
    Joseph B. Moors, App’lt, v. Henry P. Kidder et al., Resp’ts.
    
    
      (Court of Appeals,
    
    
      Filed June 7, 1887.)
    
    1. Bill of lading—Title of assignee of—Letter of credit.
    Baring Bros., through K. P. &Co,, their American agents, issued letters of credit to one Swain, he agreeing to pledge the goods purchased therewith to them, with right to take possession, etc. Swain purchased shellac in Calcutta, the bill of lading being sent to IC. P. & Co. This Swain obtained from them, indorsed in blank, upon the pretense that he wished to enter the goods in their name at the bonded warehouse; but he, through his broker, had them entered in his own name, and obtained a loan from plaintiff upon the warehouse receipt. Baring Bros, having seized the goods, this action of replevin was brought, held, that the Baring Bros, were owners and not mere pledgees, and had the title to the goods. Following, Farmers? and Meet,. Bk. v. Logan, 74 3ST. Y., 573. Batallo, Earl and Peckhaih, J. J., dissenting.
    3. Same—Factor’s Acts.
    
      Meld, that the settlement of the fact of ownership disposes of the case as affected by the factor’s acts of this state and Massachusetts.
    
      Appeal from, the supreme court, general term, first department, affirming a, judgment of the circuit, dismissing plaintiff’s complaint, in an action brought to replevy ninety-five cases of shellac. Plaintiff’s claim was founded upon an hypothecation of the goods to him by Paul M. Swain to secúre the payment of a loan. The defendants, Kidder, Peabody & Co., as agents for Baring Bros., who were also made defendants, also claimed the shellac as security for money advanced to Swain in payment of its purchase-price, by the following letter of credit:
    “Kidder, Peabody, & Co., 40 State Street,
    “ Boston, August 3, 1881.
    “ Messrs. C. C. Bancroft & Co., Calcutta:
    “Dear Sirs—You are hereby authorized to value on Messrs. Baring Bros. & Co., London, for account of Paul M Swain, Esq., Boston, Mass., by bills at three (3) months’ sight for the cost of any shipment of goods via San Francisco and thence overland, or at tíiree (3) to six (6) months’ sight for the cost of goods by any other route direct, or under through bills of lading to Boston or New York, to the extent of three thousand pounds sterling (say £3,000 stg.), and we hereby agree with the drawers, indorsers, and bona fide holders, respectively, of the bills drawn by virtue of this credit, that the same shall be duly honored by Messrs. Baring Bros. & Co., upon presentation at their banking-house in London, if drawn and negotiated within six (6) months from this date, and if accompanied by bills of lading for such goods filled up to the order of Messrs. Baring Bros. & Co., and by invoice of the same to their order for the account of whom it may concern.
    “A duplicate of such invoices with consular certificate attached, together with one bill of lading, to be sent direct to us either by vessel or mail.
    “Very respectfully, your obedient servants,
    [Signed.] ' “ Kidder, Peabody & Co.”
    Swain agreed with the defendants in accepting the letter to provide funds in London to meet any bills which might be drawn by virtue of the credit, and to give security to Baring Bros, for the amount of the bills if required, and pledged all property which might be bought with the proceeds of the letter of credit to the Baring Bros, for any moneys due them, said property to “be held subject to their order or demand, with authority to take possession and dispose of the same at discretion for their security or reimbursement, and so to take possession and dispose of the same, either by themselves or their agents, or by Messrs. Kidder, Peabody & Co.” Swain also agreed to indemnify defenders for any bond given to any custom house, etc. Bancroft & Co., on this purchased the shellac for Swain, and drew their draft on Baring Bros, for its price. The shellac was shippped, and in due time reached New York, and was placed in a bonded warehouse. Kidder, Peabody & Co. delivered the bill of lading to him with a blank endorsement, on his representation that he wanted to enter them at the custom house and store them in the name of Baring Bros. & Co., and gave them the following receipt:
    Boston, Kov. 18,1881.
    " To Messrs. Kidder, Peabody & Co., Boston•
    
    Gentlemen—I acknowledge receipt from you, as attorneys for Messrs. Baring Brothers & Company, of invoice and bill of lading of S S T Mirzapore
    D C One hundred cases of shellac.
    M
    CM R 15678 5-6
    
