Lovell v. Isidore Newman & Son

• Decision Date: 02 January 1912
• Docket Number: 2,296.
• Citation: 192 F. 753
• Parties: LOVELL v. ISIDORE NEWMAN & SON et al.
• Court: U.S. Court of Appeals — Fifth Circuit

192 F. 753

LOVELL v. ISIDORE NEWMAN & SON et al.

No. 2,296.

United States Court of Appeals, Fifth Circuit.

January 2, 1912

Rehearing Denied February 6, 1912.

It appears from the record that Knight, Yancey & Co., who had been for several years largely engaged in exporting cotton from the United States, were adjudicated bankrupts April 20 1910. On the day following receivers were appointed, who being thereunto duly authorized, instituted proceedings May 3, 1910, to restrain the removal from the jurisdiction of the court of 1,310 bales of cotton. At that time the cotton was aboard the steamship Ingelfingen at New Orleans en route to Italy. On May 6, 1910, an order for a temporary injunction was passed by the court, but it was therein provided that the cotton might be removed upon the execution of a bond by the defendant, conditioned to pay to the receivers of Knight Yancey & Co., or to a trustee thereafter to be appointed, the cash value of the cotton if it should be adjudged that they had title to the same. The bond was duly filed by the master of the ship with Isidore Newman & Co. as sureties, and the cotton was transported to its destination and delivered to the Italian spinners, who have intervened in this proceeding. This suit was brought by the trustee in bankruptcy of Knight, Yancey & Co. upon the bond thus executed, and the following named parties were permitted to intervene as claimants of the cotton, to wit: The Cantonificio Cantoni, the Cantonificio Furter, the Manifattura Tosi, all Italian corporations, Gianoli Bros., and Bernocchi Bros., the two last named being partnerships and citizens of Italy.

The essential facts may be summarized as follows: Knight, Yancey & Co., through Gino Gavirati, a cotton broker of Milan, Italy, made eight certain contracts with the interveners, bearing date in December, 1909, and January, 1910. They provided for the shipment by Knight, Yancey & Co. of specified quantities of cotton of specified grades under through bills of lading to Genoa, Italy, via the Cotoniera Steamship Line. The interveners were to pay for the cotton at fixed prices by means of drafts to be drawn by Knight, Yancey & Co. on certain bankers designated in the contracts at 90 or 180 days sight. The cotton was to be shipped during January and February, 1910, and by the terms of the contracts it was the duty of Knight, Yancey & Co. to pay the insurance and freight. At the time fixed in the contracts Knight, Yancey & Co. drew on the designated bankers drafts for the contract price of the cotton. To each draft was attached in invoice; and each invoice referred by date to the contract under which the sale was made, bore the name of the purchasing spinners, and stated the purchase price, computed as provided in the contract. Knight, Yancey & Co. then attached to each draft and invoice what purported to be a bill of lading of the Southern Railway Company, drawn in accordance with the terms of the contract and consigning the cotton which it purported to cover through to Genoa. These bills of lading, which were in fact forgeries, ran to the order of the shipper and contained a direction to notify Gino Gavirati, the Italian broker through whom, as before stated, the contracts of sale had been concluded. A certificate of insurance was also attached to each set of documents, and by its terms the loss, if any, was payable to the indorsee of the certificate. The bills of lading, the drafts, the invoices, and the certificates each contained certain identifying marks-- a combination of four letters with which they represented the cotton was marked. No cotton was shipped when Knight, Yancey & Co. issued the forged bills of lading and other documents mentioned. The drafts were thereupon sold by Knight, Yancey & Co. at their face value, less discount; and the drafts, bills of lading, and insurance certificates were indorsed in blank by them, and, still fastened together, were delivered to the discounting bank. The documents were then sent forward through the correspondents of the discounting bank to the bankers on whom the drafts were drawn. These bankers, who were duly authorized by the interveners, and who, like the interveners, honestly believed that the bills of lading were genuine and that the documents represented cotton actually shipped, accepted the drafts, and thereupon the bills of lading were delivered to the interveners.

