C.E. White & Co. v. Century Savings Bank of Des Moines, Iowa

• Decision Date: 04 January 1916
• Docket Number: 2227.
• Citation: 229 F. 975
• Parties: C. E. WHITE & CO. v. CENTURY SAVINGS BANK OF DES MOINES, IOWA.
• Court: U.S. Court of Appeals — Seventh Circuit

229 F. 975

C. E. WHITE & CO. v. CENTURY SAVINGS BANK OF DES MOINES, IOWA.

No. 2227.

United States Court of Appeals, Seventh Circuit.

January 4, 1916

Dan McGlynn, of East St. Louis, Ill., for plaintiff in error.

Edward C. Kramer, Rudolph J. Kramer, and Bruce Campbell, all of East St. Louis, Ill., and W. C. Marshall and W. W. Henderson, both of St. Louis, Mo., for defendant in error.

Before BAKER, KOHLSAAT, and MACK, Circuit Judges.

BAKER Circuit Judge.

This is an action in trover, instituted by defendant in error, a bank at Des Moines, Iowa, against White & Co., a commission house at East St. Louis, Ill. Judgment for the bank was entered upon a directed verdict.

To sustain the charge of a tortious appropriation of the bank's chattels, the following proofs were made: On June 22, 1908, Hough was a stock buyer at Des Moines and was the owner and in possession of 319 hogs. He took them that day to the Wabash Railroad, which loaded them into cars and issued to him a bill of lading for their transportation from 'Shipper L. R. Hough,' at Des Moines, to 'Consignee C. E. White & Co.,' at East St. Louis. Hough on the same day took the bill of lading to the bank indorsed it in blank, and signed a demand draft on White &amp Co. in favor of the bank for $3,900. On delivery of this draft and bill of lading the bank paid Hough the face value less lawful discount. From prior similar, but separate and independent, transactions the bank knew that Hough was a stock buyer who was accustomed to retain ownership of his shipments and to place them in the hands of White & Co. and other factors to be sold on commission. In taking the draft and bill of lading now in question the bank relied on the facts being, as they were, that Hough was the owner of the 319 hogs, and that White & Co. had no title to them, and no interest except to sell them on commission. In the evening of the same day the bank deposited the draft with the bill of lading attached in the mail; but, instead of forwarding them directly to a bank at East St. Louis, it sent them to its correspondent bank at Kansas City, with which it had an arrangement for avoiding collection charges. So the draft and bill of lading did not reach East St. Louis and were not presented to White & Co. until June 25th. In the meantime, on the morning of June 23d, the hogs arrived in East St. Louis and were delivered by the railroad to White & Co. Prior to this time White & Co. had continuing authority and instructions from Hough to receive his hogs and sell them promptly on commission. During the day of June 23d White &amp Co. sold the hogs. Hough never directly revoked his instructions. If his transfer of the bill of lading to the bank was an indirect revocation, White & Co. had no knowledge thereof until two days after they had parted with possession of the hogs.

Do these facts sustain the judgment in tort?

Ordinarily a factor must rely upon his principal's honesty or financial responsibility to protect him in dealing with chattels placed in his hands by the principal. No matter what innocence and good faith may characterize the factor's acts, he is liable in tort to the true owner or lienor against whom the principal's act of placing the chattels with the factor is a tort. This liability, however, is limited to cases in which there were defects in the principal's right of possession when he turned the chattels over to the factor.

If the principal has in fact good title and right of possession when he delivers the chattels to the factor to sell, the factor's possession is lawful, and his authority to sell continues until he has notice of revocation. In Jones v. Hodgkins, 61 Me. 480, for example, McLaine, principal, owner of logs, put them in possession of Hodgkins, factor, with authority to sell. McLaine in March sold the logs to Jones, but neither McLaine nor Jones did anything towards transference of possession. In April Hodgkins, without knowledge of his principal's sale to Jones, sold and delivered the logs to an innocent purchaser. Held, that Jones' action in trover against Hodgkins was not sustainable on these facts. But the principle there declared does not solve the present problem. There no bill of lading as representative of the chattels was involved, and the factor was in actual possession under perfect authority before and at the time his principal transferred title to a third party. Here the hogs were in the actual possession of the carrier under a bill of lading hereinbefore described, Hough had transferred his interest as owner to the bank as collateral security, and the indorsed bill of lading was in the hands of the bank, before White & Co. came into actual possession.

Nor is an answer found in any of the following classes of cases:

1. Where, as in Reed v. Racine Boat Co., 156 Iowa, 12, 137 N.W. 458, there is an 'order' or 'bearer' bill of lading, requiring production and surrender of the bill before the carrier can lawfully surrender possession, in which cases the carrier and the innocent factor may severally be liable. For here the bill of lading is not of that kind.

2. Where, as in Taylor v. Turner, 87 Ill. 296, there is a 'straight' bill of lading to a named consignee other than the shipper, under which the carrier may lawfully deliver possession to the consignee without the production and surrender of the bill of lading, and where the indorsee or holder of the bill of lading has in fact consented to the sale by the factor consignee. For here the bank did not in fact consent to the sale by White & Co. If the bank's consent is found, it must be as a matter of law, contrary to the bank's actual intent.

3. Where, as in Means v. Bank of Randall, 146 U.S. 620 13 Sup.Ct. 186, 36 L.Ed. 1107, there is a 'straight' bill of lading to a factor as consignee, and the factor, while still in possession and control of the chattels, has actual notice of his principal's prior sale of the chattels and transference of the bill of lading to a third party. For here there is in fact no question of White & Co.'s ignorance of the bank's interest and of...