receipt is entitled, as having the title to the property designated, to recover upon an insurance policy upon such property assigned to him for further security.'

1 Hoyt v. Hartford F. Ins. Co., 26 Hun (N. Y.) 416.

CHAPTER VIII.

PLEDGES BY AGENTS OR FACTORS.

I. Pledges by agents or factors at com- II. The Factors' Acts, their applicamon law, 327-332. tion and effect, 333-353.

I. Pledges by Agents or Factors at Common Law.

327. By the common law a factor or agent had no power to pledge goods which his principal had intrusted to his possession, although the factor or agent had made advances to his principal upon the goods, and had a lien thereon for the advances. Although the principal had drawn upon his factor for the value of the property consigned, he was not authorized to pledge the goods even to raise funds to meet the bills. The rights of the principal and factor whenever this relation existed, and whatever might be the circumstances, were regarded

1 Patterson v. Tash, 2 Str. 1178; Daubigny v. Duval, 5 T. R. 604; Gill v. Kymer, 5 Moore 503; M'Combie v. Davies, 7 East 5; Martini v. Coles, 1 M. & S. 140; Queiroz v. Truemen, 3 B. & C. 342, 348; De Bouchout v. Goldsmid, 5 Ves. 210; Pickering v. Busk, 15 East 38, 43; Peet v. Baxter, 1 Stark. 472; Warner v. Martin, 11 How. 209; First Nat. Bank v. Nelson, 38 Ga. 391, 95 Am. Dec. 400; Bott v. McCoy, 20 Ala. 578, 56 Am. Dec. 223; McCreary v. Gaines, 55 Tex. 485, 13 Rep. 797; Benny v. Rhodes, 18 Mo. 147, 59 Am. Dec. 293; Benny v. Pegram, 18 Mo. 191, 59 Am. Dec. 293;

Steiger v. Third Nat. Bank, 6 Fed. Rep. 569; Holton v. Smith, 7 N. H. 446; Campbell v. Reeves, 3 Head (Tenn.) 226; Merchants' Nat. Bank v. Trenholm, 12 Heisk. (Tenn.) 520; Van Amringe v. Peabody, 1 Mason 440; Hoffman v. Noble, 6 Met. (Mass.) 68, 39 Am. Dec. 711; Newbold v. Wright, 4 Rawle (Pa.) 195; Wright v. Solomon, 19 Cal. 77; Cleveland v. Shoeman, 40 Ohio St. 176, 182; Anderson v. McAleenan, 15 Daly 444, 29 N. Y. St. Rep. 406, 8 N. Y. Supp. 483. 2 Graham v. Dyster, 2 Stark. 21, 6 M. & S. 1, 14.

as depending on the law merchant, which was part of common law. By this law a factor was but the attorney of his principal, and he was bound to pursue the powers delegated, and could not go beyond them.' An agent to sell goods, though being the apparent owner by reason of having possession by permission of the principal, could not pledge them for his own debt, or that of his consignor. No usage of trade allowed this. The agency was to sell only. A creditor to whom a factor offered goods in pledge was bound at his peril to inquire and know the extent of the factor's title to the goods, or of his authority to deal with them.

Lord Chancellor Selborne stated the law to this effect, saying: "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 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 indebtedness to their full equivalent in money..

12

The cases which in England established the doctrine that a factor could not effectually pledge for his own debts goods placed in his hands for sale, although he had made advances upon them, proceeded upon the ground that the interest of the factor was merely a lien and not a pledge; and inasmuch as a

'Kinder v. Shaw, 2 Mass. 398; Odiorne v. Maxcy, 13 Mass. 178; Scott v. Owen, Wils. 400, 405.

See article on Unauthorized Sales and Pledges by Agents, by William

Evans, Esq., 63 Law Times 333, 357, 377, 390, 402.

'City Bank v. Barrow, 5 App. Cas. 664, 670.

lien is a personal right of detention, which can not be assigned to another, it followed that a factor had no interest of his own which he could pledge; and as he could not pledge his principal's interest without direct authority to do so, he could transfer no interest whatever by delivery of his principal's goods in pledge. Where money has been advanced on goods consigned for sale, the character of the transaction is that of a lien, and not of a deposit, by way of pledge.'

§ 328. A factor or agent with power to sell only has at common law no power to pledge his principal's goods for his own debt or that of his principal. A power to sell, such as is possessed by a factor appointed for that purpose, can only be exercised by way of sale. The fact that goods were invoiced to the person making the pledge, as purchaser, and not as factor, does not estop the owner from claiming the goods as against the pledgee, in case the pledgee had no knowledge of this fact at the time of the pledge, and hence could not claim that he was misled. "At common law, a person in possession of goods could not confer on another, either by sale or by pledge, any better title to the goods than he himself had. To this general rule there was an exception of sales in market overt, and an apparent exception where the person in possession had a title defeasible on account of fraud. But the general rule was

1 Smart v. Sandars, 3 C. B. 380, 400, Bush, 16 Ill. App. 437; Baxter v. 401, 5 C. B. 895, 917. Sherman, 73 Minn. 434, 76 N. W. Rep. 211; Ryan v. Stowell, 31 Neb. 121, 47 N. W. Rep. 637.

22 Kent Com., 625; Patterson v. Tash, 2 Strange 1178; Martini v. Coles, 1 M. & S. 146; Warner v. Martin, 11 How. 209; Rodriguez v. Heffernan, 5 Johns. (N. Y.) Ch. 429; First Nat. Bank v. Schween, 127 Ill. 573, 20 N. E. Rep. 681; Gray v. Agnew, 95 Ill. 315; First Nat. Bank v. Nelson, 38 Ga. 391, 95 Am. Dec. 400; Nat. Exchange Bank v. Graniteville Mfg. Co., 79 Ga. 22, 25, 3 S. E. Rep. 411; Robinson v. Nevada Bank, 81 Cal. 106, 22 Pac. Rep. 478; Silverman v.

that, to make either a sale or a pledge valid against the owner of the goods sold or pledged, it must be shown that the seller or pledgor had authority to sell or pledge. If the owner of the goods had so acted as to clothe the seller or pledgor with apparent authority to sell or pledge, he was at common law precluded, as against those who were induced bona fide to act on the faith of that apparent authority, from denying that he had given such an authority, and the result as to them was the same as if he had really given it. But there was no such preclusion as against those who had notice that the real authority was limited. And the possession of bills of lading or other documents of title to goods did not at common law confer on the holder of them any greater power than the possession of the goods themselves. The transfer of a bill of lading for goods in transitu had the same effect in defeating the unpaid vendor's right to stop in transitu that an actual delivery of the goods themselves, under the same circumstances, would have had. But the transfer of the document of title, by means of which actual possession of the goods could be obtained, had no greater effect at common law than the transfer of the actual possession.""

Where a factor, warehouseman and commission merchant who had in his warehouse certain cotton belonging to a customer, on which he had made advances and on which he claimed a factor's lien, transferred and constructively delivered, by warehouse receipt in usual form, not his lien, but the cotton itself, to a bank, as a pawn or pledge for the payment of a certain sum advanced by the bank to him, the cotton not being removed from the actual custody of the warehouseman or its location changed, the bank had neither title to the cotton nor such possession as would give it the right to maintain an action of trover against a bona fide purchaser who subsequently bought, paid for, took possession of and removed the cotton without notice of the pledge made by the factor to the bank.

'Cole v. North Western Bank, L. iteville Manuf. Co., 79 Ga. 22, 3 S. E. R. 10 C. P. 354, 362. Rep. 411.

National Exchange Bank v. Gran