# Allen v. St. Louis National Bank/Opinion of the Court

* Court Documents
* Case Syllabus
* Opinion of the Court
United States Supreme Court
120 U.S. 20
Allen v. St. Louis National Bank
When a jury is waived in writing, and the case tried by the court, the court's finding of facts, whether general or special, has the same effect as the verdict of a jury; and, although a bill of exceptions is the only way of presenting rulings made in the progress of the trial, the question whether the facts set forth in a special finding of the court, which is equivalent to special verdict, are suff cient in law to support the judgment, may be reviewed on writ of error without any bill of exceptions. Act March 3, 1865, c. 86, § 4, (13 St. 501; Rev. St. §§ 649, 700;) French v. Edwards, 21 Wall. 147; Ex parte French, 91 U.S. 423. The question whether the facts found by the court in the case at bar are sufficient to support the judgment below includes the several questions of law affecting the merits of the case. That judgment is for more than $5,000, which is sufficient to give this court jurisdiction in error. Act February 16, 1875, c. 77, § 3, (18 St. 316.) It is therefore unnecessary to consider whether those questions are duly stated in the certificate of division of opinion, within the rule affirmed in Williamsport Nat. Bank v. Knapp, 119 U.S. 357; S.C.. 7 Sup. Ct. Rep. 274.
The leading facts of the case, as found by the circuit court, are as follows:
The original action was on a promissory note made by the defendants, payable to the order of J. H. Dowell & Co., and by them indorsed to the plaintiff bank. J. H. Dowell & Co. were a partnership of cotton factors at St. Louis, in which Dowell was the acting and managing partner. Dowell was also a partner with the defendants, under the name of Allen & Dowell, in the working of a cotton plantation in Arkansas.
The note in suit was made and delivered by the defendants to the payees, their factors, to enable them to raise funds to furnish supplies for working that plantation, and under an agreement between the parties that the note should be taken up and paid by the factors out of the proceeds of the cotton crop of the plantation for the coming season when received and sold by them. That crop was consigned to the factors under that agreement, and its proceeds were more than sufficient to pay this note and all other charges of the factors. It is not doubted that upon these facts the makers would have a complete defense to the note in the hands of the payees. But, before the maturity of the note, the payees had it discounted by, and indorsed and delivered it to, the plaintiff bank, with which they kept their deposit account, and of which they from time to time borrowed large sums of money. As soon as they received the bills of lading of cotton consigned to them as factors by the defendants or by other persons, they delivered those bills to the bank, which thereupon gave them a credit, in their deposit account, of $40 for each bale, and took their note for the amount, payable on demand, with interest. On the arrival of the cotton, it was delivered to warehousemen, who gave receipts undertaking to deliver it to bearer, and these receipts were delivered to the bank in exchange for the bills of lading, which were surrendered and canceled. There was no evidence that either the bills of lading or the warehouse receipts were indorsed in writing. The bank knew that the payees of the note in suit were factors, and that they held the cotton as such. It did not know, and made no inquiry, as to the ownership of any of the cotton, or the dealings of the factors with the owners, or the state of accounts between them.
The cotton was sold in the following manner: The factors negotiated sales by means of samples, and fixed the price and other therms of sale. The bank received the whole price from the purchasers, and delivered to them the warehouse receipts, and credited the factors with the amount received, but at the same time, and as part of the same transaction, required them to draw, and they did draw and deliver to the bank, their checks for the amount of their demand notes held by the bank. After all the cotton had been sold, there was a large balance of account due from the factors to the bank.
The substance of the transaction between the factors and the bank in regard to the cotton was that the factors delivered the bills of lading and warehouse receipts to the bank to secure the repayment of money lent them by the bank, and thereby made a pledge of the cotton to secure their own debt, (Insurance Co. v. Kiger, 103 U.S. 352, 356;) and that the bank sold, on terms negotiated by the factors, the cotton so pledged to it, and received the price from the purchasers. The notes and checks which passed between the factors and the bank were but forms to carry out the main purpose of the transaction between them, and did not change its nature or effect.
