Court Opinion

ID: 5440936
Source: CourtListenerOpinion
Date Created: 2022-01-08 18:03:00.850245+00
Date Added: 2024-06-11T08:32:00.185818
License: Public Domain

McKee, J., dissenting:
I dissent. In 1874, the firm of E. E. Morgan’s Sons were commission merchants and factors in San Francisco, engaged in chartering ships, which' they controlled for themselves, for .the purpose of shipping wheat from California to foreign countries, for sale. With these factors, a number of wheat-growers in this State entered into agreements for forwarding their wheat to them, to be shipped by them to Europe and sold for the account of the owners. By the terms of the agreements Morgan’s Sons were to take charge of the wheat, make advances on it to the farmers to an extent not exceeding twenty dollars per ton, inclusive of all necessary advances for shipment and transportation, ship it to Europe and sell it in European markets, and when sold account to the respective owners for the proceeds of sales, less their allowances, rates, commissions and other expenses.
Under this agreement between Morgan’s Sons and the farmers, the former received from the latter, at the port of Vallejo, in this State, during the months of September and October, 1874, a large quantity of wheat including the plaintiff’s wheat, which they shipped from Vallejo, on board ships chartered by them for that purpose, consigned to Rathbone Brothers & Co. and Brown, Jansen & Co., to be sold in the. *425Liverpool market for and on account of the owners of the wheat.
The ships arrived safely at Liverpool; and the cargoes of wheat were delivered, in good order by the masters of the ships, to the consignees by whom the wheat was sold in Liverpool, and they received the proceeds of the sales. But neither they nor Morgan’s Sons returned all the proceeds—less the allowances, rates, compensations, and other expenses according to the agreement between them and the-farmers. On the contrary, the consignees in Liverpool applied the proceeds of the sales of the wheat to the satisfaction of certain bills of exchange, which had been drawn by Morgan’s Sons against the cargoes, and were accepted by the consignees, and the balance, after payment of the expenses attending the sales, they remitted to the Grangers’ Bank of San Francisco for account of the owners of the wheat.
But as the owners failed to receive the proceeds of the . sales of their wheat, they, by their actions, seek to make the defendant liable for the value of the wheat, because of his connection with the transactions between him and Morgan’s Sons, whereby he purchased the bills of exchange, drawn against the wheat, which bills were accepted and paid by the drawees.
The bills of exchange were drawn under the following circumstances: After Morgan’s Sons had contracted with the farmers to take charge of their wheat for shipment, transportation and sale, they, for the purpose of enabling them to charter vessels and carry out their engagements, made an arrangement with Bathbone Brothers & Co., of Liverpool, and Brown, Jansen & Go., of London, to consign the shipments of wheat to them for sale, if they would make advances upon the shipments. For that purpose Bathbone Brothers & Co., and Brown, Jansen & Co., agreed to make advances to them to the extent of one hundred thousand pounds, sterling, according to the terms of two special letters of credit, which were as follows:
" Liverpool, 30th June, 1874.

“Messrs. E. E. Morgans Sons, San Francisco, Cal.

“ Dear Sirs : We hereby authorize your draft upon us at .sixty days’ sight [GO days’ sight], payable in London, against *426shipping documents—namely, invoice bills of lading and policy of insurance for wheat shipped at California or Oregon—at the rate of forty-two shillings and six-pence (42s 6d) for Calfornia wheat, and forty-five shillings (45s) for Oregon wheat, each of fair average quality, and each per quarter of five hundred pounds, cost, freight and insurance; the insurance to be effected with approved offices, and the documents to be sur-. rendered to us against our acceptances. This credit is limited to the amount of one hundred thousand pounds sterling (£100,000), which will be renewed by advice from us of the arrival and sale of cargoes.
“ We hereby agree that all bills drawn by virtue of this credit shall be duly honored when presented at our office at Liverpool, if drawn and negotiated before the thirtieth of June, 1875.
“You will please add to all drafts under this credit, and charge to E. E. M.’s S., as per your L. C., dated June 30,1874.
