Milbank
v.
Dennistoun

Court of Appeals of the State of New YorkJun 1, 1860
21 N.Y. 386 (N.Y. 1860)

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June Term, 1860

Francis B. Cutting, for the appellants.

James T. Brady, for the respondents.



DENIO, J.

The case turns very much upon what is to be considered the true meaning of the letter of June 27, 1846. In that letter, the defendants expressed their desire that the cargo of flour in question should be withheld from the market until the operation of the new corn law should have produced its results. The direct effect of the law was greatly to reduce the duty upon wheat and flour imported into the United Kingdom. Its operation upon the owners of flour then lying in bond at the British ports, and of such as should thereafter arrive, would be to give them a more advantageous competition with the holders of domestic flour by the amount of reduction of the duty. If they sold their flour free of duty, or, in other words, if they paid the duty themselves, they could sell at a smaller nominal price in consequence of the reduction of the duties and yet realize larger profits on the sales. The price of domestic flour must always be a material element in determining the market of the imported article, as the two classes of produce immediately come into competition in the English markets. The revenue duties may be looked upon as parcel of the expenses of the foreign shipper of flour, and are of the same character, so far as this question is concerned, as freight or insurance. It is for his interest to have them fixed at the lowest rate. Hence the plaintiffs regarded the new law for the reduction of the duties as a marked advantage in their favor, which they were desirous of realizing the benefit of. But they saw also, what was sufficiently obvious, that this advantage might be neutralized at least, if not more than balanced, by the great accumulation of imported flour remaining in bond and awaiting the new parliamentary measure, which, in the event of its passage, would be released at the anticipated low duties, and thrown upon the market in competition with their own flour taken out by the Nicholas Biddle, and producing what is termed a glut in the market. The object of the instructions of the 27th June plainly was to guard against that state of things. The plaintiffs said to the defendants, in effect, we desire to have the benefit of the new law, which we trust will pass, but we fear that if our flour is sold when the first introductions for consumption take place immediately upon the passage of the bill, we shall lose the advantage. We desire, therefore, that it may be withheld from the market until the operation of the new law shall have produced its results; in other words, we wish to have the benefit of the new law, unqualified by the consequences of the glut in the market which we foresee will take place immediately after its passage. But there were other circumstances which it was foreseen would enter into the state of the market, the most material of which was the approaching harvest in the United Kingdom, which must always have a material influence upon the price of breadstuffs in the market of that country; as it is well known it has for the same reasons in the markets of countries which export grain. The plaintiffs, therefore, did not direct the defendants to withhold their flour from market for any definite period, which, if they had done, the defendants must have obeyed the direction at their peril, nor did they require that it should be kept out of market until any particular amount of diminution of the stock released from bond should have been realized; but they chose to express their desire in very general terms. They wished their flour to be held until the operation of the new law should have produced its results. This, of course, cast upon the defendants the duty of determining, under all the circumstances bearing upon the question, when the period referred to should arrive. This would not depend wholly upon the degree to which the old stock of imported flour should have been reduced, but also upon the prospects of the domestic crop. It was, no doubt, implied that the flour was not to be sold until the stock of imported flour existing when the law should pass should have been materially reduced by consumption, though the direction is not to that effect in terms. It is recited as the belief of the defendants that a reduction would cause an improvement in the market, as it obviously would, if not met by counteracting circumstances. We are to determine, therefore, whether, upon the construction which has been given to the letter, the defendants departed from the instructions contained in it by selling the flour on the 4th August, supposing it had all been sold on that day. The act took effect as a law June 30, and immediately all the flour then in bond was released by the payment of the reduced duties; and that subsequently arriving was entered and the duties at once paid. The holders immediately became free sellers. The demand from consumers was large, and was freely met. These sales were for consumption, not on speculation. They were, therefore, the kind of sales which were referred to in the plaintiffs' instructions. They operated to reduce the stock in bond at the time the act passed; but the evidence does not furnish the means of ascertaining positively the amount of such reduction, or how far it was balanced by fresh importations; though it appears that the quantity on hand continued to be large. While this state of things was going on, the plaintiffs' letter was received on the 12th of July, and about a week afterwards, on the 18th, the vessel with the flour arrived. It should be remembered that when the letter was written, it was not known in New York that the act had passed. In fact, it received the sanction of Parliament on the same day on which the letter was dated. The letter looked to the passage of the act, and not to the arrival of the flour, as the time when the reduction referred to would commence. So far as the plaintiffs know, it might not become a law until after the flour should have arrived. Indeed, they were not certain that it would become a law at any time. What they chose to forbid (if the letter is to be looked upon as peremptory) was, that their flour should be thrown upon the market in competition with the mass which would be on sale immediately upon the passage of the act. Now, the sale of the first parcel of the flour was made five weeks after that point of time, during all of which interval sales were being constantly made for consumption. In the opinion of the Superior Court at general term, the letter is construed as though the defendants were forbidden to sell until the stock of flour should be reduced, by consumption, after the arrival of the Nicholas Biddle; and it is reasoned that as it was sold soon after that time, it was not withheld from market for any period. The charge, I think, contains the same idea as to the construction of the letter. But, upon that construction, the defendants would be obliged to withhold the flour from market, though, when it arrived, the effect of the law had been fully ascertained. The meaning of the letter plainly is, that the plaintiffs did not wish the flour sold during the existence of the glut which it was anticipated would prevail upon the passage of the act. In my opinion, the defendants were not, on the 4th of August, restrained from selling the flour by the instructions contained in the plaintiffs' letter. The market had been working for five weeks under the influence of the law. The letter had fixed no period for the continuance of the experiment, and the defendants were left to determine whether the time had arrived when it would be for the plaintiffs' interest to have the property disposed of, in the view of all the circumstances of the case. They were, nevertheless, bound to the exercise of good faith and of the prudence and skill which agents to whom the property of others is intrusted are always obliged to employ; and that was the extent of their obligation. That this view is correct, is apparent from the plaintiffs' own letter of July 31. This was written, it will be remembered, four days before the first parcel of flour was sold. In that communication, the plaintiffs say: "We suppose that ere this the crop of wheat has been ascertained as to its probable yield, and the grain and flour conformed to such result: we therefore ask you to exercise your discretion in effecting sales for us." As this letter was not received until after the last sales of flour, it cannot be used to dispense with any instructions binding upon the defendants when the sales were made; but it affords evidence that the plaintiffs considered that the result of the English harvest was a material element in determining when the market would have attained the equilibrium which it was supposed would be temporarily disturbed by the large entries for consumption immediately upon the passage of the act. This was precisely the view which the defendants appear to have taken of the case when they made the sales. The grain circular of the 3d of August, which the plaintiffs gave in evidence, described the harvest as progressing favorably and the weather as remarkably fine. Then it was proved affirmatively, on the part of the defendants, that no improvement in the price of flour resulted from the passage of the corn law at any time during the year 1846.

