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damages for failure to deliver 56 bales of hemp. The opinion of the District Court is reported in 124 Fed. 975.

J. Parker Kirlin and Charles R. Hickox, for appellant.
Theodore M. Taft, for appellees.

Before LACOMBE, TOWNSEND, and COXE, Circuit Judges.

COXE, Circuit Judge. We agree with the District Judge in holding that, in the absence of any proof to the contrary, the bills of lading sufficiently establish the receipt of the bales in controversy on board the ship at Manila. These bills duly acknowledged the receipt in good order of 1,500 bales of hemp as numbered and marked on the margins "to be delivered in the like good order and condition at the aforesaid port of New York." The libelants have never received the 56 bales which are in dispute in this action. The law applicable to such a situation is clearly stated by the Supreme Court in The Eddy, 5 Wall. 481, 495, 18 L. Ed. 486, as follows:

"Delivery on the wharf in the case of goods transported by ships is sufficient under our law, if due notice be given to the consignees and the different consignments be properly separated, so as to be open to inspection and conveniently accessible to their respective owners. Where the contract is to carry by water from port to port an actual delivery of the goods into the possession of the owner or consignee, or at his warehouse, is not required in order to discharge the carrier from his liability. He may deliver them on the wharf; but to constitute a valid delivery there the master should give due and reasonable notice to the consignee, so as to afford him a fair opportunity to remove the goods, or put them under proper care and custody. When the goods, after being so discharged and the different consignments properly separated, are not accepted by the consignee or owner of the cargo, the carrier should not leave them exposed on the wharf, but should store them in a place of safety, notifying the consignee or owner that they are so stored, subject to the lien of the ship for the freight and charges, and when he has done so he is no longer liable on his contract of affreightment.”

In order to make a valid delivery, which relieves the carrier from liability, it is necessary to show that the goods in question were landed on the wharf, segregated from the general cargo so as to be conveniently accessible to the consignee, that notice was given of their arrival and location and a reasonable time allowed for their removal. Manifestly it is not a good delivery to deposit the entire cargo of the ship on the wharf and inform inquiring owners that if their goods arrived they will be found somewhere in the general mass of merchandise.

There was no actual delivery; this proposition must be conceded. To establish a constructive delivery it was necessary for claimant to show, first, that he separated the libelants' goods from the general bulk of the cargo; second, that he properly designated the goods; third, that he gave due notice to the libelants of the time and place of the delivery. The Ben Adams, 2 Ben. 445, 449, Fed. Cas. No. 1,289. There is no proof sufficient to establish any of these essential conditions to relief from liability. The claimant reaches the conclusion that a proper delivery was made by a process of syllogistic reasoning, which may not unfairly be epitomized as follows: If the missing bales were put on board at Manila they were carried safely to

New York. All of the bales which reached New York were landed on the Staten Island pier and consignees notified. Ergo the missing bales were constructively delivered to libelants. It is this presumption which the claimant seeks to substitute for proof of delivery, actual or constructive, which he is bound to furnish.

The District Judge sums up the situation as follows:

"The only evidence. in the case is that contained in the receipt in the bills of lading; and that binds the ship until it shows by equally cogent proof either that the bills of lading were false, or that it has delivered the goods."

The claimant is in the unfortunate predicament of being called upon for proof and offering conjecture in lieu thereof. The claimant's brief concedes that "the disappearance of the bales in suit, if they were ever on the wharf, cannot be absolutely accounted for in any satisfactory manner," and yet upon him the law imposed the duty of accounting for them.

As before stated the bills of lading were prima facie evidence of the receipt of the hemp. We have, however, examined the testimony upon this question sufficiently to conclude that the weight of evidence, irrespective of the bills of lading, tends to show that the goods were actually on board at Manila. So far as the bales in suit are concerned they may have been lost soon after they were placed on the wharf, or they may have been carried away by other cargo owners by mistake. If the record contains any proof that these bales were separated from the rest, libelants notified and an opportunity given them to carry their property away, we have failed to discover it.

The Titania was chartered by her owner to Warner, Barnes & Co., of Manila, November 12, 1902. The charter party was introduced in evidence by the libelants. The twelfth clause is as follows: "The cargo to be brought alongside and taken from alongside at merchant's risk and expense; and to be carefully stowed on board at steamer's expense." The District Judge ruled that the charter party had no bearing on the controversy and that the libelants were not bound by its terms, their contract being shown by the bills of lading. We incline to the opinion that this ruling is correct, the preponderance of evidence being that the libelants had no notice or knowledge of the charter party until after the terms of their contract with the ship had been unalterably fixed. The Pietro G. (D. C.) 39 Fed. 366.

