In an action in which a jury has been waived in writing, and the
judgment of the circuit court is for more than $5,000, the question
whether the facts set forth in a special finding of the court are
sufficient in law to support the judgment may be reviewed on writ
of error without any bill of exceptions or certificate of division
of opinion.
At common law, a factor has no power to pledge, whether he is
entrusted with the possession of the goods or with the bill of
lading or other symbol of property.
The statute of Missouri of March 4, 1869, gives no validity to a
transfer, without endorsement in writing, of a bill of lading or
warehouse receipt.
The statute of Missouri of March 28, 1874, making the pledge of
goods by a factor, without the written authority of the owner, a
criminal offense does not render such a pledge valid as between the
owner and the pledgee.
A usage of trade for banks to take pledges from factors as
security for the payment of the general balance of account between
them of goods known to be held by them as factors is unlawful.
An unauthorized pledge by a factor of goods owned by a
partnership of which he is a member to secure the payment of his
own debt to one who knows him as a factor only is invalid against
the partnership.
Page 120 U. S. 21
If a factor to whom the owner of goods has made a negotiable
promissory note and consigned the goods under an agreement between
them that the proceeds of the goods when sold shall be applied to
the payment of the note endorses the note and pledges the goods to
secure the payment of advances made to him by one who knows him to
be a factor and to hold the goods as such, the pledgee is bound to
apply the proceeds of the goods to the payment of the note, and the
maker may set up this obligation in defense of an action by the
pledgee on the note.
This Court, in reversing a judgment of the circuit court for the
plaintiff on a special finding which ascertains all the facts of
the case, will order judgment for the defendant without further
trial.
The original action was brought by the St. Louis National Bank
against Augusta B. Allen and her daughter on a promissory note for
$3,750, with interest at the rate of ten percent yearly, made by
the defendants May 10, 1878, and payable December 20, 1878, to the
order of J. H. Dowell & Co., and by them endorsed to the
plaintiff.
The answer alleged that the plaintiff was bound to apply in
payment of the note the proceeds of certain cotton pledged to the
plaintiff by the payees, and set out the facts attending the making
and endorsement of the note and the pledge of the cotton,
substantially as afterwards found by the court and stated below
except in the following respects: the answer alleged that the
plaintiff took the note and the cotton with full notice of the
agreement and understanding between the makers and the payees, and
was not a holder of the note in good faith and for value, but took
it as collateral security for preexisting debts of the payees to
the plaintiff. The answer contained no statement of the general
course of dealing between the payees and the plaintiff and no
mention of any usage of trade. As a further defense, the answer
alleged that the note had been paid and satisfied.
The plaintiff filed a replication denying all the allegations of
the answer. A jury was duly waived in writing, and the case was
tried by the court, which made this special finding of facts:
"1st. The promissory note set forth in the petition was made by
the defendants, and delivered by them to J. H. Dowell for J. H.
Dowell & Co., the said J. H. Dowell being
Page 120 U. S. 22
the active partner of J. H. Dowell & Co., and as such having
the control and management of their business as cotton factors, and
such note was so made under the circumstances and for the purposes
hereinafter stated. Said J. H. Dowell procured said note before its
maturity to be discounted by the plaintiff, who paid to him the
amount of said note less the usual discount, and thereupon the said
J. H. Dowell, in the name of J. H. Dowell & Co., endorsed and
delivered said note to said plaintiff, by whom it is still held.
Said note has not been paid unless the facts hereinafter found
amount to or operate as a payment thereof. The amount due on said
note with interest to this time, if the plaintiff is entitled to
recover thereon, is the sum of $5377.08. The plaintiff is the
bona fide holder of the note sued on, for value, before
maturity, without notice of any of the defenses herein claimed,
"
"2d. At the date of said note and for several years before, and
until March, 1879, J. H. Dowell was a cotton factor at St. Louis,
Mo., doing business as the active member of J. H. Dowell & Co.,
and as such having the control and management of their business as
cotton factors, receiving consignments of cotton for sale on
commission from planters and others and making advances during the
pending season to their consignors of supplies and cash, to be
reimbursed out of the proceeds of the cotton crops of said
consignors when received and sold. Said J. H. Dowell and the
defendants were also partners in the working of a cotton plantation
in Clover Bend, Arkansas, under the firm name and style of Allen
& Dowell, and said J. H. Dowell & Co. of St. Louis acted as
the factors of said Allen & Dowell, receiving the cotton raised
by them each year and disposing of it at St. Louis, and furnishing
each season the supplies needed by Allen & Dowell for carrying
on the plantation, and charging such advances to Allen & Dowell
in account and crediting them on said account with the proceeds of
the cotton when received and sold or disposed of, the accounts
being kept with Allen & Dowell in the same manner as with other
consignors of cotton."
