Sioux City and Pacific Railroad Co. v. First National Bank of Fremont.

having been shipped by him was never in fact shipped, the master having been induced to sign the bills of lading by fraud and imposition. The question before the court is thus stated in the opinion: "But the real question is, whether in favor of a bona fide holder of such bills of lading procured from the master by the fraud of an owner pro hac vice, the general owner is estopped to show the truth, as undoubtedly the special owner would be." It was held that the maritime law gave no lien upon the vessel, and that the general owner thereof was not estopped from alleging and proving the facts. In the case of Dean v. King, 22 Ohio St. 118, it was held in an action by the shipper against the owner of a steamboat engaged in the business of common carriers, to recover for goods as per bill of lading, that the defendants are liable only for so much of the goods as was actually received on the boat or delivered to some one authorized to receive freight on her account. This seems to have been an action between the original parties. In Dickerson v. Seelye, 12 Barb. 99, the court held that as between the shipper of the goods and the owner of the vessel, a bill of lading may be explained as to the quantity and condition of the goods, yet it cannot be so explained as between the owner of the vessel and a consignee or assignee of the bill of lading who has in good faith advanced money on the strength of it, and has thus been induced by the master's signing the bill to do an act changing the situation of the parties. In such case the bill of lading is conclusive on the owner in respect to the quantity of goods. The court say: "As between the owner of the vessel and an assignee for a valuable consideration paid on the strength of the bill of lading, it may not be explained. Portland Bank v. Stubbs, 6 Mass. 422; 4 Am. Dec. 151; Abb. on Shipping, 323-4; Bradstreet v. Lees, MS., U. S. Dist. Ct. In such case the superior equity is with the bona fide assignee, who has parted with his money on the strength of the bill of lading.”

In the case of Armour v. Michigan C. R. R. Co., 65 N. Y. 111; s. c., 22 Am. Rep. 603, the defendant's agent, having authority to issue bills of lading, upon delivery to him by M. of a forged warehouse receipt, issued to M. two bills of lading, each stating the receipt of a quantity of lard consigned to plaintiffs at New York, and to be transported and delivered to them. M. drew sight drafts on the plaintiffs, to which he attached the bills of lading; these were delivered to a bank and were forwarded to New York, and the drafts were paid by plaintiff upon the faith and credit of the bills

Sioux City and Pacific Railroad Co. v. First National Bank of Fremont. of lading. It was held that the defendant was bound by the acts of its agent, the same being within the apparent scope of his authority, and was estopped from denying the receipt of the lard. In the case of the Savings Bank v. A. T. & S. F. R. R. Co., 20 Kans. 519, the court held that where the agent of a railroad company has authority to receive grain for shipment over its road, and issue in the name of the corporation a bill of lading for each consignment received, and issues two original bills of lading for a single consignment, the two bills of lading having been assigned to the bank, which advanced money thereon in good faith, and the shipper being insolvent and having absconded, the railway company was estopped by its statement and promise in the bill of lading to deny that it has received the grain mentioned therein. The court say: "The custom of grain dealers is to buy of the producer his wheat, corn, barley, etc., then deliver the same to the railroad company for shipment to market. The railroad company issues to the shipper its bill of lading. The shipper takes his bill of lading to a bank, draws a draft upon his commission merchant or consignee against the shipment, and attaches his bill of lading to the draft. Upon the faith of the bill of lading and without further inquiry the bank cashes the draft, and the money is thus obtained to pay for the grain purchased, or to repurchase other shipments. In this way the dealer realizes at once the greater value of his consignments, and need not wait for the returns of the sale of his grain to obtain money to make other purchases. In this way the dealer with a small capital may buy and ship extensively; and while having a capital of a few hundred dollars only, may buy for cash and ship grain valued at many thousands. This mode of transacting business is greatly advantageous both to the shipper and the producer. It gives the shipper who is prudent and posted as to the markets almost unlimited opportunities for the purchase and shipment of grain, and furnishes a cash market for the producer at his own door. It enables the capitalist and banker to obtain fair rates of interest for the money he has to loan, and insures him, in the way of bills of lading, excellent security. It also furnishes additional business to railroad companies, as it facilitates and increases shipments to the markets. A mode of doing business so beneficial to so many classes ought to receive the favoring recognition of the courts to aid its continuance." The question whether or not bills of lading are negotiable does not enter into the case. All the testimony

Sioux City and Pacific Railroad Co. v. First National Bank of Fremont.

shows that the bills of lading in controversy were issued by an authorized agent of the railroad company, and that he not only had authority to issue such bills, but it was one of the duties imposed upon him. As against an innocent purchaser of the bills it will not do to say that the agent had authority to issue bills of lading duly signed, only in cases where shipments were made, and no authority where shipments were not made. The company itself has invested its own agent with the authority to issue bills of lading, and when duly issued they are not the bills of the agent but of the railroad company. The representation therefore thus made in the bills. that the company has received a certain quantity of grain for shipment, is a representation to any one, who, in good faith relying thereon, sees fit to make advances on the same. If these representations are false, who should bear the loss? The party who appointed, placed confidence in, and gave authority to make the bills, or the one that in good faith, relying thereon, purchased or advanced money on the same? In Lickbarrow v. Mason, 2 T. R., 63 (1 Smith Lead. Cas., 6 Am. ed. 1044), ASHURST, J., says: “We may lay it down as a broad, general principle, that whenever one of two innocent persons must suffer by the acts of a third, he who has enabled said third person to occasion the loss must sustain it."

