McLeod v. Fourth Nat. Bank of St. Louis

Treat, J., (charging jury.) There seems to be no dispute as to many of the facts in this case. The cotton in question went forward to the plaintiffs under the bill of lading and hypothecation, on which the plaintiffs had a right to rely. It also appears that the statements as to weights contained in the bill of lading were false, whereby a loss to the plaintiffs occurred, as stated in the petition. Who is responsible therefor? Unquestionably, Norvell, Canfield & Co. But is the defendant liable? It seems that the defendant had advanced on cotton notes pledged to it a sum of money, and intrusted the cotton notes to the pledgeor for the purpose of forwarding the same. The same were forwarded with the bill of lading and hypothe-cation, whereby the plaintiffs, as acceptors of the bill, received the same in the faith that said bill of lading was a true statement .as to weight, etc. There seems to be no doubt that the plaintiffs, relying on the bill of lading, accepted the draft accompanying the same, and consequently had a right to trust to the correctness as to the weight which they indicated. That there was a fraud perpetrated the jury will probably have no difficulty in determining. But who is responsible therefor? There is no doubt where the ultimate responsibility rests. In this case it is to be determined whether there is an intermediate liability, to-wit, the connection of the defendant with the fraud perpetrated. If the defendant knew of the fraud, to-wit, the short weights, and with the intent to secure to itself payment of indebtedness by Norvell, Canfield & Co., caused said bill of lading, together with the bill of exchange connected therewith, the proceeds of which it was to receive,' to be forwarded, then the defendant is responsible for the loss incurred; otherwise not. The proposition seems to be narrowed down to this inquiry: Did the defendant know that the weights were false on the shipment; and if so, did itf assent thereto with the intent to defraud the plaintiffs as acceptors or drawers of the bill ? "Whatever the cashier of the defendant bank did the defendant is liable for. Hence, the inquiry may be directed to the ascertainment of his knowledge and intent, and also the knowledge and intent of any other officer of the defendant. Did the defendant through its cashier or any other officer, know that there were false weights sent forward in the bill of lading, and assent to the forwarding of such false weights with the intent of defrauding the parties plaintiff ? Is there any testimony of any such fraudulent knowledge or intent upon the part of the defendant ? There is no testimony showing that there was any such fraudulent intent on the [229] pari of the defendant. Therefore your verdict will be for the defendant. The jury found a verdict for the defendant. Thereupon the plaintiffs filed a motion for a new trial, which, having been duly considered^ was overruled. Liability for Frauds Perpetrated by Meahs of False or Forged Bums of LADING. Several questions are involved in the principal case, and among others, the question of whether or not a principal is liable for a fraud perpetrated for Ms benefit by his agent, in the course of 1ns service, but without his express command or privity, where he has enjoyed its fruits? That question lias been answered in the affirmative by high authorities.1 It will not be discussed, however, in this note, which will be devoted to a presentation of the English and American cases in which frauds have been perpetrated by means of false or forged bills of lading. In deciding stfch eases the courts have frequently been called upon to define the nature of bills of lading. The following definition was given by Mr. Justice Miller, in delivering the opinion of the court in Pollard v. Vinton:2 “A bill of lading is an instrument of a twofold character. It is at once a receipt and a contract. In the former character it is an acknowledgment of the receipt of property on board his vessel by the owner of the vessel. In the latter it is a contract to carry safely and deliver. ” It has frequently been contended that bills of lading are negotiable, like bills of exchange, but it is now well settled that they aro not. “The indorsement of a bill of lading, under the most liberal decisions made anywhere, is no more than an assignment of the shipper’s obligation, and of the property called for by the bill. It involves no promise on the part of the indorser to do anything towards forwarding the property to its destination. If the instrument is fictitious, or if there is any fraud practiced in transferring it, any remedy that the transferee would be entitled to would be for that special wrong, and not by importing into the indorsement a promise to perform what the carrier has agreed to do.” 3 And it