Canal-Commercial Trust & Savings Bank v. New Orleans, T. & M. Ry. Co.

• Decision Date: 28 June 1926
• Docket Number: No 26794,26794
• Citation: 109 So. 834,161 La. 1051
• Parties: CANAL-COMMERCIAL TRUST & SAVINGS BANK v. NEW ORLEANS, T. & M. RY. CO
• Court: Louisiana Supreme Court

109 So. 834

161 La. 1051

CANAL-COMMERCIAL TRUST & SAVINGS BANK v. NEW ORLEANS, T. & M. RY. CO

No 26794

Supreme Court of Louisiana

June 28, 1926

Rehearing Denied October 5, 1926

Appeal from Civil District Court, Parish of Orleans; Wm. H. Byrnes Judge.

Action by the Canal-Commercial Trust & Savings Bank against the New Orleans, Texas & Mexico Railway Company, in which the International Trading & Rice Company was called in warranty to defend the suit. Judgment for plaintiff, and defendant and warrantor appeal.

Affirmed.

George Janvier, Monroe & Lemann, and Walter J. Suthon, Jr., all of New Orleans, for appellants New Orleans, T. & M. Railway Co. and International Trading & Rice Corporation, Inc.

Dart &amp Dart, of New Orleans, for appellee.

OPINION

O'NIELL, C. J.

The question in this case is whether a pledgee of a negotiable bill of lading, pledged as collateral security for a loan, annuls the pledge and loses his lien on the goods if he returns the bill of lading to the pledgor, temporarily, on a trust receipt.

The facts of the case are not disputed. The International Trading & Rice Corporation sold to Bishop C. Perkins Company, through a broker, in New Orleans, a carload of sugar, being 600 pockets of 100 pounds each, at $ 7.90 per 100 pounds, less 2 per cent. 10-days discount. The American Sugar Refining Company shipped the sugar, on the order and for account of the International Corporation, from Three Oaks (near New Orleans), La., to Houston, Tex., and issued and delivered to Bishop C. Perkins, for Bishop C. Perkins Co., a negotiable bill of lading for the shipment, "consigned to order of Bishop C. Perkins Company, Houston, Tex. * * * Notify Central Warehouse & Forwarding Co. at Houston, Tex." On the same day Bishop C. Perkins, for his company, borrowed from the Canal-Commercial Trust & Savings Bank, in New Orleans, $ 4,700, on a promissory note, and pledged and delivered the bill of lading, indorsed in blank by Bishop C. Perkins Company per Bishop C. Perkins, to the bank as collateral security for the loan. Immediately afterwards the bank returned the bill of lading to Bishop C. Perkins, taking a trust receipt for the bill of lading, in order that he might handle the shipment, either by selling the sugar and accounting to the bank for the price, or by storing the sugar in a warehouse and delivering the warehouse receipt to the bank. On the same day Perkins wrote to the Central Warehouse & Forwarding Company, at Houston, that the bill of lading would be sent direct to the Central Warehouse & Forwarding Company, and he instructed the company to store the sugar in the company's warehouse and issue a negotiable warehouse receipt for the same and to deliver the receipt to the Lumbermen's National Bank with instructions to notify the Whitney Central National Bank of New Orleans that the warehouse receipt was held for the latter's order. On the next day Perkins sent the bill of lading by registered mail to the Central Warehouse & Forwarding Company, but it appears that it was not delivered until three or four days later. There is no explanation as to why Perkins instructed the Central Warehouse & Distributing Company to have the warehouse & Distributing Company to have the warehouse receipt held in the Houston bank subject to the order of the Whitney Central National Bank, instead of having it held subject to the order of the Canal- Commercial Trust & Savings Bank; but the probability is that that was an honest mistake on Perkins' part, because, on the same day that he mailed the bill of lading to the Central Warehouse & Forwarding Company, he wired the company to send the warehouse receipt for the sugar to him instead of placing it in the bank at Houston.

