Cosmos Cotton Co. v. First Nat. Bank

• Decision Date: 02 February 1911
• Citation: 171 Ala. 392,54 So. 621
• Parties: COSMOS COTTON CO. v. FIRST NAT. BANK OF BIRMINGHAM.
• Court: Alabama Supreme Court

54 So. 621

171 Ala. 392

COSMOS COTTON CO. v. FIRST NAT. BANK OF BIRMINGHAM.

Supreme Court of Alabama

February 2, 1911

Appeal from City Court of Birmingham; C. C. Nesmith, Judge.

Action by the Cosmos Cotton Company against the First National Bank of Birmingham. Judgment for defendant, and plaintiff appeals. Affirmed.

John W Tomlinson, for appellant.

Campbell & Johnston, for appellee.

ANDERSON J.

This suit proceeds upon the theory that notwithstanding the defendant bank, the payee of the draft, cashed the same or placed the proceeds thereof to the credit of the drawers Smith & Coughlan, it became liable to the plaintiff, upon a subsequent payment, by it, of said draft, as for the breach of the contract of sale between it, the plaintiff, and the consignor of the cotton and drawers of the draft, Smith &amp Coughlan, and which said draft, when paid by the plaintiff, had the bill of lading for the cotton attached thereto, and which said bill of lading, when delivered to the defendant, was indorsed in blank. The question therefore arises: Did the defendant bank, who cashed the draft, or placed the proceeds thereof to the credit of the drawers, Smith & Coughlan, and who forwarded the same for collection with bill of lading attached, become liable to the plaintiff, upon payment of said draft, for a breach of the contract of sale, between the plaintiff and the vendors of the cotton, Smith & Coughlan, growing out of a shortage in the weight of the cotton or a deterioration in the quality? We think not. The defendant, by purchasing or cashing the draft, did not undertake thereby to carry out the contract of sale. Nor did the assignment of the bill of lading put the defendant in the shoes of the vendors and entail upon it the duty of standing sponsor for their warranties and obligations, connected with or growing out of the contract of the sale of the cotton. "Assignments of bills of lading are not governed by the commercial law. The transferee simply acquires the title of the transferror to the goods described in them." Com. Bank of Selma v. Hurt, 99 Ala. 130, 12 So. 568, 19 L. R. A. 701, 42 Am. St. Rep. 38; Jasper v. K. C. M. & B. R. R., 99 Ala. 416, 14 So. 546, 42 Am. St. Rep. 75; 4 Am. & Eng. Encyc. of Law, 549; 6 Cyc. 426. The transferee of the bill of lading gets only the title to the thing shipped or included in the bill of lading, and does not get a title to what should have been shipped, or to something which the vendor agreed to ship and which is not embraced in the bill of lading. It would therefore seem that one who gets a bill of lading as assignee does not assume to carry out the contract of the assignor with the consignee or drawee to the draft to which it is attached. He merely gets such title as the transferror has in the goods, covered by the bill of lading, and he does not assume to warrant the obligations of the shipper as to quality or quantity. The foregoing rule seems to apply to unconditional transfers or assignments of bills of lading; but, when the shipment is made with bill of lading attached to a draft for the purchase money, only a special property in the goods passes to the transferee, subject to be divested by the acceptance and payment of the draft. 4 Am. & Eng. Encyc. of Law, 548; Am. Nat. Bank v. Henderson, 123 Ala. 612, 26 So. 498, 82 Am. St. Rep. 147. The defendant in the case at bar acquired the draft for a valuable consideration, and, when accepted and paid by the plaintiff, the defendant, as the owner or payee of same, did not, in receiving the money thereon, become responsible for the breach of the contract between the drawer and drawee. It was under no obligations to perform the contract of Smith & Coughlan and had the right to assume that the draft it received and forwarded, and which was accepted and paid by the plaintiff, was a legitimate and regular transaction between the drawer and drawee, and that it was right and proper that the latter should pay, as the principal party; and the presumption of law that such is the case is its complete protection, if it received the draft in the ordinary course of business. Young v. Lehman Durr & Co., 63 Ala. 526.

The appellants contend, however, that the bill of lading, duly indorsed, was attached to the draft, and that they had the right to rely upon it as a security protecting them in the payment of the draft. As heretofore set out, the defendant by being the transferee of the bill of lading, was under no legal obligation to carry out the contract for Smith & Coughlan. They did not become a party to the contract of sale, and the only representations or warranties that can be attributed to them was that the bill of lading was in the same condition as when they got it from Smith & Coughlan. We doubt if the status would be changed, if the transfer of the bill of lading had been unconditioned, as it would only operate to transfer the title to the property, and not the contract of sale, so as to put the defendant in the shoes of Smith & Coughlan; but the transfer was conditional and was only a security for the draft, as the draft to which it was attached shows upon its face that the bill of lading was attached. The plaintiffs had knowledge, or notice of facts to put them on notice, that the payment of the draft would divest the defendant of any title or claim to the cotton under the bill of lading, and that the bill of lading was simply held as collateral security for the draft, and which was sufficient to negative all idea that the defendant, in acquiring the bill of lading, had become the vendor of the cotton or had undertaken to perform the contract of Smith & Coughlan. This conclusion is supported by the great weight of authority, English and American, and some of which are directly in point, in law and fact, and is opposed by a very few cases, which will be hereafter considered and discussed. Robinson v. Reynolds, 42 E. C. L. 634; Hoffman v. Bank, 79 U.S. 181, 20 L.Ed. 366; Goetz v. Bank, 119 U.S. 551, 7 S.Ct. 318, 30 L.Ed. 515; Blaisdell v. Bank, 96 Tex. 626, 75 S.W. 292, 62 L. R. A. 968, 97 Am. St. Rep. 944; Arpin v. Owens, 140 Mass. 144; ^[1] Torleton v. Bank, 112 Iowa, 706, 84 N.W. 930, 50 L. R. A. 777; Lewis Leonhardt & Co. v. Small, 117 Tenn. 153, 96 S.W. 1051, 6 L. R. A. (N. S.) 887, 119 Am. St. Rep. 994; Hall v. Keller, 64 Kan. 211, 67 P. 518, 62 L. R. A. 758, 91 Am. St. Rep. 209. The cases opposed are: Landa v. Lattin Bros., 19 Tex.Civ.App. 246, 46 S.W. 48; Finch v. Gregg, 126 N.C. 176, 35 S.E. 251, 49 L. R. A. 679; Searles v. Smith, 80 Miss. 688, 32 So. 287; and perhaps the Eufaula Grocery Co. Case, 118 Ala. 408, 24 So. 389, and which said last case will be hereafter fully discussed and explained. The case of Landa...