has been held that the rule as toa bona fide purchaser of a lost bill of exchange, indorsed in blank payable to bearer, has no application to the case of a lost bill of lading.4 Of all the eases in the English and American reports, the one most closely resembling the principal case is March v. First Nat. Bank of Mobile.5 In that case the defendant had discounted a draft with a bill of lading attached, and had discovered afterwards, but before the draft was presented for acceptance, that the property described in the bill of lading was claimed by the factors who had sold it to Iho shipper, and that the bill of lading was probably not security of any value in its hands, and had, immediately after making the discovery, hurried up the presentation for acceptance, and the drawee had accepted the draft upon the faith of the bill of lading, which he supposed good security. The defendant had then immediately transferred the draft, without recourse, to a bona fide holder for valuó without notice. The action was by the acceptor for tho amount of the bill. In delivering the opinion of the co urt, affirming a judgment for the plaintiff, D avis, P. J„ said: “Doubtless, if a bill of exchange had been sent alone, and accepted by plaintiffs, they would have [230] had no redress against the defendant, however well the failure of the hill of lading as security might have been Imown to them. The defendants were under no obligations to make any disclosures of facts to the plaintiffs to prevent their acceptance of the bill, but they were under obligation to do nothing and say nothing, with knowledge of the real facts, which would operate to secure an acceptance by an expression of falsehood or a suppression of truth. Knowing that the bill of lading was of no value, the defendants had no right to induce the acceptance of the bill of exchange, by presenting the bill of lading as one of value, concealing their knowledge of its true character.” But though it is a fraud for a party, who has notice that a bill of lading attached to a bill of exchange is valueless or of less value than it purports to be, to induce the drawee to accept, by presenting the bill of exchange for acceptance with the bill of lading attached, and without explanation, yet the fact that a bill of exchange has been accepted on the faith of a forged bill of lading is no defense in an action by a bonaftde holder for value and without notice.1 And where a bill of exchange, with a forged bill of lading attached, is presented for acceptance by, and afterwards paid to, a party who has no notice of any defect in the bill of lading, the acceptor cannot recover his money back again.2 So where a bank is requested by a customer to accept the draft of a third person, if accompanied by a bill of lading, and accepts a draft with a forged bill of lading attached, the customer will have to bear the loss.3 Suits AgaiNSt CommoN Carriers. The majority of the cases of this kind have been against common carriers who have issued bills of lading receipting for merchandise in good condition, when in bad condition, or for property never received at all. It is well settled that where the master of a vessel issues a false bill of lading, and money is advanced upon the faith of it, or it is transferred for value to a party having no notice of its falsity, the master himself is estopped from contradicting its recitals, as against the party who has made the advances, or to whom it has been assigned.4 And where the owner of a vessel issues a false bill of lading the doctrine of estoppel is equally applicable.5 There is some conflict of authority, however, in this country as to whether or not a principal is liable for false statements in a bill of lading issued without his knowledge by an agent. In England it seems that he is not, as a general rule, though it was held in the case of Howard v. Tucker6 (1831) that a ship-owner is estopped, as against a bona fide holder for value of a bill of lading issued by the master of his vessel, from contradicting the statement therein that freight has been paid by the consignor. The leading English case is Grant v. Norway,7 (1851,) which was an action on the case by the indorsees of a bill of lading, against the owner of a vessel, to recover the amount of advances made by the former upon the bills of lading, the goods never having, in fact, been shipped. The court held that the master of a ship signing a bill of lading for goods which have never been shipped cannot be considered as the agent of the owner in that behalf, inasmuch as a general authority to sign bills of lading only extends to eases where actual shipments are made, and that a party taking,a bill of lading, either originally or by indorsement, for goods which have never been put on board, is bound, in order to hold the ship-owner liable, to show some