E. G. Rall Grain Co. v. Missouri Pacific Railway Co.

The opinion of the court was delivered by Johnston, C. J.: These are appeals taken in an action begun by The E. G. Rail Grain Company, doing business at Fort Worth, Tex., against The Missouri Pacific ■ Railway Company and The Kemper Grain Company, of Wichita, Kan., to recover $574.55 damages by reason of its reliance upon the recitals of a bill of lading which was alleged to have been carelessly and fraudulently issued by The Missouri Pacific Railway Company at the instance of The Kemper Grain Company. There is no material dispute about the facts and, briefly stated, they appear to be that on November 20, 1912, the railway company issued, at La Crosse, Kan., its shipper’s order bill of lading for a car of wheat to H. S. Fish, showing weight 64,690 pounds, consignee H. S. Fish, Wichita, Kan., with provision to notify The Kemper Grain Company at that point; that the bill of lading was sent to a bank in Wichita with draft attached; that the Kemper company paid the draft and took up the bill of lading; that the Kemper company sold the car to L. H. Harrod, who was doing business as Harrod & Company and also as The — 448 — Harrod Grain Company, so that he might apply it on a contract he had with the Rail company, and on November 23, 1912, before the arrival of the car in Wichita, the Kemper company procured the railway company to sign and issue a bill of lading showing the weight of the car as 110,000 pounds, notwithstanding that when signing this latter bill of lading the clerk of the railway company had before him the original bill of lading showing the weight to be 64,690 pounds; that the Kemper company, knowing the actual weight, collected from Harrod for the car on the basis of 110,000 pounds; that Harrod sold the car to the Rail company, f. o. b. Sherman, Tex., and sent the bill of lading with draft for $1425 attached, which was taken up by the Rail company on November 27, 1912; and that the Rail company sold the wheat to a mill company at Sherman, Tex., where the car arrived on December 2, 1912, which company surrendered the bill of lading on January 8, 1913, and paid the whole freight bill of $203.21 and demurrage charges of $28. It further appears that Harrod disappeared from Wichita about December 24, 1912, and on March 12, 1913, was adjudged an involuntary bankrupt; that on December 27, 1912, the Kemper coxppany requested destination weights of the car of the Rail company and was answered by the Rail company that it would unload the car to the account of the Kemper company;' and that the Kemper company disclaimed any relations with the Rail company. It also appears that the Rail company had notice of a shortage in the car after the draft was paid but before the wheat was unloaded. The Kemper company, in its answer, admitted that Harrod was entitled to a credit of $528.90 because of the overdraft on the car in question, and that it was then indebted to him for a balance of $474.96. Charles A. Baldwin, as trustee for the bankrupt Harrod estate, intervened by cross-petition and counterclaim and prayed judgment against the Kemper company for the $528.90 overdraft on the car and also for the $575.05, — 449 — the amount of the claim against the estate presented by the Rail company. On the trial of the case it was in evidence that all the transactions in connection with the car were according to the usual custom of grain dealers, and also that the bill issued was. “ a clean bill of lading,” which was explained as differing from one bearing the notation “shipper’s load and count,” a phrase which meant that the shipper had weighed the car and the railroad company had not, and E. G. Rail, president of the Rail company, testified that it was because of this fact and that the bill of lading bore the indorsement of the Kemper company that he accepted it. The court found and adjudged that the Rail company should recover against The Missouri Pacific Railway Company the sum of $371.34 but refused any award for the freight paid on the car, amounting to $203.21, and also refused judgment against the Kemper company; that The Missouri Pacific Railway Company should recover against the Kemper company $371.34; that Charles A. Baldwin, trustee, should recover against the Kemper company $103.62 and interest; that the Rail company, The Missouri Pacific Railway Company and the Kemper company should each bear one-third of the costs of the action; and that the judgment rendered should be without prejudice to any right of the Rail company to proceed against Harrod’s estate for $203.21, the freight paid on the car. From this judgment all parties, save Charles A. Baldwin, trustee, appeal and allege error. It is insisted by the Rail company that it should have recovered $203.21, the freight paid, against The Missouri Pacific Railway Company, and also that it should have recovered the full amount against the Kemper company. It is contended by the railway company that the judgment in favor of the Rail company against it was erroneous, and by the Kemper company that the court erred in giving judgment against it in favor of The Missouri Pacific Railway Company and Charles A. — 450 — Baldwin, trustee. . Each company complains of the adverse judgment as to costs. First, as to the complaint of the Rail company that the court erred in refusing it any allowance against the railway company for the freight which it paid upon the car. It was negligence in the railway company to issue a shipper’s order bill of lading representing that the car contained 110,000 pounds of wheat when' it only contained 64,690 pounds. Through the negligence in issuing the false bill of lading the Rail company was induced to pay the sight draft for $1425. Under the customs of trade and the rules of law such a bill of lading is negotiable and the Rail company had a right to rely on the bill as it was executed and negotiated. The railway company became liable to the party to whom the bill was negotiated in the regular course of business for all damages which are the natural and proximate result of the misrepresentation in the bill of lading. There is no occasion to reopen the discussion of a liability on