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§ 328a. But at common law a principal is bound by the acts of an agent making a pledge either by previous direction or subsequent ratification. A woman bought one hundred shares of stock in a corporation through an agent who acted for her as a friend, without pay. One month later the agent ordered a broker to buy one hundred shares more on sixty days' credit, and deposited the first purchased shares as security. Ten days afterwards the principal asked the agent how she should know, if anything happened to him, that she had any stock. He said he would give her something to show her title, and wrote, signed, and delivered to her the following order, addressed to the broker: "The one hundred shares of stock you purchased for me" on a day named, "for which you have been paid, and the one hundred shares you purchased for me" on a later day named, "buyer 60, receiving from me the one hundred shares of stock as collateral security, were bought by me for (the principal, naming her). Please deliver the stock to her, if she calls for it at any time." Six months afterwards the principal ordered the agent to sell her stock, supposing that she had the original shares; and a hundred shares regarded as hers by the agent were sold at a loss. The principal subsequently attempted to repudiate the transaction set forth in the above order, and brought an action against the agent for the conversion of the first one hundred shares of stock. It was held that the principal must be presumed to have understood the contents of the written order; that her silence ratified the purchase, and consequently the pledge; and that the action could not be maintained.1

A power of attorney authorizing the attorney in fact to sell, transfer, and release certain mortgages specified, and to indorse and transfer the notes thereby secured, and to sell and transfer the claims of the principal for said notes and mortgages against the estate of the deceased mortgagor, confers only a power to sell and transfer the title to the securities absolutely, and no power is conferred thereby to hypothecate the mortgages as

1 Metcalf v. Williams, 144 Mass. 452, 11 N. E. Rep. 700.

security for borrowed money, and such hypothecation, being in excess of authority, is void, and vests no right in the person to whom the hypothecation is made.'

§ 329. It does not matter that the agent is not known as a factor, or that he puts his principal's goods among his own, and exposes both for sale in the same way. Thus, if one place goods in custody of a retail dealer to sell upon commission, and he places such goods in his shop, and exposes them for sale with his own goods, and then having need for a loan of money obtains it upon a pledge of his principal's goods together with his own, the pledgee, though acting in good faith and relying upon the apparent ownership of the borrower, obtains no lien upon the goods held for sale upon commission."

It is really immaterial whether or not the pledgee knew that he was dealing with a factor; for if he knew he was dealing with a factor he is bound to know that by law the factor had no right to pledge his principal's goods, without the direct authority of the latter, of which the pledgee must at his peril satisfy himself." If, on the other hand, he did not know that he was dealing with a factor, his want of knowledge of this fact does not extend the factor's authority over his principal's goods. In short, he is in any event bound to know at his peril whether the person with whom he is dealing is the real owner of the goods offered in pledge.

The fact that one who is notoriously an agent or factor sometimes acts as a general merchant, or deals on his own account, does not exempt him from the general rule that a factor can not pledge for his own use goods with which he has been intrusted to sell."

'Hawxhurst v. Rathgeb, 119 Cal. 531, 51 Pac. Rep. 846.

2 Kinder v. Shaw, 2 Mass. 398, and a similar case, McCreary v. Gaines, 55 Tex. 485, 40 Am. Rep. 818.

3 Bott v. McCoy, 20 Ala. 578, 56 Am.
Dec. 223; Baxter v. Sherman, 73
Minn. 434, 76 N. W. Rep. 211.

Phillips v. Huth, 6 M. & W. 572; Martini v. Coles, 1 M. & S. 140; Baring v. Corrie, 2 B. & Ald. 137; M'Combie v. Davies, 6 East 538; Bragg v. Meyer, McAllister 408.

Contrary to the general rule, see Hutchinson v. Bours, 6 Cal. 383, where the court, while recognizing

§ 330. The factor himself is estopped from taking advantage of his wrongful act, in pledging his principal's goods for his own debt. Every pledgor impliedly warrants his own title, or that he has full authority to make the pledge. He can not therefore bring trover or detinue in his own name, against the pledgee, on the ground that he had tortiously violated his authority in pledging his principal's goods. The latter is the person injured, and he can ratify or disaffirm the act of his agent at his pleasure.'

