Case Name: James S. Brander, and Hugh L. M'Kenna, Plaintiffs in error, v. William E. Phillips, and Henry Bell, trading under the firm of William Phillips and Company, and Rodah Horton, and Nathaniel Terry, Defendants in error
Court: Supreme Court of the United States
Jurisdiction: United States
Decision Date: 1842-01
Citations: 16 Pet. 121
Docket Number: 
Parties: James S. Brander, and Hugh L. M'Kenna, Plaintiffs in error, v. William E. Phillips, and Henry Bell, trading under the firm of William Phillips and Company, and Rodah Horton, and Nathaniel Terry, Defendants in error.
Judges: 
Reporter: United States Reports
Volume: 41
Pages: 121–131

Head Matter:
James S. Brander, and Hugh L. M'Kenna, Plaintiffs in error, v. William E. Phillips, and Henry Bell, trading under the firm of William Phillips and Company, and Rodah Horton, and Nathaniel Terry, Defendants in error.
B. and M‘K.,'merchants at New' Orleans, were the factors of P. and Company of Huptsvillé, Alabama, and made advances on cotton shipped to them. In August, 1.634, P. and Company were indebted to B. and M‘K.> one thousand three hundred' and fifteen dollars; and Williams, the- agent of B. and M‘K., agreed'with P> and Company, that B. and M‘K. would advance eight thousand dollars on bills tobe drawn between the 20th of April, and the.31st;of July, 1835, by P. and Company, and ■ any two of six persons named, among whom were Horton and Terry, two of the • defendants in this suit. Before July 31st, 1835, several shipments of cotton were made to B. and M‘K., by P. and Company, and severai bills were' drawn by them" jointly with Horton and Terry, and by others, without'them; all' of Which .were accepted by B. and M‘K. .These bills, with the advances before ma'dé, amounted to twenty-nine thousand seven hundred and ninety-five dollars', and the proceeds of the shipments were' twenty-two thousand four. hundred and sixty-dollars. B. and M‘K. applied Jjheee proceeds to the liquidation of the bills drawn. liy E, and Company, to the exclusion of those drawn by them jointly with Horton and Terry; and, as these bills .exceeded the proceeds of the cotton, they brought an action on a bill drawn June 4th, -1835, by P. and Company, and Horton and Terry,-amounting to three thousand dollars. The Circuit Court instructed the jury, that if they believed from, the .evidettqe, that at the maturity of .the bill, B. and M‘K. had sufficient funds of P, and Company to pay the bill, and Horton, and Terry to be accommodation drawers, and securities only, then, in the absence of any instructions from P. and Company in regard to the application of the funds, B. and M‘K. were bound to apply tliem to pay the bill, and could not hold them to pay a bill draw» on them by P. and Company only, which had been accepted by them, and was not then due. Held, . that the instructions of the Circuit Court were correct.
When a factor makes advances, or incurs liability on a consignment of goods, if there be r.o special agreement, he may sell the property in the exercise of a sound discretion, according to general usage, and reimburse himself out of the proceeds of the Sale, and the consignor has no right to interfere. The lien of the factor for advances and liabilities incurred, extends not only to the property consigned, but, when sold, to the proceeds in the hands of the vendee, and the securities therefor in the hands of the factor.
The acceptors of .the bill of exchange having, when the bill became due, funds of the drawers in their hands sufficient to. pay the same, the liability of the accommodation drawers was as completely, discharged, on the payment of the bill, as that of the principals.
IN error to the Circuit Court of the United States for the district of South Alabama.
The case, as stated ih the opinion of the Court, was as follows:
“Brander and M'Kenna,in 1833,1834,1835, were commission merchants at New Orleans, and acted as factors and agents for William E. Phillips and Company, of Huntsville, Alabama,, in the sale. of cotton, and made advances thereon. On ali sales they were to receive two and a half per cent, for commission, and the same amount for advances.
In August, 1834, Phillips and Company were indebted to Brander and M'Kenna, in the sum of one thousand three hundred and fifteen dollars and fifty-seven cents, for advances. On the 15th of the same month., John Williams, agent for Brander and M'Kenna, agreed to advance.Phillips and Company tie sum of eight thousand dollars on bills, to be drawn between the 20th of April, and the 31st July, 1835, by them, and ány two of six persons named; among whom were. R. Horton, and-N. Terry, two of the. defendants in error.-
Between the 15th of August, 1834, and the 31st of July,'lS35, several shipments of cotton w,ere made to. the plaintiffs by the defendants ;>and several bills-were drawn by them, some jointly with Horton and Terry; and others without them; all of which were accepted by the plaintiffs.
