Court Opinion

ID: 3587050
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:36:43.329836+00
Date Added: 2024-06-11T07:41:53.345851
License: Public Domain

The plaintiff sues as assignee of one P.M. De Leon, for the benefit of creditors, and seeks *Page 356 
to recover from the defendants damages for the non-delivery by them of 1,000 tons of super-phosphates mentioned in the following instruments, viz., an order in these words:
"BALTIMORE, December 7, 1881.
"Messrs. READ  Co., 34 Beaver street, N.Y.
"GENTLEMEN. — Please deliver to P.M. De Leon one thousand tons of ammoniated super-phosphates sold to us, and oblige,
                                 "Very respectfully, "R.W.L. RASIN  CO.,"
which was drawn by Rasin  Co., and accepted by the defendants under the name of Read  Co., by writing across the face of the paper "accepted," and signing the same by their firm name, and so accepted was delivered to Rasin  Co. with the following memorandum:
"To Messrs. R.W.L. RASIN  Co., Baltimore, Md.
"From READ  Co.,
"34 Beaver street, New York, December 10, 1881.
"DEAR SIRS. — We will deliver to Mr. Perry M. De Leon on your order dated Dec. 7th, accepted by us to-day, one cargo, say 500 tons to vessel, to begin loading about the 19th December, and the remainder of the 1,000 tons to a vessel to load the latter part of December or early in January, 1882, vessels to be furnished by Mr. De Leon.
"READ  Co."
On the same day (December tenth), Rasin  Co. delivered both papers to De Leon, who, as the jury have found, received them, and upon the faith and credit induced thereby, paid to Rasin 
Co., the sum of $24,450. The defendants subsequently, and before the time fixed for delivery, gave to De Leon notice in writing that they would not execute the accepted order or fulfill the contract. The defendants set up by answer, and also upon the trial, that they received no consideration for the acceptance and agreement, and were induced to execute the same by certain false representations made to them by Rasin  Co., and, in substance, that De Leon as *Page 357 
privy thereto, colluded and conspired with Rasin  Co. to make a colorable and apparently bona fide transfer of the writings for the purpose of cheating the defendants. The jury found against these allegations.
It appeared that, in fact, Rasin  Co. were insolvent and had not paid Read  Co. for the goods. The defendants upon the trial claimed a right to retain them, and concerning that the learned trial judge charged the jury: "If you believe that Mr. Read thought, when that paper was signed by him for the purpose of being delivered to Mr. De Leon, that it would lead Mr. De Leon to the opinion that he was to have the ownership of these goods on the day mentioned in that paper, in the letter for the delivery of them, and that that possession was not to be interfered with by any claim on the part of Messrs. Read for their vendor's lien, why, then, gentlemen, you will say so by your verdict. If you believe that that paper was meant to convey the effect on Mr. De Leon's mind that he was to have the possession of the articles in question free from the vendor's lien, and that Messrs. Read, in signing that paper, intended to convey that fact upon De Leon's mind, you will find a verdict for the plaintiff. If, on the other hand, you believe that Messrs. Read, in signing that paper, intended to reserve their vendor's lien, and had no intention whatever to convey any other idea to Mr. De Leon, then, gentlemen, you will find for the defense."
The verdict in plaintiff's favor, therefore, established that the intention of Read  Co. was to give assurance to De Leon that he was to have the goods free from any claim on their part. The General Term sustained the recovery, and we are brought to the inquiry whether any error of law was committed by the trial judge which requires a new trial. But as the appeal has been put in a great degree upon the relations between Read  Co. and De Leon and Rasin  Co. in respect to the property in question, a statement concerning the facts on which those relations depend, will be necessary. All the parties were dealers in fertilizers, and Read  Co. and Rasin  Co. were also manufacturers. On the 17th of September, *Page 358 
1881, an agreement was made between De Leon and Rasin  Co., by which in December, 1881, and January, 1882, Rasin  Co. were to supply De Leon with 2,000 tons of fertilizers at twenty-four dollars per ton, and he was to pay therefor by notes maturing from November 1 to December 15, 1882, without interest. De Leon undertook to supply the article to other parties, and Rasin 
Co., having delivered only 300 tons, were repeatedly urged by De Leon to complete delivery so as to enable him to fill his orders. Read  Co. had had dealings with Rasin  Co., and about this time solicited further orders, and an agreement in writing was made between Read  Co. and Rasin  Co., of which the following is a copy:
"ATLANTA, Ga., December 7, 1881.
