Opinion ID: 2081309
Heading Depth: 1
Heading Rank: 1

Heading: plaintiff's right to recover

Text: 1. Rock Island claims that plaintiff has been paid in full for the shipment and that as a result plaintiff has suffered no loss on account of the delivery. The claim of payment is premised on a ledger account kept by plaintiff which Rock Island contends conclusively establishes that on February 2, 1953, about a year after the shipment involved was delivered, plaintiff actually owed Freshmaster $48.06. Hence, Rock Island argues, whatever losses plaintiff sustained occurred as a result of dealings by plaintiff with Freshmaster after the ledger account had come into balance. The fallacy of this argument lies in the assumption that the ledger account reflects the entire dealings of the parties. The evidence does not require such a finding, which is essential to the contentions of Rock Island. The evidence shows that a ledger account was kept by plaintiff in which Freshmaster was charged with freezers as they were shipped out. It included only those goods invoiced to Freshmaster. In addition to the goods actually charged to Freshmaster, other charges were made which were not shown by the ledger. As part of the whole deal, an arrangement existed between the parties under which parts and replacements of freezers, defective or otherwise, were shipped to Freshmaster or its customers on Freshmaster's order. These parts were carried on memoranda accounts and were not shown on the ledger. Freshmaster was given credit for defective parts as they were returned. When they were not returned, Freshmaster was charged according to an established price list. In addition to such transactions, Freshmaster was indebted to plaintiff for work and material on freezers in the process of manufacture. The contract between plaintiff and Freshmaster was for the manufacture of 7,200 freezers  not only those invoiced to Freshmaster, which are all that are shown on the ledger account. The evidence would sustain a finding that, at the time the ledger account shows a balance in favor of Freshmaster, Freshmaster was indebted to plaintiff in a sum in excess of $14,000 for work and material on processed accounts and in excess of $13,000 on memo parts accounts. At no time was Freshmaster paid up in full on the entire transaction. It is obvious that, if the sight draft involved here had been paid, the ledger account would have shown a credit balance in favor of Freshmaster on February 2, 1953, in a sum equal to the balance of $48.06, which actually appears, plus the amount of the sight draft here involved, which was some over $11,000. But it does not follow that Freshmaster would have been entitled to demand payment to it of such credit balance without first taking into consideration other charges due plaintiff. The uncontradicted testimony of Robert L. Hascall, credit manager for plaintiff, with respect to the accumulated balances in the bank account was:    the account as such, when I talk about the account as Freshmaster, the sight draft procedure as outlined was set up to give us accumulated cash balances so we could off-set any possible loss. Toward the end of their dealings and after February 2, 1953, plaintiff shipped 5 carloads of freezers to Freshmaster on trade acceptances. These trade acceptances aggregated $62,361.98 and constituted nothing more than promises to pay in the future. It is the contention of Rock Island that plaintiff's loss was due to its decision to ship on trade acceptances rather than on order bills of lading with sight draft attached and not to a failure of the carriers to insist on payment of the sight draft involved here before delivery of the shipment. While on first blush there seems to be merit to this contention if the entire agreement of the parties can be broken up into segments so that each shipment is considered an entire transaction in itself, the argument is untenable when we view the entire dealings of the parties. The evidence establishes that at no time did Freshmaster owe plaintiff less than the amount of this shipment if we view the contract as an entire one. It must follow that the ledger account standing alone is not conclusive. Payment is an affirmative defense. The burden rests on the one asserting payment to establish it. The evidence here sustains the finding that plaintiff was not paid for the carload of freezers. 2. Rock Island next contends that the doctrine of application of payment establishes its defense of payment. It argues that, inasmuch as there has been no specific application by the parties, the first payment in should be credited by the court on the first charges on the account and that, when this is done, the shipment involved has been discharged. Here, again, Rock Island's argument is premised on the proposition that the ledger account reflects the entire dealings of the parties. Inasmuch as we have come to the conclusion that the ledger account was not conclusive, there is no merit to this contention. The doctrine of application of payments has no application to the dealings of the parties when the payments are viewed in their entirety. Plaintiff was entitled to be paid the amount of this sight draft and to accumulate the balance in the bank account to be applied on any indebtedness of Freshmaster that arose out of the performance of the entire agreement. In view of that situation, it matters little how payments were applied as long as Freshmaster was indebted to plaintiff in an amount in excess of the amount of the sight draft that should have been collected before delivery of this shipment. 