Southern Railway Co. v. W. A. Simpkins Co., 178 N.C. 273 (1919)

Oct. 15, 1919 · Supreme Court of North Carolina

178 N.C. 273

SOUTHERN RAILWAY COMPANY v. W. A. SIMPKINS COMPANY et als.

(Filed 15 October, 1919.)

1. Principal and Agent — Mortgages—Mortgagor and Mortgagee.

Where the mortgagor and mortgagee of personalty agree that the former, in possession of the mortgaged property, shall dispose of the same in the ordinary course of trade, he is the agent of the mortgagee to the extent that he may pass the title to the goods sold in the usual .way, freed from the mortgage lien, which implies authority to use the necessary means to that end.

2. Same — Undisclosed Principal — Banks and Banking — Carriers of Goods.

The cashier of a bank, as such, was the mortgagee of a certain lot of cotton seed, under a mortgage duly registered, which the mortgagor with Ms consent sMpped “order, notify,” and from whom the carrier took the shipment dealing with him alone as the person responsible for the freight, charging the amount to him and using a freight bill marked “freight prepaid.” The bank took the draft, with bill of lading attached, for collection, collected the amount, crediting so much as was necessary to the mortgage debt, and placed the surplus, more than sufficient to pay the freight, to the mortgagor’s credit, and after that had dealings with the mortgagor out of which it could have protected itself in the payment of the freight bill. For nearly three years no claim was presented to the bank by the carrier, and then the carrier sought to hold the bank liable as an undisclosed principal, when for the first time the bank had notice or- knowledge of such claim: SeU, neither the cashier nor the bank could be held, under the circumstances, as the undisclosed principal; and were it otherwise, the carrier is estopped in equity by its conduct and delay to, enforce such claim.

3. Carriers of Goods — Banks and Banking — Collection—Bills of Lading — i Title — Ownership—Freight Charges — Railroads.

Where a carrier deals with the mortgagor of goods, under a duly registered mortgage for their transportation, and looks alone to him for the freight charges thereon, and issues its bill of lading marked “freight prepaid,” the title to the goods does not pass to> the bank by reason of its taking the draft, bill of lading attached, for collection, and it may not be held liable for the freight charges as owner thereof.

4. Equity — Estoppel — Carriers of Goods — Freight Charges — Banks and Banking.

Where a mortgagee bank takes a draft, bill of lading attached, the latter marked “freight prepaid,” for collection, and afterwards makes settlement with its mortgagor, from the proceeds, with a sufficient surplus to pay the freight, relying upon the carrier’s statement "in the bill of lading, and without knowledge that it was not true, the carrier by its silence is estopped in equity to hold .the bank responsible for the freight charges.

Appeal by plaintiff from Allen, J., at May Term, 3919, of Wake.

This is a suit brought by the plaintiff to recover the freight charges on seven cars of cotton seed shipped from Raleigh, N. C., in interstate commerce, in the name of W. A. Simpkins Company, three cars being-shipped 18 October, 1912, to W. A. Simpkins Company, order notify J. P. Savant, New Orleans, La., and three cars being shipped 31 October, to the same order, notify, and the same consigned, and one ear being shipped 24 October by W. A. Simpkins Company to itself, order notify Frierson Company, Limited, Frierson, La. The complaint sets forth three causes of action: (1) being that W. B. Drake, Jr., cashier, by virtue of a chattel mortgage not yet due, as mortgagee, consenting, was liable for the shipping out and the turning into money by the mortgagor; (2) that the arrangements between the W. A. Simpkins Company and the Merchants National Bank and W. B. Drake, Jr., cashier, was such as to constitute a partnership, and (3) that the assignment of the draft and bill of lading before these shipments left Ealeigh to W. B. Drake, Jr., cashier for the Merchants National Bank, made them liable for the freight charges as assignee of the bill of lading.

There is no dispute as to the amount of the freight charges and the chattel mortgage on 26,000 bushels of cotton seed, the same reciting a $10,000 indebtedness due 30 November, 1912 (four to seven weeks after the shipment took place), was introduced.

This mortgage was to Drake, cashier, and was executed in July, 1912, and waS registered.

