Brander v. Phillips
41 U.S. 121

Annotate this Case

U.S. Supreme Court

Brander v. Phillips, 41 U.S. 16 Pet. 121 121 (1842)

Brander v. Phillips

41 U.S. (16 Pet.) 121

ERROR TO THE CIRCUIT COURT OF THE UNITED

STATES FOR THE DISTRICT OF SOUTH ALABAMA

Syllabus

B. & M'K., merchants at New Orleans, were the factors of P. & Company of Huntsville, Alabama, and made advances on cotton shipped to them. In August, 1834, P. & Company were indebted to B. & M'K. one thousand three hundred and fifteen dollars, and Williams, the agent of B. & M'K., agreed with P. & Company, that B. & M'K. would advance eight thousand dollars on bills to be drawn between 20 April and 31 July, 1835, by P. & Company and any two of six persons named, among whom were Horton & Terry, two of the defendants in this suit. Before July 31, 1835, several shipments of cotton were made to B. & M'K., by P. & Company, and several bills were drawn by them jointly with Horton & Terry, and by others without them, all of which were accepted by B. & M'K. These bills, with the advances before made, amounted to twenty-nine thousand seven hundred and ninety-five dollars, and the proceeds of the shipments were twenty-two thousand four hundred and sixty dollars. B. & M'K. applied these proceeds to the liquidation of the bills drawn by P. & Company, to the exclusion of those drawn by them jointly with Horton & Terry, and as these bills exceeded the proceeds of the cotton, they brought an action on a bill drawn June 4, 1835, by P. & Company and Horton & Terry, amounting to three thousand dollars. The circuit court instructed the jury that if they believed from the evidence that at the maturity of the bill, B. & M'K. had sufficient funds of P. & Company to pay the bill, and Horton & Terry to be accommodation drawers, and securities only, then, in the absence of any instructions from P. & Company in regard to the application of the funds, B. & M'K. were bound to apply them to pay the bill, and could not hold them to pay a bill drawn on them by P. & Company only, which had been accepted by them, and was not then due. Held that the instructions of the circuit court were correct.

When a factor makes advances, or incurs liability on a consignment of goods, if there be no special agreement, he may sell the property in the exercise of a sound discretion, according to general usage, and reimburse himself out of the proceeds of the sale, and the consignor has no right to interfere. The lien of the factor for advances and liabilities incurred extends not only to the property consigned, but, when sold, to the proceeds in the hands of the vendee, and the securities therefor in the hands of the factor.

The acceptors of the bill of exchange having, when the bill became due, funds of the drawers in their hands sufficient to pay the same, the liability of the accommodation drawers was as completely discharged on the payment of the bill as that of the principals.

Page 41 U. S. 122

The case, as stated in the opinion of the Court, was as follows:

Brander & McKenna, in 1833, 1834, 1835, were commission merchants at New Orleans, and acted as factors and agents for William E. Phillips & Company, of Huntsville, Alabama, in the sale of cotton, and made advances thereon. On all sales they were to receive two and a half percent for commission, and the same amount for advances. In August 1834, Phillips & Company were indebted to Brander & McKenna in the sum of $1,315.57 for advances. On the 15th of the same month, John Williams, agent for Brander & McKenna, agreed to advance Phillips & Company the sum of $8,000, on bills to be drawn between 20 April and 31 July 1835 by the them and any two of six persons named, among whom were R. Horton and N. Terry, two of the defendants in error. Between 15 August, 1834 and 31 July, 1835, several shipments of cotton were made to the plaintiffs by the defendants, and several bills were drawn by them, some jointly with Horton & Terry and others, without them, all of which were accepted by the plaintiffs. These bills, including the advances previously made, amounted to the sum of $29,795.65. The proceeds of the shipments of cotton to meet these advances amounted to the sum of $22,460.43. The plaintiffs applied the proceeds of the cotton to the liquidation of the bills drawn by Phillips & Company, to the exclusion of those drawn by them jointly with Horton & Terry, and as the acceptances exceeded the proceeds of the cotton, this action was commenced on a bill due 4 June 1835, for $3,000 drawn, by the defendants.

On the trial, the court instructed the jury that if they believed from the evidence that at the maturity of this bill, Brander & McKenna had sufficient funds of Phillips & Company in their hands to pay it, and believed Horton & Terry to be accommodation

Page 41 U. S. 123

drawers and sureties only, and knew this at the maturity of this bill, then, in the absence of any instructions from Phillips & Company in regard to the application of the funds, Brander & McKenna were bound to apply them to pay this bill, and could not hold them to meet the payment of a bill drawn on them by Phillips & Company, which had been accepted, but was not then due. And that if, when this bill became due, the funds of Phillips & Company in the hands of the acceptors were sufficient to pay it, the bill was extinguished and recovery could not be had on it. To this instruction, an exception was taken, and the jury having given a verdict for the defendants, the plaintiffs prosecuted this writ of error.

Page 41 U. S. 128

McLEAN, JUSTICE, delivered the opinion of the Court.

