Romeo v. Martucci

The finding is in some respects strongly suggestive of bad faith on the part of the defendant; but as the court, notwithstanding the suggestive appearances, finds that the defendant paid a reasonable price after inquiry and without notice of defect in title, he must be treated as an innocent purchaser for value.

We have, then, these facts. Ricciardelli Bro., retail grocers in New Haven, agreed to sell on commission for the plaintiff, a wholesale grocer in New York, a quantity of groceries valued at $559. The goods were received on consignment at New Haven on January 20th, and the same day the Ricciardellis, for the lump price of $965, sold their grocery store, stock (including the plaintiff's property), fixtures, household furniture and good-will of business, to the defendant, a purveyor of contract laborers in New York, and then disappeared without accounting to the plaintiff. This action was brought the next day.

There is no doubt as to the relation between the plaintiff and the Ricciardellis: it is that of principal and factor, a relation long regarded as beneficial in the transaction of business, and one whose legal effect has been defined by numerous decisions. Lawrence v. Stonington Bank, 6 Conn. 521, 527. The property consigned is bailed, and remains in the ownership of the consignor until disposed of by the consignee in pursuance of the agency established by the fact of the consignment. If the consignee, in violation of the consignment and out of the usual course of business, transfer to another, the consignor is entitled to retake his property notwithstanding it may have been so transferred to an innocent purchaser for value. This principle is too thoroughly established to permit of argument. The transfer by the Ricciardellis was in plain violation of the consignment; no serious claim to the contrary is made or can be maintained.

The only real question is whether the plaintiff has done anything which estops him from setting up his right as consignor. If by his voluntary action he clothed the Ricciardellis with an appearance of ownership beyond that involved in the ordinary contract of consignment, and the defendant was thereby deceived to his damage, he is estopped from denying the authority thus evidenced by his acts. This principle is rooted in justice and has been applied to a great variety of conditions. Such action by the owner of property may furnish evidence of fraud, and the question of estoppel is sometimes confused with that of fraudulent transfer. Possession may be evidence of fraud when it conceals the usual evidence of a change of title. This applies especially to the mortgage or pledge of personal property where the mortgagor is presumed to remain owner of the property unless there is a change of possession. But it is different where property known to belong to one man comes into the possession of another; in such case it becomes a matter of inquiry whether he has borrowed it, or hired it, or purchased it; and this ought to be ascertained by him who proposes to trust his property upon the faith of this appearance. Forbes v. Marsh, 15 Conn. 384,397. Accordingly, cases of conditional sale made bona fide have been held good; and in the modern and somewhat perilous enlargement of such sales, the fact of actual intent and good faith is made the test of the transaction. Lewis v. McCabe,49 Conn. 141, 155; Mack v. Story, 57 id. 407, 413.

But here there is no question as to the nature of the transaction; it is the ordinary contract of consignment. There is no question of fraud on the part of the owner; the good faith of his conduct is neither directly nor indirectly impugned. The sole claim is that he has "voluntarily permitted another to hold himself out to the world as being the true owner, and for this purpose entrusted him with the exclusive possession or other indicia of title, under circumstances which would naturally tend to mislead." The cases where the real owner has been estopped by having clothed the possessor with indicia of title for such purposes and under such circumstances, are many; but "all these cases proceed upon the ground that the owner has deliberately assumed a false position, and a character inconsistent with that of owner, which, if changed, would result in fraud and damage." They have no application to a case where the acts of the owner are confined to those incident to a legitimate bailment or consignment. "Every borrower or bailee for hire uses the thing bailed, in many respects, as his own; and his conduct, to some extent, furnished a false index of property; but yet, the legal powers and duties of bailee being entirely consistent with the true position and character of the owner, the rights of the bailor will be protected against the abuse of the bailee's powers, though he were to sell the property bailed to a bona fide purchaser."Baldwin v. Porter, 12 Conn. 473, 482, 483. A consignee differs from an ordinary bailee, mainly in that he is authorized to sell in the ordinary course of business; but if he sell out of the ordinary course of business he abuses his powers, and against this abuse the consignor is protected like any other bailor.

