Hall v. Hinks

Bartol, J.,

delivered the opinion of this Court:

This was an action of replevin for one hundred barrels of flour, instituted by the appellees against the appellant. The defendant helow pleaded eight pleas, denying the plaintiffs’ title and right of possession, claiming the right of possession in himself, and setting up title and right of possession in Hicks & Hathaway of New York.

The material facts contained in the bill of exceptions are, that on the 13th of January, Lyman Reed, who conducted business in Baltimore, under the name of Lyman Reed & Co., purchased the flour in controversy from the plaintiffs; on the same day the flour was.delivered by Orme, the clerk of the plaintiffs, to the draymen employed by Reed, and upon his written order, and carried for shipment on hoard the steamship “Parker Vein,” of Cromwell’s line of steamers, plying between Baltimore and New York, then lying at her wharf near the warehouse of Reed.

The flour was marked before leaving the plaintiffs’ warehouse with the letters H. & H., the initials of Plicks & Hathaway; and Orme having been directed by the appellees to ask the drayman where he was going to take the flour P was informed that it was to be shipped on board the Parker Vein. The purchase was made before eleven o’clock, A. M. The' same day Reed received from the appellant as agent of the steam ship, a bill of lading of the flour as consigned to Hicks & Hathaway, New York, and sent it the same day to the consignees, with an invoice, advising them that he had drawn on them for $625, at fifteen days sight. The draft was cashed by McKim & Co., bankers in Baltimore, forwarded to New York, and on the following day,. *415 tbe 14th January, was accepted by Hicks & Hathaway, and paid by them at maturity.

The flour was sold on change by the appellees to Lyman Seed. & Co., without any express stipulation with regard to the time or mode of payment; but evidence was offered to prove that by the established usage and custom among flour dealers in Baltimore, sales of flour made on change, are understood to be for cash, unless otherwise expressly agreed. Proof was also given that by the same usage and custom, flour is delivered to the purchaser immediately, or whenever he may call for it, without thereby changing the terms of sale from cash to credit. With reference to the time of demanding payment the custom is not established, or uniform; all the witnesses agree in saying that it is the right of the vendor to call for the money immediately on the delivery, but unusual to do so, — as some of the witnesses said, “to do so would be uncourteous,” — tbe custom being, according to the testimony, to demand the money on the next day, or within a few days; two, three, four, or as many as ten days sometimes elapsing, beforepayment is demanded.

In this case the appellees’ clerk presented the bill, and demanded payment on the next day, and called three or four times afterwards; the last time Reed offered Ms own note in payment, which the clerk did not accept. The harbor being closed by ice, tbe steamer was detained in port, until the latter part of February, and Reed having failed to pay for the flour, and being unable to meet bis engagements, on the 22nd day of January, after the appellees had demanded the possession of the flour, they sued out the writ of replevin in this case, by virtue of which the flour was taken from the possession of the appellant, who claimed and received §40 in full of charges due the steamer on the shipment.

The evidence also shows that Lyman Reed & Co., bad purchased from the appellees several lots of flour previously, for which payment had been promptly made, and that in those transactions the flour had been delivered in tbo same *416 way as in the one now in dispute; and it was further proved that in this case the shipment was made in the usual routine of business, and in the transmission of the invoice, bill of lading and draft, nothing was done out of the ordinary way of conducting such transactions, and but for the accidental detention of the steamer by the state of the harbor, the flour would have gone forward.

The real question in the case being between the appellees and Hicks & Hathaway, it is material to state that there is no evidence to prove that these last had any knowledge of the terms or conditions upon which Lyman Reed purchased the flour, or received it into his possession, or that they had any knowledge of the usage and custom existing among flour dealers in Baltimore, spoken of in the testimony; Reed’s draft was accepted and paid by them, in the usual course of their déaliug with him, and on the faith of the consignment evidenced by the invoice and bill of lading.

Under these circumstances it is clear, that Hicks & Hathaway occupy the position of bona fide purchasers, entitled to the rights and the protection which by the law is secured to parties standing in that relation.

There can be no doubt, upon all the authorities, that consignees, who bona fide advance money on the credit of consignments made to them upon bills of lading, acquire an interest in the property, and are purchasers for value. This was expressly ruled in Dows vs. Green, 16 Barbour, 72.

Persons so situated are within the definition of bona fide purchasers, to be found in Root vs. French, 13 Wend., 572 , Beavers vs. Lane, 6 Duer, 240 , and were so recognized by the Court of Appeals in Powell vs. Bradlee, 9 G. & J., 221 , and Ratcliffe vs. Sangston, 18 Md. Rep., 390 . See also Gibson vs. Stevens, 8 Howard, 384 , and Grove vs. Brien, 8 Howard, 429 .

