
    Joseph J. Schmidt, Respondent, v. Thomas Simpson, Appellant.
    First Department,
    July 7, 1910.
    Bailment — pledge — pawnbroker—Factors’ Act.
    The purpose of the Factors' Act is to relieve ordinary mercantile transactions from the strict rule of caveat em/ptor and to facilitate business. It covers two classes of transactions: Mrstly, those of factors or. other agents intrusted with the ordinary documentary indicia of title customarily used in commerce; and, secondly, those of factors or agents ordinarily doing the kind of business described in the act who-are intrusted with the possession of any merchandise' for the purpose of sale or to secure advances made thereon. '
    Where the owner of jewelry took it to a broker in precious stones and left it with him for sale at a specified pi-ice and he -pledged it with a pawnbroker for a loan and later became bankrupt, the pawnbroker has no title to the jewelry ' or lien thereon as against the real owner, although, he acted in good faith and without,knowledge. ' .
    The pledge of articles with a pawnbroker is not within the purview of the Factors’ Act.
    The broker in precious stones by pledging the jewelry committed larceny, and could give no better title to the pledgee than he had himself.
    Scott, J., dissented.
    Appeal by the defendant, Thomas Simpson, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 6th day of January, 1910, upon the verdict of a jury rendered by direction of the court after a trial at the New York Trial Term, and also from an order entered in said clerk’s office on the 8th day of January, 1910, denying the defendant’s motion for a new trial made upon the minutes.
    
      Charles Blandy of counsel [Blandy, Mooney, & Shipman, attorneys], for the appellant.
    
      John R. Dos Passos of counsel [Louis S. Posner and Cyril F. Dos Passos with him on the brief], Dos Passos Brothers, attorneys, for the respondent.
   Clarke, J.:

This is an action upon, an assigned claim to recover the possession of certain ¡jewels or their value pawned with thedefendant, alicensed pawnbroker. Plaintiffs assignor, an English woman, was traveling with her husband, in this country, when, on the evé of her sailing :for home from .the city of New York, certain circumstances arose-, in consequence of which she'desired to sed a portion of her personal jewelry. She and her husband took the jewelry to a reputable shop upon Fifth avenue and offered it for sale. She was told that the house did not buy jewelry over the counter and she was recommended' to one Charles A. Weber as a broker in jewelry.

Mrs. Kufeke and her husband went to Weber’s office, told him how she had come to visit him and. exhibited the jewels and requested him to sell them for her. She placed a price upon-each of the articles and stated that they were only to be sold at the prices she had given. Thereupon there was a discussion about the charges for-cabling and it was finally agreed that Weber was to have a tén per cent .discretion on the prices given to save the cost' o.f cabling and he was to receive five per cent on the sale, and she handed him the jewels and received the following paper :

“Charles A. Weber,
“ Dealer and Broker in Precious Stones,
“ 320-322 Fifth. Avenue,'
“ New York.
“ Telephone 734 Madison Square.
“August 14, 1906.
“ Deceived from
'. “Mrs. f, L. Kufeke, • - - -
“ Delaford,
“Waterloo Park, Liverpool,
England.
1 Opal and diamond bracelet. .............i... 200 00
1 Buby “ . “ .......,.......... 325 00
1 Emerald' .“ “ ..........750" 00
1 diamond Crescent ............ - ....... 2, 750 00
. 1 diamond necklace... ;............'.......... 1, 750 00
. 1 diamond pendant.-................ .......... ,1, 600 00
1 Emerald & 2 stone Dias ring................ . 60Ó 00'
1 Sward Emeralds Dias Babies 2 Saphs..:....... $250 00
1 3 stone Diamond ring....................... -600 00
1 5 stone Buby Bing Siam...................* . 200 00
15 “ '“ “ ...... .....:........... 250 00 small
1 Buby and 2 diamonds set as ring............. 750 0.0
'. ■ 10,020 oo .
' 250
9, 770 00
“CHABLES A. WEBEB,
“ The above to be sold' Pr. Frank: P. Webeb.
Less 10 pr. cent on all,”

The $250 subtracted from the total represented one of the pieces of jewelry at that, price which was withdrawn and not left with Weber. Mrs. Iiufeke and her husband sailed the next day, and the same day Weber pawned the jewelry with the defendant for $4,500. ' ' .

Some time afterwards Mrs. Kufeke, in response to a letter of inquiry, received a reply from Weber’s trustee in bankruptcy that he had become a bankrupt and that the pawn tickets were held subject to her order. ■ She. thereafter assigned her claim to the plaintiff and this suit was brought.

Upon the trial a stipulation was entered into conceding most of the above facts as outlined, and that no question of the identity of the goods would be raised and that for the purposes of the trial it was admitted that the jewelry was worth $8,000, and “that at the time the defendant advanced the said money.he was wholly ignorant of the fact that the said goods were not owned by the said Weber, or that said Weber was employed by Mrs. Kufeke to sell at the prices named in said Schedule A, or that he was employed by her to sell thé same, and that defendant acted in good faith as a pawm broker and made such advances on the security of the pledge of the said jewelry.”

