HOKE, J., after stating the case: In Finch v. Gregg, reported in 126 N.C. 176, this Court held in effect that when a purchaser and consignee of goods has accepted and paid a draft drawn on himself by the consignor for the purchase price to a holder of the draft, "in due course," said holder, having taken an assignment of the bill of (496) lading attached or otherwise, as security for the amount paid in obtaining the draft, and this bill of lading is turned over to the consignee on the payment of the draft, who thereby obtains possession of the goods, the said consignee can recover of the holder receiving such payment damages for breach of warranty given by the consignor in the original contract of sale; and this, though the holder of the draft had no interest ultra in the goods and took no part in the bargain. The present writer, who presided at the trial of Finch v. Gregg in the Superior Court, first made this ruling in the court below, following with much hesitation a decision of the Texas Court of Civil Appeals, then recently made ( Landa v. Lattin Bros., 1
In the case of Lander v. Lattin, 19 Tex. Civ. App., 246, 46 S.W. 48, the court held that the bank would be liable to the drawee who pays the draft for any breach of the original seller of the goods (the drawer of the bill of exchange). The holding in the Lander case was followed by the North Carolina court in the case of Finch v. Gregg, 126 N.C. 176, and to the same effect and announcing the same doctrine is the case of Haas Co. v. Bank, 39 S.R., 129; 1 L.R.A. (N.S.), 242; and by the Mississippi Court in the case of Searles v. Grain Co., 32 S.R., 287. In commenting upon the holding in these cases, Williston, in his excellent work on the law of sales, in discussing sections 36 and 37 of the Uniform Sales Act (which is identical in all of its terms with sections 35 and 36 of the Uniform Bills of Lading Act, and section 35 being almost identical in language with section 34 of the Federal Bills of Lading Act), says:
Syllabus Point 5, Pribble v. Stanley, supra. Accord, Saia v. Lusco, 155 La. 191, 99 So. 34 (1924); Zitzer v. Jones, 48 Md. 115 (1878); Archer v. High, 193 Miss. 361, 9 So.2d 647, 648 (1942); Norvell v. Schupbach, Mo. App., 185 S.W.2d 323 (1945); Finch v. Gregg, 126 N.C. 176, 35 S.E. 251 (1900), overruled on other ground, Mason v. Nelson, 148 N.C. 492, 62 S.E. 625 (1908); Horton v. Early, 39 Okla. 99, 134 P. 436, 437 (1913); Meredith v. Bell, 7 S.W.2d 605 (Tex.Civ.App. 1928). See 51 C.J.S. Justices of the Peace § 194. Amendments for additional causes of action may not be allowed on appeal from magistrate court.
To this instruction the plaintiff excepted. It was held, in Finch v. Gregg, 126 N.C. 176, that when a purchaser of goods has accepted and paid a draft drawn on himself by the consignor for the purchase price to a holder in due course, the consignee or purchaser may recover damages of the holder for the consignor's breach of warranty; but this principle was afterwards disapproved, the Court holding, on the contrary, that where a bank becomes a holder in due course of a draft drawn by the consignor on the consignee for the purchase price, with a bill of lading attached, the consignee takes the goods subject to the rights of the holder of the bill of lading to the amount of the draft, and he cannot retain as against the holder the price of the goods on account of a debt due him by the consignor. Mason v. Cotton Co., 148 N.C. 492.
3 R. C. L. 633; Packing Co. v. Davis, 118 N.C. 553. The plaintiff does not seek to recover against the bank as assignee of the bill of lading under the 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 his acts, representations or admissions, or by his silence when he 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 he will be prejudiced if the former is permitted to deny the existence of such facts.
The law is thus stated and cited with approval by Mr. Daniel: "When the vendor of goods consigns them to the purchaser for the price and delivers the bill carrier and, intending to resume the right of control over them, at the same time draws upon the purchaser for the price and delivers the bill of exchange, with the bill of lading attached, to an indorsee for a valuable consideration, the consignee, upon receipt of the goods, takes them subject to the right of the holder of the bill of lading to demand payment of the bill of exchange, and cannot retain the price of the goods on account of a debt due to him from the consignor." Emery v. Bank, 25 Ohio St. 360; 18 Am. Rep., 299; Bows v. Bank, 91 U.S. 618. This Court in Finch v. Gregg, 126 N.C. 176, 49 L.R.A., 679, recognized this almost elementary principle, carrying it to its fullest extent. It appeared that Gregg had shipped to certain persons a lot of corn and drew a draft on them with the bill of lading attached.
It would seriously impair the usefulness of banks, which are accustomed to credit to a depositor any proceeds of drafts with bill of lading attached, if, whenever it turns out that the depositor has not paid in full for the property bought by him, the seller can hold the bank responsible for the balance of the purchase money, which is a matter between seller and buyer, and which cannot concern the bank when the seller has turned over the property to the depositor. If the title is defective, that concerns the party in receipt of the cotton, and not the bank. Finch v. Gregg, 126 N.C. 176; 49 L.R.A., 679, and Bank v. Davis, 114 N.C. 343; 41 Am. St., 795, relied on by the plaintiff, have no application to the facts of this case. In the instructions given, that the plaintiff could reclaim the property or the proceeds thereof in the hands of the defendant bank, there was
MODIFIED AND AFFIRMED. Cited: Finch v. Gregg, 126 N.C. 179; Critcher v. Porter, 135 N.C. 547, 551; Allen v. Tompkins, 136 N.C. 210; Parker v. Fenwick, 138 N.C. 217; Mfg. Co. v. Machine Works, 144 N.C. 691; Mason v. Cotton Co., 148 N.C. 517; Robinson v. Huffstetler, 165 N.C. 462; Underwood v. Car Co., 166 N.C. 462; Bond v. Cotton Mills, ib., 23; Fairbanks v. Supply Co., 170 N.C. 320; Winn v. Finch, 171 N.C. 275.
Affirmed. Cited: Alpha Mills v. Engine Co., 116 N.C. 802; Ferrell v. Hales, 119 N.C. 213; Finch v. Gregg, 126 N.C. 177; Reiger v. Worth, 130 N.C. 269; Woodridge v. Brown, 149 N.C. 304; Swift v. Meekins, 179 N.C. 175. (589)
Error. Reversed. Cited: Martin v. Goode, 111 N.C. 290; Alpha Mills v. Engine Co., 116 N.C. 802; Finch v. Gregg, 126 N.C. 179; Wright v. Ins. Co., 138 N.C. 494; Beasley v. Surles, 140 N.C. 609; Wrenn v. Morgan, 148 N.C. 104; Harris v. Cannady, 149 N.C. 82; Robertson v. Halton, 156 N.C. 220; Hodges v. Smith, 158 N.C. 260; Tomlinson v. Morgan, 166 N.C. 560; Kime v. Riddle, 174 N.C. 444; Swift v. Meekins, 179 N.C. 174; Wiggins v. Motor Co., 188 N.C. 320. (93)