George F. Hinrichs, Inc. v. Standard Trust & Savings Bank, 39.

• Decision Date: 18 January 1922
• Docket Number: 39.
• Parties: GEORGE F. HINRICHS, Inc., v. STANDARD TRUST & SAVINGS BANK.
• Court: U.S. Court of Appeals — Second Circuit

279 F. 382

GEORGE F. HINRICHS, Inc., v. STANDARD TRUST & SAVINGS BANK.

No. 39.

United States Court of Appeals, Second Circuit.

January 18, 1922

The plaintiff in error was defendant below and is hereinafter referred to as defendant. The defendant in error, the plaintiff below, is hereinafter referred to as plaintiff. The plaintiff is a corporation organized under the laws of the state of Illinois, and conducts its business at the city of Chicago therein. The defendant is a corporation organized under the laws of the state of New York, and is engaged in business in the city of New York.

The complaint alleges: That on or about January 20, 1920, the firm of Grant Bros. & Co. delivered to the Michigan Central Railroad Company at Chicago 468 cases of eggs consigned to the defendant at the city of New York, and received from the United States Railroad Administration, then operating the Michigan Central Railroad Company, its straight bill of lading for the eggs consigned. That thereafter and on January 22, 1920, Grant Bros. Company applied to plaintiff at its office in Chicago for a loan of money on the security of the eggs so consigned, and delivered to the plaintiff its draft drawn on defendant and directing the latter to pay to the order of the plaintiff the sum of $8,424. That attached to the draft and referred to therein were the invoice of Grant Bros. & Co. to the defendant for the eggs at the price of $8,424, and also the bill of lading above referred to. That thereupon the plaintiff paid to Grant Bros. & Co. the sum of $8,424. That thereafter plaintiff indorsed the draft to the order of the Chase National Bank in New York, and forwarded the draft so indorsed to that bank, with the invoice and bill of lading attached, for presentation to and payment by the defendant. That on January 26, 1920, the Chase National Bank presented the draft, with the invoice and bill of lading attached, to the defendant at New York, and gave notice to defendant that the plaintiff was the owner of a special property in the eggs and the proceeds thereof in the sum of $8,424. That the defendant, notwithstanding the presentation of the draft and the aforesaid notice, sold the eggs and received the proceeds of the sale, and wrongfully applied the same to its own use, and refused to pay the same, or any part thereof, to the plaintiff. And judgment was demanded in the sum of $8,424, with interest from January 22, 1920.

The evidence at the trial showed that the eggs arrived in New York on January 28th, and on that day and January 31st the railroad company delivered them to the defendant without the production of any documents. At that time Grant Bros. & Co. was indebted to defendant in the sum of $2,500. The defendant sold the eggs between February 4th and February 11th, and credited the proceeds to the account of Grant Bros. With this credit a balance of $5,303.84 was created in favor of Grant Bros., which was paid to that company by defendant's checks dated on February 14 and February 24, 1920. The evidence disclosed that on January 24, 1920, the draft had been presented to the president of the defendant by the Chase National Bank, and payment was refused by him and the draft handed back to the bank's messenger, who had presented it. It may be noted that the indebtedness of Grant Bros. to the defendant was incurred after the plaintiff's advance and after the arrival of the eggs in New York. Grant Bros subsequently became bankrupt.

At the end of the plaintiff's case the defendant moved to dismiss the complaint, on the ground that the plaintiff had failed to prove facts sufficient to constitute a cause of action, upon the ground that the testimony showed that the eggs were shipped to the defendant upon a straight bill of lading, and that the bank could not acquire any enforceable lien upon or interest in or title to the eggs, upon the further ground that the bank failed to take any of the precautions which were open to it for the purpose of securing its money if the loan was made upon collateral, and lastly upon the ground that, if any liability existed on the part of the defendant at all, it was secondary; that is, that the bank made a loan originally to Grant Bros. & Co., and that there was no evidence in the case that Grant Bros. & Co., had not paid the loan; that there was no evidence of any effort on the part of the bank to enforce the claim against Grant Bros. & Co. The motion was denied. The motion was renewed at the close of the whole case, and again denied. The defendant then asked leave to go to the jury on the issues raised by the pleadings, and the issue as to whether or not the defendant had any notice that the bank had made an advance upon this property, and on the issue as to whether or not the bank actually did make an advance upon the car load of eggs in question as collateral, and upon all the questions raised by the evidence and by the pleadings. The plaintiff asked for the direction of a verdict for the plaintiff. The defendant's request to be permitted to go to the jury was denied, and a verdict was directed for the plaintiff.