3. Rock Island next contends that there is no liability because the goods actually were delivered to the rightful owner. This shipment, being in interstate commerce, is governed by the Federal Bills of Lading Act, 39 Stat. 538, 49 USCA, § 81, et seq. On the face of the bill of lading the goods were shipped by Freshmaster as consignor to itself as consignee, notify Clinton Builders Supply. [1] At the beginning of the transaction, representatives of the carriers were informed that, while the goods would be shipped in the name of Freshmaster as consignor, plaintiff actually was the shipper. 4. An order bill of lading is a negotiable instrument. A shipment thereunder may not be safely delivered to the consignee by the carrier without procuring surrender of the bill of lading in the absence of an agreement by the parties to the contrary. [2] While the goods may have been delivered to the party designated by the consignor as the one entitled to receive it, the holder of the bill of lading cannot be ignored by such delivery. Plaintiff at all times was the holder of the bill of lading. The carrier clearly is liable to such holder for delivery without procuring surrender of the bill of lading, in the absence of an agreement of the parties to the contrary or such conduct on their part as would justify such delivery. [3] Rock Island relies mainly on Banik v. Chicago, M. & St. P. Ry. Co. 147 Minn. 175, 179 N.W. 899. While it is not clear to us just what Rock Island's contention is in this respect, it would seem that it claims that, when goods are delivered to a carrier by a seller for transportation to a buyer under an order bill of lading, title passes to the buyer under our Uniform Sales Act and the carrier thereafter may deliver the goods to the buyer without procuring surrender of the order bill of lading. To so hold would be to destroy the value of an order bill of lading. It would be contrary to the Federal Bills of Lading Act as well as our own act. The Banik case does not so hold. Any decision must be read in the light of the facts upon which it is based. The facts in the Banik case are easily distinguishable from those now before us. In that case plaintiff was indebted to H. & B. Co. but was unable to pay the debt in money. He agreed to pay the debt instead by delivery of hoop steel, which was to be sold and the proceeds applied to payment of the debt. Accordingly, H. & B. Co. mailed an order for a quantity of hoops to be shipped f.o.b. Minneapolis at a stated price upon a bill of lading in which it should be named both as consignor and consignee. Plaintiff accepted the order unconditionally, and the hoops were delivered by plaintiff to the defendant carrier for transportation to Milwaukee. Instead of a bill of lading in which H. & B. Co. was named as consignor and consignee, plaintiff received an order bill of lading in which he was named as consignee with a direction to notify H. & B. Co. When the shipment reached Milwaukee, defendant notified H. & B. Co. and, at its direction, delivered the hoops to Schlitz Brewing Company but failed to obtain a surrender or cancellation of the bill of lading. Plaintiff attached the bill of lading to a draft drawn upon H. & B. Co. and sent it through a bank for collection, but, before presentation was made, defendant had delivered the hoops to Schlitz Brewing Company. H. & B. Co. refused to honor the draft, whereupon plaintiff made a demand upon defendant and brought action to recover the value of the hoops. The trial court found that the order of H. & B. Co. and the unconditional acceptance thereof by plaintiff amounted to a sale of the hoops and that their delivery to defendant was a delivery to H. & B. Co. so that title vested in it. No settled case was submitted to this court, and we held that in view thereof this finding could not be questioned and that the presumption arising from the form of the bill of lading was destroyed by this finding. The conclusions of law of the trial court were that there was a contract of sale of the hoops between plaintiff and H. & B. Co.; that the delivery to defendant for transportation to Milwaukee was a delivery to H. & B. Co.; that the title and right of possession then vested in it; and that defendant had delivered the hoops to Schlitz Brewing Company pursuant to the directions of the true owner. We recognized the effect of an order bill of lading throughout the opinion but held that, under the peculiar facts of that case, H. & B. Co. became the absolute owner of the property when it was delivered to the carrier in compliance with the order of H. & B. Co. based upon its agreement with plaintiff to deliver such hoops to it in payment of an existing debt. While there is some language in the opinion which, if taken out of context, might support the position now taken by Rock Island, the decision is not authority for the proposition now advanced when read in connection with the facts upon which it is based. The same is true of City Nat. Bank v. El Paso & N.E.R. Co. 262 U.S. 695, 43 S. Ct. 640, 67 L. ed. 1184. The decision in that case is based largely upon the system of dealing that had developed between the parties over a period of time. We see no necessity of pointing to the distinction between that opinion and the case now before us. [4] 5. Finally on this issue, Rock Island claims that, even assuming a misdelivery by the carrier, the subsequent conduct of plaintiff amounts to a ratification of the delivery. We see no merit to this contention. From the time that plaintiff first learned that the goods had been delivered without payment of the draft attached to the order bill of lading, it did what it could to collect the amount both from the delivering carrier and Freshmaster. It is true that plaintiff did continue to do business with Freshmaster, delivering to it several carloads of freezers on trade acceptances, but at no time did it relinquish its right to be paid for the shipment involved in this litigation.