120 U.S.

20
7 S.Ct. 460
30 L.Ed. 573

ALLEN and another

v.
ST. LOUIS NAT. BANK.
January 10, 1887.

[Statement of Case from pages 21-28 intentionally omitted]

John N. Rogers, for plaintiffs in error.
James Hagerman and Frank Hagerman, for defendant in error.
[Argument of Counsel from page 29 intentionally omitted]
GRAY, J.

When a jury is waived in writing, and the case tried by the court, the court's
finding of facts, whether general or special, has the same effect as the verdict of
a jury; and, although a bill of exceptions is the only way of presenting rulings
made in the progress of the trial, the question whether the facts set forth in a
special finding of the court, which is equivalent to special verdict, are suff cient
in law to support the judgment, may be reviewed on writ of error without any
bill of exceptions. Act March 3, 1865, c. 86, 4, (13 St. 501; Rev. St. 649,
700;) French v. Edwards, 21 Wall. 147; Ex parte French, 91 U. S. 423. The
question whether the facts found by the court in the case at bar are sufficient to
support the judgment below includes the several questions of law affecting the
merits of the case. That judgment is for more than $5,000, which is sufficient to
give this court jurisdiction in error. Act February 16, 1875, c. 77, 3, (18 St.
316.) It is therefore unnecessary to consider whether those questions are duly
stated in the certificate of division of opinion, within the rule affirmed in
Williamsport Nat. Bank v. Knapp, 119 U. S. 357; S. C. 7 Sup. Ct. Rep. 274.

The leading facts of the case, as found by the circuit court, are as follows:

The original action was on a promissory note made by the defendants, payable

to the order of J. H. Dowell & Co., and by them indorsed to the plaintiff bank.
J. H. Dowell & Co. were a partnership of cotton factors at St. Louis, in which
Dowell was the acting and managing partner. Dowell was also a partner with
the defendants, under the name of Allen & Dowell, in the working of a cotton
plantation in Arkansas.

The note in suit was made and delivered by the defendants to the payees, their
factors, to enable them to raise funds to furnish supplies for working that
plantation, and under an agreement between the parties that the note should be
taken up and paid by the factors out of the proceeds of the cotton crop of the
plantation for the coming season when received and sold by them. That crop
was consigned to the factors under that agreement, and its proceeds were more
than sufficient to pay this note and all other charges of the factors. It is not
doubted that upon these facts the makers would have a complete defense to the
note in the hands of the payees. But, before the maturity of the note, the payees
had it discounted by, and indorsed and delivered it to, the plaintiff bank, with
which they kept their deposit account, and of which they from time to time
borrowed large sums of money. As soon as they received the bills of lading of
cotton consigned to them as factors by the defendants or by other persons, they
delivered those bills to the bank, which thereupon gave them a credit, in their
deposit account, of $40 for each bale, and took their note for the amount,
payable on demand, with interest. On the arrival of the cotton, it was delivered
to warehousemen, who gave receipts undertaking to deliver it to bearer, and
these receipts were delivered to the bank in exchange for the bills of lading,
which were surrendered and canceled. There was no evidence that either the
bills of lading or the warehouse receipts were indorsed in writing. The bank
knew that the payees of the note in suit were factors, and that they held the
cotton as such. It did not know, and made no inquiry, as to the ownership of any
of the cotton, or the dealings of the factors with the owners, or the state of
accounts between them.

The cotton was sold in the following manner: The factors negotiated sales by
means of samples, and fixed the price and other therms of sale. The bank
received the whole price from the purchasers, and delivered to them the
warehouse receipts, and credited the factors with the amount received, but at
the same time, and as part of the same transaction, required them to draw, and
they did draw and deliver to the bank, their checks for the amount of their
demand notes held by the bank. After all the cotton had been sold, there was a
large balance of account due from the factors to the bank.

