Case Name: Laussatt against Lippincott and another
Court: Supreme Court of Pennsylvania
Jurisdiction: Pennsylvania
Decision Date: 1821-03
Citations: 6 Serg. & Rawle 386
Docket Number: 
Parties: Laussatt against Lippincott and another.
Judges: 
Reporter: Reports of cases adjudged in the Supreme Court of Pennsylvania (Sergeant & Rawle)
Volume: 6
Pages: 386–394

Head Matter:
Laussatt against Lippincott and another.
March.
A factor cannot pledge the goods of for SlTowo * debt; but if a broker^tí/86 're°deRv°red by his principal with power to sell, deliver, andreceive payment, deposit them, in the usual course of business, with a commission merchant, connected in business with a licensed auctioneer, who advances his notes thereon, the deposit binds the principal, who cannot recover the value of the goods in an action of trover.
UPON the trial of this cause before Duncan, J. at Nisi , ^ _ ,.x . , ¶ . n Prtus, m April, 1820, it appeared to be an action oí trover f°r a quantity of coffee, which it was agreed was the property of the plaintiff, who, in the month of March, 1816, employed William Harlan, a merchandise broker, to sell it. The coffee was P^aced in stores, the keys of which were in the power of Harlan. The plaintiff’s orders were not to'sell at less than 27 cents a pound. This was the only restriction. The authority of Harlan was to sell, deliver, and receive payment. The defendants were commission merchants, connected in business with John Humes, a licensed auctioneer. On the 15th April, 1816, Harlan delivered 45 bags of the plaintiff's coffee to the defendants to be sold at auction, without limitation of price, and at the same time received from them their note for 1300 dollars, payable in sixty days. On the 17th of April, he delivered to them more of the same coffee, on the same terms, and received their note for 1300,dollars, at sixty days. On the 20th April, he delivered to them 45 bags more on the same terms, and took their note at sixty days, for 1700 dollars; and on the 18th May, he delivered to them another parcel of the same coffee, on the same terms, and received their note at sixty days for ispo dollars. Harlan did not inform the defendants to whom the coffee belonged, nor did they ask him. He had been accustomed to deal with them in this way for four or five years to a very considerable amount. The plaintiff understood from Harlan, that he had sold his coffee ; he paid him seven or eight hundred dollars, and made excuses for not paying more. Part of the coffee delivered to the defendants was sold by .them for less than 27 cents a pound ; part remained unsold, and was demanded by the plaintiff after it was discovered that it was in the possession of the defendants, and that Harlan had failed. The defendants refused to deliver it, saying that they knew no other owner than Harlan.
On the trial of the cause, evidence was given by the defendants tending to prove an usage for merchandise-brokers to sell the goods of their principals at public auction, and to receive part of the price in advance in cash or notes at the time of depositing the goods. The plaintiff gave evidence in contradiction of this usage, and the Judge gave it in charge to the jury, that if they should be of opinion that the usage existed, and that in this case the coffee was not pledged, but sold, the verdict should be for the defendants.
The jury found for the defendants, and the case now came before the Court on a motion by the plaintiff for a new trial.
kitlera and C. J. Ingersoll, in support of the motion for a neff trial.
