Wright v. Solomon

Field, C. J. delivered the opinion of the Court

—Baldwin, J. and Cope, J. concurring.

That a factor cannot pledge, as security for the payment of his individual debt, the goods of his principal consigned to him for sale, has been the established doctrine of the common law for more than a century. It was first declared in Patterson v. Task (2 Strange, 1178) as early as 1748, and has been uniformly adhered to ever since in the Courts of England, except where it has been modified by Acts of Parliament. It is also the settled law in all our sister States of the Union, where the Legislature has not interfered to make a change. In this State, without any legislative action on the subject, a limitation in the application of the doctrine to a special class of factors has been asserted by this Court, which we shall hereafter particularly notice. The doctrine of the common» law results from the fact that the factor is but an agent, and as such j can only bind his principal when his acts are within the scope of his j authority. A power to sell for the benefit of his principal, can in no way be stretched into a power to pledge for his own benefit. Nor does it make any difference whether the party taking the pledge was ignorant as to the extent of the factor’s authority, or that the factor was not the real owner of the property. “ Whoever deals with an agent constituted for a special purpose,” says Kent, “ deals at his peril, when the agent passes the precise limits of his power.” (2 Com. 621.) “ The doctrine,” says the same distinguished jurist, “ that a factor cannot pledge, is sustained so strictly that it is admitted that he cannot do it by indorsement and delivery of the bill of lading, any more than by delivery of the goods themselves. To pledge the goods of the principal is beyond the scope of the factor’s power; and every attempt to do it under color of a sale, is tortious and void. If the pawnee will call for the letter of advice, or make due inquiry as to the source from whence the goods came, he can discover (say the cases) that the possessor held the goods as factor, and not as vendee; and he is bound to know, at his peril, the extent of the factor’s power.” (See Daubigny v. Duval, 5 T. R., 604 ; McCombie v. Davies, 6 East. 538 ; 7 Id. 5 ; Pickering v. Busk, 15 Id. 38 ; Warner v. Martin, 11 How. U. S. 224 ; Buckley v. Packard, 20 Johns. 421 ; Stearns v. Wilson, 3 Denio, 476 ; Kinder v. Shaw, 2 Mass. 398 ; Hoffman v. Noble, 6 Met. 74 ; Holton v. Smith, 7 N. H. 446 ; Skinner v. Dodge, 4 Hen. and Munf. 432 ; Howes v. Doddridge, 1 Rob. Va. 143 ; Benny v. Rhodes, 18 Mo. 147 ; and Benny v. Pegram, Id. 191.)

The limitation in the application of the doctrine in this State to which we have referred, xvas first distinctly asserted in Hutchinson v. Bours (6 Cal. 385). It was there held that the doctrine is only applicable where the party pledging is “ technically a factor,” that is, “ where his only business is to sell goods consigned to him for that purpose.” In Glidden v. Lucas (7 Cal. 26) the same limitation is recognized, and in Horr v. Barker (11 Cal. 393) it is directly affirmed. In none of these cases are any authorities cited by the Court in support of the limitation. In the last case, Mr. Justice Burnett states that the harshness and injustice of the rule, as originally established in England, induced the Court in Hutchinson v. Bours to confine the rule to a technical factor. But Justices Ellenborough and Le Blanc, from whose observations in Martini v. Coles (1 Maule & Selwyn, 145) Mr. Justice Burnett concluded that they considered the rule a hard one, expressly held that the law was too firmly settled against- the right of the factor to pledge to be disturbed by the Court. “ Perhaps,” said Ellenborough, “it would have been as well if it had been originally decided that where it was equivocal whether a person was authorized to act as principal or factor, a pledge made by such person free from any circumstances of fraud was valid. But it is idle now to speculate upon this subject, since a long series of cases has decided that a factor cannot pledged

The case of Martini v. Coles was decided in 1813, and with “ the long series of cases ” which preceded and have since followed it, all recognizing and affirming the rule, it may be said with equal truth now as then, that it is “ idle to speculate ” as to any different rule which might have been originally established. Judges of great distinction have not hesitated to declare their approbation of the existing rule. Thus, Mr. Chief Justice Abbott, in Quieroz v. True-man, (3 Barn. & Cress. 349) expressed the opinion that “ it is one of the greatest safeguards which the foreign merchant has in making consignments of goods to be sold” in England. And in the same case, Mr. Justice Bayley said, that he could not help thinking that the rule had operated much to increase the foreign commerce of the kingdom, by holding out to consignors that if the factor went beyond the authority vested in him, it should not work a prejudice to his principal. “ I entirely concur,” continued the Justice, “ in saying that in my judgment this, as a measure of policy, ought not to be altered. The rule is founded upon a very plain reason, viz : that he who gives the credit should he vigilant in ascertaining whether the party pledging has or has not authority so to deal with the goods. That knowledge may always be obtained from the bill of lading and letters of advice.”

