Greely v. Bartlett , 1 Me. 172 ( 1821 )

Mellen C. J.

afterwards delivered the opinion of the Court as follows :

The plaintiff as the agent and factor of the defendant, having sold his part of the ship Jewel to Thurston on credit, and received his promissory note in payment; and having sold the note, and indorsed it, to raise money to pay the defendant’s drafts ; and having been obliged to pay the amount to the in-dorsee, in consequence of the failure of Thurston before the note became due; in this action demands the sum thus paid, as money paid and advanced to the defendant’s use. A verdict having been returned in favour of the plaintiff for that amount and interest, the defendant now moves that the verdict should be set aside and a new trial granted.

The claim of the plaintiff to reimbursement of the sum thus-advanced is resisted by the defendant on two grounds.

1. Because the plaintiff has voluntarily assumed the debt which has been lost by the failure of Thurston, and made himself responsible.

2. If not;—yet his conduct, as factor, has been such, and he has been guilty of such neglect in his agency with respect to the transaction, that the law renders him liable to sustain the loss himself.-If either of these propositions be supported, the defendant’s motion must prevail.

The relation subsisting between principal and factor is of such a nature as necessarily to require great confidence on one part; and great care, attention, and fidelity on the other. Without all these, it is impossible that the extensive concerns of the commercial part of the world can be managed with advantage, or even preserved from confusion. Hence the importance of continuing, in their full force, those legal principles which have been established for the protection of the rights of both parties, and of third persons who may be engaged with such factor in the transaction of commercial business.

Some of these general principles may be stated.—By the law-merchant, a factor may sell the goods of his principal on a reasonable credit; unless he is restrained from so doing, either by his instructions, or by the usage of the trade to which the transaction relates.

A sale made under such circumstances is at the risk of the principal; and if a loss happens, he must bear it.

But he is not authorized to give credit, except to such persons as prudent people would trust with their own property.

He may receive securities in his own name, for goods sold, without subjecting himself to liability merely by so doing.

But he must deliver such securities to his principal if he demand them;—or, in case of loss, he will be answerable as for a breach of trust, though in such case the principal should pay him his usual commissions.

If through carelesness, or want of proper examination and inquiry, he give credit to a man who is insolvent; should a loss happen, he must indemnify the principal.—And if a debt be lost, by the inattention of the factor, in omitting to collect it when in his power so to do, he will be liable for it.

He must be honest and faithful, and must give his principal all necessary or useful information respecting the concerns of his agency.

Many of these principles are applicable to the case under consideration.

The first inquiry is, whether the plaintiff was authorized to sell the defendant’s part of the vessel on credit ?—He was not forbidden by his instructions; nor is there any proof in the case tending to shew any usage forbidding it. On the contrary he had directions to sell the defendant’s part “ as he thought proper”,—and to^wse his own judgment”.—Under this power the plaintiff was fully justified in selling on credit as he did ;—the fair value seems to have been obtained ; and the credit of Thurs-ton at the time of the sale being perfectly good, the plaintiff was warranted in receiving his personal security. Indeed little or no objection is made to the plaintiff’s conduct on this account.

But it is contended that, as the plaintiff took the note from Thurston payable to himself, and did not disclose to his principal the name of the purchaser nor the particular terms of the contract of sale, for some months,—he must be considered as the surety of Thurston—ns guarantying the debt, and assuming on himself any eventual loss of it. But the manner in which the note was made payable can be of no importance in this instance. The cases cited by the plaintiff ⅛ counsel, and the case of Goodenow v. Tyler, 7 Mass. 36. are direct to this point.

