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(148 N.E.)

In 1922 and 1923 (Laws of 1922, c. 660, | notwithstanding any subsequent revision of §§ 1, 3; Laws of 1923, c. 436, §§ 1, 3), section rates by the Compensation Inspection Rating 141 was amended and section 141-b added Board of the state of New York, except that, if said Compensation Inspection Rating Board so as to require insurance companies to comwould provide lower premium rates than those ply with the rates adopted by the rate-mak- expressed in the said policy for the policy year ing organizations, and making it an offense beginning June 30, 1920, the defendant would for brokers or insurance companies to devi- give the said New York Dock Company the ate from the rates so fixed. These provi- benefit of said lower premium rates." sions, however, were not in the Insurance Law as it existed in 1919 and in 1920, the times mentioned in the complaint. However, the premiums charged by the defendant and the rate basis or schedules adopted by it required the approval of the superintendent of insurance according to section 67 of the InIf the surance Law as it then existed. defendant were a member of a rating organization recognized by section 141 of the law as it existed in 1919 and 1920, the rates of such association would have to meet with the approval of the superintendent of insur-schedules were to be fixed by the state inance before they could become effective.

The complaint alleges:

The gist of the complaint is that the defendant contracted with the plaintiff and the New York Dock Company that its premium rates would not exceed a certain fixed and definite amount, notwithstanding any subsequent revision of rates by the compensation inspection rating board of the state of New York.

Here was a contract clearly against the spirit if not the letter of the law. Insurance rates for premiums and basis rates and

surance department and not by the defendant. It was the duty of the superintendent of insurance to see that the rates and premiums were adequate to protect the employees insured, and to preserve and provide the necessary reserve funds for this purpose. It was impossible for the defendant to fix a rate or to contract to fix a rate which did

"Sixth. Upon information and belief that said New York Dock Company, on or about May 15, 1919, requested plaintiff as broker to submit to said New York Dock Company renewal rates on workmen's compensation insurance to cover certain risks and liabilities of New York Dock Company. That prior to June 15, 1919, it was known to plaintiff, defendant, and said New not have the approval of the state authorAs the Insurance Law recognizes the York Dock Company that renewals of work-ities. men's compensation insurance were generally rating association, it is to be presumed that issued at a certain base rate, which was sub- the rates and schedules fixed by such an asject to subsequent revision as to experience. sociation within the state of New York were That plaintiff and defendant thereupon estab-properly adjusted to the risks, and met with lished a custom, dealing, and practice between the approval of the superintendent of insurplaintiff as broker, and defendant as insurer, ance who was given supervision over them. covering the New York Dock Company's workA contract to disregard an increase in such men's compensation insurance, whereby, in order to permit the said New York Dock Compa- rates or basis rate, and to ignore the disapny to know in advance that its premium rates proval of the rating association, and therewould not exceed a certain amount, defendant fore of the superintendent of insurance was agreed with plaintiff that it would write a pol- against public policy and void. icy for New York Dock Company at rates not to exceed a certain amount, notwithstanding premium rates thereafter to be fixed by the compensation inspection rating board might be higher. Thereupon, and in accordance with such practice and agreement, defendant wrote said policy for the year commencing June 15, 1919, and plaintiff delivered same to the said New York Dock Company."

As to the year 1920 it alleges:

The grievance which the complaint sets forth is that the defendant broke this alleged contract not to increase the insurance rates for the year 1920, thus injuring the plaintiff's (the broker's) business and its relaIt is said in the tions with its customer. complaint that the defendant"* * * on or about March 17, 1921, in a writing delivered by defendant to the New York Dock Company, falsely, willfully, wrongfully, "Tenth. That thereafter and prior to June and maliciously represented to the said New 30, 1920, defendant duly agreed with plaintiff York Dock Company that the treatment rethat said last-named policy should be retained ceived by said New York Dock Company from by the said New York Dock Company and plaintiff with respect to the delivery to the said should become binding and effective, pursuant New York Dock Company of said policy coverto the custom, dealing, and practice between ing the policy year beginning June 30, 1920, and plaintiff and defendant hereinabove more fully with respect to the said agreement that the set forth; defendant particularly and specifical- premium rates therefor would not exceed a cerly agreeing that its premium rates to be charg-tain amount for the said policy year, was in fact ed said New York Dock Company for the policy unethical, dishonest, not truthful, and wanting year beginning June 30, 1920, would not exceed in business integrity upon the part of plaintiff; a certain fixed, definite, and named amount, that defendant in said writing intended to and

did knowingly and falsely convey the intent and, N. Y. 80, 140 N. E. 203, 27 A. L. R. 1411. meaning that it had not agreed with plaintiff There was here no such contract between and with the said New York Dock Company the plaintiff and the New York Dock Comthat the premium rates on said policy for the pany as existed in Posner Co., Inc., v. Jacksaid policy year should not exceed a certain amount." son, 223 N. Y. 325, 119 N. E. 573.

