Source: https://supreme.justia.com/cases/federal/us/239/520/
Timestamp: 2019-04-18 10:33:32+00:00

Document:
Commercial National Bank of New Orleans v.
One who has no title to chattels cannot transfer title unless the owner has given authority or is estopped, nor can he, in the absence of such authority or estoppel, transfer title by warehousing the goods and endorsing the receipts. If, however, the owner of chattels clothes another with apparent ownership through the possession of warehouse receipts negotiable in form, a bona fide purchaser for value to whom the receipts are negotiated can be protected.
The clear import of the applicable provisions of the Uniform Warehouse Receipts Act enacted in Louisiana in 1908, is that, if the owner of goods permits another to have possession or custody of negotiable warehouse receipts running to the latter or to bearer, it is a representation of title upon which bona fide purchasers for value may rely, notwithstanding breaches of trust or violations of agreement on the part of the apparent owner.
The provision in § 57 of the Uniform Warehouse Act as enacted in Louisiana in 1908, and as the same has been enacted in other states, that the Act is to be so interpreted and construed as to effectuate its general purpose to make uniform the law of those states which enact it, is a rule of construction that prevents the Act from being regarded as an offshoot of local law to be construed in the light of decisions under former statutes of the enacting state, and requires the statute to be construed in the light of the cardinal principle of the Act itself.
The Uniform Acts relating to commercial affairs have been enacted in various states for the beneficent object of unifying so far as possible under one dual system of government the commercial law of the country, and to give effect, within prescribed limits, to the mercantile view of documents of title, and this principle should be recognized in construing the acts to the exclusion of any inconsistent doctrine previously obtaining in any of the enacting states.
indicia of ownership of the goods that a bona fide purchaser for value is enabled to take title thereto, the rule that the earlier of equal equities should prevail does not apply, as the later equities are based upon the action of the holder of the earlier equity, who is estopped thereby.
In a controversy between claimants of goods, held that giving to another negotiable bills of lading under trust receipts which authorized the taker to receive the avails of the goods or the document therefor so clothes the latter with indicia of ownership of the goods that the equities of a bona fide purchaser for value of warehouse receipts obtained for the goods on the bills of lading surrendered in exchange therefor are superior to those of the original owner of the bills of lading who had endorsed and delivered them under trust receipts which had been violated by the party transferring to the later purchaser.
The facts, which involve the determination in a bankruptcy proceeding of conflicting rights of pledgees of the same goods represented by warehouse receipts therefor, and the construction and application of provisions of the Uniform Warehouse Receipts Acts of Louisiana, are stated in the opinion.
This is a controversy arising in a bankruptcy proceeding. The Commercial National Bank of New Orleans petitioned the District Court for the recovery from the trustee in bankruptcy of certain bales of cotton alleged to have been held by the bankrupts, Dreuil & Company, for the account of the petitioner under trust receipts. The Canal-Louisiana Bank & Trust Company defended, presenting its reconventional demand based upon a claim of superior title. The district court entered a decree in favor of the Canal-Louisiana Bank & Trust Company (205 F. 568), which was affirmed by the circuit court of appeals. 211 F. 337.
trustee for the said bank, and except to receive the avails thereof or the documents therefor for account of the said bank."
Dreuil & Company, surrendering the bills of lading to the railroad company, obtained delivery of the cotton and sent it to a "pickery," where the lot of 40 bales was remade into 60, and the lot of 60 bales into 90. Dreuil & Company then stored the cotton with a warehouseman, the Planters' Press, receiving two negotiable warehouse receipts which, on December 17, 1912, they pledged to the Commercial Bank as security for their notes. On December 20, 1912, and December 28, 1912, these warehouse receipts, respectively, were withdrawn by Dreuil & Company from the Commercial Bank on trust receipts similar in tenor to those which had been given, as above stated, to the Canal-Louisiana Bank. Dreuil & Company then obtained a delivery of the cotton from the Planters' Press; on December 31, 1912, they were adjudicated bankrupts, and temporary receivers were appointed. It appears that 60 of the bales had been disposed of, but the remainder of the cotton, which had been sent by Dreuil & Company to a steamer for shipment, was recovered by the receivers and placed by them in the Planters' Press, warehouse receipts being issued therefor which passed into the possession of the trustee. Despite the changes mentioned, and remarkings (which we need not consider), the district court found the identity of the cotton to be established, and there is no further controversy upon that point. Nor is it controverted that the Commercial Bank was a purchaser in good faith for value of the warehouse receipts negotiated to it.
