In the summer and fall of 1909 certain bills of lading were issued to the Durant Elmore Company which was named therein as consignor, consignee and party to be notified, covering the shipment by rail of twenty-two carloads of grain from Buffalo to Portland, Maine. These bills were in the "order form" and contained the provision that "The surrender of the original bill of lading properly endorsed shall be required before the delivery of the property." The cars containing the grain were transported by the railroads issuing the bills over their lines from Buffalo and were finally delivered to the defendant which carried them to Oneonta. There, Durant Elmore reconsigned the grain to other destinations and the grain was delivered as directed by the consignor prior to January 1st, 1910. Such delivery was made, however, without requiring the surrender of the bills of lading. They were retained by the Durant Elmore Company. *Page 434
On May 17th, 1910, the plaintiff loaned the Durant Elmore Company $15,000 and as collateral security for such loan it received these retained bills of lading covering grain for the apparent aggregate value of $15,550. Before receiving these bills, however, they had been altered by the Durant Elmore Company. The original dates in 1909 had been erased and new dates in April, 1910, had been inserted in each. Evidently the borrower believed that suspicion would be aroused if bills bearing the original date had been presented as collateral to the loan. The plaintiff when it accepted these bills as collateral did so in good faith with no knowledge or information of the change of dates or that the goods covered by the bills had been delivered. The Durant Elmore Company became insolvent and the loan to the plaintiff has been only in part paid. There remains due something more than $8,000.
After the insolvency the plaintiff presented to the defendant the bills of lading in question and demanded from it the grain described therein. The defendant refused stating that the grain had already been delivered. Thereupon the plaintiff brought this action to recover the amount still due it from the Durant Elmore Company. The trial court dismissed the complaint on the ground that the bills of lading were "spent bills;" that when presented to the plaintiff they were forged and that the failure to require their surrender was not the proximate cause of the plaintiff's loss. This result was affirmed by the Appellate Division, two of the justices dissenting.
In my opinion this result cannot be sustained. When these bills were issued our Penal Law provided that a carrier who delivers to another any merchandise for which a bill of lading has been issued, unless it bears upon its face the words "non-negotiable," except upon surrender of the bill for cancellation, is punishable by fine or imprisonment or both. (Sec. 365.) One of the *Page 435 purposes of the statute, as we said in Colgate v. PennsylvaniaCo. (102 N.Y. 120), is to protect the innocent against "spent bills" which are susceptible of a wrongful or fraudulent use. Only by surrender and cancellation can fraud be prevented. The existence of such bills is a source of danger. They on their face import the possession by the carrier of the merchandise described. Unchanged they may be used to deceive. One who takes such a bill in good faith when the goods have in fact been delivered may well complain. The carrier has failed in the duty imposed upon him by statute for the protection of the public and the act may be the basis of a civil action by an individual to recover damages if he has been injured in his person or property and the damages suffered are the direct and proximate result of the illegal act. (Mairs v. Balt. O.R.R. Co., 175 N.Y. 409). If, therefore, these bills had been negotiated within a reasonable time after the shipments had been made to one taking them in good faith and without notice, a recovery could have been had. (Burnham v. Cape Vincent S. Co., 142 N.Y. 169.) The act of the carrier made possible the loss that ensued and that the use made by the holder of the bills is criminal in fraudulently negotiating them is no answer to the claim. The original default is clearly the proximate cause of the result.
Nor is the original act any less the proximate cause if to the crime of negotiating the "spent bills" the date of the bill is altered and so the crime of forgery is added. The mere intervention of a crime does not break the sequence of cause and effect if the crime might reasonably have been foreseen when the original default occurred. Always the outstanding bill carries this possibility. Always there is a chance that it may be fraudulently negotiated. The change in the date renders it more probable that such negotiation may be successfully accomplished. It renders the danger more pressing but simply adds to the danger that already existed. *Page 436
As we have said in other connections, we can give no definition of the words "proximate cause" applicable everywhere and under all conditions. Generally, however, the question is whether the act of the defendant gave rise to the stream of events which culminated in the injury. Was the course of the stream deflected? Was it forced into new and unexpected channels by the act of a third person? (Donnelly v. Piercy Contracting Co., 222 N.Y. 210. )
In the case of Mairs v. Balt. O.R.R. Co. (supra) that was the case. The act of the defendant in leaving uncollected a non-negotiable bill taken in itself created no danger to others. That danger arose because of the act of another in so altering the bill as to make it negotiable. Until that was done it was a piece of paper as useless as were the blank forms of bills of lading kept in the carrier's files. Here the very existence of the bill outstanding carried a potency of danger. If in its original form when the plaintiff accepted it the mere carelessness of the bank in omitting to notice its date, while it might bear upon its good faith, would have been no defense. The alteration of the date, as has been said, merely increased the danger which already existed and which was the result of the wrongful act of the defendant. The result that followed was the natural and proximate result of that act.
The judgment appealed from should be reversed and a new trial ordered, with costs to abide the event.
HOGAN, POUND and McLAUGHLIN, JJ., concur with HISCOCK, Ch. J.; CARDOZO and CRANE, JJ., concur with ANDREWS, J.
Judgment affirmed. *Page 437