Whatever doubts may have been expressed by different Judges as to .the expediency of the rule against the power of factors to pledge, there have been none as to the existence of the rule as we have stated it. It is as well settled as any rule of law can possibly be, and in no instance have we found any departure from it, except in cases cited from this Court. The limitation sought in those cases to be engrafted upon the doctrine—in other words, the distinction sought to be made between “ a technical factor,” that is, one whose “ only business is to sell goods consigned to him for that purpose,” and a factor who at the same time does business on his own account— is not recognized in any of the authorities in England or America, but is repudiated, either expressly or impliedly, in all of them, wherever the point arises. In Martini v. Coles, which we have already referred to, the factor. Vos was a general merchant, and as such had been in the habit of employing the defendants as brokers in the sale of West India produce. The plaintiff consigned to him a quantity of coffee for sale, and sent him a bill of lading for the same in the usual form, providing for the delivery of the coffee to him or his assigns, he or they paying freight. The factor indorsed the bill of lading, and delivered the goods to the defendants; and on the faith of these and other goods placed in their hands, they advanced various sums to him. And at the time, they had no knowledge that the factor was not the owner of the coffee. Trover having been brought for the coffee, the defendants urged that, as the factor was also a general merchant, and as such had usually employed them, and as the bill of lading was made out to himself, he might reasonably be mistaken for the owner of the goods. But the Court, per Le Blanc, J., said: “ Whether it might not originally have better answered the purposes of commerce to have considered a person in the situation of Vos, having the apparent symbol of-property, as the true owner in respect of that person who deals with him under an ignorance of his real character, is a question upon which it is now too late to speculate, since it has been established by a series of decisions that a factor has no authority to pledge, whether the person to whom he pledges has or has not a knowledge of his being factor. Here Vos was clearly factor for the plaintiff; and the circumstance of the goods having been made deliverable by the bill of lading to Vos or his assigns, cannot make any difference; since it conveyed to him no farther authority over the goods, than the party who consigned them intended to clothe him with.”

In Kinder v. Shaw, (2 Mass. 398) the goods of the plaintiffs were placed for sale with one Carter, who kept a retail shop. To raise money, Carter pledged the goods, with other goods of his own property, to the defendants, who were ignorant of the plaintiff’s interest. Trover having been brought for the goods, the defendants argued that as Carter was not known to them as the factor of the plaintiffs, and as they had no ground to suspect the goods to be the property of the plaintiffs or of any one else other than Carter, who kept an open shop in which these goods were exposed to sale with Ms own, they had a right to treat with him as the real owner. But the Court gave judgment for the plaintiffs, Mr. Chief Justice Parsons observing, “ that the Court, considering the question of importance to the mercantile part of the community, had looked into the case with attention, and were all of opinion that a factor had no authority to pawn goods which have been intrusted to him for sale. The rights of the principal and factor depend on the law merchant, which has been adopted by the common law. By this law, a factor is but the attorney of his principal, and he is bound to pursue the powers delegated to him.”

Humerous other cases to the same effect might be cited, where the factor was also engaged in business on his own account. In this State, there are few persons acting as factors who do not at the same time have some business of their own in buying and selling; and the practical effect of the decision in Hutchinson v. Bours, if sustained, would be to establish as a general rule that a factor may pledge without authority the goods of his principal for his own debt, and to make the very limited class of “ technical factors ” a mere exception to that rule.

The principle'upon which the decision in Hutchinson v. Bours proceeds, as we infer from the facts of the case, is, that the possession of personal property by a person engaged in business on his own account is sufficient evidence of his ownership to protect parties dealing with him as the real owner. For this principle there is no warrant in the law. Possession of personal property is only prima facie evidence of ownership, and never prevails against the true owner, except with reference to negotiable instruments, and whatever comes under the general denomination of currency. “ The law is clearly laid down,” says Le Blanc, J., in Pickering v. Busk, (15 East, 38) “that the mere possession of personal property does not convey a title to dispose of it, and which is equally clear, that the possession of a factor or broker does not authorize him to pledge.” The principle that no one can be divested of his property without his consent, and the maxim that no one can transfer a better title than he has himself, control all questions arising as to property of which a transfer is attempted, with the exceptions stated. The effect of possession as evidence of ownership is subordinate to these principles. (Covill v. Hill, 4 Denio, 327.) The consent of the owner to a disposition of his property may be inferred from acts, as well as given in direct terms. It may be inferred when the owner gives such evidence of the authority of disposal as usually accompanies such authority according to the custom of trade and the general understanding of business men. Thus, the delivery,of goods to a merchant, engaged in the sale of articles of a similar kind, is such evidence of the bestowal of the right to dispose of the same as to protect the purchaser from the possessor. The possession under such circumstances is evidence, not that the possessor is owner, but that he has received authority from the owner to sell. The authority to pledge would not be inferred from possession in such case; for to pledge is a special transaction, outside of the usual course of business, and consequently, outside of the protection extended to ordinary transactions of commerce.

From the views expressed and the authorities cited, it follows that the limitation asserted in Hutchinson v. Bours and Horr v. Barker cannot be maintained. Those decisions are anomalous in their character, and in conflict with the law upon 'the authority of factors, as it is recognized by the United States Courts and the Courts of every State of the Union, where the Legislature has not interfered to make a change. We do not hesitate to overrule them; for it is of the highest importance to those engaged in commerce in this State, that the decisions of this Court on commercial questions should be in conformity with the adjudications on like questions of the Courts of the principal commercial communities of the world.

The disposition of the question raised as to the authority of Darling to pledge the goods, for the recovery or value of which the present action is brought, renders it unnecessary to consider the other points made by the appellant. Upon the facts found, the judgment of the District Court must be reversed, and that Court directed to enter judgment for the defendant.

Ordered accordingly.