
    FIRST NATIONAL BANK OF CHICAGO, Respondent v. ROBERT J. DEAN, et al., Appellants.
    
      Warehousemen and warehouse receipts—Warehouses, free and bonded— Responsibility of warehousemen—Transfer of warehouse receipts, their negotiability by endorsement under the statute.
    
    The plaintiff as the holder of two warehouse receipts issued by defendants, as warehousemen, sought to recover damages for the failure of the defendants to deliver to plaintiff the goods, included in said receipts, after demand for the same.
    The court below submitted certain questions of fact to the jury for a special finding thereon, who found: First—That the plaintiff did, on the faith of the warehouse receipts issued by the defendants, make additional advances to Meade, Von Bokkelen & Go., so that their position would be changed for the worse if not allowed to enforce the receipts according to their legal effect; Second—The injury aforesaid would amount to as much as the value of the goods; Third—The plaintiff believed that the goods were free goods, that is, goods on which the government tax had been paid, and they did act upon that belief in their dealings with Meade, Von Bokkelen & Co.; Fourth—The value of the goods at the time the demand was made for them was $1.542,50. Both parties moved for a judgment on the verdict, and the court having discharged the jury, entertained the motion for judgment and reserved the questions of fact presented by the pleadings and the evidence not passed upon by the jury, and the questions of law, for further consideration and determination by the court; and after-wards the court, having adopted the findings of the jury, did, by the trial judge, make and file its decision with findings of fact and conclusions of law, and direct the entry of judgment for the plaintiff, from which this appeal is taken.
    The court below held, as follows: Warehouse receipts were not negotiable by common law, hut to facilitate their transfer and to aid transactions on the faith thereof, a statute was passed making them negotiable by endorsement (Laws of 1858, chap. 826, § 6). This was designed to protect purchasers and pledgees irrespective of the validity of the transfer as between the immediate parties. Under the provisions of the statute the plaintiff, by the transfer to it of the warehouse receipts as security for present and future advances, became the owner of the goods stored, and entitled to their possession without regard to the equities existing between the preceding holders. The goods represented by the warehouse receipts in this case consisted of brandy, upon which a government tax was due; and if the receipts had indicated that the goods were stored in •a bonded warehouse, the plaintiff would have been chargeable with notice of the act of congress in regard to internal revenue, and it would have become a part of the contract; but these receipts, instead of stating that the brandy was stored in a bonded warehouse, contained, the declaration that they were stored at Numbers 492 and 494 Greenwich street, New York City; and at the head of each receipt is the further declaration that the warehouse, 492 and 494 Greenwich street, is a free warehouse, a phrase which means a warehouse for the storage of goods not liable to or relieved from bonded duties. The representation at the head of the receipts, that the goods were stored in a free warehouse, estops the defendants from claiming, as against the plaintiff (who was a bona fide transferee of the receipts for value), that the brandy was subject to a government upon tax, the familiar principle that where one of two innocent persons must suffer a loss, it must be borne by that one of them who, by his conduct, acts or omissions, has rendered the injury possible. The plaintiff could not, under the circumstances, be-required to pay the government tax as a condition precedent to the right of claiming the goods from the defendants, and the latter were guilty of a conversion of the brandy in imposing that payment as a condition of their delivery. The plaintiff became the owner and holder of the two receipts, and became entitled to the possession of so much brandy stored in a free warehouse, with title unimpaired by equities existing between the prior holders, and the defendants having refused to deliver the brandy to plaintiff are liable for the value thereof.
    Before Freedman, P. J., and Gildersleeve, J.
    
      Decided January 11, 1892.
    Appeal from a judgment entered upon the special verdict of a jury and the findings and decision of the trial judge at a trial term. The facts and points in the case appear fully in the opinion of the judge at trial term, which was as follows :
    
      
      Note: The points of counsel are very full and exhaustive on every feature of this important case, and require more space than can be given in this report, yet deserve special reference to the same on the files of the court.
    
   “McAdam, J.

Warehousemen are not only responsible for damages which arise by their tortious acts, but sometimes for losses occasioned by the innocent mistake of themselves or their servants. Thus they are liable for making a delivery of goods to a person not entitled to receive them. Story on Bailments, § 414; 2 Am. and Eng. Enc. of Law, 888, 890.

