Olivier Straw Goods Corporation v. Osaka Shosen Kaisha , 27 F.2d 129 ( 1928 )

27 F.2d 129 (1928)

OLIVIER STRAW GOODS CORPORATION
v.
OSAKA SHOSEN KAISHA.

No. 314.

Circuit Court of Appeals, Second Circuit.

June 11, 1928.

Bigham, Englar & Jones, of New York City (Henry N. Longley and Roger H. Loughran, both of New York City, of counsel), for appellant.

Hunt, Hill & Betts, of New York City (John W. Crandall, of New York City, of counsel), for appellee.

Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

AUGUSTUS N. HAND, Circuit Judge (after stating the facts as above).

As between Nozaki and the libelant the contract was never in fact performed, because the goods were not shipped in June, July, or August, as the agreement required. The libelant could have rejected them, even if they had finally gone forward and reached New York, for time was of the essence, and the breach was in limine. Jones v. United States, 96 U.S. 24, 24 L. Ed. 644; Norrington v. Wright, 115 U.S. 188, 6 S. Ct. 12, 29 L. Ed. 366; Oshinsky v. Lorraine Mfg. Co. (C. C. A.) 187 F. 120; Hill v. Blake, 97 N.Y. 216; Bowes v. Shand (1877) 2 App. Cas. 455; Aron v. Compton Wegimont, [1921] 3 K. B. 435.

A possible contention may be made to the contrary, based on the clause of the indorsement on the back of the contract which provides:

"5. Proof of Shipment. — The date of bill of lading shall be final as to date of shipment. * * *"

But in the body of the contract is the requirement:

"Shipment to be made from Japan via Panama during June/July/August, 1923, shippers' option."

And there is no provision anywhere permitting the issue of a bill of lading before the goods are actually shipped. The most that indorsement No. 5 could mean is that, after the merchandise was once on board, the date of the bill of lading should fix the date of shipment. What the purpose of such a provision can be is hard to say, but it certainly cannot be thought to have been to change a contract which set a definite limit for the date of shipment into an agreement requiring nothing more than "delivery for shipment" to the carrier within the time. Such an interpretation would contradict the requirement of shipment before a certain date, and would render the time when the goods were likely to arrive doubly uncertain.

Nor can indorsement No. 7 alter the plain provisions contained in the body of the contract. It only provided that the merchandise should be at the risk of the purchaser after the seller had made delivery to the carrier, and had nothing to do with the obligation of the seller to ship by the agreed date. If Nozaki failed in that obligation, he had not performed his contract, and there was no obligation on the part of the libelant to take or pay for the goods.

It is quite evident from the foregoing that the contract between libelant and Nozaki required shipment not later than August 31, 1923, and that the letter of credit purchased by the libelant corresponded with the terms of the contract and called for a bill of lading of like date showing such shipment. The letter of credit did not in so many words specify an on-board bill of lading, but that is what the words "bill of lading" meant. The Henry R. Tilton (D. C.) 53 F. 139; Rowley v. Bigelow, 12 Pick. (Mass.) 307, 23 Am. Dec. 607; Diamond Alkali Export Corporation v. Fl. Bourgeois, [1921] 3 K. B. 443; Scrutton on Charter Parties and Bills of Lading (11th Ed.) p. 9. Thus the letter of credit, requiring in fact payment only upon production of an "on-board" bill of lading, was honored because the bill of lading issued by the respondent contained a misrepresentation as to the truth.

It is thus clear that there can be no defense based upon the contention that the contract of libelant and Nozaki did not require an on-board bill of lading, or that the letter of credit did not call for payment against such a document, and that the words "on board," in the bill of lading as issued, were surplusage, because not required by the contract between the original parties.

But it is said that the bill of lading involved no warranty that the goods were shipped on August 30, and was open to explanation as against the libelant, as it would have been as against Nozaki, if he were bringing suit. The two situations, however, are quite different.

The libelant, as indorsee of the bill of lading, is presumptively the owner of the goods shipped on the Alaska Maru under date of August 30, 1923, and as such is entitled to sue. Transmarine Corporation v. Levitt & Co. (C. C. A.) 25 F.(2d) 275. If the goods had really thus been shipped, the merchandise would not have been subjected to loss through the looting which occurred on shore at the time of the earthquake. While Nozaki would not have been in position to contend that the goods had been thus shipped, because he knew better and had not been misled, the libelant knew nothing about his default until after the International Acceptance Bank had accepted Nozaki's draft on the faith of a bill of lading which represented that the goods were on board the vessel within the time called for by the contract between Nozaki and the libelant. If the bill of lading had not been incorrectly dated in August, it would not have conformed to the terms of the letter of credit, and the bank would not have honored the draft which the libelant had afterwards to make good. Hence by the representation to the bank that the merchandise was on board August 30, 1923, contained in the predated bill of lading, a series of obligations were brought into being which terminated in a payment by libelant of the purchase price for goods which it was never under any obligation to take or pay for, because of the seller's default in shipment at the time called for by the contract. This was a complete estoppel, for it must be assumed that such a document as a bill of lading will be acted on.

It cannot be contended that a "received for shipment" bill of lading would have been sufficient to require the International Acceptance Bank to honor the bill of lading, and that, therefore, it was not misled by the form of bill of lading presented, for there was no attempt to prove a custom to honor "received for shipment" documents as bills of lading, as there was in Vietor v. National City Bank, 200 A.D. 557, 193 N. Y. S. 868.