By the common law, a factor or agent for sale has no power to pledge, whether the owner has intrusted him with the possession of the goods themselves, or with the symbol of them, as by consigning them to him by a bill of lading in which he is consignee or indorsee. 2 Kent, Comm. 625; Kinder v. Shaw, 2 Mass. 398; Warner v. Martin, 11 How. 209, 224; Phillips v. Huth, 6 Mees. & W. 572, 596; Cole v. Northwestern Bank, L. R. 10 C. P. 354, 363. And such was the law of Missouri before the passage of any statute upon the subject. Benny v. Rhodes, 18 Mo. 147; Benny v. Pegram, 18 Mo. 191.
The essential difference between a power to sell and a power to pledge is well brought out in a recent case in the house of lords by Lord Chancellor SELBORNE, who said: '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 those 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.' City Bank v. Barrow, 5 App. Cas. 664, 670.
The weight and bearing of the cases cited at the bar upon the construction of the statutes of Missouri annexed to the finding of facts, cannot be properly appreciated without keeping in mind the provisions of the various statutes under which those cases arose.
The English factors' act of 6 Geo. IV. c. 94, passed in 1825, enacted in section 2 that any person intrusted with and in possession of any bill of lading, warehouse receipt, or other like document, should be deemed and taken to be the true owner of the goods described therein, so far as to give validity to any contract made by him with other persons for the sale or disposition of the goods, or for the deposit or pledge thereof as a security for advances made by them 'upon the faith of such several documents, or either of them;' provided such persons had no notice, by such documents or otherwise, that the person intrusted as aforesaid was not the actual and bona fide owner of the goods.
The New York factors' act of 1830, c. 179, based upon the act of 6 Geo. IV., provided in section 3 that every factor or other agent intrusted with the possession of any bill of lading, custom-house permit, or warehouse-keeper's receipt for the delivery of merchandise, and every such factor or agent not having the documentary evidence of title, but intrusted with the possession of any merchandise for the purpose of sale, or as a security for any advances to be made or obtained thereon, should be deemed to be the true owner thereof, so far as to give validity to any contract made by him with any other person for the sale or disposition of the merchandise for any advances made by such other person 'upon the faith thereof.' It will be observed that this section did not in terms repeat the proviso of the corresponding section of the English act.
But, before the enactment in Missouri of any o the statutes cited in argument, the construction of this section of the New York statute had been settled by decisions of the highest courts of that state, and of this court, to be that the words 'on the faith thereof' were not to be referred to 'merchandise,' or to its symbols, but to the words 'shall be deemed to be the true owner thereof.' In the leading case, Mr. Justice BRONSON, speaking for Chief Justice NELSON, Mr. Justice BEARDSLEY, and himself, said: 'The obvious meaning is that the factor or other agent who has been intrusted with certain documentary evidence of title, or with the possession and ostensible ownership of the property, shall he deemed the true owner so far as may be necessary to protect those who have dealt with him 'upon the faith thereof;' that is, upon the faith, induced by the usual indicia of title, that he was the true owner of the property. The second section of the British statute, which answers very nearly to the third section of our own, contains a proviso which expressly saves the rights of the true owner where the pledgee had notice that he was dealing with an agent; and our statute, though framed in a different manner, was evidently designed to produce the same result. It is impossible to suppose that the legislature intended to enable the factor to commit a fraud upon his principal by pledging or obtaining advances upon the goods for his own purposes, when the pledgee or person making the advances knew that he was not dealing with the true owner.' Stevens v. Wilson, (1844,) 6 Hill, 512, 514; S.C.. in court of errors, (1846,) 3 Denio, 472; Warner v. Martin, (1850), 11 How. 209, 228; Covell v. Hill, (1852), 6 N. Y. 374, 380; Cartwright v. Wilmerding, (1862,) 24 N. Y. 521, 534; Dows v. Greene, Id. 638, 642. See, also, Howland v. Woodruff, (1875,) 60 N. Y. 73, 79, 80; First Nat. Bank v. Shaw, (1874,) 61 N. Y. 283, 301.
