Omaha National Bank v. First National Bank

Citations

• 59 Ill. 428

Syllabus

<p>1. Letter op credit—extent of liability thereon. A bank gave a letter of credit to a person, guaranteeing the payment of drafts Avhich might be draivn by the latter on a firm named in the letter, to the amount of $14,-000, the letter providing that endorsements might be made thereon The person to whom the letter Avas given, made a draft for $6000, which Avas endorsed on the letter. He then drew for $3000, Avhich was also endorsed ou the letter. This draft was fonvarded for collection to the bank giving the guaranty, which was advised by letter that it was drawn under the letter of guaranty. The holder of the letter then made a draft for $4000, which was not endorsed on the letter, nor, in sending the bill for collection to the same party as before, was any reference made to the letter of guaranty; but the draft .was paid by the drawees. He then drew for §6000, the draft purporting on its face to be drawn against the letter of credit, which was returned to the bank which gave it, with this draft, for collection. This last draft was protested. All the drafts except the first -were drawn in favor of the same party. In a suit by the latter upon the guaranty, to recover the amount of the draft for §6000, which was protested, it was held, the defendant was not liable, because, on the payment of the previous drafts, amounting to $12,000, it was exonerated from liability on its guaranty, except to the extent of §2000, the residue of the amount guaranteed.</p> <p>2. However different the rule might have been had the last draft been sold to a person who had no knowledge of the prior draft for §4000, which was not endorsed on the letter of credit, and who should purchase on the faith of that letter, yet, in the case of the plaintiff, who had knowledge thereof, the omission of such endorsement could not avail to charge the guarantor beyond the amount specified in its letter of credit.</p> <p>3. Recovery under the common counts. In such case the plaintiff could not recover, o