
    BENJAMIN F. VOORHEES and others, Plaintiffs, v. CYRUS OLMSTEAD and others, Defendants.
    
      Warehouse receipt—difference in effect between delivery of the receipt and, of an order for it — bona fide purchaser for value — Estoppel—affirmative action by pa/rty claiming it, not essential to its creation..
    
    A party who advances money upon presentation to him of a warehouseman’s receipt, stands in the position of a bona fide purchaser for value of the property therein described; while one, who in good faith advances money upon an order for such receipt, under an executory arrangement of which the delivery of the receipt was to be the consummation and consideration, does not occupy the same position.
    If in the latter case the receipt is delivered upon presentation of the order, and no notice of the repudiation of the receipt is given until after the time has elapsed "within which, had such receipt not heen delivered, the money advanced upon the order might have been recovered back, such delay will operate as an estoppel, and preclude the party seeking to set aside the receipt from doing so.
    It is not necessary to an equitable estoppel that the party should willfully intend to mislead, nor that the party who claims the estoppel should have acted affirmatively upon it. It is enough if he has been induced thereby to refrain from such action as lay in his power, by which he might have retrieved his position and saved himself from loss.
    Exceptions ordered to be heard in the first instance at General Term. •
    
      Wm. W. McFarland, for the plaintiffs.
    The defendants the Warehouse and Security Company, who claim title to this cotton under a,pretended pledge by George E. Biddle & Co., acquire no color of title, under what is known as the factor’s act, or the act in relation to warehouse receipts. (6 Edmonds’ Statutes, 668; 4 id., 461; Yenni v. McNamee, 45 N. Y., 614.) The factor’s act obviously has nothing to do with the case, Biddle & Co. not being in any sense.factors or agents. The design was to protect parties, dealing with the holder of the receipt upon the belief of his ownership founded thereon, although in fact he might not be the owner of the property, and have no power or authority to incumber it. (Yenni v. McNamee, 45 N. Y., 614.) An intention not to transfer a title to Biddle & Co., and give credit for the price of the cotton for one instant of time, is clearly established by the testimony. The sale, being for cash, payable on delivery, no title would pass until the delivery was completed in every point, and the purchase-money paid, or its payment waived and credit given. And this is equally true, whether the possession of the property be retained by the seller or surrendered to the purchaser. (Kein v. Tupper, 52 N. Y., 550; Ballard v. Burgett, 40 id., 314; Hutchings v. Monger, 41 id., 155; McNeil v. The Tenth National Bank, 46 id., 325; Coghill v. Hfd. & N. H. R. R., 2 Gray, 545; Leighton v. Stevens, 1 App., 154; Churchill v. Bailey, 1 Ship., 64; Leighton v. Stevens, 9 Shep., 252; Comstock v. Smith, 10 id., 302; Luly v. Bundy, 9 N. H., 298; Maxwell v. Briggs, 17 Vt., 176; Bradley v. Arnold, 16 id., 382; Fairbanks v. Phelps, 22 Pick., 535; Dresser Man. Co. v. Waterston, 3 Met, 9; Lehigh v. Field, 8 Watts & Sarg., 232; McBride v. White Lead, Geo. Dals., part 1, 165; Bennett v. Sims, 1 Rice, 421; Bradshaw v. Thomas, 7 Yerger, 477; Reeves v. Harris, 1 Bailey, 563; Marston v. Baldwin, 17 Mass., 606; George v. Stubbs, 26 Maine, 243; Herring v. Willard, 2 Sandf. Sup. Ct., 418; Buckmaster v. Smith, 22 Vt., 409; Etty v. Aldrich, 46 W. H., 127; Annington v. Houston, 38 W., 448; 36 Mo., 479; Patton v. McCane, 15 B. Mon. [Ky.], 555; Acker v. Campbell, id., 372; Pond v. Bradley, 9 Gill & Johns., 220; Blanchard v. Child, 7 Gray, 155; Penbank v. Crooker, id., 158; Goodwin v. May, 23 Geo., 205; Diehon v. Bigelow, 8 Gray, 159; Cragin v. Coe, 29 Conn., 51; Plumer v. Stinly, 16 Ind., 480.)
    
