First National Bank v. Ege — 15 N.Y. St. Rep. 88

Majority

p. 88

The First National Bank of Batavia, Resp’t, v. Horatio N. Ege et al., App’lts.^[1]

(Court of Appeals,

Filed April 10, 1888.)

Headnote

1. Commission merchant—Acceptance of draft upon consignment of PROPERTY TO SELL — No LIEN ON SUBSEQUENT CONSIGNMENTS FOR LOSS.

When a consignee of property to sell accepts drafts upon the faith of such consignment, he acquires the right to sell the property, and apply its. proceeds in payment of such drafts; but if such proceeds are insufficient for such purpose, he must rely upon the responsibility alone of the drawee to repay the deficiency. By the mere receipt of subsequent shipments, he acquires no lien thereon to the prejudice of those who have advanced money upon them and taken transfers of bills of lading to secure advances.

2. Same—Bills of lading sent to—Only confer right to receive. and hold.

One Williams was in the habit of sending produce by railroad to the defendants, commission merchants, in New fork, to sell. He was accustomed when shipping goods to obtain from the carrier two bills of lading, one called an original and the other marked as a duplicate. The originals were sent directly to the defendants, and the duplicates were retained by Williams, and attached to drafts drawn upon the defendants, which he procured to be discounted by the plaintiff. Held, that the possession of the original bills gave the defendants no title to the property described therein, but simply conferred upon them the right to receive it from the carrier, and hold it subject to an accounting with the assignor, or to the. true owner, when he should appear.

8. Same—Rights OF TRANSFEREES AFTER NOTICE TO CONSIGNEE.

If, before incurring liability upon the credit of such consignment, defendants received notice of its previous transfer to another party for value,, they could not thereafter deal with the property to the prejudice of the rights of such party.

4. Same—Discounting draft on faith of consignment—effect of.

By taking a transfer of a bill of lading from the consignor and discounting a draft upon the faith thereof, the plaintiff acquired title to the property described therein to the extent of the draft discounted by it, paramount to the claims of any other party.

5. Same—Duty of consignee after notice of transfer.

It was the duty of the defendants when they received notice of the ownership of their consignments by the plaintiff to hold and dispose of them on its account, applying the proceeds to the payment of the specific drafts accompanying the consignment, and if insufficient for that purpose, to charge the deficiency to their consignor.

6. Estoppel—Effect of failure to assert right in another instance.

The fact that a party has on other occasions omitted to enforce his^[1] clear, legal rights as to some property, affords no reason why he should be defeated as to legal claims upon other property, when he does finally assert them.

Appeal from a judgment of the supreme court, general term, fifth department, affirming a judgment entered upon the report of a referee.

Wm. F. Cogswell, for app’lts; George Bowen, for resp’h

This action was brought by the alleged owner to recover the value of certain personal property it ■claimed was wrongfully converted by the defenants.

The conversion is claimed to have been established by proof that the defendants had in their possession on the 9th day of June, 1881, the property claimed, and that the plaintiff then demanded the same, and they refused to deliver it. Such evidence would, of course, authorize a finding by the referee of a conversion of the property and if accompanied by evidence of title would justifiy the recovery.

The claim of title by the plaintiff is somewhat confused by reason of the peculiar mode adopted by one Williams, the general owner, in consigning produce purchased by him to the defendants to sell on commission. Williams was a produce dealer residing at Batavia, New York, and had for several years been in the habit of sending his property by railroad to the defendants, commission merchants in New York, to sell. He was accustomed, when shipping goods, to obtain from the carrier two bills of lading, one called an original and the other marked as a duplicate. The originals were sent directly to the defendants, and the duplicates were retained by Williams, and attached to drafts drawn upon the defendants which he procured to be discounted, by the plaintiff. These drafts were frequently drawn without particular regard to the value of the property described in the bills attached thereto, and were usually accepted or rejected by the defendants according to the condition of Williams’ account and the value of the consigned property in their possession. This was the general course of business pursued by the parties, and was known to and apparently acquiesced in by all. The particular transaction, in question grew out of the dealings occurring between September 29, 1879, and February 18, 1880. During that period Williams had drawn 145 drafts, accompanied by the same number of bills of lading, upon the defendants aggregating in amount $59,025. The first 135 drafts amounting to $35,725 were accepted and paid by the defendants, but the last ten drawn between January 31, 1880, and the 13th of February thereafter and aggregating $5,300 were not accepted, and, together with the bills of lading accompanying them, were returned to the plaintiff as dishonored bills.

The entire property covered by the one hundred and forty-five bills of lading as shown by its subsequent sales produced but $52,065.52, so that by the payment of the first one-hundred and thirty-five drafts the defendants had paid to the plaintiff an amount in excess of the total proceeds of the property consigned.

p. 90

The claim of the plaintiff is that the defendants had no right to apply the proceeds of the property received by them under the last ten bills of lading, to the payment of liabilities incurred through the acceptance of previous drafts, and we are of the opinion that this contention is correct.

