Traders ’ Bank v. Campbell, 81 U.S. (14 Wall.) 87
Case details
Bluebook Citation
Traders ’ Bank v. Campbell, 81 U.S. (14 Wall.) 87
Full caption
Traders ’ Bank v. Campbell.
Country
United States
Jurisdiction
Federal
Court
Supreme Court of the United States
Traders ’ Bank v. Campbell.
1. Suit in chancery by an assignee in bankruptcy to recover the proceeds of goods sold under judgment in a State court against the bankrupt taken by confession when both parties knew of the insolvency.
Such a judgment, though taken before the first day of June, 1867, is an unlawful preference under the 35th section of that act, if taken after the enactment of the bankrupt law.
2. The proceeds of the sale of the bankrupt’s goods being in the hands of . one sued as a defendant, another person who had a like judgment and execution levied on the same goods is not a necessary party to this suit, being without the jurisdiction. The rule laid down as to necessary parties in chancery.
3. The proceeds of the sale being in the hands of the bank, though it had given the sheriff a certificate of deposit, the assignee was not obliged to move against the sheriff in the State court to pay over the money to him, but had his option to sue the bank which had directed the levy and sale and held the proceeds in its vaults.
4. The defendant having money received as collections for the bankrupt delivered it to the sheriff, who levied the defendant’s execution on it and applied it in satisfaction of the same. This is a fraudulent preference, or taking by process under the act, and does not raise the question whether if the defendant had retained the money it could be set off in this suit against the bankrupt’s debt to the defendant.
5. So taking a check from the bankrupt and crediting the amount of the check then on deposit, on the bankrupt’s note the day before taking judgment, was a payment by way of preference and therefore void, and does not raise the question of set-off.
Appeal from the Circuit Court for the Northern District of Illinois.
The bankrupt act of the United States enacts by its 35th section that if any person being insolvent or in contemplation of insolvency, within four months before the tiling of a petition by or against him, with a view to give a preference to any creditor having a claim against him procures his property to be seized or makes any payment, transfer, &c., thereof, directly or indirectly, the person receiving such p. 88payment, transfer, &c., having reasonable cause to believe the debtor to be insolvent, and that the payment, conveyance, &c., is in fraud of the act, the same shall be void, and the assignee may recover the property or its value.
Similarly its 39th section provides that if any person being insolvent or in contemplation thereof should make any payment or transfer of money or property, or give any warrant to confess judgment, or procure or suffer his property to be taken on legal process, with intent to give a preference or to defeat or delay the operation of the act, the money or property might be recovered back if the person receiving the payment or conveyance had reasonable cause to believe that a fraud on the act was intended, and that the debtor was insolvent.
The 20th section of the act provides “that in all cases'of mutual debts or mutual credits between the parties, the account between them shall be stated, and one debt set off against the other.”
The act was approved on the 2d of March, 1867. But a proviso at the end of its 50th section provides, “ that no petition or other proceeding under this act shall be filed, received, or commenced before the 1st day of June, A.D. 1867.”
With this statute and this proviso as part of it in force, Hitchcock & Endicott, traders in Chicago, and keeping their bank account with the Traders’ National Bank there—the bank being in the habit of discounting their notes and collecting their drafts—were requested by the bank, on the 6th of May, 1867, to furnish them with a statement of their affairs; the firm being at this time confessedly debtors of the bank, and in a much-embarrassed and really insolvent condition. A statement was soon furnished by the bookkeeper, which on the 24th of tylay was discovered by the bank to be untrue; the liabilities of the firm being set down in it much below their reality. Thereupon, on the 28th May, the bank brought a suit against Hitchcock & En’dicott, in which, on an allegation of fraud, a capias was issued for the arrest of Hitchcock. To avoid this arrest the firm gave the bank a note, payable on demand, for the whole amount p. 89of their debt, which was $6707.43, with a warrant of attorney to confess judgment, and on the next day, the 29th, the bank entered a judgment in one of the State courts of Illinois for the debt, and $50 attorney’s fee, less $325.20, the amount which the firm bad in deposit account with'the bank on that day. For this $325.20, the firm drew a check in favor of the bank, in virtue of which check, the sura just named was indorsed on the note as a credit. Execution for $6438 was immediately (May 29th) issued on this judgment and levied on a stock of goods belonging to the firm. In what was thus done the president of the bank acknowledged that he was aware of the insolvent condition of Hitchcock & Endicott, and had instituted bis proceeding after taking the opinion of counsel, and learning from this source that the bankrppt law did not affect such cases until after the first day of June, the earliest time at which proceedings could be commenced under that law.
On the 30th of May Hotchkiss & Sons, of Connecticut, obtained a judgment against the same parties for a much smaller debt, on which execution was also issued and levied on the same goods'.
