Case Name: Fitch, Cornell & Company, Appellant, v. The Atchison, Topeka and Santa Fe Railway Company, Respondent
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1915-12-03
Citations: 170 A.D. 222
Docket Number: 
Parties: Fitch, Cornell & Company, Appellant, v. The Atchison, Topeka and Santa Fe Railway Company, Respondent.
Judges: 
Reporter: Appellate Division Reports
Volume: 170
Pages: 222–226

Head Matter:
Fitch, Cornell & Company, Appellant, v. The Atchison, Topeka and Santa Fe Railway Company, Respondent.
First Department,
December 3, 1915.
Carriers—false bills of lading—effect of Carmack Amendment to Interstate Commerce Act — fraud — issuance of bills of lading without receipt of goods — principal and agent — notice of fraudulent acts by agent—ratification by principal.
The Carmack Amendment to the Hepburn Bill amending the Interstate Commerce Act regulates the issuance of interstate bills of lading, and also establishes the carrier’s liability thereon, superseding the rules of the common law and the statute law of the State in which liability is sought to be enforced.
A commission merchant paying a draft in reliance upon a bill of lading issued by the agent of a common carrier in another State, which was false in that the produce referred to had never been received, cannot recover from the carrier upon the insolvency of the drawer in the absence of evidence connecting the carrier with the fraud.
The bill of lading relating to the shipment of produce from one State to another involved interstate commerce, although the produce was not received.
Knowledge of the carrier’s station agent who issued the false bill of lading cannot be imputed to it, since he was acting adversely to his principal’s interest.
Proof that the carrier’s agent and another employee had been engaged for some time in the fraudulent issuance of bills of lading without the receipt of the goods does not raise a presumption that such fraud had been brought to the attention of and ratified by the company.
Appeal by the plaintiff, Fitch, Cornell & Company, from a judgment of _ the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of New York on the 5th day of December, 1913, upon a dismissal of the complaint by direction of the court at the close of plaintiff’s case.
C. E. Thornall, for the appellant.
Walker D. Hines, for the respondent.

Opinion:
McLaughlin, J.:
Action to recover damages sustained by reason of the alleged fraud of the defendant in issuing a false bill of lading.
The plaintiff, at the time stated in the complaint, was a . commission merchant in the city of New York. On Septem ber 5, 1908, the O. T. Wells Produce Company of Arkansas City, Kans., drew a draft on plaintiff for $3,000 and forwarded the same for collection, through a bank in Kansas, to the National Bank of Commerce in New York city. Stamped across the face of the draft were the words: "Hold draft for arrival of bill of lading." Upon receipt by the bank of the draft it was presented for acceptance to the plaintiff, which was refused on the ground that the bill of lading had not been received. On September 15, 1908, one Krebs, a clerk in defendant's employ- at Arkansas City, Kans., whose duty it was to check the goods put into a car and then seal the car, signed, in the name of one Ingham, the station agent at that place, a bill of lading for 150 tubs of butter and 250 crates of eggs, and delivered the same to the produce company. The butter and eggs were consigned to the plaintiff in New York city, to which the produce company forwarded the bill of lading thus issued. After the bill of lading was received by the plaintiff the bank again presented the draft and the same was accepted and paid. The bill of lading proved to be false, the butter and eggs referred to therein never having been received by the defendant. Subsequently the produce company paid the plaintiff $1,500 on account of the amount advanced on the draft, and thereafter went into bankruptcy. The plaintiff then brought this action to recover the balance of the draft, $1,500, with interest, on the ground that the railroad company was hable therefor by reason of its fraud in issuing the bill of lading, when in fact the butter and eggs had not been received for shipment.
At the beginning of the trial defendant moved to dismiss the complaint upon the ground that under the Carmack Amendment to the Hepburn Bill amending the Interstate Commerce Act (24 U. S. Sfcat. at Large, 386, § 20, as amd. by 34 id. 593, 595, § 7; 34 id. 838, Res. No. 47), which was passed on June 29, 1906, to take effect sixty days thereafter, the action could not be maintained. The court reserved its decision upon the motion until the close of plaintiff's case, when it was renewed and granted. Judgment was subsequently entered dismissing the complaint, from which the plaintiff appeals.
I am of the opinion the complaint was properly dismissed. At the outset it may be observed that the draft did not, in specific terms at least, refer to the bill of lading here involved, and except for the fact that both instruments are numbered 3075, there is nothing to indicate they are in any way related to each other; on the contrary, it would seem to follow from the fact that the draft is dated September 5, 1908, and the bill of lading September fifteenth, that the words stamped across the face of the draft, " Hold draft for arrival of bill of lading," could not have been understood to refer to the bill of lading which was subsequently issued. But assuming for the purpose of disposing of the question presented, that the words quoted did refer to the bill of lading, and were so understood by the plaintiff, I am still of the opinion that the trial court properly dismissed the complaint, and for the reasons given.