This is the case of a factor who has pledged the goods of his principal, which, by law, he .cannot do. Harlan was a merchandise-broker, and the only authority he received was, to sell, deliver, and receive payment. In this character, alone, he was known as well to the defendants as to the plaintiff, which is proved by the whole course of the transaction. The limited and qualified possession which he had of the goods, was in his capacity of broker.' They were not in his store, and though he had access to that in which they were deposited, and had a right to remove them when sold, he did not even keep the key of it. The weighmaster's charge was against the plaintiff, and was paid by him. There was not a single circumstance to make Harlan the apparent owner of the property. The defendants knew that he was a broker, and that the coffee did not belong to him. Whether, therefore, the transaction between them was a sale or a pledge, is of no consequence, because they had no right to purchase goods which they knew did not belong to the seller, or with respect to which, there was at least enough to put them on inquiry. But, in fact, the coffee was not sold to the defendants; it was pledged to them, and they made advances on the deposit. A pledge is the delivery of goods in security for money lent. 1 Bac. Ab. 369. This is exactly what took place with respect to the goods in question. There was no contract for sale; no price stipulated. The receipts given by Harlan to the defendants speak of goods deposited for sale, and there cannot be a doubt that Harlan would have had a right to redeem them on paying the amount of the notes and the defendants’ commissions. What is the law in relation to this subject ? It is clear, that a factor cannot pledge the goods of his principal. In D’Aubigny v. Duval, S D. id E. 604, a factor deposited the goods of his principal with A. as a security for his own debt. It was held, that the principal might recover the value of them in trover against the pawnee; and Buller, J., stated the general rule to be, that a factor cannot pawn the goods of his principal at all. And in Newsom v. Thornton, 6 East. 17, Lord Ellenborough holds similar language. This established principle forms the basis of a great multitude of decisions. Skinner v. Dodge, 4 Hen. id Mun. 432. Martini v. Coles, 1 Maulé id Selw. 140. Solby v. llathbone, in note to Cochran v. Irian, 2 Maulé £s? Selw. 301. Van Amridge v. Peabody, 1 Mason. 440. De Bouchet v. Goldsmith, 5 Ves.jr. 211. Baring Correy, 2 Barn. Aid. 137, 15 East. 4*07. Whitaker, on Liens, 136,7. Per Ld. Mansfield, in Wright v. Campbell, 4 Burr. 2050.
But whether the act of Harlanwas a pledge or not, it was a breach of instructions, and, therefore, vested no property in the defendants. An authority to sell, and delivery of possession by the principal to the factor, confer no right on the factor to act as owner of the goods. To the defendants he did not appear in the light of owner, for he had no indicium of property about him. He was an agent for a special purpose, and a special agency like this does not admit of substitution. Harlan, therefore, could not delegate to the defendants his power to sell the goods, nor were they placed with them for that purpose. A sale at auction could not have place without the agency of Humes, and his name does not appear in any part of the transaction.
The defendants, however, rely on an alleged usage for merchandise-brokers to dispose of the goods entrusted to them in the manner adopted in the present instance, and the Court admitted evidence of it. This supposed usage it is difficult to comprehend. It is neither a common law, nor a commercial usage, but a course of dealing limited to a few individuals, which it is said may govern the contract and render that valid, which otherwise would be invalid. If an usage contravenes the law, as this certainly does, it cannot prevail. In some instances, indeed, an usage is permitted to explain a contract, but never to control the law. Frith v. Barker, 2 Johns. 327. Durham v. Gould, 16 Johns. 367. Preston v. De Forest, Id. 159. Sterritt v. Bull, 1 Binn. 237. An usage, to have any force, must be general, honest, fair, and not injurious to the public ; it must be clearly proved too, and not depend on the opinions of witnesses. Trott v. Wood, 1 Gall. 443. Winthrop v. Union Insurance Company, 2 Marsh. 707, note. (The counsel went into a minute examination of' the evidence, through which it is unnecessary to follow them, to shew that no legal usage had been proved.)
Chauncey and Binney against the motion.