"3d. The note sued on was made and delivered to J. H.
Page 120 U. S. 23
Dowell, the active member of the firm aforesaid, under the name
of J. H. Dowell & Co., by the defendants at or about its date
at the request of said J. H. Dowell, for the purpose of being used
by him and for his accommodation, to enable him to raise funds to
furnish the necessary supplies to Allen & Dowell for operating
said plantation during the season of 1878, and with the
understanding between J. H. Dowell and the defendants (but not with
any understanding or knowledge of the plaintiff) that it should be
taken up and paid by J. H. Dowell at maturity out of the proceeds
of the cotton crop of Allen & Dowell for that year, when
received and sold by J. H. Dowell v. Co. There was no other or
further consideration as between J. H. Dowell and the defendants
for the making of said note. The amount of said note was credited
by J. H. Dowell for J. H. Dowell & Co. to Allen & Dowell at
its date on account, and at its maturity was charged to Allen &
Dowell on said account as though taken up and paid by J. H. Dowell
& Co. But it was not in fact paid or taken up. The proceeds of
the cotton crop of Allen & Dowell for 1878, consigned to J. H.
Dowell & Co., were more than sufficient to pay and satisfy the
said note, together with all other advances and charges by J. H.
Dowell & Co. to Allen & Dowell, if such proceeds had been
applied to the payment of said note. The balance in favor of Allen
& Dowell on said account was never paid or settled by J. H.
Dowell, and the partnership accounts between the partners composing
the firm of Allen & Dowell have never been adjusted and
settled."
"4th. During the year 1878, and until March, 1879, J. H. Dowell
& Co. kept their bank deposit account with the plaintiff and
were very large borrowers of money from said bank. During the said
period, the following transactions were had between J. H. Dowell
& Co. and the said bank, concerning all the cotton consigned to
J. H. Dowell & Co., including the cotton of Allen & Dowell
consigned to J. H. Dowell & Co. The mode of such transactions
was as follows: the cotton being shipped to J. H. Dowell and Co. by
railroad, the bills of lading therefor as soon as received by J. H.
Dowell & Co. were delivered to the bank, which thereupon gave
J. H. Dowell &
Page 120 U. S. 24
Co. credit in their deposit account for an amount equal in the
aggregate to $40 for each bale, represented by such bill of lading,
taking J. H. Dowell & Co.'s note for said amount, payable on
demand with interest. The amount so credited to J. H. Dowell &
Co. in their account would be subject to their check when and so
far as the balance of account was after such credit in their favor,
but their account was sometimes largely overdrawn, as was the case
with many of the customers or dealers in St. Louis with the bank.
When the cotton represented by such bills of lading arrived in St.
Louis, it was delivered by the railroad company transporting it to
a cotton warehousing company, which, on receipt thereof, issued
therefor its warehouse receipts, acknowledging the receipt of the
cotton described by number of bales and marks thereof and
undertaking to deliver said cotton to the bearer of the receipts on
demand. Said receipts were then delivered to the bank in exchange
for the bills of lading, which were surrendered and cancelled."
"It is not shown whether or not the bills of lading or the
warehouse receipts or any of them were endorsed in writing by J. H.
Dowell & Co. or by anyone when transferred to the bank, there
being no evidence on this specific matter."
"The bank knew that the business of J. H. Dowell & Co. was
that of factors, and understood that the cotton represented by the
bills of lading and warehouse receipts, as aforesaid, was held by
J. H. Dowell & Co. as factors, and also knew that J. H. Dowe11
and the defendants were jointly interested in owning and operating
the plantation in the State of Arkansas. The bank did not know and
made no inquiry as to the ownership of any of the cotton, nor as to
the particular dealings of J. H. Dowell & Co. with such owners,
nor as to the state of accounts between them."
"It does not appear that cotton received by J. H. Dowell &
Co. from different consignors was kept distinct or separate in the
transactions above referred to as made with the bank, nor does it
appear what particular transaction included the cotton of Allen
& Dowell or any part of it. During the period said J. H. Dowell
& Co. by J. H. Dowell turned over to the
Page 120 U. S. 25
bank, in the manner and for the purposes above specified, all
the cotton consigned to said firm, including that of Allen &
Dowell."
"5th. The cotton represented by the bills of lading and
warehouse receipts, in the transactions with the beak aforesaid,
was sold in the manner following: Sales were negotiated by J. H.