      Joseph H. Choate, for the defendants.
   Davis, P. J. :

This action was brought to recover possession of 226 bales of cotton. The court at circuit directed a verdict for the defendants. We think the court did not err in the conclusion that the case was a proper one to be disposed of by directing a verdict. There was not sufficient evidence to have justified the jury in finding that the Warehouse and Security Company acted mala fide in the transaction. They were not shown to have had any participation in or knowledge of the alleged fraudulent acts of Biddle & Co., nor to have had any notice that should have put them on inquiry touching the same. There was no substantial dispute as to the facts of . the case. There was some conflicting evidence as to the time when the warehouse receipt was delivered to the company, but the court must be held to have assumed that such delivery was made after the weighing, etc., of the cotton was completed, on Saturday, which is in accordance with the plaintiffs’ evidence. The facts of the case are these: James Phelan was the owner, and had possession of 226 bales of cotton on store in the warehouse of Cyrus Olmstead, and for which he held Olmstead’s non-negotiable receipt. On the 22d of April, 1868, he contracted to sell the cotton to the plaintiffs Voorhees & Garrison, to be delivered and paid for in twenty days. On the next day, Voorhees & Garrison sold a half interest-in the cotton to the plaintiffs Solon W. Dewey and Solon W. Dewey, Jr., to be delivered and paid for in nineteen days; and the last named purchasers left their interest in the cotton with Yoorhees & Garrison for sale. On the second day of May, Yoorhees & Garrison sold the whole of the cotton to Biddle & Co., to be delivered and paid for within ten days. On the seventh of May, Biddle & Co. drew a delivery order for the cotton on Yoorhees & Garrison, and thereupon the latter firm made arrangements to commence the delivery of the cotton on the following morning. They sent a delivery order to Phelan, asking him to deliver the cotton to bearer, who gave an order on the warehouseman to the same effect. On the morning of the eighth the outdoor clerk of Yoorhees & Garrison attended at the warehouse, to receive delivery from Phelan, and make delivery to Biddle & Co. The receiver and sampler of Biddle & Co. was there, and the work of delivering the cotton commenced at about eleven o’clock of that" morning. The bales of cotton were weighed, and as they left the scales were sampled and marked, S. O., which was the cotton mark of Biddle & Co. It was the intention of Yoorhees & Garrison, that one delivery should operate for all; that is, as a delivery from Phelan to them, and from them of one-half to Dewey & Co., and of the whole to Biddle & Co.; and this course was in accordance With the usages of dealing in cotton. The cotton, as soon as delivered, was returned to the same warehouse, and stored for Biddle & Co. On the eighth day of May and while the delivery was in progress, Biddle & Co. applied to the Warehouse and Security Company for a loan on this and other cotton, amounting to some 353 bales, at the rate of twenty-five cents a pound. The invoice of the cotton was made out by them, describing it in substance as 350 bales in Olmstead’s warehouse, and three bales elsewhere ; and a contract was entered into for the loan of §44,000 on the cotton mentioned in the invoice. An order was drawn by Biddle & Co., on the warehouseman, Olmstead, to deliver to the Warehouse" and Security Company the receipt for 350 bales of cotton, stored with him for Biddle & Co., and on the same day the check of the Warehouse and Security Company on the National Bank of the Republic, for §44,000, was given to Biddle & Co., who deposited it to their own credit, in the National City Bank of New York. An agent of the Security Company was sent with the order to the warehouse, where he presented the order and called for the receipt; he was told by Olmstead that the cotton was then being turned over, and that.if he called the next day the receipt would be ready. One hundred bales of the cotton were weighed, sampled, and marked S. 0., on the eighth of May, and on the following day, which was Saturday, the weighing, sampling and marking were completed at about three o’clock in the afternoon. The whole of the 226 bales in question were weighed, sampled and marked; but seven bales of another lot, which would have made the 350, were rejected. On Saturday, Olmstead, before the delivery was completed, notified the clerk of Yoorhees & Garrison, that the receipt was called for by Biddle & Co. The clerk went to their store and told them of the request, and was directed to go back and tell Olmstead to “ give it to them, of course.” The clerk returned and directed Olmstead accordingly. In the course of the afternoon, and after the delivery was completed, Olmstead delivered to the agent of the Warehouse and Security Company a warehouse receipt acknowledging the receipt in store, from Biddle & Co., of 343 bales of cotton. This receipt was negotiable in form, and was immediately taken to the Security Company. On Saturday afternoon, but after business hours, Yoorhees& Garrison made out a bill for the 226 bales, and sent it to the office of Biddle & Co.; but no one being in, it was pushed under the door. On Monday following, they sent for the money, but were told, in substance, that it was not payable till the next day. According to the usages of business, the bill was payable on Tuesday, the twelfth. On sending to collect the bill on that day, they were told that Biddle & Co. had suspended payment, and that the Warehouse and Security Company had the receipt for the cotton. On the thirteenth they served notice on that company that the cotton had not been paid for, and that they claimed the same, and demanded its delivery to them. The company refused to deliver the cotton, claiming that they held it and were" entitled tó hold it, as security for the loan of $44,000. It appeared, also, that at the close of bauk hours, on the -eighth day of May, there appeared to the credit of Biddle & Co., on the books of the bank where they deposited the check of $44,000, a balance of $52,377; and on the evening of Saturday, the ninth, a balance of $31,878.96, which was drawn down on the eleventh, to $2,083.75, and on the thirteenth, to $448.18. On the thirteenth of Hay this suit was commenced to recover the property.