In October, 1912, W. A. Simpkins Company made seven shipments of cotton seed over the Southern Bailroad to Southern points. The custom which had existed between the said shipper and railroad for six or seven years was that the railroad charged the freight and “in ten days, two weeks or thirty days collection was made. The Simpkins Company had a line of credit with the railroad at the time these shipments were made.” Eeferring to the B.L. it will be seen that the same had been marked “Prepaid” before the seed left Ealeigh, Plaintiff’s witness states "that although the hill of lading was marlced ‘Freight Prepaid’ it had not been prepaid hut credit had been extended to the Simp-Icins Company by the railroad and is still due the railroad.”

Sight drafts were drawn on Savant and others, with bills of lading attached, and the defendant bank collected the drafts, in the usual course, and placed the proceeds to the credit of the Simpkins Company; and this company, by its checks on said bank, from time to time, drew out said funds, paying its debts and paying in part a mortgage debt to the bank.

The collections from the drafts amounted to about $6,000, of which $4,000 was retained by the bank on debts due by the Simpkins Company and the remainder paid out on its check.

At the conclusion of the evidence his Honor entered judgment of non-suit, and plaintiff excepted and appealed.

A. B. Andrews and W. B. Snow attorneys for plaintiff.

Robert W. Winston and J. Q. Biggs attorneys for defendant.

AlleN, J.

The plaintiff’s counsel admit that there is no evidence of a partnership between the Simpkins Company and either of the defendants, and this cause of action is abandoned.

They, however, insist that the defendants are liable for the freight upon two grounds:

1. That the Simpkins Company was the agent of Drake, cashier, in making the contract of shipment, and that Drake is liable on the contract as an undisclosed principal.

2. That tbe defendant bank, baying taken an assignment of drafts witb bills of lading attaobed, and baying collected tbe money thereon, is liable for tbe freight as tbe owner of tbe property.

There is no evidence of agency except such as arises from tbe relation of mortgagor and mortgagee, and while tbe mortgagor, left in possession of goods which, in tbe contemplation of tbe parties, are to be disposed of by the mortgagor in tbe ordinary course of trade, is tbe agent of tbe mortgagee to tbe extent that be may pass tbe title to tbe goods, sold in tbe usual way, to a purchaser, freed of tbe mortgage lien (Bynum v. Miller, 89 N. C., 393), which carries witb it “the implied authority to use tbe necessary and proper means to that end” (Etheridge v. Hilliard, 100 N. C., 253), tbe plaintiff is not in a position to take advantage of this principle.

In tbe first place, if we assume that Drake is an undisclosed principal, and as such ordinarily liable on tbe contract of tbe agent, there is no evidence that either of tbe defendants bad any notice that there was anything due for freight, and, on tbe contrary, tbe plaintiff marked tbe bills of lading “freight prepaid,” credit was given solely to tbe agent; tbe ‘defendants afterwards, without objection by tbe plaintiff, settled witb Simpkins & Co., paying out on its check from tbe proceeds of tbe draft more than enough to pay tbe freight, and tbe plaintiff waited nearly three years before making any demand on tbe defendants, during which time the defendants had numerous opportunities to reimburse themselves, if liable for tbe freight.

“Tbe qualification of tbe principal’s liability to respond to bis agent’s contract, as stated in tbe earlier authorities mentioned, was narrowed by tbe interpretation adopted in Heald v. Kenworthy, 10 Exeh., 739, to tbe effect that tbe principal is not discharged from full responsibility unless be has been led by tbe conduct of tbe seller to make payment to or settle with the agent; and the doctrine of this case has been reiterated in many subsequent cases, both in England and in this country, where tbe agent did not contract as for himself but as a broker, or otherwise as representing an undisclosed principal. One of tbe more recent English cases of this class is Davison v. Donaldson, L. R. 9 Q. B. Div., 623.

But, as is shown in Armstrong v. Stokes, L. R. 7 Q. B. 599, tbe version of Iieald v. Kenworthy, while a correct interpretation of the rule of the principal’s liability, when applied to cases in which tbe seller deals witb tbe agent, relying upon tbe existence of an undisclosed principal, is not to be applied in those in which tbe seller has given credit solely to tbe agent, supposing him to be tbe principal. This case decides that tbe principal is not liable when tbe seller has dealt witb tbe agent, supposing Mm to be the principal, if he has in good faith paid the agent at a time when the seller still gave credit to the agent, and knew of no one else. See, also, Irvine v. Watson, L. R. 5, Q. B. Div., 102.

