CLARK, C. J., dissenting arguendo.
The facts stated in the complaint, considered material to a proper understanding of the cause, are:
1. That in August, 1906, defendant A. E. Nelson, doing a cotton business in Texas, contracted to sell and deliver to plaintiff, resident and doing business in Charlotte, N.C. fifty bales of cotton, at the price of 8 3/4 cents per pound, and guaranteed that said cotton, in grade, texture and quality, was according to sample exhibited.
2. That on 6 August, 1906, the said defendant A. E. Nelson, in pursuance of said contract, delivered at Houston, Tex., fifty bales of cotton, marked "L. O. N. G.," to the Texas and New Orleans Railroad Company, a common carrier, and took and received from said railroad company a bill of lading therefor in the usual form, stipulating that said cotton was deliverable to the order of the said A. E. Nelson at Charlotte, N.C. with instruction to notify plaintiffs, R. E. and C. E. Mason, upon its arrival at said point; and thereafter, upon the same day, the said Nelson drew his draft for the said sum of $2,176.14, the price agreed to be paid for the said cotton, upon the plaintiffs, payable to the order of one W. A. Trice, and attached to the said draft, as security for the payment of same, the aforesaid bill of lading, and thereupon endorsed the said bill of lading, and sold, assigned and transferred the same to the defendant Trice for full value, and the said Trice thereby became the owner of the cotton described in and covered by said bill of lading.
6. That thereafter the said Trice endorsed the said draft and (494) bill of lading to T. W. House, banker, of Houston, Tex., for collection, who forwarded the same to the First National Bank of Charlotte, N.C. for a like purpose.
7. That plaintiffs were unable to get said cotton from the railroad company, when it arrived in Charlotte, without presenting the bill of lading therefor, and plaintiffs were compelled to pay said draft before they could get said bill of lading and examine said cotton to ascertain whether or not said cotton was of the same grade, texture and type contracted for; and plaintiffs, relying on the representations and guarantee of said A. E. Nelson that said cotton was of the same grade and type as the "E. V. A." samples, paid said draft to the First National Bank of Charlotte, N.C. to-wit, $2,176.14, and took up and surrendered the bill of lading to the Southern Railway Company and took into their possession the said fifty bales of cotton.
8. That immediately or as soon thereafter as practicable plaintiffs examined said cotton and found that said cotton was not of the same
grade as the "E. V. A." samples, in type or texture; on the contrary, said cotton was much inferior to said samples, in grade and texture and type, and was what is known as threshed cotton, worth in the market a little more than one-half the value of cotton of the grade and texture of said "E. V. A." samples, although said defendant A. E. Nelson had represented and guaranteed to plaintiffs that said fifty bales should be the same grade, type and texture as said "E. V. A." samples.
9. That by reason of the low grade and texture and inferior quality of said cotton, plaintiffs were compelled to sell said cotton at a great loss, and were put to great expense in storing and reselling said cotton.
10. That by reason of the failure of said cotton to be of the same grade, texture and type as the "E. V. A." samples, as defendant A. E. Nelson represented, warranted and guaranteed it to be, and by (495) reason of such breach of the warranty and the expense incurred by reason of such breach, and failure of said cotton to come up to the grade, texture and type of the "E. V. A." samples, plaintiffs have been damaged in the sum of $1,795.62.
11. That plaintiff are informed and believe, and are so advised, that by reason of the assignment of said bill of lading by the endorsement of said A. E. Nelson to W. A. Trice, and the endorsement of said draft by said W. A. Trice, and the assignment of said draft and bill of lading to said House, and by the endorsement of said draft and bill of lading by said House, banker (unincorporated), and the payment of same by these plaintiffs, said W. A. Trice became liable to plaintiffs for all damages they have sustained by reason of the failure of said cotton to come up to the grade, texture, and type guaranteed to plaintiffs by said A. E. Nelson, as hereinbefore set out.
12. That plaintiff have demanded payment from the defendants, and payment has been refused.
Defendant W. A. Trice demurred to said complaint, for "that same does not set" forth any fact whereby this defendant became liable to the plaintiffs, and it appears in and by said complaint that said W. A. Trice is in no way liable to account for the alleged breach of contract set out against his said codefendants.