With respect to the other branch of the objection, viz. the plaintiff’s neglect to give early notice of the terms of the sale, and his giving no notice at all till after the failure of Thurston, no authority directly in support of this objection has been cited, except the case of Simpson v. Swan, 3 Campb. 292. which will presently be examined and compared with the case at bar. The commissions charged furnish no proof of guaranty ⅞—and we are well satisfied that if the defence be substantial, it must be on the ground of negligence on the part of the plaintiff. As the sale was made under a sufficient authority,—to a merchant in good standing,—on credit,—and as the purchaser failed before the day of payment had arrived ;—it is not very easy to perceive how the omission to disclose the name of the purchaser before that day did or could prejudice the defendant; or why it should now prejudice the plaintiff. No imputation of fraud is even suggested.—The case cited from 2 D. & E. 128. of the neglect of a factor to make insurance, rests on principles different from those which apply to the case before us. In the case from Cro. Jac. 265. the agent exposed the goods of his principal to forfeiture by a direct violation of a public statute, as well as of his duty as a factor.

The case of Simpson v. Swan has been pressed upon us as a strong authority in favour of the defendant;—and though it was only a nisi prius decision, yet it is entitled to respect from the character of the learned Judge who pronounced it, and the acquiescence of the counsel in his opinion. But this case is in several particulars different from the case before us. Simpson, the factor, sold the leather consigned to him to a man notoriously insolvent at the time;—-and according to his usual practice, without naming the purchaser to his principal, he received a bill of exchange for the price, payable to himself; and then made and sent his own note to the defendant for the neat proceeds. Lord Ellenborough said that the factor’s remitting his sote fo his principal for the proceeds naturally seemed to close the concern, and that it could not be unravelled without danger. The sale to an insolvent was also considered by the Court as a fatal objection to the action, as the loss had been occasioned by the gross negligence of the plaintiff himself. There was also a distinction taken by the same Judge which is deserving of notice, as it seems to present a principle in aid oí the present action. His words are—“ If the principal draw's “ before the sale, it is very reasonable that he should repay the “ money when the consideration fails on which- the factor grant- “ ed the acceptance. Then the principal is deprived of no in- “ formation, and is led into no error.” Now in the case at bar it appears that in the month of November before the sale, the defendant drew bills on the plaintiff for upwards of 1000 dollars, which were accepted in December following, payable in March, a short time before the sale. This seems to be the precise case stated by Lord Ellenborough. For the purpose of raising money to pay these bills, the note of Thurston was sold and indorsed by the plaintiff;—and the payment of this note to the indorsee is the ground of the present claim of Greely on the defendant. There is another fact appearing in the case which seems to shew the defendant’s recognition of the propriety of the sale of his share of the ship, and of the disposal of Thurs-ton's note, and his approbation of the whole. We allude to his declaration, when he was informed that the note had been negotiated at a discount of twelve per cent, that he would rather have given twenty per cent, than that his drafts on the plaintiff should have been protested. This declaration must have been made after the receipt of Greely1 s letter of August 19, and sometime after the failure of Thurston.

It is contended that the information respecting the sale, when given, was not correct;—that the plaintiff stated the sale to have been for 915 dollars, whereas it was for a thousand. This, however, is explained by other facts. The commissions, and discount on the note, amounted to eighty-five dollars; so that the neat proceeds were exactly 915 dollars. This is only an inaccuracy in the method of stating the account. It was the conclusion, instead of the premises from which that conclusion was drawn. There is also a small variance or disagreement in the charge of 25 dollars for premium, &c :—but this is explained by the fact, that at the time of drawing out the account, the premium had not been paid.

The last fact relied on by the defendant as proof of culpable neglect in the plaintiff, is the assignment of Thurston’s effects to certain trustees, and the plaintiff’s connection with that transaction. This assignment was made to secure seventy-five per cent, of the demands of several creditors, whose claims arose from suretyship for Thurston at the custom-house, or as friendly indorsers without consideration. It was not designed to embrace any debts arising in the ordinary course of business, and none such were embraced. The plaintiff, in this concern, guarded his own business-debts no better than that of the defendant. Besides, the assignment was made of a vessel at sea,—not in a situation to be attached by the plaintiff for the benefit of the defendant: and he could not have compelled Thurston to make the assignment in any other form.

On the whole, after a careful examination of the subject, we cannot discover any legal principles by which the plaintiff is bound to sustain the loss which has happened,—or which forbid his reimbursement of the sum he has paid: and we are all of opinion that there must be

Judgment on the verdict.