If the legislature of Missouri had adopted the words of that provision of the New York factors' act, the meaning of which had been thus settled on full consideration by the highest courts of that state and by this court, there would be the strongest ground for holding, in accordance with a familiar canon of construction, that it had enacted those words with that meaning. Cathcart v. Robinson, 5 Pet. 264, 280; McDonald v. Hovey, 110 U.S. 619, 628; S.C.. 4 Sup. Ct. Rep. 142; Com. v. Hartnett, 3 Gray, 450; Scruggs v. Blair, 44 Miss. 406; Wiesner v. Zaun, 39 Wis. 188, 205.
But the statute of Missouri of March 4, 1869, differs widely, in language and in purpose, from the New York factors' act of 1830, and was apparently derived, through sections 6 and 9 of the Missouri statute of March 10, 1868, from the statute of New York of 1858, c. 326, entitled 'An act to prevent the issue of false receipts, and to prevent fraudulent transfers of property, by warehousemen, wharfingers, and others,' as amended by the statute of that state of 1859, c. 353, extending its provisions to bills of lading. None of these provisions of the Missouri statutes are limited or even addressed to factors or other agents authorized to sell the goods of their principals, and intrusted for that purpose with the possession either of the goods, or of warehouse receipts, bills of lading, or other similar documents in which such agents are named as consignees. But their leading object is to regulate the manner and effect of transferring warehouse receipts and bills of lading by indorsement.
By section 6 of the statute of Missouri of 1868, (following almost word for word the statutes of New York of 1858, c. 326, § 6, and 1859, c. 353,) it was enacted that warehouse receipts or bills of lading 'may be transferred by indorsement thereon; and any person to whom the same may be transferred shall be deemed and taken to be the owner of the goods, wares, merchandise, grain, flour, or other produce or commodity therein specified, so far as to give validity to any pledge, lien, or transfer made or created by such person or persons,'-that is, by the indorsee before mentioned; and by section 9 warehouse receipts and bills of lading were made 'negotiable by indorsement in blank, or by special indorsement, in the same manner and to the same extent as bills of exchange and promissory notes.' Laws Mo. 1868, pp. 12, 13.
By section 3 of the statute of 1869, those sections of the statute of 1868 are repealed. But section 1 of the later statute substantially re-enacts section 9 of the earlier one, substituting for the words 'by indorsement in blank, or by special indorsement,' the words 'by written indorsement thereon and delivery,' and omitting the words 'and to the same extent;' and section 2 re-enacts section 6, with the substitution, for the words 'by indorsement thereon,' of the words 'by indorsement in writing thereon, and the delivery thereof so indorsed,' and, for the words 'by such person or persons,' of the words 'thereby, as on the faith thereof.' Laws Mo. 1869, p. 91.
The principal provisions of the statute of 1869, then, as to all warehouse receipts and bills of lading, (except those which have the words 'not negotiable' plainly written or stamped upon their face,) are-First, that they are 'made negotiable by written indorsement thereon and delivery, in the same manner as bills of exchange and promissory notes;' and, second, that any person 'to whom the same may be transferred shall be deemed and held to be the owner of the goods,' 'so far as to give validity to any pledge, lien, or transfer, given, made, or created thereby, as on the faith thereof.'
The first provision, while it doubtless gives the indorsee the right to sue thereon in his own name, does not, for the reasons fully stated by Mr. Justice STRONG in delivering the judgment of this court in Shaw v. Railroad Co., 101 U.S. 557, attach to such an indorsement of the symbol of property the same effect which the common law gives to the indorsement of a bill of exchange or promissory note for the payment of a sum of money; nor confer upon persons making, upon a bill of lading indorsed in blank by the owner, an advance of money to a subsequent indorser whom they have reason to believe not to be the owner, the right to hold the goods against the true owner.
