Tolerton & Stetson Co. v. Anglo-California Bank, Ltd.

50 L.R.A. 777, 112 Iowa 706

• Court: Supreme Court of Iowa
• Decided: January 17, 1901
• Status: Published

Opinion

Waterman, J".

■1 The facts, so far as we have to consider them! under the issue upon which we make the case hinge, may be accepted as set out by plaintiff. There was a sale of these goods with a warranty, which was broken. Defendant was the payee of the draft drawn by the Canneries Company on plaintiff for the price, with the bill of lading attached, and as such received payment of the full purchase price. The question to be determined is whether defendant is now liable in damages for the breach of the Canneries Company’s warranty. It must be confessed that the theory of its liability is fully supported by the case of Landa v. Lattin, 19 Tex. Civ. App. 246 (46 S. W. Rep. 48), and that the doctrine of that case has been adopted and followed by the supreme court of North Carolina in Finch v. Gregg, 126 N. C. 176 (35 S. E. Rep. 251), decided since the trial below. If we were prepared to yield oar assent;’ to the line of reasoning pursued in these cases, we should have to affirm this judgment. These decisions proceed upon the theory that the assignee stands in all respects in the shoes of his assignor, and to this broad doctrine we cannot agree. While the rights of such an assignee are to be measured by those of his assignor, his liability is not necessarily the same.

Defendant bank could not have compelled payment by plaintiff of any greater sum than could have been collected by the Canneries Company, but on what theory can we say it is liable on a contract of warranty which it never made ? The rule of the Landa Case is founded on the thought that the transfer of the draft and bill of lading to the bank amounted to a sale of the goods, and that the bank as a purchaser under took to deliver the goods and carry out the Canneries Company’s contract with plaintiff, and because of these facts it necessarily assumed the contract of warranty, although it may have been in fact ignorant-that'any warranty was made. We do not think, even as the proposition is thus stated, the premises justify the conclusion. But the premises are not .correct. The transaction between the Canneries Company and defendant was not and could not be a sale of the goods, for they had already been sold to plaintiff, and it was the intention of all parties that such sale to plaintiff should bo consummated by delivery. What was in fact done by the assignment of the draft and bill of lading was to transfer to the bank the Canneries Company’s right to the price, and to give it the possession of the goods as security. Manifestly, while the bank could collect no more than its assignor would have been entitled to, the character of its engagement was not such as to impose upon it any .liability to the buyer which it did not expressly assume. One who purchases an account against another takes it subject to defenses, but not to affirmative claims of the debtor on some collateral agreement with the original creditor. The two cases cited stand alone in holding the purchaser of a draft with the bill of lading attached liable on a warranty made by the assignor, and the line of reasoning pursued to reach this conclusion is so at variance with well-established elementary principles of law that we decline to accept the rule they announce.

II. If there is any liability on defendant’s part to plaintiff, it must be on the ground that it has received money which it cannot equitably retain. The Canneries. Company could have collected only the price of the goods, less the damages for breach of warranty. More than this has been paid to defendant. If plaintiff has any standing here, it is to recover this excess paid, on the theory just stated. But the draft given the bank was negotiable, and it is a well-established rule of law, that, after the holder of a negotiable draft with bill of lading attached has secured an acceptance of such draft from the drawee and consignee, he is unaffected by any equities originally existing between such consignee and the seller of the goods. In such a case the liability of the drawee becomes fixed to the payee. Arkin v. Owens, 140 Mass. 144 (3 N. E. Rep. 25); Flournoy v. Bank, 78 Ga. 222 (2 S. E. Rep. 547); Nowak v. Stone Co., 78 Ill. 307; Law v. Brinker, 6 Colo. 555; Vanstrum v. Liljengren, 37 Minn. 191 (33 N. W. Rep. 555) ; Hays v. Hathorn 74 N. Y. 486; Shafer v. Bronenberg, 42 Ind., 89; Randolph Commercial Paper, 1876. It is said in the first of these cases: “The payee of an accepted bill holds the same relation to the acceptor that an indorsee of a note holds to the maker.” Under this rule, the plaintiff, after an acceptance of the draft, could not have set up against the bank any claim for breach of warranty made by the Canneries Company, and if this is the effect of an acceptance, it certainly is of a payment.

There was no matter of mutual mistake in this transaction between plaintiff and defendant. The latter had a right, as against the Canneries Company, to collect the full amount due on the draft from the drawee. The mistake, if any, was as to a matter between plaintiff and the drawer of the draft.

2 It is said in plaintiff’s behalf that there is no evidence that the bank was the owner of the draft. But we think differently. It alleged such ownership in its answer, and to establish the allegation exhibited a draft payable to its order, with a bill of lading attached, showing a shipment of the goods consigned to the bank. The rule is well established that possession of a note or bill is prima facie evidence of ownership for value. Stoddard v. Burton, 41, Iowa, 582; Lawson, Presumptive Evidence 94; ,2 Randolph Commercial Paper, 717. On the whole, we are convinced the judgment of the trial court is erroneous. Plaintiff’s remedy is against the Canneries Company. It has now no enforceable claim against the bank. — Reversed.