Court Opinion

ID: 9809147
Source: CourtListenerOpinion
Date Created: 2023-08-31 21:02:17.901094+00
Date Added: 2024-06-11T12:25:19.984420
License: Public Domain

*512Clark, C. J.,
dissenting: The complaint alleges that the defendant Nelson, in Texas, contracted to sell the plaintiff fifty bales of cotton, of a certain grade and quality, at a certain price, and shipped said fifty bales to plaintiff, taking a bill of lading to deliver same to his own (Nelson’s) order in Charlotte, N. 0. He drew a draft upon plaintiff for the purchase price, payable to defendant Trice, attached the bill of lading thereto, and delivered them for value to said Trice, who endorsed the draft and forwarded it to his correspondent in Charlotte for collection, with instructions not to deliver the bill of lading to plaintiff till the draft was paid. Upon arrival of the cotton the plaintiff was not allowed to examine or inspect the same till the draft was paid. When plaintiff did receive the cotton, and.examined it, he found that it was very inferior to the grade and quality of cotton he had contracted and paid for — so much so that he avers a loss of $1,795.62 — and he brings this action to recover back said ’ sum from Nelson and Trice. The latter demurs to the complaint, on the ground that it states no cause of action against him, and appeals from the judgment overruling the demurrer.
If Nelson had given Trice a simple draft upon the plaintiff, and the latter had paid the same, he could not have ■ recovered anything back. It would have been his own fault. But defendant Trice was not satisfied with a draft. He took an assignment of the bill of lading, taking thus to himself the title and the possession of the cotton.- He did this to secure himself. He would not permit the plaintiff to receive or even examine the cotton till he had paid the draft. He thus in effect represented to the plaintiff that the cotton was as contracted for, and worth, on the basis of the contract, the amount of the draft.
It is a bad rule that will not work both ways. If the as-signee of the bill of lading acquires the title and possession to protect himself against nonpayment of the draft, the *513drawee, who is not given tbe opportunity to examine and reject the cotton, is entitled to recover any sum he pays in excess of the contract price, if there is shortage either in the quantity or quality of the goods. This is fair and just to both sides. It gives the same protection to both. If Trice had permitted the plaintiff to examine the cotton before accepting it, there could have been no complaint. But having compelled the plaintiff to take the cotton “unsight, unseen,” under risk of suit for damages if he refused, there was an. implied representation, in all fairness, that the cotton was such as was contracted for, and for the price of which Trice was‘paid. There should be no unjust advantage given to the payee of a draft over the drawee because the payee has an assignment of the bill of lading. If the seller had brought the cotton into town on his wagon, to deliver in. accordance with a previous contract, he could not require payment until the cotton had been examined and it was ascertained that it came up to the contract, and, had he so exacted, certainly the seller would be liable for the deficiency in quantity and in quality.
AVhen the cotton is sent by railroad instead of by wagon, and instead of the seller the holder of the bill of lading has the title and possession, and refuses to deliver unless payment is made without inspection, the relation and rights of the parties are the same.
Consignees are entitled to a “fair deal” as well as the payees of drafts secured by assignment of bills of lading. The latter has the security of title and possession of the goods. The consignees are entitled to inspection of goods before payment of draft, and if that is refused and they are forced to pay under penalty of sale or reshipment of goods and protest of the draft, then the payee of the draft is bound to make good the quality and quantity .as per the contract for which the draft is drawn.
*514This same point was before this Court and, after able and elaborate argument, was decided ¿s above by a unanimous Court. Finch v. Gregg, 126 N. C., 176. Exactly the same ruling was made in Grocery Co. v, Bank, 144 Ala., 562; Searles v. Grain Co., 80 Miss., 688; Landa v. Lattin, 19 Tex. Civ. App., 246; though the last-named case has since been reversed in Texas.
