Corn Exchange Bank v. American Dock & Trust Co.

14 A.D. 453, 43 N.Y.S. 1028

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: February 15, 1897
• Status: Published

Opinion

Ingraham, J.:

Actions against this defendant upon warehouse receipts similar in form to the one in suit have been before the Court of Appeals upon three appeals, and we have, in determining this appeal, only to apply the rules settled by the court. M. W. Stone, the president of the defendant, was, under express authority froin the board of directors, authorized to sign warehouse receipts. ■ Stone took to the plaintiff, and delivered to it, for a valuable consideration, a receipt signed by himself as president, whereby he certified that there had been received in storage at the American docks, for the account of M., W. Stone, a certain number of bales-of cotton which was subject to the order of M. W. Stone on payment of the charges accrued thereon and the surrender of the receipt. - The plaintiff demanded the cotton covered by the receipt from the defendant, which was refused, and this action was then commenced, the plaintiff alleging the demand for the cotton, a tender of the defendant’s charges,- a refusal by the defendant to accept, that the value of the cotton at the time of the said tender and refusal was the sum of $8,101.15, and demanding judgment for- the recovery of that amount, with interest. The form of the action is, therefore, for the conversion of the cotton covered by the warehouse receipt issued by Stone, certifying that he (Stone) had on deposit the defendant’s cotton, and the transfer of such-receipts by Stone-to the plaintiff. In determining the legal principles applicable to an action to recover for a failure to deliver the cotton specified in these receipts, the Court of Appeals has said : “ If the president had issued a receipt similar to the one in question, except that it acknowledged the receipt of cotton froin some third person, although such named person had not in fact deposited any cotton, yet, in such case, the defendant would have been liable because the president had general authority under the by-law to issue receipts for cotton deposited by third parties, and, therefore, when he issued a receipt where no cotton had been received, although it was a violation of his authority and of his duty, yet the defendant would be held responsible on account of such general authority to give receipts. * * * That principle is that where an agent has been clothed by his principal with power to do an act, in case • of the existence of some fact peculiarity within the knowledge of the agent, and where the doing of the act is in itself a representation of the existence of that fact, the principal is estopped from denying its existence as against third parties, dealing with the agent in good faith and in reliance upon the representation * '*■ *. If the by-law clothed Mr. Stone, the president, with general authority to issue

receipts to himself for cotton which he actually deposited, if with such authority he issued a receipt where he had not in fact deposited any cotton, the defendant would be liable to respond to a Iona fide holder for value of such receipt. * * ■ * The by-law or resolution in question ought not to be construed as clothing either the president or the treasurer with any authority to issue receipts to himself for cotton, which in truth had been deposited by him. It is an acknowledged principle of the law of agency that a general power or authority given to the agent to do an act in behalf of the principal, does not extend to a case where it appears that the agent himself is the person interested on the other side.” (Bank of N. Y. N. B. Assn. v. A. D. & T. Co., 143 N. Y. 559.) It is thus settled, that Stone had no express authority under the resolution of the board of directors in question to issue a warehouse receipt, whereby it appeared that he had on deposit with the defendant any cotton and if Stone’s authority was confined to such resolution, such receipt, would be invalid, whether such cotton was actually deposited with, the defendant or not, but that if Stone, the president of the defendant, with authority to issue receipts to himself for cotton which lie-had actually deposited, issued a receipt where he had not in fact deposited any cotton, the defendant would be liable to respond to a. honafide holder for value of such receipt. The case of Hanover Bank v. American Bock & Trust Company (148 N. Y. 612), upon a receipt similar in form to that in the Bank of New York case,, came before the court. Judge Vatth, in delivering the opinion,, subsequently says: “ A certificate issued by the defendant was-negotiable, and a purchaser thereof for value, and without notice of ally fact to put him on inquiry, was entitled to receive from the defendant the property described therein on payment of the lawful charges.” (§ 6, chap. 881, Laws of 1872, the act under which the defendant was incorporated.) The opinion then proceeds: “ As the defendant failed to produce the goods when called for, the burden was cast upon it, prima facie, of either accounting for them or pay-, ing for them. * • * * It did neither, but when this action was commenced, alleged as a defense that said certificate was issued by Medad W. Stone, its president, to his own order, without any authority from the board of directors. While Stone had express authority to sign and issue warehouse receipts for cotton deposited with the defendant by persons other than himself, he had no such authority to sign or issue warehouse receipts in his own favor, even for cotton that had actually been deposited by him. * * * As the certificate on its face gave a purchaser such notice as should put a prudent person upon inquiry in regard to Stone’s authority, the plaintiff, in order to succeed, was required'to show that implied authority- had been conferred upon him to issue certificates to himself for cotton that lie had actually deposited. If he was authorized, either expressly ■ or impliedly, to issue certificates to himself for his own cotton on deposit, and he issued a receipt, on his personal account, for cotton not on deposit, in the language of the case last cited, 6 the defendant would be liable to respond to a Iona fide- holder for value of such receipt.’ * * * This is upon the ground that an agent may bind ■ his principal within -the limits "of the authority with which he has apparently been clothed in respect to the subject-matter.” And it was held in that case that upon the evidence it was a question of fact for the jury to say whether or not the defendant had, by implication, authorized Stone to sign and issue warehouse receipts for cotton deposited by himself. The third time the question was presented to the Court of Appeals was on the appeal in this action from a former judgment in favor of the plaintiff, and the Court of Appeals again reiterated the rule before referred to, and, citing the Hanover Bank case, the court held that acquiescence, under the circumstances: then disclosed by the record, would permit the inference that Stone had implied authority to issue a certificate on his own account for cotton actually deposited by him. It was further held that in issuing the certificate in -question, although for cotton never deposited, “ Stone was acting within the scope of his apparent authority, so that his representations were, binding upon the defendant, which thus became liable to a purchaser for value, even with notice that express authority to certify to himself had not been conferred.” (Corn Exchange Bank of N. Y. v. A. D. & T. Co., 149 N. Y. 180.) The judgment was reversed,, however, upon the ground that this question as to whether or not Stone had such implied authority to issue certificates to himself had not been presented to the jury, but that the case had been submitted to the jury upon a wrong theory. It would seem- that it has been settled that Stone had no express authority to issue the receipt to himself, whether he had cotton on deposit in the warehouse or not; that npon the facts appearing in the record in the Hanover Bank case, it was a question for the jury to determine whether he had implied authority from the defendant to issue receipts to himself upon his deposit of cotton in the defendant’s warehouse. If he had such authority and a certificate was issued by him and purchased by a bona fide purchaser for value, such purchaser would be entitled to recover from the defendant the cotton described in the receipt upon payment of the lawful charges, and this, irrespective of the actual deposit by Stone of cotton in the defendant’s warehouse.

