bank of Italy v. . Merchants Nat. Bank , 236 N.Y. 106 ( 1923 )

By telegram addressed to the Bank of Italy at San Francisco, the Merchants National Bank of Dunkirk guaranteed payment for two carloads of "dried grapes" bought by local merchants of one Rossi, stating that "payment will be made on presentation original bill lading here." Thereupon Rossi presented to the respondent bills of lading for two carloads of "raisins" consigned to the purchaser and the bank advanced upon them some $22,000. In due course these bills of lading were then presented to the appellant for payment but payment was refused. The sole question before us is whether such refusal was justified because the bills of lading were for "raisins" and not for "dried grapes." We hold that it was.

In making such a guaranty as the present the Merchants National Bank might limit its liability to such an extent and subject it to such conditions as it thought wise. It is to be held upon the contract which it elected to make — not upon some different contract which it might have made or which the jury thinks it should have made. (Evansville National Bank v. Kaufmann,93 N.Y. 273; Germania National Bank of New Orleans v. Taaks,101 N.Y. 442; Bank of Montreal v. Recknagel, 109 N.Y. 482.) One relying upon its guaranty is bound by such limitations and conditions.

As we have seen in the case before us, the Merchants Bank agreed to make payment upon bills of lading of cars of "dried grapes." The bills presented to it were for "raisins." It is said that the two expressions are identical; that the trial court so found upon evidence which permitted that inference. It may be so. That, however, is not sufficient. We agree that if the words used in the guaranty and in the bill of lading were as a matter of common knowledge synonymous or if the guaranty covered a certain class of objects and the bill was for one species of that class no question could arise. If the guaranty covered automobiles and the bill was for motor cars; if the guaranty was for grain and the bill for wheat, the variance would be immaterial. So, too, if the course of dealing between the parties had been such that they might be held as a matter of law to have affixed their own meaning to the terms employed. (Decatur Bank v. St. Louis Bank, 88 U.S. 294.) But where there is a question of fact as to whether the terms used in the guaranty and in the bill of lading are in truth identical, the risk of determining for itself this question is not to be placed upon the guarantor. Common words are by trade usage frequently given a particular meaning. "Hudson seal" is the skin of musk rats. Unquestionably "raisins" are dried grapes. It does not follow that in commercial usage "dried grapes" are "raisins." Dried grapes may be a technical term describing a distinct product. Indeed there is considerable evidence before us tending to show that this is so. Raisins we are told are dried white grapes. "Dried grapes" is the trade name of dried black grapes. The articles, it is said, are distinct. Their prices are quoted separately in trade journals. If this be so; if there be a substantial dispute upon that point, and we think that the evidence tends to show that this is true, the guarantor is not required to decide the fact at his peril.

This principle was decisive in Lamborn v. Lake Shore Banking Trust Company (231 N.Y. 616). The letter of credit referred to "Java White granulated sugar;" the shipping documents to "Java White sugar." There as here was evidence tending to show that the two articles were identical. Although this was denied, there as here the order of the trial judge refusing to vacate a warrant of attachment imported a finding that this was so. The Appellate Division reversed this order as a matter of law. The fact itself, the court said, was immaterial. "The only contract which the defendant has made was to honor the plaintiff's drafts as against the bill of lading for Java White granulated sugar." To hold otherwise would seriously embarrass bankers issuing letters of credit. In this court we held that because of the absence of the word "granulated" from the bill of lading no recovery based upon the defendant's letter of credit might be had. The view that we adopted in that case we adopt here. "Raisins" and "dried grapes" may or may not be the same article. We do not know.

The judgments of the courts below should be reversed and the complaint of the plaintiff should be dismissed, with costs in all courts.

HISCOCK, Ch. J., HOGAN, POUND, McLAUGHLIN and CRANE, JJ., concur; CARDOZO, J., absent.

Judgments reversed, etc.