On Rehearing.
William Alexander, for plaintiff in error.
Powers & Maxan, for defendant in error.
Gray, Associate Justice.This cause is again submitted, after a rehearing granted. The importance of the questions involved seems to demand careful examination, involving as they do the law governing letters of credit or guaranties and mandates, and their construction, the rights and duties of parties acting under them, and the remedy for their enforcement. The errors assigned on the record present and require a review* of the whole case as presented in the court below.
The petition of defendant in error avers, that on the sixteenth of March, 1870, defendant was a banker at Brownsville, in Texas, of known responsibility in the region of Mexico where she resided, at Soto de la Marina, and on that day he made and delivered to one William Scanlan a written certificate of deposit or letter of credit, which was in the Spanish language, and when read in evidence, in English translation, was as follows, to-wit:
“ Brownsville, March 16, 1870.
“To whom it may concern, present :
“The bearer hereof, Mr. William Scanlan, is going-through those parts with the object of purchasing mule *313stock. He leaves deposited in my hands the sum of $11,100 (eleven thousand one hundred dollars), which sum I hold subject to his order.
"Joseph San Roman.”
That on the fourth of April following, Scanlan, having arrived in those parts where he resided, proposed to purchase mules from her agent; and that he exhibited said agreement of defendant as evidence of his ability to pay for them ; that her agent, acting solely on the faith of it, and of defendant’s responsibility as a banker, and that he had formerly been accustomed to give such letters to parties, whose drafts or orders upon them had always been honored by defendant, did sell and deliver to Scanlan one hundred and forty-seven mules, of the value of $3752, and received from him in payment his draft or order upon defendant at Brownsville for that sum, to be paid to her order on his account, which was dated on said fourth of April, the day of the purchase by Scanlan, who then departed with the mules. That on the tenth of April she transferred and forwarded said draft to her banker at Tampico, who in due course caused it to be presented to defendant for payment on the thirtieth of April, who refused to accept and pay, and endorsed on it that he refused payment for reasons given in his letter of April 15 to plaintiff; whereupon the draft was returned to her in due course. That the reason given in said letter of April 15 by defendant was in answer to a letter from her of the 8th, advising him of the draft; that on March 18, two days after the letter or certificate of deposit had been given by defendant to Scanlan, the latter had drawn for the whole sum deposited in favor of Angel Maiz, of the house of Don Francisco Armendiaz, of Matamoros, Mexico, and that the deposit had been paid to that house on that day, where he presumed the money was ; and that Scanlan had no funds, and no authority to draw on him *314when he gave her the draft, and that he enclosed her a letter from Scanlan in regard to the matter. That this letter from Scanlan, dated April 13, at Matamoros, stated that he had drawn in her favor on San Roman “ indebidamente” (translated by plaintiff “ wrongfully” in petition, but by her agent, Serna, in his testimony, as “by mistake,” and which literally means “without funds”); that his draft should have been on the house of Don Armendiaz, where the money was deposited,' and requested her to apply there for the value of the draft.
Petition then proceeds to allege that the draft has not been paid, and that if the deposit had been paid as pretended by defendant (which she does not admit), then it was a sham pretense and fraud on her, for the purpose of enabling Scanlan and Armendiaz. to embarrass her in receiving her money, and to aid Armendiaz in enforcing payment by her of an unjust and fraudulent claim which he set up against her for about $5000 on account of one Dewitt; that if defendant had paid the deposit as he alleged, he had not taken up his letter or certificate, but allowed Scanlan to retain it for the purpose of deception; that such practice was against the law and custom of merchants, and that she had parted with her property to Scanlan solely on the faith of his possession and exhibit of the defendant’s letter or certificate, and not on Scanlan’ s credit, who had no visible means wherewith to respond.
The answer of defendant as to the facts (his demurrers being overruled) denied all responsibility by reason of his not having funds of Scanlan, and especially denying all the allegations of sham pretense, fraud on the rights of plaintiff, and that he connived with Scanlan to harass her, or that he allowed his certificate of deposit to remain in possession of Scanlan to be used for the purpose of deception; and further alleging that he is not liable on the draft, as plaintiff well knew before it was presented *315for payment, and that she and her agent and Scanlan combined with each other to harass him. This portion of the answer was not demurred to by plaintiff, but stood as presenting the issues for trial.
