Merchants National Bank v. Baltimore, Chesapeake & Richmond Steamboat Co.

Page, J., delivered the opinion of the Court. This suit was brought by the appellant against the appellee on the 12th of April, 1902, for the wrongful conversion of certain bales of cotton ; and for damages arising from the negligent conduct of the appellee, in performing its contract, as set forth in the bills of lading, one of which is filed with the pleadings. The facts of the case about which there is little if any dispute briefly stated are, that prior to October 1st, 1899, the appellee issued thirty-four order bills of lading for bales of cotton, each drawn to the order of the shipper, notify Messersmith & Co. order subject to the special conditions on their back and face. That the cotton therein mentioned was promptly delivered to the said Messersmith & Co. at that time the owners of the property and the holders of the bills of lading, who received the goods without surrendering to the appellee the bills, as by the ninth condition on the bills should have been required.

That after the delivery of the goods, Messersmith fraudulently altered the dates of the bills, and corruptly used them by transferring them to, the appellant, as collateral for loans and advances made previously thereto. That the fraud of the said Messersmith was later on discov ⁵⁷⁶ ered, and he was tried and convicted therefor. This suit was brought upon the bills of lading to recover the value of the cotton, or damages for the negligence of the appellee, in not requiring*the surrender of the bills of lading, whereby the appellant was induced to accept the bills. From the judgment rendered, the appellant has taken this appeal.

The pleadings are carefully drawn and quite voluminous; and as it appears from the very able and exhaustive arguments of counsel made at the hearing or on brief, that most if not all the decisive points in the case are presented by them, a more extended reference to the pleadings will be made than is usual. The fh'st and second counts in the declaration are in trover, for the conversion of 2,436 bales of cotton. Subsequently the appellant added a third count. This third count as amended sets out in substance, that the appellee, being a common carrier received the cotton and issued bills of lading therefor, the printed form of which is made an exhibit; that the same was consigned as set out in the bills of lading, “to the order of the several shippers thereof, with directions to notify Jno.

K. Messersmith & Co. of Baltimore; the word “order” being written on the several bills of lading immediately after the name of the consignee thereof, according to the course of tx'ade followed in such cases, without any condition or limitation other than the name of the party to be notified of the arrival of the property at its destination.” That the several bills of lading had prominently printed thereon, the following words: “If the word order is wi'itten immediately before or after the name of the party to whose ox'der the properly is consigned without any condition or limitation other than the name.of a party to be notified of the arrival of the property, the surrender of the bills of lading properly endorsed, shall be required before the delivery of the properly at destination.” There was the fuxlher condition printed and set forth in the bills of lading, that if the cotton therein described should not be called for within twenty-four hours after the arrival thereof, it would be stored by the carrier at the ex ⁵⁷⁷ pense of the owners. That by mesne endorsements for valuable considerations, paid,&c., by the appellant to the holders of the bills of lading, upon the delivery of the said bills and upon the faith of the conditions in the said bills, that said cotton would not be delivered to any one without the surrender of the bills of lading and that the cotto.n would be held and stored for account of the true owner until the said bills were surrendered properly endorsed for cancellation; but that after the appellant had paid and delivered its consideration upon the faith of the said bills, the appellant made demand upon the defendant to deliver to it, the said cotton, and presented the said bills properly endorsed for cancellation, the appellee could not and did not deliver the said cotton, because» prior thereto the appellee had parted with the possession of the same, wherefore by reason of said negligence in failing to hold and store the said cotton, until the said bills of lading were surrendered, &c., the appellant was put to great loss», &c. To this count the appellee pleaded eight pleas, viz: by the first three pleas, limitations; by the fifth, that the said bills of lading after they had been issued, were fraudulently altered in a material particular, to wit, that the dates were changed, fraudulently and wrongfully, by Messersmith & Co. into whose hands they had come or by some person or persons at their instance and request, and so the said bills by reason thereof, the appellee “ denies the genuineness” of these. The seventh plea is a general traverse to the averments of the third amended count in the declaration.

