1 Cow. 645 | N.Y. Sup. Ct. | 1824
The first question arising in this cause is, whether the defendants are liable on the ground of negligence, in taking the bills remitted to the plaintiff ?
In examining this question, the defendants will be considered as factors and agents, without reference to the effect produced by a guaranty of the sales.
Where the factor’s power is general, it has been held, that he must exercise a sound and honest judgment, in those matters which are left to his digcretion. He will not be responsible, if he appear to have acted to the best of his abilities, and not to have been guilty of breach of orders, gross negligence, or fraud. (Moor v. Mourgue, Cowp. 480. Liotard v. Graves, 3 Caines, 238. 1 John. Cas. 175. Van Alen v. Vanderpool, 6 John. 72. 1 Campb. 598. 1 Com. on Con. 236. 1 Livermore, 342.) It is not sufficient, however, that he has not been guilty of fraud, or such gross negligence as would carry with it the badges of fraud. He is required to act with reasonable care and prudence, in his employment, and exercise his judgment after proper inquiry and precautions. If ordinary diligence would have enabled him to learn the discredit or insolvency of the party, he will not be discharged from responsibility to his principal. (1 Gall. 361. 3 Campb. 291. 1 Livermore, 355.) When a factor’s power is limited, he must strictly adhere to his orders, and generally must, at his peril, pursue them literally. (3 Caines, 238. 1 Com. on Con. 236. 1 Livermore, 368.) A brief examination of the facts will determine, whether the defendants can be protected according to the principles thus laid down. As a general proposition, I apprehend that where a factor is directed to remit in bills, if he procure such as are drawn by persons of undoubted credit at the time, it is a compliance with the duty he has to perform. The person on whom the bill is drawn, rests in the discretion of the drawer. The law presumes he has effects of the drawer in his hands. If the factor has no cause to doubt the fact, he
But, on another ground, I think the defendants liable. They acted in pursuance of particular instructions, and were bound to pursue them strictly. ■ The plaintiff’s letter of January 9th, 1819, directed the defendants to negotiate-the paper received for his- shipments, in such way that he-might receive the funds in Mew-York, either in bills, ora draft at short sight, on some good house, in time to meet his note given at 90 days.
The defendants’ letter of January 20th, 1819, acknowledges the receipt of the plaintiff’s letter of the 9th. They enclosed the first bill on Butler, for $743,28. On the 27th January, the plaintiff again wrote to the defendants, in which he requests them to procure a good draft on Mew-York. At this time he had not received the letter of January 20th. On the olh February, the defendants wrote, inclosing the second bill, for $1384,78. They had not then received the plaintiff’s letter of January 27th ; it was not acknowledged, nor had sufficient time elapsed for its arrival. The defendants must then be governed by the letter of January 9th. On looking at the directions, it will be seen, that the plaintiff . wished to provide for his note of 90 days. It was, therefore, important that the acceptor should be of undoubted credit; if he was, the bill at 60 days might be discounted immediately after acceptance, and the object in view attained; but if the acceptor was doubtful, delay was the inevitable consequence, however unquestionable the drawers might be. He determined, therefore, to be explicit on this point, and required the draft to be on a good house in Mew-York. This has. been wholly disregarded. It does not appear that any inquiry was made by the defendants respecting Butler ; their wib nesses knew nothing of his standing; the plaintiff proves he
The next inquiry is, whether the defendants are liable by reason of the guaranty of the sales.
Under date of January 20th, 1819, the defendants say, 61 we have concluded to guaranty our sales at 1 1-4 per cent.” What is the legal effect of such a contract ? By an agreement, called del credere, a factor, for an additional premium, beyond the usual commission, when he sells the goods of his principal, becomes bound to pay the price at all events. In Grove v. Dubois, (1 D. & E. 115,) Lord Mansfield observes, “ it is an absolute engagement to the principal from the broker, and makes him liable in the first instance ; there is no occasion for the principal to communicate with the underwriter, though the law allows the prim cipal, for his benefit, to resort to him as a collateral security.” A broker with such a commission may set off a loss upon a policy, happening before a bankruptcy, to an action by the assignees of the bankrupt for premiums on policies, underwritten by him, and for which he had debited the broker. The same doctrine is laid down in 5 Com. Dig. (C.) 55. It is said the factor becomes liable in the same manner as if he were himself the purchaser of the goods, and was debited for them by the principal as such. (1 Com. on Con. 253. 1 Livermore, 209.) In Wienholt v. Roberts, (2 Campbell, 587) Lord Ellenborough considered the broker, with a del credere commission, as the owner of the policy ; and he being answerable to the insured for the loss, the amount might be set off in an action brought against him, by the underwriter, for premiums. So also in Houghton v. Matthews, (3 Bos. & P. 485,) the doctrine is recognized, that where a factor sells under a del credere commission, he is to be considered, as between himself and the vendee, as the sole owner of the goods. In Morris and others v. Cleasby, (1 Maule & Sel. 576,) it was held that a broker who pays to his principal the price of goods, sold by him for the principal, under such commission, is entitled to set off the amount against the purchaser.
