§ Mr. Scarlett
rose and said:—
Mr. Speaker; I am sensible that I rise to address you under very great disadvantages. The question before you involves nothing of individual feeling, or of party prejudice; nor does it very obviously affect the personal interest of any portion of this House. It wants every thing, therefore, which usually recommends a discussion to the attention of this House; 1434 and, had it not been introduced into parliament under the patronage of a minister, would probably not have found an audience. Under these circumstances, if I did not consider this as one of the most important measures of the present session, I should certainly never think of forcing myself upon your notice at so late an hour; more especially after the attention of the House has been exhausted by a very lively and interesting debate, upon a subject of a totally opposite character. It shall be my endeavour, however, to state my objections to the bill with as much brevity as possible; more with the view of redeeming the pledge I have so often given, that I would take some opportunity of explaining my sentiments upon the question fully to the House, than with the vain hope that any opposition from me can prevail against a measure supported in this House by the powerful protection of my right hon. friend, (Mr. Huskisson)—after it has been introduced into the other House of parliament by his majesty's principal minister.
Before I proceed to the consideration of the subject, I beg leave to advert to a topic which has more than once been suggested by some of those who support this measure, in allusion to my known disapprobation of it. Professing a very flattering, and a very unmerited deference to my opinions as an individual, they are so obliging as to ascribe the difference which appears to exist between me and the bankers and merchants who have petitioned for this bill upon the necessity of a change in the law of principal and factor, to the prejudices derived from the profession of which I am a member. It has been the fashion of late, to denounce the lawyers as opposed to every liberal view of policy, and incapable, from the narrow habits of their profession of judging correctly and impartially upon subjects of legislation. I shall not condescend to vindicate the profession of the law from so senseless an imputation, deserving only to be treated with scorn and contempt. I am very far from arrogating to the members of the profession, any sort of advantage over any other class of gentlemen in this House. With respect to the merchants and bankers who adorn it, no person will acknowledge more readily than I do, their liberality, their knowledge, and their capacity for questions of legislation in general; but I can 1435 not admit that either my education, or the daily habits of my professional life, render me less competent to exercise an enlightened and a liberal judgment upon any proposed rule of commercial law, than if I had enjoyed the good fortune of being brought up in a counting-house, and had been accustomed to view commercial subjects in their practical details with an eye chiefly to my own profit. Few men, indeed, are so much above prejudice as to form an impartial judgment upon the general policy by which their own pursuits of gain ought to be regulated; and I hope I shall give no offence, as I mean none, when I say, that if there be any particular subject on which I should be inclined to pay little deference to the opinions of bankers and merchants, it would be precisely upon the subject of a rule for the regulation of property in which they consider their own peculiar interests to be involved. To the judgment of my right hon. friend I am disposed in all cases to defer. I am ready to own, that if I could persuade myself that he was master of the whole subject, I should feel much hesitation at coming to a conclusion differing from his.
I shall not trouble the House by reading a commentary on each particular clause of this bill. The whole affords a very happy example of the circumlocution and obscurity that distinguish the style of modern legislation. The main object which is discernible through all its mystification, I take to be this; to enable agents and factors to raise money for their own use, or to pay their own debts, by making a binding and lawful pledge of the property of their principals, without their consent or authority. This is the substance of the second clause, and is the only substantial ground of my objection to the measure. With respect to the first clause, which I am aware is but a repetition of part of the act of 1823, though it occupies so considerable a space in the printed bill, its meaning may be stated in very few words, and is perfectly innocent. It amounts to no more than this, that the consignor, or person in whose name goods are consigned by the authority of the true owner, and who is therefore the apparent owner, shall be taken to be the true owner, for the benefit of the consignee to whom they are sent, unless the consignee have notice previously to his advancing any money upon them, that the consignor, in whose name 1436 they are shipped, is not the true owner; and moreover, that such consignor shall be deemed to have been the true owner; or intrusted therewith for the purpose of consignment or sale by the true owner, unless the contrary shall be shewn in evidence by any person disputing such fact. Whether my learned friends on the other side discover any thing new in this clause, I cannot pretend to judge. The only novelty I can find in it, after much consideration, is the very elaborate and prolix contrivance by which one of the plainest rules of common sense and common law is mystified and obscured; unless, indeed, which I cannot suspect, it was intended darkly to shadow out something of the same object which is explicitly stated in the second clause.
Another part of the bill is also to be found in the act of 1823, namely, that which enables a factor, who has advanced money to his principal, and thereby obtained a lien upon the principal's goods in his hands, to communicate the benefit of that lien to another, by pledging the goods to that extent. This part of the measure always had my approbation. My right hon. friend seems to express some surprise at this. He will surely do me the justice to recollect, that my opposition to the bill introduced by the member for Midhurst in 1823, was confined to such parts of it only as were finally abandoned in that session; and, that so far from opposing this, which considered the only material part of the act which then passed, I communicated. to him the form of a bill for carrying it into effect, which I thought, and which I believe he found, was both much shorter, and more explicit than the bill which was before the House. In truth, I have ever considered that the decision of the judges which denied to the factor the benefit of raising money upon his lien, was founded on too narrow and technical a view of the rule. It is remarkable, that both lord Kenyon and lord Eldon, coming from a court of equity, were each at the first disposed to allow that privilege; they considered that the equitable lien of the factor, though he had parted with the actual possession of the goods, was sufficient to justify the pawnee in detaining them till his own claim, to that extent, was satisfied. But the other judges of their respective courts. applied a well-known rule of law, that he who parts with his possession loses his lien, and held in conseguence, that the 1437 factor, by giving possession of the goods to the party advancing him money upon them, lost his power of retaining them against his Principal for the satisfaction of his demand. Perhaps they might, without any deviation from this rule, have considered the pawnee of the factor as merely his agent for retaining possession, on his behalf, of the goods till his demand against the principal were satisfied. However, the law on this particular subject, as laid down by them, has been corrected by the act of 1823, which is proposed now to be re-enacted; and I repeat, that to this part of the measure I make no sort of objection.