The substance of the transaction between the factors and the bank in regard to
the cotton was that the factors delivered the bills of lading and warehouse

receipts to the bank to secure the repayment of money lent them by the bank,
and thereby made a pledge of the cotton to secure their own debt, (Insurance
Co. v. Kiger, 103 U. S. 352, 356;) and that the bank sold, on terms negotiated
by the factors, the cotton so pledged to it, and received the price from the
purchasers. The notes and checks which passed between the factors and the
bank were but forms to carry out the main purpose of the transaction between
them, and did not change its nature or effect.
7

By the common law, a factor or agent for sale has no power to pledge, whether
the owner has intrusted him with the possession of the goods themselves, or
with the symbol of them, as by consigning them to him by a bill of lading in
which he is consignee or indorsee. 2 Kent, Comm. 625; Kinder v. Shaw, 2
Mass. 398; Warner v. Martin, 11 How. 209, 224; Phillips v. Huth, 6 Mees. &
W. 572, 596; Cole v. Northwestern Bank, L. R. 10 C. P. 354, 363. And such
was the law of Missouri before the passage of any statute upon the subject.
Benny v. Rhodes, 18 Mo. 147; Benny v. Pegram, 18 Mo. 191.

The essential difference between a power to sell and a power to pledge is well
brought out in a recent case in the house of lords by Lord Chancellor
SELBORNE, who said: 'It is manifest that, when a man is dealing with other
people's goods, the difference between an authority to sell and an authority to
mortgage or pledge is one which may go to the root of all the motives and
purposes of the transaction. The object of a person who has goods to sell is to
turn them into money; but, when those goods are deposited by way of security
for money borrowed, it is a transaction of a totally different character. If the
owner of the goods does not get the money, his object and purpose are simply
defeated; and if, on the other hand, he does get the money, a different object
and different purpose are substituted for the first, namely, that of borrowing
money and contracting the relation of debtor with a creditor, while retaining a
redeemable title to the goods, instead of exchanging the title to the goods for a
title, unaccompanied by any indebtedness, to their full equivalent in money.'
City Bank v. Barrow, 5 App. Cas. 664, 670.

The weight and bearing of the cases cited at the bar upon the construction of
the statutes of Missouri annexed to the finding of facts, cannot be properly
appreciated without keeping in mind the provisions of the various statutes
under which those cases arose.

10

The English factors' act of 6 Geo. IV. c. 94, passed in 1825, enacted in section 2
that any person intrusted with and in possession of any bill of lading, warehouse
receipt, or other like document, should be deemed and taken to be the true
owner of the goods described therein, so far as to give validity to any contract

made by him with other persons for the sale or disposition of the goods, or for
the deposit or pledge thereof as a security for advances made by them 'upon the
faith of such several documents, or either of them;' provided such persons had
no notice, by such documents or otherwise, that the person intrusted as
aforesaid was not the actual and bona fide owner of the goods.
11

The New York factors' act of 1830, c. 179, based upon the act of 6 Geo. IV.,
provided in section 3 that every factor or other agent intrusted with the
possession of any bill of lading, custom-house permit, or warehouse-keeper's
receipt for the delivery of merchandise, and every such factor or agent not
having the documentary evidence of title, but intrusted with the possession of
any merchandise for the purpose of sale, or as a security for any advances to be
made or obtained thereon, should be deemed to be the true owner thereof, so far
as to give validity to any contract made by him with any other person for the
sale or disposition of the merchandise for any advances made by such other
person 'upon the faith thereof.' It will be observed that this section did not in
terms repeat the proviso of the corresponding section of the English act.

12

But, before the enactment in Missouri of any o the statutes cited in argument,
the construction of this section of the New York statute had been settled by
decisions of the highest courts of that state, and of this court, to be that the
words 'on the faith thereof' were not to be referred to 'merchandise,' or to its
symbols, but to the words 'shall be deemed to be the true owner thereof.' In the
leading case, Mr. Justice BRONSON, speaking for Chief Justice NELSON,
Mr. Justice BEARDSLEY, and himself, said: 'The obvious meaning is that the
factor or other agent who has been intrusted with certain documentary evidence
of title, or with the possession and ostensible ownership of the property, shall
he deemed the true owner so far as may be necessary to protect those who have
dealt with him 'upon the faith thereof;' that is, upon the faith, induced by the
usual indicia of title, that he was the true owner of the property. The second
section of the British statute, which answers very nearly to the third section of
our own, contains a proviso which expressly saves the rights of the true owner
where the pledgee had notice that he was dealing with an agent; and our statute,
though framed in a different manner, was evidently designed to produce the
same result. It is impossible to suppose that the legislature intended to enable
the factor to commit a fraud upon his principal by pledging or obtaining
advances upon the goods for his own purposes, when the pledgee or person
making the advances knew that he was not dealing with the true owner.'
Stevens v. Wilson, (1844,) 6 Hill, 512, 514; S. C. in court of errors, (1846,) 3
Denio, 472; Warner v. Martin, (1850), 11 How. 209, 228; Covell v. Hill,
(1852), 6 N. Y. 374, 380; Cartwright v. Wilmerding, (1862,) 24 N. Y. 521,
534; Dows v. Greene, Id. 638, 642. See, also, Howland v. Woodruff, (1875,) 60

