In re Nonmagnetic Watch Co. of America

DYKMAN, J.

The Nonmagnetic Watch Company, which was a domestic corporation, filed a petition for a voluntary dissolution, and on the 12th day of October, 1889, Charles S. McCullough was appointed temporary receiver, and afterwards he was appointed permanent receiver, of the property of the company. The Eidgenoessische Bank (a name which in the French language signifies Banque Federal, and which in this opinion will be called the Federal Bank for convenience) is a banking corporation at Byrne, in Switzerland. Aeby & Co. was a corporation engaged in the business of manufacturing and selling watches at Maderetch, in Switzerland. Contracts were made between Aeby & Co. and the watch company, by which the former agreed to manufacture watch movements of American sizes for the watch company only. By the contracts, Aeby & Co. agreed to manufacture solely for the watch company, and agreed to sell and let the watch company have all they could make, and the watch company agreed to order and accept all they could make up to 300 a day, at prices which were agreed upon in the contract. The watch company was not bound to accept or receive any watches unless they were made according “to the specifications and the standard of excellence as agreed upon.” The materials of which the watch movements were made belonged to Aeby & Go. The watch company supplied Aeby & Co. with the hair springs and the balances, but they wére sold to Aeby & Co., and constituted but a small part of the material used in the manufacture of the watches. In December, 1889, Aeby & Co. had in their possession three cases of watches manufactured by them under the contract with the watch company, of the value of 28,600 francs, which they shipped to America, consigned to Nathan Bushnel at New York, through L. W. Morris & Sons, forwarding agents, and taking bills of lading therefor. Aeby & Co., the consignors, drew two drafts or bills of exchange against the consignment of $5,000 each, directed to the consignee, Bushnel, and on the 20th day of January, 1890, they drew another draft or bill of exchange against the consignment, directed to the consignee, and then attached the bills of lading to the drafts, and procured the Federal Bank to discount the drafts, transferring to the bank at the same time the bills of lading for or as security for the payment of the drafts. The drafts were accepted by Bushnel, the consignee, and at maturity were duly presented for payment, and, payment being refused, they were protested for nonpayment. The bank then demanded of the consignee the three cases of watches, and the receiver of the watch company also demanded them, claiming, as such receiver, to own them, on the ground that the watches were made by Aeby & Co. for the watch company, and consequently belonged to the latter company, and that Aeby & Co. had no right to pledge them, or draw drafts against them, and that no title or right to the watches passed by the transfer of the bills of lading. It was to determine these conflicting claims that the referee was appointed. At the time of the appointment of the referee it was agreed between the parties that the watches should be sold, and the proceeds held in their place, to abide the event of these proceedings. The referee found and decided that Aeby & Co. were not the owners, but only bailees, of the watches in question, and that the title was in the watch company. He therefore concluded and decided that the bank, by the transfer to it of the bills of lading as security for the discount and advances made to Aeby & Co., did not acquire any right or title to the watches. Upon that report a judgment was ordered, and the Federal Bank has appealed from the judgment, and also from the report of the referee, upon which it was based, and from the order confirming the referee’s report, and directing judgment to be entered thereon.

The report of the referee is not in accordance with the law which controls the case. The watch company contracted with Aeby & Co. to manufacture for it watch movements of American sizes for stipulated prices to be paid therefor. Aeby & Co. furnished all the materials, for, although the watch company supplied the hair springs and balances, they were purchased of it by Aeby & Co., and so became the property of the latter. Under the well-settled principles of law, the firm of Aeby & Co. were the owners of the watch movements until they were delivered. A contract for the construction of an article is executory, and remains so until the thing is completed. While it is competent for parties to a contract for the construction of an article to provide for the vesting of the title thereto at any time, in this case it is to be collected from the contract that the intention of the parties was that the title of the article was not to vest in the watch company until their acceptance by it, for the company was not bound to accept any of the articles unless they were made according “to the specifications and the standard of excellence agreed upon.” The following authorities support these conclusions: Andrews v. Durant, 11 N. Y. 35; Gregory v. Stryker, 2 Denio, 628. In fact the decisions in this country are all in harmony upon the question. In the Andrews Case, one of the opinions stated the rule as follows:

“The general rule is that, if a person contracts with another for a chattel not in existence at the time of the contract, though he paid him the whole value in advance, and the other proceeds to execute the order, the buyer acquires no property in the chattel until it is finished, and delivered to him.”

When, therefore, the three cases of watches in question were consigned to Nathan Bushnel by Aeby & Co., the property belonged to the latter, and the transfer and delivery of the bill of lading with the three bills of exchange was a symbolical delivery of the goods, and the Federal Bank thereby acquired title to the property, and was authorized to hold it until the loan it made thereon was paid. Bank v. Jones, 4 N. Y. 497; City Bank v. Rome, W. & R. R. Co., 44 N. Y. 136; Mechanics’ & T. Bank v. Farmers’ & M. Nat. Bank, 60 N. Y. 47. A bill of lading confers the legal title of the goods upon the person in whose favor it is issued. ' Bank v. Logan, 74 N. Y. 568. As the drafts remained unpaid when the Federal Bank demanded the three cases of watches of the consignee, the property belonged to the bank, and it was entitled to the possession of the goods. The receiver had no title to the property, and no right to its possession. He occupied the same position as the watch company, and the rights of the Federal Bank were paramount to both. The contention of the receiver was that, as the watch company furnished the springs and balances, the watches belonged to that company. The springs and balances composed but a small part of the movements required to be used in the construction of a watch. It required upper and lower plates, pillars, train, dial, hands, pendants, and jewels. Upon the theory of the watch company, therefore, this would be a case where the principal part of the materials were furnished by the manufacturer. In such a case the property of the article is in the maker until its completion and delivery. Gregory v. Stryker, 2 Denio, 628, and cases there cited. Upon either theory, therefore, the claim of the receiver is baseless.

It is claimed further in behalf of the watch company that Aeby & Co. were indebted to the watch company in a large amount, and it could hold the property for that reason. That position is also untenable, for we have already seen that even a payment in advance of the entire price of the article to be made will not place the title in the buyer until it is finished and delivered. That being the rule, certainly an advancement of money during the progress of the work will have no greater effect than an absolute payment of the entire price.

The errors disclosed by the examination already made require a reversal of the judgment; but, even if all the claims of the watch company were conceded, and it stood admitted that all the materials used in the construction of the watches belonged to the watch company, the manufacturers would then have a lien upon the manufactured articles for the labor bestowed upon them. Story, Bailm. § 295. As a party having a lien upon goods may pledge them to the extent of his lien, Aeby & Co., in this case, if they had no other rights than as lienors, had the right to pledge the goods to the extent or amount of $50,000, the watch company being indebted to them on the merchandise account in that amount. If the title to the watches was, as the receiver claims, in the watch company all the time, and the indebtedness to Aeby & Co. was for the work done and materials furnished by them all under one contract, then Aeby & Co. had a lien on those three cases of watches, not only for the work done and materials furnished in their manufacture, but for the sum remaining unpaid on the watches previously delivered. Morgan v. Congdon, 4 N. Y. 552; McFarland v. Wheeler, 26 Wend. 467. It therefore follows conclusively that the watch company had no right or title in the property in question, and that the same belonged to the Federal Bank, and should have been delivered to it upon its demand.

The referee’s report, and the order confirming the same, and the judgment entered thereon, must all be reversed, with costs; and, as the facts are substantially undisputed, and cannot be changed upon a second trial, the judgment must be entered in favor of the Federal Bank. All concur.