But it is proposed by the second clause of this bill, which I consider to embrace the substantial object of the whole measure, to enable any person whatever, who shall be intrusted for any purpose whatever, with any bill of lading, warrant, wharfinger's certificate, or order for the delivery of goods to order or bearer, to sell the goods therein mentioned, or to pledge them for the purpose of raising money upon them for his own purposes, or to pay his own debts with them to the prejudice of his principal, the true owner of the goods, and without his authority, consent, or knowledge. And this, though the person intrusted have no lien upon the goods, no claim of any kind upon the owner; nay, even though he may be a debtor of the true owner, or may be his servant, or the clerk or servant of his factor or broker. This I pledge myself to the House is the true meaning and effect of this clause as it now stands. The proposed alteration of the law is not confined to the case of a factor intrusted with goods for sale; but extends to give an express legislative sanction to the fraud of every species of agent or servant whom it may be necessary to trust with the receipts of goods for any purpose whatever, and who may chance to find, as doubtless he always may find, a money-lender discreet enough to accept his pledge of the warrant or order for the delivery of the goods without pressing for any inconvenient information. I own, Sir, that I cannot give my assent to so very important, and so very mischievous a change in the law which regulates property; nor can I persuade myself that my right hon. friend, whose enlightened views, and correct opinions in general, I have ever felt the greatest pleasure in acknowledging, or that the gentlemen who have won him to 1438 their notions upon this subject, can be aware of all the consequences of a measure which, unless I am greatly deceived, without any necessity or adequate advantage, holds out a premium for fraud, and exposes the whole commercial property of the empire to become the prey of dishonest servants and crafty usurers. Are they aware, that every merchant who has goods in a dock or warehouse, is in the habit of trusting his clerks and his brokers with warrants and orders of the exact description specified in this clause? That the broker in his turn trusts his clerks and inferior agents? In fact, no merchant attends the delivery of his own goods, and hardly any broker personally receives the goods of his principal when he has an order for that purpose. So that when this law shall have come into operation, there will be scarcely any parcel of merchandize in the metropolis, or in the kingdom, that may not find its way into the safe custody of some money-lender by profession; who, under the sanction of an act of parliament, made apparently for his encouragement, may open an honest shop for the reception of all manner of goods without asking any questions.
But it has been said on a former occasion in this House, that the law that a factor cannot pledge the goods of his principal, is of modern introduction in this country; that it is derived from a particular case, of Patterson v. Tash, and that even that case was not properly understood. This statement is, I believe, derived from a very learned and ingenious publication; for the author of which I entertain a high respect and esteem, though I differ from his reasoning and his conclusions. He has been, I conjecture, the original promoter of this bill, and the real source from whence the numerous bankers and merchants, who are so much alarmed at the present state of the law, have gathered the first notions of their danger. I may remark, by the way, that it is somewhat inconsistent to find so much deference paid to the opinions of a lawyer. The course that gentleman has adopted is, to select particular and extreme cases in which the application of the law to innocent parties has produced great hardship; and to dwell upon the feelings which such cases are ever apt to excite, for the purpose of raising a prejudice against the general rule. This mode of reasoning, which is common enough, however captivating, is very fallacious. Most of the 1439 cases which call for the opinions of the judges, are those in which the facts are of a very complicated nature, of very rare occurrence, and in which a difficulty has been found to ascertain under what precise rule of law they are to be classed. Judges are often bound to apply a rule to a particular case against their own wishes and feelings. They arc compelled to decide by general rules, without regard to particular consequences. The utility of these rules is not to be measured by the extreme and doubtful cases to which they are sometimes applied, but by their influence on the ordinary transactions of mankind. There is no rule, either of property or of morals, which may not in its application to extreme and difficult cases, appear severe and unjust. It is unnecessary to enumerate instances, which abound even in writers upon moral obligation; the whole argument is embodied in the just understanding and application of the well-known maxim "summum jus summa injuria." I shall not dwell further upon this topic, except to observe, that whatever objections my right hon. friend may feel to particular cases of great hardship, I can assert, upon my own experience, that the vast majority of instances to which the rule is applied—instances which do not find their way into printed reports—are those in which the party advancing money to the factor, has had strong reason to suspect that the goods were the property of another; and in which all the feelings of compassion and sense of injury would be awakened on behalf of a defrauded principal.