2482; Civil Code, Arts. 3157, 3158, 3170, 3173); Fidelity & Deposit Co. v. Johnston, 117 La. 880, 889; Act 94 of 1912 (Uniform Bills of Lading Act), § 32, and that, when the Canal-Louisiana Bank entrusted the bills of lading to Dreuil & Company for the purposes described in the trust receipts, given to that bank, it could still assert its title as against Dreuil & Company and their trustees in bankruptcy. See Clark v. Iselin, 21 Wall. 360, 88 U. S. 368; In re E. Reboulin Fils & Co., 165 F. 245; Charavay v. York Silk Mfg. Co., 170 F. 819; In re Cattus, 183 F. 733; Century Throwing Co. v. Muller, 197 F. 252; In re Dunlap Carpet Co., 206 F. 726; Assets Realization Co. v. Sovereign Bank, 210 F. 156; Moors v. Kidder, 106 N.Y. 32; Drexel v. Pease, 133 N.Y. 129; Moors v. Wyman, 146 Mass. 60; Moors v. Drury, 186 Mass, 424; Hamilton v. Billington, 163 Pa. 76; Williston, Sales, § 437. No question is presented as to the effect, in the light of the Uniform Bills of Lading Act passed in Louisiana in 1912 (Act 94), of an attempted negotiation by Dreuil & Company of the bills of lading contrary to the terms of the trust receipts. See Roland M. Baker Co. v. Brown, 214 Mass.196, 203. The bills of lading were not negotiated; they served their purpose, being surrendered to the railroad company on the delivery of the goods to Dreuil & Company. The transactions with the "pickery" are not material to the question to be decided. Dreuil & Company having obtained possession of the cotton, as was contemplated, placed it in store, and the question is as to the effect of the negotiation of the warehouse receipts to the Commercial Bank.
"SEC. 40. Who may negotiate a receipt. -- A negotiable receipt may be negotiated --"
"(a) By the owner thereof; or"
"(b) By any person to whom the possession or custody of the receipt has been entrusted by the owner, if, by the terms of the receipt, the warehouseman undertakes to deliver the goods to the order of the person to whom the possession or custody of the receipt has been entrusted, or if at the time of such entrusting the receipt is in such form that it may be negotiated by delivery."
"SEC. 41. Rights of person to whom a receipt has been negotiated. -- A person to whom a negotiable receipt has been duly negotiated acquires thereby --"
"(a) Such title to the goods as the person negotiating the receipt to him had or had ability to convey to a purchaser in good faith for value, and also such title to the goods as the depositor or person to whose order the goods were to be delivered by the terms of the receipt had or had ability to convey to a purchaser in good faith for value; and"
"(b) The direct obligation of the warehouseman to hold possession of the goods for him according to the terms of the receipt as fully as if the warehouseman had contracted directly with him."
"SEC. 47. When negotiation not impaired by fraud, mistake, or duress. -- The validity of the negotiation of a receipt is not impaired by the fact that such negotiation was a breach of duty on the part of the person making the negotiation, or by the fact that the owner of the receipt was induced by fraud, mistake, or duress to entrust the possession or custody of the receipt to such person, if the person to whom the receipt was negotiated, or a person to whom the receipt was subsequently negotiated, paid value therefor, without notice of the breach of duty, or fraud, mistake, or duress."
clear import of these provisions is that, if the owner of the goods permits another to have the possession or custody of negotiable warehouse receipts running to the order of the latter, or to bearer, it is a representation of title upon which bona fide purchasers for value are entitled to rely, despite breaches of trust or violations of agreement on the part of the apparent owner.
disposition of the cotton through Dreuil & Company, the latter were manifestly permitted to take such documents to their own order, as they took the bills of lading with which they were entrusted. To repeat, it was the negotiation of the receipts that constituted the breach of trust. But, after the Canal-Louisiana Bank had allowed Reuil & Company to be clothed with apparent ownership through possession of the receipts, it cannot be heard to question the title of a bona fide purchaser for value to whom they had been negotiated. In re Richheimer, 221 F. 16.
purpose of the Uniform Act, and that it should not be regarded merely as an offshoot of local law. The cardinal principle of the Act -- which has been adopted in many states -- is to give effect, within the limits stated, to the mercantile view of documents of title. There had been statutes in some of the states dealing with such documents, but there still remained diversity of legal rights under similar commercial transactions. We think that the principle of the Uniform Act should have recognition to the exclusion of any inconsistent doctrine which may have previously obtained in any of the states enacting it, and, in this view, we deem it to be clear that, in the circumstances disclosed, the Commercial Bank took title to the warehouse receipts and to the cotton in question.
Bank, in the absence of the intervention of a purchaser in good faith for value, did not lose its rights by the agreement under which the cotton which it had duly acquired was to be held for its account. There is no equality of equities, for it was through the action of the Canal-Louisiana Bank and the apparent ownership it created in Dreuil & Company that the Commercial Bank was led to advance its money upon the faith of the documents of title.
The decree is reversed, and the cause is remanded with direction to enter a decree in favor of the appellant.

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