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20 SEP 1961
Entered according to Act of Congress, in the year 1882, by REVIEW PUBLISHING COMPANY,
In the office of the Librarian of Congress, at Washington.
SOUTHERN LAW REVIEW
VOL. VII., N. S.] ST. LOUIS, APRIL, 1881.
THE POWER OF USAGE AND CUSTOM TO CONTROL OR ALTER RULES OF LAW.
In a former paper,' the power of usage and custom to affect legal rules and liability was considered in three cases, viz.:
I. In the Case of Common Carriers.
II. In the Law of Insurance.
III. In the Relation of Landlord and Tenant.
In this paper, the discussion there commenced will be extended to the following, viz. :—
IV. In the Relation of Principal and Agent.
V. In the Law of Corporations.
VI. In the Law of Sales.
VII. In the Law of Banks and Banking, and Negotiable and Assignable Paper.
The attention of the reader is directed to the language of courts and judges to the effect that a custom or usage which is contrary to an "established rule of law" is never admissible in evidence for the purpose of varying or altering those rules, which was cited at some length in the former paper, and which it is not necessary to repeat. But it may be well to repeat in this place the three divisions into which, as appears to the writer, these "established rules of law," and the cases in which usage and custom have been set 2 Id. 845, 846.
6 South. L. Rev. 845.
then been both criticised and expressly overruled.' Had such a usage been shown in Graham v. Dyster, decided by Lord Ellenborough in 1816, the liability of the factor might have been different, though such a conclusion is not certain, the opinion being far from clear upon this point. The case of Newbold v. Wright,3 which in 1833 came before the Supreme Court of Pennsylvania. is often cited as an instance of a usage of trade changing the law as to a factor's power to pledge. The opinions in that case are very lengthy, but the syllabus to the report reads thus: "A usage cannot be set up in opposition to a general rule of law; therefore a usage for factors to pledge the goods of their principals is bad." And Rogers, J., who delivered the opinion of the court, said of the custom set up at the trial: "It would be of pernicious consequence to the commercial world to recognize such a custom, so proved, made for the benefit of a few, opposed as it is to the general mercantile law. It is an attempt to set up a custom in opposition to a general principle of law, which cannot be permitted." It may be observed, however, that one judge dissented from the rest of the court, and apparently favored the admission of the custom. But in Laussatt v. Lippincott, where one to whom goods were delivered by his principal to sell, deliver, and receive payment, deposited them with a commission merchant connected in business with a licensed auctioneer, who advanced his notes thereon, it was held that this transaction bound the principal, the jury having found that this was in accordance with the usage of the trade. Tilghman, C. J., admitted the general rule of law to be against the defendant, saying: That a factor cannot pledge the goods of his principal for his own debt, seems to be too well settled to admit of a doubt." 5 But he added: "Now the jury have found that,
1 See Solly v. Rathbone, 2 Moo. & S. 298; Cochran v. Tatum, 2 Moo. & S. 301, note; Shipley v. Keymer, 1 Moo. & S. 484; Martini v. Coles, I Moo. & S. 140; Queiroz v. Trueman, 3 Barn. & Cress. 342; Boyson v. Coles, 6 Moo. & S. 14. 2 2 Stark. N. P. 21.
3 4 Rawle, 195.
4 6 Serg. & R. 386.
5 Citing Paterson v. Tash, 2 Stra. 1178; Wright v. Campbell, 4 Burr. 2046; Pickering v. Burk, 15 East, 43.
in the ordinary course of business in this city, merchandise brokers make sale of the goods of the principal in the manner in which this coffee was sold. Therefore, when the plaintiff trusted a well-known merchandise-broker with the possession of his goods for the purposes of sale, he impliedly gave him power to sell in the manner in which he sold, or, to speak with more strict propriety (though the jury call it a sale), the manner in which he deposited for the purpose of sale." This case was cited to the court in Newbold v. Wright, but without changing the decision of the court upon the main question.