    Kew York.
    Shipped by C. C. Bancroft & Company on board S. S., C. o. Manchester, at Calcutta, and consigned to the order of Messrs. Baring Brother & Company, and indorsed by you, as their attorneys, to me. Such invoice and bill of laaing are delivered to me for the purpose of enabling me to enter the goods referred to in them at the custom house.
    And I hereby agree to place .the goods on storage for Messrs. Baring Brothers & Company, and subject to their order, and so thar they may be applied to the due performance of the agreement contained in the receipt signed by me for your letter of credit on them, Ko. 2,419, or any other-letter of credit on them, through which such goods have been purchased, we agreeing to keep them covered by insurance against fire for account of and loss payable to Messrs. Baring Brothers & Company.
    It is understood that the said goods are to be warehoused in the name of Messrs. Baring Brothers & Company, and warehouse receipts therefor handed to you for them.
    Very respectfully,
    Your obedient servant,
    (Signed) PAUL M. SWAIK.”
    The bill of lading was delivered to Swain with a blank indorsement, and he took it to William A. Brown, a custom house broker, who secured the transfer of the shellac to the credit of Swain, and the latter applied to plaintiff for a loan upon it, and on an order from plaintiff the warehouseman delivered the shellac to plaintiff, who then made the loan to Swain. The defendants taking possession of the shellac, this action was begun.
    
      E. R. Robinson, for app’lt; Chas. B. Alexander, for resp’ts.
    
      
       Affirming 34 Hun, 534.
    
   Finch, J.

The entire argument of the appellant turns upon the proposition that Swain was the general owner of the shellac, and the Barings merely pledgees. Upon that assumption the argument runs smoothly to its conclusion, and encounters no serious obstacle. But the grave trouble is in the assumption itself, and the authorities which clash with it. The general subject was very thoroughly discussed in Farmers’ and Mechanics’ Nat. Bank v. Logan (74 N. Y., 573), and whether the doctrine there declared covers the facts now presented, and whether they have or do not have vital distinguishing features, are the real subjects for our consideration. The doctrine stated was, in substance, that where a commercial correspondent, however set in motion by a principal for whom he acts, advances his own money or credit for the purchase of property, and takes the bill of lading in his own name, looking to such property as the reliable and safe means of reimbursement up to the moment when the original principal shall pay the purchase price, he becomes the owner of the property instead of its pledgee, and his relation to the original mover in the transaction is that of an owner under a contract to sell and deliver when the purchase price is paid. The authorities which sustain, and the reasons which justify, the doctrine need not be repeated, and it is required only that we determine whether it applies to and settles the case in hand.

There are some facts in the cited case which are not in this, and there are some in this which were not present in that, and to these and their effect attention must be directed. In that case the purchase was made by the brokers or agents of him who, as the ultimate vendee, may be termed conveniently, if somewhat inaccurately, the principal. Such brokers were buyers and sellers on commission, and it is said were the commercial correspondents to whom the rule refers, and who needed and received its protection, while here the only commercial correspondents were Bancroft & Co., at Calcutta, who are not before the court, and whose rights are not in question. But Bancroft & Co. were the sellers, and not the buyers, of the shellac, in their relation to the parties concerned. They passed their title either to the Barings or Swain; and, while they were commercial correspondents in-some sense, they were not such within the rule under discussion, for they advanced nothing on the credit of the property, and parted with title instead of taking it. The Barings, although bankers, were equally commercial correspondents, and they took title through the bill of lading, and bought the property on their own credit. But, if Bancroft & Co. be treated as the commercial correspondents, the case is not changed. Like Sears & Daw m the Logan Case, they bought the shellac on their own credit or with their own money, and got reimbursement by drawing upon the Barings, transferring title to them by the invoice and bill of lading to their order, as Sears & Daw did to the discounting banker in the Logan Case. The difference in the manner of making the advances is not material. In each cáse the bankers became owners or pledgees.

In the Logan Case the purchasing correspondent took from the vendor a bill of sale as well as a bill of lading to his own order, but the Barings took only the bill of lading if the invoice to their order was not tantamount to a bill of sale. We do not deem that difference, if it was one, at all material. The title passed as effectually by the latter paper alone as if it had been preceded by the former, for we have uniformly held that the bill of lading is the evidence of title, and is sufficient to vest the ownership and absolute control in him to whose order it is drawn. The purchase in the case citéd seems to have preceded the shipment so as to make natural and convenient a bill of sale covering the interim. If it had been intended in this case to vest the general ownership in Swain, and make him the purchaser, a bill of sale to him, or an invoice to his order, might naturallly have been made, but as to the Barings the purchase and the shipment were practically coincident.