Prior to the Carmack Amendment, to which reference ba.s been made, the liability of a common carrier upon bills of lading for interstate commerce, as well as intrastate shipments, was determined by the rules of the common law or statute law of the State in which such liability was sought to be enforced. (Pennsylvania R. R. Co. v. Hughes, 191 U. S. 477; Chicago, Milwaukee, etc., Railway v. Solan, 169 id. 133; Hart v. Pennsylvania R. R. Co., 112 id. 331.) By that amendment) however, Congress not only regulated the issuance of interstate bills of lading, hut also established the carrier's liability thereon. The ' effect of this amendment was clearly stated by Mr. Justice Lurton in Adams Express Company v. Croninger (226 U. S. 491). He said: "That the legislation supersedes all the regulations and policies of a particular State upon the same subject results from its general character. It embraces the subject of the liability of the carrier under a bill of lading which he must issue and limits his power to exempt himself by rule, regulation or contract. Almost every detail of the subject is covered so completely that there can be no rational doubt but that Congress intended to take possession of the subject and supersede all State regulation with reference to it. The duty to issue a bill of lading and the liability thereby assumed are covered in full, and though there is no reference to'the effect upon State regulation, it is evident that Congress intended to adopt a uniform rule and relieve such contracts from the diverse regulation to which they had been theretofore subject. " The bill of lading issued involved interstate commerce, since it related to the shipment of a product from one State to another, and the liability of the defendant had to be determined, as the court held, under the Carmack Amendment. The appellant, however, insists that it did not relate to interstate commerce, since the butter and eggs referred to were never received by the defendant; that the action is not predicated upon a bill of lading involving interstate commerce, but, on the contrary, is to recover damages for fraud and deceit, that is, upon a false representation upon which plaintiff relied and parted with its money; and in support of the contention that the action may be maintained, attention is called to Bank of Batavia v. N. Y., L. E. & W. R. R. Co. (106 N. Y. 195). But that authority does not hold that an action to recover damages for fraud and deceit may be maintained; it is simply to the effect that where a principal has clothed his agent with power to do an act, and a third person dealing with such agent in entire good faith, pursuant to the apparent authority conferred, relies upon the representation, the principal is estopped from denying its truth to the prejudice of the third party. This is quite a different proposition from holding that where an agent issues, contrary to instructions and without the knowledge of his principal, a false bill of lading, the latter may be held on the ground of fraud. Here, Ingham was clothed with authority to issue bills of lading, but by specific instruction " only for or to cover goods actually received for transportation." Nor was he, so far as appears, authorized by defendant to delegate his power to issue bills of lading to another. But, even if it be assumed that he could authorize Krebs to issue a bill of lading, the latter committed a fraud, because the butter and eggs had not been received, and his act did not bind the defendant. Before one can be held liable for a fraudulent act he must in some way be connected with it, and there is nothing in the record to connect the defendant, either directly or inferentially, with Krebs' act in issuing the bill of lading in question. Knowledge of the station agent, Ingham, or Krebs cannot be imputed to the defendant. It is a well-recognized principle of law that knowledge acquired by an agent in the commission of a fraud upon his principal alone, or upon his principal and a third person, does not charge the principal with notice, since the agent is acting adversely to his interests, and it will not be presumed that such knowledge will be communicated to the principal or used for his benefit. (American Surety Co. v. Pauly, 72 Fed. Rep. 470; 170 U. S. 159.)
It is also urged that the court erred in refusing to submit to the jury the question whether defendant did not ratify the act of the agent Krebs in issuing the bill of lading without the goods being received. This contention is based upon the testimony of Krebs to the effect that he was authorized by his superior — Ingham — to issue bills of lading without the receipt of goods, and that this method had been pursued for some time. The testimony of Krebs to the effect that his act was authorized by Ingham seems to me tó be immaterial because a false bill of lading issued by Ingham would have been of no more effect than a false bill of lading issued by Krebs; in other words, Ingham could not authorize or ratify an act of Krebs which he himself could not do.- Nor could proof by Krebs that he and Ingham had been engaged in such fraudulent conduct for a considerable period of time raise a presumption that such fraudulent conduct had been brought to the attention of and ratified by the company itself. The presumption in such case would be that such fraudulent conduct was concealed from the responsible officers of the defendant. A case directly in point is Eccles & Co. v. Louisville & Nashville R. Co. (198 Fed. Rep. 898).
In any view, therefore, it seems to me, for the reasons stated, the complaint was properly dismissed.
It follows that the judgment appealed from should be affirmed, with costs.
Ingraham, P. J., Laughlin, Clarke and Scott, JJ., concurred.
Judgment affirmed, with costs.
Since amd. by 38 U. S. Stat. at Large, 1196, 1197, chap. 176.— [Rep.