The eighth plea sets out the alleged alterations, and further that by the terms of the bills, the same were “non-negotiable,” and that the same while in the possession of Messersmith & Co., were duly presented by them, to whom the cotton was deliverable, and therefore the cotton was delivered to them, wherefore the appellee performed and satisfied all the obligations of the said bills and the same became and thereby were wholly “spent and exhausted;” and that afterwards, the said Messersmith & Co. fraudulently, &c., and without the knowledge of the appellee changed or caused to be changed and assigned the said, ⁵⁷⁸ “non-negotiable and spent and exhausted bills” to the appellant, &c. The appellant demurred to the fifth, sixth and eighth pleas and pleaded specially to the other pleas. So that the first questions that arise to be considered on this appeal, are, ist. Are the bills of lading in this case, non-negotiable? 2nd.

Are the alleged alterations material to'the contract, and if so, do such alterations have the effect of rendering the contract, evidenced by the bills of lading void? “By the common law a bill of lading was not in an unrestricted sense a negotiable instrument like a promissory note, but was as this Court has repeatedly stated quasi negotiable only. But even that restricted common law negotiability may be limited and still further qualified by the insertion of appropriate terms wholly destroying all negotiability and it seems to be generally agreed that such a result may be accomplished by simply stamping or printing across the face of the instrument, the words “not negotiable,” as was done in this instance.” Bank of Bristol v. B. & O. R. Co. 99 Md. 675 ; Tiedeman v. Knox, 53 Md. 615—616. The former case further decides, that a bill of lading is of consequence “only in so far as it is the evidence of a title to something in somebody;” its transfer is the transfer of the title to the thing described in it and whatever equities exist between the parties to it with respect to the title of the parties which it purports to represent will follow that property into the hands of the assignee of the bill of lading,unless some other legal or equitable principle intervenes to preclude the assertion of a prior right as against a bona fide assignee for value. In Maryland, bills of lading are now made negotiable instruments and securities “unless it be provided in express terms to the contrary on the face thereof, &c.” Art. 14, sec. 1, Code.

It seems to be clear therefore_ that the bills of lading in this case, having the words “not negotiable” printed across the face of them are non-negotiable instruments or securities and as such passed to the appellant subject to such equities as existed between the parties to them, at the time of the as ⁵⁷⁹ signment, unless there isQsome legal or equitable principle which intervenes to preclude the assertion of the prior fight as against a bona fide assignee for value — or unless there are appropriate terms in the bills themselves that limit or destroy such features. It is said however that these bills of lading cannot be wholly non-negotiable, because of those clauses which provide for the effect of the word “order” and also of those, which impose upon the carrier certain duties, after the arrival of the property at its destination ; or of those clauses referred to at argument, as the order clause, the assignee clause and the alteration clause. The bills provide that every service shall be subject to all the conditions, written or printed thereon, all of which are agreed to by the shipper as owner or agent for the owner, and accepted for himse'f and his as-signs as just and reasonable, &c. By the ninth condition apd in the body of the instrument, it was provided that if the world “order” is-written immediately before or after the name of the party to whose order the property is consigned, the surrender of the bill of lading, shall be required before the delivery, Src.

The surrender clause which is the ninth when read in connection with other clauses seems to have been . intended to give security to all persons dealing with the bills or the property. It requires the surrender of the bills of lading-, whenever the word order is placed immediately before or after the name of the consignee upon the surrender of the property. To neglect this provision, would unquestionably constitute a breach of duty, but we do not think the clause properly understood affects the non-negotiability of the bill of lading. While not negotiable, the bills could be transferred and such transfer carried with it certain rights to the tranferee — as was held in the case of the Bristol Bank, supra.

