Planters' Rice-Mill Co. v. Merchants' National Bank , 78 Ga. 574 ( 1887 )

Bleckley, Chief Justice.

These two banks brought severally their actions against the Planters’ Rice-Mill Company in the city court of Savannah, and recovered. The company moved for a new trial in one of the cases on nineteen grounds, in the other on twenty-one grounds. The motions were overruled.

The actions were complaint, both substantially alike, the declaration in each having a count in trover and a special count on the facts. The cause of action was the failure of the rice-mill company to deliver rice in pursuance of certain receipts which it had issued, acknowledging tho rice to be in its possession in store. The company is a corporation with chartered power to receive, crush and store rice. It had issued through its superintendent certain receipts in a special form, acknowledging that an individual by the name of Schley had in the mill a certain quantity of rice stored. Each one of these receipts had a printed entry on the margin, filled out in writing with the name of the bank which held it; and this entry was signed, as was the receipt itself, by the superintendent of the mill. The entry imported an acknowledgment of notice by. the company that the bank was the holder of that receipt. \The defence to the actions was based upon the fact that the receipts were fraudulent, and that there was no rice behind them!] The rice-mill company sought to avoid the receipts, upon proof that the receipts acknowledged rice which never came to hand. The receipts- by their recitals imported that Schley had a certain quantity of rice in the mill. Schley had no such rice, nor any rice. He used these receipts as pledges upon which to obtain money,, and he did obtain money, to a large amount from each of these banks, on the faith of the receipts. At the trial, this defence was gone into very fully, and all the circumstances under which the receipts were issued and pledged were presented to the jury. It was alleged that the banks ought to have known that the receipts were fictitious, that there were certain circumstances to put them on inquiry, and that had they made inquiry, they would have discovered the fraud. But the banks replied by evidence which tended to show that they used all diligence with which they were chargeable; and the jury so found, under a very fair and full charge by the court.

1. There can be little doubt that a warehouse receipt is a mere< symbol of property. It is the shadow of an absent substance; and when it has passed from one hand to another, it is only symbolic of the property it represents; and if it represents no property, its holder has nothing but a mere piece of paper. That is the general character and effect of a warehouse receipt, just as of a bill of lading. Warehouse receipts, pure and simple, with only the incidents annexed to them by law, and none superadded by special contract, conduct or representation, are no more obligatory in the hands of bona fide holders for value than in the hands of the original bailor of the property stored.

2. This principle, however, does not rule these cases. These documents are not ordinary warehouse receipts, and they were not left to the mere incidents annexed to them by law; but contract, conduct, representation on the part of the rice-mill company intervened, both in the issuing of these receipts and in their transfer, which clothed them with other and larger incidents than the general law would have annexed to them if they had been mere warehouse recéipts in ordinary form. If warehouse receipts of a special form and character be adopted and issued in due course of business, for the express purpose of being pledged as security to obtain money, and if, as a part of the regular system of using them, the warehouseman acknowledge in writing on each receipt notice of assignment by the pledgor to the pledgee before the latter advances his money thereon, the pledgee, after advancing his money in good faith, is entitled to stand on the terms of the pledged receipt as importing a genuine business transaction of the nature described in the instrument. Thus, though in fact no goods had been received for storage, the recital in the special receipt being utterly false, nevertheless the recital will have the same effect in protecting such Iona fide pledgee as if the goods had been received and stored.

It is in evidence in one of the cases we are dealing with directly, and in the other inferentially, that these special receipts were adopted and always issued for the express purpose of enabling the bailor, or the person acknowledged as the bailor, to pledge them as security for money. When such a purpose was not in contemplation, another and different form of receipt was used, one that did not purport on its face to be special, and one that did not have annexed to it this form of acknowledging notice of the assignment. The mill corporation adopted and authorized the use of these special receipts for the very purpose of enabling its customers to obtain loans upon them and in this instance they, were so used, under circumstances that justified the banks in not making inquiry beyond the inquiry which they did make; and the jury were justified in reaching the conclusion that they fully discharged themselves of all diligence that was incumbent upon them.

3. He who creates a symbol and leaves it a symbol, is bound by it only in its symbolic character; but he who creates a symbol and aids in raising it to a security, is bound by it both as a symbol and a security. Why not ? As a mere symbol, each of these receipts is but colorable evidence of bailment which never took place. It represents property which never existed, and is therefore worthless ; ’ but the corporation raised it from its rank as a mere symbol to its rank as a security for money. It would be a mere emblem if they had not made it more; but having made it more, there is something of the nature of a real presence in it; a real presence of the thing it purports to represent.

4. Thus far the cases have been considered as if there were no element of agency in them. If this corporation could have acted without an agent, and had so acted by issuing these receipts and acknowledging the transfer of them, what has been said would be conclusive; but it acted through an agent, and the real defence is, that the agent did not have authority to bind the corporation, his principal, where no rice was in fact stored, and where the transactions on which the receipts purported to be based were wholly fictitious. The evidence leaves no question that [the agent was authorized to issue receipts of this character. The receipts belonged to a class which the agent had power to issue, and not only to issue, but to acknowledge; and every act of acknowledgment was a recognition of the rightfulness of the receipt. That was part of the purpose, doubtless, of having the acknowledgment ; it was to have the receipt recognized as an obligatory instrument upon the rice-mill company, and this agent was the right agent, under the evidence, both to issue the receipt and to enter this acknowledgment of notice upon it. So that the paper, as a class, was paper he had power to issue and deal with just as he did in these instances.'

An agent to tell the truth may bind his principal by telling a lie. A wrongful exercise of delegated authority is not the assumption of authority, but the abuse of it. Thus, an agent empowered to issue and acknowledge receipts of a given kind, based on real transactions, does not, by wrongfully issuing and acknowledging receipts of a like kind, based on fictitious or simulated transactions, pass beyond the scope of his authority, but acts fraudulently within it. To hold otherwise would be to rule that an agent cannot commit a fraud and affect his principal by it. Here he had a rightful authority to do a certain class of acts. He did a number of those acts by the wrongful exercise of that authority. His principal must be responsible both for the authority conferred and for its faithful exercise, in so far as there is a right to rely upon the fidelity of its exercise. In many cases, the law will authorize strangers to rely upon the acts of an agent, and in many cases it will not.

It authorized these banks to trust to the exercise of the authority, just as fully as they could trust to the existence of the authority; and the mill company is as much bound by the abuse as by the use of the authority which it conferred, the banks being entirely ignorant of such abuse until long after they parted with their money.

5. A question was made as to the right of the banks to recover counsel fees as a part of their damage. Schley, their debtor, stipulated in his contracts to pay counsel fees in case any were incurred by the bank in collecting. These counsel fees were added by the jury, in arriving at their verdict, to the principal and interest of Schley’s debt due to the banks, we think correctly; because the value of the property covered by the receipts, had it been property at all, would have been in excess of the whole recovery ; and we think the cost of counsel fees, where collection had to be enforced by law, was as much a part of the loss of the banks as the principal and interest. So we rule this: A pledgee holding the legal title and damaged to the full extent of the debt secured by the pledge, including attorneys’ fees promised him in the contract creating the debt, may recover from a defaulting bailee of the property pledged, the whole debt, including such attorneys’ fees, provided the recovery do not exceed the value of the property.

We have not been able to assure ourselves that there was absolutely no error in any of the grounds of the motions for new trial, but only that there was none which influenced the result. The verdict was indubitably right in each case, and the refusal of a new trial was correct.

Judgment affirmed.