(4.) A payment of money due to the principal, made to an agent duly authorized to receive it, is a payment to the principal, and will discharge the debt. But (5) one employed to sell for a known principal has not, from that fact alone, authority to receive payment, and the law does not raise such a presumption to protect an innocent payment to such an agent.2 It has been held in New York that where an agent has not, by the established rules of law, an implied authority to receive payment, such an authority cannot be shown by a local usage allowing such an agent to receive payment for his principal. This is another illustration of our third
(6.) The factor, unless authorized by his principal, cannot set off his private debt to the vendee against the vendee's debt on the sale; and the principal will not be bound by such a transaction. An agent employed to receive a debt must take
1 Favene v. Bennett, 11 East, 38; Baring v. Corrie, 2 Barn. & Ald. 137; Owen v. Barrow, 1 N. R. 101; Goodland v. Blewith, 1 Camp. 471; Coates v. Lewes, 1 Camp. 444; Barrett v. Deere, Moo. & M. 200; Henry v. Marvin, 3 E. D. Smith, 71; Renard v. Turner, 42 Ala. 117; Capel v. Thornton, 3 Car. & P. 352; Pickering v. Bush, 15 East, 38; Cross v. Haskins, 13 Vt. 536; Hackney v. Jones, 3 Humph. 612; Pinckney v. Hagadorn, I Duer, 89.
2 Baring v. Corrie, 2 Barn. & Ald. 138; Ireland v. Thompson, 4 C. B. 149; Mynn v. Jolliffe, 1 Man. & R. 326; Morris v. Cleasby, 1 Mau & Sel. 576; Whiton v. Spring, 74 N. Y. 169.
3 Higgins v. Moore, 34 N. Y. 417 (reversing s. c. 6 Bosw. 344). evidence of usage to pay an agent, see Heisch v. Carrington, 5 Car. & P. 471. 4 Whart. on Ag., sect. 741; Westwood v. Bell, 4 Camp. 349; Turner v. Thomas, L. R. 6 C. P. 610; Dresser v. Norwood, 17 C. B. (N. s.) 466; Miller
payment only in money. Nevertheless it has been ruled in several cases that where a broker or other mercantile agent has been employed to receive money for another in the general course of his business, and where the general course of business is for the agent to keep a running account with the principal and to credit him with sums which he may have received by credits in accounts with the debtors, with whom he also keeps running accounts, and not merely with moneys actually received, the rule laid down in the foregoing cases cannot properly be applied; but it must be understood that where an account is bona fide settled according to that known usage, the original debtor is discharged and the agent becomes the debtor. In Massachusetts it is recognized that, in the usual and ordinary course of business, a factor does not, and is not required, to keep the money received upon the sale of goods of different consignors in separate and distinct parcels, but mingles all in a common mass, and with the like funds of his own, from whatever source derived.3
Two rules of law concerning the agent's compensation are well established. They are: (7.) Profits made by an agent out of the principal's business belong to the principal, and not to the agent; and (8) an agent of the owner to sell property
v. Lea, 35 Md. 396; Lime-Rock Bank v. Plimpton, 17 Pick. 159; Guy v. Oakley, 13 Johns. 332; Stewart v. Aberdeen, 4 Mee. & W. 224; 2 Kent's Comm. 622; Underwood v. Nicholls, 17 C. B. 239; Sweeting v. Pearce, 7 C. B. (N. S.) 449; s. c. 9 C. B. (N. s.) 534; Warner v. Martin, 11 How. 209; Benny v. Pegram, 18 Mo. 191; Beach v. Forsyth, 14 Barb. 499; Bartlett v. Pentland, 10 Barn. & Cress. 760; Scott v. Irving, 1 Barn. & Adol. 605.
1 Barker v. Greenwood, 2 You. & Coll. 418; Bostick v. Hardy, 30 Ga. 836; Greenwood v. Burns, 50 Mo. 52; Magnum v. Ball, 43 Miss. 288; Catterall v. Hindle, L. R. 1 C. P. 186; s. c. 2 C. P. 368.
2 Stewart v. Aberdeen, 4 Mee. & W. 201; Catterall v. Hindle, L. R. 2 C. P. 368; Sweeting v. Pearce, 9 C. B. (N. S.) 534; Warner v. Martin, II How. 220; Scott v. Irving, 1 Barn. & Adol. 605.
3 Vail v. Durant, 7 Allen, 409.
4 East India Co. v. Henchman, 1 Ves. jr. 289; Rogers v. Boehm, 2 Esp. 702; Traverse v. Townsend, I Bro. C. C. 384; Diplock v. Blackburn, 3 Camp. 43; Kimber v. Barber, L. R. 8 Ch. 56; Robinson v. Robinson, I De G. M. & G. 256; Ackenbery v. McCord, 36 Ind. 473; Lafferty v. Jelley, 22 Ind. 471; Marwin v. Buchanan, 62 Barb. 468; Bain v. Brown, 7 Lans.