On the 25th of June, some other creditors of Hitchcock & Endicott filed a petition in the District Court for Northern Illinois, praying to have them declared bankrupt, and on the 10th of July they were so declared; one Campbell being appointed the assignee in bankruptcy. On the 21st of the following August the goods of the firm were sold under the execution of the bank. At the same time the bank caused to be sold under the same execution a certain sum of $943, which it had received on the 12th of June by way of collections made by it in the ordinary course of business, of drafts belonging to the firm. The net sum raised by the execution on tliQ goods was $6062.43. On the 21st of August, while things were standing in this way—the sheriff having as yet made no return of his execution—Campbell, the assignee in bankruptcy, filed a bill in chancery, in the District Court below, against the bank and Hotchkiss Sons, alleging that each of them had obtained from Hitchcock & p. 90Endicott fraudulent preferences, and that the several judgmerits in their favor were void. Hotchkiss & Sons beingo non-residents no service was made on them. The bill prayed that the judgments be set aside, and that the defendants be ordered to pay over to the assignee the value of the goods sold under thè two executions. With this bill thus pending, the sheritf (who as already mentioned, had not made any return to his execution), deposited $6500 raised under the bank’s execution on the goods in the bank itself, receiving from it a li certificate of deposit,” that he had deposited the sum named “to the credit of himself subject to his order on the return of this certificate.” There was, however, an arrangement made by the bank with the sheriff that the money should remain with the institution as a deposit, to be used by it until the suit brought by Campbell should be decided, and that if it was decided in favor of the bank that the money should, in that case, be returned to the sheriff, but if decided against the bank, that then it should abide whatever decision was made. The balance ($562.43) of the $6062.43, the net proceeds of the execution of the goods, the sheriff retained in his own hands.
The execution in favor of Hotchkiss came to nothing, the property levied on in virtue of it being levied on subject to the prior execution of the bank.
Pleadings being made up, and evidence taken, the bill was dismissed as to the non-residents and unserved defendants, Hotchkiss & Sons. On the other part of the case, the court was of opinion that Hitchcock & Endicott were insolvent on the 28th of May, 1867; that the Traders’ Bank had reason to suspect and believe the fact of such insolvency; that under such circumstances the firm gave to them the note and warrant of attorney in question; that on the 29th of May the bank appropriated as part payment of this note $325.20, then on deposit to the credit of the firm ; that the payment of $325.20 upon the note and the judgment in favor of the bank were alike void, as fraudulent preferences.
The decree ordered that the assignee recover from the bank the $325.20 and interest from May 29th, 1867, also an
Argument for the bank.
amount equal to the judgment and costs rendered in favor of the bank with interest from May 29th, 1867, amounting in all to $7903.12.
This decree being affirmed in the Circuit Court the case was brought here on error.
Messrs. Gr. C. Campbell and B. C. Cook, for the appellants:
A preliminary point arises in view of the proviso of the 50th section. We submit that under that proviso the bill below did not lie, because ah the acts which are complained of took place before the 1st of June, 1867, prior to which day the proviso declares that no petition or proceeding shall be begun. But waiving that, we submit that the decree is erroneous.
1. Because the proper parties were not before the court. In Shields v. Barrow,* Mr. Justice Curtiss, in delivering the opinion of the court, says:
“ The court can make no decree affecting the rights of any absent person, and can make no decree between the parties before it, which so far involves or depends upon the rights of an absent person that complete and substantial justice cannot be done between the parties to the suit without affecting those rights.”
Under this rule Hotchkiss & Sons were necessary parties. The goods and funds of the bankrupts had before bankruptcy been levied upon and sold by the sheriff, under two executions, one in favor of the bank and the other in favor of Hotchkiss & Sons. Upon the hearing the bill was dismissed as to Hotchkiss & Sons, and then decree rendered that the judgment in favor of the bank was void, and that it pay over to the assignee in bankruptcy $6500 of the proceeds of the executions, with interest from May 29th, 1867. This $6500 was still in the hands of the sheriff; that is, he held a certificate of deposit of the bank for that amount of the proceeds of sale; the balance, $562.43,'he still held in cash. The judgment in favor of Hotchkiss & Sons has never been
Argument for the bank.
declared void, but is still in force, and when the judgment in favor of the bank was declared void, it became the first lien upon the funds in the sheriff’s hands made from the goods of the bankrupts, and was and is entitled to be paid in full out of those funds. No reason exists why Hotchkiss & Sons cannot obtain from the State court an order upon the sheriff to pay their judgment in full. The sheriff could not successfully resist such rule by pleading the decree in this case, Hotchkiss & Sons not being parties to the bill. If the decree in this case operates to transfer to the assignee in bankruptcy the $6500 deposited byxthe sheriff with the bank, leaving in his hands only $562.43 with which to satisfy the judgment of Hotchkiss & Sons, it certainly affects the rights of these absent parties. If the sheriff can plead this decree in answer to a rule in the State court, to pay over the money, Hotchkiss & Sons are deprived of their money by decree in a case to which they are not a party. If the sheriff cannot plead the decree in answer to such rule he is left liable to Hotchkiss & Sons in that amount, and that by the operation of a decree in a case to which he was not a party.
