Allen v. St. Louis Bank
120 U.S. 20 (1887)

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U.S. Supreme Court

Allen v. St. Louis Bank, 120 U.S. 20 (1887)

Allen v. St. Louis Bank

Argued April 9, 1886

Decided January 10, 1887

120 U.S. 20

Syllabus

In an action in which a jury has been waived in writing, and the judgment of the circuit court is for more than $5,000, the question whether the facts set forth in a special finding of the court are sufficient in law to support the judgment may be reviewed on writ of error without any bill of exceptions or certificate of division of opinion.

At common law, a factor has no power to pledge, whether he is entrusted with the possession of the goods or with the bill of lading or other symbol of property.

The statute of Missouri of March 4, 1869, gives no validity to a transfer, without endorsement in writing, of a bill of lading or warehouse receipt.

The statute of Missouri of March 28, 1874, making the pledge of goods by a factor, without the written authority of the owner, a criminal offense does not render such a pledge valid as between the owner and the pledgee.

A usage of trade for banks to take pledges from factors as security for the payment of the general balance of account between them of goods known to be held by them as factors is unlawful.

An unauthorized pledge by a factor of goods owned by a partnership of which he is a member to secure the payment of his own debt to one who knows him as a factor only is invalid against the partnership.

Page 120 U. S. 21

If a factor to whom the owner of goods has made a negotiable promissory note and consigned the goods under an agreement between them that the proceeds of the goods when sold shall be applied to the payment of the note endorses the note and pledges the goods to secure the payment of advances made to him by one who knows him to be a factor and to hold the goods as such, the pledgee is bound to apply the proceeds of the goods to the payment of the note, and the maker may set up this obligation in defense of an action by the pledgee on the note.

This Court, in reversing a judgment of the circuit court for the plaintiff on a special finding which ascertains all the facts of the case, will order judgment for the defendant without further trial.

The original action was brought by the St. Louis National Bank against Augusta B. Allen and her daughter on a promissory note for $3,750, with interest at the rate of ten percent yearly, made by the defendants May 10, 1878, and payable December 20, 1878, to the order of J. H. Dowell & Co., and by them endorsed to the plaintiff.

The answer alleged that the plaintiff was bound to apply in payment of the note the proceeds of certain cotton pledged to the plaintiff by the payees, and set out the facts attending the making and endorsement of the note and the pledge of the cotton, substantially as afterwards found by the court and stated below except in the following respects: the answer alleged that the plaintiff took the note and the cotton with full notice of the agreement and understanding between the makers and the payees, and was not a holder of the note in good faith and for value, but took it as collateral security for preexisting debts of the payees to the plaintiff. The answer contained no statement of the general course of dealing between the payees and the plaintiff and no mention of any usage of trade. As a further defense, the answer alleged that the note had been paid and satisfied.

The plaintiff filed a replication denying all the allegations of the answer. A jury was duly waived in writing, and the case was tried by the court, which made this special finding of facts:

"1st. The promissory note set forth in the petition was made by the defendants, and delivered by them to J. H. Dowell for J. H. Dowell & Co., the said J. H. Dowell being

Page 120 U. S. 22

the active partner of J. H. Dowell & Co., and as such having the control and management of their business as cotton factors, and such note was so made under the circumstances and for the purposes hereinafter stated. Said J. H. Dowell procured said note before its maturity to be discounted by the plaintiff, who paid to him the amount of said note less the usual discount, and thereupon the said J. H. Dowell, in the name of J. H. Dowell & Co., endorsed and delivered said note to said plaintiff, by whom it is still held. Said note has not been paid unless the facts hereinafter found amount to or operate as a payment thereof. The amount due on said note with interest to this time, if the plaintiff is entitled to recover thereon, is the sum of $5377.08. The plaintiff is the bona fide holder of the note sued on, for value, before maturity, without notice of any of the defenses herein claimed, "

"2d. At the date of said note and for several years before, and until March, 1879, J. H. Dowell was a cotton factor at St. Louis, Mo., doing business as the active member of J. H. Dowell & Co., and as such having the control and management of their business as cotton factors, receiving consignments of cotton for sale on commission from planters and others and making advances during the pending season to their consignors of supplies and cash, to be reimbursed out of the proceeds of the cotton crops of said consignors when received and sold. Said J. H. Dowell and the defendants were also partners in the working of a cotton plantation in Clover Bend, Arkansas, under the firm name and style of Allen & Dowell, and said J. H. Dowell & Co. of St. Louis acted as the factors of said Allen & Dowell, receiving the cotton raised by them each year and disposing of it at St. Louis, and furnishing each season the supplies needed by Allen & Dowell for carrying on the plantation, and charging such advances to Allen & Dowell in account and crediting them on said account with the proceeds of the cotton when received and sold or disposed of, the accounts being kept with Allen & Dowell in the same manner as with other consignors of cotton."

"3d. The note sued on was made and delivered to J. H.