It being established that Hicks & Hathaway are bona fide purchasers from Reed, without notice of the manner in which he acquired possession, we proceed to consider- *417 what effect upon their title is produced by the circumstances and conditions attending the sale and delivery of the flour by the appellees to Eeed.

For the purposes of this question we assume, first, that there was evidence from which the jury could find that the delivery was obtained by Reed fraudulently; and secondly, that the sale and delivery was, under the usage, merely conditional and not absolute, vesting as between those parties, no title in Eeed till the money was paid, and leaving in the appellees, the vendors, the right to reclaim the property from him, upon his failure to pay the money on demand.

This is the utmost that can be claimed as the effect of the usage, supposing it to govern the contract. And upon an examination of all the authorities cited, and referred to on both sides, as well as upon the soundest principles of reason and justice, which lie at the foundation of commercial law; we are of opinion that the title passed to Hicks and Hathaway, and will be protected against the claim of the appellees. We think the rule of law governing such a transaction is correctly stated in the first point of the appellant’s printed brief.

The title of Hicks and Hathaway is assailed upon two grounds, both of which will now be examined.

First. As to the effect of the alleged fraud on the part of Eeed in obtaining the possession. All the authorities agree’that although as between the original parties a sale and delivery of goods obtained by fraud, is void, and may be rescinded at the election of the vendor, and the property reclaimed from the fraudulent vendee; yet if they have passed into the hands of a bona fide purchaser without notice, he takes a good title, which cannot be impeached by the defrauded vendor. It is not necessary to cite authorities in support of this proposition, we have said there is no conflict upon this question, and the principle has been recognized by the Court of Appeals expressly in Powell vs. Bradlee, and incidentally in Ratcliffe vs. Sangston.

*418 This rule rests upon the well established principle of equity, “that when one of two innocent persons must suffer by the fraud of a third, the loss shall fall upon him, who has enabled such third person to do the wrong.” See Lupin vs. Marie, 2 Paige Rep., 172 .

Second. As to the effect of the, condition under which the sale and delivery was made to Reed, supposing the contract-to have been made with reference to the custom. An examination of the authorities, and a careful consideration of the subject, have led us to the conclusion that the same rule applies; and that a bona fide purchaser, without notice of the-condition upon which his vendor has acquired the possession, will be protected against the claim of the original vendor, in the same manner where the sale and -delivery are conditional, as where the possession has been obtained by fraud. It seems to us, the same equitable principle lies at the foundation of the rule, and is equally applicable to both classes of cases

If a party purchase goods for cash, and they are delivered to him upon the condition that he shall pay for them on delivery, he perpetrates a fraud by selling them to -another before complying with the condition; but if the person to whom he sells deals with him in good faith, ignorant of the secret defect in his title, and pays value, it is difficult to see why, upon the principle before stated, the innocent purchaser ought not .to be protected against the claim of the-original vendor, who, by his own act, has enabled his vendee to perpetrate the fraud. This view is consistent with the general current of the authorities, and -supported both by the adjudicated cases and the elementary writers. See 2 Kent’s Com., 642, 643, 7th Ed.) Story on Sales, sec. 313. Hussey vs. Thornton, 4 Mass., 405 . Lupin vs. Marie, 2 Paige, 172 . Covil vs. Hill, 4 Denio, 327 . Beavers vs. Lane, 6 Duer, 232 ; and many others might be cited.

In the case of Coghill vs. Hartford & New Haven R. R. Co., 3 Gray, 545 , decided in 1855, the Supreme Court of *419 Massachusetts held, the contrary, supporting their judgment by an able opinion delivered by Judge Bigelow. In that case the Court determined, that where goods were sold and delivered on condition, the title did not pass from the vendor till the condition was performed, and he might reclaim them, even from a bona fide purchaser who took them without notice of the condition. This is the only case cited in which this proposition has been distinctly asserted, and with the greatest respect for that learned Court, we cannot assent to their conclusion. In our opinion the cases cited by tbe learned judge do not support the views expressed by him, while the contrary doctrine has been laid down by numerous authorities, to some of which we have referred.

In one part of the opinion the case is treated hy Judge Bigelow as one “not depending on authority, but to he determined on just and sound principles.” If we were at liberty to consider the question as an • open one, we should still dissent from the reasoning of tbe learned judge.