Brander & McKenna, in 1833, 1834, 1835, were commission merchants at New Orleans and acted as factors and agents of William E. Phillips & Company, of Huntsville, Alabama, in the sale of cotton and made advances thereon. On all sales they were to receive two and a half percent for commission and the same amount for advances. In August, 1834, Phillips & Company were indebted to Brander & McKenna in the sum of $1,315.57 for advances. On the 15th of the same month, John Williams, agent for Brander & McKenna, agreed to advance Phillips & Company the sum of $8,000 on bills to be drawn between 20 April, and 31 July, 1835, by them and any two of six persons named, among whom were R. Horton and N. Terry, two of the defendants in error. Between 15 August, 1834, and 31 July, 1835, several shipments of cotton were made to the plaintiffs by the defendants and several bills were drawn by them, some jointly with Horton & Terry and others without them, all of which were accepted by the plaintiffs. These bills, including the advances previously made, amounted to the sum of $29,795.65. The proceeds of the shipments of cotton to meet these advances amounted to the sum of $22,460.43. The plaintiffs applied the proceeds of the cotton to the liquidation of the bills drawn by Phillips & Company, to the exclusion of those drawn by them jointly with Horton & Terry, and as the acceptances exceeded the proceeds of the cotton, this action was commenced on a bill, due 4 June, 1835, for $3,000 drawn by the defendants.

On the trial, the court instructed the jury that if they believed from the evidence that at the maturity of this bill, Brander & McKenna had sufficient funds of Phillips & Company in their hands to pay it, and believed Horton & Terry to be accommodation

Page 41 U. S. 129

drawers and sureties only, and knew this at the maturity of this bill, then in the absence of any instructions from Phillips & Company in regard to the application of the funds, Brander & McKenna were bound to apply them to pay this bill, and could not hold them to meet the payment of the bill drawn on them by Phillips & Company, which had been accepted but was not then due. And that if, when this bill became due, the funds of Phillips & Company in the hands of the acceptors were sufficient to pay it, the bill was extinguished and recovery could not be had on it. To this instruction an exception was taken, and the plaintiffs in error contend that they had a right to hold the cotton and its proceeds to meet all outstanding liabilities which they had incurred on account of Phillips & Company, and that they had a right so to marshal the securities, in the absence of any express agreement on the subject, as to save themselves from loss.

Where a factor makes advances or incurs liabilities on a consignment of goods, if there be no special agreement, he may sell the property, in the exercise of a sound discretion, according to general usage, and reimburse himself out of the proceeds of the sale, and the consignor has no right to interfere. The lien of a factor for advances and liabilities incurred extends not only to the property consigned, but, when sold, to the proceeds of the sale in the hands of the vendee and the securities therefor in the hands of the factor. Drinkwater v. Goodwin, Cowp. 251; Houghton v. Matthews, 3 Bos. & Pul. 489; Brown v. McGran, 14 Pet. 495; Story on Agency 380.

But the case under consideration does not turn upon this principle. The liabilities of the plaintiffs exceeded the proceeds of the property consigned, and the question to be answered is whether they can claim a reimbursement from Horton & Terry, who were bound jointly with Phillips & Company, in certain bills amounting to $8,000. Other bills to a much larger amount, drawn by Phillips & Company without security, were accepted by the plaintiffs, several of which were not due, when the bill in controversy became payable, and the instruction of the circuit court to the jury was if, at that time, the plaintiffs had in their hands funds of Phillips & Company of a sufficient amount to pay this bill, and they knew that Horton

Page 41 U. S. 130

& Terry were accommodation drawers, they were bound to pay it. When the plaintiffs accepted this and the other bills, were they not aware of their respective amounts and the times they became due? And were they not bound to take up the bills at maturity? Of this there can be no doubt. The bills drawn subsequently to the one under consideration amounted to $15,000, all of which were accepted by the plaintiffs. Were these acceptances made to any extent on the credit of Horton & Terry? This has not been contended. On what ground, then, can this action be sustained? The application of payments by the creditor, where no direction is given by the debtor, has no relation to the present case.

Had the bills become payable at the same time, on acceptances made on the same day, the plaintiffs might have insisted on applying the funds in their hands to the payment of the notes without securities. But this would have been a very different case from the one now before us. After having accepted the bill under consideration, payable at a time stated, the plaintiffs accepted other bills payable at a more remote period. Now the contract by the acceptors was that they would pay these bills as they respectively became due. And this they were bound to do so long as the funds of the consignors in their hands remained unexhausted. A bill became extinguished as soon as it was paid by the plaintiffs with the funds of Phillips & Company. And this principle applies as strongly to those bills signed by the accommodation drawers as to others.

Could the plaintiffs lay a foundation for a recovery against Phillips & Company by showing payment of a bill drawn by them out of their own funds? This would not be pretended. And yet this is the principle contended for in the present case. The liability of the accommodation drawers was as completely discharged on the payment of the bill in question as that of the principals. The relation of factors which the plaintiffs bore to Phillips & Company gave them no power to vary their acceptances. The cotton consigned was to meet the payment of the bills as they became due. This was known to Horton & Terry, and it may well be supposed that their liability was incurred in virtue of this

Page 41 U. S. 131

arrangement. But the plaintiffs, by appropriating the proceeds of the cotton to the payment of future liabilities, have violated their contract, endeavored to defeat the just reliance of the sureties, and charge them with the payment of the bills which they guaranteed. This the plaintiffs cannot do. It would be a great hardship, if not a fraud, on the sureties. No lien can be regarded or enforced under such circumstances. The lien of a factor depends upon legal principles founded on equitable considerations, and can be held valid on no other grounds. We think that the instruction of the circuit court was correct, and the judgment is therefore

Affirmed.

Order

This cause came on to be heard on the transcript of the record from the Circuit Court of the United States for the Southern District of Alabama and was argued by counsel, on consideration whereof it is now here ordered and adjudged by this Court that the judgment of the said circuit court in this cause be and the same is hereby affirmed with costs.

Official Supreme Court case law is only found in the print version of the United States Reports. Justia case law is provided for general informational purposes only, and may not reflect current legal developments, verdicts or settlements. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or information linked to from this site. Please check official sources.