N. Y. 73, 79, 80; First Nat. Bank v. Shaw, (1874,) 61 N. Y. 283, 301.
13

If the legislature of Missouri had adopted the words of that provision of the
New York factors' act, the meaning of which had been thus settled on full
consideration by the highest courts of that state and by this court, there would
be the strongest ground for holding, in accordance with a familiar canon of
construction, that it had enacted those words with that meaning. Cathcart v.
Robinson, 5 Pet. 264, 280; McDonald v. Hovey, 110 U. S. 619, 628; S. C. 4
Sup. Ct. Rep. 142; Com. v. Hartnett, 3 Gray, 450; Scruggs v. Blair, 44 Miss.
406; Wiesner v. Zaun, 39 Wis. 188, 205.

14

But the statute of Missouri of March 4, 1869, differs widely, in language and in
purpose, from the New York factors' act of 1830, and was apparently derived,
through sections 6 and 9 of the Missouri statute of March 10, 1868, from the
statute of New York of 1858, c. 326, entitled 'An act to prevent the issue of
false receipts, and to prevent fraudulent transfers of property, by
warehousemen, wharfingers, and others,' as amended by the statute of that state
of 1859, c. 353, extending its provisions to bills of lading. None of these
provisions of the Missouri statutes are limited or even addressed to factors or
other agents authorized to sell the goods of their principals, and intrusted for
that purpose with the possession either of the goods, or of warehouse receipts,
bills of lading, or other similar documents in which such agents are named as
consignees. But their leading object is to regulate the manner and effect of
transferring warehouse receipts and bills of lading by indorsement.

15

By section 6 of the statute of Missouri of 1868, (following almost word for

word the statutes of New York of 1858, c. 326, 6, and 1859, c. 353,) it was
enacted that warehouse receipts or bills of lading 'may be transferred by
indorsement thereon; and any person to whom the same may be transferred
shall be deemed and taken to be the owner of the goods, wares, merchandise,
grain, flour, or other produce or commodity therein specified, so far as to give
validity to any pledge, lien, or transfer made or created by such person or
persons,'that is, by the indorsee before mentioned; and by section 9
warehouse receipts and bills of lading were made 'negotiable by indorsement in
blank, or by special indorsement, in the same manner and to the same extent as
bills of exchange and promissory notes.' Laws Mo. 1868, pp. 12, 13.

16

By section 3 of the statute of 1869, those sections of the statute of 1868 are
repealed. But section 1 of the later statute substantially re-enacts section 9 of
the earlier one, substituting for the words 'by indorsement in blank, or by
special indorsement,' the words 'by written indorsement thereon and delivery,'
and omitting the words 'and to the same extent;' and section 2 re-enacts section

6, with the substitution, for the words 'by indorsement thereon,' of the words
'by indorsement in writing thereon, and the delivery thereof so indorsed,' and,
for the words 'by such person or persons,' of the words 'thereby, as on the faith
thereof.' Laws Mo. 1869, p. 91.
17

The principal provisions of the statute of 1869, then, as to all warehouse

receipts and bills of lading, (except those which have the words 'not negotiable'
plainly written or stamped upon their face,) areFirst, that they are 'made
negotiable by written indorsement thereon and delivery, in the same manner as
bills of exchange and promissory notes;' and, second, that any person 'to whom
the same may be transferred shall be deemed and held to be the owner of the
goods,' 'so far as to give validity to any pledge, lien, or transfer, given, made, or
created thereby, as on the faith thereof.'

18

The first provision, while it doubtless gives the indorsee the right to sue thereon
in his own name, does not, for the reasons fully stated by Mr. Justice STRONG
in delivering the judgment of this court in Shaw v. Railroad Co., 101 U. S. 557,
attach to such an indorsement of the symbol of property the same effect which
the common law gives to the indorsement of a bill of exchange or promissory
note for the payment of a sum of money; nor confer upon persons making,
upon a bill of lading indorsed in blank by the owner, an advance of money to a
subsequent indorser whom they have reason to believe not to be the owner, the
right to hold the goods against the true owner.