There was judgment overruling the demurrer and allowing said defendant to answer over, whereupon he excepted and appealed.
after stating the case: In Finch v. Gregg, reported in 126 N.C. 176, this Court held in effect that when a purchaser and consignee of goods has accepted and paid a draft drawn on himself by the
consignor for the purchase price to a holder of the draft, "in due course," said holder, having taken an assignment of the bill of (496) lading attached or otherwise, as security for the amount paid in obtaining the draft, and this bill of lading is turned over to the consignee on the payment of the draft, who thereby obtains possession of the goods, the said consignee can recover of the holder receiving such payment damages for breach of warranty given by the consignor in the original contract of sale; and this, though the holder of the draft had no interest ultra in the goods and took no part in the bargain. The present writer, who presided at the trial of Finch v. Gregg in the Superior Court, first made this ruling in the court below, following with much hesitation a decision of the Texas Court of Civil Appeals, then recently made (Landa v. Lattin Bros., 19 Texas Civil Appeals, 246), and the position was sustained on appeal. The purport of this Texas decision, cited with approval in the opinion of our Supreme Court, on the question chiefly considered here is thus stated in Southwestern Reporter, Vol. 46, p. 48:
"1. A consignor of wheat delivered to a bank a bill of lading, with draft, drawn upon his consignee, attached. The bank cashed the draft and paid the consignor. The consignor had contracted to furnish sound wheat, but the wheat furnished was of inferior quality. Held, that the bank purchasing the bill of lading became the owner of the wheat and was responsible to the consignee for the failure to furnish sound wheat.
"3. A bank cashing a draft attached to a bill of lading drawn on the consignee of goods becomes a purchaser of the goods, and must at its peril exercise care to see that the goods are of the quality that the consignor contracted to furnish."
These cases, and the principle upon which they are made to rest, apply to the facts presented here, and if they are to be regarded as the law governing the rights of these parties the judgment of the Court below overruling the demurrer must be affirmed. Trice, the appellant who demurred to the complaint, was the holder of the draft, in (497) due course, with a bill of lading attached and assigned to him as security for the amount paid in discounting the draft. So far as appears, he had no interest in the goods, except what belonged to him by reason of these papers, took no part in the bargain and sale and had no knowledge or notice of its terms, and he is sued by the consignee, who accepted and paid the draft, for beach of warranty given by the consignor to the consignee in the contract of sale. After giving the question our best consideration, with a due sense of the great importance of adhering to decisions when formally announced as law by the Court, we feel constrained to overrule the case of Finch v. Gregg, being of opinion that the decision is based on an erroneous principle, or rather on
the erroneous and unwarranted extension and application of an admitted principle, and is contrary to the great weight of well-considered authority. The case excited much comment at the time it was announced, was the subject of adverse criticism in a learned and intelligent note by the editor in 49 L.R.A., 679, and the principle upon which it was made to rest was likewise condemned in a well-considered and instructive note toHall v. Keller, 91 Am. St. 209, the case being taken from 64 Kansas, 211. Another comment of like purport will be found in a note to an Alabama case of Haas v. Bank, 6 L.R.A., (N.S.), 242, citing additional authorities in support of the editor's position.
The opinion in Finch v. Gregg, delivered by our Supreme Court at February Term, 1900, was referred to at the same term in Sloan v. R. R.,126 N.C. 487, as announcing a correct principle of law, and again at Fall Term, 1902, in the case of Perry v. Bank, 131 N.C. 117; in this last case only to say that it had no application to the cause then being considered; and with these two exceptions, so far as the writer (498) can discover, no other reference was made to the case until Fall Term, 1903, in Mfg. Co. v. Tierney, 133 N.C. 630, when it was cited in the opinion in support of this principle: "It is well settled that when the vendor of goods ships them, taking from the carrier a bill of lading to deliver to his own order, and thereupon draws a draft payable to his own order upon the vendee, attaching the bill of lading, and endorses to a third party such draft for value, the title to the goods vests in the endorsee, at least to the extent of the amount advanced. Daniel on Neg. Instruments, sec. 1734 (a). The law is thus stated and cited with approval by Mr. Daniel: `When the vendor of goods consigns them to the purchaser, taking a bill of lading from the carrier and intending to resume the right of control over them, at the same time drawing upon the purchaser for the price and delivering the bill of exchange, with the bill of lading attached, to an endorsee for a valuable consideration, the consignee, upon receipt of the goods, takes them subject to the rights of the holder of the bill of lading to demand payment of the bill of exchange, and cannot retain the price of the goods on account of a debt due to him from the consignor.' Emery v. Bank,25 Ohio St. 360; 18 Am. Rep., 299; Bows v. Bank, 91 U.S. 618. This Court, in Finch v. Gregg, 126 N.C. 176 (49 L.R.A., 679), recognized this almost elementary principle, carrying it to its fullest extent."
