
    FIRST NATIONAL BANK OF CHICAGO v. DEAN.
    
      N. Y. Superior Court, Trial Term;
    
    
      June, 1891.
    I. Warehousing; receipts.] Warehouse receipts transferred 'to secure present and future advances, are transferred for valuable consideration; and the transferee becomes the owner of the goods and entitled to their possession without regard to the equities existing between the preceding holders.
    12. The same, estoppeli\ A warehouseman is estopped by a receipt stating that the goods are stored in a free warehouse, from showing as against a bona fide transferee for value that the-goods are in fact stored in a bonded warehouse ; and the warehouseman will be liable for conversion, if he insist as a condition to the delivery of the goods to such transferee, that he pay the duty for which the goods were bonded.
    3. The same; conflict of lawsi\ It seems that where a warehouse receipt is given in this State for goods stored here, and an action is brought here against‘the warehouseman by a person to whom the receipt had been transferred in another State, the question whether such transferee is a bona fide holder for value is to be determined by the laws of this State. Otherwise if the action had been between the persons by and to whom the. transfer was made.
    Motion for judgment on verdict.
    This action was brought by the First National Bank of Chicago against Robert J. Dean, Edward N. Dean and Alvin J. Donally. It appeared from the complaint that the defendants had issued to Marshall Spellman & Co., negotiable receipts for brandy in a free warehouse. Marshall Spellman & Co. indorsed the receipts, to the Meade,Van Bokkelen Co., who indorsed them to-the plaintiff. The goods were in fact, in a bonded warehouse, the receipts having been negligently issued by defendants. The defendants refused to deliver the-goods to plaintiff.
    The answer set up that plaintiffs were not transferees for value, the receipts having been transferred to them to secure an existing debt; that Marshall Spell-man & Co. delivered the receipts to the Meade Van Bokkelen Co. for the purpose of enabling the latter to obtain samples in negotiating a ■ sale that was never consummated, and that the Meade Van Bokkelen Co. stole the receipts and hypothecated them to the-plaintiff; that the receipts were issued to Marshall Spellman & Co. with the understanding that the goods were subject to the United States tax and bonded warehouse charges.
    
      The court submitted certain questions of fact to the jury for a special finding thereon. The facts found by the jury were as follows : First. That the plaintiff did, on the faith of the warehouse receipts issued by the-defendants, make additional advances to the Meade Van Bokkelen Company, 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 the Meade Van Bokkelen Company. Fourth. The value of the goods at the time the demand was made for them was $1,342.50.
    Both sides move for judgment on the verdict.
    
      Peckham & Tyler, for plaintiff,
    
      Hatch & Warren, for defendants.
   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. & 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 ±0 aid transactions on the faith thereof, a statute was passed making them negotiable by indorsement (1858 c. 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, ware-housemen were* forbidden to issue receipts or vouchers for goods not actually in store, and it is a penal offence to issue fictitious certificates (1858 c. 326 ; 1866 c. 440; Benal 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 acknowledgements by public or private agents that they have received merchandise, from whom or on whose account, and usage has made the possession of documents equivalent to the possession of the property itself. Thus warrants or receipts are habitualljr 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 indorsement 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 Marshall, Spellman & Co., and were by them transferred to the Meade Van Bokkelen 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 pos-, ■sible (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 prop•erty, 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 <(Ib. § 804).

To constitute such an estoppel the following elements are esseiitial: “ (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 ” [lb. '§ 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, when his charges are paid, the owner is entitled to them. In a bonded warehouse the goods are in the joint custody óf the proprietor thereof and a storekeeper assigned to it by the government (R. S. of U. S. sec. 3274), and, in order to get the goods out, the owner must settle with both the warehouseman 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, with•out notice of existing equities (Manning v. McClure, 36 Ill. 499; Butters v. Haughwout, 42 Ill. 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, 133 Penn. St. 97; Keller v. Paine, 107 N. Y. 83 ; Warner v. Jaffray, 96 ; Id. 248; Dickinson v. Edwards, 77 Id. 573 ; Wayne Co. B’k v. Low, 81 Id. 566).

It cannot be that if a negotiable obligation made in this State is there 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 Van Bolckelen Co., 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., § 287 a; 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 Johns. 636) and kindred cases, so that it is of little practical moment whether the Illinois or the New York rule is to control.

The plaintiff became the owners and holders 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.  