These bills, including the advances previously made, amounted to the sum of twenty-nine thousand seven hundred and' ninety-five dollars and sixty-five cents. The proceeds of the shipments of cotton to meet these advances, amounted to the sum of twenty-two thousand four hundred and sixty dollars and forty-three cents'.
■ The plaintiffs applied the proceeds of the-cotton to the liquidation of the bills drawn by Phillips and Company, to-the exclusion of. ihose drawn by them jointly with Horton and Terry; and as the 'acceptances exceeded the proceeds of the cotton, this action was commenced on a bill due .4th June, 1835, for three thousand dollars drawn, by the defendants.
On the trial, the Court instructed the jury that, if they believed from the evidence that, at the maturity of this bill, Brander and M'Kenna had sufficient funds of Phillips and Company in their hands to pay it, and believed Horton and Terry to be accommo dation drawers and'securities only, and knew this at the maturity of- this bill, then; in the absence of any instructions from Phillips and Company, in regard to the application, of the funds, Brander and M'Kenna were bound to apply them to-pay this biH, and could not hpld them to meet the payment of a bill drawn on them by Phillips add Company, which had been.accepted, but was not then due. And that.if, when, this bill became due, the funds of Phillips and Company-ip the hands of the acceptors were sufficient to pay it, the bill was extinguished, and recovery'could-not' be had on it.”
To this instruction an- exception was taken.;' arid the'jury having given a verdict for the defendants,-the plaintiffs prosecuted this writ of error.
The case was argued by Mr. Gilpin, for the plaintiffs in error; and by Mr; Crittenden, for. the defendants.
Mr. Gilpin, for the plaintiffs in' error.
The relation of Brander and M'Kenna with William E.'Phil-' lips and Company was strictly that of principals ánd agénts, or, factors.-. The former- had no interest of their own in the -cotton forwarded.. In performing this agency* the plaintiffs acted under two contracts, the nature ;and mutual obligations of which were well defined and understood. - Their general contract as agents arose* by legal implication, ..from the course of trade which had existed between them and Phillips and Company for a series of years. They received their cotton, sold it, made payments- and advances, and were allowed a certain commission. Their special contra ctj though relating to the same kind of business, was yet entered into for the particular benefit of Phillips, and Company^’ and on particular tergis. The object was to induce advances from Brander and M'Kenna, to the amount of eight thousand dollars, on a personal guaranty of certain individuals, independently of any security by shipments of cotton. To the extent of the probable security which such shipments would ‘ afford, they, were already willing jó' make, advances.'- This contract, therefore, could have no object, but to secure them,'if the whole'proceeds of the cotton .should not, in the end, cover the whole amount of the advances.
' Brander and M'Kenna, thus- being agents and factors, possessed, for their security, all the means which the law gives to persons in that relation; to these means they had a right to resort, to obtain payment of all that was due to them, either under the general or the special contract.
Now what, under' such circumstances, are an agent’s rights ? In the first place, he has a lien on the whole property, to cover his whole liability; as well debts that he has actually paid, as debts for which he is bound to provide. On the 1st June, 1835, the cotton on hand was not more subject to be appropriated to the liquidation of a bill of William E. Phillips and Company, Which Brander and M'Kenna had then actually paid, than of one not yet due, which they had accepted.- No principle is better settled than this, that an agent cannot be required to .apply property in his hands to a debt due, if he has also incurred a future liability. The property may be held by him for the latter, as well as for the former. If not, what agent would ever make advances ? When a principal sends forward goods to his factor, even though sufficient to meet advances then actually made, they-are not more applicable to those advances, -than to liabilities then incurred, but not actually due. This has been established by a current -of authorities. Huber. Prælect. lib. 20, t. B. -sec. 1, 3; Ex parte Deeze, 1 Atkyns, 229; Godin v. London Assurance Company, 1 Burr. 494; Kirkman v. Shawcross, 6 Durnford and East, 16; Walker v. Brick, 6 Durnford and East, 262; Stevens v. Robins, 12 Mass. 180; Jarvis v. Rogers, 15 Mass. 414; Allen v. Maguire, 15 Mass. 490; Jolly v. Blanchard, 1 Wash. C. C. R. 255.