To the extent indicated in this citation from Manufacturing Co. v.Tierney the principle contained in Finch v. Gregg is sound. The holder of a draft or bill of exchange, who takes an attached bill of lading by assignment or otherwise as security for the amount advanced on the draft, does become the owner of the goods as against the acceptor to an extent sufficient to secure and protect his claim. And it is in extending
this wholesome and very generally accepted principle of mercantile law to an unwarranted length that the error in Finch v. Gregg
consists. That decision not only makes the holder of a negotiable (499) instrument, who has taken an assignment of the bill of lading only as security the owner outright of the goods, but imposes on him the burden and obligation of a contract concerning the property made between the consignor and consignee in which the holder took no part and of which he had no notice. And in no aspect of the matter, as we view it, can such a position be sustained. Since the noted case ofLickbarrow v. Mason, Smith's Leading Cases, 9 Am. Ed., p. 1045, and before that time it has been accepted doctrine that the holder of a bill of lading by assignment will under certain conditions be regarded as the absolute owner of the goods; but, as pointed out by the American Annotator of this decision in Law Library Ed., Vol. 43, p. 543, this is only true when by the terms of the contract between the assignor and the assignee the entire title was to pass to the assignee. That decision was made on a question not at all relevant to this inquiry, and is therefore not further pursued; but there is nothing in the case or the principle therein announced which prevents the assignee, when the contract so provides, from taking a restricted interest under such an assignment, and of having his rights protected and enforced according to the stipulations of his contract. And, so far as we can discover, until these decisions were made which we are now reviewing, it was a doctrine universally recognized that the holder of a negotiable instrument with bill of lading attached, under the circumstances indicated, was by right superior to that of a consignee who had accepted and paid a draft drawn on him for the purchase price of the goods; and whether such consignee accepted and paid, as in this case, or paid the draft on presentation, as in Finch'scase, the result was the same. In either event the consignee thereby took a position in recognition of the holder's rights under his contract, whatever they were.
In accordance with this doctrine, the case of Manufacturing (500)Co. v. Tierney, supra, correctly holds: "4. Where a bank, for a valuable consideration, takes an assignment of a bill of lading with draft attached, the consignee of the goods takes them subject to the rights of the holder of the bill of lading for the amount of the draft, and he cannot retain the price of the goods on account of a debt due him from the consignor."
This principle is entirely inconsistent with the doctrine announced inFinch v. Gregg, and, as stated, is in accord with the general current of authority on the question in this country and in England. Robinson v.Reynolds, 42 E. C. L., 634; Hoffman v. Bank, 79 U.S. 181; Goltz v. Bank,119 U.S. 551; Blaidsell v. Bank, 96 Tex. 626; Arpin v. Owens, 140 Mass. 144; Tolerton Co. v. Bank, 108 Iowa 217 (50 L.R.A., 777);Lewis v. Small Co. 117 Tenn. 153 (6 L.R.A., (N.S.), 887); Hall v.Keller, 64 Kan. 211 (91 Am. St., 209), with a large number of additional authorities applying the same principle cited in the notes above referred to. Finch v. Gregg, 49 L.R.A., 679; Tolerton's case, 50 L.R.A., 777;Haas' case, 1 L.R.A., (N.S.), 242; Hall's case, supra, 91 Am. St., 209.