Dowell v. Co. by means of samples, and they agreed with the
purchasers as to all the terms of sale, including prices. When the
agreement of sale was thus made, the purchaser uniformly paid the
entire purchase money to the bank, and on such payment the bank
delivered to the purchaser the warehouse receipt held by it, on the
presentation of which to the cotton warehouse the cotton would be
delivered. The entire amount received by the bank for the cotton
was credited to J. H. Dowell & Co. in their deposit account,
and at the same time, and as part of the same transaction, J. H.
Dowell R Co. were required to and did draw and deliver to the bank
their check on the same account for the amount of their demand
notes to the bank, and thereby take up such notes."
"In March, 1879, J. H. Dowell suddenly died, and his estate
proved insolvent. J. H. Dowell & Co.'s account with the bank
was then overdrawn, and they were indebted to the bank."
"The bank at the time of said Dowell's death held about 1,000
bales of cotton through its transactions, as aforesaid, with J. H.
Dowell & Co., some of which were replevied, and some by the
bank sold and the proceeds applied to the payment
pro
tanto of the said indebtedness of J. H. Dowell & Co. But
it does not appear from any testimony in the case that any part of
the cotton on hand at the time of the death of Dowell was the Allen
& Dowell cotton. All the cotton shipped by Allen & Dowell
to J. H. Dowell & Co. was sold and disposed of as hereinbefore
stated and before the death of J. H. Dowell. The particular sales,
including said cotton of Allen c� Dowell, do not appear. The
defendants had no notice of the nonpayment of the note sued on
until after Dowell's death."
"6th. The borrowing of money from the bank by J. H. Dowell &
Co., the making of notes therefor, and the transactions as
aforesaid between J. H Dowell & Co. and the bank
Page 120 U. S. 26
concerning the bills of lading and the warehouse receipts and
the final distribution of the cotton and its proceeds, as
aforesaid, were all according to the general usage of trade between
banks and cotton factors at St. Louis, Missouri, where the
transactions took place."
"7th. At the time that the note in controversy was made, another
of the same kind was made by and to the same parties and as a part
of the same transactions, which note was at the same time
discounted by the bank in the same way, and was at its maturity
paid to the bank by J. H. Dowell & Co. and charged to Allen
& Dowell in account with J. H. Dowell & Co. against the
proceeds of the cotton crop of Allen & Dowell in 1878."
It was also stated in the finding of facts that at the time of
these transactions, certain statutes of Missouri were in force
which are copied in the margin.
*
Page 120 U. S. 27
The circuit judge and the district judge certified that they
were opposed in opinion upon the following questions:
"1st. Whether the transactions between the plaintiff and J. H.
Dowell & Co. concerning the bills of lading, warehouse
receipts, and the sales of cotton, and application of the proceeds,
were valid and effectual in favor of the plaintiff and as against
the defendants at common law."
"2d. Whether said transactions were or not valid in favor of the
plaintiff as against the defendants by virtue of the statutes of
Missouri in respect to bills of lading and warehouse receipts and
the transfer or negotiability of such instruments heretofore set
forth."
"3d. Whether such transactions were valid as to the plaintiff
against the defendants by reason of being in conformity to the
usage and custom of bankers and factors at St. Louis. "
Page 120 U. S. 30
MR. JUSTICE GRAY delivered the opinion of the Court.
When a jury is waived in writing, and the case tried by the
court, the court's finding of facts, whether general or special,
has the same effect as the verdict of a jury, and although a bill
of exceptions is the only way of presenting rulings made in the
progress of the trial, the question whether the facts set forth in
a special finding of the court, which is equivalent to special
verdict, are sufficient in law to support the judgment, may be
reviewed on writ of error without any bill of exceptions. Act of
March 3, 1865, c. 86, § 4, 13 Stat. 501; Rev.Stat.
§§ 649, 700;
French v.
Edwards, 21 Wall. 147;
Ex parte French,
91 U. S. 423. The
question whether the facts found by the court in the case at bar
are sufficient to support the judgment below includes the several
questions of law affecting the merits of the case. That judgment is
for more than $5,000, which is sufficient to give this Court
jurisdiction in error. Act of February 16, 1875, c. 77, § 3,
18 Stat. 316. It is therefore unnecessary to consider whether those
questions are duly stated in the certificate of division of opinion
within the rule affirmed in
Williamsport Bank v. Knapp,
119 U. S. 357.
The leading facts of the case, as found by the circuit court,
are as follows:
The original action was on a promissory note made by the
defendants, payable to the order of J. H. Dowell & Co., and by
them endorsed to the plaintiff bank. J. H. Dowell & Co. were a
partnership of cotton factors at St. Louis, in which Dowell was the
acting and managing partner. Dowell was also a partner with the
defendants, under the name of Allen & Dowell, in the working of
a cotton plantation in Arkansas.
