JUDICIAL INTERPRETATION OF FACTORS ACTS.

1. Rules of Construction. The courts have generally construed these statutes strictly, treating them as in derogation of the common-law rights of owners and as giving "effect to fraudulent transfers as against the owners."1 Occasionally a court has announced a different doctrine. In one case it was said: "The English statute and our own were manifestly passed for the purpose of increasing the facilities of trade, by legalizing and explaining cases in which a party could sell or pledge property at sea, in the ship at dock, or lying in the warehouse subject to the payment of duties. Historically, the necessities of trade and the custom of merchants had, in both countries, anticipated the statutes. And the benefits of the statutes and the custom are too evident and too great to allow us to narrow the construction of the law. And there is no sound principle which would oppose a liberal view, tending to enlarge the facilities of transfer; since these acts but follow out the general rule that every man is bound to take care not to select an agent who will do acts to injure other persons." 2

2. Limited to Domestic Factors. The statute of each State was framed for the regulation of the conduct of factors within its jurisdiction, and for the protection of those dealing with them in such jurisdiction. It does not apply to sales or pledges made in a foreign country, unless it is shown that such country has substantially the same statutory provisions on this subject.3

3. The Acts do not include all Agents. — In England it was held under the earlier acts, "that the term agent, does not include a mere servant or care-taker, or one who has possession of goods for carriage, safe custody, or otherwise, as an independent contracting party; but only persons whose employment corresponds to that of some known kind of commercial agent, like that class (factors) from which the Act has taken its name."

1 Stevens v. Cunninghamn, 3 Allen (85 Mass.), 491 (1862); Warner v. Martin, 11 How. (U. S.) 209, 228 (1850), and cases cited under subsequent headings.

2 Cartwright v. Wilmerding, 24 N. Y. 521, 529 (1862); Blyderstein v. N. Y. Security and Trust Co., 67 Fed. 469 (1895); N. Y. Security and Trust Co. v. Lipman, 157 N. Y. 551; 52 N. E. 595 (1899); cf. Price v. Wis. Ins. Co., 43 Wis. 267 (1877).

Walther v. Wetmore, 1 E. D. Smith, 7, 20 (1850).

1 Heyman v. Flewker, 13 C. B. N. s. 519 (1863).

The same view prevails in this country. Accordingly, a merchant's clerk who negotiates purchases and charter-parties to be ratified by his principal, and prepares and presents bills of lading for his principal's signature, is not an agent or factor intrusted with his principal's property or documents of title within the Factors Act. Nor is an employee who has charge of his principal's store, and is authorized only to sell in the name and for the account of his principal specific goods manufactured by the latter, an agent or factor so intrusted. Nor is a jeweller, who receives a diamond ring from the owner" for the purpose of obtaining a watch for it, or, failing in that, to get an offer for it;" nor is an agent for forwarding the goods in the owner's name to a third party for sale, although the agent is to have a share of the proceeds of sale as his compensation; nor is an agent who receives from the owner a picture to deliver to a third party for exhibition and sale. In the case last cited, the agent obtained a receipt in his own name from the third party, by falsely representing that "the object of the receipt was that the insurance might be transferred to the third party's store." Upon this receipt he obtained an advance from the defendant for $50. But it was held that neither his agency nor his receipt was within the provisions of the statute.

4. Goods must be in Transferrer's Name with Owner's Consent. -Hence, although goods may be in the possession of a factor, or may be shipped in the name of one who is not the owner, a bona fide purchaser from such factor or consignee may not be protected by the statute. If the owner contracts to sell for cash, and the purchaser obtains possession of the goods and secures a bill of lading to the order of a third person, by fraudulent representations made to the seller and to the carrier, neither the purchaser nor the consignee can give a valid title to the goods. "It is the consent of the owner in intrusting his goods to, and allowing a bill of lading in the name of, another, thus conferring ostensible ownership and a right of control in the person named, which shields parties entirely innocent, who, on the faith of the evi

1 Zachrisson v. Ohman, 2 Sandf. (N. Y. Super. Ct.) 68 (1848).

2 The Florence Sewing Mach. Co. v. Warford, 1 Sweeny (N. Y. Super. Ct.), 433 (1869).

3 Levi v.

Booth, 58 Md. 305 (1882).

Covill v. Hill, 4 Den. 323 (1847); 6 N. Y. 374 (1852); cf. Davis v. Bigler, 62 Pa. St. 242, 251 (1869).

Frankinstein v. Thomas, 4 Daly (N. Y. Com. Pl.), 256 (1872).

dence furnished to which the owner has consented, and of which he has knowledge, have made advances on the property shipped."1

A grain broker who obtains possession of goods by fraudulently representing that he is purchasing for a third person who is to pay cash, and who thereupon has a bill of lading made out to himself and indorses it to the third person for advances made by the latter innocently to the broker, does not convey any title to such third person, although the advances are made on the faith of the broker's possession of the bill of lading.2

Nor does the innocent purchaser from a rubber broker, relying on a warehouse receipt in the broker's name, acquire title to the goods named in such receipt, where the broker, by fraudulently representing to the owner that he had effected a sale of the goods, obtained a delivery order for them for the purpose of delivering them to the alleged purchaser, and thereupon stored them and took out the warehouse receipt in his own name. Το bring a case within the New York Factors Act, "the factor or other agent must be consciously and voluntarily intrusted with the possession of the documents or merchandise, and the section can have no application whatever to a case where the documents or goods are taken by trespass or theft, and thus the possession of the factor or agent is, from the beginning, tortious, wrongful, and unlawful." 8

5. The Acts are confined to Agents intrusted for Sale. A purchaser of goods even from a factor who has possession thereof or of the proper documents of title thereto with the owner's consent may not be protected by the Factors Acts. They will not shield him unless his transferrer was intrusted "for the purpose of sale or as a security for any advances to be made thereon."