But it is a great error, to suppose that the rule of law that a factor cannot make a binding pledge of the goods of his principal contrary to his authority is derived from the case of Patterson v. Tash, or from any other case. Decided cases serve to illustrate the law; they do not make it. Neither is the rule in question founded Upon any principle peculiar to the law of England: it is the necessary consequence of the right of property. Amongst savages, possession is the only rule of right. The advantages and the necessity of commerce amongst civilized nations have introduced a different rule. It is impossible that the true owner of personal chattels should always retain the manual possession. He must intrust them to agents; more especially, if they are to be transported to, and exchanged at, a distance from his own residence. Hence, in proportion to 1440 the extent of commerce in any nation, does the mere right of possession, or the actual possession of, merchandize (that is, of goods not appropriated for consumption, but in an exchangeable state), become less and less to the mercantile world the evidence of property. It is directly contrary to the fact, to assume that any banker or merchant takes it for granted that the holder of merchandize in a warehouse, or of a bill of lading of merchandize in a ship in transitu, which is but a title to receive the possession on arrival, is therefore the true owner. It is perfectly known, that almost every merchant is also a factor; that the bills of lading or other documents authorizing the holder to receive possession of goods, are, upon the question of title, altogether ambiguous, and remain to be explained by the bills of parcels, the invoices, or the letters of advice, of which he is surely in possession if he be the purchaser. I believe this position will not be questioned by any commercial gentleman in this House. Sure I am, that no jury of merchants would believe any man who would venture to deny it, even upon his oath. That I may not, however, be supposed to state this proposition with so much confidence on my own authority, I shall beg permission of the House to read a passage from a judgment of the late lord Rosslyn; to whom I the more willingly appeal upon this occasion, because he was not only most eminent as a lawyer, but possessed all the endowments which a liberal education and a general intercourse with the world could bestow on a gentleman. This distinguished person says, "A bill of lading is the written evidence of a contract for the carriage and delivery of goods sent by sea for freight. In the usual form of the contract, the undertaking is to deliver to the order or assigns of the shipper. By the delivery on board, the shipmaster acquires a special property to support that possession which he holds in right of another, and to enable him to perform his undertaking. The general property remains with the shipper of the goods, until he has disposed of it by some act sufficient in law to transfer property. The endorsement of a bill of lading is simply a direction of the delivery of the goods. When this endorsement is in blanks, the holder of the bill of lading may receive the goods, and his receipt will discharge the shipmaster: but the holder of the bill, if it came into his hands casually, and without 1441 any just title, can acquire no property in the goods. A special endorsement defines the person appointed to receive the goods. His receipt or order would be a good discharge to the shipmaster: and in this respect the bill of lading is assignable. But what is it that the endorsement of the bill of lading assigns to the holder or endorsee? A right to receive the goods and discharge the shipmaster. If any other effect be attributed to it, the possession of the bill of lading would have greater force than the actual possession of the goods. Possession of the goods is primâ facie evidence of title: but that possession may be precarious, as of a deposit; it may be criminal, as of a thing stolen; it may be qualified, as of things in the possession of a carrier, servant, or factor. Mere possession, without a just title, gives no property; and the person to whom such possession is transferred by delivery, must take his hazard of the title of his author." The correctness of this definition, and of this reasoning, has never been doubted, though the application of the latter to the peculiar facts of the case from which I cite it was erroneous.* Under the shelter, therefore, of so high an authority, I return to the position, that in a civilized and commercial country, the actual possession of merchandise, much less the mere authority to receive the possession, to which alone the second clause of this bill relates, is not to the mercantile world an indication of property, when unaccompanied by invoices or letters of advice from the vendor or consignor. It is, on the contrary, highly probable, that the greater portion of the wholesale exchangeable merchandise in the commercial world is not at any given time in the immediate possession or control of the true owners; it becomes, therefore, absolutely necessary, unless we return to a state of nature, and take possession for the only rule of property, that the law should establish some general rules for the security of property to the owner, when it is not in his possession. Now, it is of the very essence of property, that it should not be changed by force or by fraud, or against the will of the true owner. It is also a rule of common sense, adopted not by the law of England only, but by the civil law which governs the greatest portion of civilized Europe, that an agent shall not bind his principal beyond the* Lickbarrow v. Mason.1442 general scope of his authority. By the obvious application of this rule, and of the most essential notions of property to the relation of principal and factor, it follows that a factor who is intrusted to receive the goods of another for sale, or for any other specific purpose, cannot pledge those goods for the payment of his own debts, or for his own advantage, to the prejudice of the principal and against his will. For otherwise it would be in his power to change the property by a fraud; and without the consent of the owner, and to bind his principal beyond the scope of the authority reposed in him. I am not aware that by the law of any nation in Europe, ancient or modern, property is allowed to be changed or acquired by a direct fraud upon the owner; the general rule is the contrary. The cases where a change of property may be so affected, if they exist at all, are cases of exception depending on very peculiar circumstances. I know very well that it is roundly asserted, that the law respecting principal and factor, as it exists in this country, is peculiar; that the other commercial nations of Europe allow a factor to bind his principal beyond the scope of his authority, and to change the property of the true owner by a direct fraud upon him. To support this assertion, we are favoured with the opinions of learned foreign advocates. But I beg permission to say, that I require much better evidence