The note in suit was made and delivered by the defendants to the
payees, their factors, to enable them to raise funds to furnish
supplies for working that plantation, and under an agreement
between the parties that the note should be taken
Page 120 U. S. 31
up and paid by the factors out of the proceeds of the cotton
crop of the plantation for the coming season when received and sold
by them. That crop was consigned to the factors under that
agreement, and its proceeds were more than sufficient to pay this
note and all other charges of the factors. It is not doubted that
upon these facts the makers would have a complete defense to the
note in the hands of the payees.
But before the maturity of the note, the payees had it
discounted by, and endorsed and delivered it to, the plaintiff
bank, with which they kept their deposit account, and of which they
from time to time borrowed large sums of money. As soon as they
received the bills of lading of cotton consigned to them as factors
by the defendants or by other persons, they delivered those bills
to the bank, which thereupon gave them a credit in their deposit
account of $40 for each bale, and took their note for the amount,
payable on demand, with interest. On the arrival of the cotton, it
was delivered to warehousemen, who gave receipts undertaking to
deliver it to bearer, and these receipts were delivered to the bank
in exchange for the bills of lading, which were surrendered and
canceled. There was no evidence that either the bills of lading or
the warehouse receipts were endorsed in writing. The bank knew that
the payees of the note in suit were factors and that they held the
cotton as such. It did not know, and made no inquiry, as to the
ownership of any of the cotton, or the dealings of the factors with
the owners, or the state of accounts between them.
The cotton was sold in the following manner: the factors
negotiated sales by means of samples, and fixed the price and other
terms of sale. The bank received the whole price from the
purchasers, and delivered to them the warehouse receipts, and
credited the factors with the amount received, but at the same time
and as part of the same transaction, required them to draw, and
they did draw and deliver to the bank, their checks for the amount
of their demand notes held by the bank. After all the cotton had
been sold, there was a large balance of account due from the
factors to the bank.
The substance of the transaction between the factors and
Page 120 U. S. 32
the bank in regard to the cotton was that the factors delivered
the bills of lading and warehouse receipts to the bank to secure
the repayment of money lent them by the bank, and thereby made a
pledge of the cotton to secure their own debt,
Insurance Co. v.
Kiger, 103 U. S. 352,
103 U. S. 356,
and that the bank sold, on terms negotiated by the factors, the
cotton so pledged to it and received the price from the purchasers.
The notes and checks which passed between the factors and the bank
were but forms to carry out the main purpose of the transaction
between them, and did not change its nature or effect.
By the common law, a factor or agent for sale has no power to
pledge, whether the owner has entrusted him with the possession of
the goods themselves, or with the symbol of them, as by consigning
them to him by a bill of lading in which he is consignee or
endorsee. 2 Kent Com. 625;
Kinder v. Shaw, 2 Mass. 398;
Warner v.
Martin, 11 How. 209,
52 U. S. 224;
Phillips v. Huth, 6 M. & W. 572, 596;
Cole v.
Northwestern Bank, L.R. 10 C.P. 354, 363. And such was the law
of Missouri before the passage of any statute upon the subject.
Benny v. Rhodes, 18 Mo. 147;
Benny v. Pegram, 18
Mo. 191.
The essential difference between a power to sell and a power to
pledge is well brought out in a recent case in the House of Lords
by Lord Chancellor Selborne, who said:
"It is manifest that when a man is dealing with other people's
goods, the difference between an authority to sell and an authority
to mortgage or pledge is one which may go to the root of all the
motives and purposes of the transaction. The object of a person who
has goods to sell is to turn them into money, but when those goods
are deposited by way of security for money borrowed, it is a
transaction of a totally different character. If the owner of the
goods does not get the money, his object and purpose are simply
defeated, and if, on the other hand, he does get the money, a
different object and different purpose are substituted for the
first -- namely that of borrowing money and contracting the
relation of debtor with a creditor, while retaining a redeemable
title to the goods, instead of exchanging the title to the goods
for a title, unaccompanied by any
Page 120 U. S. 33
indebtedness, to their full equivalent in money."
City Bank v. Barrow, 5 App.Cas. 664, 670.
The weight and bearing of the cases cited at the bar upon the
construction of the statutes of Missouri annexed to the finding of
facts cannot be properly appreciated without keeping in mind the
provisions of the various statutes under which those cases
arose.
