First National Bank v. Charles Nelson & Co.

McCay, J. 1. The general rule of the common law is, that every man dealing with another in reference to property that other may have in his possession, must “ take care,” caveat emptor. The property may be stolen, or borrowed, or pledged, or in the possession of a bailee for some specific purpose, and if so, the party in possession can convey no better or further right than he has himsolf. Broome’s Legal Maxims, (355, 267); Irwin’s Code, sec. 2597. There are some exceptions to this rule, as where the property is money, or promissory notes not due, and also cases where the conduct of the true owner is such that he is estopped from setting up his title against an innocent purchaser. 3 B. & C., 42 ; 3 Bing. 145. Clearly, however, the mere permission, by the true owner, to a third party, to have possession, is not such an act as estops him. 3 B. & C., 42. Such a rule would place it in the power of [399] every bailee to dispose of the thing with which he is intrusted, and would seriously interfere with the ordinary affairs of life. . Nor is the case of a factor, who has goods put in his possession for sale, an exception. The goods are not his. He holds them for a specific purpose, and, outside of that purpose, he has no more authority in reference to them, than any other bailee has, outside of the purpose for which he holds goods. The goods belong to the true owner. If they be stolen from him, if he lend them, if he deposit them, they remain his, except so far as he clothes another with power over them. A factor, for the sale of goods, has only power to sell them. Eor purposes of sale, he is a general agent, and one may deal fairly with him in all matters pertaining to that purpose. Being a general agent for the sale, in all matters within the scope of his agency, his authority is complete. No special orders or limitations of his powers, or directions as to the mode of their exercise, will affect their buying from him without notice, but, if he steps outside of the scope of his agency, if he undertakes to affect the principal’s title in any other way than by a sale, he is acting without authority, and nothing passes, any more than if he had been a mere depository. A factor for the sale of goods can not, therefore, pledge them for advances made on his own account. This is the settled doctrine, both in England and America, and though there have been, at times, objections made by Judges to the justice of the rule, I have not been able to find a single case in which it is denied. Patterson vs. Tash, 2d Strange, 1182. Martini vs. Coles, 1 Maule & Sel., 146. 5 John. Chan., 429. Story on Agency, sec. 113. Paley on Agency, 214-221. 2d Kent, 627. The case of Martini vs. Coles, 1 M. & S., 146, was a stronger case than the one at bar. Martini had consigned to his factor goods for sale; the bill of lading was to the factor and his assigns, and the factor was a large dealer on his own account. The factor pledged the goods to Coles to secure advances to himself, and afterwards became a bankrupt. It [400] was held by the whole Court that the plaintiff was entitled to recover. It was contended in argument here that, admitting this to be the common law, it is a doctrine not suited to the circumstances of this State, and is not, therefore, within the scope of our adopting Act. The object of the rule is said by Bailey, J., to be, to encourage foreign consignors to send goods to England for, sale. Surely, if it will have that effect, this is the very locality where its influence will be a great public good. Consignments from other States for sale here, in our great want of capital, ought to be encouraged, and the argument is directly in favor of, rather than against, the adoption of the rule. It is exactly' suited to our circumstances. It is said also, that the rule is repealed by 2179, of the Code, (Irwin’s.) That section is in these words: “The principal may recover back money, paid illegally, or by mistake of his agent, or goods wrongfully transferred by the agent, the party receiving the goods having notice of the agent’s Avant of authority or Avillful misconduct.” It Avill be noticed, in the first place, that this latter clause, Avhich is the portion relied on, is, at best, but a negative pregnant. It does not declare that, in cases Avhei'e the party receiving the property had no notice, the principal shall not recover. The fact is, that the section is almost a transcript of section 437 of Story on Agency. The language of Story is : “ If an agent tortiously converts the property of his principal, as if he sells or pledges it to a third person, without right or authority, the latter will generally be liable equally with the agent for the conversion.” He then adds : “ This doctrine applies in all cases, Avhere the third person knew and participated in the illegal or unauthorized act of conversion.” Judge Story does not say, nor does this doctrine of the Code say, that the third person will be liable in no other cases. If the Code is to have that meaning, the Avhole doctrine of agency is altered. It applies as well to a special as to a general agent, and the law of Georgia is, that any person, [401] having the actual possession of personal property, as the agent of another, no matter for what purpose, can transfer to a third person a good title, unless that third person has notice of the agent’s want of authority. We do not think the section has any such meaning. The whole, at least, of article 2, is to betaken together. Section 2168 had provided that the principal was bound, by all acts of the agent, within the scope of his authority. Section 2170 declares that, in special agencies, persons dealing with the agent, should examine his authority. Section 2111 provides that even the pawnee of a promissory note, without notice, is not protected against the true owner. We cannot believe that it was the intention of the Legislature, by the negative pregnant of section 2179, to contradict the express language it has used in other parts of the Code, and especially in the very article in which the section stands. Our conclusion is, that section 2179 introduces no new rule. It authorizes a principal to recover back goods wrongfully transferred by his agent, in cases where the transferee had notice, but it does not change the rules regulating the rights of principals against parties dealing with special agents, or with general agents, who act beyond the scope of their agency. These cases stand upon the same footing as do cases where a general agent, with private instructions, disobeys those instructions, and acts improperly with the knowledge of the person dealing with him. It may not be out of place here to say, that in the argument of this ease, there seemed to be a misunderstanding of the rule, in cases of a general agent, as to the extent of his authority, and as to how far his acts bind his principal. A special agent is one appointed to do a single act, or several specified acts. Every man deals with such an agent at his peril, and is bound to take notice of the agent’s instructions. Story on Agency, sec. 17. A general agent may either be one clothed with power to do all the principal’s business, of every character, or he may be one empowered to do all acts connected with a particular business or employment. Story on Agency, sec 17. Now, the rule as to how far the acts of [402] a general agent shall bind his principal is, that he may bind him by any act within the scope of his authority. Code, 2168. He may do all acts p»>per for the accomplishment of the end, or such as are usual in matters of this kind. Story, Agency, sec. 60. But, he cannot bind the principal by an act outside of the object of his appointment. 2 Kent, 619. 3 Ross Leading Cases, secs. 150, 151. 2d. Section 2110 of the Code provides that delivery is essential to constitute a pawn. Indeed, delivery is the very essence of the bailment. At common law, therefore, incorporeal things, though they might be sold or mortgaged, could not be pawned. Story on Bailment, sec. 286. Hence the necessity of the special provision of the Code for the pledging of promissory notes and evidences of debt. Code, 2110. There need not, it is true, in- all cases, be an actual moving of the thing, as if it be logs in a stream, or any other article usually delivered by transferring the dominion, but-there must be such a delivery as the thing is capable of. The mere setting of a portable article aside, or the pledger consenting to bail it as the bailee of the other, there beiüg in fact no transfer of the custody, however such acts might, in casé of a sale, amount to delivery, is not sufficient in case of a pledge or pawn, the very essence of which is deposit. Boleman’s Commercial Law, secs. 673, 674. Story, secs. 287, 288. Irwin’s Code, 2110. 3d. While, perhaps, the language of Judge Cole is not technically accurate when he says that the facts here amount to constructive notice, yet we are clear that they are such strong evidence of notice as must bind-the bank, whether because it must have wilfully shut its eyes, or because failure to know, under the facts, was such negligence as -that it ought not to be protected, is immaterial. Judgment affirmed.