2. The assignee should have applied to the State court for an order on the sheriff to pay over to him the proceeds of the execution in his hands. The judgments in question were obtained in the State courts prior to adjudication in bankruptcy; executions were issued, levied, and sale made by the sheriff prior to any proceedings to recover the property or proceeds. The fund of $7062.43 realized from the goods of Hitchcock & Endicott was therefore legally in the hands of the sheriff, and under the control of the State court when this bill was filed.
3. The bank has never received from the sheriff any amount whatever in satisfaction of the judgment recovered by it against Hitchcock & Endicott. As heretofore stated, the sheriff still holds the funds made from the property of Hitchcock & Endicott. The decree seems to have proceeded upon the hypothesis that the money deposited by the sheriff with the bank was a payment to it of the amount of the ex-
Argument for the bank.
ecution in its favor. This hypothesis is, however, inconsistent with the facts of the case.
If the assignee had applied to the State court for an order on the sheriff to pay over to him the funds realized upon the two executions, all parties would have been in court and bound by the order rendered, and equal and exact justice done to each.* This proceeding, on the contrary, results in great wrong to the appellant. A decree is rendered against it for $7903.12. as money made from the bankrupts’ estate, when in fact it has only realized $325.20. So that in consequence of an honest misconstruction of the bankruptcy act, the bank not only lose their entire claim of $6707.43, but some $1800 in addition thereto.
4. The decree rendered against the bank is for far too large a sum. The account stated between the bank and the bankrupts is thus:
Original amount of the bank’s debt, .... $6,707 43
Contra.
Cash of bankrupts’ on deposit, . $325 20 Cash collected on drafts, June 12th, 928 38
1,253 58
True balance due the bank, . . . . . . $5,453 85
Now, under the 20th section it was lawful for the bank to apply in payment of their claim against Hitchcock & Endicott all of the moneys which came into its hands prior to the filing of the petition in bankruptcy. Thus setting one debt off against the other the balance is $5453.85. This certainly would be the full amount of the claim which could have been allowed to the bank if its officers had appeared in the bankrupt court for the purpose of proving their claim.
If it were true then that the whole amount of the judgment in favor of the bank against the firm had been paid, the decree would be too great by $1259.40, and interest from thè 29th of May to the date of the decree.
Mr. M. W. Fuller, contra.
Bohrer’s Appeal, 62; Pennsylvania State, 498.
Mr. Justice MILLER delivered the opinion of the court.
It is not asserted by counsel here that the defendant acquired any rights to the property levied on by its execution. It would be useless to do so in view of the acknowledgments of the president of the bank upon this subject and of the circumstances in which he stated that he had instituted his proceeding.*
We are of opinion that the proviso to the 50th section of the Bankrupt Act, which declares that no petition or other proceeding under it shall be commenced before the first day of June, 1867, is limited in its effect to such commencement, and that any act done after its approval, March 2d, 1867, in fraud of the purpose of the statute, was within its prohibitions.
We will consider the objections to the decree in favor of the plaintiff in the order in which they are assigned in the appellant’s brief.
1. It is said that Hotchkiss & Sons were necessary parties, without whom the court could not proceed. They were not within the jurisdiction of the court, and, though made defendants by the bill, never appeared in the case, and it was dismissed as to them without prejudice.
Their interest, as asserted by the appellant’s counsel, was that they also had a judgment against the bankrupts, on which execution was levied, on the same property, and that, as it was sold under both executions, Hotchkiss & Sons have a right to be heard as to the validity of that sale.
In the case of Barney v. Baltimore,^ this court, after reviewing the former decisions on this subject, remarks that there is a class of persons having such relations to the matter in controversy, merely formal or otherwise, that, while they may be called proper parties, the court will take no account of the omission to make them parties. There is another class whose relations to the suit are such that, if their interest and their absence are formally brought to the attention of the court, it will require them to be made par-
*
See supra, p. 89. f 6 Wallace, 280.
| ties, if .within its jurisdiction, before deciding the case. But, I if this cannot be done, it will proceed to administer such I relief as may be in its power between the parties before it. I And there is a third class, whose interest in the subjectI matter of the suit, and in the relief sought, is so bound up I with that of the other parties, that their legal presence as I parties in the proceeding is an absolute necessity, without I which the court cannot proceed.
Hotchkiss & Sons manifestly belong to this second class, I and not the third. The bank is sued for its own wrong in ■ procuring judgment and selling the property, and for the I proceeds now in its vaults. Hotchkiss'& Sons may, or may I not, be in the wrong in procuring their judgment and levy, ■ but it is not alleged that they have received any of the I money. If they are entitled to any of it they will be at I liberty to bring any suit they may be advised to, after this I suit is disposed of, against the assignee, or any one else, and I their rights will not be precluded by the present decree; I nor have they any such interest in the subject-matter of this I suit, that their presence is necessary to the protection of the | bank. A complete decree can be made between the bank ■ and the assignee without touching the rights of Hotchkiss
■ & Sons, or embarrassing the bank in its relations to them.