The English Factors' Act of 6 Geo. IV., c. 94, passed in 1825,
enacted in section 2 that any person entrusted with and in
possession of any bill of lading, warehouse receipt, or other like
document should be deemed and taken to be the true owner of the
goods described therein so far as to give validity to any contract
made by him with other persons for the sale or disposition of the
goods or for the deposit or pledge thereof as a security for
advances made by them "upon the faith of such several documents, or
either of them," provided such persons had no notice, by such
documents or otherwise, that the person entrusted as aforesaid was
not the actual and bona fide owner of the goods.
The New York Factors' Act of 1830, c. 179, based upon the act of
6 Geo. 4, provided in section 3 that every factor or other agent
entrusted with the possession of any bill of lading, custom house
permit, or warehouse keeper's receipt for the delivery of
merchandise, and every such factor or agent not having the
documentary evidence of title, but entrusted with the possession of
any merchandise for the purpose of sale, or as a security for any
advances to be made or obtained thereon, should be deemed to be the
true owner thereof so far as to give validity to any contract made
by him with any other person for the sale or disposition of the
merchandise for any advances made by such other person "upon the
faith thereof." It will be observed that this section did not in
terms repeat the proviso of the corresponding section of the
English act.
But before the enactment in Missouri of any of the statutes
cited in argument, the construction of this section of the New York
statute had been settled by decisions of the highest courts of that
state, and of this Court, to be that the words "on the faith
thereof" were not to be referred to "merchandise," or to its
symbols, but to the words "shall be deemed to
Page 120 U. S. 34
be the true owner thereof." In the leading case, Mr. Justice
Bronson, speaking for Chief Justice Nelson, Mr. Justice Beardsley,
and himself, said:
"The obvious meaning is that the factor or other agent who has
been entrusted with certain documentary evidence of title or with
the possession and ostensible ownership of the property shall he
deemed the true owner so far as may be necessary to protect those
who have dealt with him 'upon the faith thereof' -- that is, upon
the faith, induced by the usual indicia of title, that he was the
true owner of the property. The second section of the British
statute, which answers very nearly to the third section of our own,
contains a proviso which expressly saves the rights of the true
owner where the pledgee had notice that he was dealing with an
agent, and our statute, though framed in a different manner, was
evidently designed to produce the same result. It is impossible to
suppose that the legislature intended to enable the factor to
commit a fraud upon his principal by pledging or obtaining advances
upon the goods for his own purposes, when the pledgee or person
making the advances knew that he was not dealing with the true
owner."
Stevens v. Wilson (1844), 6 Hill, 512, 514;
S.C. in Court of Errors (1846), 3 Denio 472;
Warner v.
Martin (1850), 11 How. 209,
52 U. S. 228;
Covell v. Hill (1852), 6 N.Y. 374, 380;
Cartwright v.
Wilmerding (1862), 24 N.Y. 521, 534;
Dows v. Greene,
24 N.Y. 638, 642.
See also Howland v. Woodruff (1875), 60
N.Y. 73, 79, 80;
First Nat. Bank v. Shaw (1874), 61 N.Y.
283, 301.
If the Legislature of Missouri had adopted the words of that
provision of the New York Factors' Act, the meaning of which had
been thus settled on full consideration by the highest courts of
that state and by this Court, there would be the strongest ground
for holding, in accordance with a familiar canon of construction,
that it had enacted those words with that meaning.
Cathcart
v. Robinson, 5 Pet. 264,
30 U. S. 280;
McDonald v. Hovey, 110 U. S. 619,
110 U. S. 628;
Commonwealth v. Hartnett, 3 Gray 450;
Scruggs v.
Blair, 44 Miss. 406;
Wiesner v. Zaun, 39 Wis. 188,
205.
But the statute of Missouri of March 4, 1869, differs
widely,
Page 120 U. S. 35
in language and in purpose, from the New York Factors' Act of
1830, and was apparently derived, through sections 6 and 9 of the
Missouri statute of March 10, 1868, from the statute of New York of
1858, c. 326, entitled "An act to prevent the issue of false
receipts, and to prevent fraudulent transfers of property, by
warehousemen, wharfingers, and others," as amended by the statute
of that state of 1859, c. 353, extending its provisions to bills of
lading. None of these provisions of the Missouri statutes is
limited or even addressed to factors or other agents authorized to
sell the goods of their principals, and entrusted for that purpose
with the possession either of the goods, or of warehouse receipts,
bills of lading, or other similar documents in which such agents
are named as consignees. But their leading object is to regulate
the manner and effect of transferring warehouse receipts and bills
of lading by endorsement.