than the opinions of advocates, to satisfy me of what I must consider so strange an inconsistency with the general rules for the security of property. Certainly nothing short of judicial decisions, upon cases well understood and defined, will satisfy me that the law of any other country in the world is opposed in this particular to the law of England. Nor should I even then be disposed to admit, that this country, to whose decisions on commercial subjects it has been for so many years the habit of the civilized world to defer, and to whose tribunals, vilified as they have lately been, the most enlightened foreigners look for the purest and best administered justice, ought to learn a lesson upon an important branch of commercial law from any nation upon earth. But as far as I have been able to inform myself, the learned advocates who have given these opinions, would not find them supported by judicial decisions. Sure I am, that the general principles to be found in the reported decisions 1443 of those, countries where commerce most flourished, and where the rules of property were best understood, before England became the most distinguished of nations for both, are in direct contradiction to these opinions. It has occurred to me, also, to have ascertained the opinion of a very eminent foreign judge upon this particular question before it was brought under the notice of parliament. If the House will permit me, I will shortly state the particular case in which the question arose. It does not furnish a bad illustration of the principle; and if I state it incorrectly, it will be in the power of my hon. friend, the member for Taunton, to set me right. Some years ago, the House of Alexander Baring and Co. employed a certain broker, of the name of Coles, to sell for them eighty-four hogsheads of Surinam sugars. Baring and Co. had been in the habit of employing this broker, and of handing to him orders for the delivery of goods from the docks, and of allowing him to deliver the orders or the goods to the purchasers, and to receive the money. Coles was not only a broker, but dealt largely on his own account, as a merchant, in buying and selling goods. In this latter capacity, he had frequent dealings with the House of Corrie and Co. at Liverpool; to which House he was indebted upon his acceptance to a large amount when they became the purchasers of these eighty-four hogsheads of sugars. Coles sold them as his own property on his own account, and transmitted an invoice of them in his own name, accompanied with the dock warrant, or order for delivery, endorsed by the importers, Baring and Co. to be delivered to Coles or order. I must here explain, that goods in the West-India dock are landed and housed in the name of the importing merchant, who receives a warrant from the Dock company, by which he is recognized as the person to whom, or to whose order, the goods are to be delivered. This warrant, like a bill of lading, he may either endorse in blank, which makes the goods deliverable to the bearer, or to the order of any specific person, who may in his turn endorse it again. When the goods are sold, it is usual to hand over the warrant endorsed to the purchaser, or to the broker, or to the bearer, as the parties desire; and it imports, in each case, that the goods are no longer under the control or order of the importer, but of the endorsee or bearer as the case 1444 may be. It becomes, in fact, when so endorsed, the exact description of warrant or order mentioned in the second clause of this bill. The warrant, in this particular case, was in the hands of Coles in that state which entitled him to receive the sugars himself, or to assign the power of receiving them to any other person, or to the bearer. With the invoice of the sugars, Corrie and Co. received the order endorsed by Coles to them, by virtue of which the sugars were delivered to the agents of Corrie and Co. Before the time when the usual period of credit expired, Coles became bankrupt; after which, Baring and Co., to whom he was a debtor, gave notice to Corrie and Co. not to pay the purchase money to Coles, but to them. In fact, Coles had delivered a contract to Baring and Co. by which he had led them to suppose, that he had sold the sugars in their names as their property. Corrie and Co. being; creditors of Coles, and holding his acceptances over due, insisted upon their right to set the price of the sugars off against these acceptances, they having purchased the goods, without fraud, as the property of Coles, and made no contract with Baring and Co. of whose interest they had no notice by the warrant or otherwise. An action was brought by Baring and Co. to recover the price from Corrie and Co. upon the precise ground of that law, which it is the intention of this act abrogate; namely, that the possession of the warrant did not alter the character of Coles as an agent; that he was not authorized to sell the goods as his own, nor to pay his own debts with them; that by such a sale, he could not bind his principals, who had at any time before payment of the money, a right to intervene. The cause was tried before lord Ellenborough and a special jury of merchants at Guildhall. The jury, who were not then in possession of any new lights upon the subject, without hesitation gave a verdict in favour of Baring and Co. against the inclination of the judge, who thought that this case ranged itself within certain exceptions to the general rule, with which it is not necessary to trouble the House. In consequence of his doubts, the Court granted a new trial, and directed the facts to be stated in a special case for the more solemn consideration of the judges. The case was argued twice. The counsel for the defendants did not fail to urge the popular argument of which the supporters 1445 of this bill avail themselves; namely, that Baring and Co. trusted Coles with the order for the goods, and to receive the money; that if the bankruptcy had not intervened before the credit expired, the account would have been settled exactly as Corrie and Co. now contended it ought to be; and that Baring and Co. must have looked to Coles alone, in whom they had confided, as their debtor: in fact, that the mere period of the bankruptcy ought not to make a difference in the rights of the parties. The Court, however, finally decided the case, as the jury had done, in favour of Baring and Co. Whilst this case was depending, I had the opportunity of submitting it to a very learned and sagacious judge of the Cour Royale of Paris, who was then in England, and whose talents are known to this nation as well as to his own, by a very distinguished publication upon the judicial proceedings of this country, He was surprised at the doubt entertained on the case by the English judges, and assured me, that the Courts in France would have found no difficulty in deciding, that Coles, being a mere agent, could not bind his principals by a sale of the goods as his own, so as to preclude the principals from asserting their title aid interest in the contract whenever they chose to intervene before actual payment.