This case presents every element necessary to constitute an estoppel in pais, a representation made with full knowledge that it might be acted upon, and subsequent action in reliance thereon by which the defendants in error would lose the amount advanced if the representation is not made good. This principle was entirely overlooked in Grant v. Norway, and the cases following it. The defendant in the court below is therefore liable to the bank to the extent of the amount advanced on the faith of these bills, not exceeding the value of the grain certified to as having been shipped. Objections are made to the proof of the price of wheat at Scribner at the time stated in the bills, to proof in reference to the grade of wheat shipped from that place, and to the weight of an ordinary car-load, but as the verdict is for several hundred dollars less than the amount advanced by the bank on the bills of lading in question, and much less than it should have recovered, it is unnecessary to consider them. There is no error in the record of which the plaintiff in error can complain, and the judgment must be affirmed.

Judgment affirmed.

Townsend v. Star Wagon Company.

TOWNSEND V. STAR WAGON COMPANY.

(10 Neb. 615.)

Negotiable instrument - alteration-insertion of place of payment.

The unauthorized insertion of a place of payment in a promissory note made payable generally, is a material alteration that avoids the note as to an indorser.

A

CTION on a promissory note.

The opinion states the case.

The plaintiff had judgment below.

W. H. Morris, for plaintiff in error.

M. B. C. True, for defendant in error.

COBB, J. The defense chiefly relied upon by the plaintiff in error upon the trial in the District Court was, that the note sued on had been materially altered after the same had been guaranteed by him and had passed out of his possession. Plaintiff in error was sworn as a witness on his own behalf at the trial. He testified in substance that the firm of J. M. Townsend & Co., of which firm he was the acting member, and of which Mr. Fowler was also a member, took the note in question. That in February, 1877, the firm was dissolved, and upon settlement he guaranteed and delivered the note to Mr. Fowler. I quote his testimony at some length: "Q. State what you did with that note. A. I turned it over to Fowler & Co. Q. At that time was it in the same condition it is in now? When you turned it over to Fowler & Co.? A. No. Q. Well, how has it been changed? A. This (reading from the note) express office here was not on it at that time. Q. When was the first time you heard of it or heard of that note after you gave it to Fowler & Co. ? A. The first, I believe, I saw this note was at the Probate Court office. * * * Q. You may state whether you turned that note over and how you came to do it? To turn it over? A. Mr. Fowler & Co., were partners in the firm of Townsend & Co. By mu. tual consent we dissolved and published notices of dissolution. Q. Well, after that what did you do? A. At the same time we dissolved I turned this note over for a share coming from me that is, we

Townsend v. Star Wagon Company.

settled up and dissolved, and I gave this note to Fowler & Co. in settlement of our business. Q. At this time was this alteration made? A. It was not. * * Q. Was that alteration in that note made with your knowledge? A. No. Q. Or with your consent? A. No, not with my consent. I did not know that it was made then. Q. Did they ever tell you that it was made? A. No.”

There was considerable further testimony, all tending to prove that the alteration in the note was made by Fowler, but nothing as to the time when it was made- - whether before or after the dissolution of the partnership of J. W. Townsend & Co.

In the case of Brown v. Straw, 6 Neb. 536; s. c., 29 Am. Rep. 369, this court laid down the rule in the following language: "After an instrument is completed and delivered no alteration can be made therein except by the consent of the parties." This, of course, means a material alteration, and that is material which may become material. But as to whether the insertion of a place of payment where none was contained in the note when executed and delivered is such a material alteration as will vitiate the note, the question was settled in this country by the Court of Errors of New York in 1821 in the case of Woodworth v. Bank of America, 19 Johns. 392. Senator SKINNER, in delivering the opinion of the court, says: "The rule that a man is not to be held to a contract which has been varied without his assent is perfectly well settled; and if an instance can occur where it ought to be applied with peculiar strictness, it is that of a surety, in which favorable light the plaintiff in error is entitled to be viewed. Clason v. Morris, 10 Johns. 538. And in my view it is wholly immaterial whether the indorser has been prejudiced by the alteration or not. The case of Ludlow v. Simms in this court, 2 Caines' Cas., confirms this position, and is not less conformable to strict justice than to the rules of law. It was there held by the unanimous opinion of this court that a surety was not bound beyond the strict terms of his contract; and although in that case the deviation from these terms was not shown to be injurious, but on the contrary was probably beneficial to the surety, yet he was discharged by it."

In the case at bar the plaintiff in error was sued as an indorser of a promissory note. When he indorsed it it was by its terms payable generally. Now, then, the contract which the plaintiff in error entered into by indorsing said note was, that if the same should be duly presented for payment to the makers at maturity-either to