In Robinson's case, supra, Tindal, C. J., for the Court, said: "The sole ground on which the defendant relies is that the acceptance was not binding on account of the total failure or insufficiency of the consideration for which it was given, the document on the delivery of which the acceptance was given having been forged and there never having been any other consideration whatsoever for the acceptance of the defendants. And this would have been a good answer to the action if the bank had been the drawer of the bill. But the bank is endorsee, and endorsee for value, and the failure or want of consideration between it and the acceptors constitutes no defense, nor would the want of consideration between the drawer and acceptors (which must be considered as included (501) in the general averment that there was no consideration), unless they took the bill with notice of the want of consideration, which is not averred in this plea."
The exact case is presented in Tolerton's case, supra, where it is held: "(1) the purchaser of a draft with bill of lading attached is not liable on a warranty made by his assignor of the goods represented by the bill of lading. (2) Payment by the drawee to the payee of a negotiable draft with bill of lading attached cannot be recovered back by the drawee on the ground that the payee has received money which it cannot equitably retain because of a breach of warranty made by the drawer to the drawee on the sale of the goods for which the bill of lading was given, since any equities arising therefrom do not affect the payee when he has secured an acceptance or payment."
In Hoffman's case, supra, it was held: "A consignor who had been in the habit of drawing bills of exchange on his consignee with bills of lading attached to the drafts drawn (it being part of the agreement between the parties that such bills should always attend the drafts), drew bills on him with forged bills of lading attached to the drafts, and had the drafts with the forged bills of lading so attached discounted in the ordinary course of business by a bank ignorant of the fraud. The consignee, not knowing of the forgery of the bills of lading, paid the drafts: Held, that there was no recourse by the consignee against the bank."
And the doctrine, and the reason upon which it rests, is well stated in the opinion, as follows: "Proof, therefore, that the bills of lading were forgeries could not operate to discharge the liability of the plaintiffs,
as acceptors, to pay the amounts to the payee or their indorsees, as the payees were innocent holders, having paid value for the same in the usual course of business. Different rules apply between the immediate parties to a bill of exchange, as between the drawer and the acceptor, or between the payee and the drawer, as the only consideration as between those parties is that which moves from the (502) plaintiff to the defendant; and the rule is, if that consideration fails, proof of the fact is a good defense to the action. But the rule is otherwise between the remote parties to the bill, as, for example, between the payee and the acceptor or between the indorsee and the acceptor, as two distinct considerations come in question in every such case where the payee or indorsee became the holder of the bill before it was overdue, and without any knowledge of the facts and circumstances which impeach the title as between the immediate parties to the instrument. Those two considerations are as follows: First, that which the defendant received for his liability, and, secondly, that which the plaintiff gave for his title; and the rule is well settled that the action between the remote parties to the bill will not be defeated unless there be an absence or failure of both these considerations. Unless both considerations fail in a suit by the payee against the acceptor, it is clear that the action may be maintained, and many decided cases affirm the rules, where, if any intermediate holder between the defendant and the plaintiff gave value for the bill, such an intervening consideration will sustain the title of the plaintiff."
The opposing principle that maintained in Finch v. Gregg is not only contrary to this great array of well-considered authority, but is against the real facts of the transaction, bringing the holder of a negotiable instrument under the burdens of a contract which he never made, and in which, so far as appears, he had no interest. The allegations in the complaint, made by the plaintiff himself and admitted by the demurrer, are to the effect that one Nelson, of the Nelson Cotton Company sold the cotton to plaintiff. He or one of them owned the cotton, made the bargain, gave the warranty and got all the profits, if there were any.
