*It has, however, long been the practice for the factor not merely to sell the goods when they come into his possession, but also to make advances to the owner on the security of them, or incur liability by accepting bills drawn by the owner on him against the cargo consigned to him, as the expression is, i. e., on the security of the cargo, the owner thus getting paid a portion of the price before the goods or merchandise are actually sold. Now, if the factor thus makes advances or incurs liability by his acceptances, it may often be a great advantage to him when he has the control of the goods, either by having actually received them, or having the documents of title (y) to them in his possession, in turn to pledge them to some third party, either to repay himself or to put himself in funds to meet the bills as they become due. This, however, by the Common Law he could not do; for though the Courts held that the unauthorized sale by a factor was nevertheless binding on his principal, by reason of there being an implied authority to sell, as that was the factor's usual employment, yet they refused to hold that there was any implied authority to pledge, as that was no part of his usual employment as factor. Indeed so long ago as somewhere about the year 1742, in the case of Paterson v. Tash (z), it was *laid down that though a factor had power to sell, and therefore bind his principal, yet he could not bind or affect the property of the goods by pledging them as a security for his own debt, i. e., the debt due from the factor to the pledgee. Indeed, in M'Combie v. Davies (a), "the decision went so far as to hold that a pledge by a factor was so wholly tortious as not even to transfer the lien which the factor himself had" (b), i. e., he could not pledge the goods so as to repay himself even his own advances to his principal.
(t) Pickering v. Busk, 15 East, 38; Stevens v. Biller, 25 Ch. Div. 31; 53 L. J. (Ch.) 249.
(u) Per Blackburn, J., in Cole v. North Western Bank, L. R. 10 C. P. 364; 44 L. J. (C. P.) 237.
(x) Ante, p. *414.
(y) Such as the bill of lading, dock warrant, or other order for the delivery of goods.
This state of the law it was thought expedient to alter, in the interests of commerce, in favour of persons making bond fide advances to those who had the possession of the property, or who held the symbols of the property in the apparent character of true owners of it. Accordingly, a series of statutes called the Factors' Acts has been passed, by which and by the Common Law already described, contracts made with factors are now regulated. These (and the rule
(z) 2 Strange, 1178. This was a ruling at nisi prius. See, too, Martini v. Coles, 1 M. & S. 140; Shipley v. Kymer, lb. 484.
(a) 7 East, 5.
(b) Per Blackburn, J., in Cole v. North Western Bank, L. R. 10 C. P. 364; 44 L. J. (C. P.) 237.
31 481 applies to all instances of statute law) must be studied in their very words, although a general sketch of their effect is attempted here. The first of these statutes is 4 Geo. IV., c. 83; this was altered and amended by 6 Geo. IV., c. 94; and both have received amendment by the 5 & 6 Vict., *c. 39. Their scope has been enlarged and some defects in the law remedied by 40 & 41 Vict., c. 39, the last of the series. The following very succinct description of the effect of the three first of these statutes is extracted from a work of the greatest utility and accuracy, Chitty's Collection of Statutes of Practical Utility (c):- "First, where goods, or documents for the delivery of goods, are pledged as a security for present or future advances, with the knowledge that they are not the property of the factor, but without notice that he is acting without authority, in such a case the pledgee acquires an absolute lien. Secondly, where the goods are pledged by a factor without notice to the pledgee that they are the property of another, as a security for a pre-existing debt, in that case the pledgee acquires the same right as the factor had. Thirdly, where a contract to pledge is made in consideration of the delivery of other goods or documents of title, upon which the persons delivering them up had a lien for a previous advance (which is deemed to be a contract for a present advance), in that case, the pledgee acquires an absolute lien to the extent of the value of the goods given up." It is to be observed that the persons whose dealings with property or documents in their possession are within the protection of these earlier statutes, are persons entrusted therewith as factors or agents (d), not persons to whose employment a power of sale is not commonly incident, as wharfingers (e), or warehouse keepers (f), and that the transactions which are within the statutes are mercantile transactions (g).
(c) Vol. 2, p. 1082, 4th edit., by Lely.
(d) Jenkyns v. Usborne, 7 M. & Gr. (49 E. C. L. R.) 678; Van Casteol v. Booker, 2 Exeh. 691; Kingsford v. Merry, 26 L. J. (Ex.) 83; 1 H. & N. 503, in Exch. Ch.
Thus, where advances were made upon the security of furniture used in a furnished house, not in the way of trade, to the apparent owner of such furniture, such apparent owner afterwards appearing to be the agent entrusted with the custody of the furniture by the true owner, the case was held not to be within the meaning of the Factors' Acts, such agent not being an agent, nor such furniture, goods, and merchandise, within the *meaning of any of them (h). Moreover, before the passing of 40 & 41 Vict, c. 39 (the Factors' Act, 1877), it was held in a recent case (i) that the person who was to create a pledge of his principal's goods valid within the protection of the three first statutes, must be an agent who was entrusted at the time of the making the pledge. Therefore, where a person who had been an agent to sell certain goods, but whose authority was revoked, wrongfully retained the goods after the revocation and demand for the goods from the principal, and then pledged them for an advance made bond fide and in ignorance that the pos(e) Monk v. Whittenbury, 2 B. & Ad. (22 E. C. L. R.) 484.