If the property in the hands of the factor -was subject- to -be applied by him- to the latest of.his liabilities as well as to the earliest, is there a different rule in regard to the proceeds of that property? There' is certainly no reason why there .should'be. If it be right, for the factor to have security upoii the one, it is equally proper that he should have it-upon the other.- It is even more proper, because the objeot of the consignment is not merely to obtain advances, but also to háve sales made at anytime when the state of the market should fender it expedient. If the factor’s security were lessened by a sale; if the proceeds derived from the sale were held by him with a lien less éffective- for his security than the unsold, property, sales would never be made till the whole consignment was received. From the evidence in this case it is .apparent that Brander and M‘Kenna were to sell the cotton “ at their discretion;” their rights were not to be altered by the sale '; the price they received for the cotton remained in their hands, exactly as if it had been the cotton itself. Their lien on the one did not differ from their lien on the other. Ex parte Dumas, 2 Vesey, sen. 585; Kruger v. Wilcox, 1 Ambler, 252; Foxcroft v. Devonshire, 2 Burr. 936; Drinkwater v. Goodin, 1 Cowp. 251; Kinloch v. Craig, 3 Durnford and East, 122, 786; Atkinson v. Elliott, 7 Durnford and East, 376; Hammonds v. Barclay, 2 East, 227; Mann v. Shiffner, 2 East, 529; Haille v. Smith, 1 Bos. and Pull. 563; Houghton v. Matthews, 3 Bos. and Pull. 492; Cowell v. Simpson, 16 Vqs. 280 ; Hudson v. Granger, 5 Barn, and Aid'. 31; Colley **. Merrill, 6 Greenl. 50; Bradford v. Kimberley, 3 Johns. C. C. R. 434; Brown v. M‘Graw, 14 Peters, 495.
If then Phillips and Company could not themselves have directed the application of any portion of the cotton forwarded by them, or of its proceeds, to any particular liability which-Brander .and M'Kenna had incurred as their factors, the law will not certainly-direct such an application. It will only do so in cases where a party, might himself have done it. Brander and M‘Kenna had the right, on the ,4th of June, to appropriate the money, which was then, in their'hands as the proceeds , of the cotton, to' any liability due or to become due, which they had then incurred; Phillips and Company could not control the exercise of that right;’ the Court therefore will not do so.
. But, suppose- that the receipt by Brander and M‘Kenna of money derived from the sale of the cotton, in June, is to be considered as a payment to them; still, they never appropriated that payment to the account arisingvunder th,e special contract;-nor were they bound so to appropriate it. The evidence shows that they kept .their account of the advances to the amoúntiof eight thousand dollars under the special contract, separate and distinct from their genéral contract ;• in this sepárate account, they never gave a eredit for the -amount of thesé sales; it was rendered to Phillips and-Gompany, and such a credit never was. claimed by them; finally, one of the partners of that firm admitted, that the credit was properly applied to the general account, and although this admission was made after the dissolution Of tne partnership, yet it- is not the less competent evidence-of the fact. Wood. v. Braddick, 1 Taunt. 104; Lacy v. M'Neille, 4 DowL. and Ryl. 7, Nor were they bound by law to apply it to the 'special account; Phillips and Company having directed no application, it remained with Brander and M'Kenna to make it to one or-the other, at their-own option;, and especially might they so. make it as to provide 'for the debt which was least secured. Manning v. Weston, 2-Vern. 606; Goddard v. Cox, 2 Strange, 1194; Bodenham v. Purchas, 2 Barn, and Ald. 45 ; Peters v. Anderson, 5 Taunt. 601; Bosanquet v. Wray, 6 Taunt. 598; Kirby v. Marlborough, 2 Maule and Selwyn, 22 ; Simson v. Ingham, 2 Barn, and Cres. 65; Brewer v. Knapp, 1 Pick. 337; Dedham Bank v. Chickering, 4 Pick. 340; Blackstone Bank v.Hill, 10 Pick. 133; Hilton v. Burley, 2 New Hamp. Rep. 196 ; Cremer v. Higginson, 1 Mason, 324; United States v. Wardwell, 5 Mason, 85; Bainbridge v. Wilcocks, Bald. 538 ; Mayor of Alexandria v. Patten, 4 Cranch. 320; Field v. Holland, 6 Cranch, 27,
Mr. Critteñden, for the defendants in error.
No agreement was made between the plaintiffs iñ error and William E. Phillips and Company, that they should make advances on cotton to be shipped to them from Alabama. In 1834, an-agreement was made that bills should be drawn to the amount of weight thousand dollars, to be also signed by certain persons, and which Brander and M'Kenna .agreed to accept. No particular advance was made on any one of these bills; but as a bill or bills were drawn, cotton was to be shipped by William E; Phillips and Company, to furnish funds for payment. The contract of the drawers was, to furnish funds for the- payment, out of the proceeds of cotton, to pay the bill or bills when due. The Circuit Court of Alabama said, that if funds were so -provided, they should be applied to pay the bills as they became due; and they, denied the right of the plaintiffs in error to hold funds in then-hands provided by the drawers of the bills for their payment, for the purpose of paying bills which might become due subsequently; and by leaving the bills due unpaid, subject the'endorsers to liability. The jury have found that when the bill on which this suit was brought became due, funds were in the hands of the acceptors sufficient to pay ihem-; and this is conclusive.