“We remain, dear sirs, yours faithfully,
[Signed] “ Bathbone Bros. & Co.”
At the time of the transactions, Morgan’s Sons were known to themselves and the public to be insolvent; but, being armed with these letters of credit, the defendant, on the faith of the letters, agreed to purchase the bills of exchange to be drawn according to the terms of the letters; and for that purpose to make advances of money to the insolvent factors, from time to time as their needs might require it, in handling the wheat, which they had contracted to ship and to sell for their principals. Accordingly he did, during the months of August, September and October, 1874, advance various sums of money, for which they gave, at the time of the advances, their promissory notes and deposited with him the mate’s receipts of the wheat as it was received from day to day on board the vessels. When each ship was laden, these receipts were returned to the master of the ship, and he, then, issued a bill of lading for the ship’s cargo to the order of Morgan’s Sons. An invoice was also made of the wheat, and policies of insurance were procured upon the cargo represented by the bill of lading; and with these in hand, Morgan’s Sons had an accounting with the defendant of the ad*427vanees which had been made to them in the shipment of the wheat; and for the sums which had been advanced, bills of exchange were drawn on the European correspondence, according to the letters of credit, payable, on sixty days’ sight, to the order of Morgan’s Sons; these bills of exchange were • then attached to the invoices, policies of insurance and bills of lading, and all of them, being respectively indorsed in blank, were delivered to the defendant, who then returned the promissory notes to their makers. Some of the bills of exchange the defendant sold to bankers in San Francisco; but all of them were transmitted in connection with the invoices, policies of insurance and bills of lading, by him to his agent in London to be presented to the drawees for acceptance.
It is solely from this transaction between the defendant and Morgan’s Sons, that the Court below found that the defendant became a pledgee of the wheat, and that, on refusal to deliver it to the owners, on demand, he was guilty of a conversion ; and it is sought to be established as a principle of commercial law, the purchaser of a bill of exchange drawn against a shipment of wheat by the consignor, upon a letter of credit given to him by the drawee, becomes a pledgee of the wheat, by the receipt of a bill of lading which has been received, in connection with the bill of exchange, to be transmitted, with the exchange, to the drawee against his acceptance according to the terms of his letters of credit, and that, as holder of the bill of lading for that purpose, he is guilty of a conversion of the wheat, in refusing to deliver it on demand, although, in fact, he never received the wheat, never claimed or exercised the right to receive it, and never exercised any dominion or control over it. To such a principle I cannot consent. In my judgment the transaction, as proved, does not sustain the findings of the .Court below, and the decision of the Court is erroneous, and should be reversed.
“A bill of lading,” as has been said by the Supreme Court of the United States, “ is an instrument well known in commercial transactions, and its character and effect have been defined by judicial decisions. In the hands of the holder it is evidence of ownership, special or general, of the property mentioned in it, and of the right to receive the property at *428the place of -delivery. Notwithstanding it is designed to pass from hand to hand with or without indorsement, and is efficacious for its ordinary purposes in the hands of the holder, it is not a negotiable instrument or obligation in the sense that a bill of exchange or promissory note is. Its transfer does not preclude, as in those cases, all inquiry into the transaction in which it originated,” or the purpose for which it may be indorsed or delivered. So where it was made to appear that an indorsed bill of lading was received by one who was the mere agent of the shipper, it was held that the property represented by the bill did not pass to the holder. (Lincker v. Ayeshford, 1 Cal. 75.)
Neither the indorsement nor the delivery of the bill has any effect in passing the property represented by it, except as the result of a contract between the parties for the sale or transfer of the property itself; and such a contract, whatever it be, may be shown by parol, or by circumstances to explain, limit, or extend the operation of the indorsement and delivery. (Gardner v. Howland, 2 Pick. 599.) I therefore agree to the principle enunciated in the prevailing opinion, that a bill of lading represents the property for which it was given, and that the right to the property passes by indorsement and delivery of the bill, when such was the intent with ^uhich the indorsement was made; but that is the pivotal question in the case. The defendant received the bills of lading, but for what purpose? Was it for the purpose of receiving "the wheat at the port of delivery, or for transmission, as agent of the drawer or drawees, to the drawees of the bills of exchange, who had stipulated by their letters of credit for the surrender of the bills of lading against their acceptance of the bills of exchange?
