Case Name: Procter & Gamble Company, Plaintiff, v. Peters, White & Company, Defendant
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1919-05-02
Citations: 187 A.D. 376
Docket Number: 
Parties: Procter & Gamble Company, Plaintiff, v. Peters, White & Company, Defendant.
Judges: 
Reporter: Appellate Division Reports
Volume: 187
Pages: 376–391

Head Matter:
Procter & Gamble Company, Plaintiff, v. Peters, White & Company, Defendant.
First Department,
May 2, 1919.
Sale — contract for present sale of oil to be produced by seller construed — conversion by factor — when title passes.
A corporation engaged in the production of fish oil entered into a contract providing that it “ hereby sells ” and the purchaser “ buys ” from it “ all the Menhadden Fish Oil to be produced ” at its plant from the date of the contract to a certain date, except a certain number of barrels which its agent has an option to take under a.prior agreement. The purchaser was to receive the oil in tank cars to be supplied by it at the factory or at its option in barrels to be furnished by it. The oil was to be invoiced to the purchaser by the agent of the seller “ as and when ” it was produced at the factory, and thereupon said agent was to be entitled to draw at sight to its own order upon the purchaser for the oil at a certain rate per gallon. Prior to the contract by the seller with the agent giving it a sole and exclusive agency, the seller had constituted another its factor for the exclusive right to sell its fish oil during the years in question, and upon making the contract of sale notified the factor that collections should pass through its hands as theretofore. The agent exercised its option to purchase part of the oil to which it was entitled. The oil after it was extracted at the seller’s plant was allowed to remain in settling tanks until it became clear and then was pumped into storage tanks from which it was pumped out for shipment. The factor procured the seller to have shipments of oil consigned to its order and delivered to another company from which said factor received payment, and with respect to two of said shipments the purchaser under the aforesaid contract furnished its own cars as contemplated and the oil was delivered therein. In an action by the purchaser against the factor for conversion, provisions of the contract and evidence examined, and
Held, that there was a conversion of the two ears of oil, and that the defendant with a full knowledge of the plaintiff’s title participated therein;
That it was the intention of the parties that title was to pass when the oil was pumped into the storage tanks.
Smith, J., dissented in part, with opinion.
Motion by plaintiff, Procter & Gamble Company, for a new trial upon a case containing exceptions, ordered to be heard at the Appellate Division in the first instance after the direction of a verdict in defendant’s favor by the court at the close of the ease upon a trial before the court and a jury at the New York Trial Term in November, 1918.
Eugene Lamb Richards of counsel [.Rutherford B. Meyer with him on the brief], for the plaintiff, for the motion.
Clarke M. Rosecrantz of counsel [Eustace Seligman with him on the brief: Sullivan & Cromwell, attorneys], for the defendant, opposed.