Applying these principles, it would seem that the question as to whether or not Stone had actually ever deposited any cotton in the defendant’s warehouse, as indicated by the receipt in question, was entirely immaterial. If he had implied authority to issue receipts to himself, the issuing of the receipt in question being a representation of the fact that he had the cotton on deposit, then the defendant was estopped from denying it, it being a fact within the knowledge of the agent, and not within .the knowledge of the plaintiff. If Stone had authority to issue a certificate to himself of his deposit of cotton in the defendant’s warehouse, and he issued such certificate, upon that certificate being presented to the plaintiff, it had notice of the fact that Stone had issued a certificate to himself certifying that he had such cotton on deposit. The defendant then was bound to inquire as to the authority •of Stone to issue such a certificate. If Stone actually had such authority, express or implied, such investigation would have disclosed the existence of such authority, and if such authority existed, the act of Stone was then the act of the defendant. There is nothing in the fact of the receipt being issued by Stone to himself to call for any investigation by the plaintiff, except as to Stone’s authority to issue such a receipt, and if such authority in fact existed, then the defendant was liable for Stone’s act. This we think to be the logical result of the decisions in the cases before referred to. This being so, and upon the exddence in the case it being a question for the jury to determine xvhether or not Stone had such authority, and the jury by their verdict having determined that he had, the defendant was clearly liable for Stone’s act within the authority thus conferred upon him, and was bound to deliver to the plaintiff, upon demand, the cotton mentioned in the warehouse receipt. This liability of the defendant as thus expressed does not depend, upon estoppel, but upon its contract, which it has made through its authorized agent, to deliver specific personal property to Stone or his transferee (the plaintiff), upon payment of charges, and when a purchaser in good faith for value, and without notice, purchases one of such warehouse receipts and it is transferred by indorsement and delivery of the receipt, any holder to whom the- same may be so indorsed and delivered “ shall be deemed and taken to be the owner of said goods, wares, merchandise property therein specified, either absolutely or as a pledge for any advance or credits on the same as the case may be, subject, however, to all charges thereon.” (§ 6 of chap. 881 of the Laws of 1872.)