Their business has increased with the evolution of trade and commerce, and their rights and liabilities are defined by custom and by statute, so that they are generally understood by business men. They have for years issued warehouse receipts for goods stored with them, and the transfer thereof from one holder to another has been regarded as a symbolical delivery of the goods. These receipts were not negotiable at common law, for the reason that negotiability only exists in the case of absolute promises for the payment of money, a thing negotiable in itself, and which cannot be reclaimed by the true owner from any one who has received it bona fide and in exchange for a valuable consideration. But chattels personal are wholly unsusceptible of negotiation in themselves, and it was deemed manifestly inconsistent to give the documents which represent them a different character.’ 1 Smith’s L. C., Am. ed., 895, 896.

“ To facilitate the transfer of warehouse receipts, and to aid transactions on the face thereof, a statute was passed making them negotiable by endorsement. (Laws 1858, chap. 326, § 6.) This was designed to protect purchasers and pledgees irrespective of the validity of the transfer as between the immediate parties. Whitlock v. Hay, 58 N. Y., 484. To further protect the public, warehousemen were forbidden to issue receipts or vouchers for goods not actually instore, and it is a penal offence to issue fictitious certificates. (Laws, 1858, chap. 326; Laws, 1866, chap. 440; Penal Code, § 629. Under these provisions the plaintiff, by the transfer to it of the warehouse receipts as security for present and future advances, became the owner of the goods stored, and entitled to their possession without regard to the equities existing between the preceding holders. A lender on collateral security is as much a purchaser for value as if he bought out and out. Roxborough v. Messick, 6 Ohio St. R., 448; 2 Am. Lead. Cas., 235, 5th ed.

“The exigencies of trade called warehouse receipts into being. They are substantially acknowledgments by public or private agents that they have received merchandise from whom or on whose account, and usage has made the possession of such documents equivalent to the possession of the property itself. Thus, warrants or receipts are habitually issued for the merchandise deposited in the various warehouses; and as it is expressly or tacitly agreed that the goods shall be surrendered if the warrant, vouched by the order or endorsement of the owner, is presented, a sale, attended by the transfer of such an instrument, is as effectual as if the property were handed over to the purchaser. This is a mere extension of the rule that when actual delivery is impracticable, a symbol may be substituted for the goods. 1 Smith’s L. C., 8th ed., 1223. The goods represented by the warehouse receipts, in this instance, consisted of brandy, on which a government tax was due; and if the receipts had indicated that the goods were stored in a bonded warehouse, the plaintiff would have been chargeable with notice of the Act of Congress in regard to internal revenue, and it would have become part of the contract. Van Schoonhoven v. Curley, 86 N. Y., 187. The receipts, instead of stating that the brandy was stored in a bonded warehouse, contained a declaration that they were stored at 492 and 494 Greenwich street, New York City, and at the head of the receipts is a further declaration that the warehouse 492 and 494 Greenwich street is a free warehouse—a phrase which means a warehouse for the storage of goods not liable to or relieved from bonded duties.

“ The receipts were issued to Marschall, Spellman & Co., and were by them transferred to the Meade, Yon Bokelen Company, of Chicago, Illinois, and that company at Chicago, aforesaid, transferred them to the plaintiff as security for present and future advances; and the plaintiff, upon receiving the transfers, made fresh advances, exceeding the value of the property represented by the warehouse receipts. The jury so found, and the evidence sufficiently sustains their finding. The representation at the head of the receipts, that the goods were stored in a free warehouse estops the defendants from claiming as against the plaintiff a bona fide transferee of the receipts, that the brandy was subject to a government tax, upon the familiar principle that where one of two innocent persons—that is, persons each guiltless of an intentional wrong, must suffer a loss, it must be borne by that one of them who, by his conduct, acts or omissions, has rendered the injury possible. (Pomeroy, Eq. Jur., vol. 2, § 803.)

Equitable estoppel is the effect of the voluntary conduct of a party whereby he is absolutely precluded, both at law and in equity, from asserting rights which might perhaps have otherwise existed, either of property, of contract, or of remedy, as against another person who has, in good faith, relied upon such conduct, and has been led thereby to change his position for the worse, and who, on his part, acquires some corresponding right, either of property, of contract or of remedy, (lb., § 804.)

