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A TREATISE
ON THE
LAW OF AGENC1 7
INCLUDING NOT ONLY A DISCUSSION OF THE GENERAL SUBJECT
SPECIAL CHAPTERS ON
7"
By FLOYD R. MECHEM, LL.D.
AUTHOR OF MECHEM ON PUBLIC OFFICERS, MECHEM ON SALES, ETC. ; FORMERLY TAPPAN
PROFESSOR OF LAW IN THE UNIVERSITY OF MICHIGAN ; PROFESSOR OF LAW
IK THE UNIVERSITY OF CHICAGO
SECOND EDITION
IN TWO VOLUMES.
VOLUME II
CHICAGO
CALLAGHAN AND COMPANY
1914
T/IKOA r TO 77 A J.
3HT
Entered according to Act of Congress, in the year 1888, by
FLOYD R. MECHEM,
In the office of the Librarian of Congress, at Washington.
C'/1U1J1 l/h Mr! X njL'l 7J )] [ J J/x ,s I k.-i r^lUi I A
Copyright, 1914,
by
FI.OYD R. MECHEM.
Mj&S-^&r
19 14
Cm A KAl
TABLE OF CONTENTS, VOL. II.
CHAPTER V.
THE DUTIES AND LIABILITIES OF THE PRINCIPAL TO THIRD
PERSONS
[References are to sections: 1-1705, Vol. I; 1706-2588, Vol. II.]
Purpose of chapter 1706
I. THE LIABILITY OF THE PRINCIPAL UPON CONTRACTS MADE BY AN AGENT
In general 1707
1. The Contractual Liability of the Disclosed Principal
In general 1708
Principal liable on contracts made in his name by his authority 1709
Principal liable on informal contracts not expressly charging agent's
responsibility 1710
Informal entries or charges against agent not conclusive 1711
Principal may often be liable though agent also bound 1712
Written contract in agent's name Principal not liable 1713
Same subject Principal liable 1714-1716
Principal not liable where credit given exclusively to agent 1717
For what contracts and contractual act* of agent is principal liable. . . 1718
Qui facit per alium, facit per se 1719
Principal liable for acts and contracts within scope of authority 1720
Third person must ascertain agent's authority 1721
What constitutes authority 1722
Secret instructions and restrictions of principal or secret motives
of agent Mistake of agent 1723
General and special agents 1724
Special agent's authority must be strictly pursued 1725
Effect of ratification 1726
Performance of unlawful act not enforced 1727
Principal not bound where agent had an adverse interest 1728
2. The Contractual Liability of an Undisclosed Principal
Preliminary considerations as to liability 1729, 1730
General rule Undisclosed principal liable when discovered 1731
Rule applies to all simple contracts 1732
Parol evidence to identify the principal 1733
Does not apply to contracts under seal 1734, 1735
Does not apply to negotiable instruments 1736
Exceptions to the general rule 1737
Of the first exception Change in accounts Misleading conduct 1738
Thompson v. Davenport 1739
Heald v. Kenworthy 1740
IV TABLE OF CONTENTS
[References are to sections: 1-1705, Vol. I; 1706-2588, Vol. II.]
Armstrong v. Stokes 1741
Irvine v. Watson In the Queen's Beiich 1742
Irvine v. Watson In the Court of Appeal 1743
What is misleading conduct 1744
- Delay, etc 1745-1747
The rule in the United States 1748
General conclusions 1749
Of the second exception "Election" 1750
Theories of election 1751
Knowledge necessary 1752, 1753
What constitutes an election 1754
I. Before discovery of principal 1755
II. After discovery of principal . . 1 '.'}?. .'MH^i'TJ .-i 1 . 1 . 1 . ;'?. IfH'.'l'j'A W. 1756
Presenting claim 1757
Commencement of act ion 1758
Taking judgment against agent 1759
Taking agent's note 1760
Charging goods to agent 1761
Mere delay Statute of limitations . . .'I 1 . . . . 1 ?lll . n . L J 1762
Intermediate party must have been agent and not principal 1763
Alleged agent must have been really such 1764-1766
- "Apparent" authority "A 1 .!? .???. . . . . 1767, 1768
Right of assignee of other party against principal V???V?.f. : 1769
Apparent agent the real principal rXXfl'* 1770
Excluding principal's liability by terms of contract 1771
Cases in which the agent may not be liable 1772
II. BESPONSIIULITY OF THE PRINCIPAL FOR THE AGENT'S STATEMENTS, REPRESENTA-
TIONS AND ADMISSIONS
In general 1773
Agent's authority must be first shown 1774
Authority cannot be shown by agent's admissions 1775
Representations by agent .- .?I : J'.*7?. J .^ f J'. ''.'?. k .... 1776
Principal liable for statements and representations expressly author-
ized : : 1777
Statements of agent expressly authorized to give, or referred to for,
information 1778
Statements of agent impliedly referred to for information 1779
Statements of agent made as incidents of his position General man-
ager General agents, etc 1780
Statements of agent made as incident to an authorized act Res gestae 1781
Various statements of the doctrine 1782
Limitations upon the rule 1783
Further limitations 1784
-How question determined 1785
Effect of these statements not dependent upon their being true 178R
Statements showing notice to or knowledge by the agent 1787
Statements of agent made to modify, qualify or explain the act 1788
Illustrations . , 1789
TABLE OF CONTENTS V
[References are to section*: 8 1-1705, Vol. I; 8 1706^2588, Vol. II.]
Statements indicative of the agent's state of mind 1790
Words themselves constituting or aggravating the wrong 1791
Admissions of agent generally not competent to charge principal 1792
Declarations and admissions of agent as part of res gestae 1793
Meaning of res gestae as here u^ed 1794
What sort of statements admissible 1796
What embraced within res gestae 1796
How admissibility determined 1797
Illustrations of what has been called part of the res gestae Inadmis-
sible declarations 1798
Illustrations Admissible declarations 1799
When principal bound by agent's representation of extrinsic facts upon
which authority dep&nds 1800
Illustrations Bills of lading Warehouse receipts Certified
checks 1801
III. THE EFFECT UPON THE PRINCIPAL'S EIGHTS AND OBLIGATIONS OF NOTICE TO OR
KNOWLEDGE IN HIS AGENT
In general 1802
General rule No.tice to the agent is notice to the principal 1803
Illustrations 1804
The theory of the rule a. Identification 1805
6. Conclusive presumption of communication 1806
I. Notice acquired during agency 1807
II. Knowledge acquired prior to agency 1808
Requirements of present knowledge 1809-1811
What is meant by notice acquired "during the agency" or "prior
to agency" '. 1812
The resulting rule 1813
The first exception Privileged communications 1814
The second exception Agent acting adversely to principal 1815
Reasons for the exception 1816
Further of these reasons 1817-1821
The true exception 1822-1824
Applicability of exception to corporate agents 1825
The third exception Collusion of party claiming benefit of notice .... 1826
Who can avail himself of the notice 1827
What notice includes Actual and constructive notice 1828, 1829
Agent must be agent of person to whom notice is to be imputed 1830
Rule applies only to notice respecting matters within agent's authority 1831
Notice after termination of authority does not bind 1832
Notice must be of some material matter 1833
Notice must come to someone who is an agent 1834
Ratification 183~>
Releasing agent from duty Enlarging it 1836
Agent of two principals .-*h<a> 1837-1839
Two agents of same principal 1840
ivuil .'
VI TABLE OF CONTENTS
[References are to section*: 1-1705, Vol. I? 170<^25S8, Vol. II.]
Notice to snbagent when notice to principal 1841
Notice of what sort of facts imputed .>.;: i'JlyU'pWiP. g?'. 1842
These rules apply to corporations Notice to agent .33$.-l l *.<Vl!*&- 1843
What officer or agent -;l r i.'Jv; *tft'3 .WiVr-. 1844
Ordinary exceptions apply here .-. wl'i'i 1845-1847
When notice must be acquired 1848-1850
When notice to director is notice to corporation 1851-1853
Notice to stockholder not notice to the corporation 1854
IV. THE LIABILITY OF THE PRINCIPAL FOR HIS AGENT'S TORTS AND CRIMES
In general 1855
Theories of liability 1856, 1857
1. Did Relation of Principal and Agent or of Master and Servant Exist
Necessity for existence of the relation 1858
When relation exists 1859
Several masters of one servant General and special master
Lending servants Adopting servants of others 1860
Servant performing his own master's business under direction of
master's employer 1861
Furnishing persons to be employed as servants 1862
Tests for determining question 1863
Court or jury 1864
Contractual agreement as to who shall be principal 1865
Strangers assisting servants 1866-1869
Independent contractors 1870, 1871
Subagents 1872
2. Liability for Acts Expressly Directed
Principal liable for acts expressly directed 1873
3. Liability for Negligent Act of Servant or Agent
Liable for agent's negligent act in course of employment 1874
Liability dependent upon agency 1875
Rules stated 1876, 1877
Forms of negligence 1878
What meant by course of employment 1879
Not merely a question of time or place 1880
Master's prohibition or warning not conclusive 1881
Intention to benefit the master not the test 1882
Principal's ignorance or good faith will not exonerate him 1883
Ordinary and natural attributes in the light of the event 1884
The question of apparent powers 1885
Illegal or unlawful acts 1886
Application of rules 1887
Illustrations 1888
Further illustrations 1889-1891
Forbidden acts 1892, 1893
Act of servant having large degree of discretion 1894
TABLE OF CONTENTS vii
[Reference** are to sections: 1-1705, Vol. I; ITOe-ZJIS^ Vol. II.]
Servant combining his own business with that of master 1895
Servant using master's vehicle, implement, etc., upon servant's
business Facilitating master's business 1896
Servant under immediate direction of patron of master 1897
Master not liable for negligence not in course of employment 1898
Departure from service Detour 1899
Distinction between a mere detour and a departure 1900
Illustrations 1901-1904
Resumption of service after departure 1905, 1906
Comments on these views 1907, 1908
Other acts not within course of employment 1909-1911
Further illustrations 1912
Injuries to servants' invitees 1913
Negligence when servant off duty 1914, 1915
How question determined 1916
Master's liability for acts of independent contractor 1917-1920
Effect of ratification 1921
4. Liability for Trespass or Conversion
Liable for trespass or conversion in course of employment 1922
Special cases 1923
Illustrations 1924
Not liable if acts were not within course of employment 1925
5. Liability for Wilful or Malicious Acts of Servant
In general 1926-1929
Special classes of cases 1930
I. Where the master owed the plaintiff a special duty 1931
Non-delegable duties 1932
Rule applied to carriers of passengers 1933
Illustrations of the carrier cases 1934
Plaintiff provoking assault 1935
Limitations of doctrine 1936
Servant a public officer 1937
Servant insane 1938
Application to other cases Difficulty of determining classes 1939-1944
II. Where master confides to servant the care of a dangerous instru-
mentality 1945-1950
III. Where the master entrusts to servant performance of duties in-
volving the use of force 1951
Breach of instructions no defense 1952
Master not liable for servant's personal malice 1953
Act must have been within course of employment 1954
Use of force must have been authorized 1955
Other limitations 1956
IV. Master's liability for malicious acts in other cases 1957
Illustrations .-. .'.:. 1958-1972
False imprisonment and unauthorized arrest 1973, 1974
Vlll TABLE OF CONTENTS
[Reference* are to ne<-(l<ii M : g 1-1705, Vol. I; SS 17O6-2588, Vol. II.]
Unfounded prosecutions 1975
Malicious prosecution 1976
Assaults 1977, 1978
Shooting 1979
Slander and libel 1980, 1981
How question decided Court or jury 1982
Ratification 1983
6'. Liability for Fraudulent Acts and Representations
Liability for agent's fraudulent act 1984, 1985
Agent's fraud supplemented by some act or omission of the prin-
cipal 1986
Liability of principal for agent's false or fraudulent representations.. 1987
No liability for representations if any representation is outside
authority 1988
Representations within apparent authority 1989
Liability for representations not made for principal's benefit.... 1990
Representations concerning facts which condition authority 1991, 1992
Liability by ratification or adoption of act 1993
Effect of misrepresentations Remedies 1994
Action of deceit 1995,. 1996
Effect of fraud not avoided by recitals in contract that there was none 1997
?'. Liability for Penal or Criminal Acts of Agent
What here involved 1998
a. Civil Liability
Principal's civil liability for agent's criminal or penal act -. 1999
Civil liability for statutory torts committed in course of employment 2000
No civil liability for acts not in course of employment 2001
Usury 2002, 2003
Liability by ratification 2004, 2005
b. Criminal or Penal Liability
Principal's criminal liability for agent's criminal or penal acts 2006
Penal acts 2007
Illustrations 2008
Contrary holdings 2009
8. Matters Relating to Procedure
Joinder of principal and agent in one action 2010
Weight of authority permits joinder 2011
Master cannot be held if servant not liable 2012
The measure of damages against the principal Compensation 2013
Exemplary damages 2014
Exemplary damages not allowed 2015
Exemplary damages allowed 2016
Unsatisfied judgment against agent no bar to action against principal 2017
Principal or master liable although other's negligence also contributed 2018
TABLE OF CONTEXTS IX
CHAPTER VI.
THE DUTIES AND LIABILITIES OF THIRD PERSONS TO THE AGENT
[References are to sections: 8 1-17O5, Vol. I; 170O-2588, Vol. II.]
What here involved . 2019
I. IN CONTRACT
In general Right of action in principal alone 2020
Considerations affecting this rule 2021
How cases may be classified 2022
Agent may sue when principal has clothed him with title or authority
for that purpose 2023
Agent may sue on contract made with him personally 2024
Undisclosed principal 2025
Disclosed principal 2026
When agent only can sue 2027
Statutes requiring suit by real party in interest 2028
Assignees of bankrupt agent 2029
Illustrations of rule permitting agent to sue 2030-2032
Agent may sue when he has a beneficial interest 2033
What meant by rule 2034
What interest suffices 2035, 2036
Although agent may thus sue, principal may usually sue or control ac-
tion 2037
Action on sealed contract, negotiable instrument, or contract made
with agent personally must be in agent's name 2088
Agent's rights depend upon the contract 2039
Right of assumed agent to show himself principal 2040
1. Where he contracted for a named principal 2041, 2042
2. Where he contracted for an unnamed principal 2043
Agent may recover money paid by him under mistake or illegal con-
tract 2044
What defenses open to third person 2045
Set-off 2046
Admissions Discovery 2047
What damages agent may recover on contract 2048
n. IN TORT
Agent may sue for personal trespass 2049
When agent may sue for injuries to principal's property 2050
TABLE OF CONTENTS
CHAPTER VII.
THE DUTIES AND LIABILITIES OF THIRD PERSONS TO THE
PRINCIPAL
{References are to sections: 1-1705, Vol. I; 88 1706-25S8, Vol. II. J
In general 2051
The rule stated 2052
1. Right to Sue on Contracts Made fty Agent
a. The Disclosed Principal
In general , 2053
May sue on contracts in the name of the principal 2054
May usually sue on contracts made in his behalf but in agent's name 2055
May sue on contracts made on his account without authority but sub-
sequently ratified 2056
But principal must take contract as he finds it 2057
Defenses of other party based upon dealings with agent 205S
&. The Undisclosed Principal
May sue on contracts made in his behalf but in agent's name 2059
One of several undisclosed principals cannot sue on entire con-
tract 2060
One of several apparently joint parties may show himself to be the
real principal 2061
Right of one who contracted as agent to show himself to be the
real principal 2062
What actions included 2063
Exceptions Instruments under seal 2064
Negotiable instruments 2065
Principal's remedies here Rescission Enforcement of trust 2066
How when contract involves elements of personal trust and confidence 2067
What contracts do involve personal elements 2068
Contracts of suretyship 2069
Principal cannot sue where terms of contract exclude him or where
contract is solely with agent personally 2070, 2071
Principal's right of action usually superior to agents 2072
Principal's rights governed by the contract 2073
When principal subject to defenses which could have been made against
agent a. Those arising out of terms of contract itself 2074
-
b. Payment to agent 2075, 207G
- c. Set-off of claims against agent 2077, 2078
Limitations of rule 2079
Performance by agent 2080
Release by agent 2081
TABLE OF CONTENTS XI
[References are to *<< iou: 8 1-1705, Vol. I; 170 2588, Vol. II.]
Assignment by agent 2082
Repudiation of unauthorized contract by other party 2083
How principal affected by agent's fraud 2034
How principal affected by notice to or knowledge of his agent 2085
Principal's action Measure of damages 2086
Third person cannot set up agent's want of authority to dispute prin-
cipal's right 2087
2. Right to Recover- Money Paid or Used by Agent
In general .'V* V .V-i^i 2088
o. Money Wrongly Paid on Principal's Account
Right to recover money wrongly paid on principal's account 2089
b. Money Wrongfully Appropriated to Agent's Usea
Principal's right to recover money wrongfully disposed of by agent
on agent's account 2090-2094
Illustrations Bank deposits 2095-2100
Other illustrations 2101-2103
Further illustrations Restrictive indorsements 2104
3. Right to Recover Property
In general 2105, 2IO&
Principal's title cannot be divested except by his consent or voluntary
act 210T
Recovery of property disposed of by agent in excess of authority 2108
Recovery of property wrongfully disposed of by one alleged to be os-
tensible agent or owner '. 2109
Possession as evidence of ownership or authority 2110
Money Negotiable paper 2111
Possession confided to recognized sales agent 2112-2114
Possession coupled with indicia of ownership 2115
Principal may lose through agent's fraud 2116
But other party must have acted in good faith and with reason-
able prudence 2117
Illustrations Pickering v. Busk 2118
McNeil v. The Tenth National Bank 2119
Commercial Bank v. Armsby 2120
Calais Steamboat Co. v. Van Pelt 2121
Nixon v. Brown 2122
Other cases Title put in agent's name Instruments delivered in
blank 2123
Limitations on doctrine in general 2124
Limitations on rule of McNeil v. Tenth National Bank 2125
Notice of principal's right from descriptive words in document.. 2126
Rule of McNeil v. Tenth National Bank does not apply to ordinary
chattels 2127
Possession under the Factor's Acts 2128
Xll TAI5LE OF COXTEXTS
fUeferenoen are to Mectionn: gg 1-1705, Vol. I; gg 1700-Z588, Vol. II.]
Principal may recover his property appropriated to payment of agent's
debts or seized by agent's creditors 2129
Right to recover securities wrongfully released 2130
Right to recover property wrongfully sold to third person for the
agent's benefit 2131
4. Right to Recover for Torts
Principal may recover for injuries to his interests by third person's
torts 2132
For enticing agent away 2133
For preventing agent from performing 2134
For personal injury to agent causing loss of service 2135
Third person not liable to principal for agent's fraud or neglect 213fi
5. Remedies for Double Dealing
How when third person conspires with agent 2137
How when agent in secret employment of the other party 2138, 213M
One of two principals not liable to other for defaults of their common
agent 2140
6. Collusiveness upon Principal of Judgment against Agent
Principal not bound by judgment respecting property rights against
agent in action to which he was not a party 2141
Otherwise as to contract rights 2142
TABLE OF CONTENTS Xlll
BOOK V
PARTICULAR CLASSES OF AGENTS
CHAPTER I.
DuA
OF ATTORNEYS AT LAW
[References are to HIM- (Ions: 1-1705, Vol. I; 1706-2588, Vol. II.]
Scope of chapter 2143
.
1. OF THE OFFICE
Who meant by attorney at law 2144
Attorney at law defined 2145
Is an officer of the court 2146
Who may be 2147
Party may appear in person 2148
May not appear 'by agent 2149
,
II. OF THE RELATION OF ATTORNEY AND CLIENT
/. A. Relation of Agency
Rules of agency govern 2150
2. Plow Created
No formal power necessary 2151
III. APPEARANCE PRESUMPTIVELY AUTHORIZED
Presumption of authority 2152
The presumption not conclusive 2153
a. While Proceedings Are Pending
1. Opposite party may require production of authority 2154
2. What evidence sufficient 2155
3. Client may dispute authority 215(5
6. In Actions upon the Judgment
1. Foreign judgments 2157
2. Domestic judgments 2158
IV. IMPLIED AUTHORITY OF ATTORNEY
In general 2159
Has general control of conduct of suit 2160
Presumption of authority 2161
What included 2162
What not included. . 2163
xiv TABLE OF CONTENTS
[References are to section*: 88 1-1705, Vol. I; gg 1706-2588, Vol. II.]
Can not delegate his powers 2164, 2165
May not employ counsel '.! ; .i.i( }.U. 2166
May employ subordinates 2167
Authority to institute action 2168
Authority to incur expense on client's account 2169
Authority to bind client by contracts 2170
Authority to bind clients by bonds. 2171-2174
Authority to bind client by receipt of notice Notice to attorney as no-
tice to client 2175-2177
Authority to bind client by admissions 2178, 2179
Authority to receive payment : 7/. .? 2180, 2181
After judgment 2182
JO
What constitutes payment 2183
Authority to enforce judgment 2184-2186
Ratification 2187
V. DUTIES AND LIABILITIES OF ATTORNEY TO CLIENT
Bound to highest honor and integrity 2188
Duty to disclose adverse interests Must not assume antagonistic po-
sitions 2189
Duty to remain loyal Incapacities resulting 2190
Effect on opposite party ... 2191
Duty to use reasonable care and skill 2192
Errors in law or judgment 2193-2195
Negligence in collecting 2196, 2197
Negligence in bringing suit 2198-2200
Negligence in trial of action 2201
Negligence in examining titles 2202
Neglect in preparing contracts, etc 2203
Neglect of partners, clerks, etc 2204
Neglect of subagent in collecting 2205
Liability for exceeding authority, or violating instructions 2206
Liability for money collected 2207
When action may be brought 2208
J Statute of limitations 2209
Liability for interest 2210
Attorney liable through acting gratuitously 2211
The burden of proof and measure of damages 2212
VI. LIABILITY OF ATTORNEY TO TIIIBD PERSONS
Not liable for breach of duty owing to client only 2213
Cases in* which he would be liable 2214, 2215
Liable where he contracts personally 2216
Liability for clerk's, officer's, witnesses's and other fees 2217
Liability to third person in tort 2218-2223
Liability for words written or spoken 2224
Liability for money received 2225
TABLE OF CONTENTS XV
[References are to sections: SS 1-1T05, Vol. I; 1706-2588, Vol. II.]