Moreover, assuming notice by libelants of the clause quoted and that it is capable of the interpretation advanced by claimant, it is manifest that no one connected with the discharging of the ship ever asserted such a construction. If the master had the right to compel the libelants to receive the hemp at the end of the ship's tackles he should have so informed them and proposed such a delivery. Instead of doing so he proceeded to unload in a manner which made it impossible for the libelants to comply with the provision of the charter party in question even if they had known of it. The master testifies:

"The arrangement made between the ship and the dock with reference to the unloading of the cargo and the use of the dock for that purpose was that the cargo was to be discharged according to the custom of the port. The custom of the port, as I understand it, is to land the cargo on the wharf and deliver it from there. The ship paid for the use of the wharf for that purpose."

If, then, the claimant acquired any right to compel the libelants to take the hemp "from alongside," he waived the right by delivering from the dock in accordance with the provisions of the bills of lading and the custom of the port.

Although concurring in the foregoing the majority of the court are of the opinion, in which, however, the writer does not concur, that the evidence establishes the following propositions: First, that the 56 bales in controversy were actually placed on the dock and weighed by libelants' agents; and, second, that the ship undertook to deliver into lighters. Concededly these bales were not put into lighters sent to the wharf by the libelants and as the claimant has failed to show a delivery, pursuant to the agreement as aforesaid, the liability of the ship is established.

The decree of the District Court is affirmed with interest and costs.

In re HAAS CO.


(Circuit Court of Appeals, Seventh Circuit. April 12, 1904.)

No. 1,042.



A corporation has no power to execute its notes, secured by a mortgage of its property, for individual debts of its stockholders incurred in the purchase of their stock, to the exclusion of creditors of the corporation, although their claims arose after the mortgage was executed and recorded.

Appeal from the District Court of the United States for the Northern District of Illinois.

The Haas Company, a corporation organized under the laws of Illinois, October 24th, 1892, with an authorized capital stock of eighteen thousand dollars, and engaged in a soda water manufacturing business, was, on or about the 22nd day of December, 1902, adjudicated a bankrupt, and its property put into the hands of a receiver pending the appointment of a trustee. Thereupon appellee, mortgagee under a chattel mortgage, filed his petition, praying that the receiver be directed to turn over to him all the personal property described in the mortgage which was made to secure notes aggregating the sum of two thousand dollars. The property covered constituted the entire assets of the company. The trustee answered, challenging the validity of the mortgage, and on hearing before the referee, an order was recommended denying the petition; but on exceptions in the District Court, this recommendation was overruled, and the trustee directed to pay to the petitioner the proceeds of the sale, a sale having already taken place. From this order the appeal is prosecuted.

The finding of facts by the referee, about which there is no dispute, is as follows:

Prior to and on March 5th, 1902, the Haas Company was a corporation having a capital stock $18,000.00 divided into 180 shares of $100.00 each, of which Mr. Charles Ziegenhagen was the owner of 119 shares, Mrs. Lena Haas was the owner of 60 shares and Rosina Ziegenhagen was the owner of 1 share, the last named persons being the owners of all the shares of stock and the directors and officers of the corporation. At a meeting of the said directors, on the 5th day of March, 1902, at which all the directors, stockholders and officers were present, the President Charles Ziegenhagen, stated that

he had received an offer of $3500.00, for all the capital stock of the Company, payable as follows: $1500.00 cash, balance in 1, 2, 3 and 4 years. After discussing the matter, the other stockholders agreed to assign their stock in blank, and deliver the same to Mr. Ziegenhagen in order that he might make the sale, and it was decided and agreed that Charles Ziegenhagen be authorized to make the sale upon the terms above stated.

The foregoing facts appear from the record of the minutes of the corporation for March 5th, 1902. It also appears from the testimony of the petitioner, Charles Ziegenhagen, and the testimony of Frederick H. Teeple, that the negotiations for the sale of this stock had been going on for some time prior to March 5th, 1902, between Charles Ziegenhagen and Frederick H. Teeple, the latter being the proposed purchaser and that an oral agreement was made prior to the meeting of March 5th, 1902, between Ziegenhagen ant Teeple, which provided that Teeple was to purchase the stock and to pay $1500.00 cash and to give notes for the balance.

