TERRY v. BAMBERGER.

(Circuit Court for Connecticut: 14 Blatchford, 234–239. 1877.)

Opinion by SHIPMAN, J.

STATEMENT OF FACTS. This case was tried by the court, the parties having, by written stipulation duly signed, waived a jury. Upon said trial by the court, both parties appeared by their counsel and with their witnesses, and were fully heard respecting the controverted questions of law and of fact. The facts which are found to have been proved are as follows: On or about August 12, 1875, the firm of S. A. Castle & Co., of the city of New York, consisting of Samuel A. Castle, Rufus E. Hitchcock and Henry S. McGrane, being insolv ent, made an assignment in insolvency of all their goods and effects, for the joint and equal benefit of their creditors, under the statute of New York of April 13, 1860, to Leopold Bamberger, of said city, who accepted said trust, gave bonds according to law, and entered upon his duties on August 12, 1875. Previous to this time, said firm had been the selling agents in said city of the United States Button Company, a joint stock corporation, duly incorporated in pursuance of the laws of this state, and established at Waterbury. Said firm had in their store on said August 12, 1875, the manufactured goods of said company, which had been theretofore sent to them for sale upon commission, to a large amount, which goods were the property of said button company. The market value of said goods was $7,500. The company had not been in the habit of drawing against their consignments, but, prior to this date, had obtained from S. A. Castle & Co. their accommodation acceptances to the amount of $22,500, and it was agreed between said parties, at the time when said acceptances were given, that said firm should have a lien on the goods which were from time to time unsold, as security against their liability upon said acceptances. These acceptances had been discounted for the benefit of said button company, and were then held and owned by the Waterbury National Bank. The goods of said company in the possession of S. A. Castle & Co. were specified in their inventory, which was duly made and filed in pursuance of the laws of the state of New York, under the head of "goods on hand on which allowances have been made and merchandise in stock, etc.," as "consigned by the United States Button Co.," and were appraised at $6,054. The assignee thus had notice of the ownership of the goods. Said Bamberger immediately took possession of said goods as his own, and as equitably belonging to the creditors of S. A. Castle & Co., and proceeded forthwith to sell them as rapidly as he was able, for the benefit of said estate. On September 24, 1875, said button company took up and received said acceptances from the Waterbury National Bank, by the substitution of the button company's notes therefor, and thereupon the president of said company carried said acceptances to New York, tendered them to said Bamberger, and demanded of him the goods belonging to said company, but said Bamberger refused to deliver the same and continued the sale thereof. On or about November 1, 1875, the plaintiff was duly appointed receiver of the estate of said button company, by the superior court of New Haven, Connecticut, under and by virtue of the 23d section of chapter 1, title 17, of the general statutes of Connecticut (Revision of 1875, page 281), and said receiver was authorized by the decree of said court to execute the powers specified in the 1st section of part 14, chapter 17, title 19, of said general stat

utes (Revision of 1875, page 482). The plaintiff accepted said trust, gave bonds pursuant to law, which were accepted by said court, and entered upon his duties. On November 24, 1875, the plaintiff, accompanied by the secretary of said company as a witness, again tendered to said Bamberger, in the city of New York, said acceptances, and again demanded said goods, as the property of said button company, but said Bamberger refused to deliver them. The plaintiff then asked Bamberger if there were any other acceptances outstanding against said goods, or if there were any other claims or charges against the goods, for interest, commissions, etc., except the tendered drafts; to which inquiry Bamberger replied in the negative. Upon the payment of said accommodation acceptances, S. A. Castle & Co. were indebted to said button company in a large amount, as appeared by said inventory. The present action was brought in a state court of this state, and was removed to this court by the defendant. At the close of the testimony the plaintiff asked and obtained leave, against the objection of the defendant, to amend the declaration by the addition of the second and third counts, for a conversion prior to the plaintiff's appointment. Opportunity was given to the defendant, after the allowance of said amendment, to introduce additional testimony, if he desired.

