Rodriguez v. Heffernan

The Chancellor. The sole question in the case is, whether the defendants, G. and B., are accountable to the plaintiffs for the proceeds which they have received of the return cargo of the schooner Good Hope. The defendants, G. and B., claim those proceeds, (which amount, after deducting all charges, and the freight, to the net sum of 10,722 dollars and 65 cents,) by virtue of. an assignment from the defendant U., of the 26th of December, 1818, executed about the time the vessel sailed from Porto Cabello, in South America, for New-York. The plaintiff alleges, that the cargo was exclusively his property, though covered with the name of the defendant if., in order to protect it from Spanish cruizers ; and the defendant H. admits, that the plaintiff had a joint and equal interest with him in that cargo. The answers of the defendants, G. and B., disclose the manner in which the assignment was taken, and the causes which led to it. They state, that in October, 1818, the defendant if., being somewhat embarrassed in his pecuniary affairs, applied to them for assistance, and he promised to assign to them, by way of security for advances, certain vessels and cargoes, “ as hereinafter mentioned.” They accordingly did advance, as they say, “ at various times, during the period of one year after the said agreement,”' 47,000 dollars, and upwards, and the defendant if., in execution of that agreement, assigned to them, by deed of the 4th of November, 1818, and in trust, to secure the payment of 40,000 dollars, then already advanced, a vessel and two cargoes therein mentioned, and which form no part of the present controversy. The defendants, G. and B., were to apply the proceeds to the payment of the moneys due, and to become due to them, and to re-assign, or account for t)ie — 425 — Surplus. On the 17th of November, the defendant H,, in further execution of the agreement, and for the more effectual security of G. and B., assigned to them the brig Active. The property hitherto assigned, belonged to the defendant H. On this point, there is now no question between the parties; for a claim to a joint interest in the Active, was waived at the hearing. The next assignment was of the date of the 27th of November, 1818, and was given, as a further security to G. and B. It assigned the outward cargo of the schooner Good Hope, then on a voyage from Nem-York to Porto Cabello, and which had been shipped on the 7th of November, together with the vessel, and the policies covering the vessel and cargo, and it was made upon the trusts expressed in the first assignment. Then followed the assignment of the return cargo, made on the back of the assignment of the 27th, dated on the 26th of December, 1818, and which was declared to be given for the purposes, and upon the trusts expressed in the other assignments. This last assignment was evidently taken to secure antecedent advances. There is no evidence, that any advance or loan w as made upon the credit of it. The defendant H. stopped payment, and consequently avowed himself a bankrupt, on the 30th of December, and only four days after, this assignment was made. It was taken from an insolvent debtor, on the eve of bankruptcy, as additional security for an existing debt, and ought to be subjected to all the strictness applicable to an instrument taken at such a crisis. It was jiot a security taken in pursuance of the original agreement, in October. That agreement related to certain vessels and cargoes “ hereinafter mentionedbut the defendants must be understood, by these words, to refer to the subjects specified in the first assignment, and not to the return cargo in this case, for the outward voyage itself had not then commenced. It is very probable, that the defendants G. and B., from the knowledge which the defendant B. hid of the mer — 426 — cantile adventures of the defendant H. with South America, did not wish, or intend to meddle with that property, or it would have been included in the assignment of the 4th of November, The voyage was in contemplation by H., as early as the 10th of October, and he had chartered the schooner Good Hope for that purpose, and the cargo must have been procured, and the voyage in full preparation on the 4th of November. By that time the defendants had advanced at least 40,000 dollars $ and though the answers, with a want of precision that is very unusual in such a case, state that “ at various times, during the period of one year,” they advanced 47,000 dollars, yet it must all have been advanced between October and the 30th of December, 1818. We have seen that 40,000 dollars was due to them on the 4th of November-, and we have no evidence that one cent was afterwards advanced. The reasonable inference is, that the whole advance was upon the