SECT. 5. When such merchandise or document is accepted in deposit or pledge for an antecedent debt due from such consignee or factor, the person receiving the same shall thereby acquire no other or further right or interest in or authority over or lien upon the same than the consignee or factor might have enforced against the actual owner. SECT. 6. The provisions of the three preceding sections shall not affect the lien of a consignee or factor for the expenses and charges attending the shipment, transportation, and care of merchandise intrusted to him; nor prevent the actual owner of merchandise from recovering it, previous to any pledge thereof, from the consignee or factor or from his assignee in case of his insolvency, nor prevent such owner from recovering any merchandise or document so deposited or pledged, upon tender of the money and restoration of the negotiable security or property so advanced to such consignee or factor, and upon tender of such further sum of money and restoration of such negotiable instrument or property as may have been advanced or given by the consignee or factor to the owner, or upon tender of a sum of money equal to the amount or value of such merchandise; nor prevent him from recovering from a person with whom such merchandise has been so deposited or pledged any balance of money remaining in his hands as the proceeds of the sales thereof, after deducting the amount or value of the money or negotiable security so advanced thereon. HISTORICAL SKETCH OF THE FACTORS ACTS IN THE UNITED STATES. 1 MARYLAND was the first of our States to extend by legislation the powers of factors. Its original statute on this subject was an almost literal copy of the English Act of 1825; and the two statutes were to affect factors "from and after the first day of October, 1826." The act has since been remodelled, and its language and provisions bear a striking similarity at present to the Factors Act of New York. It has given rise to but little litigation. NEW YORK. 8 Early in the year 1830, a memorial was pre 1 Chap. 182, L. 1825–26, passed Feb. 25, 1826. 2 P. G. L. of 1888, Art. 2. › Senate Document, No. 46, of Jan. 19, 1830. Signed by eighty-five firms and individual traders. sented to the legislature of this State by "sundry merchants and others of New York City," together with a draft of a statute which had been suggested by the English Factors Acts of 1823 and 1825. The memoralists declared that the rule of the common law which invalidated all pledges by factors of the property of their principals was, in their opinion, "unjust and impolitic, and required legislative revision." They believed that the rule was harmful to the principals as well as harsh towards the factors and those loaning money to them. As the factor could sell his principal's goods, and convey a valid title, although he received a lower price than that named by the principal, but could not pledge them, he was subjected to great temptation to resort to a forced sale in order to repay his advances. It was thought that this temptation would be removed by giving to the factor power to pledge, and that such power would enable him to carry the goods until the market was favorable to his principal. The memorialists further declared that a vast amount of property was shipped to New York, from sister States and from foreign countries, in the names of factors selected by the owners, that no degree of caution or sagacity could guard the New York consignee, merchant, or banker against the claim of the original owner, who, the memorialists believed, should be the only sufferer by any mismanagement on the part of an agent to whom he had intrusted his property, and of whose integrity and responsibility he alone possessed the means of judging. In conclusion, they said: "The rule of law from which your memorialists ask to be relieved had its origin in England, and is understood to have been first adopted there in 1743, in the case of Paterson v. Tash, 2 Strange, 1178. It was constantly enforced by the courts of that country, though justly censured by some of its ablest jurists, until 1825, when the evils resulting from it were found so great that Parliament, after mature deliberation and inquiry, passed a statute abrogating the old rule and instituting a new one, more consonant to justice and the peculiar exigencies of trade in that country." The Senate committee to which the memorial and draft of a bill were referred examined a number of merchants upon the subject, and reached the conclusion that the representations in the memorial, as to the nature and extent of shipments to the port of New York, the risks which the common-law rule imposed upon consignees, merchants, and bankers, and the temptation to which it subjected the factor to sacrifice the interests of his prin cipal were fully sustained. After referring to the English Factors Acts of 1823 and 1825, the report declared: "This consequence then results from these enactments. The owner in England may pursue the property to this country and take it, wherever he can find it; while our own citizens, under the like circumstances, are compelled to submit to their losses upon goods and produce shipped to that country, whatever they may be." The bill, which had been presented by the memorialists, was therefore approved by the committee, and its adoption recommended as "a countervailing statute," in order "to place our citizens on an equal footing in this respect with the British subject."1 Soon after the publication of this report, a formidable remonstrance was presented by "sundry merchants of Albany."2 In their opinion a statute of this nature was " unnecessary, impolitic, and unjust." They asserted that the authority of factors, agents, and consignees over the property of their principals, as settled by judicial decisions, was well understood; that no serious evils were experienced under the existing law, and that "innovations on the common law are always hazardous, and generally prove inlets to fraud and imposition." They objected to the bill as holding out temptations to factors to defraud their principals, and as affording facilities to factors of obtaining credit upon other people's property. The third section of the bill they considered to be especially dangerous. In their opinion, it would "make the naked possession of a bill of lading, custom-house permit, or warehouseman keeper's receipt for goods evidence of actual ownership in the possessor, so as to authorize him to dispose thereof to his own use, even in case he obtains such possession feloniously or by fraudulent means, without knowledge or consent of the person to whom they belong." This fear, we shall see, has not been realized. The remonstrance was ineffective, and the bill was passed April 16, 1830. It has remained unchanged, save for the repeal of § 7, after its provisions had been incorporated into the Penal Code. It has also served as a model for similar legislation in other States. MAINE. In 1834, the New York Factors Act, with the omission of sections two, seven, and eight, and with a few verbal changes, became a part of the statute law of Maine. That enact 1 Senate Document, No. 55, of Jan. 27, 1830. ment has been changed by subsequent legislation, and its remnants are found in ch. 31 of the Revised Statutes of 1883. It does not appear to have been a source of trouble to the courts. MASSACHUSETTS. The first Factors Act in this State was passed in 1845. While it was suggested by statutes in England, and in New York, it did not copy their provisions. It did not authorize a pledge by a factor. It was amended in 1849. The present statutory provisions on this subject form ch. 71 of the Public Statutes, and are reprinted on a preceding page. OHIO AND PENNSYLVANIA have made the New York Factors Act the basis of their legislation on this subject. In fact, the former State has copied not only the substance, but for the most part the language, of the New York statute. Pennsylvania, however, modified the New York act to some extent. The report which accompanied the bill stated that "the evil complained of by the Board of Trade of Philadelphia, and by the mercantile community in general, is, that consignees and factors authorized to sell the goods of their principals, and who are held out to the world as the owners thereof, have not power to pledge the goods in their possession for advances made by persons who have every reason to believe that they are the actual owners;" that the bill was intended to remedy this particular evil, but not to go further, "lest evils should be produced on the other side." The report declared that the bill had been framed with a view "to limit the power of factors more than" it was limited "in the statutes of England and New York." 6 KENTUCKY AND WISCONSIN also copied the New York Act, but neither State appears to have found it very useful; for the former soon repealed the statute,' and the latter retains but a fragment of its provisions. 8 RHODE ISLAND'S FACTORS ACT is not a servile copy of any other statute, although its purpose and provisions are similar to those of the New York Act. 1 Mich. State Bank v. Gardner, 15 Gray, 362, 374 (1860). Pepper and Lewis' Digest, pp. 2027-2030. 4 See Macky v. Dillinger, 73 Pa. St. 85, 20 (1873). Ch. 91, L. 1863. 7 Ch. 761, L. 1885-1886, passed April 22, 1886. Pub. St. ch. 136. It is The Common Law but slightly modified by Factors Acts. apparent from the foregoing sketch that the Factors Acts in this country have wrought but a slight modification in the common law. Nor have our mercantile classes made any such demands upon the legislature for the adoption of the rule that "possession of chattels is equivalent to title," as have been pressed upon the British Parliament. Warehouse Receipts Legislation. Even the statutes1 which declare warehouse receipts and other documents of title nego. tiable by delivery, fall far short of the latest Factors Act in England, in their modification of the common law. As a fair sample of this legislation, section 4425 of the Wisconsin Revised Statutes may be referred to. Its language is as follows: "Any such receipt, bill of lading, voucher, or other document as is mentioned in the preceding section [by warehouseman, wharfinger, master of vessel, or agent of any transportation company] shall be transferable by delivery thereof, without indorsement or assignment, and any person to whom the same is so transferred, shall be deemed and taken to be the owner of the property therein specified, so far as to give validity to any pledge, lien, or transfer, made or created by such person, unless such receipt, bill of lading, voucher, or other document shall have the words 'not negotiable' plainly written or stamped on the face thereof.” 2 Whether a particular document is a warehouseman's receipt depends not upon its language, but upon the facts ttending its issue. The owner of a mill in which shingles were manufactured gave the following writing: " Received from J. B. Chown, 150,000 shingles, . . . subject to the order of F. G. Steaubli, now in dry house at mill. C. H. McKnight, warehouseman;" but the court held that as the mill-owner was not a warehouseman, the writing was not a warehouseman's receipt. An instrument purporting to be a warehouseman's receipt, but which is invalid as such between the immediate parties, may be available as a document of title to a bona fide transferee on the ground of estoppel. 1 Statutes of this kind have been passed in California, Connecticut, Delaware, Georgia, Kentucky, Illinois, Indiana, Iowa, Kansas, Maine, South Carolina, Tennessee, and other States. The New York statute on this subject has been repealed. 2 See Price v. Wis. Co., 43 Wis. 267, 285 (1877). • Steaubli v. Blaine Nat. Bank, 11 Wash. 426; 39 Pac. 814 (1895). Yenni v. McNamee, 45 N. Y. 614 (1871). |