§ 651. After a factor's lien is discharged the owner may claim the goods as against his assignee in insolvency.

Upon the foregoing facts, the conclusions of law are as follows: 1. The defendant rightfully took possession of the goods of the button company, but tortiously converted them thereafter. S. A. Castle & Co. were the factors of the button company, and as such were personally intrusted with the sale of its goods. This trust was a personal one, and could not be delegated to another, beyond the usual course of business, without the consent of the consignors. Neither had Castle & Co. any right to sell or transfer the goods in payment or in pledge for their own indebtedness. Having a lien upon the goods as security for their liability upon the accommodation acceptances which they had given to the consignors, Castle & Co. had a right to transfer said lien to their creditors, and to deliver the goods to their assignee for the benefit of their creditors, solely as a security to the extent of said lien. The button company could not regain possession until they had tendered to the assignee the amount of the lien of Castle & Co., or otherwise discharged said lien, and, upon such tender or discharge, had the right to regain possession of their property if it could be traced, or distinguished from the mass of the other property of the factor in the possession of the assignee. Warner v. Martin, 11 How., 209; Veil v. Mitchel, 4 Wash. C. C. R., 105; Thompson v. Perkins, 3 Mason, 232; Cook v. Kelly, 9 Bosw., 358; Manuf'g Co. v. Dehon, 5 Pick., 7; Denston v. Perkins, 2 Pick., 86; Scott v. Surman, Willes' R., 400. But the rightful pos

session of the assignee gave him no authority to assume to himself the entire property or right of disposing of the goods, until duly authorized by law, and when, having taken possession, with notice that the goods were the property of the button company, he proceeded to sell and convert them into money as rapidly as he could, there was a conversion. The action of trover "always supposes the defendant to have come legally into possession of the goods. It is the breach of the trust, or the abuse of such lawful possession, which constitutes the conversion." Murray v. Burling, 10 Johns., 172; Connah v. Hale, 23 Wend., 462; Fisk v. Ewen, 46 N. H., 173; Baldwin v. Cole, 6 Mod., 212; M'Combie v. Davies, 6 East, 538.

§ 652. A receiver has a right to sue in Connecticut for a conversion which occurred prior to his appointment.

2. The plaintiff, as receiver, had a right to institute a suit in this state against the defendant, for a conversion happening prior to the plaintiff's appointment. It is contended that the decree of the state court had no extraterritorial jurisdiction, and gave the plaintiff no title to property beyond the limits of this state, and that, therefore, he had no right to institute a suit for the recovery of the value of property which had been since his appointment beyond the jurisdiction of this state. But the statutes of this state in regard to the appointment and duties of receivers of the property of corporations do not undertake to change the title of the property or to vest it in the receiver. Receivers are de clared by the statute to have the right to the possession of the property of the corporation, and power in their own names, or in its name, to commence and prosecute suits for and on behalf of the corporation, to demand and receive all evidences of debt and property belonging to it, and to do and execute in its name or their own names, as such receivers, all the acts and things which shall be necessary or proper in the execution of their trust, and to have all the powers, for any of said purposes, possessed by such corporation. The receiver is the agent of the law to collect the property of the corporation and to wind up its affairs, and for that purpose to do all acts which may be necessary in the execution of the trust. By authority of law he acts in the place of the directors, but no title to property is changed. Such has been the construction of similar statutes elsewhere. Willink v. Morris Canal & Banking Co., 3 Green's Ch., 377.