Here then, at least, is one unquestionable authority against the learned opinions I have alluded to. With respect to the case, I think it was rightly decided; but I beg to assure the House, that if the proposed law lad then been in existence, Mr. Coles might not only have made a legal and binding sale of the sugars as his own, but might have pledged them to any person for a loan to himself, to the prejudice of his principals, and contrary to the authority reposed in him. For be it observed, that Coles, though not a factor, was precisely in the case of a person intrusted with a warrant or order for the delivery of goods to order; which document gave no notice that any other person was the owner. He would, therefore, in the words of the second clause, have been deemed and taken to be the true owner, so far as to give validity to any contract for the sale or pledge of the goods to any person whatever, to whom he did not think it expedient to give notice that he was not the true owner, and who might think it not expedient to ask for his invoice, or to make any other inquiry. 1446 I now return to the general question, which may be stated thus: Shall an agent who holds a bill of lading, or other order for receiving the goods of his principal, for the purpose of sale, or for any other specific purpose, having no claim whatever against the principal, have power by law to raise money upon these goods by pledge of the document or order, for his own benefit, or for some object in which the principal has no interest, and thereby, if he becomes bankrupt or insolvent, deprive his principal of the right to reclaim the possession of his property remaining unsold, except upon the condition of redeeming the pledge? This is the main object of the measure, in whatever manner it may be mystified. Now, to determine fairly upon this question, it is necessary to consider who are the parties that can have any interest in it. The first is the principal whose goods are placed in jeopardy; the second is the agent or factor; the third is the money-lender. I am aware of no other. I presume no argument can be necessary to satisfy a common understanding, that the principal or true owner of the goods can never be the advocate of a measure, that has a manifest tendency to diminish his own security. It may be said, and, if I remember right, the topic has been employed in this House, that the facility of raising money upon the pledge of goods has a tendency to prevent their being thrown upon a falling market, and that the owners of goods upon sale have a general interest in this, which outweighs the risk they run of the insolvency of their factors. It is difficult to deal with an argument that presents itself in so abstract a form. I believe that the owner of goods on sale is more apt to consider his own individual hazards and interest, which he can easily comprehend, than the general interests of the extensive class in which the argument places him. If a factor has actually advanced money, or accepted bills for the benefit of his principal, it is admitted that there can be nothing unjust or injurious to the principal in permitting the factor rather to pledge the goods for reimbursing himself, or paying the bills, than to compel him to a forced sale of the goods. This case, when it occurs, every owner of goods. can understand. He can see that his interest is in no way prejudiced, since he must pay the money due to the factor by the sale of the goods or otherwise. But beyond this point, I am persuaded, 1447 that the general abstract interest of vendors in sustaining high market prices, would never be of sufficient force to induce an owner of particular goods to put them in hazard for the credit of a factor. On the contrary, I believe, that the owner of goods would never trust them with a factor to whom he was not indebted, but upon the understanding that the factor had capital enough to sustain his credit without in any measure sacrificing the property of his principals. It is well known, that in a great variety of trades there exists a competition amongst factors, which induces them to offer various portions of the invoice price by way of advance to their principals, in order to invite a preference. Now, this mode of dealing plainly implies, that the factor holds himself out as in possession of adequate capital to do even more than the strict duties of a factor require. How then can it be assumed, that the principals generally anticipate the possibility of a want of credit in their factors leading to forced sales? But if this general theory of the abstract interests of the owners of goods on sale were founded on truth, it ought to follow, that the factors should be rather encouraged than not, to raise money by pledges; whereas, by an inconsistency somewhat new in legislation, they are by this bill declared criminal, and made liable to fourteen years' transportation, for doing that which the argument supposes to be a general benefit, and which the same bill sanctions and makes binding in law upon innocent parties who are defrauded by it. Moreover, I am not prepared to admit that there is any public benefit resulting from that degree of facility in procuring money upon goods, which tends to raise them to an artificial price. It is far from my intention to embark upon this topic in the present argument; but I think my right hon. friend must agree with me, that the power of turning every commodity in the market into its nominal value in currency, which in effect is the enhancing of prices by an indefinite augmentation of that currency, and not of the real wealth of the country, implies an artificial state of the currency, which can neither be lasting nor advantageous to any community.
The next party whose interest is involved is the factor. Now it may well be doubted, whether a law which carries along with it a penalty upon him, can be intended for its benefit. And it may, I 1448 think, be assumed, that there is as little of wisdom or policy as there is of morality, in making a law for the express purpose of sanctioning the fraud, and increasing the power of a dishonest agent. It is plain that the law is applicable to such agents only. An honest factor may undoubtedly be reduced by misfortune to the necessity of borrowing money; but I deny that any honest man will borrow money upon the goods of another, in which he has no interest; still less will an honest man make a false representation of his title to the goods on which he seeks to borrow money. These propositions surely cannot be doubted, It follows, then, that the interest of an honest factor cannot be concerned in this law. That it will serve the ends, and gratify the wishes of some factors, I entertain no doubt; but I cannot think it either necessary or wise in the legislature to pass a law for the benefit of that description of factors, to whom alone, I am most confidently of opinion, that this law, when rightly understood, will appear to be beneficial. They will calculate upon the remote risk of prosecution by a principal residing abroad; whom they will always protest they intended to serve, not to defraud, when in a season of necessity, produced by their own imprudent speculations or extravagance, they find it expedient to satisfy their English creditors, by distributing amongst them the goods of their principals; and at all events, to make no enemies of their bankers, with whom, when their difficulties are over, they may desire to open a new account.
The only remaining party whose interest is to be considered" is the lender of the money upon the pledged goods. To him I most freely admit that the proposed law is highly advantageous. Nothing can be more useful or desirable to the lenders of money, than a rule of law which may dispense with all caution about the nature of the title on which they lend. To them it would be highly advantageous to make the mere naked possession of property of all descriptions, and in all cases, a conclusive title against all mankind. They might then accept property of all sorts, and from all manner of persons, upon pledge without risk. It would greatly facilitate all transactions of lending money, and add much to that species of commerce, if it were clearly established that the lender was never called upon to make any inquiry about 1449 the title of property offered in pledge. It is very well understood, even now, that the shops which buy or advance money upon all manner of goods without asking questions, have a vast superiority of custom. But, Unfortunately, an opinion has hitherto prevailed, which has tended to discredit this species of traffic. It has been thought, perhaps from mere prejudice, that if there were no receivers, there would be fewer thieves; and that one of the best modes of protecting property from fraud and plunder, is to expose the receiver, in some cases, to punishment, and in all cases to the loss of the property which he has received through the felony, the fraud, or the embezzlement of the party from whom he obtained it. It has been thought, moreover, a strong argument against the receiver, that he should have made no proper inquiry of the party offering him property upon pledge or sale. The man who voluntarily turns his eyes away from the light, that he may afterwards seek for shelter in his own ignorance, surely suspects the existence of that which he thinks it not safe to discover too clearly. If this observation be just, it is as applicable at least to the best informed merchants and bankers, as it is to the more ignorant part of mankind. It is, therefore, very fit to be considered, admitting the benefit Of this law to moneylenders, whether it can be of any real advantage to commerce to introduce this sort of morality into it by act of parliament, and to what extent, if once introduced, it must be carried.