■ The organization of the Federal courts has always required I them to dispense with parties in chancery not within their ■ jurisdiction, unless their presence was an absolute necessity,
■ which it clearly is not in this case.
2. It is said that the assignee should have applied to the ■ State court for an order on the sheriff to pay over the proI ceeds of the execution to him.
But it cannot be maintained that the assignee, who is pur■ suing the assets of the bankrupt in the hands of third parI ties, is bound to resort to the State courts because there is a ■ litigation there pending. The language of the 14th section, ■that the assignee may prosecute and defend all suits, pend■ ing at the time of the adjudication of bankruptcy, in which
■ the bankrupt is a party, does not oblige him to seek a remedy I in that way. The 2d section of the act declares that the p. 96Circuit Courts of the United States shall have concurrent jurisdiction with the District Courts of all suits, at law or in equity, which may or shall be brought by the assignee against any person claiming an adverse interest touching any property, or rights of property, of said bankrupt.
The decree in the present suit is founded on the idea that the bank, by means of its illegal and collusive proceedings in the State court, has received the proceeds of property which ought to have come to the assignee. He has a right to proceed against the bank directly in the Federal court for those proceeds, and is not obliged to resort to the State court, where the matter is substantially ended, for relief.
3. The third objection is, that the bank has not received from the sheriff any sum whatever in satisfaction of the judgment which it recovered against the bankrupts.
The facts of the case are simple and undisputed. The goods of the bankrupt were sold under the execution in favor of the bank, and the sheriff after deducting the costs of the proceeding deposited the remainder with the defendant. This suit being then pending, the defendant, instead of giving the sheriff a receipt for the amount as paid on the execution in his hands, gave him a certificate of deposit. This transparent device can deceive no one, and does not vary the legal character of the transaction. The sheriff, under the direction of the bank, levies upon and sells the property of the bankrupt, after the title has passed to the assignee, and in violation of the law. He deposits the proceeds of the sale with the party whose agent he was in this illegal appropriation of the goods. The assignee electing to assert his right to the proceeds of the sale instead of the goods themselves, sues the party who caused the seizure and sale, and who has their proceeds in his possession. His right to recover under such circumstances cannot well be doubted.
4. The fourth objection is that the decree rendered against the bank is for too large a sum.
This assignment of error has regard to certain sums coining to the hands of the defendant as bankers of Hitchcock &
Endicott, and which they claim a right to retain by way of set-off.
The amount of $928.38 was received on the 12th day of June, some days after their judgment had been recovered in the State court, and after the execution had been levied on the stock of the bankrupts’ goods. It was received as collections made by the bank, from drafts placed by the bankrupts in their hands in the ordinary course of business, and if they had retained it and appropriated.it as a. set-off against the debt of the bankrupt to them, an interesting question might have arisen as to their right to do so. But instead of doing this, they handed it over to the sheriff who levied on it as the property of the bankrupt, by virtue of the same execution under which he levied on and sold the goods. By the act of the bank it was thus placed in the same category with the goods, and instead of exercising their own right of set-off, by directing the sheriff to credit the execution with the sum received by them on the debt, they delivered it to him to be treated as the goods of the bankrupt and subjected by him to their illegal judgment. This amount then; must be treated in the same manner as the other money received by them from the sheriff* on the sale of the goods.
There was in the bank on deposit to the credit of Hitchcock & Endicott on the day they gave the judgment note, the sum of $325.20. This sum was not computed or deducted when the note w7as given. On the next day, before the bank caused the judgment to be entered up, they credited this amount on the note, and took judgment for that much less. They now assert that this wTas what they had a right to do, and that it should remain a valid set-off. But this does not appear to have been really what was done. It appears that Hitchcock & Endicott gave the bank a check for the sum, and by virtue of that check it was indorsed on the note as a payment. Now as both the bank and the bankrupts knew of the insolvency of the latter, this was a payment by way of preference and therefore void by the 35th section of the bankrupt act. In this case as in the other, if they had stood on their right of set-off, it might
VOL. XIV. 7
possibly have been available, but when they treat it as the bankrupts’ property, and endeavor to secure an illegal preference by getting the bankrupts to make a payment in the one case, and seizing it by execution in the other, when they knew of the insolvency, both appropriations are void.
We see no error in the decree which was rendered in the District Court and affirmed in the Circuit Court on appeal, and which is again
Affirmed by this court.
The Thames.
