Commercial National Bank v. Heilbronner — 13 N.Y. St. Rep. 834

Majority

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The Commercial National Bank of Pennsylvania, Resp’t, v. Isaac Heilbronner, App’lt.

(Court of Appeals,

Filed February 28, 1888.)

Headnote

1. Principal and agent—Factors—Consignor retains title to goods TILL SOLD.

The consignor, upon a consignment of goods to he sold on commission, does not part with his title by the consignment, but continues to be the

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true owner of the consigned property until sold by the consignee. The rule is the same whether the consignee is a del aredere facior, or is under advances for the principal or is simply an agent for sale, assuming no unusual responsibility.

2 Same—Rights of factor to enforce lien for advances—In what MANNER.

A factor, under advances for his principal, or who guarantees the sale, has a lien on the goods and their proceeds for his advances, and an interest in the debts arising upon sales, to protect his guaranty. He is entitled to retain possession of the goods and their proceeds, to protect his lien, and to collect and sue the debt in his own name. But he cannot deal with the property or proceeds as his own.

3. Same—How principal can deprive him of these rights.

The principal cannot deprive him of these rights except by re-imoursing the advances, or, in case of a del credere factor, by relieving him from his guaranty.

4. Same—When factor can sell goods to repay advances.

A factor, under advances to his principal, is bound to obey the principal’s instructions and cannot dispose of the goods in violation thereof, even to repay advances, until he has called upon the principal for re-imbursement.

6. Same—Factor cannot sell a debt existing in open account arising ON SALE OF PRINCIPAL’S GOODS. ---■ j

A factor, having advanced generally-on the goods in his hands, cannot,] in the absence of special authority, sell out and out, a debt existing in open account, arising on a sale of a portion of the consigned goods, so as to transfer a good title to the claim. This is especially the case before the maturity of the debt, when the principal is not in default, has not been called upon to repay the advances, and there are no special circum-j stances.

6. Same—Factor’s power to bind principal—General rule.

By the general rule a factor cannot hind his principal by a disposition of his property out of the ordinary course of business

Appeal from a judgment of the generar term of thej superior court of the city and county of New York, affirm-] a judgment in favor of plaintiff, entered upon a verdict ofi a jury, rendered by direction of the court at a trial term; thereof.

Before the commencement oi this action, Taft, the consignor and owner of the goods, sold by his factors, Vanuxem, Wharton & Co., to the defendant Heilbronner, had served on the defendant a written notice that he had revoked the authority of Vanuxem, Wharton & Co., to act in his behalf, and that they had been fully paid all advances, commissions and expenses, and had no interest in the goods sold to the defendant, or the proceeds, and required the defendant to pay to him the money due on the sale. Taft had also brought an action against Vanuxem, Wharton & Co., joining "them as defendants in this action for an accounting by Vanuxem, Wharton & Co., alleging in his complaint that they had been fully paid their advances and commissions, and further, alleges the sale by the consignees of a portion of the consigned goods to Heilbron

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ner, a pretended assignment of the debt owing by him therefor to the bank, the plaintiff in this action, and in addition to a prayer for an accounting he prayed that he should be adjudged to be entitled to recover the money due from the defendant Heilbronner, and for an injunction ’against the bank, restraining it from collecting the same. The Taft action was pending when the present action was commenced, and Heilbronner in his answer .therein admitted the debt and avowed his readiness to pay the same to the true owner. The present defendant subsequently made a motion in the Taft action for a stay of proceedings in the present action until the determination of that action, which motion, for some reason not disclosed, was denied.

The defendant was not in a situation to bring a proceeding'for an interpleader, for the reason that he set up in the •present action a counter-claim as to which upon the state of the pleadings he was put to his proof, but which was admitted and allowed on the trial of this action.

The defendant in his answer in this action put in issue the ownership by the -plaintiff, The Commercial National Bank of Pennsylvania, of the claim against them arising on his purchase from Vanuxem, Wharton & Co., the consignees of Taft, of a portion of the consigned goods, and this ,was the only issue tried, and upon this issue, the counterclaim having been admitted, the trial court directed a verdict for the plaintiff.