(a) The Factor must have Possession. Unless the owner has

1 Kinsey v. Leggett, 71 N. Y. 387, 395 (1877).

2 Decan v. Shipper, 35 Pa. St. 239 (1860).

Soltau v. Gerdau, 119 N. Y. 380, 390 (1890); Burdick's Cases on Sales, 635; H. A. Prentice Co. v. Page, 164 Mass. 276; 41 N. E. 280 (1895); Burdick's Cases on Sales, 638, accord.

The Massachusetts statute relates "to consignees and factors, but not to lessees; and to deposits and pledges, but not mortgages." Stevens v. Cunningham, 3 Allen (85 Mass.), 491 (1862). The Pennsylvania statute "only provides for the passage of title if the agent or factor had

authority to sell the same or to deposit or pledge it." Decan v. Shipper, 35 Pa. St. 239, 244 (1860).

given to the factor actual possession of the goods or of a document of title thereto, he has not clothed such agent with apparent ownership. "It is the act of the owner in intrusting the factor with the possession of the goods, or of a documentary evidence of ownership, the apparent ownership and right of disposal, in connection with the fact that innocent third persons deal with him upon the faith of such apparent ownership that estops the owner from following his property into the hands of bona fide vendees or pledgees, and gives the latter a better title than their vendor or pledgor had."1

(b) He must have been intrusted with that Possession for Sale. -If the factor obtains possession of the goods or of the document of title, as a mere bailee, his transferee is not protected by the statute. Accordingly if goods are delivered to another for storage, with authority to receive and communicate offers to the owner, but without authority to sell, a sale by such a bailee and agent will not affect the owner's title, even though the agent is also a factor for the sale of similar goods.*

If, however, the goods have been intrusted to the factor for sale, he may validly pledge them to secure a loan himself, provided the pledgee loans the money "upon the faith that the factor is the true owner of the merchandise." 5

6. The Transferee must have Reason to believe that the Factor is the True Owner. "The statute was not made to legalize fraud; but to protect those who honestly trusted to appearances, and who supposed they were dealing with the true owner." Hence one who makes advances to a factor upon goods in the latter's possession, with the owner's consent, acquires no lien on

1 Howland v. Woodruff, 60 N. Y. 73, 79 (1875), approving Bonito . Mosquera, 2 Bos. 401 (1858), and distinguishing Pegram v. Carson, 10 Bos. 505 (1863), and Cartwright v. Wilmerding, 24 N. Y. 521 (1862); cf. N. Y. Security & Trust Co. v. Lipman, 157 N. Y. 551; 52 N. E. 595 (1899). 2 First Nat. Bk. v. Shaw, 61 N. Y. 283, 301 (1874); Davis v. Bigler, 62 Pa. St. 242, 251 (1869).

Cook v. Adams, 1 Bos. (N. Y. Super. Ct.) 497 (1857); Wilson v. Nason, 4 Bos. 155 (1859).

♦ Nickerson v. Darrow, 5 Allen (87 Mass.), 419 (1862); Stollenwerck v. Thacher, 115 Mass. 224 (1874); Thacher v. Moors, 134 Mass. 156 (1883).

Cleveland v. Shoeman, 40 Ohio St. 176, 184 (1883); Burdick's Cases on Sales, 634.

• Bronson, J., in Stevens v. Wilson, 6 Hill (N. Y.), 512, 513 (1844).

them as against the owner, if he has notice that they are not the property of the factor,1

A different view is held in Wisconsin.

Although the statute

of that State was a copy of the New York Act, the Supreme Court refused to follow the New York decisions. Referring to the opinions delivered in the New York Supreme Court and in the Court of Errors, in Stevens v. Wilson, Ryan, Ch. J., said, "In both courts it was held that the words, 'on faith thereof,' in section three, mean on faith of the title of the factor, and not on faith of the thing pledged. This is admitted to do violence to the language used. To us it seems to nullify the provision that the factor shall be deemed the true owner, to give validity to the pledge; substituting the faith of the party for the title of the statute, and appearing to involve the absurdity that a pledgee makes his advances, not at all on the faith of the thing bodily pledged, but altogether on the faith of the title to it. . . . The section authorizes the pledgee to presume the factor's title and authority, without inquiry, just as the common law authorizes the pledgee to presume the factor's title and authority to pledge other negotiable paper. Of course if the factor violate the trust of his principal to the knowledge of the pledgee, the fraud will avoid a pledge as it would a sale. But to rest the validity of the pledge upon the pledgee's faith in the factor's title is simply to abandon the statute for the common law."

The Pennsylvania statute provides that the pledgee of a factor, with notice that the pledgor is only a factor, shall acquire the same right and interest in the property as was possessed by the factor against his principal. Accordingly, such a pledgee has a right to demand of the owner the payment of any sum due from him to the factor on account of the property as a condition of surrendering it.

1 Stevens v. Wilson, 3 Den. (N. Y.) 472 (1846); Burdick's Cases on Sales, 632; Dorrance v. Dean, 106 N. Y. 203 (1887).

2 Price v. Wis. Marine Ins. Co., 43 Wis. 267, 291 (1877).

3 Macky v. Dillinger, 73 Pa. St. 85 (1873).