19

The second provision does not appear to have been brought to the notice of this
court in that case, and presents more difficulty. It differs from the provision of
the factors' act of New York, construed by the courts of that state and by this
court in the cases before cited, in several important particulars: (1) Any person
'to whom the same may be transferred [instead of any person by whom it is
transferred] shall be deemed and held to be the owner.' (2) The ensuing
qualification is, 'so far as to give validity to any pledge, lien, or transfer, given,
made, or created thereby,' which last word cannot possibly be referred to
anything but the transfer aforesaid. (3) The words 'as on the faith thereof'
follow directly afterwards, without any intermediate mention of advances made
by the transferee. In short, the New York factors' act declares that any agent
intrusted with the possession of goods, or of the symbol thereof, shall be
deemed to be the true owner, so far as to give validity to a pledge made by him
to another person for advances made by the latter 'on the faith thereof;' but the
Missouri statute only declares that an indorsee of the symbol of property shall
be deemed to be the owner so far as to give validity to any pledge made to him
by such indorsement 'as on the faith thereof.' The difficulty arises from the
introduction of the words 'on the faith thereof,' borrowed from the factors' acts,

into a statute relating to the negotiability of warehouse receipts and bills of

lading, without sufficient regard to the difference in the terms and the objects of
the two classes of statutes.
20

It may well be that, upon a view of the whole provis on, it protects only bona
fide indorsees, (Whitlock v. Hay, 58 N. Y. 484, 487; Steiger v. Third Nat. Bank,
2 McCrary, 494, 498; S. C. 6 Fed. Rep. 569. But it is by no means clear that the
mere fact that the indorsee of the bill of lading or warehouse receipt knows that
the indorser is a factor, and holds the goods as such, is sufficient proof of bad
faith. Under the English factors' act of 5 & 6 Vict. c. 39, extending the
provisions of the act of 6 Geo. IV., and protecting those advances only which
are 'made bona fide, and without notice that the agent making' the pledge 'has
not authority to make the same, or is acting mala fide in respect thereof against
the owner' of the goods, it has been held by the highest authorities that
knowledge that the agent making the pledge is a factor, without further notice
that he is acting mala fide and beyond his authority, does not deprive the
pledgee of the protection of the statute. Navulshaw v. Brownrigg, 1 Sim. (N. S.)
573; S. C. 2 De Gex, M. & G. 441; Vickers v. Hertz, L. R. 2 H. L. Sc. 113;
Kaltenbach v. Lewis, 10 App. Cas. 617. Yet it may be doubted whether
receiving, from persons known to be factors, and to hold property as such, a
pledge of the symbols of the property to secure the payment of the general
balance of their bank-account with the pledgee, is consistent with good faith.

21

We have considered the question of the effect of the words 'on the faith thereof,'
as used in Missouri and elsewhere, at some length, because of the large space
devoted to it in the arguments of counsel, and in order to put the whole matter
in a clearer light. But it is not necessary to express a decisive opinion upon the
meaning of those words as they stand in the Missouri statute of 1869, because,
upon a narrower ground, it is quite clear that that statute affords no protection
to the plaintiff. That statute applies only to transfers of warehouse receipts and
bills of lading by 'indorsement in writing thereon, and the delivery thereof so
indorsed.' The finding of facts contains this statement: 'It is not shown whether
or not the bills of lading or the warehouse receipts, or any of them, were
indorsed in writing by J. H. Dowell & Co., or by any one, when transferred to
the bank; there being no evidence on this specific matter.' The want of any
evidence upon this point is perhaps to be explained by the facts, also found and
stated, that, upon the delivery of the warehouse receipts to the bank, the bills of
lading were surrendered and canceled, and that the warehouse receipts ran to
bearer, and were therefore probably not indorsed. But, whatever be the
explanation, the fact remains that it was not proved, and cannot be presumed,
that either the bills of lading or the warehouse receipts were indorsed in writing
as required by the statute; and no better title passes by a transfer of the symbols

without such indorsement than by a delivery of the goods which they represent.
Rice v. Cutler, 17 Wis. 351, 358, 359; Hirschorn v. Canney, 98 Mass. 149; Erie
& Pacific Dispatch v. St. Louis Cotton Comp. Co., 6 Mo. App. 172; Fourth
Nat. Bank v. St. Louis Cotton Comp. Co., 11 Mo. App. 333.
22

