Rummell v. Blanchard

• Decision Date: 30 November 1915
• Parties: RUMMELL et al., v. BLANCHARD et al.
• Court: New York Court of Appeals Court of Appeals

216 N.Y. 348

110 N.E. 765

RUMMELL et al.,

v.BLANCHARD et al.

Court of Appeals of New York.

Nov. 30, 1915.

Appeal from Supreme Court, Appellate Division, First Department.

Action by Jacob Rummell and another, trading as J. Rummell & Co., against Archibald Blanchard and others. From an order of the Appellate Division of the Supreme Court, First Department (167 App.Div. 654, 153 N.Y.Supp. 159), affirming an order of the Special Term, sustaining a demurrer to the complainant, plaintiffs appeal by permission. Affirmed.

See, also, 153 N.Y.Supp. 1141.

David Michelsohn, of New York City, for appellants.

Joseph M. Hartfield, of New York City, for respondents.

CARDOZO.

[1] The action is replevin. The plaintiffs sold to George A. Alden & Co., and the New York Shellac Company 200 cases of shellac. At the time of the sale the shellac was stored in a warehouse, and the plaintiffs held warehouse receipts, issued in their name, and negotiable in form. These receipts the plaintiffs indorsed and transferred to the purchasers. This was done on February 13, 1913. On February 14, 1913, one of the purchasers, the New York Shellac Company, tendered the receipts to the warehouseman, and requested that new receipts be issued. This was refused because the charges of the warehouseman were not paid. A few days later both purchasers became bankrupts. The shellac has never been paid for, and the plaintiffs, on learning that the buyers were insolvent, paid the warehouse charges and demanded delivery. This demand was refused; an action of replevin against the warehouseman followed, and thereafter the trustees in bankruptcy of the buyers were substituted as defendants. They have demurred to the complaint, the demurrer has been sustained, and the question whether a cause of action has been stated has been certified to this court.

The plaintiffs insist that the merchandise was never brought into the possession of the purchasers, and hence that they have never lost their lien as vendors for the payment of the price. The effect of the indorsement of warehouse receipts is now prescribed by statute. Where the receipts are negotiable in form, the holder to whom they have been negotiated acquires thereby:

“(a) Such title to the goods as the person negotiating the receipt to him had or had ability to convey to a purchaser in good faith for value, and also such title to the goods as the depositor or person to whose order the goods were to be delivered by the terms of the receipt had or had ability to convey to a purchaser in good faith for value, and (b) the direct obligation of the warehouseman to hold possession of the goods for him according to the terms of the receipt as fully as if the warehouseman had contracted directly with him.” General Business Law (Cons.Laws, ch. 20) § 125.

Where the receipts are not negotiable the holder-

“acquires the right to notify the warehouseman of the transfer to him of such receipt, and thereby to acquire the direct obligation of the warehouseman to hold possession of the goods for him according to the terms of the receipt,” but “prior to the notification of the warehouseman by the transferor or transferee of a nonnegotiable receipt, the title of the transferee to the goods and the right to acquire the obligation of the warehouseman may be defeated by the levy of an attachment or execution upon the goods by a creditor of the transferor, or by a notification to the warehouseman by the transferor or a subsequent purchaser from the transferor of a subsequent sale of the goods by the transferor.” General Business Law, § 126.

In brief, the warehouseman who issues a negotiable receipt agrees in advance to hold the goods for the account of any person to whom the receipt is negotiated, and by the very act of negotiation loses his position as bailee for the vendor, and is transformed, without further assent, into a bailee for the vendee. The warehouseman who issues a nonnegotiable receipt does not become the bailee for the transferee of the receipt until notice of the transfer. From the moment of the negotiation in the case of a negotiable receipt, and from the moment of notice in the case of a nonnegotiable receipt, the holder of the receipt is the bailor, and the warehouseman's possession is for the account of the new owner.

The significance of this statute will become manifest when we consider the law as it stood before the statute was enacted. It was long a mooted question whether the transfer of a warehouse receipt divested a vendor's lien unless the warehouseman had consented to become the bailee for the vendee. Some courts held the view that such a consent was necessary. It might be given in advance, but unless it was given in some form, either before or after the event, the warehouseman, it was thought, remained the bailee of the vendor, and the transfer of the receipt, though effective to change the title, left the possession undisturbed. Williston on Sales, p. 739; Benjamin on Sales (5th Ed.) pp. 216, 846, 853; Farina v. Horn, 16 M. & W. 119; Bentall v. Burn, 3 B. & C. 424; Hallgarten v. Oldham, 135 Mass. 1, 9-11, 46 Am.Rep. 433;Selliger v. Kentucky, 213 U.S. 200, 205, 29 Sup.Ct. 449, 53 L.Ed. 761;Union Trust Co. & S.W. Co. v. Wilson, 198 U.S. 530, 536, 25 Sup.Ct. 766, 49 L.Ed. 1154;Keeler v. Goodwin, 111 Mass. 490. Whether the transfer of bills of lading had any greater effect is a question not before us. It is true that the rule which we have stated has been criticized, see, e.g., Conrad v. Fisher, 37 Mo.App. 352, 367, 8 L.R.A. 147. Indeed, until the enactment of this statute, we may doubt whether it had been fully adopted in this state (Bank of Rochester v. Jones, 4 N.Y. 497, 503, 55 Am.Dec. 290;Willets v. Hatch, 132 N.Y. 451, 44, 30 N.E. 251, 17 L.R.A. 193. See, also, Gibson v. Stevens, 8 How. [U.S.] 384, 399, 12 L.Ed. 1123), but in many jurisdictions it was settled law. The critics of the rule maintained that the transfer of a warehouse receipt ought...