On that question, the transaction, as found by the Court, leaves no room for legal doubt. It is conceded that, so far as the shipment of the wheat was concerned, eveything done up to the putting it on board and the reception of the bills of lading for it, was authorized. It is also conceded that the bills of lading were properly issued, according to law, to the orders of Morgan’s Sons. Now, the indorsements of the bills were not made in pursuance of any contract between them and the defendant to pledge the wheat. They had no autho*429rity, in fact or in law, to pledge it; none in fact, for they~were not authorized to pledge by their principals; none in law, for the law did not allow it; did, in fact, prohibit it (Sec. 2358, C. C.); nor does the transaction evidence an attempt to pledge; for, being clothed with actual and legal authority to ship and sell (Sec. 2388, supra), the consignors delivered the wheat into the possession of the master of the ship, who, as their bailee, received it and delivered it to the consignees, by whom it was, in fact received and sold, under the authority of the owners for their account; so that from the time of the shipment of the wheat until its sale by the consignees, the wheat was in possession of the owners. It never at any time came into the possession of the defendant as pledgee or otherwise.
Mo pledge is valid until the property is delivered to the pledgee (0. 0., § 2988), or is deposited in pursuance of an agreement between the parties with a third person to hold for the pledgee. (§ 2903, supra.) The captains of the ships were not the pledge-holders for the defendant. During the voyages they were the agents of the owners of the cargoes; and the safe arrival of their ships at port, and the delivery of their cargoes to the consignees, exonerated them and the owners of their ships from all liability to any one on account of the cargoes. As, therefore, the wheat was never delivered to the defendant, was never deposited with a third person to hold for him—as he never claimed or exercised the right to receive it, and never interfered with the dominion and control of it, nor with the jus disponendi of the plaintiffs, exercised through their authorized agents, I can not judicially see in the transaction between the defendant and Morgan’s Sons any of the elements of the pledge. Mor does the transaction make the defendant a tort feasor. As I have already said, the defendant did not obtain possession of the wheat, did not assume to exercise any ownership or control over it, did not use the bills of lading or take or claim the property, or to interfere with it in any way, in the possession of the plaintiff or of his consignees. Where one does no act of disturbance of the possession of the property of another or of interference with it, or of assumption of dominion and control over it under pretense of a right, he is not guilty of a trespass or conversion of the property, although *430he may he holder of a bill of sale which represents it; the law does not educe a taking and conversion of property out of non-action; there must be a wrongful act or omission and a consequent invasion of another’s right to constitute a tort.
The defendant did receive the bills of lading attached to the bills of exchange which he had purchased, did transmit them to his agent at London, did through his agent, surrender them to the drawees of the bills of exchange against their acceptance. These were not wrongful acts nor an invasion of the plaintiff’s rights of property in the wheat in the hands of his authorized agents. The reception, transmission and surrender of the bills were made by him, as agent of the drawees of the bills of exchange, according to the terms of the letters of credit. The letters prescribed the mode in which the credit was to be given, the terms on which it was to be given, and the limits of the credit; the mode was the measure of the credit; and the drawees of the bills would not have been bound for their acceptances except by strict compliance with the terms of the letters. (O. C., § 28C6.) The liability of the correspondents could not have been enforced by the defendant, except in the mode which he pursued.
Defendant followed the mode prescribed, surrendered the bills of lading, and his bills of exchange were accepted; he had, therefore, no occasion to take or interfere with the wheat, which was all the time in the possession of the plaintiff; and it is manifest from the findings of facts by the Court, that he did not take nor intermeddle with it, or claim, or assume to exercise dominion pr control over it.
The case of Green v. Meyer, which forms the basis of Justice McKinstry’s concurrence with the prevailing opinion, is one of those imperviable decisions which is not satisfactorily authoritative—the reason for it being still in the breasts of the Judges by whom it was rendered. —■>