By § 6 of the statute of Missouri of 1868 (following almost
word for word the statutes of New York of 1858, c. 326, § 6,
and 1859, c. 353), it was enacted that warehouse receipts or bills
of lading
"may be transferred by endorsement thereon, and any person to
whom the same may be transferred shall be deemed and taken to be
the owner of the goods, wares, merchandise, grain, flour, or other
produce or commodity therein specified, so far as to give validity
to any pledge, lien, or transfer made or created by such person or
persons,"
that is, by the endorsee before mentioned; and by § 9,
warehouse receipts and bills of lading were made "negotiable by
endorsement in blank, or by special endorsement, in the same manner
and to the same extent as bills of exchange and promissory notes."
Missouri Laws, 1868, pp. 12, 13.
By § 3 of the statute of 1869 those sections of the statute
of 1868 are repealed. But § 1 of the later statute
substantially reenacts § 9 of the earlier one, substituting
for the words "by endorsement in blank, or by special endorsement"
the words "by written endorsement thereon and delivery," and
omitting the words "and to the same extent;" and § 2 reenacts
§ 6, with the substitution, for the words "by endorsement
thereon," of the words "by endorsement in writing
Page 120 U. S. 36
thereon, and the delivery thereof so endorsed," and, for the
words "by such person or persons," of the words "thereby, as on the
faith thereof." Missouri Laws, 1869, p. 91.
The principal provisions of the statute of 1869, then, as to all
warehouse receipts and bills of lading (except those which have the
words "not negotiable" plainly written or stamped upon their face),
are first that they are "made negotiable by written endorsement
thereon and delivery, in the same manner as bills of exchange and
promissory notes," and second that any person "to whom the same may
be transferred shall be deemed and held to be the owner of the
goods," "so far as to give validity to any pledge, lien, or
transfer, given, made, or created thereby, as on the faith
thereof."
The first provision, while it doubtless gives the endorsee the
right to sue thereon in his own name, does not, for the reasons
fully stated by Mr. Justice Strong in delivering the judgment of
this Court in
Shaw v. Railroad Co., 101 U.
S. 557, attach to such an endorsement of the symbol of
property the same effect which the common law gives to the
endorsement of a bill of exchange or promissory note for the
payment of a sum of money, nor confer upon persons making, upon a
bill of lading endorsed in blank by the owner, an advance of money
to a subsequent endorser whom they have reason to believe not to be
the owner, the right to hold the goods against the true owner.
The second provision does not appear to have been brought to the
notice of this Court in that case, and presents more difficulty. It
differs from the provision of the Factors' Act of New York,
construed by the courts of that state and by this Court in the
cases before cited, in several important particulars:
1st. Any person "to whom the same may be transferred [instead of
any person by whom it is transferred] shall be deemed and held to
be the owner."
2d. The ensuing qualification is, "so far as to give validity to
any pledge, lien, or transfer, given, made, or created thereby,"
which last word cannot possibly be referred to anything but the
transfer aforesaid.
3d. The words "as on the faith thereof" follow directly
afterwards, without any intermediate mention of advances
Page 120 U. S. 37
made by the transferee.
In short, the New York Factors' Act declares that any agent
entrusted with the possession of goods, or of the symbol thereof
shall be deemed to be the true owner so far as to give validity to
a pledge made by him to another person for advances made by the
latter "on the faith thereof," but the Missouri statute only
declares that an endorsee of the symbol of property shall be deemed
to be the owner so far as to give validity to any pledge made to
him by such endorsement "as on the faith thereof." The difficulty
arises from the introduction of the words "on the faith thereof,"
borrowed from the factors' acts, into a statute relating to the
negotiability of warehouse receipts and bills of lading without
sufficient regard to the difference in the terms and the objects of
the two classes of statutes.
It may well be that upon a view of the whole provision, it
protects only
bona fide endorsees,
Whitlock v.
Hay, 58 N.Y. 484, 487;
Steiger v. Third National
Bank, 2 McCrary 494, 498. But it is by no means clear that the
mere fact that the endorsee of the bill of lading or warehouse
receipt knows that the endorser is a factor and holds the goods as
such is sufficient proof of bad faith. Under the English Factors'
Act of 5 & 6 Vict. c. 39, extending the provisions of the act
of 6 Geo. 4 and protecting those advances only which are "made
bona fide and without notice that the agent making" the
pledge "has not authority to make the same, or is acting
mala
fide in respect thereof against the owner" of the goods, it
has been held by the highest authorities that knowledge that the
agent making the pledge is a factor, without further notice that he
is acting mala fide and beyond his authority, does not deprive the
pledgee of the protection of the statute.
Navulshaw v.
