Hong Kong & Shanghai Banking Corp. v. Cooper

• Decision Date: 04 June 1889
• Parties: HONG KONG & SHANGHAI BANKING CORP. v. COOPER.
• Court: New York Court of Appeals Court of Appeals

114 N.Y. 388

21 N.E. 994

HONG KONG & SHANGHAI BANKING CORP.

v.COOPER.¹

Court of Appeals of New York, Second Division.

June 4, 1889.

Appeal from a judgment of the general term of the supreme court, in the First judicial department, affirming a judgment entered upon the report of a referee.

In 1883 the firm of Martin, Dyce & Co. carried on a mercantile business at Manilla, in the Philippine islands, and the firm of Martin, Turner & Co., composed of the same persons, carried on a banking business at Glasgow, Scotland. In September of that year the defendant, a commission merchant in New York, and the agent of said firms, sold 4,000 bales of hemp, ‘to arrive’ during October and November following, at from 10 3/4 to 10 5/8 cents per pound, payable on arrival of the hemp at New York from Manilla, and at once notified Martin, Dyce & Co. of such sale, which, although made in defendant's name, was intended to be on their account. On October 20th, Martin, Dyce & Co. shipped from Manilla by a vessel, known as the ‘Polynesian,’ 4,000 bales of hemp, deliverable to their order in New York, indorsed the bills of lading received therefor in blank, and delivered them to the plaintiff, a banking corporation, doing business in New York, London, and certin cities in Asia, to secure the payment of five bills of exchange drawn by the Manilla firm upon the Glasgow firm. The bills of lading were made out in the name of Martin, Dyce & Co., or order, or their assigns. At the same time the plaintiff advanced to Martin, Dyce & Co. over 18,700 pounds sterling upon said bills of exchange, which were afterwards accepted by Martin, Turner & Co., and became payable about the 1st of June, 1884. Such advance was made without any knowledge by the plaintiff of said sale by the defendant, and without any expectation thereof or reliance thereupon. December 20th the defendant received notice from Martin, Dyce & Co. that they had shipped the hemp by the Polynesian. On the 22d of January, 1884, Martin, Turner & Co. requested the plaintiff, at London, to forward to its agent at New York the bills of lading for said hemp, ‘to be delivered to the defendant in exchange for his trust receipt.’ They were forwarded accordingly, and were received by said agent on the 3d of February, 1884. It was the intention of Martin, Dyce & Co., when they shipped the hemp, to use it to fulfill the contracts of sale made by the defendant. About February 29th the firms of Martin, Dyce & Co. and Martin, Turner & Co. became, and have ever since remained, insolvent, and they have not paid said bills of exchange, nor the sum of over $20,000, which they owed to the defendant at the date of their failure. On the 5th of March the plaintiff wrote to the defendant, inquiring whether the hemp on the Polynesian had been sold ‘to arrive.’ The defendant, who up to this time did not know of plaintiff's interest in the hemp, answered that it had been so sold for more than 4,000 pounds over its value at that time, and that the contracts had been taken by him in his own name. On the 10th of March the defendant wrote to the plaintiff, rescinding his ‘notice,’ so called, that the hemp had been sold, and stating that ‘the sales of hemp’ were made in his name; that they ‘were intended for account of Martin, Turner & Co.;’ and that his relations with that firm demanded that he should treat the sales as for his own account. The plaintiff made no advance, and incurred no liability, on the faith of defendant's letter stating that he had sold the hemp, nor did it in any way change its position in reliance thereupon. In the mean time the price of hemp had so fallen that similar hemp could have been purchased in the market at New York for $17,950 less than the contract price. Upon the arrival of the Polynesian at New York on the 18th of March, the plaintiff, by virtue of the said bills of lading, took possession of the hemp on board thereof, and shortly afterwards demanded of the defendant that he should deliver that hemp in fulfillment of the said contracts made by him, and pay over the proceeds, after deducting his commissions and expenses, to the plaintiff to the full extent of its advances to Martin, Dyce & Co., upon the transfer and pledge of the bills of lading. The defendant declined to do this, claiming that he had the right to purchase other hemp in the market and deliver it upon his contracts, and to apply the profit of $17,950 in reduction of the amount which his insolvent principals were owing him, even if they had not authorized him to do so. Thereupon, in order that the benefit of the contracts might not be lost by delay, the parties agreed that the defendant should receive the hemp from the plaintiff, deliver it to the purchasers, deposit the amount of the ‘profits,’ fixed at $17,950, with a trust company, and pay over the balance, less commissions and expenses, to the plaintiff, on account of its said advances, leaving it to the courts to decide who was entitled to said fund. The defendant accordingly delivered said hemp to his vendees, and received therefor the sum of $112,514.14, of which he retained $6,471.91 ‘for commissions, marine insurance, and sundry expenses,’ deposited $17,950 with the Union Trust Company, which agreed to allow interest thereon at the rate of 1 1/2 per cent. per annum, and the remainder, $88,090.23, he paid over to the plaintiff. After applying said amount upon the indebtedness of said firms to the plaintiff there was still unpaid $22,352.57. This action was brought to recover the fund so deposited, to procure an adjudication that the defendant is not entitled to any part thereof, and for a judgment against him personally for the net balance received upon the sale of the hemp. The referee before whom the action was tried, after finding the foregoing facts, in substance, also found that the sum of $3,367.35 was paid by the defendant for marine insurance upon the hemp after the plaintiff had made said advance to Martin, Dyce & Co., and had received a transfer of the bills of lading, and that it was not paid by plaintiff's authority. The referee further found that in 1877 an agreement was entered into between Martin, Dyce & Co. and the plaintiff which, after stating that the latter might from time to time purchase from or negotiate for said firm bills of exchange drawn or indorsed by it, with collateral securities, authorized the plaintiff, in case the drawees or acceptors of such bills during the currency thereof should suspend payment or become bankrupt, ‘to sell all or any part of the goods forming collateral securities' at such time and in such manner as the plaintiff should deem fit, to apply the net proceeds in payment of such bills, and the balance, if any, upon any other debt or liability of said firm to said bank; that ‘the transaction relative to the hemp by the Polynesian was had’ under said agreement; and that before said vessel arrived, and prior to defendant's letter of March 5th, the event provided for by said clause had happened. The referee ordered judgment in favor of the plaintiff, and against the defendant, for said sum of $3,367.35 retained by him for marine insurance paid, but awarded the fund of $17,950 on deposit with the Union Trust Company to the defendant. Judgment was subsequently entered upon said report by direction of the supreme court at special term, and the same was upon appeal affirmed by the general term.

A. A. Redfield, for appellant.

John M. Bowers, for respondent.

VANN, J., ( after stating the facts as above.)

The question presented for decision by the written agreement of the parties, as well as by their pleadings, is whether the defendant had the right, as against the plaintiff, ‘to deliver to the purchasers of said hemp under the contracts aforesaid other hemp than that received from Martin, Dyce & Co., or Martin, Turner & Co., from Manilla, to-wit, hemp not received by the said ship Polynesian, but purchased by’ the defendant ‘in the New York market at some time after the said bankruptcy...