The case made by plaintiff’s petition was not a claim as holder or assignee by transfer in whole or in part of the letter of defendant, and based on its validity and binding effect as an acceptance of Scanlan’s bill or order, but it disclosed a claim on the special facts in equity, the gravamen of her cause of action being the alleged gross neglect, or wrongful design, of defendant in allowing his letter to remain in possession of the irresponsible holder when he paid it, whereby that holder had been enabled to mislead and- induce her to part with her property on the faith of that letter and his possession of it, to her injury, and which loss defendant was equitably bound to make good to her.
The ruling of the court on further answers, on evidence and in its charge, was based on a broader view of defendant’s liability on his general letter of credit, as the court properly considered it to be. Pleas alleging specifically the payment of the deposit on Scanlan’s order to Angel Maiz, and that he acted in good faith, etc., were struck out on demurrer. Evidence to prove the payment and circumstances of defendant’s action under the answer as it stood was wholly excluded, although plaintiff had not directly admitted such payment to have been made in her petition. The charge, also, was based on the same view, and throughout maintained the proposition that, “So-long as defendant, San Roman, allowed said Scanlan to remain with the letter of credit without actual notice to-the plaintiff of his having withdrawn the funds mentioned in it, he, the said San Roman, is liable for any credit as taken up by said Scanlan in favor of the plaintiff, to the-extent of the amount stated in said letter.” The court, also refused a charge requested, that “A general author*316ity to draxv, as upon an open letter of credit, cannot be treated as an acceptance of bills drawn under snch authority.”
The verdict was for the plaintiff ; and the motion for new trial overruled, and assignment of errors, both distinctly specify the various rulings of the court.
That the writing signed by San Roman and delivered to Scanlan was a contract of guaranty, known as a general letter of credit, appears from the authorities. There-is little difference in the definitions given by elemementary writers or reports. (Story on Bills, Secs. 459, 460.)
The language of Justice Bronson in Birkhead v. Brown, 5 Hill (N. Y.), 642, is clear and perspicuous, both as to what are letters of credit and their general effect. He says: “Letters of credit usually contain a request that some one will advance money or sell goods to a third person, and an undertaking on the part of the writer that the debt which may be contracted by the third person, in pursuance of the request, shall bo duly paid. These letters have been divided into two classes, general and special. They are general when addressed to any and all persons, without naming any one in particular. They are special when addressed to a particular person or firm by name. When the letter is addressed to all persons, it is in effect a request made to each and every one of them, and any individual may accept and act upon the proposition contained in it; and on his doing so, that which was before indefinite and at large becomes definite and fixed; a contract immediately springs up between the person making the advance and the writer of the letter, and it is thenceforward the same thing in legal effect as though the name of the former had been inserted in the letter at the beginning. I can see no difficulty in this, for there is plainly a privity of contract between the parties.” For this lie cites various American authorities, among others Boyce v. Edwards, 4 Peters, 111; Adams v. Jones, 12 *317Peters, 207; Lawrason v. Mason, 3 Cranch, 492; Russell v. Wiggin, 2 Story, 213; and Carnegie v. Morrison, 2 Metcalf, 381; and then significantly adds, “Whetherthis doctrine has not sometimes been carried beyond its legitimate limits, so as to make contracts where there was no privity 'between the parties, I will not now stop to inquire.” But subsequently in the same opinion he does comment on the last two of those authorities at which this observation pointed, and questions the application made of the principles in those cases, but does not-deny them as applied to general letters of credit.
In the case of Lawrason v. Mason, 3 Crunch, the letter was addressed to a particular person, yet its terms plainly indicated that it was intended to influence the action of any person who might accept its promise. Chief Justice Marshall expressively said that it was “an actual assumpsit to all the world, and any person who trusts in consequence of that promise has a right of action.”
The same principle is asserted by Judge Story in Russell v. Wiggin, but the reasoning in the opinion delivered goes further, and maintains with remarkable cogency that such letters of credit (which he calls “circulating promises”) are to be treated as negotiable instruments : and that when bills are drawn in favor of another party acting on faith of them, they are to be held as acceptances of, or at least agreements to accept, such bills which the writer of the letter would be bound to pay “without reference to any change of circumstances which might occur in the intermediate time between the giving of the-letter and the drawing of the bills under the same, of which the holder advancing the money had no notice.” This is plainly applying to such letters, which are in fact guaranties and mandates, the mercantile law of negotiability applicable to regular bills of exchange and promissory notes. By that law an accepted bill, though paid by the acceptor before maturity and not taken up or re*318tired, if afterwards negotiated by the holder in due course of trade before maturity, will in the hands of the indorser be binding on the acceptor.. His payment before maturity (the time for which and sum to be paid are definitely fixed by the bill, without room for contingency or construction of the contract) not having been a regular payment usual in trade, could not reasonably have been suspected by the most prudent, and therefore would be no answer to the demand of an innocent third party. (Story on Bills, Sec. 417.) If, then, letters of credit are to be treated as negotiable to the same extent, so that bills drawn by the holder of them on the writer are to be deemed as accepted by him, the doctrine held by the court below in its charge was right, unless the state of the pleadings rendered it improper.