In the cited case, again, the bill of lading, as attached to and sent forward' with the discounted draft, had stamped upon it a statement addressed to the original principal that the wheat, and the insurance of it, were pledged to the plaintiff as security for the payment of the draft, and that the wheat was put into his custody, in trust, for that purpose, not to be diverted to any other use until the draft was paid, and that, upon his accepting and paying the draft, the claim of the plaintiff would cease. This appears to have been an effort to put in words upon the bill of lading the legal meaning of the transaction. It was not necessary to tiie certainty or scope of that legal meaning, and amounted only to a prosecution A similar distinction was sought to be drawn in the cited case itself between it and Bank of Toledo v. Shaw, 61 N Y., 283, and 69 N. Y., 624. In that the bill of lading was, when forwarded, accompa,nied by a letter explicitly directing the property to be delivered only upon payment of the specified purchase money. The comment of the court in the Logan Case was: “ Such agreement was but putting into terms the legal effect of the transaction in the case before us; for we have shown by authority that the taking of the bill of lading in the name of the plaintiff for its account and the discount of the draft by it on the strength thereof did transfer to it the title to the wheat.” Indeed, it seems to me that the title of the then plaintiff was rather weakened than strengthened by the matter stamped upon the bill of lading, for it speaks of the transaction as a pledge, when in truth it was an ownership, and it appears to be for that reason that the court, in upholding the banker’s title, founded on the bill of lading, speak of the latter “even with the modification thereof made by the matter stamped upon it” and “even as modified,” So that the absence of the special indorsement in the case at bar, at least, does not weaken the bearing of the Logan Case upon it.

But a much more important suggestion made by the appellant is founded upon the terms of the written agreement-between Swain and Kidder, Peabody and Co. as agents of the Barings, which was intended to govern and control the entire transaction. They issued a letter of credit addressed to Bancroft & Co., and authorizing them, for account of Swain, to value on the Barings by bills for £3,000, and promised to accept and pay those bills “ if accompanied by bills of lading for such goods filled up to the order of Messrs Baring Bros. & Co., and by invoice of the same to their order for account of whom it may concern.” Swain on his part agreed to provide funds in London to meet such bills as should be drawn, at their maturity, and that “ all property which shall be purchased by means of the within credit, together with the bills of lading for the same, are hereby pledged and hypothecated to Messrs. Baring Bros. & Co. as collateral security for the payment as above promised, and shall be held subject to their order on demand, with authority to take possession and dispose of the same at discretion for their security and reimbursement. ” The argument upon this provision rests upon the words “pledged and hypothecated” and “collateral security,” and avers, as a consequence, that Swain was, within the contemplation of parties, general owner of the shellac, and the Barings merely pledgees. It is observable that Swain did not so-understand it; for in his testimony he said: “Kidder, Peabody & Co. were the owners of these goods till they arrived in Boston.” It has already been mentioned that a similar expression was used by the plaintiff in the Logan Case in the matter stamped upon the bill of lading describing the wheat as “pledged” to the plaintiff, and as “security” for the payment of the draft, and so little did the use of the inapt words affect the plain and unequivocal substance of the transaction in the mind of the court that the use of the word " pledged” was not even made the subject of remark. It is further quite evident that, from the moment of the shipment and the delivery of the bill of lading, the absolute jus disponendi was in Kidder, Peabody & Co. by the very terms of Swain’s agreement. They were at liberty to “ dispose ” of the property “ at discretion,” and either for “ security” or reimbursement. It is also to be noted that what is spoken of as “pledged” is not merely the goods or the property, but the bills of lading also. These documents carry the title as well as the right of possession, and the pledge or hypothecation is expressly applied to both The meaning assuredly was that the title should pass. Very likely, as is suggested for the defendant, the transfer was rather in the nature of a mortgage in which the title passes than in that-of a pledge in which the pledgeor is general owner. Here, then, we have a case where no title was attempted to be given to Swain, where it was given to the Barmgs by the ill of lading to them, where they paid for the property by their own credit and money, where it was the very pith of the adventure that the shellac should furnish the means of meeting the price, where the invoice was to be made to their order, where the possession was to be theirs, where they were to have the right of disposal at discretion, and Swain was to have no control until the payment of the draft. In such a case he could not be general owner, and an inference to that effect from an inapt expression cannot be indulged. So far, the case, in our judgment, cannot be distinguished from that against Logan, upon the authority and reasoning of which the Barings must be deemed owners, and not merely pledgees.