VII. LIABILITY OF CLIENT TO THIRD PERSON
In contract 2226
In tort 2227, 2228
VIII. LIABILITY OF CLIENT TO ATTORNEY
1. Attorney's Right to Reimbursement and Indemnity
Attorney entitled to reimbursement and indemnity 2229
2. Attorney's Right to Compensation
a. In General
Attorney entitled to compensation 2230
Attorney may sue for compensation 2231
1. Where There Was a Special Contract
In general 2232
Parties may agree upon amount of compensation 2233
Where such a contract is fairly made it is conclusive 2234
Extra compensation 2235
Contracts for contingent compensation 2236
What contracts champertous 2237
Statutory changes 2238
The effect of champerty 2239
What contracts barratrous 2240
Quantum meruit when contract void for champerty 2241
Agreements restricting settlement 2242
Contracts for contingent fees do not defeat settlement by client 2243
But attorney may recover from client 2244
2. Where There Was No Special Contract
Attorney entitled to statutory or usual rate, if any, otherwise to rea-
sonable value of his services 2245
What evidence admissible 2246
What evidence not admissible 2247
6. When Compensation Deemed to be Earned
In cases of ordinary retainer 2248
Compensation under express contract earned when undertaking sub-
stantially performed 2249
Lack of success no defense 2250
Negligence or bad faith may be shown 2251
Fees forfeited by breach of trust 2252
How when attorney abandons service 2253
What will justify abandonment 2254
When discharged by client 2255
In violation of agreement 2256
XVI TABLE OF CONTENTS
[Reference* are to Meetioni: gf 1-17O5, Vol. I) 17O6-25S8, Vol. II.J
What will justify discharge .................................... 2257
Effect of death of attorney or client ................................ 2258
Irrevocable power Powers coupled with an interest ........ 2259, 2260
Right to interest ............................... . .................. 2261
When attorney's claim barred by limitation .............. t .......... 2262
3. Attorney's Right to Lien
Two kinds of lien .................................................. 2263
1. The General or Retaining Lien
General nature of this lien ......................................... 2264
Declared by statute in some states .................................. 22G5
What this lien adheres to .......................................... 2266
a. Upon papers ............................................... 2267
- b. Upon property .............................................. 2268
-- c. Upon money ...m^-} -p. ........................................ 2269
What charges the lien secures ........................... ...... ..... 2270
Against what parties lien prevails .................................. 2271
How lien may be lost ................... .- v > \- ..........
TT 11 i ^
How lien may be waived ........................................... 2273
Enforcement of lien ............................................... 2274
2. The Special or Charging Lien
General nature of this lien .......................................... 2275
In what states it exists ............................................. 2276
Whom this lien protects ......... ., ..^ ^ fcv ^Maoft- mni^-r ......... 2277
What this lien protects ............................................. 2278
When lien attaches ................................................. 2279
To what the lien attaches .......................................... 2280
How lien protected Settlement Set off Notice .................... 2281
- Abandonment Discharge . .................................... 2282
How lien enforced .................................................. 2283
If the judgment has resulted in a fund ............... , x ..^,. ..... 2284
Statute of limitations, etc ...................................... 2285
Liens by contract Equitable protection independent of lien ........... 228G
How lien lost or waived ..... ....................................... 2287
By what law governed ............................................. 2288
IX. DEALINGS BETWEEN ATTORNEY AND CLIENT
In general Good faith and perfect fairness required ................ 2289
Purchases from and sales to client Adverse purchases .............. 2290
- Private purchases by the attorney of the client's property ...... 2291
- Gifts from client to attorney ................................... 2292
- Other dealings ................................................ 2293
- Contracts for compensation made after relation exists .......... 2294
TABLE OF CONTENTS XV11
[Deference* are to Kectlons: 1 1705, Vol. 1} g 170 afiss, Vol. II.]
X. PRIVILEGED COMMUNICATIONS
Confidential communications privileged 2297, 2298
What communications included By client to attorney 2299, 2300
By attorney to client 2301
Under what circumstances privileged No suit need be pending
Must be confidential 2302
Criminal acts 2303
- Fraudulent or illegal acts 2304
Non confidential communications 2305
Non-professional employments 2306
Collateral facts 2307
Relation of attorney and client must exist 2308
Attorney as scrivener 2309
Communications must have been made to an attorney 23KJ
Privilege is the client's Waiver 2311
How long it continues 2312
Attorney may disclose for his own protection 2313
XI. TERMINATION OF THE RELATION
By operation of law 2311
By act of the parties 2315
Notice of termination. .... 231G
CHAPTER II.
OF AUCTIONEERS
Purpose of this chapter 2317
1. Of the Auctioneer
Definition 2318
Who may be 2319
Whose agent he is 2320
2. How Authorized
Like other agents 2321
3. Auctioneer's Implied Authority
To fix terms of sale 2322
To accept the bid 2323
To make the necessary memorandum 2324
To receive the price 2325
To sue in his own name for the price 2326
None To delegate his authority 2327
b
XV111 TABLE OF CONTENTS
[RefrnceM are to Ke<>tlon: 88 1-17O5, Vol. I: 88 170O-2588, Vol. II.]
None To sell on credit 2328
None To rescind or alter sale 2329
None To sell at private sale 2330
None To bid for himself '*.&.$'. 2331
None To warrant quality 2332
--31:' . iii;a o'.- a iflbttW
4. Auctioneer's Duties and Liabilities to Principal
Bound for reasonable skill and diligence 2333
To act with loyalty and good faith .Mf>>*r>i< 2334
To obey instructions f!tK*"xvKi-flh 25535
To account for proceeds 2336
To take care of goods .**(. i'aatto ixw ^HfwMij-ld'H' 2337
To sell for cash only 2338
To sell to third parties only 2339
To sell in person *.. .>vt 2340
To disclose his principal 2341
5. Auctioneer's Duties and Liabilities to Third Persons
Liable where he conceals principal 2342
Liable where he exceeds his authority 2343
Liable where he contracts personally 2344
Liability for selling property of stranger 2345
Not liable for not holding auction as advertised 2346
Liable for refusing to surrender properly bought 2347
Liability for money received 2348
6. Auctioneer's Rights Against his Principal
Compensation Reimbursement Indemnity 2349
Recoupment of damages of principal 2350
Auctioneer's lien 2351
Cannot dispute principal's title 2352
T. Auctioneer's Rights against Third Persons
Right to sue bidder 2353
Right to sue wrong-doer 2354
8. Principal's Rights against Third Persons
To recover purchase price 2355
Where bidder refuses to complete purchase 2356
9. Rights of Third Persons against Principal
Principal's liability for auctioneer's acts 2357
Liability for breach of contract 235S
Liability for not holding sale, withdrawing property, etc 2359
Liability for failure of title to goods sold . 2360
TABLE OF CONTENTS xix
CHAPTER III.
OF BROKERS
[Reference* are to flections: 88 1-1705, Vol. I; 88 1700-2588, Vol. II.]
iiJl'tr. liea
Purpose of this chapter . . 2361
. OiflUii vV.
I. DEFINITIONS AND DIVISIONS
Brokers In general 2362
Different kinds of brokers 2363
Bill and note-brokers 2364
Exchange-brokers 2365
Insurance-brokers 2366
Distinctions 2367-2369
Broker's duties to employer 2370
Right to sue 2371
Right to lien iC .4Wl .'J'K ;3(it& 2372
Merchandise brokers 2373
As agent of both parties 2374
How authorized 2375
When special agent 2376
When not authorized to sign 2377
"Bought and sold notes" in the English practice. 2378
English rules governing "bought and sold notes 2379, 2380
"Bought and sold notes" in the United States 2381
Pawnbrokers 2382
Real estate brokers 2383
Ship brokers 2384
Stock brokers 2385
New York rules governing relation 2386
Broker a pledgee 2387
Massachusetts rule 2388
New York view generally adopted Substitution of other shares Re-
pledge 2389
<J irfSift A .
PI. APPOINTMENT AND TERMINATION
Appointed like other agents 2390
How authority terminated 2391
III. IMPLIED AUTHORITY OF BROKERS
In general 2392
How affected by usage 2393
Local usages or customs 2391
Usual and necessary authority 2395
Authority to make and sign necessary memorandum 2396
Effect of instructions 2397
XX TABLE OF CONTENTS
[References are to sections: SS 1-1705, Vol. I; g 1706-2688, Vol. II.]
Acting for both parties 2398
May not delegate his powers 2309
Usually must act in the name of his principal 2400
Implied authority to fix the price , 2401
Terms of sale ,^.,._ t .^., .,>. r<r*-*.,*>> 2402
May sell with warranty When 2403
When may sell on credit 2404
No authority to receive payment 2405
No authority to rescind or arbitrate 2406
No authority to accept or waive performance 2407
Authority to sell property purchased by him ^frrrtf *}r.- bm>(- T.T 240S
Authority to pledge property ?(Tr*w-*f\tc !'! 2409
IV. DUTIES AND LIABILITIES TO PRINCIPAL
Reasonable skill and diligence required 2410
Fidelity to his principal Concealing facts Dealing with or for him-
self 2411
Acting for both parties 2412
How when mere "middle man" 2413
Duty to obey instructions ,rf. }<>.}> 2414
Illustrations ,{ WM . w > 2415
Imperiling broker's security 241G
Duty to keep and render accounts and to pay proceeds and deliver
property 2417
V. DUTIES AND LIABILITIES TO THIBD PERSONS
Not liable when he contracts for a principal disclosed 2418
Liability when principal concealed 2419
Liable when he expressly charges himself 2420
Liable when he acts without authority 2421
Liability for money received (. ,-f*ic- 2422
When guilty of a conversion 2423
VI. BIGHTS OF BKOKER AGAINST PRINCIPAL
1. Right to Compensation
Entitled to compensation 2424
How amount determined 2425
Broker must show employment Volunteer Ratification 2426
Broker must have performed undertaking 2427
Real estate broker Nature of his undertaking 2428, 2429
Usually need not conclude a binding sale Find purchaser ready, will-
ing and able to buy 2430
When is such a purchaser "found?" 2431, 2432
Contract in particular cases may require less 2433
Contract with broker need not be in writing 2434
Broker must be procuring cause May be such though not present at.
sale Directness of cause 2435, 2436
TABLE OF CONTENTS XXI
[References are to Hectiong: 1-1705, Vol. I; g 1706-2588, Vol. II.]
Must be on terms required 1. Where terms were prescribed 2437
2. Where no terms were prescribed 2438
Must be within time limited 2439
Readiness and willingness of purchaser 2440
Pecuniary responsibility of purchaser 2441
Abandonment by broker before success 2442
Must be sale, not mere option or conditional contract 2443
Must be sale, not exchange 2444
Sale by principal in person Exclusive agencies 2445
Giving time 2446
Broker's right not defeated, how Principal's default 2447
Buyer's default 244S
Revocation of authority 2449
Reasonable time in which to find purchaser 2450
Definite time Contract for 2451
When such contract exists Consideration for 2452-2454
Performance liberally viewed in order to avoid hardships to broker 2455
Employment of two or more brokers 2456
When one entitled How determined 2457
Same subject Interpleader 2458
Abandonment by one broker Termination of his authority 2459
Duty to notify principal, when purchaser found 2460
How much compensation broker entitled to Quantum meruit 2461
At what time commission payable 2462
Broker to sell chattels 2463
Abandonment by one broker Termination of his authority 2459
Revocation of authority 2465
Several brokers 2466
Broker to effect loan 2467
Broker to effect exchange 2468
Bringing parties to terms 2469
Failure of contract 2470
Broker to purchase land 2471
Broker to find a tenant 2472
Other cases within the same principles 2473
Commissions from both parties 2474
How in case of mere middle-man 2475
How affected by misconduct 2476
How affected by disloyalty, double dealing, etc 2477
No compensation where undertaking illegal 2478
How when not licensed 2479
2. Right to Reimbursement and Indemnity
Entitled to reimbursement 2480
Needless expenses Illegal transactions 2481
How when undertaking not performed 2482
S. Right to a Lien
No general lien 2483
XX11 TAIJLE OF CONTENTS
[Reference* are to lectlona: gg 1-1705, Vol. I; gg 1706 2588, Vol. IT.]
Liens in special cases Stock brokers^ Real estate brokers Insurance
brokers 2484
Equitable liens 2485
No lien except for debt due from principal 2486
VII. RIGHTS OF BROKER AGAINST THIRD PKKSOXS
1. In Contract
In general, no right of action on contracts 2487
When he may sue 2488
What defenses may be made when broker sues 2489
2. In Tort
May recover when he sustains injury in the line of his business 2*90
VIII. RIGHTS OF PRINCIPAL AGAINST THIRD PERSONS
Same as in other cases of agency 2491
No set-off of broker's debts or obligations 2492
Right to recover money and property 2493
IX. BIGHTS OF THIRD PERSONS AGAINST PRINCIPAL
Same as in other cases of agency 2494
No remedy if broker did not act as defendant's agent 2495
CHAPTER IV.
OF FACTORS
Purpose of this chapter 2496
I. DEFINITIONS AND DISTINCTIONS
Factor or commission merchant defined 2497, 2498
Distinction between factor and purchaser 2499
H. HOW APPOINTED
Same as other agents 2500
in. IMPLIED AUTHORITY OF FACTORS
In general 2501
How affected by usage 2502
To fix price and terms 2503
To sell on credit 2504
To sell in his own name 2505
To warrant quality 2506
To warrant title 2507
To receive payment 2508
To pledge 2509, 2510
Under factor's act.. 2511
TABLE OF CONTENTS XX111
[Reference* are to neotlons: 1-1705, Vol. I; S 1700-2588, Vol. II.]
To pay his own debts 2512
To barter or exchange 2513
To delegate his authority 2514
To compromise or compound the debt 2515
To submit to arbitration 2516
To rescind sale 2517
To extend time of payment 2518
To receive anything but money in payment 2519
rn l * vi ocon
To make negotiable paper 2520
To insure property 2521
To sell to himself 2522
IV. DUTIES AND LIABILITIES TO PRINCIPAL
To use reasonable care and prudence 2523
To be loyal to his principal's interest 2524
To obey instructions 2525
Instructions to sell 2526
Factor's right to sell, or to decline to sell, for his own protection 2527
The measure of damages 2528, 2529
Instructions to sell for cash 2530
Instructions to insure 2531
Duty to inform principal 2532
Duty to sell only to responsible purchaser 2533
Del credere commission 2534
Factor's duty to care for property 2535
Unforeseen contingency Sudden emergency 2536
General duty as to sales 2537
Duty as to place of sale 2538
Duty as to time of sale 2539
Duty as to price 2540
Duty in collecting price 2541
Factor's duty in keeping account 2542
Not obliged to keep funds separate 2543
Factor's duty to account for money and property 2544, 2545
Set-off 2546
Conclusiveness of accounts 2547
Duty in remitting money 2548
When principal may sue factor 2549
Liability for acts of sub-agents 2550
V. BIGHTS OF FACTOR AGAINST PRINCIPAL
a. Commissions
Factor entitled to compensation 2551
When factor may have commissions from both parties 2552
When commission earned Upon what computed 2553
b. Reimbursement
Factor entitled to reimbursement 2554, 2555
XXIV TABLE OF CONTENTS
[HefereneM are to aeetionii: g 1-17O5, Vol. I; 88 1TO-25S8, Vol. II. J
- Interest upon advances ....................................... 2556
- Collusiveness of accounts ..................................... 2557
c. Indemnity
Factor entitled to indemnity against losses .......................... 2558
d. Lien
Factor entitled to lien ............................................. 2559
When lien does not exist ........................................... 2560
Nature of the lien ..................... 2561
. .....
When lien attaches ............................................ 2562-2564
Who may confer lien ............................................... '2565
How lien may be lost .............................................. 2566
How lien enforced ......... ....................... ^^ uWsnrwwr 2567
VI. BIGHTS OF FACTOR AGAINST THIRD PERSONS
a. In Contract
May sue for price of goods sold ................................ 2568, 2569
- Defences .............................. ........................ 2570
May sue on contracts made in his name ............................. 2571
&. In tort
May maintain trespass, replevin or trover .......................... 2572
Actions against carriers ........................................... 2573
VII. BIGHTS OF PRINCIPAL AGAINST THIRD PERSONS
a. In Contract
May sue for price of goods sold ..................................... 2574
- What defenses principal subject to ............................. 2575
Right to follow property ....................................... 2576, 2577
b. In Tort
For injuries to or conversion of the goods .......................... 2578
Vm. RIGHTS OF THIRD PERSONS AGAINST PBINCIPAI,
Same as in other cases ............................................. " 2579
How when principal undisclosed ................................... 2580
How when exclusive credit given to the factor ....................... 2581
IX. BIGHTS OF THIRD PERSONS AGAINST FACTOB
Same as in other cases ........................................... 2582
When liable for conversion ......................................... 2583
How in case of foreign factor ..................................... 2584
X. HOW RELATION TERMINATED
As in other cases of agency Revocation by principal ................ 2585
Renunciation by agent ........................................ 2586
- Lapse of time, etc .............................................. 2587
- - War, death, bankruptcy ....................................... 2588
THE LAW OF AGENCY
BOOK IV.
OF THE RIGHTS, DUTIES AND LIABILITIES ARISING OUT
OF THE RELATION
(Continued)
CHAPTER V
THE DUTIES AND LIABILITIES OP THE PRINCIPAL TO THIRD
PERSONS
1706. Purpose of chapter.
I. THE LIABILITY OF THE PRINCIPAL
UPON CONTRACTS MADE BY AN
AGENT.
1707. In general.
1. The Contractual Liability of the
Disclosed Principal.
1708. In general.
1709. Principal liable on contracts
made in his name by his
authority.
1710. Principal liable on informal
contracts not expressly
charging agent's responsi-
bility.
1711. Informal entries or
charges against agent not
conclusive.
1712. Principal may often be liable
though agent also bound.
1713. - Written contract in
agent's name Principal
not liable.
1714-1716. Same subject
Principal liable.
1717. Principal not liable where
credit given exclusively to
agent.
1718. For what contracts and con-
tractual acts of agent is
principal liable.
1719. Qui facit per alium, facit per
se.
1720. Principal liable for acts and
contracts within scope of
authority.
1721. Third person must ascertain
agent's authority.
1722. What constitutes authority.
1723. Secret instructions and
restrictions of principal or
secret motives of agent
Mistake of agent.
1724. General and special agents.
1725. Special agent's authority
must be strictly pursued.
1726. Effect of ratification.
THE LAW OF AGENCY
[BOOK IV
1727. Performance of unlawful act
not enforced.
1728. Principal not bound where
agent had an adverse inter-
est.
2. The
1729.
1731.
1732.
1733.
1734,
1736.
1737.
1738.
1739.
1740.
1741.
1742.
1743.
1744.
1745-
1748.
1749.
1750.
1751.
1752,
1754.
1755.
1756.
Contractual Liability of an
Undisclosed Principal.
1730. Preliminary considera-
tions as to liability.
General rule Undisclosed
principal liable when dis-
covered.
Rule applies to all simple
contracts.
Parol evidence to identify the
principal.
1735. Does not apply to con-
tracts under seal.
Does not apply to negotiable
instruments.
Exceptions to the general
rule.
Of the first exception
Change in accounts Mis-
leading conduct.
Thompson v. Davenport.
Heald v. Kenworthy.
Armstrong v. Stokes.
Irvine v. Watson In
the Queen's Bench.
Irvine v. Watson In
the Court of Appeal.
What is misleading con-
duct.
1747. Delay, etc.
The rule in the United
States.
General conclusions.
Of the second exception
"Election."
Theories of election.
1753. Knowledge neces-
sary.
What constitutes an election.
I. Before discovery of prin-
cipal.
II. After discovery of prin-
cipal.
1757. Presenting claim.
1758. Commencement of ac-
tion.
1759. - - Taking judgment
against agent.
1760. Taking agent's note.
1761. Charging goods to agent.
1762. Mere delay Statute of
limitations.
1763. Intermediate party must
have been agent and not
principal.
1764-1766. Alleged agent must
have been really such.
1767, 1768. "Apparent" author-
ity.
1769. Right of assignee of other
party against principal.
1770. Apparent agent the real prin-
cipal.
1771. Excluding principal's liabil-
ity by terms of contract.
1772. Cases in which the agent may
not be liable.
II. RESPONSIBILITY OF THE PRINCIPAL
FOB THE AGENT'S STATEMENTS,
REPRESENTATIONS AND ADMIS-
SIONS.
1773. In general.
1774. Agent's authority must be
first shown.
1775. Authority cannot be shown
by agent's admissions.
1776. Representations by agent.
1777. Principal liable for state-
ments and representations
expressly authorized.
1778. Statements of agent of agent
expressly authorized to
give, or referred to, for in-
formation.
1779. Statements of agent implied-
ly referred to for informa-
tion.
1780. Statements of agent made as
incidents of his position
General manager General
agents, etc.
1294
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES
1781.
1782.
1783.
1784.
1785.
1786.
1787.
1788.
1789.
1790.
1791.
1792.
1793.
1794.
1795.
1796.
1797.
1798.
1799.
1800.
Statements of agent made as
incident to an authorized
act Res gestae.
Various statements of
the doctrine.
Limitations upon the
rule.
Further limitations.
How question deter-
mined.
Effect of these statements not
dependent upon their being
true.
Statements showing notice to
or knowledge by the agent.
Statements by agent made to
modify, qualify or explain
the act.
Illustrations.
Statements indicative of the
agent's state of mind.
Words themselves constitut-
ing or aggravating the
wrong.
Admissions of agent gener-
ally not competent to
charge principal.
Declarations and admissions
of agent as part of res ges-
tae.
Meaning of res gestae
as here used.
What sort of statements
admissible.
What embraced within
res gestae.
How admissibility de-
termined.
Illustrations of what has
been called part of the res
gestae Inadmissible decla-
rations.
Illustrations Admissi-
ble declarations.
When principal bound by
agent's representation of
extrinsic facts upon which
authority depends.
1801. Illustrations Bills of
lading Warehouse receipts
Certified checks.
III. THE EFFECT UPON THE PRINCIPAL'S
RIGHTS AND OBLIGATIONS OF NO-
TICE TO OR KNOWLEDGE IN HIS
AGENT.
1802.
1803.
1804.
1805.
1806.
1807.
1808.
1809-
1812.
In general.
General rule Notice to the
agent is notice to the prin-
cipal.
Illustrations.
The theory of the rule
a. Identification.
b. Conclusive
1813.
1814.
1815.
1816.
1817-
1822-
1825.
1826.
1827.
1828,
presump-
tion of communication.
I. Notice acquired during
agency.
II. Knowledge acquired prior
to agency.
1811. Requirement o f
present knowledge.
What is meant by notice
acquired "during the
agency" or "prior to
agency."
The resulting rule.
The first exception Privi
leged communications.
The second exception Agent
acting adversely to princi-
pal.
Reasons for the excep-
tion.
-1821. - - Further of these
reasons.
-1824. The true exception.
Applicability of excep-
tion to corporate agents.
The third exception Collu-
sion of party claiming
benefit of notice.
Who can avail himself of the
notice.
1829. What notice includes
Actual and constructive no-
tice.
1295
THE LAW OF AGENCY
[BOOK iv
1830. Agent must be agent of per-
son to whom notice is to be
imputed.
1831. Rule applies only to notice
respecting matters within
agent's authority.
Notice after termination of
authority does not bind.
Notice must be of some
1832.
1833.
1834.
material matter.
Notice must come to some-
one who is an agent.
1835. Ratification.
1836. Releasing agent from duty
Enlarging it.
1837-1839. Agent of two principals.
1840. Two agents of same principal.
1841. Notice to subagent when no-
tice to principal.
1842. Notice of what sort of facts
imputed.
1843. These rules apply to corpora-
tions Notice to agent.
1844. What officer or agent.
1845-1847. Ordinary excep-
tions apply here.
1848-1850. When notice must
be acquired.
1851-1853. When notice to di-
rector is notice to corpo-
ration.
1854. Notice to stockholder
not notice to the corpora-
tion.
18C1.
1862.
1863.
1864.
1865.
1866-
1870,
1872.
Servant performing his
own master's business un-
der direction of master's
employer.
Furnishing persons to
be employed as servants.
Tests for determining
question.
Court or jury.
Contractual agreement as to
who shall be principal.
1869. Strangers assisting serv-
ants.
1871. Independent contract-
ors.
Subagents.
