Dare v. New York Cent. R. Co., 20 F.2d 379 (2d Cir. 1927)

*380 Hendrick & Hendrick, of New York City (John H. Hendrick, of New York City, of counsel), for plaintiffs in error.

Alex S. Lyman, of New York City (William Mann, of New York City, of counsel), for defendant in error.

Before MANTON, L. HAND, and SWAN, Circuit Judges.

SWAN, Circuit Judge.

This is a suit by the railroad company, hereinafter referred to as plaintiff, against partners trading as E. H. Dare & Co., hereinafter referred to as defendants, to recover freight charges on 28 carloads of oats carried in interstate commerce over the plaintiff's rails.

The oats were shipped from Illinois and Wisconsin under order bills of lading running to various consignees in New York City. The bills of lading were indorsed in blank by the consignees and were pledged to defendants as security for money loaned by them to Brainard Commission Company. The defendants then indorsed the bills of lading and delivered them to the plaintiff, with instructions to deliver the oats "for our account" to named vessels for export. The letter of instructions stated also: "Freight and all charges collect from Brainard Commission Company." The plaintiff made delivery to the vessels as ordered, and presented freight bills to Brainard Commission Company. Finding it insolvent and unable to pay, the plaintiff demanded payment from defendants.

After the grain was received on the vessels, the shipping documents went to the defendants, and were released by them to Brainard Commission Company upon payment of the above-mentioned loan. The plaintiff had no knowledge of the relations between the defendants and the commission company. Neither plaintiff nor defendants knew that the commission company was insolvent.

It has been authoritatively established that a consignee who receives the goods becomes legally bound to pay the freight charges. Pittsburgh, etc., Ry. Co. v. Fink, 250 U.S. 577, 40 S. Ct. 27, 63 L. Ed. 1151; L. & N. R. Co. v. Central Iron Co., 265 U.S. 59, 70, 44 S. Ct. 441, 68 L. Ed. 900. Such charges must coincide with the rate fixed by law, notwithstanding contractual arrangements between consignee and carrier to the contrary. N. Y. Cent. R. R. Co. v. York & Whitney Co., 256 U.S. 406, 41 S. Ct. 509, 65 L. Ed. 1016. Even if it be assumed that the consignee might substitute another's obligation for his own, a mere direction in the order of delivery to collect freight from another would not be sufficient. The case of N. Y. C. R. Co. v. Ross Lumber Co., 234 N.Y. 261, 137 N.E. 324, 24 A. L. R. 1160, so holds, and we concur in this view. There should be some effective substitution by novation, or otherwise, so that the new debtor would become legally bound to the carrier for freight before the consignee is freed.

It is contended that the cases above mentioned are distinguishable, because in the case at bar the defendants were not consignees nor owners, but only pledgees for security. We think this difference immaterial. So far as plaintiff knew, the defendants were owners of the shipments. They held order bills of lading duly endorsed by the consignees named therein. Each bill of lading contained the provision: "The surrender of this original order bill of lading properly indorsed shall be required before the delivery of the property."

Under the terms of the Bill of Lading Act (39 Stat. 538; Comp. St. §§ 8604aaa-8604w), the carrier is justified in delivering the goods to one in possession of an order bill of lading duly indorsed, and is bound to deliver to such holder on the conditions stated in section 8 (Comp. St. § 8604dd). The act declares the order bill negotiable, and gives the person to whom it has been negotiated a direct right against the carrier (section 31 [Comp. St. § 8604p]). We see no reason why the holder should not stand in the shoes of the consignee in respect to the obligation to pay freight upon delivery of the goods to him. At least, this should be true where the carrier does not know that the holder of the endorsed bill of lading is not the owner. A delivery to the vessels upon the defendants' order and "for our account" was a delivery to the defendants. We agree with the District Court that such delivery, under the authority of the cases above cited, imposed upon them the obligation to pay the freight.

The judgment is affirmed, with costs.