Brownrigg, 1 Sim. N.S. 573, and 2 D., M. & G. 441;
Vickers v. Hertz, L.R. 2 H.L.Sc. 113;
Kaltenbach v.
Lewis, 10 App.Cas. 617. Yet it may be doubted whether
receiving, from persons known to be factors and to hold property as
such, a pledge of the symbols of the property to secure the payment
of the general balance of their bank account with the pledgee is
consistent with good faith.
We have considered the question of the effect of the words
Page 120 U. S. 38
"on the faith thereof," as used in Missouri and elsewhere, at
some length because of the large space devoted to it in the
arguments of counsel, and in order to put the whole matter in a
clearer light. But it is not necessary to express a decisive
opinion upon the meaning of those words as they stand in the
Missouri statute of 1869 because, upon a narrower ground, it is
quite clear that that statute affords no protection to the
plaintiff.
That statute applies only to transfers of warehouse receipts and
bills of lading by "endorsement in writing thereon, and the
delivery thereof so endorsed." The finding of facts contains this
statement:
"It is not shown whether or not the bills of lading or the
warehouse receipts, or any of them, were endorsed in writing by J.
H. Dowell & Co., or by anyone, when transferred to the bank,
there being no evidence on this specific matter."
The want of any evidence upon this point is perhaps to be
explained by the facts, also found and stated, that upon the
delivery of the warehouse receipts to the bank, the bills of lading
were surrendered and cancelled, and that the warehouse receipts ran
to bearer, and were therefore probably not endorsed. But whatever
be the explanation, the fact remains that it was not proved, and
cannot be presumed, that either the bills of lading or the
warehouse receipts were endorsed in writing as required by the
statute, and no better title passes by a transfer of the symbols
without such endorsement than by a delivery of the goods which they
represent.
Rice v. Cutler, 17 Wis. 351, 358-359;
Hirschorn v. Canney, 98 Mass. 149;
Erie & Pacific
Dispatch v. St. Louis Co., 6 Mo.App. 172;
Fourth National
Bank v. St. Louis Co., 11 Mo.App. 333.
The decision in
Price v. Wisconsin Ins. Co., 43 Wis.
267, on which the plaintiff much relied, was based both upon a
warehouse receipt act differing from that of Missouri in allowing
the documents to be transferred "by delivery, with or without
endorsement," and in not containing the words "as on the faith
thereof," and also upon other grounds inconsistent with the
judgments of this Court in
Warner v. Martin and
Shaw
v. Railroad Co., before cited.
Page 120 U. S. 39
The statute of Missouri of March 28, 1874, affixing a heavy
penalty to the negotiation or pledge of bills of lading or
warehouse receipts by an agent or consignee without the written
authority of the owner or consignor, does not change the law as to
the validity of the transfer as between individuals. A transfer by
an agent that before was valid as between his principal and his
transferee is not invalidated by the statute.
Gardner v.
Gager, 1 Allen 502. And with even stronger reason a transfer
that was wholly invalid before is not rendered valid by being made
a criminal offense. The proviso that any consignee or agent
lawfully possessed of a bill of lading or warehouse receipt may
pledge it to the extent of raising sufficient means to pay charges
for storage or shipment or for advances drawn for by the owner or
consignor has no application to this case, because this pledge was
not made for either of those purposes, but to secure the factors'
own debt to the pledgee.
Factors having no power by the law of Missouri to make a pledge
of the goods of their principals by a transfer without endorsement
in writing of the bills of lading or warehouse receipts, the
finding of the circuit court that the transactions between the
factors and the plaintiff "were all according to the general usage
of trade between banks and cotton factors at St. Louis" cannot aid
the plaintiff, because the usage attempted to be set up was not
shown to have been known to the defendants or to other owners of
cotton, and because it was contrary to law in that it undertook to
alter the nature of the contract between the factors and their
principals, which authorizes them to sell, but not to pledge, and
in that it would sustain a pledge by a factor of the goods of
several principals to secure the payment of his own general balance
of account to a third person.
Barnard v.
Kellogg, 10 Wall. 383;
Irwin v. Williar,
110 U. S. 499;
Newbold v. Wright, 4 Rawle 195;
Lehman v.
Marshall, 47 Ala. 362;
Leuckhart v. Cooper, 3
Bing.N.C. 99;
S.C. 3 Scott 521 and 2 Hodges 150;
Robinson v. Mollett, L.R. 7 H.L. 802.
Nor is the further fact found, that Dowell, the active member of
the firm of J. H. Dowell & Co., the factors, was also a partner
with the defendants in the working of the plantation,
Page 120 U. S. 40
at all material, because he had not been held out by the
defendants as the owner of the property or as authorized by them to
dispose of it otherwise than as a factor, and was not understood by
the plaintiff to be acting in any other capacity.