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It is unnecessary to determine whether the receiver was empowered to commence a suit in his own name, in the state of New York, for the recovery the property of the corporation. As the title to the property which is now in question was confessedly always in the button company, a suit could have been instituted in New York against the defendant, in the name of the corporation, certainly with the assent of its officers. It is apparent that, both before and after the appointment of the plaintiff, the officers of the corporation were seeking to obtain this property, and they have not been prevented from aiding the receiver in the collection of the debts of the company in any court here or elsewhere. They are still the officers of the company. In this state the plaintiff can commence a suit either in the name of the corporation or in his own name in its behalf. Whether the receiver or the corporation is plaintiff, the action is for the recovery of the value of property the title of which is in this company. Being thus the agent of the law to wind up the affairs of the corporation, and to do whatever it could do in this behalf, the receiver is authorized to collect, within this state, its debts and choses in action, of whatever nature the same may be, and to commence any proper suits, whether sounding in tort or in contract. "There is no greater reason for allowing the receiver to recover damages in his own name for the breach of a contract made with the bank than there is for allowing him to recover damages in his own name for the wrongful withholding of the property of the bank, in another form." Gillett v. Fairchild, 4 Denio, SO.

§ 653. In trover the plaintiff may prove a prior conversion.

The fact that the United States Button Company had not discharged the lien, and so were not entitled to the possession of the goods at the time of the conversion by the defendant, on August 12, 1875, does not defeat the action of trover, the lien having been discharged before suit was brought. If the plaintiff had a right of action when the suit commenced, it is competent for him to show a

prior conversion. Delano v. Curtis, 7 Allen, 470; Carpenter v. Hale, 8 Gray, 157. Judgment should be rendered in favor of the plaintiff for $7,500 and interest at six per cent. from September 24, 1875, and his costs accruing after May 15, 1877. Upon the amendment, the plaintiff should pay the defendant his taxable costs until May 15, 1877, in accordance with the state practice. Richardson v. Hine, 43 Conn., 201.

§ 654. In general.—Where a purchaser from a factor purchases with knowledge of the insolvency of the factor, he is chargeable with full notice of the factor's commission, and takes the property subject to the full rights of the principal. Warner v. Martin, 11 How., 222. $655. Where A. is supercargo for several shippers, having separate interests, a party to whom the cargo is delivered by A. for sale, cannot retain the proceeds, by arrangement with A. to satisfy a debt due from A. Merrick v. Bernard,* 1 Wash., 479.

§ 656. A principal may follow his property into the hands of his agent or factor and recover it, or its proceeds, from him. So where an agent, owing his principal a balance for collections made by him, sent to the principal a check for the amount of such balance, and became insolvent, and made a general assignment before the check reached his principal, and payment of the check was refused when presented to the drawee because of such assignment, on a bill of interpleader by the bank, it was held that the principal was entitled to the funds of his agent on deposit to the full amount of his agent's check. German Savings Bank v. Adae, 8 Fed. R., 109; S. C., 1 McC., 501. See § 645.

§ 657. It seems that if an agent sells goods consigned to him, and receives the money and invests it in other property for the benefit of the principal, or marks it and puts it away as belonging to his principal, the latter has a right thereto or is entitled to the profits; but if the agent applies the money to his own use, charging himself therewith in his account with his principal, the money cannot be specifically followed, and the agent becomes simply the debtor of the principal for such proceeds. Horquebie v. Girard, 2 Wash., 216.

3. Factor's Lien.

·In general, § 658. — For commissions and expenses, §§ 659, 660.

§ 658. A factor has a lien on the property of the principal for all advances made, for any balance that may be due, and for all responsibilities incurred for the principal in the general course of the business. But this lien is lost by a voluntary delivery of the property; the factor cannot stop property in transitu, where he has voluntarily delivered up the possession, upon any pretense that he has a lien upon it for advances made on account of the principal. Matthews v. Menedger, § 661–665. See $$ 636, 651, 672, 674, 677, 679, 680.

§ 659. A party to whom goods are consigned, as security for advances, is a factor, and has no proprietary interest in the goods. The Ship Packet, §§ 668–670.

§ 660. Where the factor's lien is discharged, the principal may dispose of the goods as he pleases. So where goods were to be consigned to a factor, to be sold on commission, and the proceeds to be held as security for advances, and the amount of the advances was paid before the goods were shipped, the principal had a right to consign the goods to other parties; but the factor had a claim against the proceeds of the goods in court for commissions and expenses. Ibid.