Bouvier & Beale, of New York City (B. F. Norris, of New York City, of counsel), for plaintiff in error.

Spencer, Ordway & Wierum, of New York City (Otto C. Wierum, of New York City, of counsel), for defendant in error.

Before ROGERS, HOUGH, and MANTON, Circuit Judges.

ROGERS Circuit Judge (after stating the facts as above).

It appears that Grant Bros. & Co. was, in January, 1920, wholesale dealers in butter, eggs and poultry in Chicago, and did its banking business with the Standard Trust & Savings Bank in that city-- the plaintiff in this action. Grant Bros. shipped a carload of eggs by rail, consigned to the defendant at New York, taking a straight bill of lading therefor. Thereupon Grant Bros. obtained from the plaintiff a sight draft, payable to its order and drawn on defendant, in the sum of $8,424, to which the bill of lading and invoice was attached. The bill of lading named the defendant as consignee. The plaintiff credited the account of Grant Bros. with the amount of the draft, and forwarded it with the bill of lading and the invoice to its correspondent in New York for presentation to defendant, and payment was refused. The defendant sold the eggs on their arrival in New York, paid themselves out of the proceeds a debt due to them from Grant Bros., and remitted the balance to the latter.

The plaintiff brought this action on the theory that it acquired title to the eggs when it took the bill of lading from Grant Bros. and advanced to the latter $8,424, and that defendant acquired no right in the eggs and could not sell them, having declined to pay the draft drawn on it. The defendant claims that, as the bill of lading was a 'straight' bill of lading, and not an 'order' bill of lading, the title to the eggs was in it as consignee, and that it had the right to pursue the course it took. The defendant says that, having sold the eggs and paid the proceeds over to Grant Bros., it ought not now to be required to pay the plaintiff, as it would be paying for the eggs twice over. This is, of course, no answer. If defendant with notice paid the money to one not entitled to receive it, it may be compelled now to pay to the rightful owner what it wrongfully paid to another.

The Act of August 29, 1916, known as the Bills of Lading Act (Comp. St. Secs. 8604aaa-8604w), applies, as the shipment was in interstate commerce. 39 Stat.p. 538, c. 415. Section 2 of the act provides that a bill in which it is stated that the goods are consigned or destined to a specified person is a straight bill; and section 3 provides that a bill in which it is stated that the goods are consigned or destined to the order of any person named in such bill is an order bill. The bill of lading issued to the shipper in the transaction herein involved stated that the goods were 'consigned to Geo. F. Hinrichs & Co.,' and their destination was New York. It was therefore a straight bill of lading.

The act also provides in section 3 that any provision in an order bill that it is nonnegotiable shall be null and void, and shall not affect its negotiability, unless upon its face and in writing it is agreed to by the shipper; and section 6 provides that a straight bill shall have placed plainly upon its face by the carrier issuing it 'nonnegotiable' or 'not negotiable.' The evident intention of the act is to make straight bills nonnegotiable and order bills negotiable; and subsequent sections of the act provide how order bills may be negotiated and as to the rights acquired under a negotiated order bill. We need not concern ourselves with such provisions as the bill here in question is not an order bill.

Section 29 of the act provides as follows:

'That a bill may be transferred by the holder by delivery, accompanied with an agreement, express or implied, to transfer the title to the bill or to the goods represented thereby. A straight bill cannot be negotiated free from existing equities, and the indorsement of such a bill gives the transferee no additional right.'

And section 32 provides in part as follows:

'That a person to whom a bill has been transferred, but not negotiated, acquires thereby as against the transferor the title to the goods, subject to the terms of any agreement with the transferor. If the bill is a straight bill such person also acquires the right to notify the carrier of the transfer to him of such bill and thereby to become the direct obligee of whatever obligations the carrier owed to the transferor of the bill immediately before the notification. * * * '

It appears, then, that the carrier delivered to Grant Bros. a straight bill of lading, which was nonnegotiable, and that Grant Bros. transferred...