The judges being equally divided in opinion, the judgment of the lower court was affirmed.
Slidell, J.
The petition in this case alleges that the defendants, in the capacity of factors and commission merchants, received for the plaintiff’s account, at different times, various sums of money, and so became indebted to him in the gross sum of $14,554 23, as shown by an account current rendered by them. That in said account he is improperly charged with certain payments, made by the defendants without his authority or consent. The suit is brought to recover the amount of funds in the factors’ hands, exclusive of these payments.
The defendants answered by a general denial of any indebtedness to the plaintiff ; and alleged that, as his general agents and factors, they had in all respects faithfully performed their duty, and accounted to plaintiff.
The district judge gave judgment in favor of the plaintiff, and the defendants have appealed.
The following facts are presented by the evidence : The plaintiff was a sugar planter, living upon his estate in the country, and the defendants were his commission merchants at New Orleans. They were at the same time agents of Goodloe, an engine builder living at Cincinnati. In November, 1845, the defendants, acting as the agents of Nolan and of Goodloe, made a contract, which they signed for both principals, for the building and putting up of a sugar mill and engine for Nolan. The agreed price was to be paid by Nolan to Goodloe, in March, 1847. Whatever irregularity there may have been in a' contract thus made by the same agent for two principals is immaterial, as both subsequently assented' to the contract. Shaw Co. contracted no personal liability, at the time, to Goodloe, for the payment. On the 29th December, 1846, Nolan, who then had a large amount in the hands of his factors, addressed them a letter, • [45]*45expressing his dissatisfaction with the machinery furnished by Goodloe, and directing them to pay him no money whatever on his account. To this letter Shaw Co. replied on the 2d January, 1847, as follows : “Your favor of the 29th December, is received, and we note contents. We regret very much that you and Mr. Goodloe should have any difficulty in settling your business. We will settle nothing without your orders. It has always been our custom to-pay out money for no one without orders.” The letter then states that a claim for fifty dollars had been presented by a creditor of Nolan, and asks whether it shall be paid. At this time, Shaw Co. do not appear’ to have been under any obligations to Goodloe, as guarantors, or otherwise, for the price of the machinery. If such had been the case, they had a fair opportunity of showing it by their clerk, whow as a witness for them in the cause, or in their answers to interroga-, lories put to them by the plaintiffs. Subsequently, however, as may be fairly inferred, they accepted drafts drawn upon them by Goodloe, on account of various contracts, including that with Nolan; and on the 18lh March, 1847, Goodloe was the debtor of Shaw Co. in an amount exceeding that stipulated between Nolan and Goodloe for the machinery. Thereupon, Shaw Co. paid themselves the debt due by Goodloe, by debiting Nolan in account current with $7267 43, and crediting Goodloe in his account with that sum. In the account with Nolan, this item is stated as follows : March 23, 1850. To cost of sugar mill and engine, as per contract with James Goodloe, 86250 00: amount of extra work per bill furnished, $1017 43 — $7267 43. The relations of factor and principal still continued as usual, between the plaintiff and defendants, after the order not to pay to Goodloe, and the promise by Shaw 4’ Co. to act accordingly. Further monies were received by them for account of Nolan, and disbursements made upon his drafts, or in payment of plantation supplies, &c. On the 21st June, 1847, they rendered their account current, in which he was charged with the amount of $7267 43, in the manner above stated, this being the first advice given of the payment.
It further appears by testimony offered by the defendants, and to the introduction of which the plaintiff excepted, that the machinery was constructed and erected on Nolan’s plantation by Goodloe, in a good and workmanlike manner, and in conformity with the contract, and that it worked well, except some occasional breaking, which the witness, an engineer employed by Goodloe, says was not uncommon. Some repairs and changes were made by the wjtness after the first grinding season was over (1846) without charge by Goodloe. These consisted in putting in wheels that had been broken. The witness adds, however, that Nolan was always complaining about the machinery.
It is very material to observe, in ascertaining the rights of these parties, that at the time when the order not to pay Goodloe was given by Nolan, Shaw Sf Co. had not incurred any liablity whatever to Goodloe, growing out of the contract for the machineiy. They had not guaranteed the payment to be made by Nolan, nor entered into any engagement with Goodloe, which would have given him a right of action against them. The payment, therefore, must be considered as having been made in violation of the order of their principal and of their promise to obey that order, and in furtherance of their own interests originating after the order was given. We will assume, for the purposes of the present inquiry, that the debt so paid was justly due by Nolan to Goodloe.