The plaintiff disclaims that this action is one for libel. The counsel in his brief frankly states that the letter written by the defendant to the New York Dock Company will not sustain such an action. Wherein then is the wrong which the law recognizes?

However we may view the claim put forth by the plaintiff, we cannot see that it has stated a cause of action or alleged any wrong recognized by the law.

The judgment dismissing the complaint should therefore be affirmed, with costs.

HISCOCK, C. J., and CARDOZO, McLAUGHLIN, ANDREWS, and LEHMAN, JJ., concur.

POUND, J., absent.

Judgment affirmed.

OF NEW YORK.

(240 N. Y. 520)

[1] If the defendant made a contract to insure the New York Dock Company for a certain premium for the year 1920, and agreed not to change the rate, the agreement, if legal, could be enforced by the New York Dock Company. If the defendant deliberately broke its contract, such breach did not constitute an actionable wrong in behalf of the agent who had procured the insurance. He would be entitled to his commission and LAMBORN et al. v. NATIONAL PARK BANK that is all. Should the insurance company claim that its contract was made without authority, the question of authority could be tried out in an action by the New York Dock Company. Whichever way the question was decided, the insurance agent would have no cause of action, although he might lose his commission or suffer in his reputation for business acumen and judgment should the contract have been made without proper authority on behalf of the insurance company's agents.

[2] On the other hand, the insurance broker is supposed to know the law as well as the insurance company, and, if the latter had no right under the insurance laws to fix a rate of premium not acceptable to the insurance authorities, the broker would have no right to procure from it a contract so to do. In other words, the insurance company could not agree with its insured that the premium rate fixed by it would not be changed, when the rate-making association under the laws of the state of New York demanded a higher rate. Such a contract would be illegal as one made in contravention of the laws of the state of New York. The insurance company, having made such a contract, could not be held to it, and would violate no right of the insurance broker by repudiation. The law favors obedience to its statutes rather than the keeping of contracts in violation of them. The law does not recognize that as a breach which is in obedience to a statute. Whatever may have been the motives of the defendant in repudiating the rates for 1920 was entirely immaterial. Even if it acted willfully and maliciously, as the plaintiff alleges, it would not be liable, provided it had a just and rightful purpose to serve. Beardsley v. Kilmer, 236

(Court of Appeals of New York. July 15, 1925.)

1. Banks and banking 191-Promise to pay letter of credit is implied or inferred from statement that credit has been established and is irrevocable.

Letters of credit do not usually contain a direct promise to pay; but such promise is implied or inferred from the statement that credit has been established and is irrevocable.

2. Banks and banking 191-"Confirmed irrevocable letter of credit," "irrevocable letter," or "confirmed credit" defined.

A "confirmed irrevocable letter of credit," an "irrevocable letter," or a "confirmed credit" is a contract to pay on compliance with its terms, and needs no formal acknowledgment or acceptance other than is therein stated. 3. Banks and banking 191-Presenting sight drafts against irrevocable letter of credit in December held compliance with letter of credit covering shipments of sugar from Java in August and September.

Bank, on May 5, 1920, opened confirmed credit without expiration date in plaintiffs' favor for named amount payable against delivery of sight drafts for sugar, shipments to be made from Java during August and September, 1920. Held, that implied provision that sight drafts were to be presented within reasonable time was not changed by plaintiffs' request that expiration date be set as of December 31, 1920, and bank's reply thereto, and that by presenting drafts in December they complied with conditions entitling them to payment.

4. Banks and banking 191-In absence of fixed time for presentment law reads into letter of credit provision that sight drafts were to be presented within reasonable time.