[NOTES.- See §§ 671-678.]

MATTHEWS v. MENEDGER.

(Circuit Court for Ohio: 2 McLean, 145-155. 1840.)

Opinion by the COURT.

STATEMENT OF FACTS.-This is an action of trover for a flatboat, and five thousand bushels of wheat, in barrels and sacks.

It was proved that the plaintiffs were merchants in Baltimore, and in September, 1836, they made a contract with McCourtney and Read, merchants of Wheeling, to purchase for them a large quantity of wheat, which they were to have shipped to the plaintiffs by the way of New Orleans. Flatboats were to be used in conveying the wheat to New Orleans. At the time of the contract

the plaintiffs advanced to McCourtney and Read $10,000, in two drafts of $5,000 each, which were paid at maturity. McCourtney and Read despatched an agent, by the name of Matthews, to Parkersburg, who made a contract with Chevalier, a resident of that place, to purchase the wheat at five per cent. upon the cost; McCourtney and Read to furnish the money. The sum of $1,000 was paid in a check by Matthews, and this Chevalier stated was sufficient, as it would enable him to make a small advance to the farmers on the purchase of the wheat. Chevalier, having purchased about four thousand bushels of wheat, called on McCourtney and Read for money to complete the payments on this purchase, who drew a bill of exchange on E. Dorsey, for $3,000, payable to the order of Cowgill & Son, at some bank in Baltimore. This bill was accepted by Dorsey, and made payable to Chevalier by the indorsement of Cowgill & Son. It was negotiated by one of the banks at Wheeling or Pittsburg, and the proceeds were paid to Chevalier, he being the last indorser.

A flatboat was sent down to Spencer's farm, near Parkersburg, by McCourtney and Read, in charge of Ford, to receive the wheat. Shortly after this McCourtney and Read failed, and made an assignment of their effects. Before this was done they applied to Forsythe and Atturbury, of Wheeling, to become the agents of the plaintiffs, and represented that, they having advanced money to buy wheat, it was just that the wheat purchased should inure to their benefit. The proposed agency was accepted by Forsythe and Atturbury, and they despatched Matthews, as their agent, to Chevalier to inform him of the failure of McCourtney and Read, and that the wheat belonged to the plaintiffs; and he was also authorized to inform Chevalier that the bill for $3,000, indorsed by him, would not be paid. Matthews communicated this intelligence to Chevalier before the loading of the boat was completed, there having been placed on board of it between fifteen hundred and two thousand bushels. This was the first intimation received by Chevalier that the plaintiffs had any interest in the wheat. He acted as the agent of McCourtney and Read, and supposed he made the purchase on their account. There was no more wheat delivered on board the boat after the arrival of Matthews; and Chevalier directed Ford to take the boat to Gallipolis, where he would meet him. The boat was taken to Gallipolis, and, on the arrival of Chevalier, he sold the wheat to the defendants, with the barrels in which a part of it was contained; the sacks they returned to the boat. The defendants paid to Chevalier $1,800 for the wheat; and, owning a merchant mill, they manufactured it, and sent the flour to New Orleans, where it was sold at a good profit.

Before the sale of the wheat to the defendants they admitted that Chevalier informed them of the circumstances, but what those circumstances, thus communicated, were, does not appear from the evidence. The defendants offered in evidence the record of a judgment, in 1839, against Chevalier, in favor of McCourtney and Read, in the state of Virginia, in an action of trover for the same wheat. And on the record there was an indorsement that the suit was brought for the benefit of Matthews and Hopkins. To the introduction of this record the plaintiffs objected, as it was not between the same parties, and could for no legal purpose be received in evidence. But the defendants' counsel insisted that it was evidence, if not as a bar to the plaintiffs' action, to show where the legal right to the wheat was vested, to influence the jury in their assessment of damages in the present action, and also to show that, by the judgment in Virginia, the right of property in the wheat became vested in Chevalier.