The drafts were duly paid by the bank, which was reimbursed by the respective interveners. The result of the transaction was that Knight, Yancey & Co. received payment under the contracts without having shipped the cotton. Thereafter Knight, Yancey & Co., at various dates between March 16 and April 11, 1910, actually shipped the cotton called for by the contracts, and obtained therefor genuine bills of lading. The cotton so shipped bore the same identifying marks as that described in the forged bills, invoices, drafts, and insurance certificates, and it was of the same grades and quantities called for by the contracts. The genuine bills of lading were practically duplicates of the forged bills, save as to dates. The genuine bills were, and the spurious ones purported to be, executed by railroad agents at Decatur and Selma, Alabama. In the case of the Decatur shipments, Knight, Yancey & Co. retained in their possession the genuine bills of lading unindorsed for some six weeks. It appears from the record that the receivers were unable to obtain possession of the bills, but those representing the Decatur shipments, after remaining in possession of Knight, Yancey & Co. for the period of time above mentioned, were delivered to the trustee indorsed in blank on May 26, 1910. Touching the Selma shipments, the facts are somewhat different. It appears that the main office of Knight, Yancey & Co. was at Decatur, but they had another at Selma. The Selma bills were received by the duly authorized agent of Knight, Yancey & Co. at Selma from the railway company and were thereafter by him indorsed for Knight, Yancey & Co. and hypothecated with a bank in Selma as collateral security for advances of money made by it to Knight, Yancey & Co. The agent then attached the bills to negotiable drafts drawn by him on Knight, Yancey & Co., at Decatur in favor of the Selma bank for sums of money approximating the value of the cotton recovered by the bills of lading. The drafts were duly accepted by Knight, Yancey & Co. and the bills of lading were delivered to them on April 16, 1910, freed from any claim on the part of the bank. Knight, Yancey & Co. retained the Selma bills also until the appointment of the trustee, when they were delivered to him.

It may be added that the individual estates of the partners composing the firm of Knight, Yancey & Co., taken in connection with the estate of the partnership, are not sufficient to pay the claims which have been proved in bankruptcy against the partnership. No insurance was obtained on the cotton when it was actually shipped, and the only insurance effected in connection with the contracts between the parties was that evidenced by the certificates hereinbefore referred to, which were attached to the drafts and spurious bills of lading when the drafts were paid.

A jury having been waived in the court below, the cause was heard upon an agreed statement of facts. Upon the findings of fact filed by the court judgment was rendered in favor of the defendants and interveners, to which exceptions were duly taken by the trustee, who prosecutes a writ of error to review the judgment.

William A. Blount, A. C. Blount, Jr., F. B. Carter, Dufour & Dufour, and Percy, Benners & Burr, for plaintiff in error.

John W. Griffin, Haight, Sanford & Smith, and Dart, Kernan & Dart, for defendants in error.

Before PARDEE and McCORMICK, Circuit Judges, and MAXEY, District judge.

MAXEY District Judge (after stating the facts as above).

Upon the trial of the case, a jury was waived by written stipulation of the parties, and the cause was submitted to the court upon an agreed statement of facts. The court, accepting such agreed statement as a basis, filed its findings of the ultimate facts, and rendered judgment in favor of the defendants and interveners, thus in effect holding that the spinners ^[1] were the owners of the cotton at the date of the adjudication of bankruptcy, to wit, April 20, 1910. The trustee excepted to the judgment rendered, and insists that at the date mentioned the title to the cotton was in the bankrupts, and by operation of law it became vested eo instanti in him as the trustee of their estate. The question thus suggested is the vital one submitted for decision. If the spinners were the true owners of the cotton, the judgment was right; and, e converso, if the trustee was the owner, it was erroneous and should be reversed. Before entering upon an examination of the real question involved and in order to abbreviate the discussion, it may be well to state a few of the recognized and well-established principles of law which have been referred to and elaborated by counsel in their briefs.

1. In mercantile contracts time is of the essence. A statement descriptive of the subject-matter, or of some material incident, such as the time or place of shipment, is ordinarily to be regarded a condition precedent upon the failure or nonperformance of which the party aggrieved may repudiate the contract. Norrington v. Wright, 115 U.S. 188, 6 Sup.Ct. 12, 29 L.Ed. 366; Pope v. Allis, 115 U.S. 363, 6 Sup.Ct. 69, 29 L.Ed. 393; Jones v. United States, 96 U.S. 24, 24 L.Ed. 644.

2. If a party intend to repudiate or rescind a contract because of the failure of the other party to perform it, he should give clear notice of his intention to do so, unless the contract itself dispenses with such notice, or...