Mason v. Nelson

• Decision Date: 21 October 1908
• Citation: 62 S.E. 625,148 N.C. 492
• Parties: MASON et al. v. NELSON et al.
• Court: North Carolina Supreme Court

62 S.E. 625

148 N.C. 492

MASON et al. v. NELSON et al.

Supreme Court of North Carolina

October 21, 1908

Appeal from Superior Court, Mecklenburg County; Ward, Judge.

Action by R. E. Mason and another, composing the firm of R. E. and C. E. Mason against A. E. Nelson and others. From a judgment overruling a demurrer to the complaint, defendant W. A. Trice appeals. Reversed.

Clark C.J., dissenting.

A court will take judicial notice of the general business methods of railways and quasi public corporations, when the methods are universally practiced and commonly known to exist; and the court will assume, in the absence of proof to the contrary that a bank discounting a draft for the price of goods with a bill of lading attached does not thereby intend to take over the original contract of sale, or to come under its burdens.

The facts stated in the complaint, considered material to a proper understanding of the cause, are: (1) That in August 1906, defendant A. E. Nelson, doing a cotton business in Texas, contracted to sell and deliver to plaintiff, resident and doing business in Charlotte, N. C., 50 bales of cotton, at the price of 8 3/4 cents per pound, and guaranteed that said cotton, in grade, texture, and quality, was according to samples exhibited. (5) That on the 6th day of August, 1906, the said defendant A. E. Nelson, in pursuance of said contract, delivered at Houston, Tex., 50 bales of cotton, marked "L. O. N. G.," to the Texas & New Orleans Railroad Company, a common carrier, and took and received from said railroad company a bill of lading therefor in the usual form, stipulating that said cotton was deliverable to the order of the said A. E. Nelson at Charlotte, N. C., with instruction to notify plaintiffs R. E. & C. E. Mason, upon its arrival at said point, and thereafter upon the same day the said Nelson drew his draft for the said sum of $2,176.14, the price agreed to be paid for the said cotton, upon the plaintiffs, payable to the order of one W. A. Trice, and attached to the said draft, as security for the payment of same, the aforesaid bill of lading, and thereupon indorsed the said bill of lading, and sold, assigned, and transferred the same to the defendant Trice for full value, and the said Trice thereby became the owner of the cotton described in and covered by said bill of lading. (6) That thereafter the said Trice indorsed the said draft and bill of lading to T. W. House, banker, of Houston, Tex., for collection, who forwarded the same to the First National Bank of Charlotte, N. C., for a like purpose. (7) That plaintiffs were unable to get said cotton from the railroad company when it arrived in Charlotte without presenting the bill of lading therefor, and plaintiffs were compelled to pay said draft before they could get said bill of lading and examine said cotton to ascertain whether or not said cotton was of the same grade, texture, and type contracted for, and plaintiffs, relying on the representations and guaranty of said A. E. Nelson that said cotton was of the same grade and type as the E. V. A. samples, paid said draft to the First National Bank of Charlotte, to wit, $2,176.14, and took up and surrendered the bill of lading to the Southern Railway Company, and took into their possession the said 50 bales of cotton. (8) That immediately, or as soon thereafter as practicable, plaintiffs examined said cotton, and found that said cotton was not of the same grade as the E. V. A. samples in type or texture. On the contrary, said cotton was much inferior to said samples in grade and texture and type, and was what is known as "threshed cotton," worth in the market a little more than one-half the value of cotton of the grade and texture of said E. V. A. samples, although said defendant A. E. Nelson had represented and guaranteed to plaintiffs that said 50 bales should be the same grade, type, and texture of said E. V. A. samples. (9) That by reason of the low grade and texture and inferior quality of said cotton, plaintiffs were compelled to sell said cotton at a great loss, and were put to great expense in storing and reselling said cotton. (10) That by reason of the failure of said cotton to be of the same grade, texture, and type of the E. V. A. samples as defendant A. E. Nelson represented, warranted, and guaranteed it to be, and by reason of the breach of the warranty, and the expense incurred by reason of such breach and failure of said cotton to come up to the grade, texture, and type of the E. V. A. samples, plaintiffs have been damaged in the sum of $1,795.62. (11) That plaintiffs are informed and believe, and are so advised, that by reason of the assignment of said bill of lading by the indorsement of said A. E. Nelson to W. A. Trice, and the indorsement of said draft by said W. A. Trice, and the assignment of said draft and bill of lading to House, and by the indorsement of said draft and bill of lading by said House, banker, unincorporated, and the payment of same by these plaintiffs, said W. A. Trice became liable to plaintiffs for all damages they have sustained by reason of the failure of said cotton to come up to the grade, texture, and type guaranteed to plaintiffs by said A. E. Nelson, as hereinbefore set out. (12) That plaintiffs have demanded payment from the defendants, and payment has been refused. Defendant W. A. Trice demurred to said complaint, for "that same does not set" forth any fact whereby this defendant became liable to the plaintiffs, and it appears in and by said complaint that said W. A. Trice is in no way liable to account for the alleged breach of contract set out against his said codefendants. There was judgment overruling the demurrer and allowing said defendant to answer over, whereupon he excepted and appealed.