The second provision does not appear to have been brought to the notice of this court in that case, and presents more difficulty. It differs from the provision of the factors' act of New York, construed by the courts of that state and by this court in the cases before cited, in several important particulars: (1) Any person 'to whom the same may be transferred [instead of any person by whom it is transferred] shall be deemed and held to be the owner.' (2) The ensuing qualification is, 'so far as to give validity to any pledge, lien, or transfer, given, made, or created thereby,' which last word cannot possibly be referred to anything but the transfer aforesaid. (3) The words 'as on the faith thereof' follow directly afterwards, without any intermediate mention of advances made by the transferee. In short, the New York factors' act declares that any agent intrusted with the possession of goods, or of the symbol thereof, shall be deemed to be the true owner, so far as to give validity to a pledge made by him to another person for advances made by the latter 'on the faith thereof;' but the Missouri statute only declares that an indorsee of the symbol of property shall be deemed to be the owner so far as to give validity to any pledge made to him by such indorsement 'as on the faith thereof.' The difficulty arises from the introduction of the words 'on the faith thereof,' borrowed from the factors' acts, into a statute relating to the negotiability of warehouse receipts and bills of lading, without sufficient regard to the difference in the terms and the objects of the two classes of statutes.
It may well be that, upon a view of the whole provis on, it protects only bona fide indorsees, (Whitlock v. Hay, 58 N. Y. 484, 487; Steiger v. Third Nat. Bank, 2 McCrary, 494, 498; S.C.. 6 Fed. Rep. 569. But it is by no means clear that the mere fact that the indorsee of the bill of lading or warehouse receipt knows that the indorser is a factor, and holds the goods as such, is sufficient proof of bad faith. Under the English factors' act of 5 & 6 Vict. c. 39, extending the provisions of the act of 6 Geo. IV., and protecting those advances only which are 'made bona fide, and without notice that the agent making' the pledge 'has not authority to make the same, or is acting mala fide in respect thereof against the owner' of the goods, it has been held by the highest authorities that knowledge that the agent making the pledge is a factor, without further notice that he is acting mala fide and beyond his authority, does not deprive the pledgee of the protection of the statute. Navulshaw v. Brownrigg, 1 Sim. (N. S.) 573; S.C.. 2 De Gex, M. & G. 441; Vickers v. Hertz, L. R. 2 H. L. Sc. 113; Kaltenbach v. Lewis, 10 App. Cas. 617. Yet it may be doubted whether receiving, from persons known to be factors, and to hold property as such, a pledge of the symbols of the property to secure the payment of the general balance of their bank-account with the pledgee, is consistent with good faith.
We have considered the question of the effect of the words 'on the faith thereof,' as used in Missouri and elsewhere, at some length, because of the large space devoted to it in the arguments of counsel, and in order to put the whole matter in a clearer light. But it is not necessary to express a decisive opinion upon the meaning of those words as they stand in the Missouri statute of 1869, because, upon a narrower ground, it is quite clear that that statute affords no protection to the plaintiff. That statute applies only to transfers of warehouse receipts and bills of lading by 'indorsement in writing thereon, and the delivery thereof so indorsed.' The finding of facts contains this statement: 'It is not shown whether or not the bills of lading or the warehouse receipts, or any of them, were indorsed in writing by J. H. Dowell & Co., or by any one, when transferred to the bank; there being no evidence on this specific matter.' The want of any evidence upon this point is perhaps to be explained by the facts, also found and stated, that, upon the delivery of the warehouse receipts to the bank, the bills of lading were surrendered and canceled, and that the warehouse receipts ran to bearer, and were therefore probably not indorsed. But, whatever be the explanation, the fact remains that it was not proved, and cannot be presumed, that either the bills of lading or the warehouse receipts were indorsed in writing as required by the statute; and no better title passes by a transfer of the symbols without such indorsement than by a delivery of the goods which they represent. Rice v. Cutler, 17 Wis. 351, 358, 359; Hirschorn v. Canney, 98 Mass. 149; Erie & Pacific Dispatch v. St. Louis Cotton Comp. Co., 6 Mo. App. 172; Fourth Nat. Bank v. St. Louis Cotton Comp. Co., 11 Mo. App. 333.