. The practice of carriers in issuing duplicate bills of lading to consignors for property shipped for sale, has been much disapproved of by the courts, for the reason that it affords a convenient opportunity for the commission of frauds by consignors, as well as subjecting the carrier to the hazard of making incorrect delivery of the property. Glyn Mills & Co. v. East and West India Co., 7 App. Cases, 591.

No copies of the bills of lading issued in these transactions, appear in the case, but we must assume that, in accordance with the usual custom in regard to such instruments, they authorized the delivery of the property by the carrier to the consignees named therein according to the order in which they were presented to it. Kemp v. Falk, 7 App. Cases, 573; Glyn Mills & Co. v. The East and West India Dock Co., supra.

No question, however, arises in this case over conflicting claims between holders of respective bills of lading, as there can be no claim that the defendant acquired title to the property consigned by virtue of the receipt of any bills by them.

It was said by Lord Westbury in deciding the case of Barber v. Meyerstein (Law Rep., 4 H. L., 336), “There can be no doubt, therefore, that the first person who for value gets the transfer of a bill of lading, though it be only one of a set of three bills, acquires the property; and all subsequent dealings with the other two bills must in law be subordinate to that first one, and for this reason, because the property is in the person who first gets a transfer of the bill of lading. It might possibly happen that the ship owner having no notice of the first dealing with the bill of lading, may, on the second bill being presented by another party, be justified in delivering the goods to that party. But although that may be a discharge to the ship owner, it will in no respect affect the legal ownership of the goods.”

These expressions are approved in Glyn Mills Co. v. The East and West India Dock Co. (supra), and undoubtedly state the condition of the law in England on the subject at this time. See also Lickbarrow v. Mason, 2 T. R., 63, and notes to that case in Shirley’s Leading Cases in Common Law, Blackstone Series.

The possession of these bills therefore gave the defendants no title to the property described therein, but simply' conferred upon them the right to receive it from the carrier

p. 91

and hold it subject to an accounting with the consignor when sold, or to the true owner when he shall appear. If, however, before incurring liabilities upon the credit of such consignment they received notice of its previous transfer to another party for value they could not thereafter deal with the property to the prejudice of the rights of such party. By taking a transfer of a bill of lading from the consignor and discounting a draft upon the faith thereof, the plaintiff acquired title to the property described therein to the extent of the draft discounted by it, paramount to the claims of any other party. This would clearly be so unless such party had in good faith parted with value in reliance upon the possession of the property lawfully acquired. Commercial Bank of Keokuk v. Pfeiffer, 108 N. Y.; 13 N. Y. State Rep., 506, and cases therein cited.

When a consignee of property to sell accepts drafts upon the faith of such consignment, he acquires the right to sell the property and apply its proceeds in payment of such drafts, but if such proceeds are insufficient for such purpose he must rely upon the responsibility alone of the drawee to repay any deficiency. By the mere receipt of subsequent shipments, he acquires no lien thereon to the prejudice of those who have advanced money upon them and taken transfer of bills of lading to secure such advances.

The defendants have had notice by the uniform course of dealing between these parties, and the invariable practice of Williams in raising money of the plaintiff to make purchases, that the consignments in question had been transferred to the plaintiff, and they could not prejudice its rights thus acquired, except by incurring in good faith new liabilities upon the faith of Williams’ apparent ownership and their possession of the property, even if they could do so under such circumstances.

It was the duty of the defendants when they received notice of the ownership of their consignments by the plaintiff, to hold and dispose of them on its account, applying the proceeds to the payment of the specific drafts accompanying the consignment, and, if insufficient for that purpose, to charge the deficiency to their consignor. The plaintiff, however, never incurred any liability to the defendants on account of the acceptance and payment of drafts by the defendants for a greater amount than the value of the prop.■erty consigned, and had the right to consider each subsequent consignment as a new dealing to be treated according to the specific rights thereby acquired.

With respect to the ten bills of lading in question, the evidence shows that the plaintiff advanced money upon the transfer thereof to it, and acquired title to the property therein described before any other right or claim could have attached thereto, and it is clear that they had the right to

p. 92

have its proceeds applied in satisfaction of the respective drafts accompanying the respective consignments, or to have the property delivered to them upon demand.

Some proof was given tending to show that the plaintiff was ignorant of its legal rights until after all of the consignments were received by the defendants; but there is no evidence showing that the defendants were prejudiced by this conduct of this plaintiff, or that it was estopped from asserting its legal ownership by any steps taken by the de-' fendants in reliance upon the plaintiff’s conduct.

It is quite possible that the defendants might thereby have felt authorized to pursue a course of business which would not otherwise have been adopted; but this affords no reason why courts should disregard the plain legal rights of parties, unless some element' of estoppel, as against such parties, is introduced into the transaction. The fact that a party has, on other occasions, omitted to enforce his clear, legal rights as to some property, affords no reason why he should be defeated as to legal claims upon other property, when he does finally assert them.

The judgment of the general term should be affirmed.

All concur.