Four days after the pledge of the bill of lading to the bank and its return to Perkins on the trust receipt, it developed that Bishop C. Perkins Company was insolvent; and the manager of the International Trading & Rice Company called upon Perkins, in New Orleans, and demanded that he pay for the sugar or surrender the bill of lading. As Perkins could neither pay the invoice nor produce the bill of lading, the International Trading & Rice Company, as seller of the sugar, notified the railroad company to stop the shipment in transit because of the insolvency of Bishop C. Perkins Company and because of the right of the shipper to rescind the sale for nonpayment of the price. On the next day the shipment arrived in Houston, and on the same day the Central Warehouse & Forwarding Company received the bill of lading by registered mail from Perkins. The railway company refused to deliver the shipment to the Central Warehouse & Forwarding Company on the company's offer to surrender the bill of lading, but delivered it to the International Trading & Rice Company on the company's furnishing an indemnity bond, with satisfactory surety, to protect the railway company "against any claim that might arise from the stoppage of said shipment in transit by the seller or for nondelivery in accordance with the original bill of lading issued on said shipment," etc.

In the meantime, as soon as it had become known that Bishop C. Perkins Company was in financial difficulties, the Canal-Commercial Trust & Savings bank had demanded of Perkins, in New Orleans, that he return the bill of lading or pay the note which it was pledged to secure. Perkins had been informed of the stoppage of the shipment in transit and had wired the Central Warehouse & Forwarding Company to return the bill of lading to him, and on the same day that the bank demanded its return he received it by mail from the Central Warehouse & Forwarding Company and immediately returned it to the bank and took back his trust receipt. That was on the seventh or eighth day after he had pledged the bill of lading to the bank and had retaken it on the trust receipt. The bill of lading was in Perkins' possession, or in the possession of the Central Warehouse & Forwarding Company for him, when the shipment was stopped in transit and delivered to the seller, the International Trading & Rice Company, on the indemnity bond.

The Canal-Commercial Trust & Savings Bank, having regained possession of the bill of lading from Perkins, made demand on the railway company for the shipment or its value. The reply being that the shipment had been stopped in transit and delivered to the seller on the latter's indemnity bond, the bank brought this suit against the railway company for $ 4,800, as the value of the sugar, with legal interest from the day when the shipment arrived in Houston, and for $ 50 statutory damages allowed by the Act 29 of 1908. The railway company defended on the ground that the bill of lading was in the possession of the consignee, Bishop C. Perkins Company, and therefore not pledged to the bank, when the shipment was stopped in transit and delivered to the seller. The railway company called the International Trading & Rice Company in warranty to defend the suit, and the latter pleaded that the return of the bill of lading by the pledgee, bank, to the pledgor, Bishop C. Perkins Company, on the latter's trust receipt, had the effect of annulling the pledge, and that therefore the bank had no claim upon the sugar when it was stopped in transit and taken by the seller for nonpayment of the price and because of the insolvency of the consignee. The court gave the plaintiff a judgment for $ 4,625, as the value of the sugar, with interest as prayed for, and gave the railway company a judgment against the warrantor for the same amount. The railway company and the warrantor have appealed.

As the shipment was an interstate shipment, the obligations of the carrier are determined by the federal statute relating to bills of lading in interstate and foreign commerce, Act of August 29, 1916, c. 415, 39 Stat. at L. 538 (U.S. Comp. St. § 8604aaa et seq.). The uniform state statute on the subject, Act 94 of 1912, p. 101, is substantially and almost exactly like the federal statute. The most pertinent provision of the federal statute is section 39 (which is section 42 of the state statute), viz.:

"That where an order bill has been issued for goods no seller's lien or right of stoppage in transitu shall defeat the rights of any purchaser for value in good faith to whom such bill has been negotiated, whether such negotiation be prior or subsequent to the notification to the carrier who issued such bill of the seller's claim to a lien or right of stoppage in transitu. Nor shall the carrier be obliged to deliver or justified in delivering the goods to an unpaid seller unless such bill is first surrendered for cancellation." (Stat. at L. 544.)

The only difference in the language of section 42 of the state statute is that it begins thus, "Where a negotiable bill has been issued," whereas, the federal statute says: "That where an order bill has been issued," etc. It is conceded by the appellants that, according to the language quoted, if the pledge of the bill of lading to the bank by Bishop C. Perkins Company was not annulled by the temporary return of the bill by the bank to the pledgor on the trust receipt, the railway company is liable to the bank for having delivered the sugar to the unpaid seller without a surrender of the bill of lading for cancellation. There is nothing in either the federal or the state statute, of course, relating to the question whether the temporary return of the bill of lading by the pledgee to the pledgor had the effect of annulling the pledge. The appellants rely upon article 3162 of the Civil Code, viz.:

"In no case does this privilege [meaning the privilege of the pledgee] subsist on the pledge except when the thing pledged, if it be a corporeal movable or the evidence of the credit if it be a note or...