Case Name: William Knight and Others, Copartners, Composing the Firm of Knight & McDougal, Appellants, Respondents, v. The Delaware and Hudson Company, Respondent, Appellant
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1917-06-08
Citations: 178 A.D. 518
Docket Number: 
Parties: William Knight and Others, Copartners, Composing the Firm of Knight & McDougal, Appellants, Respondents, v. The Delaware and Hudson Company, Respondent, Appellant.
Judges: 
Reporter: Appellate Division Reports
Volume: 178
Pages: 518–531

Head Matter:
William Knight and Others, Copartners, Composing the Firm of Knight & McDougal, Appellants, Respondents, v. The Delaware and Hudson Company, Respondent, Appellant.
First Department,
June 8, 1917.
Carriers — conversion — diversion by defendant of carloads of grain on bills of lading for which plaintiffs had made advances — knowledge by plaintiffs as to diversion of merchandise represented by earlier bills of lading.
Where in an action for damages resulting from the diversion by the defendant of certain carloads of grain, the bills of lading for which plaintiffs held and had made advances upon, it appears that the bills of lading actually represent grain received by defendant and in its possession when plaintiffs made the advances, it will be held that the plaintiffs acquired a special property in the grain, and that when defendant permitted it to be diverted into other hands it committed a conversion of plaintiffs’ property which it could justify only by showing actual consent or acqui-. escence on the part of the plaintiffs.
Evidence examined, and held, insufficient to establish such consent or acquiescence.
The fact that plaintiffs had knowledge that merchandise represented by other and earlier bills of lading upon which they had made advances had been diverted without their consent, is insufficient as a defense, although it should have aroused the plaintiffs’ suspic'ons.
Action for damages caused to plaintiffs by reason of having made advances upon bills of lading issued by defendant which did not represent and never had represented any actual merchandise. Held, that the complaint was properly dismissed on the ground that when plaintiffs made the advances they had reason to believe that the statements made in earlier bills of the same description were untrue, and hence their advances were not made in good faith and in reliance upon the bills of lading. 0
Davis, J., and Clarke, P. J., dissented, with opinion.
Cross-appeals by the plaintiffs, William Knight and others, and by the defendant, The Delaware and Hudson Company, from a judgment of the Supreme Court, entered in the office of the clerk of the county of New York on the 18th day of September, 1914,-upon the report of a referee appointed to hear and determine the issues.
Herman Aaron, for the plaintiffs.
Morgan J. O’Brien, for the defendant.

Opinion:
Scott, J.:
The complaint states two causes of action. The first is for damages resulting from the diversion by defendant of certain carloads of grain the bills of lading for which plaintiffs held and had made advances upon. This cause of action rests upon tort. The second cause of action is for damages which plaintiffs suffered by reason of having made advances upon bills of lading issued by defendant which did not represent and never had represented any actual merchandise. This cause of action rests upon estoppel. (Bank of Batavia v. N. Y., L. E. & W. R. R. Co., 106 N. Y. 195.)
As to the second cause of action the referee dismissed the complaint on the ground that when plaintiffs made the advances upon the bills of lading comprised within that cause of action they had reason to believe, and must have known or believed, that the statements made in earlier bills of the same description were untrue, or, at least, had such knowledge or information as to put them upon inquiry as to the genuineness of the bills upon which they were making advances. He, therefore, concluded that such advances were not made in good faith, and in reliance upon the bills of lading, and consequently that plaintiffs were not entitled to the benefit of the rule stated in the Bank of Batavia Case (supra). With this conclusion we all agree.
The only question in the case upon which we are not agreed is as to the first cause of action upon which the referee has awarded judgment to the plaintiffs. The bills of lading upon which that cause of action is based did actually represent grain which had been received by defendant and was actually in its hands when plaintiffs made advances upon them. They thereby acquired a special property in the merchandise, and when defendant permitted this merchandise to be diverted into other hands it committed a conversion of plaintiffs' property. This conversion it could justify only by showing actual consent or acquiescence on the part of plaintiffs and this defense it failed to establish. It may be, as defendant strenuously argues, that plaintiffs had knowledge that merchandise represented by other and earlier bills of lading upon which they had made advances had been diverted without their consent. But such knowledge falls far short of a consent to such diversion of the merchandise represented by the later bills. Of express consent to such diversion there is absolutely no evidence. The most that can be said is that there were certain circumstances relating to earlier transactions which should have aroused plaintiffs' suspicions, and that as prudent men they should have refrained from dealing with bills of lading issued by defendant to Durant & Elmore, from whom plaintiffs received them. To uphold this defense would be equivalent to permitting a tort feasor to escape the consequences of his wrongdoing by pleading that his reputation was so bad that no one was justified in relying upon his representations. This is not the law. We are, therefore, of the opinion that the referee rightly disposed of both causes of action and the judgment is consequently affirmed, with costs.
Page and Smith, JJ., concurred; Clarke, P. J., and Davis, J., dissented.