There can be no doubt upon this state of facts, that both the title and possession of the cotton remained in Phelan, until the delivery to Biddle & Go. was complete on the afternoon of Saturday, the ninth of May. On the completion of such delivery, the title and possession passed from Phelan, through Voorhees & Garrison, to Biddle & Co.; but, as the sale to the last named firm was for cash, payable • on delivery, according to the usages of the trade, the delivery and possession were, as between that firm and Voorhees & Garrison, conditional upon payment for- the cotton; as between them, the right of recaption clearly existed, on the discovery of the insolvency of 'the purchasers, on the twelfth day of May. The questions of the case are, therefore, whether the Warehouse and Security Company are entitled upon the facts to hold the cotton as security for the loan of $44,000, as bona fide purchasers fro tanto, or whether any such condition of things existed, that they are entitled, upon the doctrine of estoppel, to shut off the assertion of any superior right on the part of the plaintiffs.

There can be no doubt, we think, that the loan was intended to be, and was made by the company, upon the security of the cotton, and in the belief that the transaction would be consummated by the delivery of possession in the form of a warehouseman’s receipt, on the presentation of the order of Biddle & Co. It is true that the company intrusted their check to Biddle & Co. before receiving the warehouse receipt, but that fact, under the circumstances of the case, does not show that they intended to make a loan to be secured by a pledge thereafter to be made. Each successive step in the arrangement for the loan and security, to and including the receiving by the company of the warehouse receipt on Saturday afternoon, was part of a single transaction, carried on in apparent good faith, with a single object, to wit: the making of a loan, to be secured by the possession, and, so far as necessary, by the title of the cotton. As between the company and Biddle & Co., there could be no question of this; nor could there be any doubt, if Biddle & Co. had defeated the obtaining of the warehouseman’s receipt on Saturday, that the right of recaption of the check, or money, as against them, would have been complete, and, for the same reason, that the plaintiffs’ right to retake the cotton, on failure to pay for it, was perfect as between themselves and Biddle & Go. It is therefore not sound in law or in fact, to assert that the pledge of the cotton was made, at the time of the delivery of the warehouseman’s receipt, as security for a precedent debt. That delivery was the consummation of a transaction remaining inconsummate until that event; and that act was, as between the parties to the transaction, the perfecting of a pledge to secure a loan of which it was the consideration, and not a pledge to secure an antecedent indebtedness. But this view of the law and fact as between the parties to the loan, does not dispose of the question between the plaintiffs and the Warehouse and Security Company. As between them, the question is whether the latter parted with the money, or with some valuable thing, upon the delivery of the possession and apparent title of the 226 bales of cotton, under circumstances in which they can claim to be bona fide purchasers. On the eighth day of Hay, when Biddle & Co. applied for the loan, they had no title to the cotton, and no right to its possession; all they had was a contract for its purchase, and an order for its delivery upon such contract. They were at that time incapable of transferring anything more than they had. They could of course sell the cotton as their vendors had sold to them, but that would, in legal effect, only have given the right to acquire title and possession by doing what they and their vendors were bound to do. It would operate as the assignment of an executory contract of purchase of property of which Phelan was the owner in possession, subject to the right of the intermediate dealers through whom the title and possession were only obtainable. Biddle & Go. were not in possession of any documentary evidence of title. The company were not deceived by the exhibition of such apparent evidence. On the contrary, the papers given