IV. THE LIABILITY OF THE PRINCIPAL
FOB HIS AGENT'S TORTS AND
CRIMES.
1855. In general.
1856, 1857. Theories of liability.
1. Did relation of Principal and Agent
or of Master and Servant Exist.
1858. Necessity for existence of the
relation.
1859. When relation exists.
1860. Several masters of one
servant General and spe-
cial master Lending serv-
ants Adopting servants of
others.
1296
Liability for Acts Expressly Di-
rected.
1873. Principal liable for acts ex-
pressly directed.
Liability for Negligent Act of
Servant or Agent.
1874. Liable for agent's negligent
act in course of employ-
ment.
1875. . Liability dependent upon
agency.
1876, 1877. Rules stated.
1878. Forms of negligence.
1879. What meant by course
of employment.
1880. Not merely a question of time
or place.
1881. Master's prohibition or warn-
ing not conclusive.
1882. Intention to benefit the mas-
ter not the test.
1883. Principal's ignorance or good
faith will not exonerate
him.
1884. Ordinary and natural attri-
butes in the light of the
event.
1885. The question of apparent pow
ers.
1886. Illegal or unlawful acts.
1887. Application of rules.
1888. Illustrations.
1889-1891. Further illustrations.
1892, 1893. Forbidden acts.
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES'
1894. Act of servant having
large degree of discretion.
1895. Servant combining his
own business with that of
master.
1896. Servant using master's
vehicle, implement, etc.,
upon servant's business
Facilitating master's busi-
ness.
1897. Servant under immedi-
ate direction of patron of
master.
1898. Master not liable for negli-
gence not in course of em-
ployment.
1899. Departure from service De-
tour.
1900. Distinction between a
mere detour and a depart-
ure.
1901-1904. Illustrations.
1905, 1906. Resumption of
service after departure.
1907, 1908. Comments on these
views.
1909-1911. Other acts not
within course of employ-
ment.
1912. Further illustrations.
1913. Injuries to servant's in-
vitees.
1914. 1915. Negligence when serv-
ant off duty.
1916. How question deter-
mined.
-:1917-1920. Master's liability for
acts of independent con-
tractor.
1921. Effect of ratification.
4. Liability for Trespass or Conver-
sion.
1922. Liable for trespass or can-
version in course of em-
ployment.
1923. Special cases.
"1924. Illustrations.
1925. Not liable if acts were not
within course of employ-
ment.
82 1297
Liability for Wilful or Malicious
Acts of Servant.
1926-1929. In general.
1930. Special classes of cases.
1931. I. Where the master owed
the plaintiff a special duty.
1932. Non-delegable duties.
1933. Rule applied to carriers
of passengers.
1934. Illustrations of the car-
rier cases.
1935. Plaintiff provoking as-
sault.
1936. Limitations of doctrine.
1937. Servant a public officer.
1938. Servant insane.
1939-1944. Application to oth-
er cases Difficulty of de-
termining classes. '!! ,10
1945-1950. II. Where master con-
fides to servant the care of
a dangerous instrumental-
ity.
1951. III. Where the master en-
trusts to servant perform-
ance of duties involving the
>9btovj; use of force.
1952. Breach of instructions
no defense.
1953. Master not liable for
servant's personal malice.
1954. Act must have been
within course . pf employ-
ment.
1955. Use of force must have
been authorized.
1956. Other limitations.
1957. IV. Master's liability for ma-
licious acts in other cases.
1958-1972. Illustrations.
1973, 1974. False imprison-
ment and unauthorized ar-
rest.
1975. Unfounded prosecutions.
1976. Malicious prosecution.
1977. 1978. > Assaults.
1979. Shooting.
1980, 1981. Slander and libel.
1982.
1983.
How question decided Court
or jury. .j Tjiiju 'io ^
Ratification.
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES
[
6. Liability for Fraudulent Acts and
Representations.
1984, 1985. Liability for agent's
fraudulent act.
1986. Agent's fraud supple-
mented by some act or omis-
sion of the principal.
1987. Liability of principal for
agent's false or fraudulent
representations.
1988. No liability for repre-
sentations if any represen-
tation is outside authority.
1989. Representations within
apparent authority.
1990. Liability for representa-
tions not made for princi-
pal's benefit.
1991. 1992. Represent a t i o n s
concerning facts which con-
dition authority.
1993. Liability by ratification
or adoption of act.
1994. Effect of misrepresentations
Remedies.
1995. 1996. Action of deceit.
1997. Effect of fraud not avoided
by recitals in contract that
there was none.
7. Liability for Penal or Criminal
Acts of Agent.
1998. What here involved.
a. Civil Liability.
1999. Principal's civil liability for
agent's criminal or penal
act.
ito ni EJOB aooi'jil
,_,, , ' <~ ~C[__,"(>f
1706. Purpose of chapter. It is obvious that one of the most
important questions in the law of agency is that which deals with the
duties and liabilities of the principal to third persons, based upon and
growing out of the acts, declarations, contracts and misconduct of the
agent in his dealings and transactions with them. To some extent and
for some time, the agent has been invested with authority by his prin-
cipal and sent out into the world to obtain for the principal the profits,
benefits or other objects which he desired, and to bind the principal
1298
2000. Civil liability for statutory
torts committed in course
of employment.
2001. No civil liability for acts
not in course of employ-
ment.
2002. 2003. Usury.
2004, 2005. Liability by ratification.
6. Criminal or Penal Liability.
2006. Principal's criminal liability
for agent's criminal or penal
acts.
2007. Penal acts.
2008. Illustrations.
2009. Contrary holdings.
8. Matters Relating to Procedure.
2010. Joinder of principal and agent
in one action.
2011. Weight of authority per-
mits joinder.
2012. Master cannot be held
if servant not liable.
2013. The measure of damages
against the principal
Compensation.
2014. Exemplary damages.
2015. Exemplary damages not
allowed.
2016. Exemplary damages al-
lowed.
2017. Unsatisfied judgment against
agent no bar to action
against principal.
2018. Principal or master liable al-
though other's negligence
also contributed.
.nor
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1706
when necessary by such representations, contracts and other acts as
are suitable to the occasion, and within the terms and objects of the
authorization.
In pursuing these objects, the agent may have kept either the fact
of the agency, or the name of his principal, or both, concealed from
the persons with whom he dealt, and in this event the question arises
whether, in either case, the actual principal can be made liable when
discovered.
Or the agent may have disclosed both the fact of his agency and
the name of his principal, and in this event it is material to know
whether the act, contract or representation of the agent, assumed to
be done or made by virtue of his authority, was in fact within its na-
ture and its scope.
~J* V"Wt r TiR ^O >/fi r ti\ 'V
So the question may arise how far the principal can be held respon-
sible for the misrepresentations, deceits, trespasses and other wrongs
committed by the agent in pursuance of, or while engaged in, the un-
dertaking. For convenience of treatment there will be considered:
1. The liability of a disclosed principal.
2. The liability of an undisclosed principal.
I. The liability of the principal upon contracts made by his agent,
including:
IL The responsibility of the principal for the agent's statements,
representations and admissions.
III. The effect upon the principal of notice to or knowledge in his
agent.
IV. The liability of the principal for the torts and crimes of his
agent or servant.
Hereunder will be considered such questions as
1. Did relation of principal and agent or of master and servant ex-
ist?
2. Liability for acts expressly directed.
3. Liability for negligent acts of servant or agent.
4. Liability for trespass or conversion by servant or agent.
5. Liability for wilful or malicious acts of servant or agent.
6. Liability for fraudulent acts and representations of servant or
agent.
7. Liability for penal or criminal acts of agent
8. Matters relating to procedure.
1299
177- 1 79] THE LAW OF AGENC * [BOOK iv
I.
THE LIABILITY OF THE PRINCIPAL UPON CONTRACTS MADE BY AN AGENT.
G ftonss^wi* srfMfr ft ITIC ,i
1707. In general. In dealing with the liability of the principal
upon contracts made by his agent, there must be deemed to be in-
cluded not only the making of the contracts but the alteration, modifica-
tion or termination of them, the performing and receiving performance
of them, and the various other acts which are incidental to the contract
relation.
As has already been suggested, in view of one of the peculiar situa-
tions in the law of agency, the questions must be considered not only
in relation to a disclosed principal but also to an undisclosed principal.
For the purpose of disposing of the general before the particular, the
case of the disclosed principal will be considered first.
1. The Contractual Liability of the Disclosed Principal.
1708. In general. The case in which the principal is disclosed
at the time of making the contract or doing the act is the usual and
typical one. To this case the great majority of the rules and principles
of the subject are directed, although, as will be seen many of them
apply equally to the case of the undisclosed principal where he is liable
at all. It is fitting therefore to consider them at the outset.
1709. Principal liable on contracts made in his name by his
authority. Beginning with the simplest aspects, it may be noted
that the principal is liable on all lawful contracts made in his name by
his agent acting within the scope of his authority. This is the normal
and typical case, and to this case the general rules of agency have their
fullest application.
In this case the agent is not liable and cannot be held even though
the principal fails, or is unable, to perform. The contract is made in
the principal's name and not in the agent's, and no liability on the part
of the agent can arise upon the contract. The contract, by the hypo-
thesis, is made with the principal's authority, and there is therefore
no room for liability on the part of the agent based either upon deceit
or on any warranty of authority.
1300
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ I?!, 17 M
The principal is also liable to the same extent upon contracts made
by his authority in a name adopted as the principal's trade name. 1
1710. Principal liable on informal contracts not expressly charg-
ing agent's responsibility. The principal is also liable on all in-
formal contracts entered into on. his account and by his authority and
not expressly made on the agent's responsibility rather than the prin-
cipal's. 2 The contract is, by the hypothesis, made on the principal's
account and by his authority ; and it should naturally and normally be
the principal's contract. It is, however, true, as has been seen, 3 thai
an authorized agent may, intentionally or unintentionally, charge his
own personal responsibility rather than that of his principal ; but, as
has also been seen, 4 where a person is known to be acting as the agent
of a disclosed principal the presumption is that the principal and not
the agent is to be bound, and the burden of proof is upon him whc
alleges that the agent pledged his own responsibility.
The rule of liability in this case is simple and just. An agent is
sent, for example, to buy goods. He discloses his agency and the
name of his principal. After examination and negotiation, he says,
"I will take these goods at this price," etc. Whom does he bind?
Who is "I" in such a case? Obviously his principal, unless the con-
trary is clearly indicated- either by some express agreement or by a
course of dealing. Ordinary business is too informally done to re-
quire that the person known to be acting as agent of a known principal
shall constantly reiterate that he is speaking for his principal and not
for himself.
1711. - Informal entries or charges against agent not con-
clusive. The fact that, in such a case, goods are charged to the
agent or bills or other memoranda are made out in his name, is not
conclusive that the credit was not given to the principal. These charges
or entries may be merely informal and for the purpose of identification
or to serve until more formal and regular entries can be made. Unless
some one has been reasonably mislead by them to his prejudice, they
are inconclusive. 8
i Sec Conroe v. Case, 79 Wis. 338, Y.), 252; Owen v. Gooch, 2 Esp. 567;
Where the principal was doing busl- Ex parte Hartop, 12 Ves. 349; Rob-
ness in a name which was formerly Ins v. Bridge, 3 M. & W. 114.
the business name of the agents. 3 See ante, 1405.
3 Whitney v. Wyman, 101 U. S. 392, * See ante, 1422.
25 L,. Ed. 1050; Bonynge v. Field, 81 Guest v. Burlington Opera House
N. Y. 159; Covell v. Hart, 14 Hun (N. Co., 74 Iowa, 457.
1301
op, ot
1712,1713] THE LAW OF AGENCY [BOOK IV
1712. Principal may often be liable though agent also bound.
The principal, moreover, may often be liable though the agent is also
bound. The agent, by special agreement, may bind himself jointly
with the principal. 6 He may also, in the same manner, make himself
a surety for his principal. But entirely outside of these forms of bar-
gaining, it is also possible for both principal and agent to be liable.
This is true, as seen in the preceding subdivision, where the principal
was undisclosed at the time of the bargaining ; but it may also be true
where both were then known, though the theory of liability is differ-
ent. Where the principal is known and the agent is known to be act-
ing for him, it is, as has been seen, 7 the presumption that the principal,
and the principal alone, is to be bound. But the agent may pledge his
own responsibility ; and he may do so in two ways : either instead of
his principal's, or in addition to his principal's.
1713. Written contract in agent's name Principal not
liable. Where, when the principal is known at the time of the bar-
gaining, the written obligation of the agent is taken, it is often said that
this amounts to an election to give the credit to the agent and not to
the principal, and that the latter can therefore not be held.* This
case, it is said, is unlike the case of the undisclosed principal. There
the obligation of the agent is taken because no principal is known to
exist; but when, later, the existence of the principal is discovered, the
law gives the other party the right to choose between them. Here, it
is said, both parties are known at the time of making the contract, and
the other party by taking the agent's obligation elects in the first in-
stance to rely upon him rather than upon the principal. It also vio-
lates the rule of evidence, it is urged, to permit a party [the principal]
See ante, 1419. is implied in the terms of the propo
i See ante, 1422. sition that a party may pursue an
s Chandler v. Coe (1874), 54 N. H. undisclosed principal; and, indeed,
561, 22 Am. Rep. 437; Ferguson v. the rule is elementary, neither need-
McBean, 91 Cal. 63, 14 L. R. A. 65; ing nor permitting citation of au-
Gillig v. Lake Bigler Road Co., 2 Nev. thority in its support."
214. Where money was loaned upon the
In Matter of Bateman, 7 Misc. 633, note of the agent, endorsed by the
it is said: "Where a party contracts person now claimed to have been an
with an agent as such, in ignorance undisclosed principal, it was held
of the existence of a principal, he that there was no room for the doc-
may, on discovering the principal, trine of the undisclosed principal and
elect to hold him. But, if he know the liability of the parties as fixed by
the principal at the time of the co' the contract could pot be changed,
tract, and yet chooses to engage with Brown v. Tainter, 114 N. Y. App. Div.
the agent, he is estopped afterward 446.
to go against the principal. So much
1302
CHAP. V] LIAPILITY OF PRINCIPAL TO THIRD PARTIES [ 1714
to be charged upon a contract in writing made with knowledge of his
existence yet containing no word showing an intention to bind him.
Thus it was said by the court in New Hampshire. 9 "We are of opin-
ion that where a principal is sought to be charged upon a contract in
writing, made in the name of his agent, the rule of evidence, which
prohibits the parties to a written contract from contradicting or vary-
ing its terms by parol testimony, applies if the principal was known,
but not if he was unknown." A number of cases have adopted this
view.
1714. Same subject Principal liable. Notwithstanding
these cases, however, there is excellent authority for the position that
the principal also may be held in such a case. It does not violate the
parol evidence rule, it is replied, because the effect is not to release the
agent but simply to add the liability of the principal. Taking the ob-
ligation of the agent may be evidence of election it is conceded ; but it
is urged that it is not conclusive and should ordinarily be a question for
the jury. The leading case on this side is Calder v. Dobell, 10 decided
in 1871, by the English court of common pleas and the exchequer
chamber. It appeared that one Cherry, a broker, had proposed to the
defendant, a Liverpool merchant, to buy cotton "to arrive," and the
defendant had authorized Cherry to buy 100 bales for him but declined
to allow his name to appear in the transaction. Cherry offered to buy
the cotton of the plaintiffs but they refused to trust him, and he, being
pressed, disclosed the name of the defendant as his principal. A writ-
ten contract was then entered into between plaintiffs and Cherry, in
which Cherry alone was named as the buyer and which he signed in
his own name without any reference in the contract to the fact that he
was acting for another. An invoice was later made in Cherry's name,
he was charged with the cotton on plaintiffs' books and when the cot-
ton arrived he was repeatedly asked to accept and pay for it. He*
failed to do so, and, the price of cotton having fallen, an action for
damages was brought against the defendant. It was urged at the trial
that the taking of the contract in Cherry's name was a conclusive elec-
tion to hold him only, but the trial judge left the question of election
to the jury and the jury found for the plaintiffs. Against this action
appeal was taken. Four judges in the common pleas gave opinions,
all in favor of affirmance. A variety of views were expressed but all
agreed that the matter of election was for the jury. Montague-Smith,
Chandler v. Coe. supra. 486. See other quotations from this
10 Calder v. Dobell, L. R. 6 C. P. case ante, 1420, note 20.
lyoit
1715] THE LAW OF AGENCY [BOOK IV
J., said of the contention that the entering into the contract in Cherry's
own name was conclusive evidence of an election to hold him alone as
the principal : "I agree that it was strong evidence ; but, if the parol
evidence [that defendant had authorized the purchase] was admissible,
it shows what the real transaction between the parties was. Being
employed to buy cotton for the defendant, with, an injunction not to
allow the defendant's name to appear, Cherry buys in his own name;
but the sellers, for reasons of their own, insisting upon knowing who
the principal was. Cherry, disregarding his instructions in that respect,
disclosed the defendant's name. The plaintiffs required the principal's
name, with a view of fixing him ; but, because he desired that his name
should not appear, the contract was made out in the name of the agent.
The plaintiffs clearly never intended to make the bargain with Cherry
alone. At all events, it was a question for the jury." This judgment
was affirmed by the exchequer chamber, all the judges regarding it as
a question of election not conclusively determined by the form of the
contract. This case undoubtedly has some peculiar features, but the
same doctrine has been applied in cases which did not have them.
1715. Thus in Byington v. Simpson " decided in 1883
by the supreme court of Massachusetts the suit was to recover a bal-
ance due under a building contract. The contract was in writing and
purported on its face to be made by the plaintiffs with J. B. Simpson.
It provided that the work should be done under the direction of J. B,
Simpson, agent, and was signed "J. B. Simpson, agent." J. B. Simp-
son was in fact contracting as agent for the defendant, his wife, and
this was known to the plaintiffs at the time the contract was made. It
was contended that inasmuch as the plaintiffs knew the principal and
yet were contented to accept a written contract which on its face bound
the agent they must be taken to have dealt with, and to have given
credit to, the agent alone. But the court said: "We are of opinion
that the plaintiffs' knowledge does not make their case any weaker
than it would have been without it. Whatever the original merits of
the rule, that a party not mentioned in a simple contract in writing may
be charged as a principal upon oral evidence, even where the writing
gives no indication of an intent to bind any other person than the
signer, we cannot reopen it, for it is as well settled as any part of the
law of agency. And it is evident that words which are sufficient on
their face, by established law, to bind a principal, if one exists, cannot
11 Byington v. Simpson, 134 Mass. Merrell v. Witherby, 120 Ala. 418, 74
169, 45 Am. Rep. 314. See also, York Am. St. Rep. 39.
County Bank v. Stein, 24 Md. 447;
1304
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1716
be deprived of their force by the circumstance that the other party re-
lied upon their sufficiency for that purpose. Yet that is what the de-
fendant's argument comes to. For the same parol evidence that shows
the plaintiffs' knowledge of the agency may warrant the inference that
the plaintiffs meant to have the benefit of it, and to bind the principal."
1716. - Conceding that the other party's election is not
conclusively determined by taking the written contract of the agent,
his situation seems to be thenceforward like that of one who has dealt
with the agent of an undisclosed principal he would not lose his right
to proceed against the principal merely by conduct showing an inten-
tion to preserve his rights against the agent and not amounting to a
discharge or merger of the claim. 12 Thus in Calder v. Dobell it was
suggested that the other party might sue either principal or agent, and
that there would be no conclusive election unless he had sued to judg-
ment.
The doctrine of Calder v. Dobell would doubtless be also subject to
the qualification that the written contract made in the name of the
agent was not an instrument under seal or a negotiable instrument.
12 In Cross v. Matthews (K. B.
Div.), 91 Law Times Rep. 500, it
appeared that the plaintiffs sued M.
and W. jointly. M. did not appear,
and plaintiffs entered a judgment by
default against him. When the case
came on for . trial against W. it
appeared that M. was simply W.'s
agent, and that the credit was really
given W., although the invoices had
been made out in the name of M.
W. objected to judgment against him-
self upon the ground that the plain-
tiffs had already elected by taking
judgment against M. Against W.'s
objection the judgment against M.
was set aside, and upon the hearing,
judgment was rendered against W.
On appeal this was held to be er-
roneous, the court saying that the
taking of Judgment against M.
"showed an election on the part of
the plaintiffs to accept the liability
of the agent." Hammond v. Scho
field, [1891] 1 Q. B. 453, was cited to
the point that the effect of taking
judgment could not be obviated by
subsequently setting aside that judg-
ment upon the consent of the defend-
ant therein only.
In Wilson v. Blanck, [1909] Trans-
vaal L. R., the plaintiff, who had fur-
nished goods upon the order of de-
fendant's agent, sued the agent and
recovered in the lower court upon
the theory that the agent had pledged
his own credit. Upon appeal it was
held that he had not pledged his
own credit, and the judgment against
him was reversed. Plaintiff then
sued this defendant, and was held
entitled to recover. It was held that
the doctrine of election did not apply
because the result in the other case
showed that plaintiff never had any
claim against the agent, and the
mere prosecution of an unsuccessful
action in which no judgment could
legally be obtained, did not constitute
an election.
1305
(8 .Y . T / 8Si
I7I7~ I 7 I 9] THE LAW OF AGENCY [BOOK IV
1717. Principal not liable where credit given exclusively to
agent. As has already been pointed out, 13 it is entirely possible
that a known agent may pledge his own responsibility, and that the
contract, although made for the benefit of the principal, shall be made
solely and exclusively on the credit of the agent. Where this is the
situation, the principal cannot be held upon the contract. 14 Whether
the credit was thus given exclusively to the agent, is, as has been seen,
ordinarily a question of fact to be determined in the light of all the
circumstances of the case. 15 In two particular classes of cases, how-
ever, already frequently referred to, namely, the case of the negotiable
instrument and the instrument under seal, the question is determined
by the established rule that no one can be charged upon the contract
except the one who upon its face appears to be the party to it. 16
1718. For what contracts and contractual acts of agent is prin-
cipal liable. With this much of preliminary discussion, the ques-
tion next arises, for what particular contracts and contractual acts is
the principal responsible. A detailed answer to this question is here
impracticable. All that has gone before has been designed to aid in
its solution. How authority is conferred," how it is to be interpreted
and construed. 18 how it is to be executed, 19 and especially what acts
and contracts fall within or without the scope of particular authori-
ties, 20 have already been considered at much length. The only thing
which is practicable here is to refer back to those discussions, and to
recall to mind some of the more general principles which must always
be taken into account when endeavoring to solve a particular problem.
In the field of these general principles, those which follow are perhaps
the most important.
1719. Qui facit per alium, facit per se. It is the fundamental
principle of the law of agency, that what one person does for and by
the authority of another is to be considered as the act of that other.
The principle has taken the form of the familiar maxim Qui facit per
alium, facit per se. That this should be so, is an obvious natural and
moral necessity as well as a legal one, founded upon manifest doctrines
of good faith and moral and legal responsibility. The law of agency,
is See ante, 419. Lynch, 31 N. Y. Misc. 724; Lament
**See Paterson v. Gandasequi, 15 v. Hamilton, [1907] Scotch S. C. 628.
East, 62; Addison v. Gandasequi, 4 See ante, 1422 et seg.
Taunt. 574; Hazelhurst Lumber Co. i See ante, 1425; post, 1734.
v. Carlisle Mfg. Co., 130 Ky. 1; Silver 17 See ante, 209-253.
v. Jordan, 136 Mass. 319; Perkins v. See ante, 764-793.