Trice, the defendant and payee, took the draft for full value in (503) the regular course of mercantile dealing and, as heretofore stated, so far as the facts show, he had no interest in the cotton, took no part whatever in the bargain and had no knowledge or notice of its terms. He simply received what was due him under his contract, and, this being true, it would be a hard measure of justice to hold him responsible for the assurances and stipulations given by the vendor to the purchaser in the contract between them from which he derived no benefit. This case of Finch v. Gregg and the two or three others of like
import profess to find support in Dows v. Bank, 91 U.S. 618, and Bankv. White, 64 Mo. Appeal Reports, p. 677, but neither of these decisions is authority for their position. In Dows v. Bank the precise question we are now discussing was not presented, but the case in its principal feature held that where a bank had discounted a draft in due course for the purchase price of certain wheat, and had taken bills of lading as security for the amount, these bills making the wheat deliverable on account of the cashier of a correspondent bank, the bank discounting the draft (holder of the same in due course) would be the owner of the wheat to the extent necessary to protect its claim, and could recover the same from one who had purchased the wheat from the drawee of the draft, to whom it had been delivered, but who had received it as warehousemen, subject to instructions not to deliver till the drafts were paid. The drawee of the draft had neither accepted the same nor paid it on presentation, and the question was simply one of title between the bank, the holder of the draft with bill of lading attached, and the purchaser from the drawee, who had received the wheat as warehouseman, with instructions not to deliver; and the rights and obligations of the respective parties after acceptance or payment of the draft by the drawee were in no way considered. So far as this decision bears on the question, it favors defendant's position in holding, as it does, (504) that a person discounting a draft in due course for the purchase price of goods, and taking a bill of lading attached as security, can enforce his claim according to the terms of his contract. The case on this point being properly digested as follows: "2. A party discounting a draft and receiving therewith, deliverable to his order, a bill of lading of the goods, against which the draft was drawn, acquires a special property in them, and has a complete right to hold them as security for the acceptance and payment of the draft."
In the Missouri case, the bank having discounted a draft of a lumber company for the price of certain shingles, with bill of lading attached, and assigned to the bank as security for the amount, sued one White, a lumber dealer and drawee of the draft, to whom the shingles had been consigned for sale at a certain price. White, the consignee and defendant, had taken the shingles from the carrier, paying a freight bill thereon to the amount of $134.61, and, finding the shingles were off grade and not salable at the stipulated price, immediately notified the consignor, requesting that he take the shingles and reimburse him for the amount of his costs and charges or the shingles would be sold for that purpose. No attention being paid to this request, White sold the shingles, realizing the market value, reimbursed himself for the amount he was wrongfully out of pocket, and remitted the balance of $40 to the consignee and original owner. The bank sued for the entire amount of the
draft, and the Court of Appeals, in holding that the defense was available against plaintiff's demand, said: "From that time on plaintiff occupied the same relation towards the shingles then in transit that the lumber company did before the bill of lading was transferred. The assignment of the bill of lading operated as a symbolic delivery of the property covered by it. However, the rights of White, the consignee, were not impaired or disturbed by this change of ownership in the property. He was left with the same defense as against the plaintiff bank that he would have as against the lumber company," etc. (505)
It will be noticed here that White, the consignee, had not accepted or paid the draft drawn on him and discounted by the bank, and this distinction serves to indicate and emphasize the error in the cases we are reviewing. Until White, the drawee, had accepted the draft or acknowledged his obligation thereon by paying the same, he was only bound by the terms of the original contract, and that was the only consideration moving against him; and the discounting bank, having to assert its demand under and by virtue of the original contract of the consignor, must take his position in the transaction and be subject to the defenses available against him. But on acceptance of the draft the owner comes under a different obligation, and the amount paid by the bank for the draft becomes a new and binding consideration, giving the bank, when a holder in due course, a position superior to the original contract between the consignor and consignee, and to any defenses existent as between them.
So far as we are now aware, the first case notably making erroneous application of these two authorities was that of Landa v. Lattin,19 Tex. Civ. App. 246. That decision held, as stated, that the purchaser of goods and drawee of draft for purchase price, who pays same on presentation, may recover for breach of contract stipulations made by the vendor against one who has become the owner of the draft in due course, with bill of lading attached and assigned as security for the amount paid in obtaining the draft. A conclusion drawn from the position maintained in this and other cases holding the same view, that the holder, in taking the assignment of the bill of lading as security becomes the owner outright of the goods and responsible for the stipulations of the bargainor given in the original contract of sale, a position which we have endeavored to show cannot be sustained in reason or authority. The decision has since been disapproved by the Supreme Court of Texas, in an opinion delivered in June, 1903 (Blaisdell Co. v. NationalBank, 96 Tex. 627), and is no longer recognized as authority in that State.
The Supreme Court of Mississippi has rendered a decision similar to
that of Landa v. Lattin Bros., in Searles v. Grain Co., 80 Miss. 688. The opinion in this case, however, simply adopts the reasoning of the Court inLanda v. Lattin, embodying the opinion in that case as its own deliverance on the subject, and in itself adds nothing to the discussion and affords the position maintained no additional weight, except that which arises from the sanction and approval of that learned and usually sane and safe Court.