But it will be observed that in Russell v. Wiggin, and other cases maintaining this doctrine, the advances made were not only within the limits of the guaranty, but the holder of it, acting in good faith, had not exceeded the limit by overdraft. The extent of the credit had not knowingly been exhausted, nor the sum of deposit paid to his order according to the terms of the letter. No question therefore arose as to the effect of such fulfillment of the contract and bad faith of the holder. Had such a case been presented, it may be questioned whether the doctrine of negotiability would have been so broadly asserted.
Again, if we consider the nature and requisites of bills of exchange and negotiable promissory notes, and compare them with those of letters of credit, there is such marked difference between them that it is difficult .to reconcile and apply the effects of the negotiability of the former to the latter. The rules governing the former are always the same, fixed and determinate while the latter are to be construed with reference to the particular and often varying terms in which they may be expressed, the *319circumstances and intentions of the parties to them, and the usages of the particular trade or business contemplated. (Lawrence v. McCalmont, 2 How. S. C. R., 449; Bell v. Bruen, 1 How. S. C. R., 169; Lee v. Dick, 10 Peters, 482; Mussey v. Rayner, 22 Pick., 228; Smith v. Dunn, 6 Hill, 543.)
In the case under consideration, it is questioned whether the letter is to be construed as a certificate of deposit, intended to be transferred for the whole sum by a single order, either by draft or indorsement, or whether it was designed to be used as a means of credit to the extent specified, payable upon successive orders or bills to different persons, at the option of the holder. Considering that the letter is written in Spanish, that it is addressed to all whom it may concern or be presented, and states that the bearer “is going through those parts with the object of purchasing mule stock” (that is, those parts where Spanish is spoken and mule stock is to be found for sale), and that he has left deposited this sum of money, “which I hold subject to his order,” as translated (but literally, “ a su disposición'’ — at his disposition or control), there can be little doubt that the intention was to enable the bearer to draw orders on the deposit as convenience in making his purchases might require. It could hardly have been supposed that he would be likely to make a single purchase of mules for the whole sum from one party, though such a transaction may not have been impossible. How, to hold that such a contract has the attributes of negotiability in favor of each person to whom successive orders might be given for portions of the sum deposited, without definite limit of the period in which they should be given, would not only be contrary to the rules of certainty required in bills or notes, but also tend to increase the risk of liability of the writer, arising from careless mistakes or even frauds between the holder of the letter and parties acting under it. Such a rule would *320change the burden of proof necessary to avoid liability, although the writer had honestly paid the full amount of the deposit.
From these considerations, and others which might be urged, it is my opinion that all letters of credit are special contracts, guaranties and mandates, not to be treated as negotiable, in the full sense and proper meaning of that term. Nor is it believed that such letters are to be construed as actual acceptances of bills or orders drawn under them, but rather as agreements to accept such as may be drawn in good faith and within the limits of the credit or deposit specified.
It has been ably insisted in some of the cases that such doctrine is subversive of the beneficial use of letters of credit in commerce and otherwise, because it tends to weaken, if it does not destroy, their value abroad or on the Exchange, where they are intended to be used, and where-advances on them are always made on the credit of the writer, and not on that of the stranger who "holds them. There is force in this view, but it is not strictly true that such advances are made solely on credit of the writer, for the drawer of the bills is held responsible on them in case of the failure of the writer before payment. To some extent, therefore, the party advancing does look to the character and responsibility of the holder of the letter and drawer of the bills. It may be further answered that, if our view of the law is correct on principle, bankers and traders should conform their letters and contracts to those views, rather than that the courts should modify the law to suit the supposed convenience of commerce and forms of contracts which traders and bankers may see fit to adopt, and if the necessities of commerce require negotiable letters of credit, the parties interested can so make them.
But it is not believed that such consequences would result, at least to the extent supposed, from the doctrine *321now maintained. For while such letters are special contracts, not negotiable, yet general letters of credit do make a general request to all the world, which may be accepted by any one to whom it may be exhibited, and acted upon by him so as to make it a contract with himself, which may be enforced in his own name at law or in equity. It is the result of many decisions that a party who acts in pursuance of a general promise or request is as much entitled to a remedy on it as if specifically made with himself. (Louisville Manf. Co. v. Welch, 10 How. S. C. R., 461; Union Bank v. Coster, 1 Sanford, 563, and 3 Comstock, 203; Watson v. McLaren, 19 Wend., 557, 566, and many others.)