Cady, 111 Mass. 318; Burns v. Royal 19 See ante, 1079-1183.
Bank, 128 N. Y. Supp. 723; Davis v. 20 See ante, 794-1078.
1306
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ I72O, 1721
however, is wider than this maxim. For the principal is liable in many
cases, especially of tort, in which he can not be deemed to have author-
ized or intended the act. On the other hand, that the maxim is not a
principle of unlimited application in the law of agency, has already
been shown. 21 It is not every act done by one person for another which
is binding upon the latter. The act done must have been a lawful one,
done in the name and behalf of that other, and by his express or im-
plied authority. What acts are lawful to be done by an agent have
been determined. 22
1720. Principal liable for acts and contracts within scope of
authority. Out of these principles, however, grows the general rule
that the lawful acts and contracts of the agent, done or made for the
principal and in his behalf, are binding upon the principal, if so done
or made by the agent while he was acting in the course of his under-
taking and within the real or apparent scope of his authority, 23 or if
they have subsequently, with full knowledge of the facts, been ratified
and confirmed by the principal. 24
The converse of this rule follows as a necessary consequence. If
the act done or contract made was not a lawful one, the law, as has
been seen, will not enforce it. 23 If the agent acted for himself and in
his own behalf instead of for his principal, and the other party with full
knowledge so dealt with him, the principal is not liable. 26 If the agent
were not acting in the course of his principal's business, but was acting
entirely outside of that, and for some purpose of his own, the act is not
the principal's, unless he has adopted it. If the act done or contract
made was not within the scope of his authority, but exceeded or dis-
regarded it, then no liability attaches to the principal, unless he volun-
tarily affirms and ratifies it.
1721. Third person must ascertain agent's authority. Every
person dealing with an assumed agent is bound, at his peril as pre-
viously explained, to ascertain the nature and extent of the agent's
authority. The very fact that the agent assumes to exercise a dele-
gated authority is sufficient to put the person dealing with him upon
his guard, to satisfy himself that the agent really possesses the pre-
tended authority. 27
21 See ante, 80, 81. 28 See ante, 1419 et seq.
22 See ante, 79-126. 27 See ante, 743. Jacobs v. MOT-
23 Ante, 275-291. ris, [1902] 1 Ch. 816; Forman v. The
24 See Book I, Chap. V, Of Ratifica- Liddesdale, [19001 App. Gas. 190;
tion. Wigaud v. De Wertheimer, 35 Can.
25 See ante, 275-291. Super. 436.
O7
1722,1723] THE LAW OF AGENCY [BOOK IV
If, having relied upon it, he seeks to hold the alleged principal re-
sponsible, he must be prepared to prove, if either be denied, not only
that the agency existed, but that the agent had the authority which he
exercised. 28
But as has been frequently pointed out, it is not essential that an
actual authority existing should have been known and specifically re-
lied upon at the time. If it existed, it may be proved, although the
other party did not then rely upon it. 29
1722. What constitutes authority. An attempt has been made
in an earlier portion of the work to show what constitutes authority.
It has been seen that it is a composite matter into which a number of
different elements may enter. 80 All authority emanates from the prin-
cipal, who may in general confer as little or as much as suits his pur-
poses, and unless an alleged authority can be traced home to him as its
author and its source, it can not operate against him. It rests upon
his will and intention. That will and intention may find expression in
words, but it may also be declared by conduct. The authority of the
agent, then, so far as third persons are concerned, is as broad not only
as the words of the principal, but as broad also as his acts and conduct.
In other phrase, it is, so far as third persons are concerned, as broad
as the principal has made it appear to be. 31 As respects the mutual
rights and dealings of the principal and agent, the actual authority
may govern ; but as respects the liability of the principal to third per-
sons for the acts and contracts of the agent, it is the apparent authority
in the sense previously explained, which controls. This apparent au-
thority may be the result of the principal's negligent act of his omis-
sion, silence, or acquiescence. 32 Every person is presumed by law to
contemplate and intend the natural and proximate results of his own
acts, and he cannot avoid them by asserting that he did not really in-
tend or contemplate them. If the principal leads third persons, acting
reasonably and in good faith, to believe that his agent possesses a cer-
tain authority, then, as to them, the principal will be estopped to deny
that the agent does possess it. 33
1723. Secret instructions and restrictions of principal,
or secret motives of agent Mistakes of agent. As has been seen,
- See ante, 745. Hambro v. Burn- ^> See ante, 728.
and, [1903] 2 K. B. 399, s. c., [1904] 2 ^ See ante, 710.
K. B. 10. 32 See ante, 720.
20 See ante, 744. See Hambro v. s 3 See ante, 245, 722.
Burnand, [1904] 2 K. B. 10, and par-
ticularly the opinion of Romer, L. J.
1308
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1723
however, the agent's authority is not unlimited. The principal may
impose upon it as many limitations and restrictions as he thinks best,
and these limitations and restrictions are binding upon third persons if
they have knowledge or are charged with notice of them. The prin-
cipal cannot, however, expect third persons to have notice of limita-
tions and restrictions which are in their nature secret and undisclosed.
And while, as has been stated, persons dealing with the agent are bound
to know the extent of his authority, they may reasonably take the vis-
ible and apparent interpretation of that authority by the principal him-
self as the true one, and as the one by which he chooses to be bound.
It is therefore the rule of the law that the rights of third parties, who
have reasonably and in good faith relied upon the apparent authority
of the agent, as previously explained, cannot be prejudiced by secret
limitations or restrictions upon it of which they had no notice. 3 *
So where the act of the agent is apparently within the terms of an
express authority, the principal may be bound, although the agent,
unknown to the party dealing with him, is secretly engaged in abusing
his authority, or has a secret motive to divert the authority to per-
sonal or other illegitimate ends. 35
3* See ante, 710. such act is binding on the constituent
35 Thus in Hambro v. Burnand, as to all persons dealing in good faith
[1904] 2 K. B. 10, it was held by the with the agent. Such persons are
English court of appeal, reversing not bound to inquire into facts
s. o., [1903] 2 K. B. 399, that where aliuntie. The apparent authority is
an agent had written authority to is- the real authority." (This had also
sue underwriting policies, his princi- been approved by the Privy Council,
pals were liable on policies of the in the case of a bill of exchange, in
sort authorized and apparently regu- Bryant v. Quebec Bank, [1893] App.
lar, although he was secretly abusing Gas. 170, 180.)
his power because the policies were The court thought the case distin-
issued for the benefit of an in- guishable from such cases as Grant
solvent concern in which the agent v. Norway, 10 C. B. 665; Whitechurch
was personally interested. The court v. Cavanagh, [1902] App. Gas. 117;
cited and relied upon the New York and British Mut. Bank Co. v. Charn-
cases of North River Bank v. Aymar, wood Forest Ry. Co., 18 Q. B. Div.
3 Hill, 262, and President, etc., v. 714. Romer, L. J., referred to them
Cornen, 37 N. Y. 320 cases of promis- as cases of master and servant, in-
sory notes and quoted with approv- volving implied rather than formal
al the rule approved by Cowen, J., that written authority. "They have noth-
"Whenever the very act of the agent ing to do with a case where there is
is authorized by the terms of the an express authority in writing."
power, that is, whenever by compar- Mathew, L. J., held that when plain-
ing the act done by the agent with tiffs saw that the written authority
the words of the power, the act la was sufficient, they were not bound to
in itself warranted by the terms used, inquire into his .motives, where there
1309
I724-I7 2 6] <i CJflTHE LAW OF AGENCY, /TIJIH [BOOK IV
So where the agent was authorized to act, the mere fact that he
acted mistakenly, that he erred in judgment, sold for too low a price,
paid too much, sold too soon or too late, granted too liberal terms,
selected the wrong article, did not sufficiently safe-guard the princi-
pal's interest, made or accepted offers contrary to his real intention,
and the like, where the other party was innocent and ignorant of the
mistake, will not ordinarily release the principal, 88
1724. General and special agents. These principles apply to
all agents whether they be general or special. It is true, of course,
that the scope of the general agent's authority is, from the very nature
of the case, wider and more flexible than that of the special agent.
The latter is essentially and necessarily limited and restricted. In the
former case, particular instructions are unusual ; in the latter, they are
expected. In each case the actual authority will be the determining
authority, unless the principal gives to it the appearance of a wider
scope. In neither case can the apparent authority be controlled by
secret limitations. The true distinction between general and special
agents lies, as has been stated, in this, that the apparent scope of the
special authority is naturally and necessarily a limited one. Of these
limitations, its very nature gives peculiar warning to which the persons
interested must give heed. 3T
1725. Special agent's authority must be strictly pursued.
When, therefore, it is said that the act of the agent must be within
the scope of his authority in order to be binding upon the principal, the
statement applies alike to general and special agents. None the less
true on this account, however, is the well settled and often asserted
rule that the authority of the special agent must be strictly pursued.
It is in its nature limited, and these limits may not be exceeded. 88
1726. Effect of ratification. Although the agent may have acted
beyond the scope of his authority, or may have acted without any au-
thority at all, the principal may yet subsequently see fit to recognize
was nothing to arouse suspicion. Col- (N. Y.), 194; Comer v. Granniss, 75
line, M. R., thought the case covered Ga. 277; Borden v. Richmond, etc., R.
by the case of Bryant v. Quebec Co., 113 N. Car. 570, 37 Am. St. Rep.
Bank, supra, and since the bill there 632; Natcher v. Natcher, 47 Pa. 496;
was signed per proc., he thought that Hasbrouck v. Western Un. Tel. Co.,
the fact that that was a negotiable in- 107 Iowa, 160, 70 Am. St. Rep. 181;
strument was immaterial. See also, Beaufort v. Neeld, 12 Cl. & F. 248.
Rainey v. Potter, 57 C. C. A. 113, 120 ST See ante, 739.
Fed. 651; Lysaght v. Falk, 2 Comw. ss See ante, 742. Russo-Chinese
L. R. (Australia) 421. Bank v. Sam, [1910] App. Cas. 174.
See Levy v. Terwilliger, 10 Daly
1310
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1/27, 1728
and adopt the act as his own. This recognition and adoption is termed
ratification, the doctrine of which has been hereinbefore discussed.
By such ratification, as has there been seen, the principal accepts the
act with its burdens and responsibilities precisely as though he had
previously authorized it. 39
1727. Performance of unlawful act not enforced. No contract
for the performance of an act which is either illegal in itself or which
ts opposed to public policy, will be enforced. No authority to make
any such contract or to perform any such act can, as has been seen, 40 '
be lawfully delegated. And even though the agent deeming himself
authorized should perform the act or execute the contract with all
formalities, yet such performance or such contract will furnish no
ground of action. The law, in general, leaves all such parties where
it finds them.* 1
1728. Principal not bound where agent had an adverse interest.
As has been seen, the principal is entitled to demand and receive from
the agent a loyal, zealous and disinterested service. He presump-
tively contracts for the exercise of all the agent's skill, knowledge and
ability in his own behalf and for his own advantage, and the policy of
the law will not tolerate the existence of a secret and undisclosed in-
terest in the agent antagonistic to that of his principal, on account of
the temptation offered to the agent to sacrifice the principal's interest
to his own. The principal may, if he sees fit, intrust his interests in
the hands of an agent whom he knows to also have an interest in the
same transaction which is or may be adverse to his own. But this is
not to be presumed, and it must appear that the interest of the agent
was fully and fairly disclosed to the principal. 42
Where, therefore, the agent while ostensibly acting only for his
principal, is secretly acting as the agent of the other party, or is him-
self the other party, the acts done or contracts made by him will not
be binding upon the principal if he sees fit to repudiate them.* 3
This rule is frequently applied to the case of the agent who, while
apparently acting only for his principal in the purchase or sale of prop-
39 See ante, Chapter on RATIFICA- neau, 1 Wis. 151, 60 Am. Dec. 368;
TION. Switzer v. Skiles, 3 Gilm. (111.) 529,
*o See ante, 82 et seg. 44 Am. Dec. 723; Harrison v. Mc-
41 See ante, 83. Henry, 9 Ga. 164, 52 Am. Dec. 435.
42 See ante, 1188 et seg. Bartram A fortiori where the other party ha&
v. Lloyd, 90 Li. T. Rep. 357. bribed the agent. Shipway v. Broad-
43Wassell v. Reardon, 11 Ark. 705, wood, [1899] 1 Q. B. 369. See also,.
54 Am. Dec. 245; Herman v. Marti- post. 3037 et seq.
1311
1729] THE LAW OF AGENCY [BOOK IV
erty, is, in reality, acting under the commission of the contemplated
purchaser or seller, and more often, to the case of the agent who, being
authorized to sell or buy property for the principal, secretly sells to or
buys of himself.
2. The Contractual Liability of an Undisclosed Principal.
1729. Preliminary considerations as to liability. It is ordi-
narily to the interest, as it is usually the duty, of an agent in making
contracts for his principal to full)- disclose the fact of the agency and
to make the contract in the name and on the account of the principal.
It often happens, however, that the agent will either intentionally or
unintentionally omit to do this. He may (i) disclose that he has a
principal but conceal his name and identity ; or he may (2) wholly con-
ceal the fact that he is an agent and contract as though he were him-
self the principal in the transaction. In either of these cases the agent
usually makes himself personally liable upon the contract. In the
second case the liability of the agent is ordinarily clear, because no
other person being known in the transaction, the agent is the one upon
whom the liability directly rests. In the first case also the agent may
be liable because, though disclosing the fact that he has a principal,
but concealing his name, he may be held to have pledged his own re-
sponsibility.**
Conceding that the agent thus is, or may be, liable upon the con-
tract, the- question arises whether the principal, if discovered, may be
held liable upon it also. In favor of such a liability it may be urged
that in as much as there is a principal in the transaction who has au-
thorized' the contract to be made and who is entitled to its benefit, the
principal should be held liable upon the contract when he is discovered.
Inasmuch as the principal must ordinarily settle with some one, being
liable to the agent, perhaps upon an express contract of indemnity or
reimbursement, or upon an implied one wherever the non-disclosure
of the principal and the pledging of the agent's own credit do not con-
stitute such a violation of duty as to disentitle the agent to such re-
lief, 45 it seems to be a convenient "short-cut," if nothing more, to
give the third party a direct claim upon the principal instead of re-
quiring him to pursue the agent who will then pursue the principal.
Where this is attempted before the principal has paid or settled with
One cannot be held as an undis- time. Brown v. Tainter, 114 N. Y.
closed principal whose relation to App. Div. 446.
the transaction was known at the gee ante, 1601 et seq.
1312
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ I73O, 173!
agent, and this seems to have been the 'typical case in the first in-
stances, nothing but more or less technical rules of procedure would
seem to stand in the way of it. Although in theory such an action
might be regarded as founded upon some right of the third party to be
subrogated to the agent's claim upon the principal, in practical effect
it would be likely to come to be looked upon as a direct right of the
third party against the principal upon the contract.
1730. Against such a liability it may be urged (i) that
it is contrary to the general principles of contract to permit a person
to be bound upon a contract who does not appear to be a party to it,
and (2) that, in the case where no principal was known to exist, the
effect of such a rule is to give to the other party the benefit of a liabil-
ity which he did not contemplate at the time of making the contract
and for which he did not stipulate. A right to hold the undisclosed
principal in such a case would, as was pointed out by a distinguished
English judge, come to the other party as a mere "God-send."
Whatever may be thought where the contract is informal and oral,
it is certain that where the contract is in writing and especially where
it contains no intimation of. the existence of a principal, a rational
theory for the principal's liability is not easy to discover. The con-
tract is in the name and over the signature of the agent. How can
that name and signature be treated as the name and signature of the
principal? If the agent also could not be held upon it, it might then
be said that the agent's name had, for the time being, been adopted as
the business name of the principal, and was therefore, in this case, the
name of the principal. 46 But if the agent is to be held liable also be-
cause it is his name, how can the principal be held upon the theory that
the name used is not the agent's name but the business name of the
principal ? May the same be, at the same time, the actual name of the
agent and the trade name of the principal?
A theory of the legal identification of the principal with the agent
leads to the same result. If the principal and the agent are legally one
and that one the principal, it may not be difficult to see that the con-
tract is the principal's contract, but it is not easy to see how the con-
tract is also the contract of the agent.
1731. General rule Undisclosed principal liable when discov-
ered. Notwithstanding these objections, the considerations mak-
ing for the principal's liability have generally prevailed under Eng-
lish law, though not under the Continental systems, and it is unques-
4 See Isham v. Burgett, 157 Mass. 546.
83
THE LAW OF AGENCY
[BOOK iv
.tionably the general rule of our law that an undisclosed principal, when
subsequently discovered, may, at the election of the other party, if
exercised within a reasonable time, be held liable upon all simple non-
negotiable contracts made in his behalf by his duly authorized agent,
although the contract was originally made with the agent in entire
ignorance of the principal.* 7
*f Mississippi Valley Co. v. Abeles,
87 Ark. 374; Bryant Lumber Co. v.
Crist, 87 Ark. 434; Merrill v. Ken-
yon, 48 Conn. 314; Appeal of National
Shoe & Leather Bank, 55 Conn. 469;
Dashaway Ass'n v. Rogers, 79 Cal.
211; Curran v. Holland, 141 Cal. 437;
Simpson v. Patapsco Guano Co., 99
Ga. 168; Baldwin v. Garrett, 111 Ga.
876 (but the matter is regulated by
the Code, 3024); Guest v. Burling-
ton Opera House Co., 74 Iowa, 457;
Steele-Smith Grocery Co. v. Potthast,
109 Iowa, 413; Edwards v. Gildemei-
ster, 61 Kan. 141; Jones v. Johnson,
86 Ky. 530; Ware v. Long, 24 Ky.
Law Rep. 696; Cecil v. Citizens' Nat.
Bank, 145 Ky. 842; Hyde v. Wolf, 4
La. 234, 23 Am. Dec. 484; Maxcy
Mfg. Co. v. Burnham, 89 Me. 538, 56
Am. St. Rep. 436; Henderson v. May-
hew, 2 Gill (Md.), 393, 41 Am. Dec.
434; Mayhew v. Graham, 4 Gill
(Md.), 339; Tobin v. Larkin, 183
Mass. 389; Schendel v. Stevenson, 153
Mass. 351; Hunter v. Giddings, 97
Mass. 41, 93 Am. Dec. 54; Exchange
Bank v. Rice, 107 Mass. 37, 9 Am. Rep.
1; Byington v. Simpson, 134 Mass.
169, 45 Am. Rep. 314; Huntington v.
Knox, 7 Cush. (Mass.) 371; Eastern
R. R. Co. v. Benedicts Gray (Mass.),
561, 66 Am. Dec. 384; Lerned v. Johns,
9 Allen (Mass.), 419; Nat'l Ins. Co. v.
Allen, 116 Mass. 398; Schweyer v.
Jones, 152 Mich. 241; Lindeke Land
Co. v. Levy, 76 Minn. 364 (Rowell v.
Oleson, 32 Minn. 288, overruled);
Simmons Hdw. Co. v. Todd, 79 Miss.
163; Weber v. Collins, 139 Mo. 501;
Lamb v. Thompson, 31 Neb. 448;
Grrenburg v. Palmleri, 71 N. J. L. 83;
Elliott v. Bodine, 59 N. J. L. 567;
Yates v. Repetto, 65 N. J. L. 294;
Borcherling v. Katz, 37 N. J. Eq. 150;
Jennings v. Davies, 29 App. Div. 227;
Taintor v. Prendersrast, 3 Hill (N.
Y.), 72, 38 Am. Deo. 618; Briggs v.
Partridge, 64 N. Y. 357, 21 Am. Rep.
617; Cobb v. Knapp, 71 N. Y. 348, 27
Am. Rep. 51; Inglehart v. Thousand
Islands Hotel Co., 7 Hun (N. Y.),
547; Coleman v. First Nat'l, 53 N. Y,
388; Dykers v. Townsend, 24 N. Y. 57;
Meeker v. Claghorn, 44 N. Y. 319;
Jessup v. Steurer, 75 N. Y. 613;
Adolff v. Schmitt, 13 Misc. 623; Davis
v. Lynch, 31 Misc. 724; City Trust
Co. v. Amer. Brew. Co., 174 N. Y.
486; Patrick v. Grand Forks Merc.
Co., 13 N. D. 12; Harper v. Tiffin Nat'l
Bank, 54 Ohio St. 425: Smith V.
Plummer, 5 Whart. (Penn.) 89, 34
Am. Dec. 530; Hubbert v. Borden, 6
Whart. (Penn.) 79; Rice v. Fidelity
& Casualty Co., 1 Lack. Leg. News
(Penn.) Ill; Episcopal Church v.
Wiley, 2 Hill (S. C.), Ch. 584, s. c.,
1 Riley (S. C.), Ch. 156, 30 Am. Dec.
386; Waddill v. Sebree, 88 Va. 1012,
29 Am. St. Rep. 766; Belt v. Wash-
ington Water Power Co., 24 Wash.
387; Pennsylvania Casualty Co. v.
Washington Portland Cement Co., 63
Wash. 689; Ford v. Williams, 21 How-
ard (U. S.), 287, 16 L. Ed. 36; Moore
v. Sun Ptg. & Pub. .Ass'n, 41 C. C. A.
506, 101 Fed. 591; Boland v. North-
western Fuel Co., 34 Fed. 523; Hig-
gins v. Senior, 8 M. & W. 834; Brown-
ing v. Provincial Ins. Co., L. R. 5
P. C. App. 263; Calder v. Do'^ell, L.
R. 6 C. P. 486; Trueman v. Loder, 11
A. & E. 589; Smethurst v. Mitchell,
1 E. & E. 622; Thomson v. Davenport,
9 B. & C. 78. (This list does not
purport to be complete.)
CHAP. V]
LIABILITY OF PRINCIPAL TO THIRD PARTIES
[ 1732
The rule applies not only where the principal has in fact received the
benefits of the contract, but also where the contract still remains ex-
ecutory. 48
The rule itself is doubtless an anomaly, but even so it is undoubtedly
as well settled as any other rule in the law of agency. 49
1732. Rule applies to all simple contracts. This general rule
imposing obligation upon the undisclosed principal when discovered,
extends to all contracts made by oral negotiation under his authority.
It also, by the weight of authority, applies to all simple non-negotiable
contracts in writing, entered into by an agent in his own name and
within the scope of his authority, although the name of the principal
does not appear in the instrument, and was not disclosed, and although
the party dealing with the agent supposed that the latter was acting
for himself ; so and this rule obtains as well in respect to contracts
The same principle was applied this liability of the principal to the
agent, thereby putting the liability
ultimately, where it justly belongs,
upon the principal on whose account
the contract was made. Many prac-
tical objections to a remedy purely
equitable will, however, at once sug-
gest themselves. The less familiar
and more complicated procedure, and
the fact that many small claims are
not within the statutory jurisdiction
of courts of equity, may be mentioned.