particular 'authority given to the master to sign it, and that, as no such au [231] thority was shown in that caso, the plaintiff could not recover. In Hubersty v. Ward,1 (1853,) which was an action in trover for wheat by the indorsees of a bill of lading therefor, the court of exchequer placed its decision upon the same ground. The, same doctrine was applied, in Coleman v. Riches,2 (1855,) to a case where the agent of a wharfinger had fraudulently given a receipt for goods which liad noi; been delivered to him. And in Brown v. P. D. S. C. Co.,3 (1875,) it was applied in a case where the master had receipted for more coal than he had received. In America, Grant v. Norway has been followed in Lousiana,4 Maryland,5 Massachusetts,6 Missouri,7 and the federal courts;8 but the doctrine of that case has boon rejected in New York,9 Kansas,10 and Nebraska.11 The Massachusetts and Missouri cases are cases of shortage. Lehman v. Cent. R. & B. Co. is a case in which the bill of lading in question was written by the shipper in such a way that it was easy to raise it, and was signed by the defendant’s agent in that form, and afterwards raised by the shipper and transferred for value. In the other cases cited, which follow Grant v. Norway, the bills of lading were issued without any goods having boon received. In Pennsylvania,12 and the district court for the Southern district of New York,13 it has been held that carriers are estopped as against indorsees for value, and parties who have advanced money upon the faith of bills of lading issued by their agents, from contradicting the statement therein, that the goods receipted for were received in good condition. Put whore, though the bill of lading contains a statement in writing as to the condition14 or weight15 or nature16 of the property receipted for, it nevertheless stales, in print or otherwise, that the condition or weight or nature, as the case may bo, is unknown, then the statement, if as to condition, must bo understood as referring to the external condition; and if the statement is as to weight or nature, it should bo taken as a statement of what the shipper has represented it to be. Tiie cases referred to, in which the doctrine of Grant v. Norway has been rejected, hold that though a general authority to issue bills of lading gives no power to issue them for goods not received, yet if an agent having power to issue bills of lading for goods delivered to him for transportation issues a bill of lading for goods which have not been delivered, and an innocent third party purchases it, or advances money upon the faith of it, in the regular and ordinary course of business, then the carrier should be held liable for the loss sustained through the negligence or fraud of its agent, and should be estopped from contradicting the receipt of the goods, upon the principle that “whore one of two innocent persons must suffer by reason of the fraud or misconduct of a third, he by whose act, omission, or negligence such third party was enabled to consummate the fraud ought to bear the loss.” That principle seems to have been recognized in Howard v. Tucker, supra, but to have been entirely overlooked in Grant v. Norway and the cases following it. St. Louis, Mo. BbNjamin F. Rex. Mackay v. Com. Bank of New Brunswick, 5 Priv. Council, (Eng.) 394; Mitchell V. Donahey, 17, N. W. Rep. 641. 105 U. S. 7. Opinion of Campbell, J., in Maybee v. Tregent, 47 Mich. 495; S. C. 11 N W. Rep. 287. Shaw v. Railroad Co. 101 U. S 557 4 Hun, (N. Y.) 466. Robinson v. Reynolds, 2 Adol. & E. (Eng.) 634; Kelly v. Lynch, 22 Cal. 661; Thiedemann v. Goldschmidt, 1 De Gex, F. & J. (Eng.) 4. Leather v. Simpson, 40 L. J. Eq. 177; S. C. 11 Eq. 398. Woods v. Thiedemann, 1 Hurl. & C. (Eng.) 478. Valieri v. Boyland, 12 Jur. 566; Relyra v. N. H. R. M. Co. 42 Conn. 579; Bradstreet v. Heron, 2 Blatchf. 116. Relyra v. N. H. R. M. Co. 42 Conn. 579; Schooner Freeman v. Buckingham, 18 How. 182. Barn. & Adol. 712. 10 C. B. 664. 18 Eng. Law & Eq. 551. 29 Eng. Law & Eq. 325. 10 C. P. 562. Hunt v. M. C. R. Co. 29 La. Ann. 446. B. & O. R. Co. v. Wilkins, 44 Md. 11. Sears v. Wingate, 3 Allen, 103. Nat. Bank v. Lavielle, 52 Mo. 580. Schooner Freeman v. Buckingham, 18 How. 182; Vandewater v. Mills, 60 U. S. 90; Pollard v. Vinton, 105 U. S. 7; The Loon, 7 Blalchf. 244; The Joseph Grant, 1 Biss. 193; Lehman v. Cent. R., etc., Co. 12 Fed. Rep. 595; Robinson v. M. & C. R. R. Co. 9 Fed. Rep. 129. Dickerson v. Seelye, 12 Barb. 99; Armour v. Railroad Co. 65 N. Y. 111. Wichita Savings Bank v. A., T. & S. F. R. Co. 20 Kan. 519. S. C. & P. R. Co. v. First Nat. Nank, 10 Neb. 556; S. C. 7 N. W. Rep. 311. Warden v. Green, 6 Watts, 424. Bradstreet v. Heron, 1 Abb. Adm. 206. Clock v. Barnwell, 53 U. S. 272. Ismaele, 14 Fed. Rep. 491; Jessei v. Bath, 2 Exch. 267. Miller v. H. & St. Jo. R. Co. 90 N. Y. 430.