Opinion:
Laughlin, J.:
The plaintiff, a corporation duly organized and existing under the laws of Ohio, brought this action against the defendant, a domestic corporation, for the conversion of fish oil, at Promised Land, N. Y., between the 1st day of August' and the 15th day of September, 1914. The answer is a general denial. The plaintiff claimed title and the right to the possession of the oil by virtue of an agreement, in writing, made between it and the Atlantic Phosphate and Oil Company, which was a domestic corporation, and which, for the sake of brevity, will be referred to as the seller, on the 29th day of January, 1914. The seller had a plant at Promised Land, L. I., for extracting oil from fish, and it conducted the business of catching fish, unsuitable for human consumption, and of extracting the oil therefrom and selling the refuse as fertilizer. It was not a contract to purchase in the future for it expressly provided that the " seller hereby sells " and the purchaser " buys " from it " all the Menhaden fish oil to be produced " at said plant, from the date of the contract to the thirty-first day of December thereafter " except six thousand (6,000) barrels) or such part thereof as Harden, Orth & Hastings Company shall take under agreement " between it and the seller, dated the 15th day of December, 1913, and the plaintiff agreed to pay for the oil as thereinafter provided. On the subject of the delivery of the oil, which is one of the principal points in the case, the contract provided that the purchaser should receive the oil in tank cars to be supplied by it at the factory, or, at its option, in barrels to be furnished by it at the factory; that the purchaser w;as to provide enough tank cars or barrels at the factory to take and receive the oil " as and when produced by the seller, except as hereinafter provided; " that the oil should be invoiced to the purchaser by said Harden, Orth & Hastings Company, as agent for the seller " as and when " the oil was produced at the factory, and that thereupon said agent should be entitled to draw, at sight to its own order, upon the purchaser for the oil, at the rate of twenty-five cents per gallon; that if, at any time, there should not be at the factory sufficient tank cars or barrels furnished by the purchaser " to receive all the oil as fast as produced " the seller should store the oil in its own tanks at the factory and its agent should invoice the oil as soon as so stored to the purchaser and should be entitled, thereupon, to draw upon the purchaser the same as with respec-t to the oil delivered into tank cars or barrels, and in the event that the oil so stored in the seller's tanks should reach the amount of 15,000 barrels, and the purchaser should not provide sufficient tank cars or barrels " to take care of all excess as fast as produced," the seller was to be at liberty to " ship such excess oil to the purchaser or store the same in any way that may be possible," and in that event the purchaser agreed to pay the seller any extra expenses thus incurred. Provisions were then made for weighing and testing the oil on its receipt at the purchaser's factory in Cincinnati in order to determine the correctness of the invoices as to quantity and to determine whether the oil shipped was of the quality specified in the contract, and thereafter the final payment of the purchase price, to be determined as therein provided either by the ' purchaser's election to take f. o. b. cars at Promised Land at thirty cents per gallon or by the current market prices at Baltimore, was to be made. By the agreement between the oil company and the Harden, Orth & Hastings Company, referred to in the contract between the seller and the plaintiff, the seller appointed the Harden, Orth & Hastings Company its sole and exclusive agent for the sale of all the fish oil offered for sale or produced by it or, by any one controlled by it, during one year from the date thereof, and the agent was given the option to take oil for its own account to the extent of 6,000 barrels, and the agent agreed to lend to the seller its credit, in the form of promissory notes, to the extent of $50,000. The agency, which the contract between the seller and the plaintiff contemplated should be exercised by the Harden, Orth & Hastings Company, was not exercised by that company but in part was exercised by the defendant. It was not shown, however, whether that contract of agency was terminated by mutual consent or otherwise. The evidence shows that the Harden, Orth & Hastings Company exercised its option to purchase part of the oil but not to the extent of 6,000 barrels and that it received the oil to the extent that it exercised the option. It does not appear when it exercised the option but it is fairly to be inferred from the evidence that its exercise in no manner related to or affected the oil claimed to have been converted by the defendant.