The question thus pi’esented is substantially one of the light of compensation. I owe you, says the defendants, the proceeds of your crops placed in my hands for sale, but you owe me a debt which was justly due by you to Goodloe, whose [46]*46rights against your orders and in furtherance of my own interest, I have acquired by paying him. Is a factor permitted to make such a defence ?
The relation between factor and principal is not the ordinary relation of debtor and creditor. It is a relation of trust and confidence. It creates a contract in the nature of what is known to the civil law as the irregular1 deposit. See Bludworth v. Jacobs, 2d Ann. 28. In the absence of an agreement to the contrary, the factor is to be considered as undertaking to hold the funds confided to him by his principal, subject to his order, and to be ready to pay them over to him upon demand, deducting only his own charges and advances made in the course and within the scope of his employment. In the present case, there was superadded to the implied agreement to hold Nolan's funds subject to his order, a positive promise not to use them in paying Goodloe.
Now, according to the spirit of our code and the principles of the civil law from which it is derived, compensation does not take place against a party who has confided his funds to another under such circumstances, C. C. 2207 and 2927. Compensation must rest upon the basis of good faith. It. is not permitted where its operation would involve a deception and a disappointment of the just expectation and confidence of the party against whom it is set up.
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The judges being equally divided in opinion, the judgment of the lower court was affirmed.
Slidell, J.
The petition in this case alleges that the defendants, in the capacity of factors and commission merchants, received for the plaintiff’s account, at different times, various sums of money, and so became indebted to him in the gross sum of $14,554 23, as shown by an account current rendered by them. That in said account he is improperly charged with certain payments, made by the defendants without his authority or consent. The suit is brought to recover the amount of funds in the factors’ hands, exclusive of these payments.
The defendants answered by a general denial of any indebtedness to the plaintiff ; and alleged that, as his general agents and factors, they had in all respects faithfully performed their duty, and accounted to plaintiff.
The district judge gave judgment in favor of the plaintiff, and the defendants have appealed.
The following facts are presented by the evidence : The plaintiff was a sugar planter, living upon his estate in the country, and the defendants were his commission merchants at New Orleans. They were at the same time agents of Goodloe, an engine builder living at Cincinnati. In November, 1845, the defendants, acting as the agents of Nolan and of Goodloe, made a contract, which they signed for both principals, for the building and putting up of a sugar mill and engine for Nolan. The agreed price was to be paid by Nolan to Goodloe, in March, 1847. Whatever irregularity there may have been in a' contract thus made by the same agent for two principals is immaterial, as both subsequently assented' to the contract. Shaw Co. contracted no personal liability, at the time, to Goodloe, for the payment. On the 29th December, 1846, Nolan, who then had a large amount in the hands of his factors, addressed them a letter, • [45]*45expressing his dissatisfaction with the machinery furnished by Goodloe, and directing them to pay him no money whatever on his account. To this letter Shaw Co. replied on the 2d January, 1847, as follows : “Your favor of the 29th December, is received, and we note contents. We regret very much that you and Mr. Goodloe should have any difficulty in settling your business. We will settle nothing without your orders. It has always been our custom to-pay out money for no one without orders.” The letter then states that a claim for fifty dollars had been presented by a creditor of Nolan, and asks whether it shall be paid. At this time, Shaw Co. do not appear’ to have been under any obligations to Goodloe, as guarantors, or otherwise, for the price of the machinery. If such had been the case, they had a fair opportunity of showing it by their clerk, whow as a witness for them in the cause, or in their answers to interroga-, lories put to them by the plaintiffs. Subsequently, however, as may be fairly inferred, they accepted drafts drawn upon them by Goodloe, on account of various contracts, including that with Nolan; and on the 18lh March, 1847, Goodloe was the debtor of Shaw Co. in an amount exceeding that stipulated between Nolan and Goodloe for the machinery. Thereupon, Shaw Co. paid themselves the debt due by Goodloe, by debiting Nolan in account current with $7267 43, and crediting Goodloe in his account with that sum. In the account with Nolan, this item is stated as follows : March 23, 1850. To cost of sugar mill and engine, as per contract with James Goodloe, 86250 00: amount of extra work per bill furnished, $1017 43 — $7267 43. The relations of factor and principal still continued as usual, between the plaintiff and defendants, after the order not to pay to Goodloe, and the promise by Shaw 4’ Co. to act accordingly. Further monies were received by them for account of Nolan, and disbursements made upon his drafts, or in payment of plantation supplies, &c. On the 21st June, 1847, they rendered their account current, in which he was charged with the amount of $7267 43, in the manner above stated, this being the first advice given of the payment.