§ 331. But it seems that a factor's or broker's lien might at common law be assigned as security for an amount not exceeding that secured by the lien, provided the assignment was expressly so limited. In M'Combie v. Davies, it appeared that a broker had pledged for his own debt goods of his principal upon which he had a lien. Lord Ellenborough, after saying that "nothing could be clearer than that liens were personal, and could not be transferred to third persons by any tortious pledge of the principal's goods," added, "that he would have it fully understood that his observations were applied to a tortious transfer of the goods of the principal, by the broker undertaking to pledge them as his own, and not to the case of one who, intending to give a security to another to the extent of his lien, delivers over the actual possession of the goods on which he has the lien to that other, with notice of his lien, and appoints that other as his servant to keep possession of the goods for him." And even where the assignment in pledge has not been expressly limited to the amount of the

the general rule, say that "where the party pledging is technically a factor, where his only business is to sell goods consigned to him for that purpose," he has no power to pledge them; and they deny its application to the case in hand, because the pledgor was not a technical broker, whom they define to be one whose only business is to sell goods consigned to him.

1 Bott v. McCoy, 20 Ala. 578, 56 Am. Dec. 223.

27 East 5, 7.

A factor who has made advances on the credit of the goods consigned to him for sale, has clearly a right to sell enough to reimburse his advances, unless restrained by some agreement with his consignor. Fordyce v. Peper, 16 Fed. Rep. 516; Brown v. M'Gran, 14 Pet. 479.


factor's advances, it has been held that his pledge of his principal's goods is valid to the extent of such interest, provided he retains the power to control the sale of the goods.'

Chief Justice Kent, in an opinion in which he referred with approval to the case of M'Combie v. Davies, held that a factor may deliver the possession of goods, on which he has a lien, to a third person, with notice of the lien, and with a declaration that the transfer is to such person as agent of the factor, and for his benefit. In such case there is in effect a continuance of the factor's possession.

§ 332. At common law there is no substantial difference between the effect of a pledge made by a factor and one made by a pledgee. A distinction has sometimes been taken between a pledge by the one and a pledge by the other on the ground that a factor has only a lien for his advances, whereas a pledgee has a special property in the pledge. But a factor is generally regarded as holding in pledge the goods upon which he has made advances. He is regarded as having a special property in such goods, and not merely a lien upon them. A distinction may properly be drawn between the rights of a pledgee or factor and those of a mere lien-holder, in regard to pledging the property. The former has the right of possession accompanied by the right to exercise acts of ownership in the disposition of the property, for the factor has a general power to sell, while a pledgee has the right to sell upon the pledgor's making default in payment of the debt secured. But the holder of a mere lien has no right to exercise acts of owner



3 First Nat. Bank v. Boyce, 78 Ky. 42, 39 Am. Rep. 198. In Donald v. Suckling, 1 Q. B. 585, 597, Shee, J., said: "In all the decisions on pledges by factors the relation between a factor who has made advances on the

1 Blair v. Childs, 10 Heisk. (Tenn.) goods intrusted to him and his principal has been held not distinguishUrquhart v. M'Iver, 4 Johns. (N. able, or barely distinguishable, in its Y.) 103, 116. legal incidents, from the relation between pawnee and pawnor." Judge Story, writing in regard to this matter, says "it is not easy to point out any substantial distinction between the case of a pledgee and the case of a factor." Bailm., § 327

ship in the disposition of the property. It is only by the intervention of a court of equity, or by the use of some statutory process that he can divest the owner of his title in satisfaction of the lien. In a leading English case upon this subject Mr. Justice Mellor said: "I think that when the true distinction between the case of a deposit by way of pledge of goods for securing the payment of money, and all cases of lien, correctly so described, is considered, it will be seen that in the former there is no implication, in general, of a contract by the pledgee to retain the personal possession of the goods deposited, and I think that, although he can not confer upon any third person a better title or a greater interest than he possesses, yet if nevertheless he does pledge the goods to a third person for a greater interest than he possesses, such an act does not annihilate the contract of pledge between himself and the pawnor, but that the transaction is simply inoperative as against the original pawnor, who, upon tender of the sum secured immediately becomes entitled to the possession of the goods, and can recover in an action for any special damage which he may have sustained by reason of the act of the pawnee in repledging the goods.'

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The legal effect of a pledge by a factor is therefore the same as that of a pledge by a pledgee. Neither the one nor the other is tortious to such an extent as to render the pledge absolutely void ab initio; but the pledge is good to the extent of the pledgor's interest in the property.2

II. The Factors' Acts, their Application and Effect.

§ 333. The purpose of the factors' acts is to avoid the inconveniences to trade and commerce which were found to attend the general rule of the common law, that he who deals with one ex mandato, can obtain from him no better title than

1 Donald v. Suckling, L. R. 1 Q. B. Donald v. Suckling, L. R. 1 Q. B. 585, 585, 610. 610.

2 §§ 418-423; Story Bailm., § 327;

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