When a mortgagee leaves the property mortgaged in the possession of the mortgagor, possession under such circumstances may be treated as an index of title; it is inconsistent with the real transaction which demands a change of possession, and the mortgagee deliberately puts himself in a false position. But in the case of a consignment, the reverse is true. Possession by the consignee is consistent with the transaction, and is evidence of the authority pertaining to that transaction, but furnishes no other index of title as against the consignor. Some act of the consignor inconsistent with the true relation is necessary for that purpose; as if the bill for goods consigned were made out as one for goods sold, or a bill of lading were given which treats the consignee as owner or purchaser. In such way the consignor may put himself in a false position, so that, if the rights of an innocent purchaser intervene, he cannot change that position without fraud and damage. There may be other acts by which a consignor may be estopped from asserting his title, but they must be equivalent in force to the ones indicated.

In the present case it does not appear whether the goods consigned and received on the day of the sale had been unpacked when the defendant first examined the stock; it is immaterial, except as bearing on the good faith of the defendant; but if he had then asked for some evidence of ownership, he could only have been shown a bill for goods consigned, and the real character of the Ricciardellis' possession would have been apparent. The defendant chose to rely on the authority of the possessors to sell in their retail business indicated only by the possession described. He would have been protected in a purchase within the scope of such authority, which was real as well as apparent. But the selling out of the whole business was not within the scope of that authority. It does not necessarily follow that a retail dealer authorized in the ordinary course of business to sell the articles on his shelves, is therefore the owner of the whole business and every article in his possession. If he attempts to sell his business and stock as a single chattel, he enters upon an outside and independent transaction; the purchaser cannot retain, as against the real owner, portions of that stock held under consignment, unless the owner has clothed the consignee with some index of ownership beyond that incident to the fact of a consignment. Where a principal with full knowledge permits his factor "to transact the ordinary business of a merchant in his own name, he would even then be bound by his acts only so far as they were within the ordinary mode of transacting that particular branch of business, provided there were no circumstances tending to show that he permitted him to use his own name with a view of imposing upon others." Potter v. Dennison, 10 Ill. 590, 598.

The plaintiff has done nothing to mislead, unless every consignment is misleading. He gave the Ricciardellis possession, but it was the possession of consignees only. He knew that the goods were to be sold by the consignees in their retail store in connection with their other stock, and that the goods were to be sold at retail in the name of the consignees; but these are the ordinary incidents of a consignment to a retail merchant. Ex parte Dixon, L. R. 4 Ch. Div. 133, 136, 137; Slack v. Tucker Co., 23 Wall. 321, 330;Potter v. Dennison, supra, p. 598.

The conduct of the plaintiff amounts to a consignment of his goods for sale in the ordinary course of business, and nothing more. His title cannot be defeated by any disposition of his property not within the agency established by such consignment. A consignee cannot transfer the property in payment of his own debt. Benny v. Pegram,18 Mo. 191. He must sell in the market where he transacts business.Wootters v. Kaufman, 73 Tex. 395[73 Tex. 395], 399; Catlin v.Bell, 4 Campb. 183; Marr v. Barrett, 41 Me. 403. He cannot sell by way of barter. Guerreiro v. Peile, 3 B. Ald. 616, 618. He cannot pledge the goods consigned. Paterson v. Tash, Str. 1178; Kuckein v. Wilson, 4 B. Ald. 443, 447; Kelly v. Smith, 1 Blatchf. 290, 293; Gray v. Agnew,95 Ill. 315. To turn over the goods consigned to another by a sale of his business and stock in trade is as distinctly a disposition foreign to the consignment and for the benefit of the consignee, as a pledge, or sale in payment of consignee's debt, or a barter. "By the general rule a factor cannot bind the principal by a disposition of his property out of the ordinary course of business." Commercial Nat. Bank v. Heilbronner,108 N.Y. 439, 444; Warner v. Martin, 11 How. 209, 224.

We are asked to treat the ordinary incidents of a bona fide consignment as sufficient indicia of title to enable the consignee to bind his principal by every act of ownership, as against an innocent third party. This would involve the reversal of the whole line of cases by which the contract of consignment has been recognized and defined.

The court erred in overruling the claim of the plaintiff that upon the special facts found the goods in question were still the property of the plaintiff, and that he is entitled to the immediate possession thereof.

There is error, the judgment of the Court of Common Pleas is reversed and the cause remanded for further proceedings according to law.

In this opinion the other judges concurred, except ANDREWS, C. J., and HALL, J., who dissented.