An interesting discussion of the ques-
tion by Professor William Draper
Lewis, of the University of Pennsyl-
vania, will be found in 9 Columbia
Law Review, 116. Professor Lewis,
after discussing the theory of subro-
gation as an explanation of the rule,
and suggesting but rejecting the argu-
ment that the principal's liability
may be founded upon the theory of
his deceit in holding out some one-
other than himself as the principal,
contends that historically it is per-
fectly consistent with the theory of
the obligations enforced in the ac-
tion of assumpsit that the undis-
closed principal should be held liable,
because he was really the one who
caused the plaintiff to act ta his det-
riment.
e Briggs v. Partridge, 64 N. Y. 357,
21 Am. Rep. 617; Dykers v. Town-
where a corporation doing business
under an assumed name was held for
contracts made in that name. "An
undisclosed principal is bound by the
contracts of his agent acting within
the scope of his authority, although
the party with whom the contract was
made may have known the principal
under some other name." Phillips v.
International Text Book Co., 26 Pa.
Super. 230.
48 See Tobin v. Larkin, 183 Mass.
389; Lerned v. Johns, 9 Allen (Mass.),
419; Dykers v. Townsend, 24 N. Y.
61; Hubbert v. Borden, 6 Whart.
(Pa.) 79; Waddill v. Sebree, 88 Va.
1012, 29 Am. St. Rep. 766.
Kayton v. Barnett, 116 N. Y. 625.
In an article upon the general sub-
ject by Professor James Barr Ames
of Harvard in 18 Yale Law Journal,
443, it is suggested that, instead of
attempting to work out a rule under
which the principal can be held di-
rectly liable in an action at law, the
legal liability should be held to be
where the contract itself puts it,
namely, upon the agent, but that then, '
in as much as it is the duty of the
principal to exonerate the agent from
the liabilities incurred on his ac-
count, the other party should be per-
mitted In equity to avail himself of
1315
1733. X 734j
THE LAW OF AGENCY
[BOOK iv
which are required to be in writing, as to those to whose validity a
writing is not essential. 61
1733. Parol evidence to identify the principal. For the pur-
pose of identifying the principal, parol evidence may be admitted. It
does not violate the principle which forbids the contradiction of a writ-
ten agreement by parol evidence, nor that which forbids the discharg-
ing of a party by parol from the obligations of his written contract.
The writing is not contradicted, nor is the agent discharged; the re-
sult is, merely, that an additional party is made liable. 52 As is said by
a learned judge in a Massachusetts case : "Whatever the original mer-
its of the rule that a party not mentioned in a simple contract in writ-
ing may be charged as a principal upon oral evidence, even where the
writing gives no indication of an intent to bind any other person than
the signer, we cannot reopen it, for it is as well settled as any part of
the law of agency." 53
1734. Does not apply to contracts under seal. It was a funda-
mental principle of the common law that, upon an instrument under
seal, those persons only can be charged who appear upon its face to
'
send, 24 N. Y. 61; Coleman v. First v. Coe, 54 N. H. 561, 22 Am. Rep. 437;
Nat. Bank, 53 N. Y. 393; Ford v.
Williams, 21 How. (U. S.) 289, 16 L.
Ed. 36; Weber v. Collins, 139 Mo. 501;
Waddill v. Sebree, 88 Va. 1012, 29 Am.
St. Rep. 766; Belt v. Washington Pow-
er Co., 24 Wash. 387.
siTobin v. Larkin, 183 Mass. 389;
Borcherling v. Katz, 37 N. J. Eq. 150;
Briggs v. Partridge, supra. Compare
Bourne v. Campbell, 21 R. I. 490, prob-
ably wrong.
62 Higgins v. Senior, 8 M. & W. 834;
Huntington v. Knox, 7 Cush. (Mass.)
371; Ford v. Williams, 21 How. (U.
S.) 287, 16 L. Ed. 3G; Curran v. Hol-
land, 141 Cal. 437; Pleins v. Wachen-
heimer, 108 Minn. 342; Lindeke Land
Co. v. Levy, 76 Minn. 364 (overrul-
ing Rowell v. Oleson, 32 Minn. 288);
Belt v. Washington Power Co., 24
Wash. 387. There is language con-
trary in a number of cases though
they are practically all distinguish-
able. Ferguson v. McBean, 91 Cal.
63, 14 L. R. A. 65 (a sealed instru-
ment) ; Gillig v. Road Co., 2 Nev. 214
(a negotiable instrument) ; Chandler
Heffron v. Pollard, 73 Tex. 96, 15 Am.
St. Rep. 764; Silver v. Jordan, 136
Mass. 319; Matter of Bateman, 7 N. Y.
Misc. 633; Brown v. Tainter, 114 N.
Y. App. Div. 446, sometimes referred
to, were cases of a disclosed principal
and involved a different question, else-
where considered. Murphy v. Clark-
son, 25 Wash. 585, is contra, but the
court apparently overlooked the dis-
tinction between ordinary simple con-
tracts in writing and negotiable in-
struments, which was involved in
Shuey v. Adair, 18 Wash. 188, 63 Am.
St. Rep. 879, 39 L. R. A. 473.
53 Holmes, J., in Byington v. Simp-
son, 134 Mass. 169, 45 Am. Rep. 314,
[citing Huntington v. Knox, 7 Cush.
(Mass.) 371; Eastern R. R. v. Bene-
dict, 5 Gray (Mass.), 561, 66 Am. Dec.
384; Lerned v. Johns, 9 Allen
(Mass.), 419; Hunter v. Giddings, 97
Mass. 41, 93 Am. Dec. 54; Exchange
Bank v. Rice, 107 Mass. 37, 9 Am.
Rep. 1; National Ins. Co. v. Allen,
116 Mass. 398; Higgina v. Senior, 8
M. & W. 834].
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES
[ 1734
be the parties to it. 54 Under this rule an undisclosed principal could
not be charged upon such an instrument. 55 The mere fact that the
54 "Where a contract is made by
deed, under seal, on technical grounds,,
no one but a party to the deed is
liable to be sued upon it, and, there-
fore, if made by an attorney or agent,
it must be made in the name of the
principal, in order that he may be
a party, because otherwise he is not
bound by it." Shaw, C. J., in Hunt-
ington v. Knox, 1 Gush. "(Mass.) 374.
ss Huntington v. Knox, supra;
Haley v. Belting Co., 140 Mass. 73;
Mahoney v. McLean, 26 Minn. 415;
Briggs v. Partridge, 64 N. Y. 357, 21
Am. Rep. 617; Kiersted v. Orange,
etc., R. Co., 69 N. Y. 343, 25 Am. Rep.
199; Schaefer v. Henkel, 75 N. Y. 378;
Henricus v. Englert, 137 N. Y. 488;
Farrar v. Lee, 10 N. Y. App. Div.
130; Whitehouse v. Drisler, 37 N. Y.
App. Div. 525; Williams v. Magee, 76
N. Y. App. Div. 512: Spencer v. Hunt-
ington, 100 N. Y. App. Div. 463 (aff'd
without opinion, 183 N. Y. 506) ; Fur-
culi v. Bittner, 69 N. Y. Misc. 112;
Denike v. DeGraaf, 87 Hun (N. Y.),
61 (aff'd no opinion), 152 N. Y.
650; Benham v. Emery, 46 Hun
(N. Y.), 156; Smith v. Pierce, 45 App.
Div. (N. Y.) 628; Stanton v. Grang-
er, 125 N. Y. App. Div. 174; Willard
v. Wood, 135 U. S. 309, 313, 34 L.
Ed. 210; Badger Silver Min. Co. v.
Drake, 31 C. C. A. 378, 88 Fed. 48;
City of Providence v. Miller, 11 R. I.
272; Lenney v. Finley, 118 Ga. 718;
Van Dyke v. Van Dyke, 123 Ga. 686,
3 Ann. Cas. 978.
Briggs v. Partridge, 64 N. Y. 357,
21 Am. Rep. 617, is a leading case.
In this case it appeared that an agent
appointed by parol. had, without dis-
closing his agency, made in his own
name a contract under seal for the
purchase of real estate, but it was
held that the contract was not en-
forceable against the principal either
as a contract under seal or as a sim-
ple contract. See also, Klein v. Me-
chanics Bank, 145 App. Div. 615; Tut-
hill v. Wilson, 90 N. Y. 423.
Neither does the rule apply to a
lease under seal. Nor can liability
be enforced in equity. The relation
between the owner of land and those
who occupy it is of a purely legal
character (Borcherling v. Katz, 37
N. J. Eq. 150); and this is true al-
though the fact of the agency is re-
cited and it extrinsically appears
that the lessee acted as agent and al-
though the principal occupies the
premises without assignment of the
lease and furnishes money to pay the
rent. Kiersted v. Orange, etc., R. R.
Co., 69 N. Y. 343, 25 Am. Rep. 199.
See also, Haley v. Belting Co., 140
Mass. 73; Schaefer v. Henkel, 75 N.
Y. 378; Rand v. Moulton, 72 App. Div,
236; Lenney v. Finley, 118 Ga. 718.
A contract for the sale of land
made by the agent under seal in his
own name and not disclosing any
principal cannot be specifically en-
forced against the principal, even
though it be alleged that he ratified
it. Stanton v. Granger, 125 N. Y.
App. Div. 174, aff'd, 193 N. Y. 656. No
action for damages against the prin-
cipal will lie in such a case. Ma-
honey v. McLean, 26 Minn. 415.
But in Schenkberg v. Treadwell, 94
N. Y. Supp. 418, it is held that where
persons, assuming to act as officers of
a non-existing corporation, sign a
lease in its assumed name but adding
their pretended official titles, they are
personally liable, although the lease
was under seal. One judge dissented.
There was no discussion by the ma-
jority, merely a citation of cases to
a per curiam affirmance.
.Y .W >'
1317
1735] rffE LAW OF AGENCY [BOOK iv
principal received the benefit of the contract does not, it is held, alter
this rule. 56
The common law incidents attached to the presence of a seal were
confessedly highly technical, and efforts have been made in many
places to abolish them. In several states statutes have been enacted,
though not always in the same form or having the same effect. In
Minnesota, for example, the statute has abolished seals and declared
that the addition of a seal to an instrument should "not affect its char-
acter in any respect." Under this statute it has been held that an un-
disclosed principal may be charged upon an instrument under seal. 57
On the other hand in Texas where the statute declares that a seal
shall not be necessary to the validity of any contract, etc., and that the
addition of a seal shall not "in any way affect the force and effect of
the same," it was held that the statute had not changed the common law
rule with respect of the undisclosed principal. 58
I 735- With reference to authority for the execution of
instruments, a distinction has been made, as has been seen, between
instruments to w r hose validity a seal is an essential and those to which
a seal may happen to be attached but which would be perfectly valid
and effective without it it being held in the latter case that the un-
necessary seal might be disregarded as so much surplusage and the in-
strument dealt with, so far as authority for its execution is concerned,
as though no seal were attached. 59
Extending that doctrine still further it has been suggested that it
may be availed of here, that is to say, that for the purpose of charg-
ing an undisclosed principal an unnecessary seal may be regarded as
non-existent; and a number of cases have adopted the suggestion, at
least so far as to permit the undisclosed principal to sue upon the con-
tracts. 60
So far as action upon the contract itself is concerned, however, many
other cases, chiefly in New York, have refused to apply this theory and
have held to the general rule.' 1
BO Klein v. Mechanics Bank, 145 Stowell v. Eldred, 39 Wis. 614;
N. Y. App. Div. 615. Kirschbon v. Bonzel, 67 Wis. 178;
BT Streeter v. Janu, 90 Minn. 393; Lancaster v. Knickerbocker Ice Co.,
Efta v. Swanson, 115 Minn. 373. To 153 Pa. 427; Love v. Sierra Nevada,
same effect: Gibbs v. Dickson, 33 Ark. etc., Co., 32 Cal. 639, 91 Am. Dec. 602.
107. 6i Briggs v. Partridge, 64 N. Y. 357,
ss Sanger v. Warren, 91 Tex. 472, 21 Am. Rep. 617; Kiersted v. Orange,
66 Am. St. Rep. 913. See also, Jones etc., R. Co., 69 N. Y. 343, 25 Am. Rep.
v. Morris, 61 Ala. 518, 524. 199; Schaefer v Henkel, 75 N. Y. 378:
5i See ante, 215. Henricus v. Englert, 137 N. Y. 488;
I 3 l8
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES
[ 1736
In a few cases contracts clearly intended to be the contract of the
principal, but sealed with the seal of the agent, have been held enforce-
able by and against the principal as simple contracts. 62
There may also be cases in which, though no action will lie against
the principal upon the contract itself, there may yet be such elements
of adoption or receipt of benefits of a contract actually authorized by
him as to justify a recovery against him upon an implied promise. 03
1736. Does not apply to negotiable instruments. In addition to
the limitation upon the principal's liability growing out of the nature
of the instrument under seal, "there is," as pointed out in a case al-
ready referred to, 6 * "a well recognized exception to the rule in the case
of notes and bills of exchange, resting upon the law merchant. Per-
sons dealing with negotiable instruments are presumed to take them
on the credit of the parties whose names appear upon them ; and a per-
son not a party cannot be charged upon proof that the ostensible party
signed or indorsed as his agent." This doctrine has been applied in
many cases. 65
It is entirely possible, however, notwithstanding this rule, that an
action may, in many instances, be maintained by the original creditor
Spencer v. Huntington, 100 N. Y.
App. Div. 463; Denike v. De Graaf,
87 Hun (N. Y.), 61; Smith v. Pierce,
45 N. Y. App. Div. 628; Stanton v.
Granger, 125 N. Y. App. Div. 174,
aff'd, 193 N. Y. 656, and other New
York cases cited, supra.
But in New York it is held that
the recital of a seal where none is
affixed does not make the instrument
a sealed instrument within the gen-
eral rule. Slade v. Squier, 133 N.
Y. App. Div. 666.
82 Randall v. Van Vechten, 19
Johns. (N. Y.) 60, 10 Am. Dec. 193;
Dubois v. Delaware & Hud. Canal
Co., 4 Wend. (N. Y.) 285.
3 Moore r. Granby Mining Co., 80
Mo. 86.
G* Briggs v. Partridge, 64 N. Y. 357,
21 Am. Rep. 617.
s Heaton v. Myers, 4 Colo. 59;
Sparks v. Dispatch Transfer Co., 104
Mo. 531, 24 Am. St. Rep. 351, 12 L.
R. A. 714; Webster v. Wray, 19 Neb.
3 "
558, 56 Am. Rep. 754; Cortland
Wagon Co. v. Lynch, 82 Hun (N. Y.),
173; Ranger v. Thalmann, 84 App.
Div. 341, affirmed on opinion below,
178 N. Y. 574; Anderton v. Shoup, 17
Ohio St. 126; Shuey v. Adair, 18
Wash. 188, 63 Am. St. R. 879, 39 L.
R. A. 473; Cragin v. Lovell, 109 U. S.
194, 27 L. Ed. 903; Ducarrey v. Gill,
Mood. & Mai. 450.
Action against the principal has,
however, been permitted in a number
of cases upon the ground that though
the agent's name was signed to the
note, usually with the word "agent,"
etc., added, that name had been
adopted as the principal's name and
therefore the note was originally the
note of the principal. See Burkhalter
v. Perry, 127 Ga. 438, 119 Am. St. Rep.
343; Moore v. McClure, 8 Hun (N.
Y.), 557; Pentz v. Stanton, 10 Wend.
(N. Y.) 271, 25 Am. Dec. R58; Kay-
ton v. Barnett, 116 N. Y. 625.
: -
I 737> I 73&] THE LAW OF AGENCY [BOOK iv
against the principal, not upon the note itself, but upon the considera-
tion for which it was given. 66
1737. Exceptions to the general rule. The general rule, how-
ever, is subject to certain exceptions. Of these the most direct and im-
mediate are two. One of them grows out of the question whether the
other party should be permitted to recover of the principal if the latter
has already paid, credited or settled with the agent. The other, whether
such a recovery should be allowed if the other party had already takeri
steps indicating that he intends to charge the agent, even though there
has been no such payment or settlement.
For the purpose of discussion, these two exceptions may be tenta-
tively stated as follows :
1. Where principal has settled with agent. That the principal is not
liable where, before the other party has intervened with his claim, the
principal has settled with, paid or credited the agent in good faith*
and in reliance upon such a state of conduct or representations on the
part of the other party, as to reasonably lead the principal to infer
that the agent had already settled with such other party, or that the
latter looks exclusively to the agent for payment.
2. Where other party has elected to hold agent only. That the prin-
cipal cannot be held liable where the other party, with full knowledge
as to who was the principal, and with the power of choosing between
him and the agent, has distinctly and unquestionably elected to treat
the agent alone as the party liable.
1738. Of the first exception Change in accounts Misleading
conduct. This subject has been much discussed in the English
courts and various and conflicting rules have been laid down in suc-
es Coaling Co. v. Howard, 130 Ga. The court said that if there had
807, 21 L. R. A. (N. S.) 1051. been an Instrument under seal given,
In the Georgia case, land had been instead of the notes, the action could
sold and conveyed to one W, who was not have been maintained, as in that
described as "trustee" and who was case the simple contract would have
really the undisclosed agent or trus- been merged in the higher. See Van
tee of the defendants in making the Dyke v. Van Dyke, 123 Ga. 686, 3
purchase. For a portion of the pur- Ann. Cas. 978. But that the note was
chase price, W gave notes signed by a simple contract and that one sim-
himself with the word "trustee" pie contract did not merge another,
added. Held, that an action could be Theoretically and historically there
maintained for the recovery of the seems to be as much reason to say
balance of the purchase price against this in the case of the negotiable in-
the defendants as undisclosed princi- strument.
pals, not upon the notes 'but upon
"the original consideration."
1320
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1739, I74-C
cessive cases. Some of these rules have been adopted by the courts
and textwriters in this country, but have been afterwards denied or
limited by later cases in the English courts, and the result has been an
exceedingly unsatisfactory condition of the law.
The question, as will be seen, is substantially whether the rule shall
go beyond the point marked by the * in its statement above.
I 739- Thomson v. Davenport. One of the earliest of
these cases is that of Thomson v. Davenport, 67 decided in the court of
King's Bench, in 1829. In that case the agent disclosed that he was
acting for a principal in Scotland but did not disclose his principal's
name. Lord Tenterden, in his opinion, said : "I take it to be a general
rule, that if a person sells goods (supposing at the time of the contract
he is dealing with a principal), but afterwards discovers that the per-
son with whom he has been dealing is not the principal in the transac-
tion, but agent for a third person, though he may in the meantime have
debited the agent with it, he may afterwards recover the amount from
the real principal ; subject, however, to this qualification, that the state
of the account between the principal and the agent is not altered to the
prejudice of the principal," and Bayley, J., in the same case, said:
"Where a purchase is made by an agent, the agent does not, of neces-
sity, so contract as to make himself personally liable ; but he may do so.
If he does make himself personally liable, it does not follow that the
principal may not be liable also, subject to this qualification, that the
principal shall not be prejudiced by being made personally liable if the
justice of the case is that he should not be personally liable. If the
principal has paid the agent, or if the state of accounts between the
agent and the principal would make it unjust that the seller should call
on the principal, the fact of payment or such a state of accounts would
be an answer to the action brought by the seller where he had looked
to the responsibility of the agent."
The rule as laid down by Lord Tenterden was approved by Mr. Par-
sons in his work on Contracts, 68 and by Judge Story in his work on
Agency. 69 It was also adopted in Indiana. 70
1740. Heald v. Kenworthy. Following this case came
Heald v. Kenworthy, 71 decided in the Exchequer in 1855. The case
arose upon the sufficiency of a plea to a declaration for goods sold and
delivered. The plea alleged that the goods were bought for defendant
T 9 Barn. & Cress. 78. TO Thomas v. Atkinson, 38 Ind. 248.
8 Parsons on Contracts, 63. " 10 Exch. 739.
9 Story on Agency, 449,.
1321
I74 1 ] THE LAW OF AGENCY [BOOK IV
by his agent; that the latter bought in his own name and not -in that
of defendant; that plaintiff gave credit to the agent not knowing of
defendant, and that while plaintiff still gave credit to the agent, de-
fendant, in good faith, "at reasonable and proper times and according
to the usual course of dealing" between himself and his agent, settled
with the agent, believing and having reason to believe that the latter
would settle with the plaintiff.
The plea was held not to be good : the expressions of Lord Tenter-
den and Bayley, J., were shown to be mere dicta, and were held to be
inaccurate statements of the law. Parke, B., who delivered the leading
opinion, limited the rule to those cases in which the principal has been
misled by the action of the seller, saying: "If the conduct of the seller
would make it unjust for him to call upon the buyer for the money, as
for example, where the principal is induced by the conduct of the seller
to pay his agent the money on the faith that the agent and seller have
come to a settlement on the matter, or if any representation to that ef-
fect is made by the seller, either by words or conduct, the seller cannot
afterwards throw off the mask and sue the principal."
1741. Armstrong v. Stokes. Afterwards arose the case
of Armstrong v. Stokes, 72 decided in the court of Queen's Bench in
1872. In this case J. & O. Ryder, who were commission merchants
at Manchester, acting sometimes for themselves and sometimes as
agents, having received an order for goods from defendants, bought
them of plaintiff, without disclosing that they were not acting for
themselves.
J. & O. Ryder delivered the goods to defendants who paid for them
in good faith. Afterward J. & O. Ryder failed, not having paid the
plaintiff. Later it was discovered by plaintiff that J. & O. Ryder had
bought the goods for the defendants and thereupon the plaintiff brought
the action to charge defendants as undisclosed principals, but it was
held that defendants' payment to J. & O. Ryder was a bar to recovery.
Blackburn, J., who delivered the opinion of the court (Blackburn, Mel-
lor and Lush), held that the rule laid down by Parke, B., was too nar-
row and cited and approved that advanced by Lord Tenterden and
Mr. Justice Bayley.
Referring to the rule of Parke, B., the court say : "We think that if
the rigid rule thus laid down were to be applied to those who were
only discovered to be principals after they had fairly paid the price
to those whom the vendor believed to be the principals, and to whom
w
2 L. R. 7 Q. B. 598.
1322
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1/42
alone the vendor gave credit, it would produce intolerable hardship.
It may be said, perhaps truly, this is the consequence of that which
might originally have been a mistake, in allowing the vendor to have
recourse at all against one to whom he never gave credit, and that w,e
ought not to establish an illogical exception in order to cure a fault in
a rule. But we find an exception (more or less extensively expressed)
always mentioned in the very cases that lay down the rule ; and with-
out deciding anything as to the case of a broker, who avowedly acts
for a principal (though not necessarily named), and confining our-
selves to the present case, which is one in which, to borrow Lord Ten-
terden's phrase in Thomson v. Davenport, 73 the plaintiff sold the goods
to J. & O. Ryder (the agents), 'supposing at the time of the contract
he was dealing with a principal,' we think such an exception is estab-
lished. We wish to be understood as expressing no opinion as to what
would have been the effect of the state of the accounts between the
parties if J. & O. Ryder had been indebted to the defendants on a
separate account, so as to give rise to a set-off or mutual credit between
them. We confine our decision to the case where the defendants, after
the contract was made, and in consequence of it, bona fide and with-
out moral blame, paid J. & O. Ryder at a time when the plaintiff still
gave credit to J. & O. Ryder and knew of no one else. We think that
after that it was too late for the plaintiff to come upon the defendant."