Tillett & Guthrie and W. A. Trice, for appellant.

Burnell & Cansler and W. F. Harding, for appellees.

HOKE J.

In the case of Finch v. Gregg, reported in 126 N.C. 176, 35 S.E 251, 49 L. R. A. 679, this court held, in effect, that when a purchaser and consignee of goods has accepted and paid a draft, drawn on himself by the consignor for the purchase price, to a holder of the draft "in due course," said holder, having taken an assignment of the bill of lading attached, or otherwise, as security for the amount paid in obtaining the draft, and this bill of lading is turned over to the consignee on the payment of the draft, who thereby obtains possession of the goods, the said consignee can recover of the holder receiving such payment damages for breach of warranty given by the consignor in the original contract of sale, and this, though the holder of the draft had no interest ultra in the goods, and took no part in the bargain. The present writer, who presided at the trial of Finch v. Gregg in the superior court, first made this ruling in the court below, following with much hesitation a decision of the Texas Court of Civil Appeals, then recently made (Landa v. Lattin Bros., 19 Tex.Civ.App. 246), and the position was sustained on appeal. The purport of this Texas decision, cited with approval in the opinion of our Supreme Court, on the question chiefly considered here, is thus stated in 46 S.W. 48: "(1) A consignor of wheat delivered to a bank a bill of lading, with draft drawn upon his consignee attached. The bank cashed the draft, and paid the consignor. The consignor had contracted to furnish sound wheat, but the wheat furnished was of inferior quality. Held, that the bank purchasing the bill of lading became the owner of the wheat, and was responsible to the consignee for the failure to furnish sound wheat." "(3) A bank cashing a draft, attached to a bill of lading, drawn on the consignee of goods, becomes a purchaser of the goods, and must, at its peril, exercise care to see that the goods are of the quality that the consignor contracted to furnish." These cases, and the principle upon which they are made to rest, apply to the facts presented here, and, if they are to be regarded as the law governing the rights of these parties, the judgment of the court below overruling the demurrer must be affirmed. Trice, the appellant who demurred to the complaint, was the holder of the draft, in due course, with a bill of lading attached and assigned to him as security for the amount paid in discounting the draft. So far as appears, he had no interest in the goods, except what belonged to him by reason of these papers, took no part in the bargain and sale, and had no knowledge or notice of its terms, and he is sued by the consignee, who accepted and paid the draft, for breach of warranty given by the consignor to the consignee in the contract of sale. After giving the question our best consideration, with a due sense of the great importance of adhering to decisions when formally announced as law by the court, we feel constrained to overrule the case of Finch v. Gregg, being of opinion that the decision is based on an erroneous principle, or rather on the erroneous and unwarranted extension and application of an admitted principle, and is contrary to the great weight of well-considered authority. The case excited much comment at the time it was announced, was the subject of adverse criticism in a learned and intelligent note by the editor of Lawyers' Reports Annotated, in volume 49, at page 679, and the principle upon which it was made to rest was likewise condemned in a well-considered and instructive note to the case of Hall v. Keller, 91 Am. St. Rep. 209, the case being taken from 64 Kan. 211, 67 P. 518, 62 L. R. A. 758. Another comment of like purport will be found in a note to an Alabama case (Haas v. Citizens' Bank of Dyersburg, 144 Ala. 562, 39 So. 129, 1 L. R. A. [N. S.] 242, 113 Am. St. Rep. 61), citing additional authorities in support of the editor's...