Upon the question whether the defendants had violated their instructions, the burden of proof was upon the plaintiffs. All the material testimony bearing upon the subject was produced by them. There was no question of credibility to be determined by the jury, for the evidence was not in any respect contradictory. Thinking, as I do, that there was no evidence tending to show that the defendants sold the plaintiffs' flour prior to the time when the operation of the new corn law had produced its results, so far as those results affected the price of flour, I think the judge erred in submitting it to the jury to determine whether there had been a breach of instructions.

Upon the second question, whether, laying out of view the alleged instructions, there was evidence upon which the defendants could be charged with a breach of duty in selling the flour at the time they did, and for the price which was obtained, I think there was an equal defect in the evidence. In the first place, it was proved that all the large holders of flour were freely selling at the price which then prevailed, and that the defendants themselves were among the sellers. On the 6th of August they sold three thousand barrels of their own flour at a less price than that which they obtained for the plaintiffs'. It was shown that all the indications were in favor of an abundant domestic harvest, and that no immediate improvement in prices was looked for among the dealers in breadstuffs in that market: the prices obtained were the market prices prevailing at the time of the sales, and for some time afterwards. The plaintiffs' flour was a damaged article, and liable to further depreciation if kept on hand. The subsequent extraordinary rise was owing to causes wholly exceptional in their character, which were not so far developed when the sales took place as at all to influence the market, and could not have been anticipated with any degree of sagacity. In looking at the case after the event, we can see that, if the defendants had refrained from selling, the adventure would have resulted quite differently as regards the plaintiffs. They would have realized large gains, instead of having suffered a loss, but it would not have been owing in any degree to the corn law.

It seems plain to me that there was not the slightest reason on the evidence to impute blame to the defendants, and that there was nothing for the jury to deliberate upon. If these views prevail with my brethren, the judgment must be reversed and a new trial ordered.

All the judges concurring,

Judgment reversed, and new trial ordered.