The decision in Price v. Wisconsin, etc., Ins. Co., 43 Wis. 267, on which the
plaintiff much relied, was based both upon a warehouse receipt act differing
from that of Missouri, in allowing the documents to be transferred 'by delivery,
with or without indorsement,' and in not containing the words 'as on the faith
thereof;' and also upon other grounds inconsistent with the judgments of this
court in Warner v. Martin and Shaw v. Railroad Co., before cited.

23

The statute of Missouri of March 28, 1874, affixing a heavy penalty to the
negotiation or pledge of bills of lading or warehouse receipts by an agent or
consignee, without the written authority of the owner or consignor, does not
change the law as to the validity of the transfer as betwee individuals. A
transfer by an agent that before was valid, as between his principal and his
transferee, is not invalidated by the statute. Gardner v. Gager, 1 Allen, 502.
And with even stronger reason a transfer that was wholly invalid before, is not
rendered valid by being made a criminal offense. The proviso that any
consignee or agent, lawfully possessed of a bill of lading or warehouse receipt,
may pledge it to the extent of raising sufficient means to pay charges for
storage or shipment, or for advances drawn for by the owner or consignor, has
no application to this case; because this pledge was not made for either of those
purposes, but to secure the factors' own debt to the pledgee.

24

Factors having no power, by the law of Missouri, to make a pledge of the goods
of their principals by a transfer, without indorsement in writing, of the bills of
lading or warehouse receipts, the finding of the circuit court that the
transactions between the factors and the plaintiff 'were all according to the
general usage of trade between banks and cotton factors at St. Louis,' cannot aid
the plaintiff; because the usage attempted to be set up was not shown to have
been known to the defendants, or to other owners of cotton; and because it was
contrary to law, in that it undertook to alter the nature of the contract between
the factors and their principals, which authorizes them to sell, but not to pledge,
and in that it would sustain a pledge by a factor of the goods of several
principals to secure the payment of his own general balance of account to a
third person. Barnard v. Kellogg, 10 Wall. 383; Irwin v. Williar, 110 U. S. 499;
S. C. 4 Sup. Ct. Rep. 160; Newbold v. Wright, 4 Rawle, 195; Lehman v.
Marshall, 47 Ala. 362; Leuckhart v. Cooper, 3 Bing. N. C. 99; S. C. 3 Scott,
521, and 2 Hodges, 150; Robinson v. Mollett, L. R. 7 H. L. 802.

25

Nor is the further fact found, that Dowell, the active member of the firm of J.
H. Dowell & Co., the factors, was also a partner with the defendants in the
working of the plantation, at all material, because he had not been held out by
the defendants as the owner of the property, or as authorized by them to dispose
of it otherwise than as a factor, and was not understood by the plaintiff to be
acting in any other capacity. Rogers v. Batchelor, 12 Pet. 221; Locke v. Lewis,
124 Mass. 1.

26

Although the general relation of a bank to its depositor is that of debtor and
creditor, yet when, as in this case, a factor, holding property in trust for his
principal, transfers it to a bank which has notice of the capacity in which he
holds it, the principal may assert his right in the property against the bank,
either by independent suit, or by way of defense to an action by the bank
against him. The defendants in this case were therefore entitled to have the
proceeds of their property, so received by the plaintiff, applied to the payment
of the note in suit. National Bank v. Insurance Co., 104 U. S. 54; Baker v. New
York, etc., Bank, 100 N. Y. 31, 2 N. E. Rep. 452; St. Louis Nat. Bank v. Ross, 9
Mo. App. 399. As those proceeds are found to have been more than sufficient
to pay and satisfy this note and all other charges of the factors against the
defendants, the plaintiff cannot maintain this action.

27

All the facts of the case being ascertained by the special finding of the court
below, as they would be by the special verdict of a jury, there is no reason for
awarding a new trial, but there must be a general judgment for the defendants.
Fort Scott v. Hickman, 112 U. S. 150; S. C. 5 Sup. Ct. Rep. 56.

28

Judgment reversed, and case remanded to the circuit court, with directions to
enter judgment for the original defendants.