Another case sustaining the position announced in Landa v. Lattin is that of Haas v. Bank, 144 Ala. 562. The decision reported also in 1 L.R.A. (N.S.), 242, where it is subjected to adverse comment in a note by the editor, proceeds on the theory that the holder, in taking over the draft with bill of lading attached, without proof ultra, thereby became the owner outright of the goods and of the contract of sale, and by delivering the bill of lading on payment of the draft he came under all the obligations of the original parties to the contract of sale. The Judge delivering the opinion states the position as follows: "And when, as here, the defendant became the owner of the debt and the goods, and assuming necessarily the responsibility and burden of delivering them to the plaintiffs, it became the seller in fact, and must bear the burden of the transaction. In short, the defendant took the contract of Klyce, the shipper, and stood in his shoes with the same rights — no greater, no less."
(507) There is doubt if the Court intended in strictness to apply the principle stated to a case like that presented here, for in our case it is stated expressly that the appellant took the bill of "lading as security," but on the facts suggested in the opinion we do not think the decision of Haas v. Bank can be sustained, proceeding as it does on the assumption, without proof, that the bank on discounting the draft with bill of lading attached became the owner of the original contract of sale.
As we have held in Furniture Co. v. Express Co., 144 N.C. 642, "A court will take judicial notice of the general business methods of railways and other well-known and quasi public corporations when these methods are universally practiced and commonly known to exist, and to the extent that such methods are sufficiently notorious to make their assumption safe and proper." And we think it an erroneous position to hold or assume that a bank, in discounting a draft for purchase price of goods, with bill of lading attached, took over or intended to take over the original contract of sale or to come under its burdens. On the contrary, we may safely assume, when there is no proof to the contrary, that no such intent existed, and that the bank simply discounted a draft according to the ordinary methods of mercantile dealing. It held it, and had a right to hold it, by reason of the consideration moving from itself
to the drawer, and when the drawee accepted or paid the draft, on presentation, he did so in recognition of the bank's position.
It is earnestly contended that the appellant in the present case comes under the obligation of the contract of sale, because the plaintiff was compelled to pay the draft before he could make examination of the cotton — that he was forced to take the cotton "unsight unseen." There is doubt if any such allegation is made against the appellant. In this connection the complaint states "that plaintiffs were unable to get said cotton from the railroad company, when it arrived at Charlotte without presenting a bill of lading therefor, and plaintiffs were compelled to pay said draft before they could get said bill of lading and (508) examine said cotton to ascertain," etc.
The allegation here seems to be against the carrier, and we have held inSloan v. R. R., 126 N.C. 487, that a common carrier, under certain circumstances, may permit a consignee to inspect goods without subjecting itself to liability; but if it be conceded that no such right existed here, and that the refusal was imputable to Trice, the appellant, he had the right to stand on the integrity of his own contract and hold the goods as owner till his draft was paid. As heretofore stated, by reason of the consideration moving from himself, as purchaser of the draft, his position was superior to that of the drawee, and he had the contract right to insist that the drawee should recognize this position before delivering to him the bill of lading.
Even on grounds of expediency, if such considerations should have placed in a discussion of this character, the weight of the argument is against the plaintiff. The utmost that can be urged by plaintiff against the doctrine we apply in denial of his claim is that, by negotiation of the draft, at times colorable, he may be forced to seek redress for his wrong in a distant forum, and that his recovery may on occasions be restricted to a vendor who is insolvent. But these general laws of business, established to facilitate and promote enlightened commercial intercourse, are framed, and properly framed, on the assumption that men will act honestly, and as a rule they do. The few cases that are brought before the courts for decision are exceedingly small in proportion to the immense volume of business that is carried on and satisfactorily adjusted between the parties. And one of these rules universally recognized as well fitted for its purpose should not be interfered with nor have its usefulness seriously impaired because in rare and exceptional instances a wrong may be possible. And it must be borne in mind (509) that the plaintiff is left without interference to assert his demand against the original vendor, the man with whom he had elected to deal.