The bill on which this suit was instituted, was also signed by Horton and Terry, and'was payable in nine months, according to the contract with Williams, the agent of Brander and McKenna. The funds in their hands when the bill became due, should have beer, applied to pay the bill, without specific or express instructions. . The-obligation to make this application, .was implied by. the circumstances. On the deposit of the money in the hands of another, particular orders for its application are not required. Implied orders áre equivalent. In this case, the application of the funds to pay the first bill becoming due, wa?s ordered by the bill itself. .
There is another consideration in this case which the. Court will notice. The quesfion here is one in which sureties are interested. The endorsers.of the bill are called upon to pay a. bill, for the payment of which ample funds were in the hands of the acceptor when it became due; and it is asked to apply those funds .to debts becoming due afterwards, with which they had no connection.-
Can the drawers of the bill withhold the funds in their hands until' the final adjustment of accounts between them and the-drawers? This would be most ineiquitable, and against the express terms of the 'acceptance. The acceptance oh the part of the drawees, was a contract to pay the bill when it should become due: the contract on the.part of the’ drawers, was to furnish funds to enable them to pay it when due.. The contract of the latter has been performed; and shall.the contract of the former remain unexecuted, to the injury of the other drawers, who had no other. connection with the parties but upon the bill ?
This court have said, in other cases, that whenever there is an account between parties and rests; the application of funds.in the hands of the “party to whom money is due, is to be made to the period of the rests in the account. Outstanding items in the account are not to operate to prevent such appropriations. Cited, Bell v. Morrison, 1 Peters, 351.
The question in this case, is only on the instructions of the Court; were they correct, if the facts were so found by the jury?

Opinion:
Mr. Justice M'Lean
delivered the opinion of the Court.
'This is a case on error from the Circuit Court for the district of South Alabama.
Brander and McKenna, in 1833, 1834, 1835, were commission merchants at New Orleans.; and acted'as factors and agents of William.E. Phillips and Company, of Huntsville, Alabama, in the sale of cotton, and made advances thereon.- On all sales they were to receive two and a half per cent.- for commission, and the Same amount for advances.
In August," 1834, Phillips and Company were indebted to Brander.. and McKenna, in the sum of -one thousand three hundred and fifteen dollars and fifty-seven cents, for. advances. On the 15th of the same month. John Williams, agent for Brander- and M'Kenna, agreed to advance Phillips and Company the sum of eight thousand dollars on bills, to be drawn between the 20th of April, and the 31st of July, 1835, by them, and any two. of pix persons named; amorig whom were R. Horton, and N. Terry, two:of the defendants in error..
Between the 15th of August, 1834, and the 31st of July, 183., several shipments of cotton were made to the plaintiffs by the defendants, and several bills Were drawn by-them, some-jointly with Horton and Terry, arid others without them; all of which, were, accepted by the plaintiffs.
Thesé bills, including the advances previously made, amounted to the sum of twenty-nine thousand seven hundred and ninety-five dollars and sixty-five cents. The proceeds of the shipments of cotton to mee.t thése advances, amounted to the sum of twenty-two .thousand four hundred and sixty dollars and forty-three cents.
'The plaintiffs applied the proceeds of the cotton to-the liquidation of the bills'drawn by Phillips, and Company, to the exclusion of those drawn by. them jointly with'Horton and Terry; ' and as me acceptances exceeded the proceeds of the cotton, this action was commenced on a .bill due 4th June, 1835, for'three thousand dollars drawn by the defendants.
On the trial, the Court instructed the jury that, if they bélievéd from the evidence that; at the maturity of. this bill, Brander and Mdferina had sufficient, funds of Phillips and Company hi their hands to. pay it, and believed Horton and Terry to be accommo dation drawers and securities only, and knew this at the maturity of this bill;.then, in the absence of any instructions from Phillips and Company, in regard to the application of the funds, Brandar and M'Kerma were .bound to apply them to pay this bill, and could not hold them- to meet the payment of the bill drawn oii them by Phillips and Company, which had been, accepted, but was not then .due.. And that if, when this bill betiame due, the-funds of. Phillips and Company, in the hands of the acceptors, were sufficient to pay it } the bill was extinguished, and recovery could not be had on it.