1. The contract between a ship and the shipper is that which is contained in the bills of lading delivered to the shipper. The bill retained by the ship or “ ship’s bill,” as it is sometimes called, is designed only for its own information and convenience ; not for evidence, as between the parties, of what their agreement was. If it differs from the others, they must be considered as the true and only evidence of the contract. 2. By issuing bills of lading for merchandise, stipulating for a delivery to order, the ship becomes bound to deliver it to no one who has not the order of the shipper. It is no excuse for a delivery to the wrong persons that the indorsee of the bills of lading was unknown, and that notice of the arrival of the merchandise could not be given to him. Diligent inquiry for the consignee, at least, is a duty. And if, after inquiry, the consignee or thè indorsee of a bill of lading for delivery to order cannot be found, the duty of the carrier is to retain the goods until they are claimed, or to store them prudently for and on account of their owner. He has no right under any circumstances to deliver them to a stranger.
3. The indorsee of a bill of lading may libel the vessel on which the goods are shipped, for failure to deliver them, though he may be but an agent or trustee of the goods for others ; as ex gr., the cashier of a bank.
Appeal from the Circuit Court for the Southern District of New York; the case being this:
In January, 1868, Alfred Bennett, James Van Pelt, and Gilbert Van Pelt, were merchants doing a commission business in New York under the name of Bennett, Van Pelt& Co. The partner, Gilbert, resided in Savannah, where he was in the habit of purchasing cotton and consigning it to p. 99his firm in New York. In the course of this dealing he bought, on the 28th of January, 1868, one hundred and eleven bales of Brady & Moses, commission merchants in Savannah, for this firm in New York, and on the same day shipped the cotton to New York by the steamship Thames, one of the vessels of a line known as the Black Star Line. Three bills of lading, of the same tenor and date, were issued, each stating that the cotton was shipped by Gilbert Van Pelt, and that it was to be delivered “unto order or to his or their assigns.” “ And it is expressly understood,” the bill of lading went on to say, “ that the articles named in this bill of lading shall be at the risk of the owner, shipper, or consignee thereof, as soon as delivered from the tackles of the steamer, at her port of destination, and they shall be received by the consignee thereof, package by package, as so delivered; and if not taken away the same day by him, they may (at the option of the steamer’s agents) be sent to store, or permitted to lay where landed, at the expense and risk of the aforesaid owner, shipper, or consignee.” Two of the bills were delivered to said Gilbert Van Pelt; the other being retained as the ship’s bill of lading. On the same day, in order to procure money wherewith to pay for the cotton, and in compliance with the terms and conditions of the purchase, he drew his draft on his firm in New York for $8300, payable fifteen days after sight, to the order of “Billopp Seaman, cashier,” and delivered the draft and the two bills of lading which he had to the said Brady & Moses, who held moneys of the Atlanta National Bank of Atlanta, Georgia, for the purpose of investment in bills drawn on New York, and the draft was discounted for the account of that bank, and the proceeds were applied toward the payment of the cotton. The bill or invoice for the cotton was receipted as if it had been paid for in cash, and the Atlanta Bank was charged with the advances. The two bills of lading were indorsed,
“ Deliver B. Seaman, Cashier, or order.
G. S. Van Pelt.”
The point of contest in the case was for what exact purpose the two bills of lading hp4 beet^lelivered to Brady & Moses, that is to say, whether to st&ml as security until the draft of Gilbert Van Pdt/shoi^cPoe^cepted, or whether to stand until it shoul^l^/jm^^Gilb^PVan Pelt himself swore it was given but for tke^brnj^^purpose, and that this was perfectly understood^! botij^ides. Brady & Moses, on the other hand, eachO^wo^apuiat it was given to stand as security until the draft should be paid; and in this they were confirmed by the clerk of their house, one Bruen. The draft and the bills of lading were forwarded to Billopp Seaman, under general instructions from the Atlanta National Bank, to hold and collect for the credit of the account of the said Atlanta National Bank.
The Thames arrived in New York late on Sunday afternoon, February 2d, 1868. Before arrival, the purser had made out bills for freight, and made out those for freight on this cotton, to Bennett, Van Pelt & Co. There was a memorandum, in writing, at the foot of the ship’s bill of lading, “for Bennett, Van Pelt & Co.;” by whom put there wTas not at all explained, further than that it was not in the handwriting of any of the ship’s agents at Savannah who signed the bill of lading and made the contract for carriage. The ships of the Black Star Line, of which, as already mentioned, the Thames was one, had brought cotton regularly for Bennett, Van Pelt & Co. On Monday morning, February 3d, the steamer commenced delivering cargo. The one hundred and eleven bales were delivered on the pier. Bennett, Van Pelt & Co. sent their carts and took the cotton, paid freight for it, receipted for it on the ship’s bill of lading, and sold the bulk ofi it for cash on delivery the day that they got it.
As appeared on the one hand, nothing was done by the Fourth National Bank in reference to the cotton, or its delivery, from the time of the acceptance of the draft, February 1st, 1868, until after its maturity, February 19th, 1868. On that day, and on that draft, Bennett, Van Pelt & Co. failed, and the draft was protested for non-payment. On the other hand it did not appear, except by the testimony of
Statement of the case.