“ To constitute such an estoppel, the following elements are essential: (1). There must be conduct—acts, language or silence—amounting to a representation or a concealment of material facts. (2). These facts must be known to the party estopped at the time of his said conduct, or, at least, the circumstances must be such that knowledge of them is necessarily imputed to him. (3). The truth concerning these facts must be unknown to the other party claiming the benefit of the estoppel at the time when such conduct was done, and at the time when it was acted upon by him. (4). The conduct must be done with the intention, or, at least, with the expectation that it will be acted upon by the other party; or under such circumstances that it is both natural and probable that it will be so acted upon. (5). The conduct must be relied upon by the other party, and thus relying he must be led to act upon it. (6). He must in fact act upon it in such a manner as to change his position for the worse. (75., 805.)

" The acts of the defendants contain all the ingredients necessary for an estoppel, and the jury found against the defendants on all the facts required to make the estoppel effectual. In a free warehouse, the warehouseman is the sole custodian of the goods, and w'hen his charges are paid the owner is entitled to them. In a bonded warehouse the goods are in the joint custody of the proprietor thereof and a storekeeper assigned to it by the government (R. S. of U. S., § 3274); and, in order to get the goods out, the owner must settle with both the warehousemen and the government. (For an interesting account of the origin and growth of the warehouse system in England and the United States, see 2 Kent’s Com., 11th ed., 737.) The plaintiff could not, under the circumstances, be required by the defendants to pay the government tax as a condition precedent to the right of claiming the goods from the defendants, and the latter were guilty of conversion in imposing that as a condition to their delivery.

“ Counsel have discussed at length the question, whether the Illinois or the New York rule is to govern in determining whether the plaintiff is a bona fide transferee of the receipts for value. Under the Illinois rule, one who takes a negotiable instrument in good faith in payment, or as collateral security for the payment of an antecedent indebtedness, parts with such value as entitles him to all the rights of one who purchases a negotiable instrument for a present consideration without notice of existing equities. Manning v. McClure, 36 Ill., 499; Butters v. Haughwout, 42 Ib., 18. The goods were stored in New York; the contract was made in that state and was to be performed there, and the plaintiff is in the forum of that state seeking to enforce the obligation against the defendants, who reside there, so that both the lex loci and lex fori unite in . requiring the rights and obligations of the parties to be determined exclusively by the laws of this state. Hallgarten v. Oldham, 135 Mass., 1; Guillander v. Howell, 35 N. Y., 657; Loftus v. Bank, 135 Penn. St., 97; Keller v. Paine, 107 N. Y., 83; Warner v. Jaffray, 96 Ib., 248; Dickinson v. Edwards, 77 Ib., 573; Wayne Co. Bank v. Low, 81 Ib., 566. It cannot be that if a negotiable obligation, made in this state, is then re-transferred for a precedent debt, the transferee is not a bona fide holder to shut out equities in favor of the maker; and yet if the obligation is transferred in Illinois, to a resident of that state, our courts must ignore the rule adopted in this state, and follow that prevailing in Illinois, and shut out the equities. Any such doctrine would be an unjust discrimination in favor of non-residents against residents of our own state inconsistent with every principle of comity or notion of uniform justice,. and cannot prevail. As against the Meade, Yon Bokelen Company, its obligation might, in a proper action, be determined by the laws of Illinois, because its indorsement (which is, to an extent, an independent contract) was made and delivered there, and it cannot object that its obligation is determined according to the law of the place where it was entered into. Story Conf. of Law, § 287a ; Weil v. Lange, 6 Daly, 549; 2 Am. and Eng. Enc. of Law, 329, 330. Under the finding of the jury, which is satisfactorily sustained by the evidence, the plaintiff became a bona fide owner of the warehouse receipts, under the laws of this state, as declared in Coddington v. Bay, 20 John., 637, and kindred cases, so that it is of little practical moment whether the Illinois or the New York rule is to control.

Peckham & Tyler, attorneys, and Charles A. B. Pratt of counsel, for respondent.

Hatch & Warren, attorneys and of counsel, for appellants.

The plaintiff became the owner and holder of the two receipts, and entitled to the possession of so much brandy stored in a free warehouse, with title unimpaired by equities existing between prior holders. The defendants having refused to give up the brandy are liable for the value thereof, as assessed by the jury, $1,342.50, with $98.50 interest thereon, making together $1,441; and for this amount the plaintiff is entitled to judgment.”

Per Curiam.

The judgment is affirmed, with costs,. on the opinion of the court below.  