Now it is manifest, that a banker or merchant applied to by a factor to lend money upon the pledge of goods, must be aware, that if the borrower is honest, and means to pledge none but his own goods, he cannot possibly have the slightest objection to make his title to the goods known, by producing his invoice, or his letters of advice. The application for money discloses his necessity. The disclosure of his title, if it be a good one, can have no other effect than to strengthen his credit. No man who wants credit can feel any desire more natural or more strong than that of displaying the resources which can best procure him credit. He gains confidence by it, is the more certain of immediately attaining his object, and can by no possibility do himself or any other man any injury by it. In all imaginable eases, therefore, where such an application 1450 is made by the holder of bills of lading, or other orders for the delivery of goods, without at the same time shewing or offering to shew his invoices or letters of advice, the money-lender has, from that very omission, the more reason to suspect, that the ambiguous documents which are alone produced, are held by the party applying in the character of a factor or agent, and not that of a principal. The plain dictates of honesty and good faith in such a case, surely more imperiously prescribe, that the lender should demand an inspection of the particulars withheld. Wherever he omits to do so, the inference is plain, that he fears he may be pressing for an embarrassing disclosure. Those who are conversant with cases of this kind in courts of law, are well aware of the many shifts to which he who is desirous of lending money to a needy man, upon pledge of goods, without risk, is obliged to resort. The most common of these is a fictitious sale of the goods. The suspicious lender, unwilling to embarrass his friend, or to imply a doubt of his integrity, which he really feels, is not disposed to take goods upon pledge, but he has no objection to purchase them, if he can be sure of a small profit. The borrower has no difficulty in gratifying him; he offers to purchase the goods to be paid for at a future day, at a small increased price. Sometimes a third party intervenes, who becomes the intermediate buyer and seller. I appeal to my hon. and learned friend, the Attorney general, if he has not had very recent experience in the court of King's-bench, of these dexterous expedients. They are, it must be owned, not so convenient a machinery for fraud as the more direct road opened by this bill; and what is worse, they are sometimes, more especially in cases of bankruptcy, found ineffectual. The basis of the transaction is fraud, and it has hitherto been one of the most universal maxims of the common law, that fraud vitiates and avoids all transactions of which it makes a part. But this bill proposes to qualify that maxim, in the particular case in which the fraud and dishonesty of the borrower of the money, is combined with the affected ignorance and real suspicion of the lender. For no advantage then of the principal, for no advantage of the honest factor, but for the mere benefit and security of the careless at least, if not the crafty and suspicious lender of money, a law is to be passed, 1451 whereby a dishonest factor or agent of any kind may more successfully defraud his principal. Is the necessity of lending money then so urgent, that it must be the paramount object of legislation? Or is it worthy of the character of the law of England that it should lend an express and positive sanction to such transactions? That it should proclaim free liberty of fraud as part of the freedom of trade, and consecrate in the very sanctuary of legislation the principles of treachery and spoliation?
But is has been said, that admitting the factor to be guilty of fraud, and to merit punishment, the question is between two innocent persons, which shall bear the loss resulting from that fraud, the one who has placed confidence in a dishonest factor by trusting him with his goods for sale, or the lender of the money who has placed no confidence, but exacted the security of goods for his loan? It will be easy to show the sophistry of this mode of stating the question. In the first place, it is not true that the lender has placed no confidence in the factor, but just the reverse. The lender, knowing that the true owner of merchandise must always be in possession of documents to prove his title, has chosen to rely upon the representation of the borrower, or upon an ambiguous bill of lading or order for delivery, without demanding those documents. In the next place, the lender was aware, that the borrower was pressed by some urgent call for money, and that a man who is obliged to borrow is never unwilling to show his title to credit if he has any. It is the lender, therefore, who, disregarding circumstances that ought to have excited his suspicion, has placed an unwary confidence in the mere personal character of a necessitous borrower. Whereas the principal, more especially the foreign principal, has less. means of knowing the circumstances of the factor, and has confided to him nothing but what was warranted by the usual course of trade. Every man who carries on a particular branch of business, holds himself out to the world, and may be reasonably presumed by those who deal with him in that line only, to have competent skill, integrity, and resources for his ordinary business. Nor can it be reasonably supposed, that any owner of merchandises would intrust them for sale, to a factor whom he thought deficient in any of these points. But the man who deals 1452 with a factor, not in the way of his business, but in transactions of lending him money, must surely know best, or at least is bound to know best, what are his resources. Besides, the foreign merchant is under the necessity of trusting his goods to a factor for sale; he cannot otherwise conduct his commerce. But what necessity has any man for lending his money upon the pledge of goods? What obliges him to do so without first ascertaining the title of the borrower? How would commerce suffer if no factor should hereafter ever be able to obtain money upon goods in which he has no claim or interest? The true way, then, of stating the question seems to be this: Whether of the two parties, supposing them equally innocent of fraud, shall the loss fall—upon him who hat lent his money without necessity, without inquiry, and under circumstances that justified suspicion, and called for inquiry; or upon the owner of the goods, who was as under the necessity of trusting an agent with them, who did not know of the embarrassment of that agent, and who has no negligence or want of caution to reproach himself with?