1742. Irvine v. Watson In the Queen's Bench. This
case, in its turn, was followed by Irvine v. Watson, 7 * decided in the
Queen's Bench in 1879 H1 which Bowen, J., laid down the following-
rules : "There are two classes of sales through an agent to an undis-
closed principal which it is necessary to distinguish. I. Where the
seller supposes himself to be dealing with a principal, but discovers
afterwards that he has been selling to an agent, and that there is an
undisclosed principal behind, the law allows the seller to have recourse
on such discovery to the undisclosed principal, provided always 75 that
the principal has not meanwhile paid the agent, or that the state of ac-
counts between the principal and agent does not render it unjust, i. e.,
inequitable that the seller should any longer look to the principal for
payment. This statement of the proviso which relieves the undisclosed
principal in certain cases from all necessity to pay the seller was thought
by Parke, B., and the other judges in Heald v. Kenworthy 7e to be too
73 Supra. and Bayley, J., In Thomson v. Daven-
7* 5 Q. B. Div. 102. port, 9 B. & C. 78. ^ BT
T5 See, per Lord Tenterden, C. J., 78 10 Exch. 745.
THE LAW OF AGENCY [BOOK IV
large without further explanation, and they expressed the view that the
only case in which the seller under such circumstances was precluded
from having recourse to the undisclosed principal when discovered,
was when the seller, by some conduct of his own, had misled the prin-
cipal into paying or settling with his agent in the interim. The prin-
cipal, such is the reasoning of the court of Exchequer, has originally
authorized his agent to create a debt, and the principal cannot be dis-
charged from the debt unless the seller has estopped himself, by his
conduct, from enforcing it against him. The court of Queen's Bench
in Armstrong v. Stokes, 77 do not adopt this narrower version of Lord
Tenterden's and Mr. Justice Bayley's proviso. They revert to the
wider language used by Lord Tenterden and Bayley, J., in Thomson
v. Davenport, 78 and it must now be taken to be the law that a seller
who has given credit to an agent, believing him to be a principal, can-
not have recourse against the undisclosed principal, if the principal
has bona fide paid the agent at a time when the seller still gave credit
to the agent, and knew of no one else except him as principal.
"2. The present case is one that belongs to a distinct but analogous
class. At the time of the dealing in the goods, the seller was informed
that the person who came to buy was buying for a principal, but was
not told, and did not ask, who that principal was, nor anything further
about him. Thomson v. Davenport 79 is the leading authority to show
that, in such a case, where no payment or settlement in account be-
tween the undisclosed principal and his agent has intervened, the seller
may afterwards have recourse to the undisclosed principal. But what
if the undisclosed prin:ipal has meanwhile innocently paid or settled
with his agent? If ineeed such payment or settlement is the result of
any misleading conduct on the part of the seller, then, no doubt, the
general principal alluded to in Heald v. Ken worthy, 80 would equally
apply, and the seller could no longer pursue his remedy against the
man whom he had misled. But is this the only proviso, or must a
wider proviso still in the present class of cases be engrafted on the
statement of the rule, similar to the proviso as finally sanctioned in
Armstrong v. Stokes. 81 This was a case in which, at the time of sale,
exclusive credit had been given by the seller to the agent, who bought
in his own name as principal. In the present instance the agent bought,
it is true, in his own name, but held out to the seller the additional
it Supra. so supra.
73 supra. si Supra.
19 Supra.
1324
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1742
advantage of the credit of an unnamed principal behind. What dif-
ference to the liability of the principal does this make? It is obvious
that when, as in Armstrong v. Stokes, 82 the seller deals exclusively
with the agent as principal, the seller sells knowing, if his buyer turns
out to have a principal behind him, the principal will have, at all events,
been justified in assuming, as the fact is, that the seller deals simply
with the agent. The principal may be expected to arrange with his
agent on this basis. If before recourse is had to him, the undisclosed
principal has put his agent in funds to pay, the seller cannot afterward
object that the undisclosed principal, who had a right to suppose his
credit was not looked to in the matter, should have held his hand. The
case is altered where the agent, when buying, states he has a principal
whose existence, though he does not name him, he is authorized in
mentioning. I think that the liability of the principal, who under such
circumstances pays his agent, to pay over again to the seller must de-
pend in each case on what passes between the seller and the agent,
acting within the scope of his authority, and on the precise nature of
the contract which the agent has lawfully made. * * * The es-
sence of such a transaction is that the seller, as an ultimate resource,
looks to the credit of some one to pay him if the agent does not. Till
the agent fails in payment, the seller does not want to have recourse to
this additional credit. It remains in the background : but if, before the
time comes for payment, or before, on non-payment by the agent, re-
course can be fairly had to the principal whose credit still remains
pledged, the principal can pay or settle his account with his own agent,
he will be depriving the seller behind the seller's back of his credit. It
surely must, at all events, be the law that in the case of sales of goods
to a broker the principal, known or unknown, cannot, by paying or
settling before the time of payment comes, with his own agent, relieve
himself from responsibility to the seller, except in the one case, where
exclusive credit was given by the seller to the agent. But may the
payment or settlement to or with the agent be safely made in such a
case after the day of payment has arrived, and if so within what time ?
It seems to me that it can only safely be made if a delay has intervened
which may reasonably lead the principal to infer that the seller no
longer requires to look to the principal's credit, such a delay, for ex-
ample, as leads to the inference that the debt is paid by the agent, or to
the inference that, though the debt is not paid, the seller elects to aban-
don his recourse to the principal and to look to the agent alone."
sz Supra.
1325
I743 J 744] THE LAW OF AGENCY [BOOK IV
1743. Irvine v. Watson in the court of appeal Irvine v.
Watson, however, went to the court of appeal 83 where, while the re-
sult reached below was affirmed, the court declare the rule as laid down
by Parke, B., in Heald v. Kenworthy, to be the true one.
The court did not expressly overrule Armstrong v. Stokes [Bram-
well, L. J., spoke of it as "a very remarkable case ;" and Brett, L. J.,
declared it depended upon "the peculiar customs obtaining in Man-
chester in relation to the business of commission merchants"] as the
difference in the facts enabled them to draw a distinction between the
cases, but Bramwell, L. J., said : "It is to my mind certainly difficult to
understand that distinction, or to see how the mere fact of the vendor's
knowing or not knowing that the agent has a principal behind him can
affect the liability of that principal. I should certainly have thought
that his liability would depend upon what he himself knew, that is to
say, whether he knew that the vendor had a claim against him and
would look to him for payment in the agent's default," and Brett, L. J.,
said : "If the case of Armstrong v. Stokes arises again, we reserve to
ourselves sitting here, the right of reconsidering it." The distinction
of Parke, B., was again approved in Davison v. Donaldson, 84 decided
in the court of appeal in 1882.
The result, therefore, of the English cases seems to be to limit the
exception to that first stated by Parke, B., 83 although that may perhaps
not be settled beyond controversy. 86
1744. What is misleading conduct. The question of
what acts or conduct of the other party may be sufficient to reasonably
lead the principal to believe that the agent only is relied upon, has not
83 5 Q. B. Div. 414; 49 L.. J. C, L. Browne had failed to distinguish be-
531, 42 L. T. 800. The opinions dif- tween the author's own statement and
fer more or less as reported in these his quotation from an English judge,
various reports. The quotations in Upon having his attention called to
the text are made from the official thfs fact, Mr. Browne promptly ac-
edition. knowledged his error, and promised
a* L. R. 9 Q. B. Div. 623. In Can- to correct it in future reprints, and
ada, see Arbuthnot v. Dupas, 15 Mani- this has now been done,
toba, 634. In Scotland, see Lament v. ssThus Mr. Bowsteart in his Di-
Hamilton, [1907] S. C. 628. gest of the Law of Agency (3d ed.
SB The learned American editor of 1907), p. 303, says that Armstrong v,
"English Ruling Cases, Vol. 2, p. 483, Rtokfs "must be treated as still be-
first impression, in referring to this insr law, because it has not been
statement erroneously suggested that dffinitely overruled. It is, however,
the present author had been incon- of very doubttvi authority, and cer-
sistent in stating the result of the tainly will not be in the least ex-
English cases. The fact was that Mr. tended."
1326
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1744
been much considered, and it is not one which readily lends itself to
definite rules. It must be largely a question of fact in each particular
case. In Irvine v. Watson 8T the defendants had given their broker
an order to buy goods, and the broker had bought them in his own name
of the plaintiffs, stating that he had a principal but not disclosing his
identity. The invoice given by plaintiffs to the broker stated that the
terms were, "cash (or before delivery if required) allowing two and
one-half per cent discount." The broker rendered to defendants a
statement of the purchase stating terms of payment, "cash, less two
and one-half per cent." The sellers, however, did not insist upon cash
on or before delivery. They made no demand on the broker for pay-
ment for five or six days. Then they demanded payment from him at
intervals for about ten days, after which, the broker having stopped
payment, they made demand for the first time upon defendants. In
the meantime defendants had paid the broker. Under these circum-
stances defendants urged that they had a right to believe from the fact
that the terms were "cash" that plaintiffs would not have delivered the
goods unless they had gotten their pay and that therefore defendants
were justified in paying the broker within the rule of Heald v. Ken-
worthy. It appeared, however, that even where the terms of sale were
"cash," there was no fixed custom of insisting upon payment at the
precise time of delivery and that it was not infrequent to allow a few
days of grace after delivery. It also appeared that defendants had paid
the broker (by accepting his draft which he immediately discounted)
before part of the goods had in fact been delivered. It was held that
these facts furnished no sufficient evidence that defendants had been
misled by the plaintiffs. Bramwell, L. J., said : "The terms of the con-
tract were 'cash on or before delivery' and it is said that the defendants
had a right to suppose that the sellers would not deliver unless they
87 Irvine v. Watson, 5 Q. B. Div. Argument in Heald v. Kenworthy, 10
414, 49 L. J. 531, 42 L. T. 800. In Exch. 739.
Kymer v. Suwercropp, 1 Camp. 109, In Horsfall v. Faimtleroy, 10 B. &
it was said that permitting the time C. 755 a statement in a sales cata-
of payment to pass without a demand logue that the terms of credit on
upon the principal, was a mislead- which the agent bought were billed at
ing circumstance; but no such point two months was held sufficient to
was actually involved in the case, lead the principal to believe that the
See Smyth v. Anderson, 7 C. B. 21. agent must hgve given his bill for
Compare Macfarlane v. Giannaeopulo, the goods and to protect him in therc-
8 H. & N. 860. See this point in upon accepting the agent's draft
Armstrong v. Stokes, supra; also the
1327
1745] THE LAW OF AGENCY [BOOK iv
received payment of the price at the time of delivery. I do not think,
however, that this is a correct view of the case. The plaintiffs had a
perfect right to part with the oil to the broker without insisting strictly
upon their right to prepayment and there is, in my opinion, nothing in
the facts to justify the defendants in believing that they would so in-
sist. No doubt if there was an invariable custom in {he trade to in-
sist on prepayment where the terms of the contract entitled the seller to
it, that might alter the matter; and (in such case non-insistence on pre-
payment might discharge the buyer if he paid the broker on the faith
of the seller already having been paid. But that is not the case here ;
the evidence shows that there is no invariable custom to that effect."
1745. Delay, etc. In Davison v. Donaldson 88 one of
several owners of a boat bought supplies for her of the plaintiff. The
latter knew that there were other owners though it does not appear that
he knew who they were. The goods were charged to the one who
bought them. He collected the amount from the other co-owners but
did not pay the plaintiff. The plaintiff finally sued the other owners.
Their defence was that they had settled with the managing owner be-
lieving that he had paid the plaintiff, and that they had been misled by
the fact that the plaintiff had not pressed his claim against the pur-
chaser who had now become insolvent. It did not appear, however, that
there had been any unreasonable delay at the time they settled with
the managing owner, and the real gist of the defendants' contention
was that if they had known of plaintiff's claim against them they could
have recovered the money from the managing owner before he became
insolvent. This was held not sufficient to release defendants. Jessel,
M. R., said : "The principal cannot be heard to say that the subsequent
conduct of the plaintiff induced him not to sue the agent for repayment
of the money. Independently of the settlement of accounts there is no
evidence that the mere abstaining from pressing the agent is an injury
to the principal. A debtor must find out his creditor and go and pay
ss Davison v. Donaldson, 9 Q. B. There are dicta In a number of
Dlv. 623, 47 L. T. 564. See also, The cases that the right to charge the un-
Huntsman, [1894] Pro. Div. 214. disclosed principal must be exercised
In Berry v. Chase, 102 C. C. A. 572, within a reasonable time. See Smeth-
179 Fed. 426, it was held that a de- hurst v. Mitchell, 1 El. & El. 622; Fell
lay of three or four months in mak- v. Parkin, 52 L. J. Q. B. 99, 47 L. T.
ing claim upon the principal after Rep. 350; Curtis v. Williamson, L. R.
discovery was- not so unreasonable 10 Q. B. 57; Irvine v. Watson, 5 Q.
as to discharge him In the absence B. Div. 102.
of anything to prejudice him there-
by.
1328
CHAP. Vj LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1746-1748
him." "No doubt in many cases principals may reasonably rely on
the honor of their agents, and may not require vouchers ; but when they
come into a court of law and seek to excuse themselves from liability,
and it turns out that they have not required the production of vouchers,
they must expect the court to deal strictly with them." Bowen, L. J.,
said : "I do not say that in very special circumstances mere delay may
not amount to misrepresentation: it may be conduct misleading the
defendant. But that can only be when there is something in the origi-
nal contract or in the conduct of the parties which renders the delay
misleading. The creditor is not obliged to apply to all his debtors if he
can get payment from one of them." This case, however, as was
pointed out by the judges, was not the mere case of principal and agent
because the defendants were co-owners or partners with the managing
owner and jointly liable with him.
1746. Giving the agent a receipt for the price, even
though mistakenly, upon the strength of which the principal in good
faith pays or credits the agent, will be such conduct as protects the
principal. 89
1747. It must be kept in mind that this exception dif-
fers from the following one. This is not a question of election but of
misleading. It is essential here that the principal shall have done
something shall have paid or credited or otherwise altered his situa-
tion which will prejudice him if he now be called upon to pay. No
such act is necessary where election alone is involved.
It is also possible that that which would not suffice to constitute an
election may be sufficient to relieve the principal under this rule if he
has reasonably acted upon it to his prejudice. For example, the com-
mencement of suit against the agent is, as will be seen, not usually re-
garded as sufficient to constitute an election. But would the principal
be liable again if, after the other party who knows there is a principal
and has had an opportunity to sue him has sued the agent, the princi-
pal in reliance thereon should pay the agent ? It would seem that there
might be cases in which the conduct of the plaintiff was so unambiguous
and decisive as to be reasonably relied upon by the principal.
1748. The rule in the United States. The subject has
not very frequently arisen in the United States and has not been thor-
oughly considered in any very recent case by a court of last resort.
so Cheever v. Smith, 15 Johns. (N. Co., 30 Md. 39; Hyde v. Wolf, 4 La.
Y.) 276; English p v. Rauchfuss, 21 234, 23 Am. Dec. 484.
N. Y. Misc. 494; Brown v. Telegraph
84 1329
1749]
THE LAW OF AGENCY
[BOOK iv
In the earlier cases, as was naturally to be expected, the tendency was
to follow the rule laid down by Judge Story and Professor Parsons,
based upon the dictum of Lord Tenterden, 90 (that is, as far as the *
in 1737 ante.) A general statement of the rule was made some years
ago by the New York court of appeals 91 with the exception "provided
he has not in the meantime in good faith paid the agent," but the state-
ment was a mere dictum. Most of the cases which have arisen since
Irvine v. Watson was decided by the court of appeal, have either ig-
nored that decision or apparently failed to note its full significance. 92
1749. General conclusions. Notwithstanding the re-
marks of Bramwell, L. J., the distinction between the case where the
other party knows that there is a principal in existence though he does
not know who he is and that where he is totally ignorant of the exist-
ence of such a person, seems not without significance. Certainly if the
other party is to be charged with the consequences of his misleading
o Thus for example in 1847 in Clea-
land v. Walker, 11 Ala. 1058, 46 Am.
Dec. 238; in 1855, in Fish v. Wood, 4
E. D. Smith (N. Y. Com. Pleas), 327;
in 1871, in Thomas v. Atkinson, 38
Ind. 248; in 1879, in McCullough v.
Thompson, 45 N. Y. Super. 449. See
also, Ketchum v. Verdell, 42 Ga. 534;
Emerson v. Patch, 123 Mass. 541.
The Georgia code enacts substantially
the rule of Thomson v. Davenport.
On the contrary, in 1866, in York
County Bank v. Stein, 24 Md. 447,
the rule of Baron Parke in Heald v.
Kenworthy, was approved in reliance
upon the staterrient of the Editor of
Story on Agency.
91 Knapp v. Simon (1884), 96 N.
Y. 284.
92 The question was quite fully con-
sidered in 1885 in Laing v. Butler, 37
Hun (N. Y.), 144. The court cites
Armstrong v. Stokes and Irvine v.
Watson as applying to different
classes of cases and apparently with-
out attaching much importance to
the comments made upon the former
case by the Court of Appeal when
Irvine v. Watson was before it.
There is also a very interesting
discussion in Fradley v. Hyland
(1888), 37 Fed. 49, 2 L. R. A. 749;
Irvine v. Watson, in the Queen's
Bench Division, is cited, but not the
case in the Court of Appeal. See al-
so, Harder v. Continental Printing
Co., 64 N. Y. Misc. 89.
A very general reference to the
matter is made in Berry v. Chase, 77
C. C. A. 161, 146 Fed. 625, 102 C. C.
A. 572, 179 Fed. 426.
The question was involved in Nich-
olson v. Pease, 61 Vt. 534, and the
syllabus indicates the case as holding
that "a traveling salesman who is
furnished with money by his employ-
er to pay his expenses while on the
road, cannot bind his principal for
the payment of such expenses if, be-
fore receiving notice from the party
extending such credit, the employer
has settled with his salesman and al-
lowed him the amount of such ex-
penses." There is, however, no dis-
cussion of the point in the opinion.
There is a statement of the English
rule as a dictum in Simmons Hard-
ware Co. v. Todd, 79 Miss. 163; and
Guest v. Burlington Opera House Co.,
74 Iowa, 457. See the cases reviewed
in 1889 by Mr. John W. Beaumont in
23 American Law Review, 565.
1330
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ I/5O
conduct, it seems much more reasonable and just to do so where he
knows that there is a principal whose actions may be affected by his
conduct than where he has no such knowledge. It may be suggested
that every person who dc?.k without expressly excluding that possibil-
ity may always be regarded as potentially an agent with an undisclosed
principal ; but the suggestion seems forced if not fanciful.
Nevertheless, the rule of Parke, B., seems on the whole to be rea-
sonable and just. If a principal sends an agent to buy goods for him
and on his account, it is not unreasonable that he should see that they
are paid for. Although the seller may consider the agent to be the
principal, the actual principal knows better. He can easily protect him-
self by insisting upon evidence that the goods have been paid for or
that the seller with full knowledge of the facts has elected to rely upon
the responsibility of the agent, and if he does not, but, except where
misled by some action of the seller, voluntarily pays the agent without
knowing that he has paid the seller, there is no hardship in requiring
him to pay again. If the other party has the right, within a reasonable
time, to charge the undisclosed principal upon his discovery, and this
right seems to be abundantly settled in the law of agency it is diffi-
cult to see how this right of the other party can be defeated, while he
is not himself in fault, by dealings between the principal and the agent,
of which he had no knowledge, and to which he was not a party.
1750. Of the second exception "Election." The second excep-
tion to the general rule is commonly said to rest upon the theory of
"election." A wholly anomalous situation is presented. A contract
has been made which in terms binds the agent only. Nevertheless the
principal may be made liable upon it. How is he liable ? Although the
other party may perhaps sue both severally but simultaneously, or pos-
sibly sue both jointly, 93 the obligation can hardly be deemed a joint
one in the sense that it can ultimately be enforced against both. 9 - 1
Neither can it be said that both are liable severally in the sense that
recovery can be had partly from each. The liability is commonly said
to be an alternative one. The agent can be held because he made the
contract in his own name, or the principal can be held because it is in
law deemed to be his contract. Which one shall be held ? The answer
ordinarily given is that the other party may "elect" between them. As
3 See cases post, 1758, note 14. 742; Belt v. Washington Power Co.,
4 See Tew v. Wolfsohn, 77 N. Y. 24 Wash. 387; Steele-Smith Grocery
App. Div. 454; McLean v. Sexton, 44 Co. v. Potthast, 109 Iowa, 413; Good-
N. Y. App. Div. 520; Gay v. Kelley, ale v. Page, 92 S. Car. 413.
109 Minn. 101, 26 L, R. A. (N. S.)
1331
I75 1 ] THE LAW OF AGENCY [BOOK IV
a corollary to this, it is said that the other party has but one choice ;
that when he has made his election his determination is final ; and he
cannot afterwards make a new choice even though his first efforts did
not result in a satisfaction of his claim. How far this is true, it is now
necessary to inquire. Before doing so, it may be well to notice one pre-
liminary matter.
Election properly is a matter of choice. It does not rest upon estop-
pel. It is not therefore essential in order to make it conclusive that it
shall appear to have misled the principal to his prejudice. If, however,
it has misled him if the principal, being apprised of the fact that the
other party has elected to look to the agent, settles with the agent upon
that basis and either pays him or allows him a corresponding credit,
nothing could be more unjust than to permit the other party after-
wards to repudiate his action with the agent and resort to the princi-
pal. 95
1751. Theories of election. With reference to this mat-
ter of election four views are possible: I. That the other party un-
expectedly finds himself in a situation where he can hold one of two
parties liable and he must simply choose between them. 2. That the
other party, inasmuch as he has a contract in terms with the agent, will
presumptively pursue this obligation, and that therefore some affirma-
tive action is necessary to show that he intends to abandon this for
his remedy against the principal. 3. That the other party, as soon as
he discovers the existence of the principal, will presumptively look to
him rather than to the agent, and that some affirmative act is therefore
necessary to show that he prefers to hold the agent. 4. That the other
party, having actually dealt with the agent as principal and obtained
an obligation against him, but finding unexpectedly that he also has a
claim against the principal, intends to make the most of the situation
Bpaterson v. Gandasequi, 15 East, Smith, 15 Johns. (N. Y.) 276; Bush
62; Addison v. Gandasequi, 4 Taunt, v. Devine, 5 Har. (Del.) 375; Brown
574; Thomson v. Davenport, 9 Barn. v. Bankers, etc., Tel. Co., 30 Md. 39;
& Cress. 78; Horsfall v. Fauntleroy, Schepflin v. Dessar, 20 Mo. App. 569;
10 Barn. & Cress. 755; Smyth v. An- Hyde v. Wolfe, 4 La. 234, 23 Am. Dec.
derson, 7 Com. Bench, 21; Irvine v. 484; Romans v. Lambard, 21 Me. 308.
Watson, 5 Q. B. Div. 102; Armstrong One who gives a receipt to a state
V. Stokes, L. R., 7 Q. B. 599; Heald agent, without actual payment cannot
v. Kenworthy, 10 Exch. 739; Kymer afterward hold the state although he
v. Suwercropp, 1 Camp. 109: Mac- has given notice to the accounting of-
farlane v. Giannacopulo, 3 Hurl. & fleers not to allow such receipt as a
Nor. 859; Clealand v. Walker, 11 Ala. credit to the agent. Pitler v. Com-
1058, 46 Am. Dec. 238; Cheever v. monwealth, 31 Pa. 406.
1332
CHAP. V 7 ] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1752, 1753
to keep and enforce his claims against both until he has obtained sat-
isfaction from one of them or has done something which in fact or in
law shows that he has abandoned his claim against one or the other of
them.