Prior to the making of the contract with Harden, Orth & Hastings Company, and on Hay 1, 1913, the seller had constituted the defendant its factor for the exclusive right to sell its fish oil during the years 1913-1914, and the day after it made the contract with the plaintiff it notified the defendant that the collections for its oil for the year 1914 should pass through the defendant's hands as theretofore. The defendant claims that it was not aware of the terms of the contract between the seller and the plaintiff. The evidence shows, however, that the defendant was aware of the pendency of the negotiations leading up to the execution of that contract and was consulted by the seller with respect thereto and that the contract was exhibited to its vice-president shortly before execution and in the form in which it was executed. The vice-president of the defendant did not deny that he examined the contract when it was so exhibited to him with sufficient care to ascertain plaintiff's rights thereunder; and the correspondence between the seller and the defendant before the alleged conversion tends to show that defendant knew that the plaintiff had purchased all Menhaden fish oil of that grade to be manufactured that season by the seller subject only to said option for 6,000 barrels. The first draft drawn by the seller on the plaintiff, under the contract, through the defendant was a time draft for thirty days for an advance payment of $25,000 to be made to the seller under the contract, and was drawn on the 30th day of January, 1914, and was discounted by the defendant. On the 9th day of May, 1914, the defendant wrote the seller asking whether it had notified the plaintiff of the defendant's relations " as regards the deal made with them in oil," and as to whether the plaintiff had been instructed that all payments were to go through the defendant's office, and on the eleventh day of May the seller acknowledged the letter and inclosed copies of letters sent to the plaintiff to cover the suggestion made by the defendant, which on the next day the defendant acknowledged to be satisfactory. Numerous drafts drawn by the seller on the plaintiff passed through the defendant's hands, and it discounted those of them which were time drafts. The process of extracting oil at the plant was shown and it appears that after it is allowed to remain in settling tanks until it becomes clear, it is pumped into storage tanks from which it is pumped out for shipment. When a shipment was to be made the seller filled out an order for a bill of lading on forms furnished by the carrier, specifying, among other things, to whose order the consignment was to be made, the destination, who was to be notified, and a description of the property and the name of the shipper, and on the presentation of that and the delivery of the oil to the carrier, the bill of lading was filled out and delivered to the shipper. On the 17th of July, 1914, the defendant wrote the seller stating that it understood that by the form in which the oil had been shipped theretofore the plaintiff could get the cars without awaiting the arrival of the bills of lading with drafts annexed, and it inclosed forms of orders for bills of lading, and requested that they be used in the future, and that the goods be shipped in the defendant's name and to its order, and stated in effect that otherwise the defendant would not make any payments on account of shipments. The seller conformed to this request and thereafter, and on the first, twelfth, twentieth and twenty-ninth of August and the third of September respectively, on applications on such forms, the carrier, the Long Island Railroad Company, issued five bills of lading, each for a tank car of oil consigned from this plant, to the order of the defendant at the Union Stock Yards, Chicago, with a notation to notify Swift & Co., and designating the defendant as the shipper. The oil was shipped accordingly and the bills of lading were presented to the defendant and it made advances thereon or on some of them to the seller and forwarded them with drafts annexed for the full purchase price to be paid by Swift & Co. on delivery of the bills of lading. The defendant collected the drafts and credited the net proceeds less any advances theretofore made thereon, on an existing indebtedness owing by the seller to it. It does not appear that when the defendant suggested the change in the forms of the bills of lading it was aware that the seller contemplated diverting this oil from the plaintiff, and the reasonable inference is that the change was suggested solely with a view to protecting itself against a possible delivery of the oil without presentation of the bills of lading and payment of the drafts annexed on account of same, on all of which it had made advances to the seller, but when these bills of lading came to the defendant in this form the oil was under its control (Furman v. Union Pacific R. R. Co., 106 N. Y. 579), and in forwarding the bills of lading to Swift & Co. it participated in the diversion thereof and appropriated the proceeds with the full knowledge that the oil belonged to the plaintiff. There is also evidence warranting the inference that owing to the fact that plaintiff was insisting upon credits on the drafts to the extent of one-half the amount on account of the advance of the $25,000, as it had a right to do under the contract after June 30, 1914, the defendant at the request of the seller had negotiated the sales to Swift & Co.
On the 17th of August, 1914, on application by the seller in like form, the carrier issued bills of lading for two other tank cars of oil consigned to the order of the seller at the Union Stock Yards, Chicago, with a notation to notify Swift & Co., and designating the seller as the shipper. Although by the forms of the bills of. lading these two cars were not under the control of the defendant the bills of lading passed through its hands and it appropriated the proceeds in the same manner, after it was chargeable with knowledge by the other bills of lading, issued in its own name and to its own order, that the seller was diverting the oil from the plaintiff.