"We have to-day sold to Messrs. R.W.L. Rasin  Co., of Baltimore, Md, one thousand tons ammoniated super-phosphates at twenty-four ($24) dollars per ton (2,000 lbs.), on a cash basis, goods to be delivered free on board buyer's vessels, and by us in bulk. We guarantee the analysis of goods to be not less than 2 per cent of ammonia, and not less than 8 per cent of available phosphoric acid, sampling and analysis of each shipment to be made by A.R.D. Dane  Co., of New York, or by Prof. White of Georgia. Settlements are to be made on delivery to buyers of bills of lading, by their notes, with 6 per cent interest added. For the convenience of sellers, buyers agree to make their notes at four months, with the understanding that they are to be renewed, so as to mature finally not later than December 10th and December 20th, 1882, say one-half each date. Shipment to be made as early as possible during this month.
"READ  CO., of New York.
"We accept the above.
"R.W.L. RASIN  CO., Baltimore, Md.
"Messrs. Read  Co. have the option of furnishing an additional one thousand tons on above terms within twenty days from this date." *Page 359 
The evidence tended to show that this agreement was made by Rasin  Co., because of the non-completion of their new factory and consequent inability to keep their agreement with De Leon, who was "pressing them for a delivery," and that Read  Co., before their acceptance of the order making the memorandum above set out, were notified of this difficulty and of the desire of Rasin  Co., to give De Leon their goods in order to fulfill the contract. On the same day (December 10, 1881), Read  Co. billed the goods to Rasin  Co. at twenty-four dollars per ton, with interest to December 15, 1882, amounting to $25,428, and credited Rasin  Co. with their notes then given, ten in number, each for $2,542.80, maturing at different times and in all amounting to the same sum of $25,428.
In my opinion the record shows two mutual and independent contracts, for the breach of either of which an action would lie. There was one contract between Rasin  Co. and Read  Co., and another contract between Read  Co. and De Leon. The first is of no importance to the parties in this action if the second is valid, and if by it De Leon was induced to advance money to Rasin Co., upon the belief that Read  Co. intended to become bound according to its terms. The right thus created could not be put an end to by annulling the contract between Rasin  Co. and Read Co. The reasoning of the court in Briggs v. Sizer (30 N.Y. 647), is to the effect that it is not necessary there should be a consideration moving from the payee to the drawee of such an order as the one now before us, to support an acceptance; that as in the case of a bill of exchange the consideration for the acceptance moves between the drawer and drawee, and not between the holder and acceptor, and the whole argument of the learned judge writing in that case, goes to show that after acceptance of an order for merchandise, a privity is established between the payee and acceptor, which makes the latter liable at the suit of the payee. In that case, however, there was no actual acceptance, but only facts from which it was sought in vain to infer an acceptance, and the court say, there being no *Page 360 
acceptance, the action must fail. The order or draft in that case was for merchandise; it was similar in form to that at bar, and it is plain the conclusion of the court as to the effect of an acceptance, had one been made, would be decisive in favor of the plaintiff here. But as there was in fact no acceptance, it is argued by the appellants that the reasoning is uncalled for by the circumstances, and the opinion obiter, and so not decisive in any other case. The observations of the court were not meredicta, but the main part of an argument expressive of a deliberate and carefully considered opinion. It is, therefore, entitled to weight, and the principle upon which it stands, is applicable to the case at bar.
As most favorable to the appellants, let us assume that there was no consideration between Read  Co. and Rasin  Co., i.e.,
between drawer and drawee, and that Read  Co. accepted without consideration, simply for the accommodation of Rasin  Co., or even that the acceptance was procured by representations of Rasin Co., which were in fact false, but not known to be so by either Read  Co. or De Leon. In such a case, until actually delivered to De Leon, the acceptance might have been withdrawn or revoked, and so it might have been even after delivery to De Leon and until, without notice, he had made advances on the strength of it, or in some other way changed his position; for until that event, he was not a party to the contract. But the moment he, relying on this acceptance, paid Rasin  Co. for the goods, he became a holder for value of the acceptance and a party to the contract. For such payment indicated his assent to the obligation, and the promise of Read  Co., which was before a mere naked promise, became clothed with a consideration and a new debt was contracted in his favor.