It was probably inserted as well for the protection of the carrier as for that of persons dealing with the property. The consignee is presumptively the owner of the goods and may be treated by the carrier as the absolute owner as well as by other persons who have had no notice to the contrary. Sweet v. Barney, 23 ⁵⁸⁰ N. Y. 333; Lawrence v. Minturn, 17 Howard, 100. If, therefore, the carrier is guilty of negligence ip not enforcing this “order clause” and such neglect is the proximate cause of injury to one innocently dealing with the property such negligence would furbish a valid ground for a recovery in damages., Coventry v. Great Eastern R. R. Co., 11 Q. B. D. 767 ; London & N. W. Ry.

Co. 10 C. P. 307. But it is also alleged, that after the delivery of the goods, Messersmith & Co., the then holders and owners of the bills before they passed into the hands of the appellant were fraudulently altered by Messersmith changing the dates thereof. It was said in Wood v. Steel, 6 Wallace, 80, “it is now settled in both English and American jurisprudence, that a material alteration in any commercial paper without the consent of the party sought to .be charged, extinguishes his liability. The materiality of the alteration is to be decided by the Court. * *' * The grounds 6f the discharge in such cases are obvious.

The agreement is no longer the one into which the defendant entered. Its identity is changed; another is substituted without his consent; and by a party who had no authority to consent for him. If the instrument be under seal, he may well,plead that it is not his deed; and if it be not under seal, /that he did not so promise. In either case, the issue must be found for him.

To prevent and punish such tampering, the law does not permit the plaintiff to fall back upon the contract as it was originally. In .pursuance of a stern but wise policy, it annuls the instrument as to the party sought to be wronged.” Burrows v. Klunk, 70 Md. 460 ; Lehman v. Central R. R. Banking Co., 12 Fed. Rep. 596; Getty v. Shearer, 20 Pa. 12 ; Bigelow v. Stilphens, 35 Vermont, 521. But it is contended, that this well-established doctrine, has no application in this case because, among other things, the eighth condition of the bill provides, that, “any alteration, addition or erasure in the bill of lading which shall be made without the special notation hereon of the agent of the carrier issuing the bill, shall be void.” But we cannot agree to this. ⁵⁸¹ The clause seems to be designed, to avoid unauthorized alterations; but it can have no reference to fraudulent alterations made after it has been issued by the carrier. It is more reasonable to construe it as having reference as was said by the learned Judge below, only to such “alterations” as may be “properly susceptible of special notation by the carrier’s agent.” It would be most unreasonable to hold, that the intent of the condition was to do away with the well-settled law, that a material alteration fraudulently made by the holder vitiates the instrument, and so leave it unprotected from the devices of the unscrupulous.

Burrows v. Klunk, supra; Wood v. Steele, supra. It was perfectly allowable for the parties to make any contract they chose to agree to; to limit or modify their respective rights, with respect to the place or mode of delivery, and in many other particulars, but in order that there should be no misunderstanding; this provision was made in this clause, that no alteration, addition and erasures in the bill should be valid, if made without the notation of the agent of the carrier issuing the bill. The alterations shown by the proof were the changing of the dates of the bills of lading — whether such alterations are of a material character is a matter for the Court to decide. It seems on principle as well as authority, that the change of the date of any commercial instrument, is a material change.

Here the date not only identified the instrument, but is important because of the duties devolving on the parties after the property has reached its destination. “The duty to deliver, within a reasonable time is one engrafted by the law upon the principal contract, which is to carry safely.” Hutchinson on Carriers, sec. 328. It is important also in reference to the application of the Statute of Limitations, and also in the rule by which the loss or damage is to be computed in cases where the carrier is liable, depending as it does by the third condition of the bill of lading upon the “value of the property at the place and time of shipment, &c.” ⁵⁸² In the case of Stephens v. Graham, 7 Sergt. & Rawle, 507, where the alteration in a promissory note, was in the date from the 25th to the 26th, it was contended the change was not material, as the 26th came on Sunday and by the custom of merchants, the note became payable on the 25th the preceding day, the Court in holding that the date was a material part of the note, said “it does not depend on the accelerating or extending the day of payment, or increasing or decreasing the sum, but upon the identity; to insure the identity and