The decision in Price v. Wisconsin, etc., Ins. Co., 43 Wis. 267, on which the plaintiff much relied, was based both upon a warehouse receipt act differing from that of Missouri, in allowing the documents to be transferred 'by delivery, with or without indorsement,' and in not containing the words 'as on the faith thereof;' and also upon other grounds inconsistent with the judgments of this court in Warner v. Martin and Shaw v. Railroad Co., before cited.
The statute of Missouri of March 28, 1874, affixing a heavy penalty to the negotiation or pledge of bills of lading or warehouse receipts by an agent or consignee, without the written authority of the owner or consignor, does not change the law as to the validity of the transfer as betwee individuals. A transfer by an agent that before was valid, as between his principal and his transferee, is not invalidated by the statute. Gardner v. Gager, 1 Allen, 502. And with even stronger reason a transfer that was wholly invalid before, is not rendered valid by being made a criminal offense. The proviso that any consignee or agent, lawfully possessed of a bill of lading or warehouse receipt, may pledge it to the extent of raising sufficient means to pay charges for storage or shipment, or for advances drawn for by the owner or consignor, has no application to this case; because this pledge was not made for either of those purposes, but to secure the factors' own debt to the pledgee.
Factors having no power, by the law of Missouri, to make a pledge of the goods of their principals by a transfer, without indorsement in writing, of the bills of lading or warehouse receipts, the finding of the circuit court that the transactions between the factors and the plaintiff 'were all according to the general usage of trade between banks and cotton factors at St. Louis,' cannot aid the plaintiff; because the usage attempted to be set up was not shown to have been known to the defendants, or to other owners of cotton; and because it was contrary to law, in that it undertook to alter the nature of the contract between the factors and their principals, which authorizes them to sell, but not to pledge, and in that it would sustain a pledge by a factor of the goods of several principals to secure the payment of his own general balance of account to a third person. Barnard v. Kellogg, 10 Wall. 383; Irwin v. Williar, 110 U.S. 499; S.C.. 4 Sup. Ct. Rep. 160; Newbold v. Wright, 4 Rawle, 195; Lehman v. Marshall, 47 Ala. 362; Leuckhart v. Cooper, 3 Bing. N. C. 99; S.C.. 3 Scott, 521, and 2 Hodges, 150; Robinson v. Mollett, L. R. 7 H. L. 802.
Nor is the further fact found, that Dowell, the active member of the firm of J. H. Dowell & Co., the factors, was also a partner with the defendants in the working of the plantation, at all material, because he had not been held out by the defendants as the owner of the property, or as authorized by them to dispose of it otherwise than as a factor, and was not understood by the plaintiff to be acting in any other capacity. Rogers v. Batchelor, 12 Pet. 221; Locke v. Lewis, 124 Mass. 1.
Although the general relation of a bank to its depositor is that of debtor and creditor, yet when, as in this case, a factor, holding property in trust for his principal, transfers it to a bank which has notice of the capacity in which he holds it, the principal may assert his right in the property against the bank, either by independent suit, or by way of defense to an action by the bank against him. The defendants in this case were therefore entitled to have the proceeds of their property, so received by the plaintiff, applied to the payment of the note in suit. National Bank v. Insurance Co., 104 U.S. 54; Baker v. New York, etc., Bank, 100 N. Y. 31, 2 N. E. Rep. 452; St. Louis Nat. Bank v. Ross, 9 Mo. App. 399. As those proceeds are found to have been more than sufficient to pay and satisfy this note and all other charges of the factors against the defendants, the plaintiff cannot maintain this action.
All the facts of the case being ascertained by the special finding of the court below, as they would be by the special verdict of a jury, there is no reason for awarding a new trial, but there must be a general judgment for the defendants. Fort Scott v. Hickman, 112 U.S. 150; S.C.. 5 Sup. Ct. Rep. 56.
Judgment reversed, and case remanded to the circuit court, with directions to enter judgment for the original defendants.

## Notes

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