In Bank v. Bank, 91 U. S., 98, Mr. Justice Strong says: “That the holder of a bill of lading, who has become such by endorsement and by discounting the draft drawn against the consigned property, succeeds to the situation of the shipper is not to be doubted. He has the same right to demand acceptance of the accompanying bill, and no more. If the shipper cannot require acceptance of the draft without surrendering the bill of lading, neither can the holders. Bills of lading that are transferable by endorsement - are only quasi negotiable. The endorsee does not acquire a right to change the agreement between the shipper and his sendee. He cannot impose obligations or deny advantages to the drawee of the bill of exchange drawn against the shipment which were not in the power of the drawer and consignor.”
Bank v. White, 65 Missouri App., 679, was a case-where a manufacturer of lumber and shingles sold and shipped to a dealer a car load of shingles and at the same time drew a draft on the purchaser, with a bill of lading attached, and assigned the same to the plaintiff, the banking company. When the shingles arrived they were found to be of inferior quality, and the purchaser refused to pay the draft. Thereupon the bank sued the purchaser for the entire amount of the draft, and the purchaser interposed his defense. The Court, in supporting the contention of the defendant, says: “We can discover no prejudicial error in the trial of this case, and since, too, substantial justice has been done, the judgment will not be disturbed. Plaintiff’s counsel are right in the contention that when the bank took an assignment of *515the draft and bill of lading' from the lumber company, whether as an absolute purchase or collateral security, it became vested with the title to the property. From that time on, plaintiff occupied the same relation towards the shingles then in transit that the lumber company did before the bill of lading was transferred. The assignment of the bill of lading operated as a symbolical delivery of the property covered by it. However, the rights of the consignee were not impaired or disturbed by the change of the ownership in the property. He was left with the same defense as against the bank that he would have had as against the lumber company.”
In Haas v. Bank, 144 Ala., 562, a shipper consigned goods in his own name, having the bill of lading made out to himself, and assigned the bill, accompanied by draft on the buyer, to a bank to which the draft was made payable, and which paid the seller for the goods. In that case-it was held that the bank became the absolute owner of the goods and of the debt due from the buyer, and, on constructively delivering the goods to the buyer by an assignment of a bill of lading and the acceptance and payment of the draft by the buyer, became liable to him to the same extent as the seller would have been, but for the assignment, for any shortage in the goods. On page 131 the Court said: “In short, the defendant took the contract of the shipper and stood in his shoes, with the same rights — no greater, no less; and the payment of the draft by plaintiffs, who were consignees, which merely evidence the price to be paid for the goods, could no more shield or protect the defendant bank from liability than its payment would have protected the shipper had he undertaken a delivery of the goods and received the purchase; price for them. It would be an anomaly to hold that the defendant is protected as purchaser of the account and bill of lading because the plaintiffs paid the draft, which also belonged to it in right of its ownership of the goods, or that it held the bill of lading for security for a debt which belonged *516to it. Just bow it could be tbe unqualified owner of tbe debt and only a qualified owner of tbe goods, when it purchased both, says tbe court, we confess our inability to see.” In almost identical language is Searles v. Grain Co., 80 Miss., 688, citing and approving Landa v. Lattin, supra; Bank v. White, supra; Finch v. Gregg, supra, and Miller v. Bank, 76 Miss., 84. In tbe Searles case plaintiffs purchased a lot of corn from tbe Smith Grain Company at a fixed price. Only a part of tbe corn 'was shipped, and in order to supply their customers they were compelled to go into tbe market and buy other corn at á higher price. Tbe corn shipped them was defective in quality, whereby they suffered loss. The Smith Grain Company drew on the plaintiffs for the purchase price of the corn in favor of the Exchange National Rank, and said bank paid said draft, and on other dates they bought other corn and suffered losses in the same way. All the drafts vvere drawn on the same bank and paid through the same channels. The Court, citing the cases above named, and approving them, says: “This ease falls within Miller v. Bank, which is in accord with and supported by Landa v. Latlin, supra; Bank v. White and Finch v. Gregg,” and further says: “We specially refer to the reasoning in Landa v. Lattin as thorough and sound. There are cases to the contrary of our views/-’ says the Court, “but they clearly fail to apprehend the true nature of this sort of transaction. The bank buying the draft and bill of lading is bound to comply with all the terms of the contract between seller and buyer. This places it, as to the buyer, in the exact situation in which its assignor stood.” . On page 290 the Court says: “We think the courts which have taken the other view have dealt with half the transaction — not the whole of it. They have looked to the draft — not to the bill of lading. They have failed to give every factor in the transaction its full significance and to look through form to substance.”
