Pere Marquette Railway Co. v. J. F. French & Co.

Background

J. F. French & Company shipped a carload of potatoes from Michigan to Louisville on an order bill of lading and attached that bill to a draft which was sent through banks. An Indianapolis bank detached the bill without payment and handed it to the buyer, Marshall & Kelsey. At Dumesnil, a Southern Railroad employee, Bindner, had the endorsed bill and asked the Big Four trackage clerk to forward the car to a nearby Army camp; the Big Four released the car to the Southern without insisting on physical surrender of the original bill. After Marshall & Kelsey refused the potatoes, the shippers retook the car and bill, sold the potatoes at a loss, and sued the initial carrier for misdelivery or conversion.

Reasoning

The Court read §9 of the Federal Uniform Bills of Lading Act to say that physical possession of an endorsed order bill justifies a carrier’s delivery if the carrier acts in good faith and has no notice of a problem. The Court explained that failing to require surrender of the bill does not automatically make a delivery wrongful; the carrier is liable only when that failure is the cause of the shipper’s loss. Here the Big Four had no reason to doubt Bindner’s authority, and the actual loss resulted from the wrongful surrender of the bill by the bank and the shippers’ own decision to retake the bill and accept the loss.

Real world impact

The ruling protects railroads and other carriers who in good faith deliver goods to someone in physical possession of an endorsed order bill of lading when they lack notice of a defect. Shippers can still recover if a carrier’s failure to require surrender is the direct cause of loss. The Court reversed the Michigan decision and relieved the carrier of liability in this case.