Speaking to this question, in Hall v. Keller, 64 Kan. 211, Smith, J., delivering the opinion of the Court, said: "To fix a liability upon the
bank or upon Keller Dean, under the circumstances of the present case, would not only violate well-settled rules of the law governing commercial paper, but would also tend to decrease the immense volume of business which is carried on by shippers of stock, grain and other commodities by restricting that freedom with which banks advance money to the drawers of such drafts with bills of lading attached. In banks in whose favor such bills are drawn are made liable for damages on account of the defective quality of the property shipped and covered by the bill of lading, or for failure of title in the drawer of the draft, a serious impediment would be placed in the way of shippers who need a part or all of the price of the commodity sold before its arrival in the market to which it is consigned. To hold with the plaintiff in error would, to use the language of the author of the note in Finch v. Gregg, 49 L.R.A., 679, `undoubtedly cause a revolution in commercial circles.'"
We are not insensible to the great importance of the doctrine ofstare decisis, a doctrine of recognized value in all countries whose jurisprudence, like our own, is founded so largely on precedents. We know that the courts in such countries, as a general rule, will adhere to a decision found to be erroneous, when it has been acquiesced in for a great length of time, so as to become accepted law, constituting a rule of property. And there are other conditions, restricted in their nature, where the doctrine may be properly applied, but none of them require or permit that a court should adhere to a decision, found to be clearly erroneous, which affects injuriously a general business law, and under the circumstances indicated here. As it has been well said, "Where vital and important (510) public or private rights are concerned, and the decisions regarding them are to have a direct and permanent influence on all future time, it becomes the duty as well as the right of the court to consider them carefully and to allow no previous error to continue, if it can be corrected. The foundation of the rule of stare decisis was promulgated on the ground of public policy, and it would be a grievous mistake to allow more harm than good to come from it." 26 Am. and Eng. (2d Ed.), p. 184. This decision, announced something like ten years ago cited, not more than twice, as direct authority for the position it contains, and disapproved in the State where it seems to have originated, commented on adversely by the intelligent annotators and reviewers of the country, and pronounced unsound by the great weight of authority bearing on the question, cannot be considered to have ever been acquiesced in or to have become the accepted law of the land. Nor are we inadvertent to the fact that this contract was made at a time when Finch v.Gregg expressed the rule which prevailed with us on the question presented, but we are of opinion that this should not be allowed to affect the result.
The general principle is that a decision of a court of supreme jurisdiction overruling a former decision is retrospective in its operation, and the effect is not that the former decision is bad law, but that it never was the law. Center School Township v. State ex rel., 150 Ind. 168;Stockton v. Mfg. Co., 22 N.J. Eq., 56; Storrie v. Cortes, 90 Tex. 283. To this the courts have established the exception that where a constitutional or statute law has received a given construction by the courts of last resort, and contracts have been made and rights acquired under and in accordance with such construction, such contracts may not be invalidated nor vested rights acquired under them impaired by a change of construction made by a subsequent decision. Hill v. R. R., 143 N.C. 539;Gelpcke v. Dubuque, 68, U.S., 175; Sedalia v. Gold,91 Mo. App. 32. And there is high authority for the position that this is the (511) only exception that should be allowed. Falconer v.Simmons, 51 W. Va. 172. And while this Court, in a case of unusual hardship, has extended the principle of this exception to a criminal cause, in S. v. Bell, 136 N.C. 674
— a cause it will be noted, arising on the construction of a statute — and, in another decision, to a case where a title to real estate had vested (Hill v. Brown, 144 N.C. 117), the principle should certainly not be further extended and applied to an erroneous decision on general mercantile law which is contrary to accepted doctrine and recognized business methods. We are of opinion, therefore, that the case of Finch v. Gregg should be overruled and the principle upon which it rests disapproved:
1. As contrary to the general current of authority on a subject where uniformity of decision is so greatly to be desired.
2. Because it puts an undesirable and injurious clog upon commercial intercourse between different sections of the country.
3. Because it may, and frequently does, work grievous wrong to parties litigant, in subjecting them to the burdens and obligations of contracts which they never made, and holding them responsible for fraud and wrongs which they did not commit and of which they had no knowledge or notice.
And from this it follows that the judgment overruling the demurrer of the defendant Trice should be reversed, and on the facts stated in the complaint said demurrer should be sustained.
Reversed.