But it is said, that the foreign principal may easily protect himself from the fraud of his factor by inserting his name as agent in the bill of lading. Those who insist upon this topic have not considered, and probably are not aware, how many questions and how much litigation will necessarily arise from the introduction of a new clause into a long-established and well-understood instrument. Many doubts will occur as to the rights of third parties, as well as of the agent himself, under such a bill of lading: at present no doubt exists. I have been endeavouring to shew that no necessity exists for the alteration, and that no advantage can be gained by it. Indeed, I am much disposed to believe, that the benefit expected from this new Law very much depends upon the persuasion that no such alteration is likely to be made. But let it be recollected, that this measure is not confined to a bill of lading, but extends to every warrant or order for delivery of goods. Now, supposing the bill of lading to denote the factor as agent, it must always depend on his pleasure whether his name or that of his principal shall appear at the wharfs, at the docks, or at the brokers, or in any of the subsequent documents which are enumerated in this bill. 1453 But the true way, as it strikes me, of considering the principle of the law on this subject, is to examine what authority is to be inferred from the actual possession and custody of merchandise; for surely it is a solecism in reasoning, to infer a greater right and power in the. holder of the mere order or authority to receive the possession, than in the actual possessor. To say that the custody of the various documents, which entitle the holder of them to receive possession of merchandise, shall be conclusive evidence of his right to transfer the property, but that the actual possession of the merchandise itself, which is the result and consequence of these documents, and in effect the very consummation of their object, shall confer no such right, is a manifest absurdity. It seems, therefore, that the necessary consequence of this law is to revive the ancient and only rule of property in the first stages of society; namely, possession. Now, it may be worth while to pause for a moment, for the purpose of inquiring to what extent this ancient rule of property may be carried in our present artificial condition. If the possession of personal chattels is in all cases to enable the possessor to make a binding disposition of them, then it follows, that the renter of a ready-furnished house may make a binding pledge of the furniture to a pawnbroker; that a servant intrusted with his master's goods, jewels, or plate, may sell or pawn them to a broker for his own benefit; that a drover, intrusted with a farmer's cattle or sheep for sale in Smithfield (he is properly a factor), may pay his own debts with them, or raise money upon the pledge of them. Nay, why shall not a coachmaker pledge or sell a carriage sent to him for repair? or a stable-keeper, horses standing with him at livery? or a gentleman, his job-carriage and horses? All these, and a thousand other cases, depend on the principle now proposed to be subverted for the benefit of those who have money to lend. It would be more simple and intelligible to declare at once, that possession is in all cases conclusive evidence of title.
It is said, however, that a bill of lading is a negotiable instrument by the custom of merchants, and that there is no reason why it should not circulate like a bill of exchange, the property in which is always transferred by endorsement for a valuable consideration, It is certainly true, that 1454 by the general rule a bill of exchange is transferred by endorsement, without reference to the title of the endorser. But this rule is subject to certain exceptions in those cases where the bill is offered or endorsed under such circumstances as ought reasonably to have excited the suspicion of the party accepting it. If in such cases he takes it without inquiry, though he gives the full value for it, the property is not transferred to him. But in fact, there is no just analogy between a bill of exchange and a bill of lading, any more than between the things they represent. A bill of lading is a contract. for the carriage and delivery of goods to the shipper, or his order, or the consignee. It entitles the holder to receive the goods. By the custom of merchants, the power or title to receive the goods may be transferred by endorsement; but the property in the goods cannot be transferred by endorsement, except by the true owner. The indorsee of the bill of lading receives the same title as the endorser had, and no more. The title to receive possession cannot give a better right than the actual possession. A bill of exchange, on the contrary, is the acknowledgment of a debt from the acceptor to the drawer. It represents neither specific goods, nor specific monies, but imports a debt which may be paid in any lawful coin, and which, by the custom of merchants, may be transferred to an endorsee. If that endorsee should be but an agent, he would nevertheless be accountable to his principal only in the character of a debtor, and not for the delivery or safe custody of any specific monies. The receipt of money by an agent for his principal, by the laws of all nations, makes him a debtor to his principal, and he may discharge that debt by paying the same amount in any other lawful coin. The currency of a nation, or that which represents the currency, as a bill of exchange, has been deemed of too fugitive a nature to be placed under the same regulations in all respects as other property. As far as I know, the distinction exists in every civilized country. It is founded upon the very nature of the thing. The loan or deposit of a horse, or other specific chattel, implies a contract to return the same individual article: the loan of a guinea, or of a sum of money, implies no such thing; if it did, what would become of the profits of a banker? The cases of a bill of lading and a bill of exchange 1455 would be more parallel, if the bill, of exchange were for a particular sealed bag of money; but then it would cease to be a bill of exchange, and become an order for a specific bag of money, not intended to circulate, but to be brought to the true owner in that form.