Under such circumstances it is immaterial that the principal has not been misled by the seller’s conduct or laches into paying or settling with his agent. It is enough to absolve him from liability that he has in good faith paid or settled with his agent. In that case the court was dealing with a contract made by an agent which was within the scope of the authority conferred on him, but which was nevertheless made by the agent as though he were acting for himself as principal. Fradley v. Hyland, 2 L. R. A., 750.

•The same principle is stated in 31 Cyc., 1580, as follows: “An undisclosed principal may be relieved from liability by reason of a changed state of accounts between him and the agent, the rule being formerly laid down in England, and now very generally followed in the United States, that where the principal, acting in good faith, has settled with the agent so that he would be subjected to loss were he compelled to pay the third person, he is relieved of liability to the latter. This doctrine is now held in England, and in a few cases in the United States, to be too broad, and in these jurisdictions the better rule is stated to be that the principal is discharged only where he has been induced to believe that such person has settled with the agent or has elected to hold the latter. In any event, the principal is relieved from liability where he has been induced by the conduct of the third person to settle with the agent.” And in Taintor v. Prendergast (N.. Y.), 38 A. D., 619 : “It may be admitted, as was urged in the argument, that whether the principal be considered a foreigner or not, his agent, omitting to disclose his name, would be personally liable to an action. Even in case of a foreign principal, however, I apprehend it would be too strong to say that when discovered he would not be liable for the price of the commodity purchased by his agent. This may indeed be said, when a clear intent is shown to give an exclusive credit to the agent.”

And the same result would follow if Drake is a disclosed principal on the facts in this record.

He has no relation to the transaction except as mortgagee, and his mortgage was registered, which was notice to the plaintiff; the contract was made with the Simpkins Company as principal, not as agent; the Simpkins Company had property rights in the cotton seed; credit was given exclusively to the Simpkins Company, and the bills of lading were marked “freight prepaid,” pursuant to the contract between the plaintiff and the Simpkins Company.

Tbe editor in tbe note to Fradley v. Hyland, supra, cites numerous authorities in support o£ tbe proposition, that “Where a third party, knowing that tbe agent acts for bis principal, elects at tbe time of tbe making of tbe contract to give exclusive credit to the agent, be cannot afterwards sue tbe principal.” And in 31 Cyc., 1570, tbe author says: “A person who, upon entering into contractural relations with an agent, has full knowledge of tbe principal, but extends credit to tbe agent exclusively, cannot thereafter resort to tbe principal, and tbe latter is not bound, although tbe agent acted in tbe course of bis employment and for tbe principal’s benefit.”

We are therefore, of opinion tbe plaintiff cannot recover on tbe ground of agency, and its cause of action against tbe bank as tbe owner of tbe property is equally without foundation as tbe undisputed evidence is that tbe bank took tbe drafts with bills of lading attached for collection, and in such case no title passes. 3 B. C. L., 633; Packing Co. v. Davis,. 118 N. C., 553.

Tbe plaintiff does not seek to recover against tbe bank as assignee of tbe bill of lading under tbe authority of Finch v. Gregg, 126 N. C., 176, recognizing that it has been overruled by Mason v. Cotton Co., 148 N. C., 495.

Again every element of an equitable estoppel is present in this case which “arises when any one, by bis acts, representations or admissions, or by bis silence when be ought to speak out, intentionally or through culpable negligence, induces another to believe certain facts to exist, and such other rightfully relies and acts on such belief, so that be will be prejudiced if tbe former is permitted to deny tbe existence of such facts.” Boddie v. Bond, 154 N. C., 365, or as stated in different language in Mason v. Williams, 66 N. C., 571, quoting from Barnwell, B., in Cornish v. Abingdon, 4 Hurl. & Nor., 549, and approved in Redman v. Graham, 80 N. C., 235: “Tbe rule is that if a man so conducts himself, whether intentionally or not, that a reasonable person would infer that a certain state of things exists, and acts on that inference, be shall be afterwards estopped from denying it.”

Tbe plaintiff represented to tbe defendants that tbe freight bad been paid, and relying on' this representation, and without knowledge that it was not true, tbe defendants, having in band more than enough money to pay tbe freight, turned it over to tbe Simpkins Company, and thereafter, during numerous dealings between tbe Simpkins Company and tbe defendants, when there was tbe opportunity for indemnity, the plaintiff remained silent and did not notify tbe defendants that tbe freight bad not been paid, and made no demand for tbe freight for near three years.

Under these circumstances tbe plaintiff ought not to be permitted to assert its claims, if there was liability on the part of the defendants originally.

Affirmed.