March v. First National Bank of Mobile

11 N.Y. Sup. Ct. 466

Opinion

Davis, P. J.:

The questions presented by this case are by no means free from doubt, and .they well deserve the consideration of the court of last resort. The bill of exchange drawn by Stannard Brothers & Co. on the plaintiff’s firm, made no reference to the bill of lading. It was sent to the agent of defendants in the city of New York, pinned to the bill of lading, properly indorsed to the defendants. This was notice to the agent that the bill had been drawn against the cotton described in the bill of lading, and that the latter bill and the title of the property had been transferred to and were held by the defendants as security for the acceptance and payment of the bill of exchange.

* The agent of the defendants was thereby authorized to present the bill of exchange to the plaintiffs for acceptance, with the bill of lading annexed, which act was equivalent to saying that the bill of exchange had been drawn against the cotton mentioned in the bill of lading, the title of which was held as security by the defendants, and would, upon acceptance, become the security of the plaintiffs, † It was shown that the bill of exchange was presented to the plaintiffs on the thirteenth day of July. At the time of presentation, the bill of lading was annexed and presented to the plaintiffs, but was taken off by the person presenting the papers, on leaving the bill of exchange for acceptance. The plaintiffs were entitled to the possession of the bill till the next day, before accepting. They were called upon in the afternoon of the thirteenth and requested to accept, but declined; on the fourteenth they made their acceptance and delivered the bill to the agent of defendants, by whom, under instructions from defendants, it was sold to a bona fide purchaser at a discount, and without recourse. Evidence was given tending to show that before the fourteenth of July the defendants knew that the cotton was claimed by the factors who had sold the same to Stannard Brothers & Co., on the ground that it had not been paid for by that firm, and that as early as the twelfth, and certainly on the thirteenth, the defendants had reason to believe that the bill of lading was not security of any value in their hands, and that with this knowledge they hurried up their agent by divers telegrams to procure immediate acceptance, saying nothing of those facts either to the agent or to plaintiffs. If the withholding of their knowledge of the true state of affairs in relation to the value of the bill could in law charge the defendants on the ground of fraudulent concealment, enough evidence on that subject was given to carry the case to the jury. The court, in submitting the case to the jury, left it to them to say “ whether, in presenting the bill of exchange to the plaintiffs for acceptance, with the bill of lading attached to it, the defendants intended to convey to the plaintiffs the idea that it was a bill of exchange secured by the cotton described in the bill of lading,” and he instructed the jury that if they did not find such to have been the intent, that was the end of the case. He instructed the jury also, that to entitle the plaintiffs to recover, they “ must find that the acceptance was upon the faith of the exhibition of the bill of lading alone. If it was on the credit of Stannard Brothers & Co., or upon any request from them, or for any other reason, the plaintiffs cannot recover.” He charged also, that the element on which the case could alone stand was fraud, and that if they found as above stated in respect' to the intent in presenting the bill of lading with the bill of exchange, they should then inquire whether the defendant knew at the time that it was not true that the cotton was any security for the bill of exchange; and finally he submitted, as he said, “ the proposition which contained the whole law of the case,” in these words : “ I charge you that if the jury believe that by the exhibition of the bill of lading, at the time of and in connection with the presentment to the plaintiffs of the bill of exchange for acceptance, the defendants intended to mislead the plaintiffs into the belief that such bill of exchange was actually secured by the pledge of the cotton described in. said bill of lading; and if the jury further believe that before the bill of- exchange was accepted, the defendants knew that the cotton described in the bill of lading had not been paid for, and that the vendors to Stannard Brothers & Co. were taking steps with a view to reclaim it, under the law of Alabama, and intentionally concealed these facts from the plaintiffs, in order to lead them to accept the bill of exchange upon the faith of the security of the said cotton, and they accepted such bill on the faith of the bill of lading being a valid bill for the cotton described in it, they have a right to recover against the defendants the damages resulting from the bill of lading being a defective or insufficient security; otherwise not.” Doubtless, if the bill of exchange had been sent alone and accepted by plaintiffs, they would have had no redress against the defendants, however well the failure of the bill of lading as security might have been known to them. The defendants were under no obligations to make any disclosure of facts to the plaintiffs to prevent their acceptance of the bill, but they were also under obligations to do nothing and say nothing, with knowledge of the real facts, which would operate to secure an acceptance by an expression of falsehood or a suppression of truth. Knowing that the bill of lading was of no value, the defendants had no right to induce the acceptance of the bill of exchange, by presenting the bill of lading as one of value, concealing their knowledge of its true character. In the cases cited by the learned counsel for the defendants, where the bill of lading turned out to be a forgery, it can hardly be doubted that if the holder of such a bill had presented it annexed to the draft as a genuine one, with, knowledge that it was in fact forged, and in silence on that subject, he would not be heard to say that there was no fraud iti inducing an acceptance by presenting the false appearance of security when he knew that in reality he was giving commercial currency to a forgery.

We think the judgment should be affirmed.

Daniels and Brady, JJ., concurred.

Judgment affirmed.

Cayuga County Bank v. Daniels, 47 N. Y., 631; Marine Bank of Chicago v. Wright, 48 id., 1.

The Marine Bank of Chicago v. Wright, ubi supra.