Where bank issued irrevocable letter of credit, payable against sight drafts with ship

(148 N.E.)

ping documents for sugar, to be shipped from Java during August and September, in absence of fixed time when sight drafts were to be presented, law will read into instrument a provision that they were to be presented within a reasonable time.

white sugar at 22c per pound less 2 per cent. duty paid f. o. b. cars Philadelphia landed weights, shipments to be made during August and September, 1920.

"We advised the Bankers' Trust Company of this credit our No. 13840, but they have returned our advices, stating that credit should

Appeal from Supreme Court, Appellate Di- have been opened directly with you and not vision, First Department. through them. Kindly advise us in this connection. "Very truly yours,

Action by Arthur H. Lamborn and others, copartners doing business under the firm name and style of Lamborn & Co., against the National Park Bank of New York. From a judgment of the Appellate Division (212 App. Div. 25, 208 N. Y. S. 428), affirming judgment of Trial Term without a jury (123 Misc. Rep. 211, 204 N. Y. S. 557), for plaintiffs, defendant appeals. Affirmed.

Louis F. Doyle, of New York City (Emmet F. Smith, of New York City, of counsel), for

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CRANE, J. On the 24th day of April, 1920, Lamborn & Co., a copartnership with

"[Signed] H. L. Sparks,
"Assistant Cashier."

On June 11th the National Park Bank notified Lamborn & Co. that the shipping period, according to the instructions received from Brodsky Gross & Co., was August and September from Java.

Here we have a full and complete letter of credit, confirmed and irrevocable, issued by the defendant to the plaintiffs in accordance with instructions from Brodsky Gross & Co. or their Chicago agents carrying out the terms of the contract of sale.

and was placed on board cars at Philadel

The sugar arrived in December of 1920,

phia. A draft for $79,623.24 was drawn on the defendant and presented at its New York

banking house with all the required documents. Payment was refused. The reason

It is

principal offices in the city and state of New York, sold to Brodsky Gross & Co., of Chi-given was that the letter of credit had excago, Ill., 1650 bags of Java white sugars. ter of credit had not been issued. pired. There was no claim made that a letThe contract of sale was in writing, and conceded and always has been that the plainprovided as follows: tiffs complied fully with all shipping in"Shipment. Shipment to be made during structions, and that they presented all the August-September, 1920, at option of the sell-documents required by the letter of credit. ers, from Java by steamer or steamers to Philadelphia, Pa. Names of such steamer or steam-letter of credit the amount of the draft. This action is brought to recover on the The "Payment. Payment to be made by net cash on presentation of sight draft, with invoice and bill of lading attached in New York. Buyers to open within five (5) days confirmed irrevocable letter of credit in favor of Lamborn & Co., New York City, for the full invoice value of 1650 bags with Bankers' Trust Company, New York City, and Bankers' to confirm same to Lamborn & Co., New York City."

ers to be declared later.

*

*

*

The "confirmed irrevocable letter of credit" was not opened with the Bankers' Trust Company, but with the defendant, the National Park Bank. It read as follows:

"The National Park Bank of New York. "May 5, 1920. "Messrs. Lamborn & Co., 132 Front Street, City. Re Our Credit No. 13840-Gentlemen: We beg to advise you that we have received instructions from Greenebaum Sons' Bank & Trust Co., Chicago, to open a confirmed credit in your favor with the Bankers' Trust Co., for $79,685.76, payable against delivery of sight drafts with invoices and bills of lading attached covering 1650 bags about 224 lbs. each Java

defenses are inconsistent. First, the defendant denies that there was any letter of credit; secondly, it claims that, if there were a letter of credit, it expired on October 1, 1920. The case was fully tried out before the court without a jury, and judgment delivered for the plaintiffs, which has been affirmed by the Appellate Division, one of the justices dissenting (212 App. Div. 25, 208 N. Y. S. 428).

[1, 2] We may dismiss the first contention of the defendant, that there was no letter of credit, by the brief statement that all of its correspondence regarding this transaction admitted that there was a letter of credit, its sole claim being until the matter came to court that the draft was not presented in time. It is said that the letter of May 5th contained no promise to pay. Letters of credit do not usually contain a direct promise to pay. Such a promise is implied or inferred from the statement that credit has been established and is irrevocable. A confirmed irrevocable letter of credit, an irrevocable letter, or a confirmed credit is a con

Bank & Trust Company, Chicago, for the account of Brodsky Gross, Chicago, Ill., for $79,685.76.