to them were notice that Biddle & Co. did not then possess such evidence. The invoice rose no higher than their personal assertion of title; while the order on the warehouseman for a receipt for the cotton was notice that the evidence of title had not yet been delivered to them. -It cannot therefore be said that the company was induced, on the eighth of Hay, to part with their money or check, upon anything higher than the assertion of Biddle & Co., that they owned the cotton and had a right to call for and receive a warehouseman’s receipt. We think it cannot be claimed, within any of the authorities, that on the eighth day of May, the Warehouse and Security Company had acquired any interest in the cotton that could be set up to affect the rights of the plaintiffs. The question then is, whether anything subsequently transpired to change their relations to the property, and entitle.them to assert a better right than they got on the delivery of their check to Biddle & Co. We have seen that as a part of an incomplete transaction between themselves and Biddle & Co., they were authorized to call for and receive a warehouse receipt for the cotton, which, if it had been presented and delivered to them when they gave their check, on the eighth, would have made them purchasers for value to the extent of their loan. They were to do this for the purpose of consummating the transaction with Biddle & Co., and as part of it, and not as a separate matter. When that order was presented, the company found the warehouseman upon whom it was drawn, in the act of making delivery of the cotton to Biddle & Co., under the order of Phelan, the owner, and the order of Yoorhees & Garrison to deliver to bearer.” Their agent was informed by the warehouseman, that the cotton was then being turned over, and told to come the next day and the receipt would be given. On the next day, and before the delivery was complete, the warehouseman informed the clerk of the plaintiffs that Biddle & Co. wanted the receipt for the cotton. The clerk immediately went to the plaintiffs and stated to them that Biddle & Co. wanted the receipt, and asked if it should be given. The reply was, “ certainly, give it .to him of course.” This answer was reported to the warehouseman, and, acting upon it, he, as soon as the delivery of the cotton was finished, gave to the agent of the Warehouse and Security Company, upon Biddle & Co.’s order, a receipt for the 343 bales of cotton; which included the 226 bales in question. Nothing was said about the form- of the receipt by plaintiff's, but their silence authorized the giving of a negotiable one, if in accordance with the usages of business. By this consent and act of the plaintiffs, the transaction of the loan upon the pledge of the cotton between the Security Company and Biddle & Co. became complete according to the intention of the parties, ánd no one can doubt that, if Biddle & Co. had paid for the qotton on Tuesday following, the Security Company could have held it against them and every one. This act is claimed to be a ratification on the part of the plaintiffs, of the arrangement to pledge the cotton made by Biddle & Co. But the idea of ratification necessarily implies knowledge of the subject-matter ratified, and as it does not appear that plaintiffs, when they directed the receipt to be given, knew of the loan and its condition, and of the order of Biddle & Co. to deliver the receipt under that contract, it cannot be maintained that the Warehouse and Security Company’s right to the cotton can stand on the ground of ratification. It is urged by the plaintiffs’ counsel, that, as the company had parted with their money on the eighth, they cannot be said to have been induced to do so by a receipt not in existence till the ninth. This position is well taken ; for although the check was given on an executory agreement, yet, as matter of fact, it was delivered to Biddle & Co., and by them put to their credit in bank, on the eighth, and at least twenty-four hours before the receipt was delivered. It is difficult therefore for the defendants to stand upon a claim of superior right to the cotton, as iona fide purchasers .for value. Whatever rights they have as against the plaintiffs, must rest upon another principle — the principle of estoppel in pais.