It is contended in behalf of the defendant that the title to the oil never passed to the plaintiff and that, therefore, there could be no conversion thereof. With respect to two of the shipments the plaintiff furnished its own cars as contemplated and the oil was delivered therein, and the cars instead of being shipped to the plaintiff were shipped to Chicago and delivered to Swift & Co. Surely the delivery into the cars furnished by the plaintiff must be deemed a delivery to the plaintiff, and neither the seller nor the defendant can be heard to say, in effect, that the seller had appropriated the plaintiff's cars before it pumped the oil into them and that, therefore, they were its own cars. It is quite clear, therefore, that there was a conversion of the two cars and that the defendant, with the full knowledge of the plaintiff's "title, participated therein. Consequently it is equally liable with the seller. It is not essential that a motive be shown to induce the action of the defendant in assisting its principal in converting the oil; but there is some evidence that its principal was largely indebted to it and that by thus diverting this oil it received the full purchase price to apply thereon, whereas it was only at liberty in the first instance to draw on plaintiff for part of the purchase price and until the plaintiff was reimbursed for the advance payment made by it only twelve and one-half cents per gallon was payable by it on the first drafts. I am of the opinion that by the express terms of the contract there was a delivery of the oil to the plaintiff and that title passed when it was pumped into the storage tanks. The identification was then complete and it became the. duty of the seller to hold the oil for the plaintiff or to ship it to the plaintiff in the event that the quantity on hand amounted to 15,000 barrels. It does not appear how many barrels were on hand at any one time, and, therefore, it cannot be assumed that the quantity of oil amounted to that number of barrels. Until the Harden, Orth & Hastings Company exercised the option the plaintiff's title was, doubtless, subject to the exercise thereof. But as already stated the option did not concern the oil in question and none of it was taken in the exercise of the option.
Section 156, subdivision 4, of the Personal Property Law (Consol. Laws, chap. 41 [Laws of 1909, chap. 45], as added by Laws of 1911, chap. 571) provides, among other things, as follows:
" Goods are in a ' deliverable state ' within the meaning of this article when they are in such a state that the buyer would, under the contract, be bound to take delivery of them."
Section 86 of the Personal Property Law (as added by Laws of 1911, chap. 571) provides:
" 1. The goods which form the subject of a contract to sell may be either existing goods, owned or possessed by the seller, or goods to be manufactured or acquired by the seller after the making of the contract to sell, in this article called ' future goods.'
" 2. There may be a contract to sell goods, the acquisition of which by the seller depends upon a contingency which may or may not happen.
" 3. Where the parties purport to effect a present sale of future goods, the agreement operates as a contract to sell the goods."
Section 100 of the Personal Property Law (as added by Laws of 1911, chap. 571) provides:
"Rule 4. 1. Where there is a contract to sell unascertained or future goods by description, and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer, or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be expressed or implied, and may be given either before or after the appropriation is made."
By virtue of the precise terms of this contract, and the uncontroverted facts the case is, I think, brought clearly within the provisions of the Personal Property Law quoted; and the intention of the parties, which governs as to when title was to pass (Cornell v. Clark, 104 N. Y. 455; Burrows v. Whitaker, 71 id. 296), plainly was, I think, that the title was to pass when the oil was pumped into the storage tanks.
The only authority on which the defendant relies, which is not manifestly distinguishable on the facts, is Comfort v. Kiersted (26 Barb. 472); and that is distinguishable on the ground that therein there was not a sale of all the shingles the seller made during a season or during a specified time or even the first shingles made, but of a specified quantity, and, therefore, until there was an actual or constructive delivery the purchaser could not claim any particular shingles. Whereas, here the contract was for all the fish oil of the specified description manufactured by the seller during the period specified, and of course the seller thereafter could confer title on no one else with respect to any of it.
It follows that the plaintiff's exception to the direction of the verdict should be sustained and a new trial granted, with costs to the plaintiff to abide the event.
Clarke, P. J., Dowling and Merrell, JJ., concurred; Smith, J., dissented in part.