Though the weight of authority in the law courts of England denies, not only the doctrine of negotiability, but also of privity of contract arising, which is maintained by the American courts, yet there, as here, relief can be had in proper cases in equity. The case of the Agra and Masterman’s Bank, 2 Law R., Chancery Appeal Cases, 391 (cited in 2 American Leading Cases, 5th Edition, Notes to Lawrason v. Mason), in its practical result seems nearly equivalent to that in Russell v. Wiggin. It held that the assignee or holder of the bills drawn on faith of the letter of credit, and within limit of its authority, was entitled to relief “without reference to any collateral or cross-claims,” or claim of debt to the writer from the persons who had received his letter.
But neither this case nor the others before cited clearly reach the question here involved, of the effect of full compliance with, or discharge of, the obligation of the letter to the holder of it, before the advances on it and sale of the bills, acceptance of which was refused. They all assume that the contract was in force between the writer and holder of it; that the latter had acted in good faith, and within the limit of the credit specified. In such case it is not difficult to perceive how privity of *322contract arose between the writer and the third party mediately through the holder of the letter. But where there has been payment in full of it to the holder, or he acts in bad faith by drawing in excess of the credit limited on the face of the letter, it is not so easy to perceive how privity can then arise by virtue of and through the contract itself. It seems clear that plea and proof of such payment made in good faith would be a complete answer at law to a suit in assumpsit on that contract or agreement to accept and pay bills, unless the rules of pleading allowed replication alleging equitable grounds for relief. Clearly this could be done by the laws of Texas, either at law or by suit in equity setting out all the facts entitling to relief, by reason of matters outside of the mere possession of the letter by the holder, and such was the nature of plaintiff’s petition in this case. With us such a suit can be maintained by the third party injured, in his own name, as assignee of the whole or any part of the credit or deposit, according to the intention of the parties to the letter of credit, either at law or in equity.
These considerations seem to be sufficient. The doctrine of estoppel by admissions in the letter, insisted on by appellee, does not apply, for the simple reason, if no .other, that plea and proof of a subsequent payment of a deposit is not a denial of the fact that it was made at a prior date.
The principles of the liability of a principal to third parties, who act in good faith and give value to an agent, whose power has been revoked without notice to them, do apply to the case; but those principles are in accordance with those here maintained, as a careful consideration of the authorities will show.
Without commenting on the opinion delivered by our predecessors in Ranger v. Sargent, 36 Texas, 26, it will suffice to say, that if the contract there in question was a letter of credit, the decision is in accord with the view *323now taken as a question of law. The case was presented as purely at law, and the contract treated in that view alone. Ho equitable circumstances, other than the want of notice of payment by Sargent, without inquiry, which he could have made, appeared.
The case before us was presented by the pleadings as a suit in equity on the whole facts alleged and denied. But the court, by its rulings narrowed its trial by the jury to the simple issue of notice by plaintiff, when she sold her mules to Scanlan, that the money deposited had been drawn by him, although proof of the fact of payment by defendant had been excluded. In other words, the court held that the letter was negotiable, that its possession by Scanlan was conclusive evidence of his having money deposited with San Roman on which he had authority to draw for the purchase of mules from plaintiff, and that unless it appeared by evidence from defendant that she or her agent had notice that the deposit had previously been paid, she was entitled to recover of San Roman. How could it be made to appear that she had notice of a fact, proof of which had been excluded % The main fact of payment being excluded, it was useless for defendant to prove other matters which possibly might relieve him. This ruling and the charge were both erroneous, because contrary to the rules of law as herein indicated, and not presenting to the jury the issues made by the pleadings for trial.
From an inspection of the facts in evidence, as far as developed, it probably may be that substantial justice has been attained, but we cannot certainly so conclude in face of such mode of trial, which cannot be sanctioned as a precedent. The plaintiff in error had a right to trial of all the equitable issues presented by the pleadings, and if he had actually paid the deposit in the usual way and time for such payment, consistently with the nature of the letter issued by him and left outstanding, then he could *324only be made liable on the equitable causes alleged, of which the burden of proof was on the plaintiff.
The judgment being erroneous, is reversed, and cause remanded for'a new trial.
Reversed and remanded.