The settlement of that point disposes of the case as affected by the factors’ acts of this state and Massachusetts, except in a single respect. It is not pretended that plaintiff is protected under the provision which makes the transfer by an agent intrusted with the evidence of title, and which has been made upon the faith thereof,” valid under some circumstances, even against the real owner; for the bill of lading, with its indorsement, was not shown to the plaintiff, and in no manner affected his action. But the appellant insists that there was evidence enough to go to the jury that Swain was intrusted with the property for the purpose of a sale, or of obtaining advances upon it, and so, under the factors’ act, the plaintiff’s title as pledgee is to be protected. The course of business brought the shellac to the custom-house, and into the " general order ” stores. From that custody it could only be removed by some action of Kidder, Peabody & Co. by force of their bill of lading. Swain applied for the papers to Mr. Collins, who was their merchandise clerk, and who testifies. I asked what he was going to do with the papers, and he said he wanted to enter them at the custom-house, and warehouse them for account of Baring Brothers & Co.” Collins repeated that request to Peabody, who gave his consent. Thereupon Swain signed a receipt for the papers, which specifies explicitly this one sole purpose for which they were put in his control, and thereupon they were indorsed in blank to enable Swain to make the entry, and to warehouse the goods as agreed. Instead of doing that, Swain entered them ■ in the name of his broker, and then pledged them to plaintiff as security for a loan, the pledgee trusting to the representations of Swain and the warehouse receipt which he obtained. Peabody, so far as he was a party to the occurrence, fully corroborates Swain, and the latter was not thereafter called to deny, and did not deny, their version of the transaction. All that was later shown in rebuttal was a copy of the complaint in an action begun by Kidder Peabody & Co. against Swain and Casey, who was the warehouseman. The opinion of the general term shows so fully that the statements of that complaint taken together were in no manner inconsistent with the evidence given for the defense as to make a repetition needless; and we may confine our attention to the evidence of Swain, and what it is claimed to establish.

_ Invariably the manner of dealing between the parties was like that developed in this case, so far as the written agreements were concerned. These were in two forms. One of them, that which we have described, which intrusted the shipping papers to Swain solely that he might enter and warehouse the goods in the name of the Barings; and the other, which recited their sale, and gave them into the custody of Swain, to make delivery, and collect the proceeds which were stipulated to “belong” to the Barings, and to be handed over to them. Swain could not name a single instance in which one or the other of these papers was not signed by him, but it was sought to show by him that the action under them was loose, and he was permitted to act differently. He said that he had been in the habit of entering the goods sometimes in his own name, and of selling or pledging the goods and paying the proceeds long after, to meet the drafts maturing in London. Under the second form of receipt a sale was contemplated, and payment of proceeds over to Kidder, Peabody & Co., and that they did not demand them immediately upon the sale, and often accepted them later, although in time for the drafts, shows simply their confidence in Swain, but did not make their money his, and serves sufficiently to explain Peabody’s alleged admission that Swain had been permitted to do as he pleased. And it is noticeable that the one single instance in which Swain says he can remember the facts of the deviation from the written stipulation was one under the second form of receipt, in which, after a sale, he did not deliver -over the proceeds promptly upon obtaining them. But he admits that he never had any consent to warehouse the 'goods in any other name than that of the Barings, and, out ■ of thirty-four instances in which the papers were put in evi-. dence, Swain, with the aid of the books, was able to name but four instances in which he warehoused in his own name and pledged the goods. He does not pretend that the fact came to the knowledge of Kidder, Peabody & Co., and any such knowledge is denied by them. The argument here is that they must have known, and the jury might have found that they did know. Our opinion is with that of the courts below, that such a finding would not have been warranted. All that Swain’s evidence tends to show is that in transactions under form No. 1 he often did not at once turn over the warehouse receipts, and was not questioned about them, and in transactions under form No. 2 was not immediately called upon for the proceeds received. There was not enough to destroy the force and work a modification in the written stipulations of the parties, and no verdict to that effect would have been justified.

The judgment should be affirmed, with costs.

All concur except Rapallo, Earl and Peckham, JJ., dissenting.  