Any one of these views might undoubtedly be taken, but no one of
them, in fact, has been consistently held. The field is therefore open
for the adoption of the one which seems most consistent with principle
and the peculiarities of the situation. That the last is the sound and
natural view would seem to require no argument to establish, although
it undoubtedly is not election in the ordinary sense. From the stand-
point of the liability of the principal it would lead to this conclusion :
that no act with reference to keeping alive or enforcing the liability of
the agent would discharge the principal unless it also showed that the
other party did not intend to charge the principal.
1752. Knowledge necessary. Election, as has been
pointed out involves choice, and choice presupposes knowledge of the
alternatives and freedom to choose between them. The other party
cannot elect between the principal and the agent so long as he does not
know that there was a principal in the transaction, or does not know
who he was ; and this knowledge must include not only the fact of the
agency but the name and identity of the principal. 96 What he may do
before that can not be charged to him as an election.
I 753- At this stage it seems desirable to notice more
fully a question already referred to, namely, whether the rules are the
same whether the other party knows there is a principal but does not
know who he is, or is totally ignorant of the existence of any principal,
and believes that the agent is the only person interested. In general, as
has been pointed out, that distinction is deemed immaterial. It was fully
discussed in Thomson v. Davenport, 97 where Bayley, J., said "There
is no authority to show that mere knowledge that there is a principal
destroys the right of the seller to look to that principal as soon as he
knows who that principal is, provided he did not know who he was at
the time when the purchase was originally made." It is true that Lord
Blackburn, in Armstrong v. Stokes, 98 refers to such a distinction, cit-
ing the case of the broker who is usually known to be acting for a prin-
cipal, though the latter's identity may not be disclosed. But in Irvine
as Greenburg v. Palmieri, 71 N. J. Kenyon, 48 Conn. 314, 40 Am. Rep.
L. 83; Steele-Smith Grocery Co. v. 174; Reid v. Miller, 205 Mass. 80.
Potthast, 109 Iowa, 413; Curtis v. Wil- ^ 9 B. & C. 78.
liamson, L. R., 10 Q. B. 57; Merrill v. L, R. 7 Q. B. 598.
1333
1754] THE LAW OF AGENCY [BOOK iv
v. Watson, 09 as has been seen, 1 Lord Bramwell, referring to that case,
said, "It is to my mind certainly difficult to understand that distinction,
or to see how the mere fact of the vendor knowing or not knowing that
the agent has a principal behind can affect the liability of that princi-
pal." Several American cases 2 have approved the views of Bayley, J.,
saying that even if the other party knew there was a principal, but did
not know who he was, he could not then choose between them or debit
the real principal.
It seems to be everywhere agreed that the fact that the other party
knows there is an undisclosed principal in existence does not charge
him with the duty of then finding out who he is and giving the credit to
him alone. 3
The utmost effect which the knowledge of an existing but unnamed
principal would seem to have would be to make it easier, as a mere mat^
ter of fact, for the other party to elect, at the time of the transaction,
by some unequivocal means, to deal with the agent only, to the exclu-
sion of any principal named or unnamed. 4
1754. What constitutes an election. It is impossible to lay
down any hard and fast rule by which it can/in all cases, be determined,
what constitutes an election until there is agreement as to what is
meant by election. The other party may, of course, by some express
and unequivocal act, done with that direct intent, declare his purpose to
treat the agent only as his debtor in such a manner as to leave no room
for doubt; but, in the majority of the cases, the intention of the other
party is to be gathered from his words and conduct, and the various
circumstances which surround the case. If the case were one of ordi-
nary election, any act which unequivocally indicated a purpose to pur-
sue either the principal or the agent would suffice ; 5 but it is quite clear
that we are not dealing with an ordinary case at all. This will be evi-
dent from a consideration of the cases which have actually been de-
cided, distinguishing between what is done before and what is done
after the discovery of the principal.
9 5 Q. B. Div. 414. 4 This seems to be the ground upon
1 See ante, 1743. which certain inconclusive cases, like
2 See, e. g. Merrill v. Kenyon, 48 Jablon v. Traynor, 135 N. Y. Supp.
Conn. 314, 40 Am. Rep. 174; Raymond 545, are to be based.
v. Crown, etc., Mills, 2 Mete. (Mass.) There is good discussion of "elec-
319. tion" by Lord Blackburn, in Scarf v.
A See Thomson v. Davenport; Ray- Jardine, 7 App. Gas. 345.
mond v. Crown, etc., Mills.
1334
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1/55
1755. I. Before discovery of principal. As has already been
pointed out, any act done before knowledge of the principal, unless it
amounts to an absolute discharge, extinction or merger of the debt,
cannot amount to such an election to charge the agent as will release
the principal when discovered.
Thus it has been held, the taking of an agent's promissory note or
acceptance for the price of goods sold to him by one who knew he was
acting as agent but who did not know for whom, will not conclude the
seller from holding the principal also when subsequently discovered,
nor will the fact that the vendor charged the goods to the agent, 7 or
sent him a statement of the account made out in his name, 8 supposing
him to be the principal, prevent the vendor from subsequently charging
the real principal when ascertained to be such.
The commencement of an action against the agent, before knowl-
edge, cannot be deemed an election ; 9 and even the recovery of a judg-
ment against the agent, before discovery of the principal, has been
held not to be a bar to an action against the principal when discovered
unless the principal discharges the judgment against the agent. 10 This
latter holding may, perhaps, be open to question, not because the re-
covery of judgment constitutes an election but upon the ground of mer-
ger. 11
e Merrill v. Kenyon, 48 Conn. 314, (N. Y.), 353; Steele-Smith Grocery
40 Am. Rep. 174. See also, Harper v. Co. v. Potthast, 109 Iowa, 413.
Tiffin Nat. Bank, 54 Ohio St. 425. "If Filing claim and having it allowed
the vendor on a sale made to an against estate of bankrupt agent be-
agent, take the promissory note of fore discovering principal, does not
the agent for the amount of the pur- preclude following the principal af-
chase, on failure of payment by the ter he is discovered. Sweeney v.
agent, the principal would be equally Douglas Copper Co., 149 N. Y. App.
liable to an action by the vendor, Div. 568.
founded upon the original considera- 10 Greenburg v. Palmieri, 71 N. J.
tion, as if the note had been given by 369, 8 Ann. Gas. 1024, 6 L. R. A. (N.
the principal himself." Keller v. L. 83; Lindquist v. Dickson, 98 Minn.
Singleton, 69 Ga. 703. S.) 729; Brown v. Reiman, supra.
7 Yates v. Repetto, 65 N. J. L. 294. " This question of merger is not
See also, Raymond v. Crown, etc., easy to dispose of. How many con-
Mills, 2 Mete. (Mass.) 319; French tracts are there? Is there the visible
v. Price, 24 Pick. (Mass.) 13; Guest contract of the agent and another,
v. Burlington Opera House Co., 74 invisible, contract of the principal?
Iowa, 457. Is there but one contract either of
s Henderson v. Mayhew, 2 Gill the principal or of the agent at the
(Md.), 393, 41 Am. Dec. 434. election of the other party? Is there
9 Brown v. Reiman, 48 App. Div. but one contract upon which prinei-
295; Ranger v. Thalmann, 39 Misc. pal and agent may be held jointly, as
420; Remmel v. Townsend, 83 Hun is said in several of the cases cited in
1335
I75^- I 758] THE LAW OF AGENCY [BOOK IV
1756. II. After discovery of principal. After knowledge of the
existence and identity of the principal comes to the other party, he is
in a position to choose between the principal and the agent. All of the
aspects of election are at once presented. If it be treated merely as a
matter of choice, the question is, when has a choice been indicated.
Treating the election in the manner suggested, however, the question
becomes : What acts of the other party, in view of the liability of both
principal and agent, manifest an intention not to hold the principal?
A number of situations have been considered in this connection.
I 757 Presenting claim. In one case, 12 after the discov-
ery of the principal, the creditor filed a claim against the estate of the
agent who had become insolvent. The proof was sent by mail. "Al-
most immediately" after this had been posted, the creditor's attorneys,
fearing that the presentation of this claim might prejudice the demand
against the principal, sent a telegram to stop its presentation, but the
telegram arrived too late as the proof had already been filed. Nothing
further, however, was done under it and no dividend was ever received.
As a mere matter of election, many cases could be imagined wherein
the filing of such a claim would be enough. Considered as evidence of
an intention not to hold the principal, it could be strongly urged that
merely keeping the claim alive against the agent was slight, if any, evi-
dence that the creditor did not intend to follow the principal also. It
was held not to be conclusive evidence, as a matter of law, of an inten-
tion to treat the agent as the only debtor. The argument was that, as
the mere commencement of an action against the agent was not conclu-
sive, the filing of the claim, which was less than the commencement of
an action, ought not to be.
1758. Commencement of action. As suggested in the
preceding case, the mere commencement of an action against the agent,
although this act is often regarded as an election in other fields, is not
a following note? Here are obvious- the estate of the Insolvent agent and
ly, but in a different form, the same received a small dividend upon it.
questions which arise under the doc- Held, that this did not defeat his ac-
trine of election. See the (dissent- tion against the principal,
ing) opinion of Lord Penzance, In In Hoffman v. Anderson (1902), 112
Kendall v. Hamilton, 4 App. Gas. 504. Ky. 893, the claim was presented
12 Curtis v. Williamson (1874), L. first against the estate of the princl-
R. 10 Q. B. 57. In Jones v. Johnson pal and a small dividend received.
(1888), 86 Ky. 530, while the creditor Held, that this did not prevent a sub-
had an action pending against the sequent proceeding against the agent
principal, he filed a claim against
CHAP. V]
LIABILITY OF PRINCIPAL TO THIRD PARTIES
[ 1758
here deemed to constitute a conclusive election as a matter of law, 13
whatever may be its force as evidence of an election as a matter of fact.
There is, moreover, as has been seen, authority for saying that principal
and agent may be simultaneously sued severally, and possibly even
jointly. 14
is Ferry v. Moore, 18 111. App. 135;
Curtis v. Williamson, supra; Ray-
mond v. Crown, etc., Mills, 2 Mete.
(Mass.) 319; Weil v. Raymond, 142
Mass. 206, 213; Cobb v. Knapp, 71 N.
Y. 348, 27 Am. Rep. 51.
In Raymond v. Crown, etc., Mills,
supra, the creditor took out a writ
against the agent before discovering
the principal; before the writ was
served he discovered the principal
and inserted his name also, and the
writ was thus served; later the cred
itor discontinued as to the agent.
Held, not as matter of law to defeat
the action against the principal. See
also, McLean v. Sexton, 44 App. Div.
520; Tew v. Wolfsohn, 77 App. Div.
454; Gay v. Kelley, 109 Minn. 101, 26
L. R. A. (N. S.) 101.
In Barrell v. Newby, 62 C. C. A.
382, 127 Fed. 658, the other party had
sued the agent and attached or gar-
nished funds of his, which suits were
still pending and plaintiff claimed
the right to proceed under them,
though no money had yet been re-
alized; they had also "elected to ap-
ply and did apply" certain funds in
their hands belonging to the agent
upon their claim. It was held that
this action was an election. The
court takes a more narrow view of
election than is taken in several other
cases.
i* In Pollock on Contracts (7th ed.
p. 105, Williston's Wald's Pollock p.
116) it is said: "When it is said that
he [the other party] has a right of
election this means that he may sue
either the principal or the agent or
may commence proceedings against
both but may only sue one of them
to judgment; and a judgment ob-
tained against one, though unsatis-
fied, is a bkr to an action against the
other."
In McLean v. Sexton, 44 App. Div.
520, [an action to foreclose a me-
chanic's lien] it is held that, under
the 'New York code at least, both
principal and agent may be sued in
the same action. This, however,
must be taken in connection with
what is there said to be the rule in
New York, that prosecuting the ac-
tion against either to judgment is not
an election.
In Tew v. Wolfsohn, 77 App. Div.
454, it is said: "Assuming that the
plaintiff is only entitled to judgment
against one of the defendants and
that he must elect which party he in-
tends to hold, he cannot be required
to make that election until the close
of the case." This case was affirmed
in the court of appeals, Tew v. Wolf-
sohn, 174 N. Y. 272, though that court
declined to treat it as a case of un-
disclosed principal. The dissenting
opinion of Cullen, J., discusses the
general question quite fully. But in
Cherrington v. Burchell, 147 App. Div.
16, the right to sue jointly is denied.
In Gay v. Kelley, 109 Minn. 101, 26
L. R. A. (N. S.) 742, it is held that
while prosecuting the action to judg-
ment against one of the parties
would be an election, where done with
full knowledge, still where -the al-
leged principal denies that he was
such, the other party may join both
in one action and cannot be compelled
to elect until the close of the testi-
mony. In Mussenden v. Raiffe, 131
111. App. 456, it is said that the
plaintiff may join both but must dis-
continue as to one before judgment.
1337
1759]
THE LAW OF AGENCY
[BOOK iv
I 759- Taking judgment against agent. Prosecuting the
action to judgment against the agent, after discovery of the principal,
has been held in several cases to constitute an election as a matter of
law. 15 As a mere matter of ordinary election, this is undoubtedly sound ;
as a matter of a possible merger it may also be sound ; but if election be
treated in the manner which has been suggested it cannot well be said
that changing the form qf the agent's obligation, or putting it into a con-
dition in which it can be more readily enforced, is inconsistent with an
intention to proceed against the principal also. Nothing' short of satis-
faction of the judgment against the agent would then release the prin-
cipal as a matter of law, and some cases have so held. 16
In Coaling Co. v. Howard, 130 Ga.
807. 21 L. R. A. (N. S.) 1051, a joint
action against several principals, only
one of whom was disclosed at the
time of contracting, was permitted.
There was no discussion of the ques-
tion.
In Weil v. Raymond, 142 Mass. 206,
it is said that while the third party
may proceed against each separately
(though not after judgment against
one) he cannot sue both jointly.
In Pittsburg Plate Glass Co. v.
Roquemore (Tex. Civ. App.), 88 S. W
449, it is said that if the other party
sues the agent who then discloses his
principal and the plaintiff brings him
into the action, the plaintiff must
then elect against which one he will
ask for judgment.
Priestly v. Fernie (1865), 3 H.
& C. 977; Kingsley v. Davis (1870),
104 Mass. 178; Weil v. Raymond, 142
Mass. 206 (dictum) ; Tuttill v. Wilson,
90 N. Y. 423; per Lord Ch. Cairns in
Kendall v. Hamilton, L. R. 4 App.
Cas. 504; Sessions v. Block, 40 Mo.
App. 569; Lindquist v. Dickson, 98
Minn. 369, 8 Ann. Cas. 1024, 6 L. R.
A. (N. S.) 729; Codd Co. v. Parker,
97 Md. 319; Murphy v. Hutchinson,
93 Miss. 643, 17 Ann. Cas. 611, 21 L.
R. A. (N. S.) 785; Semisch v. Guen-
ther, 10 Br. Col. L. R. 371; Hoffman v.
Anderson, 112 Ky. 873. See also
Coles v. McKenna, 80 N. J. L. 48.
is Beymer v. Bonsall, 79 Pa. 298.
This has been said to be the rule in
New York: McLean v. Sexton, 44 App.
Div. 520: Tew v. Wolfsohn, 77 App.
Div. 454, largely upon such approval
of Beymer v. Bonsall as is to be
found in Cobb v. Knapp, 71 N. Y. 348,
27 Am. Rep. 51; and First Nat. Bank
v. Wallis, 84 Hun, 376, neither one
precisely in point. But it seems to
be denied in Cherrington v. Burchell,
147 App. Div. 16. Maple v. Railroad
Co., 40 Ohio St. 313, 48 Am. Rep. 685,
so holds but it was an action of tort.
Beymer v. Bonsall is disapproved in
Barrell v. Newby, 62 C. C. A. 382, 127
Fed. 656.
As strong a statement, probably, as
has l:een made against this view is
that of Lord Chancellor Cairns, in
Kendall v. Hamilton, 4 App. Cas. 504
(a case of partnership). He said:
"Now, I take it to be clear that,
where an agent contracts in his own
name for an undisclosed principal,
the person with whom he contracts
may sue the agent, or he may sue the
principal, but if he sues the agent
and recovers judgment, he cannot af-
terwards sue the principal, even al-
though the judgment does not result
in satisfaction of the debt If any
authority for this proposition is need-
ed, the case of Priestly v. Fernie, 3
H. & C. 977, may be mentioned. But
the reasons why this must be the case
are, I think, obvious. It would be
clearly contrary to every principal of
1338
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES
1760. Taking agent's note. The effect of taking the
agent's promissory note or bill of exchange, after the discovery of the
principal, for a debt contracted before, is involved in some uncertainty.
If the paper be expressly taken as payment, no question could ordina-
rily arise. In a few States the paper is presumptively taken as payment,
justice that the creditor who had
seen and known and dealt with and
given credit to the agent, should be
driven to sue the principal if he does
not wish to sue him, and, on the other
hand, it would be equally contrary to
justice that the creditor on discover-
ing the principal, who really has had
the benefit of the loan, should be
prevented suing him if he wishes to
do so. But it would be no less con-
trary to justice that the creditor
should be able to sue first the agent
and then the principal, when there
was no contract, and when it was
never the intention of any of the par-
ties that he should do so. Again, if
an action were brought and judgment
recovered against the agent, he, the
agent, would have a right of action
for indemnity against his principal,
while, if the principal were liable
also to be sued, he would be vexed
with a double action. Farther than
this, if actions could be brought and
judgments recovered, first against the
agent and afterwards against the prin-
cipal, you would have two judgments
in existence for the same debt or
cause of action; they might not nec-
essarily be for the same amounts,
and there might be recoveries had, or
liens and charges created, by means
of both, and there would be no mode,
upon the face of the judgments, or
by any means short of a fresh pro-
c^eding, of shewing that the two
judgments were really for the same
debt or cause of action; and that sat-
isfaction of one was, or would be, sat-
isfaction of both." [But in Judd Lin-
seed Oil Co. v. Hubbell, 76 N. Y. 543,
it was held that it was merely an ir-
regularity if two separate judgments
for slightly different amounts were
taken against two partners respec-
tively.]
The opinion in Beymer v. Bonsall,
79 Penn. 298, which is the leading
case on the other side, is very brief
and was per curiam. The court said :
"Undoubtedly an agent who makes a
contract in his own name without dis-
closing his agency is liable to the
other party. The latter acts upon his
credit and is not bound to yield up
his right to hold the former personal-
ly, merely because he discloses a prin-
cipal who is also liable. The princi-
pal is liable because the contract was
for his benefit, and the agent is bene-
fitted by his being presumably the
creditor, for there can be but one
satisfaction. But it does not follow
that the agent can afterwards dis-
charge himself by putting the creditor
to his election. Being already liable
by his contract, he can be discharged
only by satisfaction of it, by himself
or another. So the principal has no
right to compel the creditor to elect
his action, or to discharge either him-
self or his agent, but can defend his
agent only by making satisfaction for
him."
In McLean v. Sexton, 44 App. Div.
520, after quoting with approval the
rule in Pollock's Contracts that the
other party may sue either principal
or agent or may commence proceed-
ings against both, but may sue only
one of them to judgment, it is said:
"If they may be sued in separate ac-
tions, there is no good reason why
both the principal and agent who are
liable for a debt should not be sued
in the same action. Both will be dis-
charged by the satisfaction of the
debt, and neither can be discharged
without it."
1339
I76l,I/62j THE LAW OF AGENCY [BOOK IV
and would ordinarily release the principal. 17 In the majority of the
States, however, the paper is not presumptively payment and such a
conclusion would not follow. 18 In a case 10 in Massachusetts, where a
note is presumptively payment, the court said : "If the plaintiff, knowing
O. to be the agent of the defendant, accepted his note in payment for
property sold to the defendant, intending to receive it as payment and
to give exclusive credit to O., it would operate as payment ; and he could
not thereafter fall back upon the defendant for the price of the prop-
erty, although the note of O. should be dishonored." This, however,
was not a case of undisclosed principal at all, but of election between a
known principal and a known agent tendering his individual responsi-
bility, a case which may be analogous but is not identical. In a simi-
lar case 20 in Missouri, where a note is held to be not presumptively pay-
ment, 21 it was said that "where the creditor with knowledge of the prin-
cipal's liability sees fit to take the individual note of the agent, without
taking, at the time of the transaction, any steps indicative of an intent to
hold the principal, this is equivalent to a discharge of the principal as
a matter of law." Considering that these two rules were inconsistent,
the court in a later case suggested that the conclusion in the agency case
might perhaps be regarded as an exception to the previous more general
rule. 22
On the principle of election suggested, while the taking of the agent's
note may have some effect as evidence, it is difficult to see why, unless
actually taken as payment, it should operate as matter of law to dis-
charge the principal.
1761. Charging goods to agent. A fortiori would there
be no release merely because the goods were charged, or a bill made
out, to the agent after the discovery of the principal. 23
1762. Mere delay Statute of limitations. The question
of the effect of delay is not easily dealt with. Delay reasonably leading
17 Paige v. Stone, 10 Mete. (Mass.) bone v. Tucker, 15 Wend. (N. Y.)
160, 43 Am. Dec. 420; Wilkins v. Reed, 498; Muldon v. Whitlock, 1 Cow. (N.
6 Greenl. (Me.) 220, 19 Am. Dec. 211; Y.) 290, 13 Am. Dec. 533.
French v. Price, 24 Pick. (Mass.) 13; " Perkins v. Cady, 111 Mass. 318.
Green v. Tanner, 8 Mete. (Mass.) 20 Ames Packing & Prov. Co. v.
411; Chapman v. Durant, 10 Mass. Tucker, 8 Mo. App. 95.
47; Tudor v. Whiting, 12 Mass. 212. 21 Commiskey v. McPike, 20 Mo.
is See Atlas S. S. Co., v. Columbian App. 82.
Land Co., 42 C. C. A. 398, 102 Fed. 22 Schepflin v. Dessar, 20 Mo. App.
358, where the question is fully dis- 569.
cussed though the case was not really 23 Dyer v. Swift, 154 Mass. 159;
one of undisclosed principal. Rath- Gardner v. Bean, 124 Mass. 374.
1340
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1763-1765
to and followed by a detrimental change of position would bar recovery ;
but unless it thus results in an alteration of the situation it seems quite
certain that no ordinary delay in seeking to charge the principal will, as
a matter of law, operate to release him. But a delay so long that all
right of action against the agent is barred by the statute of limitations,
will, it is held, ordinarily bar a recovery against the principal. 24
1763. Intermediate party must have been agent and not princi-
pal. Where it is sought to hold one as undisclosed principal, for
example for goods bought, it is essential that the intermediate party
through whom the goods were secured shall have been an agent of the
principal sought to be held and not his vendor. 25 Thus, for illustration,
if A orders goods of B as seller, but B, not happening to have them on
hand, buys them in his own name of C -and supplies them to A, A will
not be liable to C as undisclosed principal if B fails to pay C. A would
not be liable to C in such a case if he had been disclosed. There was no
agency and no principal disclosed or undisclosed.
The same doctrine would, of course, apply to other cases than the
sale of goods to leasing, borrowing, employing, and the like.