"You state that you advised the Bankers' Trust Company, but that they returned your advices, stating that credit should be opened directly with us. This is correct. We beg to request that you issue this letter of credit for $79,685.76, setting expiration date of December 31, 1920. We also beg to call your attention to the fact that shipment should be August and/or September from Java,

"We regret that this matter has not been

called to your attention at an earlier date, but would appreciate your co-operation in arranging details, so that they may be satisfactory to all concerned.

"Yours very truly,

"McF/AMS

"Lamborn & Company,
"[Signed] G. F. J. Amthor,
Credit Department."

tract to pay upon compliance with its terms,, and needs no formal acknowledgment or acceptance other than is therein stated. Banks may-they usually do-communicate to the drawer the instructions received from the correspondent establishing the credit. Gelp cke v. Quentell, 74 N. Y. 599; Krakauer V. Chapman, 16 App. Div. 115, 45 N. Y. S. 127, affirmed 162 N. Y. 623, 57 N. E. 1114; Doelger v. Battery Park National Bank, 201 App. Div. 515, 194 N. Y. S. 582; Border Nat. Bank of Eagle Pass, Tex., v. American Nat. Bank of San Francisco (C. C. A.) 282 F. 73. Moss v. Old Colony Trust Co., 246 Mass. 139, 140 N. E. 803, contains no statement or ruling to the contrary, as intimated by the courts below. The letter of credit in that case had been rejected. Chief Justice Rugg is particular to point out that no particular form is prescribed for a letter of credit. "Their nature and use," says he, "ought to be kept as free as possible from narrowing statements of limitations and from judicial dicta not necessary to a particular decision." [3, 4] As to the second ground of defense, that the letter of credit had expired on October 1st, we must consider other letters passing between the parties after May the fifth. In considering these letters we must carry in mind the terms and conditions of this alleged letter of credit of May 5th as amended or modified by the letter of June 11th. It advised Lamborn & Co. that the defendant had received instructions to open a confirmed credit for $79,685.76, payable against sight drafts and shipping documents, showing that the sugars were placed f. o. b. cars Philadelphia, shipments to be made during August and September, 1920, from Java. "The National Park Bank of New York. The credit was to be opened with the Bank"June 11, 1920. ers' Trust Company, but that bank had in"Messrs. Lamborn & Co., 132 Front Street, structed the National Park Bank to open it City. Re Our Credit No. 13840-Gentlemen: directly with Lamborn & Co. The letter Referring to your favor of June 10th, relative closed by asking, "Kindly advise us in this to our confirmed credit No. 13840, we regret connection." I have said that this consti- having to advise you that we have no authority tuted a complete letter of credit. No time to extend validity of this credit from October was mentioned within which the sight drafts 1st to Dec. 31st, and would suggest your comwere to be presented. In the absence of a municating with your customers and having fixed time the law will read into the instru-corrected instructions sent to us. This also applies to the shipping period, which in the inment a provision that they were to be pre- structions received by us specified August and sented within a reasonable time. See above September from Java. "Very truly yours,

cases.

On June 10th, the plaintiffs wrote the defendant the following letter:

"Lamborn & Co., Import & Export Depart-
ment.

"132 Front Street, New York.
"June 10, 1920.

Certain things are to be noted about this letter. It refers to the letter of credit No. 13840 as one which has been issued upon instructions for the account of Brodsky Gross, Chicago, Ill. It answers the last and only inquiry in the letter of May 5th by saying that the credit opened with Lamborn & Co., directly instead of with the Bankers' Trust It then contains the Company is correct. request that the letter of credit set the expiration date as of December 31, 1920. In other words, instead of leaving the drafts to be presented within a reasonable time, the plaintiffs ask that a definite time be stated. October 1st is not mentioned or referred to in either the letter of May 5th or On the following day that of June 10th. the National Park Bank answers:

"[Signed] H. L. Sparks,
"Assistant Cashier."