The alleged title of the plaintiff to the claim is derived through a written transfer from Vanuxem, Wharton & Co., to the bank, of the .claim against Heilbronner, .resting in open aqeount, made on or about the 28th of May, 1884. ¡The firm of Vanuxem, Wharton & Co., failed on June 2, ;1884. It is claimed that they paid for the assignment the full amount .of the claim in cash. How the proceeds were applied by Vanuxem, Wharton & Co., does not appear. When the assignment was made the terms of credit on which the-goods were sold had not expired.

It appears that by the arrangement between Vanuxem, Wharton & Co. and Taft, under which Taft made consignments to the firm, the firm were to make advances,.and that advances were made, - but to what amount is left uncertain, nor does it appear how the account stood between the firm and Taft, when the assignment of the claim against Heilbronner was. made to the bank. It does not appear that Taft had been called upon to repay advances, or that there was any default on. his part. By the agreement between him and Vanuxem, Wharton & Co. the;firm was to guaranty sales.

Jacob Fromme, for app’lt; Theron O. Strong, for resp’t.

As factors, Vanuxem, Wharton & Co. had no title to the consigned goods. The consignor, upon a consignment of goods to be sold on commission, does not part with his title by the consignment, but _he .continues to be the true owner or the consigned property until sold' by the consignee, and the rule is the same whether the consignee is a del credere factor or is under advances for the principal, or is simply an agent for sale, assuming no responsibility except that usually appertaining to the position of an agent. Baker v. New York National Exchange Bank, 100 N. Y., 31 ; Mellish, L. J., Ex parte White, L. R., 6 Ch. App., 403.

But a factor under advances for his principal, or who guarantees the sale, has a hen on the goods and their proceeds for his advances, and an interest in the debts arising upon sales, to protect his guaranty. . He is entitled to retain possession of the goods and their proceeds, to protect his lien, and to collect and sue the debts in his own name, rights of which the principal cannot deprive him except by re-imbursing the advances, or incase of a del credere factor, by relieving him from his guaranty. Hudson v. Granger, 5 Barn. & Ald., 27; Story on Agency, §§ 398, 407, 408, 424.

But such factors are nevertheless agents and cannot deal with the property or proceeds as their own. They cannot pledge the goods for their own debt (Buckley v. Packard, 20 Johns., 421 ), and an unauthorized pledge by a factor did not at common law transfer any right as against the principal, even to the extent of his lien. McCombie v. Davies, 7 East., 5; Graham v. Dyster, 6 M. & S., 1: Leake on Contracts, 515. A factor, although under advances to his principal, is bound nevertheless to obey the principal's instructions, and cannot dispose of the goods in violation thereof, even to repay "advances, until at least he has called .upon the principal for reimbursement. Marfield v. Goodhue, 3 Comst., 62; Hilton v. Vanderbilt, 82 N. Y., 591 .

The precise question in the present case is whether a factor, "having advanced generally on the goods in 'his hands, can, in the absence of -special authority, sell, out and out, a debt existing in open account, arising on a.sale of a portion of the consigned goods, só as to transfer a good title to the claim, and this too before the maturity of the debt, and when the principal is not in default and has not been called upon to repay the advances and there are no special circumstanc's.

The question depends, we think, upon the general doctrine of agency. The agent is invested with such authority as his commission confers, and as to third persons, such as he is held out as possessing, and in construing his authority, the custom or usage of the business is frequently a

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mutual consideration. The transaction between Vanuxem, Wharton & Co., and the bank, was not a sale of goods or a collection of a debt. By the general rule a factor cannot bind the principal by a disposition of his property out of the ordinary course of business. Easton v. Clark, 35 N. Y., 225 . We have been referred to no authority holding that a factor possesses the authority exercised by Vanuxem, Wharton & Co., in the case in question. Such a construction of his power would be inconvenient and might lead to great abuses. It would enable the factor to put his principal’s property out of his hands before any default on the part of the principal, thereby depriving the latter of the right to the possession of his" property on discharging the factor’s claims. Assuming that the transferee would, himself, be held to account, it subjects the principal to the embarrassment of calling third parties into the settlement of his transactions with his agent.

The transaction in this .case was out of the ordinary course of business, and has all the ear marks of an irregular transaction. It was not an assignment to the bank of the factor’s lien, accompanied with a delivery of the property of the principal to keep possession for the factor in order to preserve the lien. Urquhart v. McIver, 4 J. R., 103. We think it'would be unwise to extend the factor’s authority to embrace this transaction, and that the bank acquired no title to the claim.

This conclusion leads to a reversal of the judgment.

All concur.