Independent of authority, I do not perceive how any Well founded doubts can arise ás to the meaning of these expressions. A principal, knowing that his factor would hot be answerable for the solvency of the purchasers, if hé acted with due caution and prudence, does not request him to purchase the g'oods himself, but to guaranty thé sales to others, or, in other words, to bind himself that the purchasers shall priy according to the terms of purchase. It is impossible, I apprehend, to mistake the intention of the parties to such a contract. It has reference only to that portion of the factor’s duty, which relates to sellings How then can it be applied to another distinct duty of the factor, to remit according to his instruction's ? I very much question, whether any merchant in this country ever considered that a guaranty of sales had any connexion with the remittance afterwards»
But it has been.urged, that this doctrine has the sanction of authority. After an attentive consideration of the cases, I have arrived at a different conclusion. It is supposed that the case of M'Kenzie et al. v. Scott, (6 Brown Par. Ca. 280,) is decisive on this point. There the factor sold corn, rind took bills from the purchasers, which he endorsed to the banker at the place of sale ; and having re ceived the banker’s bill, payable to the factor’s order on a
I will only notice one fact : The respondent wrote to the appellants, saying he was much surprised, that they did not send a remittance. They forwarded á draft payable 75 days after date. This Was not authorized by the respondent. Admitting that a request to remit money in the hands of a factor will justify the transmission of a draft on persons in good credit, the principal is' not bound to' accept a bill payable at a future period, unless by consent. In this case, there ,was no allusion to bills payable at a future day. If an order to remit money may be satisfied by transmitting a draft on sight, it is no authority to make the principal risk the solvency of the acceptor for 75 days. On this ground I apprehend, the decision is warranted, independent of the del credere commission. If the doctrine now contended for
The quest! on in this case is, whether the defendants have made themselves liable for the amount of the bills, with which they attempted to make remittance.
To determine that question, it is proper to enquire, 1st, whether they, as factors, used due diligence in transacting the plaintiff’s business; and 2d, whether they are liable on their guaranty.
1. The general duty of a factor is, to procure and communicate all necessary information to his principal relating' to the state of the market ; to execute faithfully and. promptly his employer’s orders ; and consult his interest in all matters referred to the factor’s discretion ; and to be
The factor’s contract, is to sell and render an account. . • He ought not to remit at his own risk ; nor unless in compliance with instructions. (17 Mass. Rep. 148, 15.0. 10 John. 286.)
The factor is bound to exercise that degree of diligence which a prudent man exercises in his own affairs, and if the debt he lost, the loss falls on the principal. The same degree of care and diligence is required, in making remittance, when instructed so to "do. The instructions of the principal are at all times to be strictly pursued.
When the relation of principal and factor commenced in this case, does not appear. The defendants, on the 24tK December, 1818, inform the plaintiff, that they have sold some butter and gin, at 60 and 90 days ; and on the 2d Jan. 1819, that they have not been able to exchangé it for bills on New-York, though they intended to do this. They assure him that the paper taken by them is undoubtedly good, though it could not be discounted, as the banks were fearful of a demand for specie, On the 9th January, 1819, the plaintiff approves the acts of "the defendants, and adds, “ I will thank you to negotiate the papers received for gin and butter, in" such á way that I may receive the proceeds here, either in the bills you have mentioned, or á draft at short sight, on some good house, in time to meet my note, given for those articles', at 90 days.” It was the duty of the defendants, under these instructions, to enquire into the standing, .pot only of the drawers of the bills, but also of the drawee.
The weight of testimony in the case is certainly in favour of the defendants, as to the standing of "the house of Rea & Butler at Savannah. But it is shewn, by five witnesses, that the credit of Thomas C, Butler was very suspicious for several months before his failure ; ’ and two of them say, that he never was in "good credit.
The defendants do not contradict this testimony ; and it is argued' by their counsel, that it is enough "for "them to enquire into the standing of the drawers ; and that they ar$ not bound to know that of the drawee.
In the case of Rundle v. Moore, (3 John. Cas. 36) the Court said,. “ If the defendants, as the agents or factors of the plaintiffs, have, through mistake or design, disobeyed jheir instructions, they are undoubtedly responsible.”
Having come to the conclusion, that the defendants are liable on the ground of negligence in not pursuing their in* ptructions, it seems to be unnecessary to examine the other point in the cause, to wit, whether they were liable on their guaranty; but having looked ipto the cases cited, I have no hesitancy in giving my opinion on that point.
In all actions founded upon contract, we must see what the contract is, before we determine upon the liability, or -the rights of the parties, In this case, the defendants, after stating that the paper which they had already taken for the plaintiff was undoubted, add—“ And we are willing, in all Cases, to add our guaranty to our sales, for the usual commission for so doing.” The plaintiff answers—“ I should wish you to guaranty the sales of rny different shipments, which •are made at a credit, at the usual commission ;” and mentions one and a fourth per cent, which is agreed to by the defendants, in their next letter. This is the whole contract, and from these letters we must ascertain the meaning of the parties.' The plaintiff urges sales for cash, when practicable, and surely did not expect to pay the one and a fourth per cent, for cash sales. Not one word is to be found in this contract about remitting; but the defendants evidently meant to guaranty the paper which they "took for goods sold. That
It is said that the defendants acted under a commission del credere, and that it has been adjudged that a factor, acting tinder such a commission, is liable at all events. What is the precise import of those words, it is not necessary to inquire. They are said to signify the same as the English word guaranty; and if so, then we come back and ask, what did the defendants guaranty ? They did not, in terms, consider themselves as acting under a del credere commission. Had they done so, their liability must have depended upon the nature and extent of such an engagement. Where parties fairly enter into sucha contract, and when the nature; and extent of the responsibility is understood by the parties thus contracting, there is no hardship in enforcing it. The parties, however, must make their own contracts, and having done so, in this instance, it is the duty of the Court to declare the effect of it. It is clear that, in this case, the solvency of the purchasers only was intended to be guarantied. >
Sutherland, J. concurred.
Judgment for the plaintiff.