It is true that it has for years been held by the English and federal courts that the master of a vessel has no apparent authority to sign bills of lading when he has not possession of the goods, and the same doctrine has been applied to railroad freight agents. Grant v. Norway, 10 C. B. 665; George Whitechurch, Ltd., v. Cavanagh, [1902] A. C. 117; Pollard v. Vinton, 105 U.S. 7, 26 L. Ed. 998; Schooner Freeman v. Buckingham, 18 How. 182, 15 L. Ed. 341. But here the merchandise was in the hands of the carrier, and it cannot be, and we understand is not, contended that the bill of lading was issued without apparent authority. Certainly no such defense is suggested by the answer. The trial judge relied upon Atchison, Topeka & Santa Fe Ry. Co. v. Harold, 241 U.S. 371, 36 S. Ct. 665, 60 L. Ed. 1050, as holding that "purchasers of bills of lading acquire no greater rights than the original shippers"; but there the bill of lading was issued when the goods were in the possession of another railroad, so that the doctrine of Pollard v. Vinton, supra, that the acts of the railroad agent were not within the scope of his authority, applied.

When a carrier has given a clean bill of lading, stating that cargo has been received in good order, though it was at the time manifestly damaged, the courts hold that it is estopped to deny the truth of the assertion against a purchaser of the bill of lading, who has been misled by the representation and has altered his position to his detriment on the faith of the representation. Compania Naviera Vasconzada v. Churchill & Sim, [1906] 1 K. B. 237; Martineau, Ltd., v. Royal Mail Co., [1912] 17 Com. Cases, 176; Higgins v. Anglo-Algerian S. S. Co., 160 Cow. C. A. 396, 248 F. 386; Relyea v. New Haven Rolling-Mill Co. (D. C.) 75 F. 420; Bradstreet v. Heran, Fed. Cas. No. 1792a; Sears v. Wingate, 85 Allen (Mass.) 103. We can see no difference in principle between a misrepresentation as to the condition of merchandise and a misrepresentation that it is on board, when it is not. Either furnishes a basis for an estoppel.

In The Isla de Panay, 267 U.S. 260, 45 S. Ct. 269, 69 L. Ed. 603, the Supreme Court seems to have sanctioned the doctrine of Higgins v. Anglo-Algerian S. S. Co., supra, though the case was distinguished on the ground that in The Isla de Panay a failure to note on the bill of lading that cargo was damaged caused no estoppel, as it was not accompanied by a statement that the goods were received in good order and condition.

The exception in the bill of lading exempting the carrier from liability for losses arising from acts of God is clearly unavailable as a defense, because of the estoppel which precludes the respondent from denying that the goods were on board the Alaska Maru on August 30. Assuming, as we must, that they were on the vessel at that date, the earthquake and robbers could not have affected them.

It is, of course, quite clear why the bill of lading, reciting that the goods were on board, was dated August 30, although the shipper knew that the vessel was not to arrive at Yokohama until September 2, and would not sail before the next day. The reason was that Nozaki had a contract with the libelant that shipment was to be made during June, July or August, 1923, and a failure to ship before September would be a cause of cancellation. Moreover, the letter of credit by the International Acceptance Bank provided that bills of lading must be dated on or before August 31 and drafts must be drawn on or before that date.

Consequently, though the shipper could have had no idea that anything so unforeseeable as an earthquake would prevent the transportation of the goods, he did intend to procure the issue of shipping documents which would represent the merchandise as shipped at a time when it was not in fact on board, and he also intended to make it appear that he had performed his contract, when he was really in default.

However common the practice may be of issuing on-board bills of lading when the goods are not yet laden, the practice is at best extremely negligent. It not only may mislead merchants as to their actual contract rights, but, if recognized as valid, is likely to deprive purchasers who import merchandise, banks financing their operations, and companies insuring the goods against risks of that certainty as to their rights and obligations which truthful conduct and fair business dealing at least tend to promote.

The reason why consignees and banks so often desire on-board bills of lading is that at least some risks, such as fires on shore and delay in shipment, are left behind when the merchandise gets on the ship. At any rate, on-board bills of lading are often, as here, a requirement of the importer. In such circumstances there should be no sanction for an easy, unreliable practice of issuing bills which purport to be on-board bills, when merchandise has been delivered to the carrier, but has not been shipped.

The libelant has been prejudiced because, if a true bill of lading had been issued, it would have been able to cancel its contract with Nozaki, for failure to ship the goods in time, without incurring any liability to the bank, which would not have honored the draft on presentment of a "delivered for shipment" bill of lading. It has been further prejudiced by being forced to reimburse the bank, in order to pay for goods which it never contracted to pay for unless actually shipped, goods which would have been in a place free from the special dangers that caused their loss, if the representations upon which the bank honored the letter of credit had been true. While the libelant may have a cause of action against Nozaki, it is not compelled to pursue it, but may rely on the estoppel, and assert its rights against the respondent because of the representations in the bill of lading. Compania Naviera Vasconzada v. Churchill & Sim, [1906] 1 K. B. 237.

We hold the respondent estopped to deny that the hemp braid was shipped on the Alaska Maru on August 30. If shipment be taken as of that date, the exceptions in the bill of lading relied on can have no application. The libelant is entitled to an interlocutory decree providing for an assessment of the damages caused by the failure of the respondent to deliver the merchandise according to the terms of the bill of lading.

The decree is reversed and the cause remanded.