- To this -instruction an, exception was taken, and- the plaintiffs in error contend, that they had a right to hold , the cotton-and .it» proceeds to meet- all outstanding liabilities, which they had -incurred on account of Phillips and pompany; and, that they had a right so to. marshal the securities, in the absence of any expresa agreement on the subject, as to save themselves from loss.
. Where, a factor makes advances, or incurs liabilities on a consignment of goods, if there be no special agreement,, he may. sell the property in. the - exercise óf a sound discretion, according to -general usage, and reimburse himself out of the proceeds of. the sale; and the consignor has no right to intertere. The lien ofa factor for advances and liabilities incurred, extends not only to. the property consigned, but, when sold, to the proceeds of the sale in''the'hands of the vendee, and the securities thetefor in.,the hands of the factor. Drinkwater v. Goodwin, Cowp. 251; Haughton v. Matthews, 3 Bos. & Pull. 489; Brown v. M'Gran, 14 Peters, 495; Story on Agency, 380.
But the case under consideration does not turn upon this principle. The liabilities of the plaintiffs exceeded the- proceeds of the property consigned: and,the question to be answered'is, whether they can claim a reimbursement-from .Horton and Terry, who were bound jointly with Phillips and Company, in certain bills amounting to eight thousand dollars.. Other bills to a much larger amount, drawn by Phillips and Company, without security, were accepted By the plaintiffs, several .of which- were not due, when the bill in controversy became payable: and the instruction of the Circuit Court to the jury was,-if at that time the plaintiffs had in their hands funds of Phillips, and Company, of a sufficient amount to pay this, bill, and they knew that Horton aq.d Terry .-were. accommodation drawers, .they were bpund to pay it.
When the• plaintiffs accepted this and the other bills, were they not aware of their respective amounts and, the times they became due? And were they not hound to take up the bills .at maturity? Of this there can he"no doubt.. The- bills drawn subsequently to Vthe one under consideration, amounted to fifteen thousand dollars, all of which were accepted by the plaintiffs; Were these, acceptances made, to any extent, on the credit of Horton and Terry? Thiá has not been contended. On what ground then can this action- be sustained? The application pf, payments by -the creditor, where no direction is given by the debtor, has no' relation to the present.casé.
' Had the bills become .payable at the sanie tipie, on acceptances made on the same day; the plaintiffs might .have 'insisted on applying the funds in their hands td the payment of the notes without securities.- But this-would' have been-a very different •case from the onte now. before us. After having accepted the bill under consideration, payable at a time stated, the plaintiffs accepted other hills, paykblbat a more - remote period. Now, the contract/by the acceptors was, that they would pay these bills as they respectively became due. And .this they were bound tó do, so long as the funds .of the consignors in their hands remained unexhausted. A bill became extinguished so soon Us if was paid by the plaintiffs; with the funds of Phillips and Company;' And this principle applies as strongly to those bills signed by the, accommodation drawers, as to others. -
Could the plaintiffs .lay a foundation for a recovery,against Phillips and Company,'by showing payment of a hill drawn by them, out of their own funds ? . This would not. be pretended. And yet this. is the principle contended-' for in the present case. The liability-of the accommodation drawers was as completely discharged, on the payment of the hill in question, as that of- the , principals. .
The relation of factors which the plaintiffs bore-, to Phillips and Company, gave them no power to vary their acceptances; The cotton consigned was to meet the payments of the hills, as they became due. This was known to Horton and Terry; .and it- may well be supposed that their - liability was incurred in-virtue of this arrangement. But the plaintiffs, by. appropriating the proceeds of the .cotton to the payment of future liabilities, have violated their contract,-endeavoured to defeat the just reliance of.the. sureties, and charge them with the payment ,of the hills which, they.guarantied. This tlie plaintiffs cannot do. It would he a great hardship, .if not a'fraud on the sureties.. No lien, can be regarded or enforced under such circumstances. The lien of a factor depends upon legal principles, founded on equitable considerations, and, can he. held valid on no other grounds.
We think that the instruction of the Circuit Court was correct ; and the judgment is, therefore, affirmed.'
This 'cause .came .on to be'heard on the transcript,of the record from the Circuit Court of the United States, for the southern' district of Alabama, and Yas -argued by counsel.'' consideration whereof, it js now here ordered'and ádjudgéd-by this.Court,;that the judgment of- the - said Circúit Court in this' cause be, and thé same.is hereby,.affirmed, with'costs.