The main ground of the opposite argument is, the application of the rule of law,.that a factor cannot pledge the goods of his principal, to the act of the broker in the present instance, which, it is' insisted, constituted a pledge. This principle was first ruled at Nisi Prius, by Lee, C. J. in the case of Patterson v. Task, 2 Sir. 1178, in which the goods were pledged, for the debt of the factor. The next case in which it occurred was that of D’Aubigny v. Duval, 5 D. E. 604, where, without much examination, it was taken for granted. In later case's, and on more mature consideration, the soundness of the principle has been doubted, at least in the unqualified sense in which it has been laid down. The cases; however, by which the principle is attempted to be supported in reference to this case, do not apply. In Van Amridge v. Peabody, the factor pledged the goods for a debt of his own, and it was known that they were consigned to him for sale by the plaintiff. In Skinner v. Dodge, the goods were expressly pawned by the factor. In Baring v. Correy, the question was, whether the defendant could set off a debt of the broker against the owner of the goods; besides which, there was negligence in the purchaser, and the case turned upon the point that the defendant ought to have known he was dealing with a factor, from the manner in which the business was done. None of the cases prove that a factor may not pledge in the usual course of business. This is all it is necessary to contend for, and this he certainly may do. Evans v. Pollen, 2 Gall. 13. Usage of trade always governs. Cochran v. Irian, 2 Maulé Sehv. 302, note. Martini v. Poles, 1 Maulé £s? Sehv. 147. Floyer v. Edwards, Cowp. 112. Scott v. Sermon, Willes, 406. M‘Kinstry v. Pearsall, 3 Johns. 319. Halsey v. Brown, 3 Day, 346. 2 Sm. 157. A general usage, such as enters by implication into a contract, is not contended for, but a course of business only, from which the extent of the authority committed to the agent may be inferred. The reason why a factor is not permitted to pledge is stated by Bailey, J.,.in Shipley v. Hyman, iMaule & Selw. 493, to be, because a power to pledge is not within a power to sell. That reason does not apply to this case. An authority to sell involves a power to sell in such a manner, and on such terms as are usual, though not universal. What the broker did in this case was within his power, though he abused it. When an agent acts within the apparent power given to him, his principal is bound, and any private instructions he may~ have received will not affect a purchaser who trusts to the general ostensible power. Thus, if his instructions are to sell at a limited price, and he sells below it, the sale is good. This is strongly laid down in Pickering v. Burk, 15 East. 38, where A. purchased hemp through a broker, and suffered a transfer to be made in the books of the wharfinger in the name of the broker, which gave an implied power to the broker to sell the hemp. If, therefore, Harlan did pledge the coffee, in the usual course of business, and in prosecution of his power to sell, the pledge was valid. But the coffee was not pledged. The transaction was totally of a different character, and much will depend on understanding its true character. Harlan's occupation did not resemble that of an English broker. He was a commission merchant, whose mode of doing business differs essentially from that of a broker in England. There the broker cannot pledge, because that forms no part of the exercise of the power to sell, with which he is entrusted. Here the deposit with the defendants was connected with the broker’s power of sale, and was made in the course of the exercise of that power. It is said, that the goods were pledged, because Harlan had a right to redeem them. This we deny. He had a right to stop the sale on payment of the amount of the notes and commissions, but not a right of redemption, according to the proper signification of the term. The coffee was not pledged, but deposited in the usual course of business for sale.. It was not a sale to the defendants, but a sale in which they were employed, and gained alien on the goods to the amount of their advances. This arrangement was assented to and sanctioned by the plaintiff. He gave Harlan the possession of, and control over the coffee. He knew that it had been weighed and part of it sold, to which he made no objection, but, on the contrary, received 300 dollars on account of the sales, and permitted him to retain possession of the remainder. More coffee was after-wards sent to the defendants, and the plaintiff received 500 dollars more on account of the price, without making any objection to the manner in which it had been disposed of. In conclusion, the transaction was withoutfraud on the part ofthe defendants, and in the usual course of business. The verdict was founded on these grounds, and ought not to be disturbed.

Opinion:
Tilghman C. J.,
delivered the opinion of the Court.