Now this plaintiff, when this warehouse receipt was transferred tO' it by indorsement and delivery, became the owner of the cotton that the defendant, by its authorized agent, had agreed to hold for Stone or his transferee (the plaintiff), and was entitled to receive such cotton upon demand. It demanded such cotton of the defendant, and the defendant refused to deliver it, and the plaintiff sued for its conversion, demanding the value of the cotton which the' defendant had refused to deliver. The action is not to recover the damages sustained by the plaintiff in consequence of any irregularity-on the part of Stone in issuing the receipt, or for a breach on his part of his duty as president to the defendant in issuing this receipt, but to recover the value of certain specific bales of cotton which the defendant had by contract agreed to hold for plaintiff, and to-deliver on demand. If the plaintiff had the right to the specific cotton in consequence of the transfer of this receipt by indorsement, then it would seem to follow that a refusal of the defendant to deliver such-cotton would entitle the plaintiff to a verdict for the value, of the cotton.- At the defendant’s request, however,'the question as to whether or not the defendant was estopped from denying the truth of the statements in the warehouse receipts, that it had in its possession at the time -of the delivery of the receipt to the plaintiff, and -the payment of the amounts advanced to Stone, the specific cotton described in the receipt,- was- submitted to the jury. At the request of the defendant the court charged the jury that “ to recover, the plaintiff must establish to the satisfaction of the jury that on the'said 2d day of May, 1891, the defendant is estopped to deny that it had in its possession at such time such cotton, and also estopped to deny the plaintiff’s right to the possession of the same on or prior to that day.” Under this charge, the verdict of the jury must be deemed to have, established such estoppel, and the evidence clearly sustained this verdict. Before the plaintiff advanced to Stone anything on the faith of these warehouse receipts, its agent was sent to the warehouse off the defendant to investigate as to whether or not the cotton as represented by the receipts, was actually on deposit with the defendant. Mead, the plaintiff’s agent, went to the warehouse and asked the person in charge about the cotton. This person was a Mr. Jewell, who was the- superintendent of the warehouse, and had general charge of it, and the custody of the property there stored. Mead gave to Jewell a memorandum containing a copy of the certificates, and said to him, “ Mr. Jewell, I have come down to see if that cotton is in store.” To that Mr. Jewell replied, “Well, that cotton is here all right in store, but I cannot show it to you now because it has an inspection number.” The plaintiff had thus done all in its power to ascertain whether or-not the cotton was there. It had no power to force its way into the warehouse and look at the cotton against the wish of the person in charge. With that statement the messenger was forced to be content. He returned to the plaintiff and stated to its officer that “ they (that is the hales of cotton) were all right..”

The criticism by counsel for the plaintiff upon this report as being a false report is not well founded. It is true that Mead had been directed to look at the cotton, but an inspection was refused, and he could do nothing but rely upon a statement of the officer in charge that the cotton was there and all right, and to make-a report to his principal, relying upon that statement. As before stated, Mead had no authority to force his way into the warehouse of the defendant against the wish or direction of the person in charge. All the information that he could obtain about the cotton was such information as the officers or employees of the defendant were willing to give; and when they refused to permit an examination, but made a, statement to him. that the cotton w-as there and all right, the plaintiff had done all that it could do to ascertain whether or not the cotton was there subject to its call; and having received this assurance .that it was there from a responsible officer of the defendant, it was entitled to rely upon that statement. It was upon that statement that the plaintiff relied- and paid the money to Stone. The situation was that the defendant had made an agreement with Stone that it had on storage certain bales of cotton which it agreed to deliver to ■ Stone on demand. Stone had transferred the title to the cotton, and the right to enforce the certificate to the plaintiff for a valu- • able consideration, who thereby became the owner of the cotton. The defendant was estopped from denying the fact that Stone had on deposit with the defendant, at the time of the transfer of the certificate to 'the plaintiff, the cotton called for by the warehouse receipt.

Thus the plaintiff’s cause of action was complete, and clearly, within the principles established by the Court of Appeals in the cases before cited, he was entitled to á .verdict for the value of the ■cotton at the time of the refusal to deliver on demand. The court having, at the defendant’s request, submitted this question to the jury, and'based the right of the plaintiff to recover upon the establishment of the estoppel, the defendant cannot now insist that the action was submitted to the jury upon a wrong theory.

There are many exceptions by the defendant to the refusals of the: court to charge, and to the charge as made, and to the rulings upon the evidence, which it is impossible to- notice .in detail. We would say, however, .that we are satisfied that all of the dealings between Stone and others, whereby he assumed to act on behalf' of the defendant, and the fact that such dealings were entered in the books of the defendant, were competent evidence as against the defendant upon the question of Stone’s implied authority to act for the defendant and issue these certificates. The fact that he had before issued ■ certificates to himself which were entered in the books of the defendant, and which were recognized by 'the defendant and its officers as valid, was competent évidence to prove the authority of Stone to act for the defendant; and' in connection with such evidence, the degree of the control of the business of the defendant which was left to Stone. The neglect of the directors or other officers of the defendant to in any way supervise his actions, while dealing with others, the authority to act for the corporation which he assumed and exercised with the acquiescence of the directors of the defendant corporation, together with his general relation to the corporation itself, were all competent evidence to show just what implied authority had been granted to Stone, by the corporation;. and the jury, passing upon the question of Stoné’s implied authority,, were bound to consider all of the evidence bearing upon the subject. There was no error, therefore, in the admission of evidence as to Stone’s relation to the company, or as to the acts that he did on behalf of the company, and the acts of the company in voluntarily surrendering into the hands of Stone the actual control and management of all the company’s business.

The other objections taken by the defendant to this recovery, and the exceptions taken upon the trial, have all been examined. We-are satisfied, however, that, applying the principles established by the Court of Appeals in the cases before cited, and accepting the verdict of the jury upon the disputed questions of fact, which was clearly sustained by the evidence, the verdict of the jury was right and the plaintiff is entitled to recover, and no eiror was committed that would justify us in reversing this judgment.

The judgment and order appealed from is, therefore, affirmed,, with costs.

Yan Brunt, P. J., Barrett, Rumsey and O’Brien, JJ., concurred.

Judgment and order affirmed, with costs.