At the Directors' meeting above referred to, held on March 5th, 1902, Charles Ziegenhagen, Lena Haas and Rosina Ziegenhagen resigned as directors and officers of the corporation, the resignations to take effect March 6th, 1902, at 12:00 o'clock noon. The records of the corporation show what purports to be the minutes of the meeting of the stockholders of the Haas Company, held "pursuant to notice." It is stated that there were present at said meeting, the following named stockholders:

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The record is silent as to the date or day on which said meeting was held. The minutes of this meeting show that the parties named as stockholders, elected themselves as directors of the corporation for the period of one year. The evidence shows that none of the stock was turned over by Ziegenhagen until the 7th day of March, 1902, but the minutes of the corporation show that on the 6th day of March, 1902, a meeting of the new directors last named, was held pursuant to notice. At that meeting, the directors were elected officers of the corporation: Frederick H. Teeple, President and Treasurer, Frederick Matz, Secretary, and a resolution was passed as follows: "That the officers of this Company be and they are hereby authorized to execute a chattel mortgage for and in the name of the Company in favor of Charles Ziegenhagen upon the property of the Company to secure its five notes dated the 7th day of March, A. D. 1902 one-for $250, due in six months after date one for $250, due twelve months after date one for $250, due eighteen months after date one for $250, due twenty-three months after date one for one thousand dollars due two years after date all of said notes to bear interest at the rate of 5% per annum and 7% per annum after maturity." On the 7th of March Ziegenhagen delivered the 180 shares of stock of the corporation to Teeple and the others purporting to be stockholders of the Company and received from Teeple, $1500.00 in cash, and notes and mortgage of the Haas Company for the balance, and a chattel mortgage as set forth in said petition.

On March 7th, when the original stock was turned over by Ziegenhagen, there was no indebtedness against the Haas Company.

I find that, at the time the meeting of March 6th, 1902, was held, Frederick H. Teeple and the others who purported to act as stockholders and directors were not the stockholders of the corporation and did not become stockholders or directors by right until the 7th day of March, 1902.

I further find that the indebtedness to Ziegenhagen was the indebtedness originally of Frederick H. Teeple and that no consideration whatever passed from Ziegenhagen to the Haas Company, a corporation, and that the notes and mortgage in controversy, were wholly without consideration, passing to the Haas Company and that the Haas Company, even through its authorized directors or managers, had no authority or power to make such notes and mortgage and that the petitioner, Ziegenhagen, had knowledge of all these facts when he turned over his stock and took the chattel mortgage and notes. My conclusion is that the action of the directors and officers in giving the mortgage, was wholly unauthorized and ultra vires and if not absolutely void

as to the corporation, the said notes and mortgage should be held as void against the rights of even subsequent creditors.

The only further fact of consequence is that at the time of the giving of the chattel mortgage, the company was free from debt; the creditors represented by the trustee here having become such since the mortgage was put on record.

William E. Oneill, for appellant.

J. G. Grossberg, for appellee.

Before JENKINS, GROSSCUP, and BAKER, Circuit Judges.

GROSSCUP, Circuit Judge, after the foregoing statement of facts, delivered the opinion of the court:

The sole question raised by this record is this: Is it within the lawful power of shareholders of a corporation, to the exclusion of creditors of the corporation, subsequent in point of time to the transaction, to use the notes, and pledge the assets of the corporation, toward paying the shareholders' individual debts contracted in the purchase from others of such shares?

We think not. The corporation, as a statutory person, with power to transact business, invite credit, incur obligations, and to discharge them, is an entity entirely distinct from its individual shareholders, and from their power to transact business, invite credit, incur obligations, and to discharge the same. The shareholders may, it is true, out of the assets of the corporation, declare and pay dividends; or, the affairs of the corporation being wound up, divide among themselves its capital and assets; but dividends mean the division not of capital and assets as such, but of earnings; and a final division of capital and assets means that the corporation will invite no further credit. Under the name of dividends there can be no lawful division of assets and capital that would impair the rights of creditors; and so long as the corporation is a going concern, there can be no lawful division of capital and assets that would diminish the security upon which continuing or future credit will be presumably based.

The notes and mortgage under consideration here are in no sense a dividend; they do not pretend to be a division of earnings. Nor are they a final distribution of capital and assets; the corporation remained a going concern, and invited the subsequent credit which the trustee now represents. Unless shareholders may invade, at will, the capital and assets of the corporation, appropriating them with impunity to the payment of their individual debts, the transaction. complained of by the trustee cannot be sustained.

But it is said that the creditors represented by the trustee in this case had knowledge of the existence of the mortgage, and must therefore have extended their credit with notice of the facts. The contention clearly embodies a non sequitur. Knowledge of the presence on the records of the mortgage does not imply notice that out of the capital or assets of the corporation the shareholders were paying their individual debts. The mortgage on file, so far as the creditors knew, may have been executed for corporate purposes, its avails remaining somewhere among the corporate assets.

The order of the District Court is reversed, and the case remand

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