U.S. Supreme Court EDDOWES v. NIELL, 4 U.S. 133 (1793)
4 U.S. 133 (Dall.)
Eddowes et al.
Supreme Court of Pennsylvania.
April Term, 1793
THIS was an action on the case, for goods sold and delivered to William Niell, upon a special assumpsit by the defendant, Thomas Niell, to guarantee the payment of the price. Pleas, 1st. Non assumpsit, on which issue was joined; and, 2d. The statute of limitations, to which, resident beyond seas, was replied, &c.;
The plaintiffs were British merchants, from whom William Niell, a trader in Baltimore, was accustomed to import goods. On the 14th of January 1771, his brother, the defendant, wrote a letter to them, in which he said, 'that to strengthen his brother's credit, he would guarantee all his dealings with their house.' Several shipments of goods were made both before, and after, the receipt of this letter; and William Niell continued to make payments on account, till the year 1775, when the revolutionary war began its agitations; and all commercial and amicable intercourse, between Great Britain and the United States, was suspended until the peace of 1783. In the year 1784, the plaintiffs sent a power of attorney to collect the debts due to them here; their agent applied to William Niell who acknowledged the justice of the debt; but claimed an abatement of eight years interest, on account of the war; and a further credit upon giving his bond for the amount; which the agent refused. In 1785, William Niell died, leaving the defendant his executor; to whom, in that character, the agent of the plaintiffs applied for payment; and he answered, by admitting the claim, and recommending a suit against the estate. No demand, however, was made, on the ground of the defendant's guarantee, till about the time of commencing the present action, in January 1790.
On these general facts, the plaintiffs' counsel contended, 1st. That the demand was fair and legal, founded upon an unequivocal letter of credit, applicable, in its terms and meaning, as well to shipments made before, as after, it was received. 2d. That it was not necessary to render the letter binding on the defendant, that the plaintiffs should answer it; nor that they should give notice to him of a default, (as in the case of bills of exchange) at any period of the transaction. 3d. That there was no express waiver of the guarantee; and nothing can be implied, even in favour of a surety, since no new security was taken; nor any negligence shown, in omitting to prosecute the principal, upon the demand of the surety.
For the defendant it was urged, 1st. That the demand was a harsh and stale one; founded on a letter, which had not, in fact, created any additional confidence, or credit; the receipt of which had never been acknowledged; and the responsibility of which had never been suggested, for more than nineteen years. 2d. That the guarantee ought not to receive an indefinite interpretation; but to be regarded as a credit, according to the course of the American trade, for a year; and to forbear a suit for so long a time, during the life, and after the death of the principal, was, in fact, giving a new and independent credit; which is tantamount to a release of the surety. 3d. That although the statute of limitations may not apply, as a plea in bar (the plaintiffs residing abroad) the lapse of time furnishes a presumption, that the defendant's letter never was accepted, or relied upon, as a guarantee. 4th. That, on the most rigid construction, the guarantee can only apply to future, not to past, transactions. And on these points, respectively, the following books were cited: 1 T. Rep. 167. 2 Br. Ch. 579. 2 T. Rep. 366. 370. 1 Pow. Cont. 287. Ibid. 8, 9, 10.
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. [ Footnote 1 ]
Tilghman, and Bowie, for the plaintiffs.
Ingersoll, Smith, and Duncan, for the defendant. Footnotes
Footnote 1 This cause was tried at York-Town, Nisi Prius, on the 22d o f May 1793, before SHIPPEN and BRADFORD, Justices.