We have said that the rule is well established, that a bona fide purchaser from a vendee who has procured possession of the goods by fraud, is protected against the claim of the original vendor. This principle is recognized and adopted by the Court in 3 Gray, and their decision rests entirely upon a supposed distinction between such a case, and the case of a sale and delivery of goods on condition. In the soundness of this distinction we do not concur.

In the view of Judge Bigelow, this distinction is based upon the proposition, that “by a sale and delivery of goods procured by fraud, the property passes, because such is the agreement and intent of the parties, and therefore the vendee having the property as well as the possession of the goods, can pass a good title to a purchaser who takes the goods in good faith, and without notice of the fraud.” * * * “But in the case of a conditional sale and delivery, the title docs not pass from the vendor until the condition is fulfilled. The vendee obtains no right under such sale to *420 dispose of the property, but only to hold it until the terms are complied with.” White vs. Garden, 10 C. B., 919.

The case of White vs. Garden, does not sustain the distinction here taken, nor have we seen any case which asserts that a party can acquire, as against his vendor, any title to goods under a sale and delivery procured by fraud. Such a contract is void, and no rights are acquired under it by the vendee. It is true that it is at the election of the vendor to treat the contract as void, and reclaim the goods; or he may hold the vendee bound by it, not because the fraudulent contract is valid per se and sufficient to pass the title, but because, by the principles of law, which forbid a party from taking advantage of his own fraud, the vendee is precluded from impeaching the contract on that ground. The supposed distinction therefore between a sale and delivery of goods on condition, where the condition is not performed,. and a sale and delivery procured by fraud, does not in reality exist as between the original parties to the contract; the vendee no more acquires the title in the latter case than in the former. In support of this view see Root vs. French, 13 Wend., 572 . Lupin vs. Marie, 2 Paige, 172 , and Parsons on Mer. Law, 55, 56. These authorities also show, that to these cases the principle, “that a party having no title to property can pass none to others,” does not apply. We conclude, therefore, both upon reason and authority, that the rule of law which secures protection to a bona fide purchaser, who has dealt in good faith with a fraudulent vendee having the possession, applies with equal force to a case where the original sale and delivery are made subject to conditions of which he is ignorant. We are unable to draw any distinction, either in reason or upon grounds of public policy, between the two classes of cases.

In the case of Copeland vs. Bosquet, 4 Wash. Cir. Ct. Rep., 594, referred to by the Court in 3 Gray, and which goes farther in support of their judgment than any other cited, Mr. Justice Washington uses this language: “If the possession be delivered by the real owner, together with *421 tbe usual indicia of property, or under circumstances which may enable the vendee to impose himself upon the world, as the real owner; this might be a case of constructive fraud, which would postpone, even at law, the right of the real owner, in favor of a fair purchaser without notice, and for a valuable consideration.”

This principle, although not positively asserted by the learned judge, we think is correct, and altogether applicable to this case.

It follows from the views above expressed, that the first, third and fourth prayers of the appellant are correct, and ought to have been granted; and for the same reasons there was error in granting the first and second prayers of the appellees. These last we construe as asserting the proposition, that upon the hypothesis of facts contained in the prayers, Lyman Seed could not sell and dispose of the flour so as to pass a good title to his vendees, as against the plaintiffs, and so construed the prayers are erroneous. The counsel for the appellees contended that they were not susceptible of this construction; but upon looking at the words of the prayers it is manifest, that an instruction that Lyman Need was not entitled “to sell or dispose of the same as his property, irrespective of the rights of the plaintiffs in or to said flour, was equivalent to an instruction that parties purchasing from him could acquire no title under any circumstances, and was calculated to mislead the jury. The third prayer of the appellees was also erroneously granted, because it ignores tbe rights which the appellant had to retain the property as bailee of Hicks & Hathaway, in the event of the jury finding the facts contained in the appellant’s first prayer, which, as we have said, would constitute Hicks & Hathaway bona fide purchasers, and entitle them, or their bailee, to tbe possession of tlie flour, against the claim of the appellees.

We are also of opinion that the appellant’s second prayer ought to have been granted; the evidence therein referred to was inadmissible, and having been taken subject to exception, ought to have been excluded, as it was cer *422 tainly incompetent for the appellees to impeach, or affect the rights of Hicks & Hathaway by any declarations of Reed, made after he had parted with the property, by the shipment, and the transmission of the invoice and bill of lading to Hicks & Hathaway, and their acceptance of the draft. No act or declaration of Reed subsequently made could impair their rights thus acquired.

(Decided May 27th, 1864.)

Judgment reversed, and procedendo ordered.