A point is made by the appellant that "by the delivery of the order and memorandum the property in the goods did not pass to De Leon." These papers, the learned counsel argues, "are notindicia or documents of title, nor quasi negotiable." If I am right in the view already expressed as to the effect of the acceptance by Read  Co. and the payment *Page 361 
of money by De Leon, the question raised by the appellants' proposition as to the effect of a mere delivery order is quite irrelevant and constitutes no legal excuse for the non-delivery of the goods. It may be conceded that if De Leon were to be regarded merely as an assignee, although for value, of a bill of lading or a delivery order, or a warehouse receipt, his right to recover would depend upon the title or right of his assignor, and thus be subject to any defense which might exist against Rasin 
Co. The appellants cite authorities to that effect; among them and as applicable as any others are Collins v. Ralli (20 Hun, 246, and 85 N.Y. 637); Hentz v. Miller (94 N.Y. 64);Farmeloe v. Bain (L.R., 1 C.P. Div. 445); Imperial Bank v.London  St. Katharine Docks Company (L.R., 5 Ch. Div. 195, 200). But to what effect are the authorities? In Collins v.Ralli there was a very able and instructive opinion, which, upon appeal, was adopted by this court (85 N.Y. 637) and afterwards cited with approval (94 N.Y. 64). Omitting matters not now material, it went upon these circumstances: One Cutter, by fraud, induced the plaintiff to sell certain bales of cotton to mills which he assumed to represent, and deliver to him a bill of sale running to the mills. In like manner he procured a delivery order upon the warehousemen who had the cotton in store, and there he marked the cotton with the address of the mills. He next stored the cotten in another warehouse, taking receipts in his own name and afterwards in the name of his brokers. The marks were then removed from the bales, and the defendants bought the cotton in good faith for value and shipped it to Liverpool. The plaintiffs sued them for the value of the cotton, and recovered upon the ground that Cutter was guilty of larceny in fraudulently obtaining the custody of the cotton and converting it to his own use; and as the plaintiff had never conferred upon him the apparent title thereto, or any authority to dispose thereof, the plaintiff was not estopped from reclaiming it from the defendants.
The case turned upon the propositions that the fraud of Cutter was equivalent to larceny, and the absence of an indicia *Page 362 
of title conferred on him by the plaintiff. The learned court, applying the doctrine of McNeil v. Tenth National Bank
(46 N.Y. 325, 329), added: "If plaintiff clothed Cutter  Co. with apparent title or power to sell, or did anything out of the usual course of business calculated to, and which actually did, mislead the defendants in respect to the ownership or right of sale of the cotton, it would clearly be inequitable to permit the plaintiff to recover therefor from the defendants, who had parted with their money on the faith and credit of the appearances so created by him, the principle of estoppel would apply." And, referring to the defendants' claim that this was affected by the delivery orders, say: "These orders were the means adopted to put Cutter in temporary possession of the cotton so that it might be shipped to his assumed principals," adding, they "worked no harm to any one. They were not seen by defendants, or any person representing them, and their existence even was unknown to them," so that, even if the delivery order indicated title, it would furnish no support to their claim of estoppel. But it was also held that such an order related only to the possession, and that its purpose was served when it was delivered to the warehouseman, and he obeyed it; and the elementary rule that bare possession is not sufficient to enable one to convey title was applied. But the distinction between such a case and that of a person procuring the sale of goods by reason of false pretenses was adhered to. The learned court referred to the fact that in the case then in hand there was no sale, no purchase, and so the title remained in the plaintiff, and no doubt was entertained that if by fraudulent contrivance a person induced the sale and delivery of goods to himself, he could convey a good title to a bona fide purchaser for value, so long as the original owner had not exercised his right to revoke the sale and reclaim his goods. Hentz v.Miller (supra) goes no farther and holds that, so far as the real owner has allowed another to have the appearance of ownership, he is estopped from setting up his own right. The other cases cited only show that a delivery order, or other similar instrument, gives the *Page 363 
assignee no greater right of action than the assignor had, although by its terms it runs to the promisee or his assignee. They show that such a document is not a negotiable security, and clearly it is not. In Farmeloe v. Bain (supra), for instance, the plaintiff took as indorsee an instrument made by the defendant to Burrs  Co., in these words: "We hereby undertake to deliver to your order indorsed hereon, twenty-five tons merchantable sheet zinc, off your contract of this date." On the strength of this paper, indorsed by Burrs  Co. to the plaintiff, they accepted bills drawn by Burrs  Co. It was held that the giving of this undertaking did not estop the defendants from setting up against the plaintiff their right, as unpaid vendors, to withhold delivery, and that Burrs  Co. were not at liberty to transfer to their vendees a property in the zinc which they themselves did not possess. The plaintiff contended that the undertaking was a representation that the zinc belonged to Burrs Co. free from any lien, and sought to apply the doctrine of equitable estoppel, but failed, because it stated no fact, and left the indorsee or assignee to recover, if at all, on the case of his assignor. So in Imperial Bank v. London and St.Katharine Docks Company (supra), the plaintiff claimed by indorsement under a delivery order, and the defendant justified in substance under the title of a vendor's lien for unpaid purchase-money of the goods in question, and succeeded, the court holding that so long as the vendor was in possession "as vendor and in no other character," and was unpaid, he could maintain his lien as vendor, notwithstanding he had given a delivery order. Therefore, it may well be as the appellant contends, settled law, that the indorsement and transfer of a dock warrant or warehouse certificate, or other like document of title, by a vendor to a vendee, will not divest the vendor's lien. The present case is not governed by such doctrine. We have here a very different thing. A contract or promise from the vendor directly with and to the plaintiff, not resting on representation or assignment, but upon novation — a new debt or undertaking *Page 364 