James Van Pelt, which was contradicted by Billopp Seaman, that he, Seaman, knew of the arrival of the vessel before the cotton was delivered and'sold. On the 19th, after the draft was dishonored, Seaman, by direction of the President of the Fourth National Bank, sent a clerk to the office of the agents of the ship, where he saw the ship’s bill of lading, and heard that the cotton had: been delivered some days before to Bennett, Van Pelt & Co. '-, He made no demand. Afterwards, on March 16th, 1868, the bank made a formal demand for it.
Until the inquiries made on February 19th, 1868, the agents of the Thames had no notice, beyond that which the bill of lading itself gave, of any claim to or interest in the cotton in question by any other parties than Bennett, Van Pelt & Co.
It was undisputed that Seaman had no real interest in the cotton, and that it belonged to the Atlanta National Bank, whose sole agent in New York was the Fourth National Bank.
In this state of things Seaman filed his libel in the District Court of New York against the Thames, March 19th, 1868, claiming damages in the sum of $8300 for non-delivery to him, at New York, of thé cotton, the bill of lading for which had, as he set forth, and as was not denied, been assigned to him for a valuable consideration. The owners of the Thames answered the libel and put in issue its material allegations, averring that the cotton was shipped by the Thames for and to be delivered to Bennett, Van Pelt & Co., of Newr York, and was so delivered in due course and without notice of the claim of the libellant, and that no claim for it was ever made by the libellant until long after such delivery; that the alleged assignment of the bill of lading to the libellant was by way of security for personal obligations of Bennett, Van Pelt & Co., who were solvent merchants, and to whom the libellant looked for payment of such obligations; and that he gave no notice and did no act as assignee of the bill of lading on the arrival of the p. 102vessel or upon the delivery of the cotton, nor until after Bennett, Van Pelt & Co. had become insolvent, and that by his delay and laches he waived and lost all claim against the vessel and her owners. •
The District Court, considering that Seaman had a sufficient interest to sue, and holding, upon the evidence, that the delivery of the bills of lading for the cotton was intended to, and did, transfer it to the libellant as a security for the payment of the draft for $8300, decreed in favor of the libellant, and the Circuit Court affirming that decree, the owners of the vessel brought the case here.
Messrs. Barney, Butler, and Parsons, for the appellant:
The witnesses do not, indeed, agree as to the purpose for which the bills of lading were transferred, but the facts show that it was as security.for the acceptance, and not for the payment of the draft. Thus—
1. The draft was a time draft, having fifteen days to run, and was taken at the rate of such paper. Van Pelt would have had no motive to buy cotton on credit if his house was not to have the benefit of the purchase till the credit expired.
2. No instructions were given to the Fourth National Bank to deal with the cotton in the interval of fifteen days during which the draft would be running to maturity. The bank actually did nothing to show any interest in the property- . ' .
Even if the transfer of the bills of lading was intended to secure the payment of the draft, Seaman was not entitled to hold the vessel and owners'for the non-delivery of the goods, inasmuch as by his own laches he suffered the cotton to go into the possession of Bennett, Van Pelt & Co., and to remain in their possession until after their insolvency. The cotton was shipped in the regular course of business on a vessel which formed one of a line of steam packets between New York and Savannah, and which had been engaged in carrying cotton for account of the same shipper and consignees. The vessel knew no other party in interest. Before arriving at New York, the purser made out the freight
Argument for the appellant.
bill to Bennett, Van Pelt & Co., assuming in good faith that the cotton was for them. A memorandum at the foot of the bill of lading, “For Bennett, Van Pelt & Co.,” confirmed him in this assumption. The bill of lading, by its terms, required the consignee to take away goods on the day of the arrival of the vessel at her port of destination, or in default of his so doing the goods were, at the option of the steamer’s agents, to be sent to store or left on the steamer’s wharf. The vessel arrived on Sunday, and on Monday morning early, notice was given to Bennett, Van Pelt & Co., the only consignees of whom the ship had knowledge, and who came in the usual course of business and took it from the pier, receipting for it. The firm being solvent, and being regular consignees, and giving their receipt, the non-production of the outstanding bill of lading was not a circumstance to excite suspicion. Notwithstanding that the bill of lading showed a shipment on a steamer of a regular line at Savannah, January 28th, 1868, which in due course would have brought the goods to the pier in New York about 3d February following, the Fourth National Bank did absolutely nothing until February 19th, and even then made no demand, and took no further action till March 16th. Bennett, Van Pelt & Co. did not fail until February 19th, 1868.
