Kelly v. Smith

14 F. Cas. 271

• Court: U.S. Circuit Court for the District of Connecticut
• Decided: April 15, 1848
• Status: Published

Opinion

NELSON, Circuit Justice.

1. The question on the merits in this case is, whether the defendants below should be allowed, in the adjustment of their accounts, the nett proceeds of the actual sales of their goods, or their market value at the time of their delivery to Arnold & Co., on the 8th of June, 1S42. The court below allowed only the nett proceeds.

The pledge of the goods by Preston & Pomeroy, as security for advances made to them by Arnold & Co., with authority to the latter to sell to re-imburse the same, was a conversion of the property which subjected the factors to an action for the value of the goods at the time of their delivery in pledge. Daubigny v. Duval, 5 Term R. 604; McCombie v. Davies, 7 East, 5; Fielding v. Kymer, 2 Brod. & B. 639; Graham v. Dyster, 2 Starkie, 21; Kennedy v. Strong, 14 Johns. 128. The authority given to the factors to procure the goods to be printed did not change the character of the transaction, as the pledge was not a necessary prerequisite to the exercise of that authority. Nor is it affected by the fact that the goods were sold probably as early as they could have been, had they not been pledged, that is, as soon as they could be printed. The legality of the act cannot depend upon the result. The pledge was lawful or unlawful at the time it was made. The act was a wrongful conversion, for which the factors became immediately liable to their principals.

The only difficulty in the case is in respect to the remedy. That an action of trover would lie for the value of the goods on the 8th of June, 1842, is beyond question. That is the usual mode of redress. Whether in-debitatus assumpsit for goods sold and delivered would also lie is not so clear. Putnam v. Wise, 1 Hill, 234, 240, and cases in note. The case of Lee v. Shore, 1 Barn. & C. 94, seems to go that length. In that case the fact of the removal or taking away by the defendant of the goods claimed by the plaintiff, was the sole ground relied on for implying a contract of sale; and the court conceded throughout that it was sufficient The cases generally do not carry the doctrine of election of actions to this extent. 2 Phil. Ev. 110, 111 (7th Bond. Ed.); Browne, Actions at Law, 324, 480, and cases.

But, independently of this principle, I am inclined to think that the defendants below are entitled to an adjustment of their claim, in the settlement of accounts with their factors. It is well settled that any loss which the principal may have sustained by reason of the negligence of the agent, or his departure from instructions, may be taken into account. White v. Chapman, 1 Starkie, 113; Shaw v. Arden. 9 Bing. 287, 291; 2 Smith, Lead. Cas. 14, note to Cutter v. Powell; Russ. Fact. 187. The case of Bell v. Palmer, 6 Cow. 128, was an action of assumpsit by factors against principal, to recover a balance due in account. The defendant sought to reduce the balance, by showing a loss in the sale of the goods, by reason of a departure from instructions. He was charged, not with the price of the goods sold, but with what he might, have received if he had followed the instructions. The case of Guy v. Oakley, 13 Johns. 332, involves a like principle.

Now, it appears to me that the principles referred to, and which are of daily application, cover the case in question. Whether the loss is occasioned ,by the negligence of the agent, or by some other wrongful act of his in dealing with the goods committed to his trust, can make no difference. In either case, it is a loss by his misconduct, in the execution of his trust, and nothing more.

That the principal, whether he be plaintiff or defendant, must, in an action of assumpsit, look to the proceeds and not to the value of the property, is answered by the case of Palmer v. Bell [supra]. There the value of the property, or, in other words, what the factors might have got for it, was allowed to the defendant in the adjustment of accounts. And the principle of that case is fully borne out by the cases referred to in Smith. Lead. Cas. and Russ. Fact.

Suppose the factor should sell the goods greatly under the market value, give them away, or appropriate them to his own use, can there be a doubt that in the adjustment of accounts he would be bound to account for their value? The pledge of the goods by the factors in this case for money advanced, was a virtual appropriation of them to their own benefit, and affords much stronger ground for implying a sale, than the fact relied on in Lee v. Shore [supra]. The principle of the cases, however, does not rest, upon this implication, but upon the fact of a loss or damage arising out of the negligence or other wrongful act of the agent in dealing with the goods, which the principal is entitled to have adjusted in the settlement of accounts, without being driven to a cross action. The damage consists in the difference between the value of the goods at the time of the conversion, and the proceeds of the sale. This is the loss which, if any, the law presumes the principal to have sustained. The wrongful conversion gives him a right to their value at the time; and to that he is, in justice and equity, entitled, in the settlement of the accounts.

2. 1 have no doubt that the district court had jurisdiction of the case. By the sixth section of the bankrupt act of August 19, 1841 (5 Stat. 445), it has jurisdiction “in all matters and proceedings in bankruptcy arising under this act,” and that jurisdiction extends “to all acts, matters and Things to be done under and in virtue of the bankruptcy, until the final distribution and settlement of the estate, &c.” The jurisdiction does not depend upon the parties to the suit, but upon the subject matter. The suit in this case was essential to the winding up of the proceedings in bankruptcy, as it involved a question, in respect to a portion of the assets of the estate. Without this settlement there could be no final distribution, or termination of the proceedings.

3. Assuming that the defendants were entitled to a trial by jury, a question which it is not now necessary to determine, it is a sufficient answer to the objection that the case was tried by an auditor, to say that the defendants waived their right by acquiescing in the reference to the auditor, and by appearing before him and contesting the claim. The judgment of the district court must be reversed.