Notice should be taken that this letter refers to "our confirmed credit No. 13840," and that the instructions regarding the shipping period "specified August and September "National Park Bank of New York, No. 214 from Java." In reply to the request of the Broadway, New York City-Gentlemen: We plaintiffs, the defendant writes that it has refer to your letter of credit No. 13840, issued no authority to extend validity of this credupon instructions from Greenebaum & Sons' it from October 1st to December 31st. The

(148 N.E.)

defendant does not say that its instructions be correct. The shipping documents and were to limit the time of payment to October bills of lading showing that the sugar had 1st, and it has never in its brief or by the been placed f. o. b. cars at Philadelphia unevidence claimed that its instructions were der no circumstances could possibly be preto this effect. The contract between Brods- sented to the bank on October 1st. No interky Gross & Co. and the plaintiffs contained pretation should be given to this letter of no such limitation-in fact no limitation at credit of the defendant or its correspondall. The letter of credit of May 5th con- ence which would make the whole thing tained no limitation. The sight drafts were meaningless and an absurdity. The defendto be presented within a reasonable time. ant intended to give the plaintiffs something Lamborn & Co. asked that a definite time of value. Its letter of May 5th, followed by might be fixed, and I read this answer of the that of June 11th, cannot be considered as National Park Bank under June 11th as mere empty formalities. The bank should meaning that the defendant bank had no be held to the fair import of its engagement. power or authority to make that definite These letters must receive a reasonable conwhich had been left indefinite. The letter struction, having regard to the intent of the of credit had been given the number 13840. parties and the circumstances. Krakauer v. Throughout the correspondence this number Chapman, supra. "In the construction of is referred to as the letter of credit. The written contracts it is the duty of the court, first mention of it is in the letter of May as near as may be, to place itself in the 5th, wherein it is termed, "Our credit No. situation of the parties, and from a consid13840." This is the only letter of credit in eration of the surrounding circumstances, the evidence in this case having this number. occasion and apparent object of the parties, It contains no reference to October 1st. It to determine the meaning and intent of the reads in the eyes of the law as though it language employed." Gillet v. Bank of contained the provision payable against "de- America, 160 N. Y. 549, 555, 55 N. E. 292, 294. livery of sight drafts within a reasonable time." If those words had been actually written into this letter of credit 'No. 13840, we would not consider that the letter of June 11th modified or struck them out. The plaintiffs, by the letter of June 10th, request- as follows: ed that the time limit be made definite. This "The National Park Bank of New York. letter of the defendant of June 11th simply refused the request as not within its instructions. It did not attempt to modify the letter of May 5th in this particular, or to say that anything had been omitted. The answer was that the letter must stand as it was, as the bank could not modify it; the instructions which had been followed could not be departed from. And thus the matter was left.

The plaintiffs never acquiesced in any modification, and did not consider that the date of payment had been limited to October 1st. How could any reasonable business man dealing in sugars to be shipped from Java during August and September accept a letter of credit which would expire the day after the last day of shipment from Java? The claim of the defendant would nullify the letter altogether. It is unreasonable. By a stipulation of the parties it was agreed that in the ordinary course of shipping it takes 75 days to bring goods from Java to Philadelphia. Goods shipped the 1st day of August, the earliest possible date for shipment

under the sales contract and the letter of credit, could not possibly reach Philadelphia until 15 days after the expiration of the letter of credit, if the defendant's contention

Beyond doubt, the defendant considered that it was bound to do something; that it was held to the plaintiffs by some valid and enforceable obligation. After the drop in the price of sugar it wrote on August 25th

"August 25, 1920. "Messrs. Lamborn & Co., 132 Front Street, City-Dear Sirs: Referring to our credits numbered 13840 and 14031, opened in your favor by the Greenebaum Sons' Bank & Trust Company of Chicago, Illinois, we beg to advise you that our correspondents have to-day telegraphed us directing that payments be suspended until further notice.

"Please advise us if this arrangement has

your consent.

"Yours very truly,

"[Signed] H. L. Sparks,
"Assistant Cashier."

And again on August 27th:
"The National Park Bank of New York.
"August 27, 1920.

"Messrs. Lamborn & Company, 132 Front Street, City-Dear Sirs: Referring to our letter of August 25th in which we advised you that the Greenebaum Sons' Bank & Trust Company of Chicago had directed us to suspend payments under our credits numbered 13840 and 14031 until further notice, we would point out to you that apparently we have not received your consent to this arrangement.

"We are to-day in receipt of a letter from our correspondents, in which they explain that their clients, Messrs. Brodsky, Gross & Co., wish to examine all documents presented be

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