A question of law only is presented' upon this record. The appellant conceded upon the argument in this court that under the common law there would be no defense. He claimed, however, that he came within the terms of the Factors’ Act (Laws of 1830, chap. 179, § 3 ; now Pers. Prop. Law [Consol. Laws, chap. 41; Laws of 1909, chap. 45]j § 43, subd. 1) which, as contained in the latter statute, provides as follows: 1. Every factor or other. agent, intrusted, with the possession óf any bill of lading, custom-house permit, or warehouseman’s receipt for the delivery of any merchandise, and every such factor or agent not having the documentary evidence of title, who shall be intrusted with the possession of any merchandise for the purpose of sale, or as a" security for ' any advances to be made or obtained thereon, shall be deemed to be the true owner thereof, so far as to give validity to any contract made by such agent with any other person, for the sale or disposition of the whole or any part of such merchandise, for any money advanced, or' negotiable instrument or other obligation in writing given by such other person upon the faith thereof;” the contention being that Weber, having been intrusted with the possession of the jewelry for the purpose of sale, 'became the factor or agent alluded- to in the statute, and, therefore, was to be deemed to be the true owner thereof so far a§- to give validity to the contract made by him with the defendant for the disposition of such merchandise for the money advanced by- the defendant upon the faith thereof.

It seems to me that the Factors’ Act does not apply. It was undoubtedly passed for the purpose of relieving ordinary mercantile transactions from the strict rule of the common law; ■ its purpose was to facilitate business. It covered two classes of transactions : First, those of factors or other agents intrusted with the possession of any bill of lading, custom house permit or warehouseman’s receipt for the delivery of any merchandise, that is to say, the ordinary documentary indicia of ownership customarily used in commerce taking the place ’of the actual possession of bulky articles, and customarily passing in the course of trade as good delivery, and made use of. with banks to obtain the ordinary advances upon goods arriving and to arrive. Second, and every such factor or agent, that is, a factor or agent ordinarily doing the kind of business theretofore enumerated in the statute, who shall be intrusted with the possession of any merchandise for the purpose of sale or as the security for any advances to be made or obtained thereon. -

There was no such mercantile transaction in the case at bar. Weber was a broker and dealer in precious stones. He received the possession thereof, not coupled with a general power of sale, but with a restriction as to price. He received them, not in the ordinary course of business from merchants or dealers as merchandise, but as the personal adornments of a lady who was forced to - sell. They were to be sold for her at the price fixed by her, and from the proceeds he was to receive five per cent commission.. In violation of his obligation he appropriated them to his own use by immediately taking them to a pawnbroker and pledging them for about half their value, which he received and kept. This surely was not an ordinary mercantile transaction, nor does the pawnbroker come within the purview of the act. He is under a special body of law; he is required to obtain a license, to give a bond, to keep specified books which are open to inspection by the courts and the police authorities, and he is permitted to take a very large rate of interest upon the loans advanced upon the pledge of personal property. (See Gen. Business Law [Consol. Laws, chap. 20; Laws of 1909, chap. 25], §§ 40-52, as amd. by Laws of 1909, chap. 240; 2 Birds. C. & G. Consol. Laws, 1812, § 40 et seq. See, also, Greater New York charter [Laws of 1901, chap. 466], §§ 51, 121, 316, 317, as amd.) He exists to accommodate the necessities of the poor, and is not a recognized instrument in the ordinary trade and commerce of the country in regard to which the Factors’ Act was passed.

While it is true that it is conceded in the case that he acted in good faith, yet that does not help him if Weber was not such factor or agent as was covered by the terms of .the statute. Weber committed larceny and could transfer no better title than he had.

In Heilbron v. McAleenan (1 N. Y. Supp. 875), a pawnbroker’s case, Van Brunt, P. J., said: “There was no general power of sale given to Jácquin, only the power to sell and deliver to a particular person, collect the money from this particular person and receive from such purchase money his brokerage, circumstances precisely analogous to those presented in the case of Soltau v. Gerdau [48 Hun, 537].” I do not understand that a restriction to sell to a particular person is any greater restriction than to sell at a particular price.

. In Anderson v. McAleenan (29 N. Y. St. Repr. 406) the court said: “ The jury were correctly charged that if plaintiff delivered the diamond ring referred to in the complaint to Alexander Katen with authority to exhibit it to a particular person and to sell it to such person if the latter- wished it, said Katen was not thereby given a power of disposition sufficiently broad to enable him to pledge said ring.” __

I do not think that the Legislature ever intended to include such a. transaction as is here presented within the provisions of the Factors’ Act.

■ The judgment and Order appealed- from should, therefore, be affirmed, with costs to the respondent. '

. Ingbaham, P. J., Lahghlin and Millek, JJ., concurred; Scott, J., dissented.