That a factor cannot pledge the goods of his principal for his own debt, seems to be too well settled to admit of a dispute. It was so' decided by C. J. Lee in Patterson v. Tash, 2 Str. 1178, at Nisi Prius, and that decision has been adhered to, though not without some reluctance. Indeed, it is no wonder it has been said by some modern Judges, that perhaps it would have been as. well if the law had been originally decided otherwise ; for certainly it bears extremely hard upon persons who deal with a factor, without a possibility of knowing that the goods do not belong to him. It would seem reasonable that the loss should fall on him who puts it in the power of the factor to deceive innocent persons who deal with, him, bona jide, and on valuable consideration. And there certainly is some inconsistency in the law which declares, that a factor cannot pledge the goods of his principal, and yet permits a purchaser, who buys the goods supposing them to be the property of the factor, to set off a debt due from the factor to himself; for the principle of caveat emptor, which avoids the pledge, would forbid the set off. But I am not for disturbing the law which has been settled, especially as it advances the commercial credit of the country, to afford strong protection to the property of foreigners sent here upon consignment. The reason why the factor is not permitted to pledge is, that his authority is only to sell. Anything not inconsistent with a general power to sell, he may do; he may sell for cash or on credit; he may receive in payment notes, or any kind of'property. And in the case of Wright v. Campbell, 4 Burr. 2046, Lord Mansfield was of opinion, that a bona jide transfer by the factor, in satisfaction of a debt due from himself, would have been good. After the verdict of the jury in the case before us, we must not consider the coffee of the plaintiff as having been pledgedhy the broker. We must take it to have been delivered to the defendants for the purpose of being sold, part of the proceeds of sale having been paid in advance by the defendants. It is one of those new kinds of business which commerce, in its endless varieties, is constantly producing. The counsel for the plaihtiff objected to the evidence of the usage ; and if its admission was improper, the verdict ought not to stand. But on what ground could the evidence have been refused ? There was no attempt to set up a custom in opposition to any principle of law. For, surely, a man violates no law, when he authorises his broker to deposit his goods with an auc 'tioneer, and on receiving part of their value in advance, to give to.the auctioneer an irrevocable po.wer of sale. Nor does the broker violate any law when he acts in pursuance of such authority, whether express or implied ; and this is the amount of the usage. This, though not an absolute sale, is very different from a simple pledge, and partakes more of the nature of a sale than of a pledge. Business to an immense amount has been transacted in this manner, and the usage being established, it follows, that when the plaintiff authoris-' ed his broker to sell, he authorised him to sell according to the usage, and when the defendants dealt with the broker, even if they had known that the coffee was not his own, they had a right to consider him as invested with power to deal according to the usage. If the plaintiff desired to keep any control over his property, he should have retained the possession of it, and not have suffered it to go into the hands of the broker, thus enabling him to exhibit to the world all the emblems of full power. Any collusion between the broker and the auctioneer would vitiate their transactions. But it was not incumbent on the auctioneer to make any inquiry about the owner,' unless there were some suspicious circumstances ; because persons who raise money by sending their goods to auction, often wish that their names should be concealed. The verdict, however, negatives all idea of fraud. No case exactly like the present, is to be found in the books ; but the reasoning of the Court in Pickering v. Burk, 15 East. 43, is not inapplicable. In that case, A, who had made a purchase of hemp, through B, his broker, .suffered a transfer to be .made in the books of the wharfinger, in the name of B. It was held, that this gave B an implied power to sell. " Strangers," says Lord Ellenborough, " can only look to the acts of the parties, and to the external indicia of property, and not to the private communications which may pass between a principal and his broker, and if a person authorises another to assume the apparent right of disposing of property, in the ordinary course of trade, it must be presumed that the apparent authority is the real authority." Now the jury have found that, in the ordinary course of business in this city, merchandise-brokers make sale of the goods of their principals in the manner in which this coffee was sold. Therefore, when the plaintiff trusted a known merchandise-broker with the possession of his goods for the purpose of sale, he impliedly gave him power to sell in the manner in which he sold, or, to speak with more strict propriety (though the jury call it a sale) the manner in which he deposited for the purpose of sale. No ill consequences can result from this implication of power. The owners 0f goods may always protect themselves by retaining the possession until they receive payment; while it will be out of their power to injure the auctioneers by investing brokers with the appearance, without the reality, of authority* I am of opinion, that a new trial should not be granted.
New trial refused.