credit of the property specified in the assignment of the 4th of November, and that the subsequent assignments of property of doubtful title, (for so the defendant B. must have regarded the mercantile adventure in question,) were taken under impression of the subsisting credit of H., and for the purpose of adding further security to their former advances. There is no evidence, nor even an averment, that any advance was made on the credit of this return cargo, or on the strength of this assignment. Are not these slight circumstances sufficient to protect the right and interest of the plaintiff in the return cargo, against that assignment ? It was not a purchase by G. and B. in the ordinary course of commercial dealing, and the interest of G. and B. has no better pretensions, in this case, than that of the plaintiff, to protection. The defendant B., admits, what may be deemed sufficient information of the plaintiff’s right, at the time he took the last assignment, to . have put him upon inquiry, and to charge both those partners with taking the assignment subject to those rights. He was acquainted with those circumstances, which — 427 — ought, in equity, and in fairness, to have led hijn to inquiry, and if he preferred to waive that inquiry, the assignment was taken subject to the right of the plaintiff* He says, that “ he knew, or had reason to believe, that the plaintiff and H. bad a running account between them, arising from mercantile adventures to South America, but whether the said adventures were partnership transactions between them, or whether the plaintiff acted merely as agent or factor for H„ and was to receive a certain fixed commission for his services, or whether, at the time the return cargo of the Good Hope was assigned to G. and B., there was any thing due on the said account, or what interest the plaintiff had in the said return cargo, except in case the balance of the running account might be in his favour, the defendant did not know, nor was he informed.” And if he knew that the plaintiff and the defendant H. had running accounts between them, arising from mercantile adventures to South America, and which alluded to the very voyage in question, and was uncertain whether the plaintiff and the defendant H. were partners, or what interest the plaintiff had in the return cargo, why did he not inquire ? Was it not his duty to have inquired of H., who could have told him that they were jointly and equally interested in that very cargó, which he was then laying hold of as tabula in naufragio, to secure his former advances ? Was it dealing fairly with the rights of the plaintiff? Lord Hardwiclce observed, in Smith v. Low, (1 Atk. 490.) that whatever was sufficient to put the party upon in* quiry, was good notice in equity. And we have the familiar case in the books,(Moore v. Bennett, 2 Ch. Cas. 246.) where-a purchaser shall be charged with knowledge of a fact, provided he cannot make out a title but by a deed which leads him to that fact, for it was crassa negligentia that he sought not after it, and this is in law a notice. Chancery, says Lord Bacon, looks to the conscience of a party, if he will traffick for what in equity he knows to belong to another. The defendant B. had here reason to know, of believe, that the — 428 — return cargo belonged, in whole, or in part, to the plaintiff. He knew be was dealing for a subject in which the interest of the plaintiff was probably concerned, and that was sufficient to have prompted him to inquiry. He was bound; by the plainest principles of justice, to have called for explanations, and to have examined into the title of the plaintiff, before he took an assignment, for the purpose of excluding and barring his right. I have no hesitation in concluding, that the assignment in this case ought to be adjudged to have been taken,, subject to the interest of the plaintiff, and the next and remaining inquiry is, as to the extent of that interest. It was observed, upon the argument, that the plaintiff had held out to the world, the defendant II. as the real owner of this return cargo, and thereby enabled II. to practise a deception upon the public., If the defendants, G. and B., could show that they had been the victims of this deception, they would have been entitled to have made the complaint. If the return cargo had arrived, and the letters of the plaintiff, and-the invoice and bill of lading had been shown-to these defendants, and trusting to them, they had made ad-' vanees upon the credit of that cargo", to the defendant H.t they would have had a fair, equitable claim to protection. But the assignment, in this case, was taken a month before the return cargo had arrived, or the documents attending it had been seen, and they are not-entitled to the benefit of any such