Scott, J. (dissenting):

I dissent, although in so doing I am not to be understood as expressing the opinion that pawnbroking transactions always or even generally fall within the purview of the Factors’ Act. The circumstances-surrounding this case are unusual. In the first place the jewels came lawfully into the hands of Weber, having been voluntarily intrusted to him by the owner for absolute sale and dis- • position. . There was, therefore, no larcenous talcing, no qualified possession'and no restriction upon the person to whom a sale was to be made, and, therefore, the authorities which have held the Factors’ Act to be inapplicable to shch case need not .be considered. Weber undoubtedly fell within the language of the act, being an “ agent, not having the'-documentary evidence of title, who [was] intrusted with the .possession of * * ’* merchandise for the purpose of sale.” The statute embraces two classes of factors or agents, those who have been intrusted with the documentary evidencé of title, and “ every such factor or agent,” who. not .having been intrusted with the possession of the documentary evidence of title, has been intrusted with the actual possession of the merchandise. It is not clear, just what meaning the Legislature intended to give to the qualifying word “ suóh,” but the most favorable meaning to attach to it, so far as concerns the respondent here, is to hold that the Legislature meant that the factors or agents whose author-

ity to dispose of merchandise might be inferred from the actual possession thereof, must be such as in the ordinary course of their known business might from the very nature of their business be persons to whom others would be likely to intrust merchandise, or the documentary evidence of title thereto, for purposes of ábsolute disposition. ' My only doubt is whether this is not giving too restricted a meaning to the word “such.” Certainly no more restricted meaning can be given to it, without destroying, in large part, the very purpose for which the act was passed. But under this closely restricted meaning, I still think that the act applies to the present case. The receipt in evidence shows that Weber was engaged in the business of “ Dealer and Broker in Precious Stones,” that his place of business was on Fifth avenue, and it appears that he had been designated to plaintiffs assignor by a well-known and reputable firm of jewelers as a person who dealt in jewelry and precious stones and who would be a proper person to undertake the sale of her jewelry. It may be assumed, without much violence, that he was also known to defendant as a dealer in such merchandise, and he was certainly a person to whom it would be both natural and reasonable that jewelry, or in a proper case the evidence of title thereto, might be intrusted for sale. In my viejvs therefore, Weber was an agent, within the meaning of our Factors’ Act, who had been intrusted with merchandise for the purpose of sale. Indeed I think that he would even fall within the language of the English Factors Act, 1889 (52 & 53 Vict. chap. 45), which speaks of a “mercantile agent” which has been defined to designate “ persons of the class ordinarily carrying- on the business of mercantile .agents” (Hastings Ltd. v. Pearson, L. R. [1893] 1 Q. B. Div. 62), for such is precisely what Weber appears to have been. Of course it cannot be successfully contended that jewelry per se is not merchandise. It is our common knowledge and experience that it is the subject of great business enterprise, of sale and barter, and of importation and exportation. True the jewelry owned by plaintiff’s assignor while retained by her for personal adornment was withdrawn from trade and for the time ceased to be merchandise as that term is ordinarily used, but when she determined to dispose of it and intrusted it to an agent for sale to any one who would purchase at her price she restored her jewelry to the channels of trade and reinvested it with the character of merchandise. The prevailing opinion intimates that, even if all the other statutory conditions be present,' still the defendant, because he is a pawnbroker,' cannot avail himself of' the protection of the Factors’ Act, and the inference is that if the loan had been made under like circumstances by a bank or banker the. Factors’ Act might be found to apply. I am unable to see the. force of this distinction. The business of pawnbroking is not anathema in the eye of the law, but, on the contrary, while strictly, regulated it is in other ways highly favored. In many countries it is deemed so important and honorable that it is engaged in by the government as an administrative monopoly. It is undoubtedly true that of recent years there has been a line of division between banking and pawnbroking, but it has not always, been so, and history -is full of instances in which' great bankers have loaned large sums of money upon the pledge of rare and valuable jewels. I can see no reason, therefore, why defendant, who is conceded to have acted in good faith, should be denied the equal protection of the Factors’ Act, merely because he pursues the perfectly lawful business of a pawnbroker. To test the applicability of the Factors’ Act by the nature .of the business carried on by the lender is to introduce an innovation which is not to be found in the language of the act itself, and which finds support in no reported case to which our attention has been called. The kind of business commonly.carried on by the lender might under some circumstances have a bearing upon the good faith of the transaction, but can have no such-application in the present case because the good faith of defendant was conceded. The authority given to Weber was not a restricted one in the sense in which that term is used in the cases cited by the respondent. In those the restriction was as to persons to whom the sale was to be made, and thus conferred only a very limited agency. Here the agency, so far as concerns a sale, was unrestricted, the only limitation being as to the price, a very common limitation in cases of sale by agents or factors. In my opinion the judgment should be revérsed and a new trial granted.

Judgment and order affirmed, with costs.  