Rogers v.
Batchelor, 12 Pet. 221;
Locke v. Lewis,
124 Mass. 1.
Although the general relation of a bank to its depositor is that
of debtor and creditor, yet when, as in this case, a factor,
holding property in trust for his principal, transfers it to a bank
which has notice of the capacity in which he holds it, the
principal may assert his right in the property against the bank,
either by independent suit or by way of defense to an action by the
bank against him. The defendants in this case were therefore
entitled to have the proceeds of their property, so received by the
plaintiff, applied to the payment of the note in suit.
National
Bank v. Insurance Co., 104 U. S. 54;
Baker v. New York Bank, 100 N.Y. 31;
St. Louis Bank v.
Ross, 9 Mo.App. 399. As those proceeds are found to have been
more than sufficient to pay and satisfy this note and all other
charges of the factors against the defendants, the plaintiff cannot
maintain this action.
All the facts of the case being ascertained by the special
finding of the court below, as they would be by the special verdict
of a jury, there is no reason for awarding a new trial, but there
must be a general judgment for the defendants.
Fort Scott v.
Hickman, 112 U. S. 150.
Judgment reversed, and case remanded to the circuit court
with directions to enter judgment for the original
defendants.
* The statute of March 4, 1869, contains the following
provisions:
"SECTION 1. All receipts issued or given by any warehouseman or
other person or firm, and all bills of lading, transportation
receipts and contracts of affreightment issued or given by any
person, boat, railroad, or transportation or transfer company for
goods, wares, merchandise, grain, flour or other produce, shall be
and are hereby made negotiable by written endorsement thereon and
delivery in the same manner as bills of exchange and promissory
notes, and no printed or written conditions, clauses or provisions
inserted in or attached to any such receipts, bills of lading, or
contracts shall in any manner limit the negotiability or affect any
negotiations thereof nor in any manner impair the rights and duties
of the parties thereto or persons interested therein, and every
such conditions, clauses, or provisions purporting to limit or
affect the rights, duties, or liabilities created or declared in
this act shall be void and of no force or effect."
"SEC. 2. Warehouse receipts given by any warehouseman,
wharfinger, or other person or firm for any goods, wares,
merchandise, grain, flour, or other produce or commodity stored or
deposited, and all bills of lading and transportation receipts of
every hind given by any carrier, boat, vessel, railroad,
transportation, or transfer company may be transferred by
endorsement in writing thereon and the delivery thereof so
endorsed, and any and all persons to whom the same may be
transferred shall be deemed and held to be the owner of such goods,
wares, merchandise, grain, flour, or other produce or commodity, so
far as to give validity to any pledge, lien or transfer, given,
made, or created thereby, as on the faith thereof, and no property
so stored or deposited, as specified in such hills of lading or
receipts, shall be delivered, except on surrender and cancellation
of such receipts and bills of lading, provided however that all
such receipts and bills of lading, which shall lave the words 'not
negotiable' plainly written or stamped on the face thereof shall be
exempt from the provisions of this act."
Missouri Laws, 1869, p. 91.
The statute of March 28, 1874, amends § 13 of the statute
of March 10, 1868, so as to read as follows:
"SECTION 12. If any commission merchant, agent, or other person
storing or shipping any gain, flour, or other produce or commodity,
or any person to whom any such property is consigned and who shall
come in possession of a bill of lading or warehouse receipt for
such property for or on account of another person or other persons,
shall hypothecate, negotiate or pledge such bill of lading or
warehouse receipt without the written authority therefor of the
owner or consignor of such property, or if, having so disposed of
such bill of lading or warehouse receipt, shall fail to account for
and pay over the proceeds thereof forthwith to his principal or the
owner of such property, in either or any of such cases, he shall be
adjudged guilty of fraud, and shall, on conviction, be punished by
fine not exceeding five thousand dollars or by imprisonment in the
penitentiary for a term not exceeding five years or by both such
fine and imprisonment, provided that nothing herein shall be
construed to prevent such consignee or other person, lawfully
possessed of such bill of lading or warehouse receipt, from
pledging the same, to the extent of raising sufficient means
thereby to pay charges for storage and shipment or advances drawn
for on such property by the owner or consignor thereof, and a draft
or order by such owner or consignor for advances shall be held and
taken to be 'written authority' within the meaning of this section
for the hypothecation of such bill of lading or warehouse receipt
to the extent, and only to the extent, of raising the means to meet
such draft and to pay such freights and storage."
Missouri Laws 1874, p. 51.
