Gihon v. Stanton

Full title: GIHON and others against STANTON and others

Court: Court of Appeals of the State of New York

Date published: Apr 1, 1854

9 N.Y. 476 (N.Y. 1854)

Opinion

April Term, 1854

J.A. Spencer for the appellants.

C.H. Doolittle for the respondents.

SELDEN, J.

The decisions in relation to the somewhat complex rights, duties and obligations of principal and factor, are numerous; but very few of them have any direct bearing upon the point raised in this case. It would seem, from an examination of the long series of cases on this subject, that hardly any one had ever thought of contending that a factor or commission merchant, who, for the sake of inducing consignments to himself, makes advances to the consignor upon the faith of the goods consigned, and in anticipation of their avails, could, without rendering any account of the disposition of the goods, or of their proceeds, turn immediately around and sue for and recover back the amount of his advances. The question has arisen, whether advances of this kind are not made prima facie upon the exclusive credit of the property consigned; and whether the factor could without some special agreement to that effect resort to the personal responsibility of the principal at all, even for a deficiency. It is, however, settled that in the absence of any express agreement to look exclusively to the fund arising from the consigned property, the factor may have recourse to the principal for the balance due after the fund is exhausted. ( Peisch v. Dickson, 1 Mason, 9; Burrill v. Phillips, 1 Gallis., 360.) In Parker v. Brancker (22 Pick., 40), the supreme court of Massachusetts held that a commission merchant, having received goods to sell at a certain limited price, and made advances upon them, has a right to reimbruse himself by selling them at a fair market price, though below the limit, if the consignor has refused upon application and after reasonable time to repay the advances. From these cases it is strongly to be implied that the factor or commission merchant must first have recourse for reimbursement to the fund in his hands before resorting to his principal. That the credit, where a commission merchant makes advances upon consignments to him, is given primarily to the fund to be derived from the sale of the property consigned, would seem to result from the very nature of the transaction. The object of the consignor is not to borrow money, but to realize in advance some portion of the avails of his property. That of the consignee is not to make a loan of money for the accommodation of the consignor, or for the sake of the interest, but to increase the profits of his business, which depend upon the amount of consignments he can secure. He frequently knows little or nothing of the personal responsibility of the consignor, and must of course rely upon the property as his security. The lien which the law gives him for his advances upon the goods consigned from the moment of their shipment, and which it protects by the most stringent rules, affords of itself some evidence that he is regarded as having made the advance primarily upon the credit of the goods.

It was held by this court, in the case of Marfield v. Goodhue (3 Comst., 62), that a factor who has made advances upon goods after their receipt by him, may proceed to sell, notwithstanding instructions from his principal to the contrary, provided the latter, after reasonable notice, fail to repay his advances; and in the case of Brown v. McGran (14 Pet., 479) the supreme court of the United States held that the party under such circumstances might sell in defiance of his instructions, without even calling upon the principal for reimbursement. In both these cases, one ground upon which the right of the factor to sell was urged was, that he was compelled to look to the goods as the primary fund for the repayment of his advances, and could not resort to the principal until that was exhausted; and the cases contain no intimation in opposition to this argument.

The ground taken by the plaintiffs in this case is, that they are to be regarded as having accepted and paid the drafts for the mere accommodation of the defendants, and that a debt therefore was created, eo instanti, upon their payment, as for so much money lent to the defendants at their request. But this view is inconsistent with the facts. The arrangement was no more for the defendants' accommodation than for that of the plaintiffs. The advantage was mutual. The plaintiffs received a consideration for their advance in the consignment made to them. They cannot therefore be regarded as mere accommodation acceptors.

Again, the commercial language universally applied to such a transaction goes to refute the ground taken by the plaintiffs. It is called an advance. An advance is something which precedes; and of course there is something to follow. As applied to the payment of money, the term implies that the parties look forward to a time when the money will be due to the recipient. A debtor who voluntarily pays his debt before it is due is said to advance it. Can he recover it back? An advance by a factor is a transaction somewhat similar. It is a prepayment; a mere anticipation of the avails of the goods consigned; and no more creates a debt in the first instance, than an advancement of a father to his son, in anticipation of his expected inheritance, creates a debt. It is true, that if the property proves insufficient to reimburse the factor for his advances, the law, in the absence of any agreement to the contrary, implies an undertaking to make up the deficiency. But even this has been doubted, as I have already shown.

I am prepared, therefore, to concur in the decision of the superior court of the city of New-York, in the case of Mottram v. Mills (2 Sandf., 189), where it was held that a consignee who accepts and pays a bill of exchange upon the faith of property consigned to him, cannot be regarded in any sense as an accommodation acceptor; and that he must show the proceeds of the property to be insufficient to meet the bills, before he can call upon the drawer for reimbursement.

The judgment of the supreme court must be affirmed.

RUGGLES, PARKER, ALLEN and EDWARDS, Js., concurred in the foregoing opinion.

GARDINER, Ch. J., and JOHNSON, J., dissented.

DENIO, J., having been counsel in the case, took no part the decision.

Judgment affirmed.