such a bill of lading as it has received full consideration in a number of cases and there is nothing in the notations upon or in the terms of this bill to take it outside of the authorities. (Savings Bank v. A. T. & Santa Fe Rld. Co., 20 Kan. 519; Railway Co. v. Hutchings, 78 Kan. 758, 99 Pac. 230; Hutchings v. Railway Co., 84 Kan. 479, 114 Pac. 1077; Harold v. Railway Co., 93 Kan. 456, 144 Pac. 823.) The freight charge was an incident of the shipment and followed it to destination. The Rail company purchased the wheat f. o. b. Sherman, Tex., and was entitled to have it delivered there free of all charges, including freight. Before the Rail company could obtain the wheat it was compelled to pay the freight charge, and the fact that the demand was excessive was due to the fault of the railway company and the Kemper company. The representation made by them was that the car contained 110,000 pounds, and to get possession of the car and of the wheat contained in it the Rail company was obliged — 451 — to pay $1425 to the bank and $203.21 to The Missouri, Kansas & Texas Railway Company. It is said that the Rail company had notice that there was less wheat in the car than was represented by the bill of lading before the freight was paid, and that therefore it was not warranted in paying or in asking a recovery of the freight. The draft had been paid to the bank long before notice of the shortage was received and the car was held by the carrier’s lien. To avail itself of so much wheat as had been shipped and thus reduce the loss as much as possible it was-necessary for the Rail company to pay the freight charge. If it had refused to accept the car it could, of course, have recovered the full amount paid, but the damage was greatly reduced through the action of the Rail company in accepting the wheat actually shipped and giving a proportionate credit to the parties guilty of the wrong. It is the duty of one inj ured by the fault of another to use reasonable efforts to lessen the resulting damages, and so the Rail company was justified in taking the wheat, which was worth $1053.66, thereby reducing the amount of damage to $574.55, which included the shortage in the wheat and the freight that the Rail company was required to pay in order to get the wheat. (Lumber Co. v. Sutton, 46 Kan. 192, 26 Pac. 444; Frick Co. v. Falk, 50 Kan. 644, 32 Pac. 360; Holly v. City of Neodesha, 88 Kan. 102, 127 Pac. 616; Maddux v. Telegraph Co., 92 Kan. 619, 141 Pac. 585; 37 Cyc. 1757.) The freight item was the proximate result of the negligence of the railway company and it should have been added to the award of $371.34 made against that company, increasing the- amount of recovery to $574.55. There is complaint because judgment was not rendered in favor of the Rail company against the Kem-per company, and also, by the latter, that the railway company was allowed a recovery against it for $371.34; While the Kemper company had no direct relationship — 452 — with the railway company it did contribute towards the issuance of the false bill of lading and became jointly liable for the resulting damages. It represented to the railway company that the car contained 110,000 pounds of wheat when it knew that it contained a less quantity. The Kemper company prepared the false bill of lading, signed its name thereto, and then presented it to the railway company for execution. It knew that a draft would be attached to the bill ánd that the purchaser would be compelled to pay the excessive amount. There is testimony, .too, that the Kemper company raised the amount in the bill of lading because it was suspicious of Harrod, to whom the grain was being shipped, and did not consider him to be strong and reliable. When the bill of lading was raised the Kemper company knew that a sight draft would be issued on the amount stated by it in the bill of lading and that the purchaser would be deceived and suffer loss through the misrepresentation. Even if no benefit had accrued to the Kemper company through the misrepresentation it would nevertheless be held liable for the loss. The president of the Rail company testified that he relied on the indorsement of The Kemper Grain Company, which he regarded to be a responsible dealer. One who makes a representation known to be untrue, and which he has reason to believe will be relied and acted upon by others to their loss, is liable for the loss sustained, although he has no direct interest in the transaction and receives no consideration or benefit from it. (Carpenter v. Wright, 52 Kan. 221, 34 Pac. 798; Hewey v. Fouts, 92 Kan. 268, 140 Pac. 894.) This rule was applied in Stoney Creek Woolen Co. v. Smalley, 111 Mich. 321, 69 N. W. 722, where it was said: “Where one deliberately gives another a false statement in writing, knowing the purpose for which it is to be used, which that other uses to deceive a third party, he is a joint wrong-doer, and must be held responsible for the consequences which follow. Smalley can not defend upon the ground that he received no benefit from the fraud.” (p. 324.) — 453 — (See, also, Skeels v. Porter, [Iowa, 1914] 145 N. W. 832; Weber v. Weber, 47 Mich. 569, 11 N. W. 389; Bishop on Noncontract Law, § 315; 20 Cyc. 71.) The Rail company was therefore entitled to a judgment against The Kemper Grain Company for the full amount of the loss sustained, namely, $574.55, and because of its action in inducing and causing the railway company to issue the false bill of lading and thus incur a liability the railway company is entitled to a judgment for the amount against the Kemper company. The fact that the Rail company, at a later time, presented a claim in the bankruptcy court and endeavored to recoup its loss to some extent from the Harrod estate does not prevent a recovery in this proceeding. As the Rail company is entitled to a full recovery in the action it was also entitled, to a judgment for its costs against the other parties, and the costs of the litigation should be equally divided beween the railway company and the Kemper company. The judgment of the district court will be modified to the extent herein indicated, and to that end the case will be remanded to the district court.