Court Opinion

ID: 5247751
Source: CourtListenerOpinion
Date Created: 2022-01-06 18:04:26.227524+00
Date Added: 2024-06-11T08:27:53.586658
License: Public Domain

Scott, J. (dissenting) :
In my opinion the order appealed from worked substantial justice between the parties and should be affirmed, unless there be controlling reasons to the contrary. The result of the transaction as it has turned out is that the defendant, the seller of the leather, has received payment for its merchandise, and has also received back the merchandise itself, leaving the bank, which furnished the funds to pay for the merchandise, out of pocket with no hope for reimbursement except in so far as it can recover from two insolvent debtors.
I agree entirely with my brother Smith that when the bank surrendered the bills of lading to the consignee at Buenos Aires it surrendered its specific lien upon the leather, and if the consignee and acceptor of the drafts had sold the leather in due course of trade to a bona fide purchaser, the bank *172would have had no claim either upon the leather or the purchaser but would have been remitted to its remedies against the acceptor and drawer of the drafts. The very purpose of surrendering the bills of lading to the acceptor when he accepted the drafts, was to enable him to sell the merchandise, and thus, if necessary, put himself in funds to pay the drafts at maturity. But the acceptor never did sell the merchandise, but reshipped it to the consignor, the drawer of the draft, for no new consideration.
This circumstance creates a situation which is not precisely duplicated in any reported case which I have been able to find. It is necessary, therefore, to reason somewhat from analogy with cases not identical. What the bank claims is that, notwithstanding its delivery of the bills of lading to the acceptor, while it surrendered its legal lien and right of possession, it retained an equitable lien, as against the acceptor of the drafts and the makers. As is said in Jones on Liens (2d ed. § 22): “ As between the immediate parties a change of possession may not defeat the lien. It is only between the claimant and third persons that continued possession is essential.” Of course such a lien may be utterly defeated by a bona fide sale of the property, but that is not the question here presented.
When the drafts were discounted or purchased by the bank, the bills of lading were attached to them, and they were so attached when the drafts were presented to the drawee and were accepted. This fact indicated in the clearest possible way both to the bank and to the acceptor that the drafts had been discounted upon the faith of the shipment, and that it was upon the merchandise that the bank relied.
A very similar case in principle is Flour City Nat. Bank v. Garfield (30 Hun, 579). In that case a merchant shipped a cargo of wheat to commission merchants in New York, and the next day drew a draft upon the consignees and procured it to be discounted at a bank upon the representation that the cargo had been shipped to the drawees (as it had) and with an understanding between the drawer and the bank that the draft was drawn against the proceeds of the shipment. The shipping documents were not delivered to the bank,' but were sent direct to the consignees, with a letter stating that the shipper *173had drawn a draft and asking its payment. The next day the shipper, being insolvent, made an assignment for the benefit of his creditors, and the assignee stopped the goods in transit. The drawees of the draft refused to accept or pay it, and the bank claimed to be entitled to possession of the-merchandise, although no title either actual or constructive had been acquired by it, but upon the ground that it had an equitable lien. The court so held upon the ground that the circumstances showed that the draft had been discounted upon the credit of the shipment. Surely the fact that the shipping documents are attached to a draft when discounted and when presented for acceptance is equally clear evidence that the discount is effected upon the credit of the shipment. In the course of its opinion the court uses the following language (p. 585): “ There is an almost unbroken line of judicial expression to the effect that upon a state of facts such as are found by the referee, the purchaser of the draft has an equitable lien upon the property against which the draft is drawn, as a security for the payment of the money advanced, and the same can be enforced in a court of equity, whether the drawee accept the draft or not, and the same attaches from the time of discounting, and continues after the goods reach the consignee, and, if the draft is not paid before, the lien adheres to the funds.derived from the sale of the property.”
The principle upon which the bank claims the merchandise in this case is succinctly stated by the Supreme Court of the United States in Means v. Bank of Randall (146 U. S. 620, 627, 628) as follows: “A bank which makes advances on a bill of lading has a lien to the extent of the advances, on the property in the hands of the consignee, and can recover from him the proceeds of the property consigned, even though the consignor be indebted to the consignee on general account; and the consignee cannot appropriate the property or its proceeds to his own use in payment of a prior debt.” And it is equally clear that he should not be permitted, by returning it to the consignor, to appropriate it to the payment of a prior debt due from him to the consignor.
My conclusion is that the bank clearly discounted the drafts on the credit of the bills of lading; that by surrendering the bills of lading to the consignee on the acceptance of the drafts *174it surrendered its specific legal Hen on the goods, but retained an equitable hen, subject to be defeated by the actual sale of the goods; that since no such sale took place this equitable lien still persisted after the return of the goods to the consignor and that the bank is still entitled to enforce it.
The order appealed from should be affirmed, with ten dollars costs and disbursements.
Clarke, P. J., concurred.
Order reversed, with ten dollars costs and disbursements, and motion denied, with ten dollars costs.