in place of the old. Nothing is transferred from the assignor to the assignee; the debt due the original vendor is extinguished and a new one created by the acceptance. Read  Co., from the moment of acceptance, became bound as bailees to De Leon, at first contingently upon the payment by him on the faith of the acceptance, and upon that payment absolutely. They no longer held the character of vendor only, but were acceptors, and by assuming that character an end was as effectually put to the vendor's lien as if there had been an actual delivery of the goods to the vendee, or they being in a common store, the warehouseman had on the seller's order transferred them on his book to the purchaser. In either case there is, in legal effect, an actual change of custody. In the case of a mere assignment of a warehouse receipt, or an assignment of a delivery order, it has been held that neither amounts to a constructive delivery of the goods covered by it, but where the warehouseman is notified of the assignment, and agrees to hold the goods for the assignee, such effect is to be given to it. (Wilkes v. Ferris, 5 Johns. Rep. 335;Briggs v. Sizer, supra; Addison on Contracts, 959.) This author sums up the doctrine by saying: "If the goods have been resold, and the second purchaser has received from his immediate vendor, the first purchaser, a delivery order addressed to the original vendor, which has been accepted by him, the original vendor cannot, after he has thus attorned to such second purchaser, refuse to deliver the goods to such second purchaser, pursuant to his acceptance, although the first purchaser to whom he sold became bankrupt before delivery, and before payment of the price, and the goods were not weighed or measured over prior to the bankruptcy of the first purchaser."
In the case before us the transaction implies a title in De Leon, and the receipt not only acknowledges that, but contains an express promise to deliver the property to him. The transmutation of title is, therefore, as complete as if produced by the attornment of a warehouseman or dock-master to the holder of a dock warrant or delivery order. *Page 365 
More in point to the case actually before us, and in contrast with those cited by the appellants, is Armour v. MichiganCentral Railroad Co. (65 N.Y. 111). The action was upon two bills of lading or carrier's receipts, issued in the name of the defendant by its agent. The defense was (1) that they were issued by him without authority, he being authorized to bind the company only for goods actually shipped, and there were none; (2) that he was induced to issue them by fraud practiced by one Michaels. The facts were that Michaels presented to the defendants' agent a receipt purporting to be signed by one S., a warehouseman, for 200 packages of lard in store for account of Michaels, "and subject to the return of the receipt properly indorsed." This was delivered to the defendant's agent, accompanied by the order of Michaels for 100 packages, and afterwards a similar order for 100 other packages, and in each instance the defendant, by its agent, executed and delivered to Michaels a carrier's receipt acknowledging the receipt from him of one hundred packages of lard consigned to the plaintiffs at New York, and to be there delivered to them. The defendant, at the time the receipts were given, was informed by Michaels that he intended using the same at bank the same day. He did so by drawing on the plaintiffs for $3,600 in each case, and attaching to the respective drafts one of the bills of lading. The bank discounted the drafts and forwarded the same to New York for collection. They were paid by the plaintiffs on the faith of the defendant's receipts, and the lard not being delivered they sued the defendant. They recovered before the referee for three packages, but were defeated as to one hundred and ninety-seven of them for reasons which are not involved here. At General Term the decision of the referee was affirmed, but upon appeal the judgment was reversed upon grounds showing that in the opinion of the Commission of Appeals they were entitled to a full recovery upon both receipts. One commissioner stated that the principle that a party, who, by his admissions, has induced a third party to act in a particular manner, is not permitted to deny the truth of his admission if the consequence *Page 366 
would be to work an injury to such third person, applied to and governed the case; in substance, saying that the defendant having been the cause of the advances made by the plaintiffs, must be held to have intended what was in fact the legitimate consequences of its own misstatements. The commissioners call attention to the fact that the bills or carrier's receipts run directly to the plaintiffs, that they were not assignees of bills made to Michaels, but that the contract to deliver the lard was made directly with them, and distinguish the case from one where title is made by assignment and the assignee takes only the right and place of the assignor, adding "the fact that a bill of lading is not negotiable has nothing to do with the question." That point would have been open for discussion if the bills had been issued to Michaels and then assigned to the plaintiffs. As it was, the representation having been made direct to the plaintiffs, their right of action is not derived through Michaels, but rests upon the direct relations between itself and the plaintiffs.