Page 120 U. S. 23

Dowell, the active member of the firm aforesaid, under the name of J. H. Dowell & Co., by the defendants at or about its date at the request of said J. H. Dowell, for the purpose of being used by him and for his accommodation, to enable him to raise funds to furnish the necessary supplies to Allen & Dowell for operating said plantation during the season of 1878, and with the understanding between J. H. Dowell and the defendants (but not with any understanding or knowledge of the plaintiff) that it should be taken up and paid by J. H. Dowell at maturity out of the proceeds of the cotton crop of Allen & Dowell for that year, when received and sold by J. H. Dowell v. Co. There was no other or further consideration as between J. H. Dowell and the defendants for the making of said note. The amount of said note was credited by J. H. Dowell for J. H. Dowell & Co. to Allen & Dowell at its date on account, and at its maturity was charged to Allen & Dowell on said account as though taken up and paid by J. H. Dowell & Co. But it was not in fact paid or taken up. The proceeds of the cotton crop of Allen & Dowell for 1878, consigned to J. H. Dowell & Co., were more than sufficient to pay and satisfy the said note, together with all other advances and charges by J. H. Dowell & Co. to Allen & Dowell, if such proceeds had been applied to the payment of said note. The balance in favor of Allen & Dowell on said account was never paid or settled by J. H. Dowell, and the partnership accounts between the partners composing the firm of Allen & Dowell have never been adjusted and settled."

"4th. During the year 1878, and until March, 1879, J. H. Dowell & Co. kept their bank deposit account with the plaintiff and were very large borrowers of money from said bank. During the said period, the following transactions were had between J. H. Dowell & Co. and the said bank, concerning all the cotton consigned to J. H. Dowell & Co., including the cotton of Allen & Dowell consigned to J. H. Dowell & Co. The mode of such transactions was as follows: the cotton being shipped to J. H. Dowell and Co. by railroad, the bills of lading therefor as soon as received by J. H. Dowell & Co. were delivered to the bank, which thereupon gave J. H. Dowell &

Page 120 U. S. 24

Co. credit in their deposit account for an amount equal in the aggregate to $40 for each bale, represented by such bill of lading, taking J. H. Dowell & Co.'s note for said amount, payable on demand with interest. The amount so credited to J. H. Dowell & Co. in their account would be subject to their check when and so far as the balance of account was after such credit in their favor, but their account was sometimes largely overdrawn, as was the case with many of the customers or dealers in St. Louis with the bank. When the cotton represented by such bills of lading arrived in St. Louis, it was delivered by the railroad company transporting it to a cotton warehousing company, which, on receipt thereof, issued therefor its warehouse receipts, acknowledging the receipt of the cotton described by number of bales and marks thereof and undertaking to deliver said cotton to the bearer of the receipts on demand. Said receipts were then delivered to the bank in exchange for the bills of lading, which were surrendered and cancelled."

"It is not shown whether or not the bills of lading or the warehouse receipts or any of them were endorsed in writing by J. H. Dowell & Co. or by anyone when transferred to the bank, there being no evidence on this specific matter."

"The bank knew that the business of J. H. Dowell & Co. was that of factors, and understood that the cotton represented by the bills of lading and warehouse receipts, as aforesaid, was held by J. H. Dowell & Co. as factors, and also knew that J. H. Dowe11 and the defendants were jointly interested in owning and operating the plantation in the State of Arkansas. The bank did not know and made no inquiry as to the ownership of any of the cotton, nor as to the particular dealings of J. H. Dowell & Co. with such owners, nor as to the state of accounts between them."

"It does not appear that cotton received by J. H. Dowell & Co. from different consignors was kept distinct or separate in the transactions above referred to as made with the bank, nor does it appear what particular transaction included the cotton of Allen & Dowell or any part of it. During the period said J. H. Dowell & Co. by J. H. Dowell turned over to the

Page 120 U. S. 25

bank, in the manner and for the purposes above specified, all the cotton consigned to said firm, including that of Allen & Dowell."

"5th. The cotton represented by the bills of lading and warehouse receipts, in the transactions with the beak aforesaid, was sold in the manner following: Sales were negotiated by J. H. Dowell v. Co. by means of samples, and they agreed with the purchasers as to all the terms of sale, including prices. When the agreement of sale was thus made, the purchaser uniformly paid the entire purchase money to the bank, and on such payment the bank delivered to the purchaser the warehouse receipt held by it, on the presentation of which to the cotton warehouse the cotton would be delivered. The entire amount received by the bank for the cotton was credited to J. H. Dowell & Co. in their deposit account, and at the same time, and as part of the same transaction, J. H. Dowell R Co. were required to and did draw and deliver to the bank their check on the same account for the amount of their demand notes to the bank, and thereby take up such notes."

"In March, 1879, J. H. Dowell suddenly died, and his estate proved insolvent. J. H. Dowell & Co.'s account with the bank was then overdrawn, and they were indebted to the bank."

"The bank at the time of said Dowell's death held about 1,000 bales of cotton through its transactions, as aforesaid, with J. H. Dowell & Co., some of which were replevied, and some by the bank sold and the proceeds applied to the payment pro tanto of the said indebtedness of J. H. Dowell & Co. But it does not appear from any testimony in the case that any part of the cotton on hand at the time of the death of Dowell was the Allen & Dowell cotton. All the cotton shipped by Allen & Dowell to J. H. Dowell & Co. was sold and disposed of as hereinbefore stated and before the death of J. H. Dowell. The particular sales, including said cotton of Allen c

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