*517Assignments of bills of lading are not governed by tbe commercial law. The transferee simply acquires the title of transferer to the goods described in them. Williams v. Railroad, 93 N. C., 42; Haas v. Bank, 144 Ala., 562; Bank v. Hurt, 99 Ala., 130 (19 L. R. A., 701; 42 Am. St., 38); Trust Co. v. Railroad, 99 Ala., 416 (42 Am. St., 75; 4 Am. and Eng. Enc., 2d Ed., 549).
By the assignment of this bill of lading to Trice he became the owner of the property. Dowe v. Bank, 91 U. S., 618; Daniel Neg. Instr., sec. 1734a. By the endorsement of the draft to him he became the owner of the right to receive the purchase money evidenced by the draft.
On arrival of the qotton the plaintiff had the right, if it was short either in quality or quantity, either to refuse it or, if he received it .and was sued for the price, to have set up the loss by reason of such defects. Kesler v. Miller, 119 N. C., 475 ; McKinnon v. Morrison, 104 N. C., 354. In common. justice, the consignee should be allowed to see the goods before paying .or refusing to pay the draft. The rights of Trice, assignee of the bill of lading, are not greater than those of Nelson, assignor. If Trice had sued consignee and drawee for refusal to pay draft and accept goods, he could recover no more than their value on the contract basis. He cannot put himself .on a higher plans by compelling the purchaser to lake them without opportunity of inspection, and thus, having collected more than their contract value, refuse to be liable in an action by the purchaser to recover back the excess sum thus extorted. Finch v. Gregg has been reaffirmed by Sloan v. Railroad, 126 N. C., 489; Manufacturing Co. v. Tierney (Connor, J.), 133 N. C., 636, and has been cited and followed in other States, ut supra.
The bill of. lading is a security to' the holder of the draft attached thereto that he shall receive the'purchase price before he surrenders possession of the property, but it does not protect him from refunding, if by refusal of opportunity to *518inspect be collects tbe full purchase price when tbe goods upon delivery are found to be below tbe contract.
Such cases as this could not possibly occur if tbe consignee was permitted to inspect tbe goods before paying tbe draft. Tbe assignee takes tbe draft and bill of lading, relying' on-drawer and the goods. He should have no more. If there is a defect in quality or quantity, tbe bolder of tbe draft and bill of lading should look to tbe party from whom be bought them to make good, and not, having forced payment out of tbe consignee and drawee by refusing sight of tbe goods, refuse reimbursement. This is not fair.
A bill of lading has not tbe characteristics of negotiable paper, and it should not have. A bill.of lading is not good against the company that issues it, even in favor of a bona fide bolder for value, unless goods of tbe .quality and quantity described therein are actually delivered to it. Williams v. Railroad, 93 N. C., 42. Certainly, therefore, it should not be conclusive against tbe consignee, unless be is afforded an opportunity to examine the shipment as to quantity and quality before accepting or paying a draft attached to tbe bill of lading. Tbe rule should not be more rigid against tbe drawee than the bolder can enforce it against the railroad or other common carrier.