These positions in every aspect support the respondent here and are warranted, it is believed, by a line of well-settled decisions, and, among others, by McNeil v. Tenth NationalBank (supra); Moore v. Metropolitan National Bank (55 N.Y. 41), and Voorhis v. Olmstead (66 id. 113). Another strong case in the plaintiff's favor, and much in point, is Knights v.Wiffen (L.R., 5 Q.B. 660). There M. bought barley from B., and, without paying for or receiving the same, sold it to D., gave an order on B. for its delivery and received payment. D.'s agent showed the order to M., who said it was all right and when a note for forwarding was received he would ship the barley. M. became bankrupt, and the defendant, setting up a vendor's lien, refused to deliver the barley. D. sued B. for the barley. The court held him estopped, because if he had refused assent to the order, peradventure D. might have received the money paid M., at least he had altered his position by abstaining from the attempt. This case is cited and followed under somewhat similar circumstances by this court in Voorhis v. Olmstead (supra). The present is much *Page 367 
stronger for the plaintiff because here the plaintiff actually paid his money on the strength of the acceptance, and not in expectation of it, and in this respect also the defendants knew the plaintiff would act upon it. In Knights v. Wiffen
(supra), the defendant was his own warehouseman, as was the defendant in the case before us.
The appellants argue that the contract between Read  Co. and Rasin  Co. was executory. I find nothing in the writing to warrant that contention. It purports to be, not an agreement to sell, but an actual sale; not an agreement to manufacture and deliver, but a sale as of existing property, to be delivered at a time fixed, and payment was in fact made by Rasin  Co. by notes executed and delivered to Read  Co., and accepted by them in settlement before the acceptance of the order in favor of Read 
Co. was given. Nothing more remained to be done by Rasin  Co., nothing by Read  Co. save to make delivery. But however that may be, and whatever construction should be given to that contract, there is no ambiguity or doubt as to that between Read  Co. and De Leon. There is nothing in it to suggest to De Leon the existence of any incident or circumstance which makes the obligation of Read  Co. less than absolute, or the interest of Rasin  Co. in the goods other than that of a purchaser having a perfect and complete title. The order calls for goods "sold" to the drawer. The acceptance is an agreement to deliver those goods. There is no reference to a contract to sell, or to any executory, or incomplete or unexecuted contract, but to a perfected result. The order and acceptance is a representation in effect that Rasin  Co. are the owners of the goods then held by Read  Co. But it is said upon evidence outside the writing that the goods were in fact to be manufactured, that Read  Co. had indeed the ingredients but had not compounded them. The cases ofGriswold v. Haven (25 N.Y. 595), Knights v. Wiffen andArmour v. Railroad Company (supra), show that this is no answer. The reply may be given in the language of BLACKBURN, J., in the former case, "that when one *Page 368 
states a thing to another with a view to the other altering his position, or knowing that as a reasonable man he will alter his position, then the person to whom the statement is made is entitled to hold the other bound, and the matter is regulated by the state of facts imported by the statement." So are the other cases and such is the general doctrine (2 Smith's Law Cases, [7th Am. ed.], 668.) The verdict of the jury establishes not only that such was the effect of the defendant's statement to De Leon, but that such effect was looked for and intended by them when making it. (Farmeloe v. Bain (supra), much relied on by the appellants and already referred to is in no degree in opposition to the plaintiff's case, but stands on a different theory. There the plaintiff claimed as assignee, stood in the place of the original vendee, and took by virtue only of his contract and with notice, and by the language of the agreement he might be deemed put upon inquiry as to the nature and terms of the contract, in fulfillment of which the defendant made his promise.
Upon the subject of damages, the learned trial judge charged that if the plaintiff recovered he would be entitled to the value of the property at the time fixed for delivery, with interest from that time. A general exception was taken by defendants, but no suggestion made as to any other measure of damages. We find no error. As owner of the goods, De Leon was entitled to them or to their value. In no other way could he be made good, and the plaintiff, as assignee, stands in his place. The other questions raised have been considered, but disclose no errors affecting the case.
The judgment should be affirmed.
RAPALLO, EARL and FINCH, JJ., concur with PECKHAM, J.; RUGER, Ch. J., and ANDREWS, J., concur with DANFORTH, J.
Judgment reversed. *Page 369