On this state of facts Seaman took the risk of the continued solvency of Bennett, Van Pelt & Co., and of the possession of the cotton by them. Although he may have been legally entitled, in the first instance, to the possession, yet it was competent for him by his acts to waive actual possession, and permit the goods to go into the hands of Bennett, Van Pelt & Co., consignees and owners, subject to Seaman’s rights. Had he intended to avail himself of the rights of a ' consignee of the cotton under the bill of lading, he should have looked after the property and asserted such right. A consignee, by refusing or failing to accept the consignment, and look after the property, disclaims and loses the position of consignee. By failing to assert his rights as consignee until after the insolvency of Bennett, Van Pelt & Co. had intervened, Seaman lost all recourse, except as against them. p. 104They were liable to him in trover for the value of the goods if they took them from the ship without right. The ship’s agent having acted in good faith, and Seaman having clearly been guilty of laches, the ship should not be visited with the consequences of his neglect.
3. Seaman was not entitled to maintain this action. He was not the real party in interest, nor had he such title to or interest in the case as to entitle him to sue in admiralty. The Fourth National Bank, the real agent and representative of the Atlanta National Bank, and not the cashier, was thé only party entitled to bring the suit.*
The indorsement of commercial paper to and by a bank cashier is the act of his bank and not his individual act, and the libellant having no individual property or interest did not stand in any such relation to the transaction as to enable him to proceed.^
Mr. B. F. Lee, contra.
Mr. Justice STRONG- delivered the opinion of the court.
The engagement of the ship with the shipper was to deliver the cotton in New York to order. In regard to this there is no doubt. Such was the express stipulation of the bills of lading, which were given on the 28th of January, 1868, when the cotton was received on shipboard. On that day Gilbert Van Pelt purchased the cotton in Savannah from Brady & Moses, and settled for it by giving in payment his draft upon the firm of Bennett, Van Pelt & Co., in New York, of which firm he was a member. The draft wras drawn at fifteen days’ sight in favor of the libellant, Billopp Seaman, cashier, or order, and it was discounted by Brady & Moses with money of the Atlanta National Bank, which they had in hand for the purpose of purchasing bills on New York on the bank’s account. The price of the cotton was p. 105thus, in substance, paid by money which Van Pelt obtained from the bank, as the proceeds of his draft. At the time when he drew the draft he also indorsed upon the bills of lading which the ship had given for the cotton, an order directing its delivery to Billopp Seaman, cashier, in whose favor the draft was drawn, and delivered them with the draft to Brady & Moses. They were made out in triplicate, as is usual, and, by them all, the ship undertook to deliver the cotton shipped to order. Two of them had been delivered to Van Pelt, the shipper, and the third was retained by the ship. That retained by the ship, it is true, when produced at the trial in the court below, was found to have, at its foot, the memorandum, “ for Bennett, Van Pelt & Co.,” which is not upon those delivered to the shipper. How that memorandum came there is not explained. No witness has testified in whose handwriting it is, but it is proved not to have been in that of any of the ship’s agents at Savannah who signed the bills of lading and who made the contract for carriage. This, however, is of little importance. The contract between the ship and the shipper is that which is contained in the bills of lading delivered. The ship’s bill was designed only for its information and convenience; not for evidence, as between the parties, of wThat their agreement was. If it differs from the others, they must be considered as the true and only evidence of the contract.
*
Houseman v. Schooner North Carolina, 15 Peters, 40; McKinley ®. Morrish, 21 Howard, 355. f Bank of Genesee v. Patchin Bank, 19 New York, 312; Folger v. Chase,
18
The proofs in the cas'e leave no reasonable doubt that the bills of lading were indorsed to the libellant in order to transfer to him the cotton as a security for the payment of the draft at its maturity. Gilbert Van Pelt alone asserts the contrary. His testimony, it must be admitted, tends to show that they were indorsed and received as security for the acceptance only of the draft. But he is directly contradicted by Moses, by Brady, and by Bruen, neither of whom has any interest in this controversy, and all of whom state that the bills of lading were indorsed to secure to Seaman the payment of the draft and not merely its acceptance. Besides, their testimony is in harmony with all the probabilities of the case. It is absurd to talk of security for the acceptance p. 106of the draft. Ho such security was needed. It might have been accepted before it was discounted. Gilbert Van Pelt was a member of the firm upon which it was drawn, and he was at hand when it was discounted. He might then have accepted it. In addition to this it is significant that the invoice of the sale from Brady & Moses to Van Pelt was made out and receipted as if paid in cash (the draft having been turned into cash by a deduction of discount and exchange), and the advances made upon the draft were at once charged to the Atlanta National Bank. In view of all this it is incredible that the bills of lading were indorsed to Seaman merely to secure what the maker of the draft could have given on the instant. Hor ought the position of Gilbert Van Pelt to be overlooked. If the bills of lading were indorsed as security for payment of this draft, his firm has obtained from the ship delivery of the cotton through a fraudulent representation that they were the consignees, or entitled to the delivery of possession, and they sold it for cash on the day when it was thus wrongfully obtained. He is not, therefore, an unbiased witness. His testimony was given while he was under the influence of a temptation, not unnatural, to vindicate his firm from the guilt of fraudulently abstracting a large amount of property from its rightful owner. Standing as he does, in such a position, his statements are not to be credited when in conflict with the positive testimony of Brady, of Mdses, and of Bruen, and when inconsistent with the strong probabilities of the case.
