Case Name: The Saugerties Bank, Appellant, v. The Delaware and Hudson Company, Respondent
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1923-01-20
Citations: 204 A.D. 211
Docket Number: 
Parties: The Saugerties Bank, Appellant, v. The Delaware and Hudson Company, Respondent.
Judges: 
Reporter: Appellate Division Reports
Volume: 204
Pages: 211–222

Head Matter:
The Saugerties Bank, Appellant, v. The Delaware and Hudson Company, Respondent.
Third Department,
January 20, 1923.
Bills of lading — action to recover from carrier money loaned shipper on bill of lading altered by it — property shipped on order bill stopped in transit and delivered to shipper without taking up bill of lading — shipper canceled date, inserted new date and borrowed money from bank on bill — alteration was not signed by agent of carrier — bank was chargeable with notice — forgery not proximate result of failure of carrier to take up bill on delivery of goods — carrier not liable.
A carrier of goods is not liable to a bank for money loaned by it to a shipper on an order bill of lading, where it appears that the goods were stopped in transit by the shipper and were delivered by the carrier to the shipper without taking up the original bill of lading; that thereafter the shipper canceled the date in the original bill of lading, inserted a new date, and borrowed money from the bank on the altered bill of lading, and that said alteration was not signed by an agent of the carrier issuing the bill.
The bank was chargeable with notice that the bill had been altered fraudulently and with notice of the provision contained in the bill that the carrier would not be liable except according to the original tenor of the bill where an alteration made was not signed by the agent.
While the carrier was guilty of a crime when it delivered the goods without taking up the original bill of lading and so was negligent, still the forgery was an independent wrong intervening between the negligence of the carrier and the loss of the bank and was not the direct or proximate result of the omission to take up the bill of lading and so, in the absence of any conspiracy between the shipper and the carrier to defraud the bank, the carrier is not liable.
Hasbrouck and Kilby, JJ., dissent, with opinion.
' Appeal by the plaintiff, The Saugerties Bank, from a judgment of the Supreme Court in favor of the defendant entered in the office of the clerk of the county of Albany on the 21st day of September, 1921, upon the decision of the court rendered after a trial before the court without a jury, dismissing the complaint on the merits.
Tracey, Cooper & Townsend [B. Jermain Savage, of counsel], for the appellant.
Lewis E. Carr, for the respondent.

Opinion:
Van Kirk, J.:
The facts are stipulated. The Durant & Elmore Company in 1909 shipped by rail cargoes of grain from Buffalo, N. Y.,. to Portland, Me., and received bills of lading covering the shipments. The Durant & Elmore Company, who were also the consignees, stopped the grain at intermediate points and received the same without surrendering the bills of lading, and these were not canceled. The bills of lading were upon printed forms, with appropriate spaces for dating. The Durant & Elmore Company canceled and obliterated the datings and inserted new datings of April, 1910, but not in the spaces originally left therefor. These bills, so forged, were thereafter presented to the plaintiff, which loaned money thereon. The Durant & Elmore Company failed. There were no shipments of grain covered by these forged bills. The plaintiff has suffered loss and brings this action to recover from the defendant because it failed in its duty to take up the bills when the grain was delivered.
The trial court has not found, and it cannot be found on the stipulated facts, that there was any conspiracy, design or fraud participated in by defendant which in any degree contributed to plaintiff's loss, or that any act of defendant, or for which it is responsible, was willfully done. Were it possible to infer that some agent of defendant was in collusion with the Durant & Elmore Company and with intent to aid in fraud, but without the knowledge of defendant, allowed them to retain the bills of lading when they received the grain, the defendant could not be held liable for any loss suffered by a third party through forgery of the bills and loaning money thereon. (Friedlander v. Texas, etc., Railway Co., 130 U. S. 416.) In that case there is a very interesting discussion of the character of bills of lading and their proper commercial uses. The station agent of the defendant company in that action had issued a bill of lading before the receipt of the goods, and the court held that in so doing he acted outside of his authority and was not the agent of the company in the transaction. " ' The general rule is that the master is answerable for every such wrong of the servant or agent as is committed in the course of the service and for the master's benefit, though no express command or privity of the master be proved.' " (P. 425.) " The law can punish roguery, but cannot always protect a purchaser from loss, and so fraud perpetrated through the device of a false bill of lading may work injury to an innocent party, which cannot be redressed by a change of victim." (P. 426.)