The rule in this State, allowing tbe drawee to inspect goods before accepting tbe draft, thus making tbe drawee liable for no more than the carrier would be -if there was no delivery, i. e., only for goods of tbe quantity and quality actually delivered, was held tbe law in this State nearly ten years ago by one of tbe best and ablest judges on tbe Superior Court bench, 'and on appeal be was affirmed by a unanimous Court. Finch v. Gregg, 126 N. C., 176. It has ever since been recognized as law here. ’ Parties, including those to this action, are presumed to have dealt with each other, relying upon that ruling being tbe law. It has worked no hardship. Its revocation will unquestionably protect tbe vendor and ship*519per in this case in a fraud be has perpetrated, and will deprive consignees of the just protection they have had. Why, then, change it ? For what purpose ?
Finch v. Gregg has not only been held law in this State for many years, and not denied till now, but our decision hás been cited and followed in other States, as above quoted, as well as in our own Court. Finch v. Gregg is a just decision, protecting the consignee here against fraud by vendors in distant States. It has “made for righteousness,” and should stand. If courts in other States, where the interest of deal: ers in mercantile paper is the public policy, have specially favored them by assimilating bills of lading to the rights of negotiable paper, that is no reason why we should abandon our own decisions to follow theirs. We did not abandon our doctrine of mental anguish because the courts in some other States, where the claim of telegraph companies to exemption from liability was more favored, held to the, contrary.
It has been suggested that vendees of goods shipped here can, by special contract in each case secure the right -fo examine the goods before accepting or paying the draft. But why change our decisions to require a special contract ? Besides, such contract, if conceded, by the vendor, would not be put by railroads in the bills of lading, and it could not be put. into the draft without affecting its negotiability; and hence the holder, having no notice, would be exempt, and the opportunity of vendors to commit the same fraud as the vendor in this case, both in the quality and quantity of shipments, will be unrestricted.
There are 380 cotton mills within 100 miles of Charlotte, N. 0., and the number is increasing and will largely increase. The adjacent territory is growing more and more incapable of furnishing a full supply of cotton, and it must be shipped in ever-increasing quantities from distant points. Under the just and honest rule laid down in Finch v. Gregg, and followed for so many years in this and other States, above cited, the assignee of a draft looks to the drawer till ac*520ceptance, and until then tbe bill of lading is good against the vendee only to tbe extent that tbe quality and quantity of tbe goods come up to tbe contract, with tbe necessary corollary that tbe consignee can always examine tbe goods before be assumes unqualified liability by accepting tbe draft. It is a serious matter to affect our great and growing manufacturing interests by cbanging tbe law as we have so held it to be — a law wbicb bas protected tbe consignee, without any possibility of injury to any bonest consignor. Tbe bolder of tbe draft usually receives it “for collection”; but if be buys it he should take it on faith of vendor’s credit, supplemented only by value of goods. Indeed, tbe bolder will be benefited by a rule which forces tbe shipper to send goods of tbe quality and quantity contracted for. Failure to do so will be rare when be knows tbe consignee bas tb'e right -to see them.
Tbe.change will have a wider application than affecting injuriously our great cotton-milling industry. There are many, dealers in North Carolina who buy meats, lard, corn, wheat and flour in tbe Northwest in large, quantities to retail to their customers. These shipments are drawn for, with bills of lading to tbe shipper’s orders attached to tbe draft, wbicb is usually assigned, as in this case, “for collection.” Under tbe law, as we have held it, without detriment, for tbe nearly ten years past, the vendee ran no risk, for be bas till now bad tbe right to examine tbe goods before accepting tbe draft. But if that is now changed, tbe vendee must assume the risk of such frauds as tbe vendor bas perpetrated in this ease, for not only a special contract could not be put into bill of lading or draft, but tbe vendors of these articles, like Armour, Swift and others, will not make such special contracts, well knowing that tbe dealers here must buy of them or not at all.
Our rule bas worked well. It has protected consignees here. It bas not injured any bonest consignor. Tbe revocation of tbe rule will deliver purchasers here into the un-covenanted mercy of distant consignors who cannot be reached by tbe process of our courts.