It further appears by testimony offered by the defendants, and to the introduction of which the plaintiff excepted, that the machinery was constructed and erected on Nolan’s plantation by Goodloe, in a good and workmanlike manner, and in conformity with the contract, and that it worked well, except some occasional breaking, which the witness, an engineer employed by Goodloe, says was not uncommon. Some repairs and changes were made by the wjtness after the first grinding season was over (1846) without charge by Goodloe. These consisted in putting in wheels that had been broken. The witness adds, however, that Nolan was always complaining about the machinery.
It is very material to observe, in ascertaining the rights of these parties, that at the time when the order not to pay Goodloe was given by Nolan, Shaw Sf Co. had not incurred any liablity whatever to Goodloe, growing out of the contract for the machineiy. They had not guaranteed the payment to be made by Nolan, nor entered into any engagement with Goodloe, which would have given him a right of action against them. The payment, therefore, must be considered as having been made in violation of the order of their principal and of their promise to obey that order, and in furtherance of their own interests originating after the order was given. We will assume, for the purposes of the present inquiry, that the debt so paid was justly due by Nolan to Goodloe.
The question thus pi’esented is substantially one of the light of compensation. I owe you, says the defendants, the proceeds of your crops placed in my hands for sale, but you owe me a debt which was justly due by you to Goodloe, whose [46]*46rights against your orders and in furtherance of my own interest, I have acquired by paying him. Is a factor permitted to make such a defence ?
The relation between factor and principal is not the ordinary relation of debtor and creditor. It is a relation of trust and confidence. It creates a contract in the nature of what is known to the civil law as the irregular1 deposit. See Bludworth v. Jacobs, 2d Ann. 28. In the absence of an agreement to the contrary, the factor is to be considered as undertaking to hold the funds confided to him by his principal, subject to his order, and to be ready to pay them over to him upon demand, deducting only his own charges and advances made in the course and within the scope of his employment. In the present case, there was superadded to the implied agreement to hold Nolan's funds subject to his order, a positive promise not to use them in paying Goodloe.
Now, according to the spirit of our code and the principles of the civil law from which it is derived, compensation does not take place against a party who has confided his funds to another under such circumstances, C. C. 2207 and 2927. Compensation must rest upon the basis of good faith. It. is not permitted where its operation would involve a deception and a disappointment of the just expectation and confidence of the party against whom it is set up. Hence, if a creditor should buy goods at the shop of his debtor in such a manner as to hold out the idea that he would pay for them in cash; and after receiving the goods should propose a set off, his conduct would be considered as not in good faith and compensation, would not be allowed. Pardes.sus, Droit Commercial, vol. 2, No. 325. So it would be with one who, under representation of a pressing exigency, and a promise of an early repayment, should borrow money of another, and refuse afterwards to pay upon the ground that the lender was his debtor. Such artifices, says Mr. Pardessus, are unworthy of the good faith of commerce. Ib. See also Merlin Rep. verbo Compensation, ss. 2.
In the examination I have made of the English commentators on commercial law, I have found no case which countenances the pretensions of the defendant.
Mr. Russell, in his Treatise on Fnctors, states it to be an incontestable principle of mercantile law, that where a party orders his agent to pay money to a third person, but afterwards, before the money is paid or passed into account, countermands such order, the agent, paying after such countermand, must be deemed to have made the payment wrongfully, and will not be entitled to charge the sum in account against his principal. Russell on Factors, 170.
In Child v. Maley, 8 Tenn. 610, cited by Mr. Paley in his Treatise on Agency, 110, it was held, that if the principal refuse payment upon a contract made by means of the agent, and the agent not being himself liable, but for the sake of his own character, which would be affected by the discredit of the principal, choose to pay the money himself, he cannot recover it; though the principal might himself have been compelled to pay it in the first instance.
It is in vain for the defendants to say, that the debt which he has paid for Nolan to Goodloe was a just debt; Nolan thought, or professed to think, it was not. He could have withdrawn his funds out of his factor’s hands, if he had chosen, for aught that appears to the contrary. He left them there and permitted them to accumulate under the express promise that they should not be used to pay Goodloe. The payment was a breach of the confidence reposed, and the defendants cannot profit by their own wrong. They must pay over to the plaintiff, upon his demand, the funds entrusted to them, and bring their separate action upon Goodloe's claim, as Goodloe would have been, obliged to do if they had not thought proper, by paying him, to take his place.
[47]*47We all concur in the opinion of the the district judge as to the other disputed items.
The court being equally divided in opinion, judgment of the district court stands affirmed, with costs.