The bill of lading contains a provision as follows: " Any alteration, addition or erasure in this bill of lading which shall be made without an indorsement thereof hereon, signed by the agent of the carrier issuing this bill of lading, shall be without effect, and this bill of lading shall be enforceable according to its original tenor." Webster's International Dictionary defines "tenor" as follows: " Law. An exact copy of a writing, set forth in the words and figures of it. Setting forth a document according to its tenor necessitates giving an exact copy of it, as distinguished from setting it forth according to its purport and effect."- Any alteration is here absolutely forbidden, except it be indorsed over the signature of the agent of the carrier, and any erasure without such indorsement is without effect; the bill of lading is available only as it stood before the alteration. Without the alteration in this case the dates of the bills would certainly have put the bank upon inquiry, or it itself would have been guilty of negligence. Bills of lading can be issued only when the goods are actually received by the carrier, when transportation is about to begin. (Friedlander Case, supra, 424.) The alteration of these bills was plainly discernible. The date spaces were covered by cancellation marks, and the new dating was not in the natural place, and the alteration was not an indorsement signed by the agent of the carrier. The plaintiff was called upon to challenge the bill.
The defendant was guilty of crime when it delivered the goods without taking up the bills of lading, and so was negligent; but there is nothing in the record showing that it had reason to believe that the Durant & Elmore Company contemplated using any spent bills through forgery. The defendant is in no wise connected with the forgery and no inference can be drawn that the railroad company, when it failed to take up the bills of lading, should have anticipated that the consignee would commit a crime in connection therewith, and so wrongfully procure funds. The forgery was an independent wrong intervening between the negligence of the defendant and the loss of the plaintiff. It was not the direct or proximate result of the omission to take up the bills of lading. There are not in this case two proximate causes of damage; given the negligence without the subsequent forgery no loss would have occurred. The plaintiff accepted these spent bills of lading which had been forged, and advanced moneys thereon without detecting the forgery. (Mairs v. Baltimore & Ohio R. R. Co., 175 N. Y. 409.) In that case a non-negotiable bill of lading had been issued, but without the word " non-negotiable " stamped on the face thereof. The cargo was delivered without taking up the bill of lading which the consignor altered by inserting the words " order of and notify," thus making the bill negotiable, and pledged it as collateral. It also appeared that the plaintiff was acquainted with the nature of bills of lading and their commercial uses. The court said: " It is, therefore, apparent that the plaintiff could not have been induced to part with any property or make loans upon this bill of lading had it remained in the form in which it was originally executed. He was induced to take it for the reason that it appeared to be negotiable. He was deceived by reason of the forgery and for this the. defendants were not responsible. The forgery was not the direct or proximate result of the omission to take up the bill of lading, but was the independent and felonious act of another person. For this reason we think the plaintiff cannot recover." Without an inference that there was a conspiracy between the consignor and the defendant, a concerted design to defraud by using these bills of lading when forged, we are unable to distinguish the Mairs case from the case at bar.
It was suggested by one of the counsel on the argument, and was not questioned by his adversary, that the Durant & Elmore Company up to the time of their failure was understood to be composed of business men of character and financial responsibility. This fact suggests a plausible reason why both the plaintiff and the defendant were less careful in their transactions with that firm than they otherwise would have been. This grain was consigned by the Durant & Elmore Company to itself. The destination had been changed. There was nothing suggestive of doubt when the consignee asked from this defendant the grain which it had shipped to itself. The plaintiff bank, knowing the standing of the company, would not suspect that it would present a forged bill as a collateral for a loan. We do not appreciate how any moral responsibility under the facts in this case rests more heavily upon the railroad company than upon the bank. If an individual had suffered because the bank had failed to detect a forgery the responsibility would rest upon the bank. Why should it not be responsible when it itself has suffered?
The judgment dismissing the complaint should be affirmed, with costs.
H. T. Kellogg, Acting P. J., and Hinman, J., concur; Hasbrouck, J., dissents, with an opinion in which Kiley, J., concurs.