Majority
p. 589CHARLES G. FRANCKLYN and another, Executor, etc., v. WILLIAM SPRAGUE and others.
Headnote
Factor selling under del credere commission — rights of assignee or recew&r of.Where a factor, acting under a del credm'e commission, fails, after having made advances to his consignor in the form of notes and acceptances, his receiver or assignee is entitled, as against the assignee and general creditors of the consignor, to retain in his hands the amounts arising from the sale of the goods, until such notes or acceptances are surrendered or destroyed.
Appeal by the receiver and the plaintiffs in the above entitled action, from an order of the Special Term confirming the report of a referee.
In 1873, Birchall was a manufacturer of goods at Philadelphia. Hoyt, Spragues & Co. were commission merchants at New York. Birchall made an arrangement with Hoyt, Spragues & Co. to consign goods to them for sale on commission. Hoyt, Spragues & Co. guaranteed sales, and had the right to sell on credit. Birchall had the right to draw bills on Hoyt, Spragues & Co., to an amount of about two-thirds the value of the goods consigned.
On October 30, 1873, Hoyt, Spragues & Oo. failed. There were then outstanding and unmatured eleven acceptances of Hoyt, Spragues & Co., for $5,000 each, drawn by Birchall and negotiated in the ordinary course of business. Some appear to have been discounted by banks and some purchased in the market. Hoyt, Spragues & Co., or the receiver of the firm, have collected, since then suspension, $22,784.19, principally on account of BirchalPs goods sold before the suspension, upon terms of credit maturing thereafter.
p. 590
On October 24,1873, Birchall made ah insolvent assignment, under the laws of Pennsylvania, for the benefit of his creditors, to Jones. Birchall and Jones both reside at Philadelphia.
In May, 1876, the holders of seven of these eleven drafts applied by petitions to this court, asking to have the receiver pay to them on account of their drafts the entire proceeds of Birchall’s goods. A reference was ordered, testimony taken, and the matter summed up by counsel. Upon such summing up the counsel for the contestants raised the objection that Birchall, or his assignee, and the holders of the other four drafts ought to be parties to the proceedings. Thereupon, in November, 1876, the assignee and the holders of ■ the four remaining drafts applied by petition, being represented by the counsel of the original petitioners, and were made parties to the proceedings. The holders of the last four drafts had already proved their claim against H., S. & Co., as general creditors, and received a dividend of ten per cent thereon.
There are other creditors of Birchall, to a large amount, besides the holders of these eleven drafts.
The receiver made a settlement of accounts with the assignee of Birchall, by paying him a balance of $384.13. This was a balance of an account in which Birchall was charged with the face of the acceptances, $55,000.
The referee reported, upon these facts, that said sum collected as aforesaid, with interest at two and a-half per cent, amounting to $23,815.61, should be applied by the receiver, pro rata, upon said eleven drafts, to wit, $2,165.05 on each draft; the four petitioners who had already proved as general creditors reducing their proofs by that amount.
George G. Holt, for Julliand, receiver, appellant.
Addison Brown, for the petitioner, respondent.
That the proceeds of goods consigned to a factor for sale on a del credere commission, in whatever form they exist, continue to be the property of the consignor, so long as such proceeds can be traced and identified, has been repeatedly adjudicated in this court. If the factor has made advances in cash he has a right to retain enough of
p. 591
such proceeds to reimburse bim therefor. If be bas made advances in tbe form of bis notes or acceptances, wbicb are outstanding, tbe proceeds may be retained until sucb notes or acceptances shall have been surrendered or destroyed. A receiver or assignee of a factor, who bas become insolvent, merely succeeds to bis rights, and is under tbe same obligation to restore to tbe consignor tbe proceeds of bis goods, wbicb are distinguishable, as tbe factor himself. These principles are manifestly just and equitable, and are well sustained by authority. (2 Kent Com., 623; Edw. on Fac., § 70, 71; 1 Am. Lead Cas., 480 -490; German Bank v. Edwards, 53 N. Y., 544 ; Hidden v. Waldo, 55 id., 294.)
In this case tbe consignor has become insolvent, and bis assignee now seeks, in conjunction with certain creditors, to have tbe pro: ceeds of bis goods, which have been kept distinct, applied to tbe payment of drafts drawn by tbe consignor upon tbe factors, wbicb are in tbe bands of third persons. We think sucb a disposition of tbe proceeds in question ought to be made for tbe reasons assigned by tbe referee. Order affirmed.
Present — Barnard, P. J., Gilbert and Dtkman, JJ.
Order affirmed, with costs and disbursements.