It must be considered, then, that by the indorsement of the bills of lading the libellant became the owner of the cotton, and that by force of the contract with the ship it was deliverable at Hew York only to him, or to. his order. Reference to authorities to show that the effect of the indorsement was to vest such ownership in Seaman is quite unnecessary. We may, however, refer to a few.*
*
Conrad v. The Atlantic Insurance Company, 1 Peters, 445; Gibson ft Stevens, 8 Howard, 384; Thompson v. Dominy, 14 Meeson & Welsby, 403; Caldwell v. Ball, 1 Term, 205; Wright v. Campbell, 4 Burrow, 2051; 1 Lord Raymond, 271; Walter v. Ross, 2 Washington’s Circuit Court, 283.
The ship arrived with the cotton at the port of New York on Sunday, the 2d day of February, 1868, late in the afternoon, and on the morning of the 3d delivered it to Bennett, Van Pelt & Co. on their demand, without the production of either of the bills of lading which had been given to the shipper, and without any order from Billopp Seaman, who was the indorsee of the bills, and to whom alone, or to whose order, it could rightfully be dejivered. It does not appear that any notice of the ship’s arrival was given to Seaman, or that the ship made any inquiry to ascertain to whom the cotton was deliverable. It would seem that assuming the mysterious memorandum on the bill of lading retained by the ship was equivalent to an order to deliver to Bennett, Van Pelt & Co., no demand was made for the presentation of such an order, and no further inquiry for the consignee was set on foot. The consequence was that Bennett, Van Pelt & Co., having obtained the property without any right to it, sold it for cash on the day it was delivered to them, and failed within a few days afterwards.
No argument is needed to show, what is most manifest, that the delivery which was thus made was a breach of the ship’s contract. By issuing bills of lading for the cotton, stipulating for a delivery*to order, the ship became bound to deliver it to no one who had not the order of the shipper, and this obligation was disregarded instantly on the arrival of the ship. And it is no excuse for a delivery to the wrong persons that the indorsee of the bills of lading was unknown, if indeed he was, and that notice of the arrival of the cotton could not be given. Diligent inquiry for the consignee, at least, was a duty, and no inquiry was made. Want of notice is excused when a consignee is unknown, or is absent, or cannot be found after diligent search.* And if, after inquiry, the consignee or the indorsees of a bill of lading for delivery to order cannot be found, the duty of the carrier is to retain the goods until they are claimed, or to store them prudently for and on account of their owner. He may thus p. 108relieve himself from a carrier’s responsibility.* He has no right under any circumstances to deliver to a stranger.
*
Fisk®. Newton, 1 Denio, 45; Pey’tona, 2 Curtis, 21.
It is said, however, that the libellant delayed presenting the bills of lading which had been indorsed to him, and delayed making any demand for the cotton until after the 19th of February, when the draft had fallen due, and when it had been dishonored. But that delay cannot justify the ship’s delivery of the cotton, on the day after its arrival, to persons who had no bill of lading and no authority whatever to receive it. Had the delay been instrumental in causing such a wrongful delivery, had it been active interposition to mislead the ship, a different case might possibly have been presented. But at most the laches of the libellant was mere inaction, and the wrong delivery was in no degree due to it The delivery was, as we have stated, made on the morning after the ship’s arrival in port, and the ship’s order for delivery to Bennett, Van Pelt & Co. was issued before the libellant could have known of its arrival. We say this, notwithstanding the testimony of James Van Pelt, which is plainly in conflict with the proved and conceded facts of the case. And as the cotton was sold for cash on the 3d of February, the very day of its delivery, the failure of the libellant to claim it until some weeks afterwards, wrought no injury or loss to the carrier, so far as it appears. We are, therefore, of opinion that the ship is clearly liable for the cotton to the libellant.
And we think that the libel was rightly filed in the name of Billopp Seaman. By the indorsement of the bills of lading the legal ownership of the cotton passed to him, as well as the right to control its delivery. It is a matter of no importance that the beneficial interest may have been in the bank of which he was cashier, f The holder of a legal right may always assert it by suit, though he may be accountable to another for what he may recover. A judgment in his favor may always be pleaded in bar against a suit by the p. 109beneficial owner. Besides, it is settled that the agent of absent owners may libel in admiralty, either in his own name or in that of his principals.*
*
Galloway v. Hughes, 1 Bailey, 553; 1 Conklin’s Admiralty, 196; Fisk ®. Newton, supra. f Fairfield v. Adams, 16 Pickering, 381.
Decree affirmed.
*
Houseman v. The Schooner North Carolina, 15 Peters, 49; McKinlay v, Morrish, 21 Howard, 355 ; Lawrence v. Minturn, 17 Id. 100.