For the purpose of illustrating further the distinction between bills of lading and bills of exchange, and indeed of expressing my own sentiments on the whole subject in language of higher authority, I appeal once more to my lord Rosslyn. In the same judgment from which I before cited a passage, that learned person says, "Bills of exchange can only be used for one given purpose; namely, to extend credit by a speedy transfer of the debt which one person owes to another, to a third person. Bills of lading may be assigned for as many different purposes as goods may be delivered; they may be endorsed to the true owner of the goods by the freighter, who acts merely as his servant; they may be endorsed to a factor to sell for the owner; they may be endorsed by the seller of the goods to the buyer; they are not drawn in any certain form; they sometimes do, and sometimes do not express on whose account and risk the goods are shipped; they often, especially in time of war, express a false account and risk; they seldom, if ever, bear upon the face of them any indication of the purpose of the endorsement. To such an instrument, so various in its use, it seems impossible to apply the same rules as govern the endorsement of bills of exchange. The silence of all authors treating on commercial law, is a strong argument that no general usage has made them negociable as bills. And unless there was a clear established general usage to place the assignment of a bill of lading upon the same footing as the endorsement of a bill of exchange, that country which should first adopt such a law, would lose its credit with the commercial world; for the immediate consequence would be, to prefer the interest of the resident factors, and their creditors, to the fair claim of the foreign consignor. It would not be much less pernicious to its internal commerce; for every case of this nature is founded in a breach of confidence, always attended with a suspicion of collusion, and leads to a dangerous and false credit at the hazard and expense of the fair trader."
Before I conclude, I would call the at 1456 tention of the House to the very peculiar situation in which an owner of goods may find himself placed by this law. By the laws of Russia, and of some other countries, the owner of goods actually shipped, who may have transmitted bills of lading duly signed by the master of the ship to his factor in London for sale, has a right, if he hears of the insolvency of the factor, to compel the master of the ship, before she quits her final port of departure, to re-land the goods upon paying a reasonable compensation for the freight, or to sign fresh bills of lading. What would be the surprise of such an owner, if he should afterwards accompany his own property to England, to find, that some rich merchant or banker in possession of the first set of bills of lading, pledged by the insolvent factor, not only claims the goods, but is entitled by the law of England to maintain an action against him, the true owner, to recover against him the possession of his own goods? The predicament will be strange, and, I apprehend, will not be very honourable to the commercial code of our country. At present, notwithstanding the appearances that are exhibited of dissatisfaction with the existing law, it is my firm belief, that one, if not the chief cause of the superiority of British commerce, and of its triumph over all the absurd restrictions introduced partly by the supposed necessity of revenue, but chiefly by the narrow views of commercial men themselves, is the undoubted security which the laws of England afford to property. Her tribunals are resorted to by all nations, who repose with confidence upon the protection of her laws, as much as upon the integrity of her merchants. The effect of any alteration which shall enable a factor fraudulently to apply the property of his principal to pay his own debts, or to increase his own resources, must be, as I conceive, inevitably to excite great distrust. The probable result will be, to throw the foreign consignments into the hands of a few of the most eminent and affluent houses, such as the house of my hon. friend, the member for Taunton, perhaps the greatest now in Europe, whose known affluence and resources place them above the possibility of any breach of trust.
Sir, I beg pardon for having troubled you so long on so very dry and uninteresting a subject. Much more may be urged upon it than I think it convenient 1457 to urge at this hour, and upon a hopeless object. I shall not take advantage of the state of the House by dividing it upon the question, but content myself with giving it my decided negative.
§ Mr. Huskisson
combatted the arguments of the hon. and learned gentleman. He entered, at considerable length, into the details of the bearing of the law as it at present stood, and stated the absolute necessity of altering it; a necessity the more pressing, as England, under the warehousing system, was now becoming the dépôt of the merchandize passing between the two worlds; and unless they were prepared to renounce all the advantages of that system. Every security ought to be given to advances made on the goods so warehoused. The consign. ors were, in numberless instances, not the owners, but drew their bills against goods, the property of different individuals who employed them to ship them. if, therefore, any person was to come forward and only have to state his ownership to enable him to invalidate the pledge on which money had been raised to enable the consignee to transact the business to the consignors' advantage, it was evident, that an entire bar must be placed to the raising money on any goods whatever; as no one could ascertain the real owner. The bill certainly did place the bill of lading in the situation in which Exchequer bills stood at present; as negociable securities; but the parties might always make the bill of lading special, if they chose so to do. As to the objection of trusting the clerks of brokers and merchants, it was well known that property to an immense amount was daily trusted to the clerks of bankers, from which no inconvenience resulted.
§ Mr. J. Smith
said, that this bill originated with the merchants of London, who were exposed to the greatest frauds. For instance, he would suppose a merchant at Calcutta to ship 50,000l. worth of indigo to a merchant in London: he at the same time draws bills on him for 48,000l. which are accepted. The indigo does not belong to the Calcutta merchant, for no indigo grows near Calcutta; it belongs to a grower in Bengal, who sends it to Calcutta. The merchant in Calcutta fails, and the owner then comes and demands his goods from the merchant in London, who had already advanced nearly to the amount of their value. The same took place in the corn-trade. 1458 A corn-merchant at Boston, in shire, ships a cargo of oats to London property of, perhaps, forty or fifty farmers. The corn-merchant draws bills for the amount on the factor at Mark-lane, which are accepted. The merchant at Boston fails, and the former claim their goods from the factor who had already paid for them. Such was the injustice and fraud which resulted from the present law. The only part of the bill that he was displeased with, was the clause postponing its operation till October 1826.
§ Mr. Huskisson
said, the extension of the period was necessary, that all the parties whom it might affect should have notice of it.
§ Mr. J. P. Grant
opposed the bill.
supported the bill, both on account of its obvious necessity, and on the custom of merchants. All agreed in the inconvenience which resulted from the present state of the law.
§ Mr. T. Wilson
supported the bill, and stated that it originated with the merchants of Liverpool two years ago.
The bill was then read a third time.