defence. The defendant H. admits, that the return dargo was marked with his name, for the purpose stated ih the bill, of protecting it from the depredations of the Spanish cruisers, hostile to .the Spanish royalists, and he pretends only to a joint and equal interest with the plaintiff in that cargo. If the plaintiff and H. were partners, then the interest of H. in that cargo, was his share in the surplus, subject to nil partnership accounts, and the defendants, G. and B., his assignees, are entitled only to fifis share, after a settlement of the accounts, and after all just claims qf the plaintiff were — 429 — satisfied. (Nicoll v. Mumford, 4 Johns. Ch. Rep. 522.) As the defendants derive their title from £T., and as he has been extremely well disposed to promote their interest, in opposition to that of the plaintiffs, his admissions are good testimony against them, in respect to that title; and we are, at all events, to consider the plaintiff as jointly and equally concerned in the cargo. The only question now is, whether we are to consider him as a joint partner, as U. pretends, or as sole and exclusive owner of the entire return cargo, as he himself asserts. If the whole cargo belonged to him, then the assignment was the act of an agent or factor, pledging the goods of his principal for his own debt, and this the law will not permit. A factor may sell, out and out, in the way of business, and the sale will be binding; but he cannot pledge, even under the formality of a bill of parcels, and this Was clearly such an act. It was an assignment to secure a debt, with a trust, to account for the surplus. It was, therefore, a mortgage, and not an absolute sale. It is an old settled and understood rule, that a factor cannot pledge, even though the creditor have no notice of his character as factor. In such a case, every creditor trusts and deals at his peril. (Str. 1178. 5 Vesey, 211.) No conclusion ‘would appear more clear and inevitable, than that the plaintiff, in this case, is entitled, either as partner with H., or as sole owner, to call the defendants G. and B. to account for the proceeds of the return cargo. A factor cannot pledge the' goods of big principal: He can only sell them, out and out, in the way of his business. The evidence that the plaintiff was the sole owner of the return cargo, consists principally in the letters that passed between the plaintiff and H. It is evident, from the letters of the defendant H., of the 5th of June, and of the 7th and 8th of November, 1818, that Curriel therein mentioned, was some assumed or fictitious name, and intended, the better to cover the property from depredation, to stand for the plaintiff. Then we have the declaration of the plaintiff', in his letter of the 20th of December, 1818, to B., and which was produced on the part of the defendants, that the greatest part of the return cargo was purchased with the money Mr. Cur430 rid sent me, or, in other words, with the plaintiff’s own money. Here is, at least, sufficient ground for a reference to a ... . master, to inquire and report what interest, if any, beyond Qr greater than a joint or equal interest, the plaintiff had in the return cargo, and to whatever extent that interest shall be duly ascertained, to that extent the defendants G. and B. must be decreed to account.1 I shall, accordingly, declare, “ that the defendants, G. and B., took the assignment of the 26th of December, 1818, by way of security, and in trust, principally, if not entirely, for the purpose of securing the payment of advances antecedently made, and of debts antecedently incurred, and that the same was not a sale and purchase in the ordinary course of commercial dealing; and that the defendants, G. and B., were, at the time they took the assignment, chargeable with sufficient notice of the rights of the plaintiff, to have put .them upon inquiry as to the extent thereof, and to charge them with taking the assignment, subject to all the prior rights and equities of the plaintiff, and that as the plaintiff claims to have been the sole and entire owner of the return cargo in the assignment mentioned, and as the defendant H. admits the plaintiff to have been jointly and equally interested with him, and that it be referred to a master, to inquire and ascertain the extent and quantity of interest of the plaintiff, 8zc. and to report the amount, with the interest, if any, due thereon together with the amount of the net proceeds of the return cargo, received by the defendants, G. and B., with interest thereon ; and that he call for papers, See. and examine either of the parties, on oath, &c. and that the pleadings and exhibits in this cause, be received as proof before the master, together with such further proof as the parties may offer.” Decree accordingly.