We have already seen, that if on Friday the eighth, when the company first called upon the warehouseman for a receipt for the cotton, it had' been refused, and they had been told that Biddle & Co. had no right to any receipt, the company would have been at liberty to have demanded their check from Biddle & Co., or to have pursued its proceeds then lying to their credit in bank, either on the ground of fraud, or of the non-performance of the condition on which the check was given. They were lulled into security by the statement of the warehouseman, that the receipt would be delivered on the following day, when the delivery of the cotton would be complete. For this statement the plaintiffs were probably not responsible; but there was no lack of vigilance on the part of the Warehouse and Security Company in waiting till the next day, and therefore their right to such remedy of recaption remained in full vigor on the ninth. On Saturday the plaintiffs, by their own voluntary act, caused the delivery of the receipt which the warehouseman gave on the order of Biddle & Co. This act the plaintiffs did with full knowledge that the cotton had not been paid for by Biddle & Co., and that, according to the usage of business, it was not to be paid for until the following Tuesday, the twelfth of May. It is apparent that they relied upon the responsibility and business integrity of Biddle & Co. They are chargeable with the negotiability of the receipt, because they imposed no limit as to its form, and the warehouseman did not exceed his authority in giving it in that form. It is no strained inference to say that plaintiffs probably acted upon the assumption that Biddle & Co. needed the receipt to raise' the money to pay for the cotton on the following Tuesday, and that they intended to give them the facility for so doing. But however that may be, they voluntarily armed that firm with an instrument which was the evidence of title and possession, and upon which any bona fide purchaser for value could have acquired a perfect title to the cotton as against them. Morally considered, there is but small difference between the party who might advance his money on presentation of that receipt, and the party that in good faith had before done'so upon an order for the receipt, under an executory arrangement of which the delivery of the receipt was at once the consummation and consideration. But, legally speaking, the difference rests upon a sound principle of commercial law, which, as the learned counsel for the plaintiffs says, “ goes by sight and not by faith ” (although faith is the basis of all commerce). The plaintiffs are therefore able to say to the defendants: You did not part with your money on the receipt we gave on Saturday, because you had already given it to Biddle & Go. on Friday. But did not the Security Company part with something, which, under the circumstances of this case, might have been of equal value to them; and have they not lost that, by the act of plaintiffs in giving the receipt, and their delay in notifying them of Biddle & Co.’s insolvency until the thirteenth of May, when its pursuit was hopeless ? If this question be answered in the affirmative, we do not see why the principle of equitable estoppel, already alluded to, does not step in to protect the defendants. It appears' that, on Friday, the credit which the deposit of the cheek of $44,000 gave to Biddle & Co. in their bank, was intact, as their Dalanee on that day was more than $50,000. It appears also, that on Saturday, and at the hour when the receipt was delivered, which was after the close of banking hours, the same account was in credit $31,878.96, which is a sum greater than the company had loaned on the security of the 226 bales of cotton, as the computation made in the invoice will show. This was a tangible indemnity, which, had not the receipt been given, the company could have seized by legal process, and which probably Biddle & Co. would voluntarily have returned, to have avoided arrest and prosecution for fraud. These were rights which the company possessed- and could have exercised to save themselves from loss, but which, as the case shows, were gone when the plaintiffs repudiated the receipt, on the thirteenth of May.

It is not necessary to an equitable estoppel; that the party should willfully intend to mislead, nor that the party who claims the estoppel shall have acted affirmatively upon it. It is enough if he have been induced thereby to refrain from such action as lay in his power, by which he might have retrieved his position and saved himself from loss. This question has been so ably and fully considered by the Court of Appeals, in the late case of The Continental National Bank v. The Bank of the Commonwealth , that its further discussion seems wholly unnecessary. That case and those cited in the opinion establish, as it seems to us, that a clear equitable estoppel arises upon the undisputed facts of this case against the plaintiffs and in favor of the defendants, because, by their voluntary act of delivering the warehouse receipt, they enabled Biddle & Co. to consummate the pledge in such form as apparently to give possession and title; and by that means, and by their neglect, the Warehouse and Security Company were deprived of valuable modes of redress, which men of ordinary prudence and diligence would have pursued. The plaintiffs did not ask to go to the jury upon any of the questions of fact upon which the estoppel arises; and, indeed, we think there was no conflict of evidence to carry the question to the jury, had such request been made. So far as the requests incidentally or argumentatively affect the question, through knowledge of the custom or the usage of dealing in cotton, they may be assumed as true, without changing the rights of the defendants. There is nothing, we think, in conflict with the views above expressed on the question of estoppel, in Taft v. Chapman in which the owner of the bonds had done no act invoking the application of the principle to him; nor in Barnard v. Campbell, which was decided distinctly upon the ground that the doctrine of estoppel had no foothold in the facts of the case. “ The defendants here,” says Allen, J., in that case, at no time had any statement or declaration of the plaintiff upon which to rely, and were not led to act, or to forbear to act, by any documentary evidence of title in Jeffries, emanating from them.” It would be difficult to say this with truth in the case before us.

We are of opinion that the motion for a new trial should be denied, and that the defendants should have judgment upon the verdict, with costs.

Present — Davis, P. J., Daniels and James, JJ.

James, J., dissented.

Ordered accordingly. 
      
       Kein v. Tupper, 52 N. Y., 550, and cases there cited.
     
      
      50 N. Y., 575.
     
      
       50 N. Y., 445.
     
      
       55 N. Y., 456.
     
      
      
         Casco Bank v. Keene, 53 Maine, 103; Irving Bank v. Wetherald, 36 N. Y., 885; Delaware Bank v. Jarvis, 20 id., 226; St. John v. Roberts, 31 id., 441; Brown v. Montgomery, 20 id., 287; Knights v. Wiffen, L. R. (5 Q. B.), 660; Man. & Tra. Bank v. Hazard, 30 N. Y., 226.
     