1764. Alleged agent must have been really such. It must be
kept in mind that the rules here considered contemplate the actual ex-
istence of authority from a principal, though he be not disclosed. There
is no more warrant for holding an undisclosed party liable for acts
which he did not authorize than there is for holding a disclosed party
in such a case. In fact there is often much less warrant. It is therefore
an indispensable part of the plaintiff's case to show that the alleged
principal was really such as to the act in question. 26
1765. It must also usually appear that the fact that the
undisclosed principal was undisclosed was not so far in violation of
his authority or consent as to practically destroy the agency. An au-
thority to contract for the purchase of goods, for example, in the prin-
cipal's name and upon his credit only, can ordinarily not be deemed
to warrant a contract in the agent's name and upon his credit. It is, of
2* In Gay v. Kelley, 109 Minn. 101, 383, 37 Am. Rep. 369; Consol. Safety
26 L. R. A. (N. S.) 742, a delay for Pin Co. v. Humbert, 128 N. Y. Supp.
a year was held not conclusive, and 710.
a verdict against the principal was 2 Young v. Inman, 146 Iowa, 492;
upheld. Delay until action against Moline v. Neville, 38 Neb. 433; Dick-
agent is barred by statute of limi- erson v. Rogers, 114 N. Y. 405; Mc-
tations bars action against principal. Kenna v. Stayman Mfg. Co., 112 N.
Ware v. Galveston City Co., Ill U. S. Y. Supp. 1099; Edwards v. Annan
170. (Tex. Civ. App.), 127 S. W. 299; Harp-
25 See Stoddard v. Ham, 129 Mass. er v. Sinclair, 7 Wash. 372. See also,
1341
i;66, 1767] THE LAW OF AGENCY [BOOK IV
course, true that custom, or the distinction between instructions and
authority, 27 or ratification with knowledge, may affect the matter, but
in the absence of some element of that nature the rule must be as stated.
1766. Where goods are bought upon credit it must also
be usually a part of the plaintiff's case that a purchase upon credit was
authorized, subject to the qualifications mentioned in the preceding par-
agraph. A principal who supplies an agent with funds with which to
buy and pay for goods can not, it is held, ordinarily be made liable where
the agent, concealing the principal, buys the goods upon his own credit
and makes some other disposition of the money. 28
Moreover there can ordinarily in such a case be no ratification of
which the other party may avail himself, in view of the rule denying
ratification by an undisclosed principal.
1767. "Apparent" authority. Granting that an agency
actually exists, it is held that the usual incidents attach to it, and,
among others, that the undisclosed principal is liable for acts which
fall within the usual scope of such an agency, even though the principal
may have given private instructions to the contrary. Thus where the
defendants put an agent in charge of their business to be carried on in
his own name and gave him authority to buy certain classes of goods
but instructed him not to buy other appropriate classes because they
would furnish these goods themselves, it was held that defendants were
nevertheless liable to the plaintiff for the price of goods of the forbid-
den class bought by the agent, although the plaintiff at the time of the
sale knew nothing of the agency and supposed the agent to be the prin-
cipal. 28 Wills J., said: "Once it is established that the defendant was-
Pitkin v. Benfer, 50 Kan. 108, 34 Am. of the disclosed principal see ante,
St. Rep. 110; Brown v. Tainter, 114 913, 914.
N. Y. App. Div. 446. 29 Watteau v. Fenwick, [1893] 1 Q.
27 Thus, in the converse case, it is B. 346. Followed in Kinahan v.
held that the principal may be liable, Parry, [1910] 2 K. B. 389, distinguish-
although he instructed the agent to ing Daun v. Simmins, 41 L. T. 782.
buy in his (the agent's) own name, But see, Kinahan v. Parry, [1911] 1
the seller being ignorant of the spe- K. B. 459; Edmunds v. Bushell, L. R.
cial instructions. Perth Amboy Mfg. 1 Q. B. 97, was relied upon, where
Co. v. Condit, 21 N. J. L. 659. See Cockburn, C. J., said: "If a person
also, Calder v. Dobell, L. R. 6 C. P. employs another as an agent in a
486. character which involves a particular
28 Laing v. Butler, 37 Hun (N. Y.), authority, he cannot by a secret res-
144; Fradley v. Hyland, 37 Fed. 49, ervation divest him of that author-
2 L. R. A. 749; Harder v. Continental ity." Watteau v. Fenwick is followed
Printing Co., 64 N. Y. Misc. 89 in Brooks v. Shaw, 197 Mass. 376.
For the ordinary rule in the case
CHAP. V]
LIABILITY OF PRINCIPAL TO THIRD PARTIES
[
the real principal. The ordinary doctrine as to principal and agent ap-
plies that the principal is liable for all the acts of the agent which are
within the authority usually confided to an agent of that character, not-
withstanding limitations, as between the principal and the agent, put
upon that authority. It is said that it is only so where there has been a
holding out of authority which cannot be said of a case where the per-
son supplying the goods knew nothing of the existence of a principal.
But I do not think so. Otherwise, in every case of undisclosed princi-
pal, or at least in every case where the fact of there being a principal
was undisclosed, the secret limitation of authority would prevail and
defeat the action of the person dealing with the agent, and then discov-
ering that he was an agent and had a principal." A number of other
cases have adopted similar views, as will be seen from the note.
1768. This doctrine, however, has been severely criti-
cised. 30 It has been thought by some to be merely one more extension
of a confessedly anomalous principle. It clearly can not be sustained
A similar conclusion had previously
been reached in Hubbard v. Tenbrook
(1889), 124 Pa. 291, 10 Am. St. Rep.
585, 2 L. R. A. 823. In this case an
agent had been put forward to man-
age a business apparently as owner
but with instructions not to buy
goods' on credit. He did so buy of
plaintiff and his principal was held
liable. Mitchell, J., said: "We have
thus the question presented whether
an agent can be put forward to con-
duct a separate business in his own
name, and the principal escapes lia-
bility by a secret limitation on the
agent's authority to purchase. The
answer is not at all doubtful. A man
conducting an apparently prosperous
and profitable business obtains credit
thereby, and his creditors have a
right to suppose that his profits go in-
to his assets for their protection in
case of a pinch or an unfavorable
turn in the business. To allow an
undisclosed principal to absorb the
profits, and then when the pinch
comes, to escape responsibility on the
ground of orders to his agent not to
buy on credit, would be a plain fraud
on the ruLlic. No exact precedent
has been cited. None is needed. The
rule so vigorously contended for by
the plaintiff in error that those deal-
ing with an agent are bound to look
to his authority is freely conceded,
but this case falls within the equally
established rule that those clothing an
agent with apparent authority, are,
as to parties dealing on the faith of
such authority, conclusively estopped
from denying it." Hubbard v. Ten-
brook was followed in Cracken v.
Hamburger, 139 Pa. 326; Ernst v.
Harrison, 86 N. Y. Supp. 247; Lamb
v. Thompson, 31 Neb. 448; Patrick v.
Great Falls Merc. Co., 13 N. D. 12;
Napa Valley Wine Co. v. Cassanova,
140 Wis. 289; Mississippi Valley
Const. Co. v. Abeles, 87 Ark. 374; and
Allison v. Sutlive, 99 Ga. 151, are to
the same effect.
30 For example, by Mr. Ewart in his
book on Estoppel pp. 246-248; by
the Solicitors' Journal, Vol. 37 p. 280;
in 10 Columbia Law Review, p. 763.
It is doubted in 9 Law Quarterly Re-
view, p. 111. The court in Watteau
v. Fenwick did not cite, or apparently
have their attention called to, Miles
v. Mcllwraith (1883), 8 App. Cas. 120,
rauH
1343
i?68]
THE LAW OF AGENCY
[BOOK iv
upon the ordinary principles of estoppel as applied to agency. The
person in charge did not appear to be an agent but an owner. If the
question had been what an ostensible owner may do, it would be easier
of solution. If he had attempted to deal with the goods, or even pos-
sibly to get credit in reliance upon their ownership, 31 there might be
and although the precise issue wag
not the same the general question
was similar and there is much in the
opinions in the cases not easy to
reconcile. Miles v. Mcllwraith was
an action for a penalty brought un-
der a statute imposing penalties up-
on any one who being in the public
service should be interested in a pub-
lic contract. Defendant was a mem-
ber of a Colonial legislature. The
colony was about to lease boats. De-
fendant was part owner of a number
of steamships for which a certain
firm (the agents herein) were agents.
This firm proposed to offer boats to
the government and, In order not
to involve defendant, he required the
agents not to offer any ships in which
he was interested as part owner.
With reference to one ship in particu-
lar it was agreed that the agents
should lease her at a rent independ-
ent of any they might obtain on a
lease to the government. In violation
of the directions the agents leased
this ship to the government on be-
half of the owners and in such form
as would bind defendant as one of
them. The colonial agent who acted
for the government did not know of
defendant's connection with the boat.
It was contended that defendant had
violated the statute and was subject
to the penalty. But it was held that
as defendant would not have been
liable to the government (since the
agents violated the instructions and
there was no apparent authority to
bind the defendant as he was un-
known) the defendant was not
amenable to the statute. A distinc-
tion may be made here upon the
ground that the business done was
not so done with the consent of the
alleged principal. Daun v. Simmins,
41 L. T. 783, was not cited in Watteau
v. Fenwick, but the court in Kinahan
v. Parry, supra, thought it distin-
guishable upon the ground that the
person in charge was known to be
only a manager.
In Becherer v. Asher (1896), 23
Ont. App. 202; Watteau v. Fenwick and
Miles v. Mcllwraith were considered,
and it was held that undisclosed prin-
cipals who had employed an agent to
carry on business (in a store rented
by him) for the sale of their goods
in his name (his authority being lim-
ited to the sale of goods supplied by
his principals and his compensation
being what he obtained for them
above invoice prices), were not liable
for goods purchased by him in his
own name and which he added to the
stock in the store. Watteau v." Fen-
wick was distinguished on the ground
that there the agent had authority to
purchase certain goods though he was
instructed not to buy any of the sort
which he did buy, but here he had no
authority to buy any goods at all.
One of the judges said he thought
that Watteau v. Fenwick was well
decided; another said: "It has been
sharply criticised, and, it would seem,
not without reason."
31 In several partnership cases it
has been held that firm creditors of
an ostensible partnership, composed
of apparent partners and the actual
owner, were to be preferred to indi-
vidual creditors of the actual owner
upon a theory that the holding out
the partnership as proprietor of the
business estopped the owner and
those claiming under him from set-
ting up the real situation. Kelly v.
Scott, 49 N. Y. 595; Thayer v. Hum-
1344
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [1769-177!
found analogies which would throw light upon the situation. But the
question was not one of these but of a purely personal liability. The
most tenable explanation is probably this : The defendants when they
put a general agent in charge actually gave him by implication all the
incidental authorities which usually attend such a managerial position.
Among these would be authority to buy such goods as those in question,
which are usually dealt in at such a place. The defendants then sought
to narrow this actual authority by instructions which were either secret
or which were designed to limit usual authority and were not made pub-
lic. Within well settled rules, such limitations are ineffective.
1769. Right of assignee of other party against principal.
Where, even before the discovery of the principal, the other party as-
signs his rights under the contract to a stranger, it is held that the as-
signee will have the same right to follow the principal when discovered
which the assignor would have had. 32
1770. Apparent agent the real principal. As has already been
pointed out in an earlier section, 33 there may be cases in which the un-
disclosed principal proves to have been no other than the alleged agent
himself. In such a case, unless it can be said that the terms of the con-
tract are so explicit as to exclude his liability, there seems to be no rea-
son why he may not be held.
1771. Excluding principal's liability by terms of contract. In
Humble v. Hunter, 34 where by the terms of the contract, one who was
phrey, 91 Wis. 276, 51 Am. St. Rep. 82 Berry v. Chase, 102 C. C. A. 572,
887, 30 L. R. A. 549; Van Kleeck v. 179 Fed. 426.
McCabe, 87 Mich. 599, 24 Am. St. Rep. Ante, 1403. Compare Paine v.
182. See also, Adams v. Albert, 155 Loeb, 37 C. C. A. 434, 96 Fed. 164.
N. Y. 356, 63 Am. St. Rep. 675; Cod- 3*12 Q. B. 310. Followed in Form-
ville v. Smart, 15 Ont. L. Rep. 357. by Bros. v. Formby, 102 L. T. Rep.
Also, Ex parte Hayman, 8 Ch. Div. 11, 116. Compare Schmaltz v. Avery, 16
where, under the English Bankruptcy Q. B. 655; Sharman v. Brandt, L. R.
Act, it was held that property of 6 Q. B. 720; Harper & Co. v. Vigers,
which the firm had the "reputed own- [1909] 2 K. B. 549; Paine v. Loeb, 37
ership" will be administered as firm C. C. A. 434, 96 Fed. 164; Humble v.
assets. Hunter is followed in Moore v. Ce-
To the contrary, on the theory that ment Co., 121 N. Y. App. Div. 667.
estoppel in such cases is purely per- See also, Winchester v. Howard, 97
sonal, see Broadway Nat. Bank v. Mass. 303, 93 Am. Dec. 93.
Wood, 165 Mass. 312; Himmelreich v. In Brown v. Tainter, 114 N. Y.
Shaffer, 182 Pa. 201, 61 Am. St. Rep. App. Div. 446, where money was
698; Swanson v. Sanborn, 4 Woods, loaned upon the note of one person,
625, Fed. Cas. 13,675; Johnson v. Wil- endorsed by another, now sought to
liams, 111 Va. 95, 31 L. R. A. (N. be held as an undisclosed principal,
S.) 406. the majority of the court held that
85 1345
1772] THE LAW OF AGENCY [BOOK iv
actually an agent but ostensibly a principal described himself in a char-
ter-party as the owner, it was held that the undisclosed principal could
not show that he was the owner and sue upon the contract. Lord Den-
man said, "You have a right to the benefit you contemplate from the
character, credit, and substance of the party with whom you contract."
In Kayton v. Barnett 35 it was held that the undisclosed principal could
be held, even though, at the time of making the contract, the plaintiff
had inquired if the defendant was really the buyer and had declared
that he would not sell the goods if that was the fact. Notwithstanding
this declaration, said the court, the plaintiff did in fact sell the goods
to the defendant, although he did not know that he was doing so ; and
it did not now lie in defendant's mouth to assert that he was not liable
because he had succeeded in inducing the plaintiff to do that which he
did not intend to do. This case does not fall within Lord Denman's
reason, because the plaintiff here was not deprived of any benefit which
he may have contemplated from the personality of the party with whom
he ostensibly dealt, he still had that, and the only question was whether
he might also avail himself of the fact that defendant was the principal.
But other questions arise. May the terms of the negotiation be used
to show that the real agent was not dealt with as an agent at all, but
was the actual as well as the ostensible principal ? If so, there was no
agency and no undisclosed principal, and hence no room for the appli-
cation of the doctrine under consideration. 30 Suppose, also, that in a
formal contract it is made a term that no undisclosed person shall ac-
quire rights or be subject to liability thereon. May it afterward be as-
serted that there was, nevertheless, an undisclosed principal who may
be made liable ? 3T
1772. Cases in which the agent may not be liable. In practi-
cally all of the cases thus far considered, it has been assumed that the
agent was liable upon the contract, and he ordinarily is liable. It is en-
tirely possible, however, that a contract may be made in such terms as
the doctrine of the undisclosed prin- Helvetia Ins. Co., 163 Fed. 644, 'It
cipal could not apply to change "the was held that an undisclosed princi-
relations established between parties pal could not be held in contradiction
by their direct personal contracts, of of the terms of the written contract,
such a character as to exclude the and that therefor where it was pro-
idea of agency." vided in an insurance policy that cer-
35 Kayton v. Barnett, 116 N. Y. 625. tain funds only should be liable for
3 This is apparently the view of claims arising under it, another com-
the lower court in Kayton v. Bar- pany could not be held as an undis-
nett, 54 N. Y. Super. Ct. 78. closed principal of the one which is-
37 in Western Sugar Ref. Co. v. sued the policy.
1346
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1773
to exclude his liability, as, for example, where it is expressly made to
bind an announced but as yet unnamed principal, but is not under any
circumstances to charge the agent.
There would seem to be no doubt also that the undisclosed principal
of an infant agent would be liable like any other, or of a married woman
at common law or of a slave, as agent.
There may also doubtless be cases, wherein for some other purely
personal reason the agent can not be held, in which the principal may
nevertheless be charged.
The contract in any such case would not necessarily be void.
II
RESPONSIBILITY OF THE PRINCIPAL FOR THE AGENT'S STATEMENTS,
REPRESENTATIONS AND ADMISSIONS.
1773. In general. Important and difficult questions arise re-
specting the power of the agent to affect the principal by the agent's
statements, representations and admissions, either when made directly
and ultimately or incidentally and as a concomitant of some other act.
Such statements, representations and admissions, may be such as af-
fect the principal's liability in contract or contractual relations, or in
tort.
It is, of course, ordinarily true that one person's statements, repre-
sentations, or admissions can affect himself only ; and, if it be contended
that they affect some one else, some relation or causal connection be-
tween the latter and the former which alters this general rule must be
shown.
It is also ordinarily true that we do not, in our law, prove facts
merely by permitting one person to testify to what some other person,
who is not a party to the proceeding, may have said about them. The
rules against hearsay usually prevent that. If, then, such statements
are to be admitted, it is ordinarily essential to show some relation or
connection between the person speaking and the one against whom his
utterances are offered, which will take the case out of the ordinary rule.
The relation or connection which is offered here is that of agency,
and the question is how far that fact may serve to charge the principal
with responsibility for the statements of one who, if he were not the
former's agent, would affect himself alone by what he says.
1347
I774-I77 6 ] THE LAW OF AGENCY [BOOK IV
1774. Agent's authority must be first shown. It is necessary
to keep constantly in mind in dealing with the subject of the agent's
statements, representations and admissions that the fact of his agency
is a condition precedent. Before proof, therefore, can be made of his
statements, representations or admissions it is essential that the fact
that he was an agent at the time of making them shall either be admitted
or be shown by evidence making a prima facie case. 38
1775. Authority can not be shown by agent's admissions. It
must also be kept in mind, that, as has been already seen, 39 the fact of
the agent's authority can neither be established, nor can its scope or
effect be extended or enlarged, by his own statements, representations
or declarations, so as to charge the principal. There must be first a
prima facie showing of his authority by other evidence, before* the ad-
missions, declarations or representations, if otherwise competent, can
be admitted. 4 *
1776. Representations by agent. Representations made by an
agent may affect his principal in a variety of cases. They may be ex-
pressly and specifically authorized, and bind the principal because they
were so authorized. Authority to make them may properly be implied
from an express authority to do some act or to act in some capacity. An
agent authorized to lease his principal's house may, by implication, be
found to have authority to make certain representations respecting it ;
an agent authorized to sell goods may be found, by implication, to have
authority to make certain representations respecting their quality, fit-
ness, and the like. When made as a term of the contract these repre-
sentations may become warranties and bind the principal as such. This
subject has already been considered. 41
False and fraudulent representations by an agent may -affect the prin-
cipal because he has expressly or impliedly authorized representations
to be made by the agent and the latter made false and fraudulent ones.
Even though no representations were contemplated, the principal may
be affected by the false and fraudulent representations of his agent if
made in the course of his employment. When they were the induce-
ment to a contract, the principal, by taking the benefits of the contract,
:
*8 See Smith v. Kron, 96 N. C. 392; v. Cryder, 55 N. J. L. 329; Rumbough
Willcox v. Hines, 100 Tenn. 524, 66 v. Southern Impl. Co., 112 N. C. 751,
Am. St Rep. 761. vfcftl : 34 Am. St. Rep. 528: Gates v. Max,
: - See ante, 285. 125 N. C. 139; Summer-row v. Brauch,
4 See ante, 292; Taylor v. Com- 128 N. C. 202.
mercial Bank, 174 N. Y. 181, 95 Am. *i See Warranties by Agent
St. Rep. 564, 62 L. R. A. 783; Dowden
1348
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1777
may be often found to have assumed responsibility for the means by
which it was procured. They may in a proper case justify a rescission,
or they may be ground for charging the principal in damages. The sub-
ject will be more fully considered in a later subdivision. 42
Representations made by an agent, like those made by the principal
in person, would be subject to the rule excluding all other terms than
those finally included in a written contract. And the authority of the
agent to make representations which shall affect his principal may be
cut off by notice or by express stipulation.
1777. Principal liable for statements and representations ex-
pressly authorized. In the first place it may be noted that the prin-
cipal is of course responsible for the statements and representations
which he has expressly authorized. It must be kept in mind that the
speaking of words is as much an act as any other physical manifesta-
tion, and may be authorized as readily as any other act. In many cases
the speaking of words may be the very act authorized. In other cases
the use of words may be the only means by which the end authorized
can be accomplished. Thus if the principal authorizes an offer to be
made or accepted, or directs a notice to be given or a demand to be
made, the speaking of the words which constitute the offer or the ac-
ceptance or which make up the notice or the demand is the very act
which the principal has directly and expressly authorized. So if the
principal authorizes a contract to be made or modified or rescinded or
any other negotiation to be entered upon or conducted for which the
use of language is essential, the speaking of the words or the use of the
language necessary for the accomplishment of the purpose is an act
done by the direct authority of the principal. A moment's consideration
will suffice to show in how large a proportion of the cases the act to be
done by an agent consists of or involves the use of language by the
agent. If the distinction between an agent and a servant heretofore sug-
gested be considered, the distinguishing feature of the agent may appear
to be that he speaks as well as acts for his principal. And when spoken
language is referred to, it will be obvious that written language is also
to be included. Written words when appropriate may be just as much
the direct object of the authority as spoken words.
In view of these considerations it is evident that there may be oral
or verbal acts as well as any other, and that the principal will be as re-
sponsible for a verbal act which he has authorized as he will be for any
other.
42 See post, Liability for Fraudulent Acts and Representations.
1349
1778] THE LAW OF AGENCY [BOOK IV
1778. Statements of agent expressly authorized to give, or re-
ferred to for, information. It is not at all uncommon for the prin-
cipal to put an agent in a position in which the making of statements
or representations or the giving of information is the act expressly con-
templated and directed. Thus if the principal refers a person to his
agent for information, the agent is clearly authorized to give informa-
tion for the principal upon the subject indicated. If a principal carry-
ing on an extensive business establishes a bureau of information, or
designates an agent to whom inquiries may be referred or of whom in-
formation may be obtained, the giving of such information or the an-
swering of such inquiries is an act which the principal has directly au-
thorized.
The giving of information or the answering of inquiries in such a
case must, of course, be confined to the subjects which have actually or
apparently been confided to him to answer for ; but within that sphere
persons, expressly or impliedly referred to him, who act in good faith
and with reasonable prudence may rely upon the information as infor-
mation given by the principal.* 3
For similar reasons, if the principal refers a person for information
to another, though not then his agent, as a person who is authorized to
speak for the principal and on his account, what, such person says when
so referred to respecting the matter in question will be admissible, 44 but
not unless he was referred to as a person authorized to speak on the
principal's account.* 5
43 King v. Livingston Mfg. Co., plied to a telephone operator who
Ala. , 60 South. 143; Craig v. Craig, conducted a conversation between the
3 Rawle (Pa.), 472, 24 Am. Dec. 390; parties. Oskamp v. Gadsden, 35 Neb.
Chapman v. Twitchell, 37 Me. 59, 58. 7, 37 Am. St. Rep. 428.
Am. Dec. 773; Over v. Schiffling, 102 44 Chadsey v. Greene, 24 Conn. 560;
Ind. 191; Hahl v. Brooks, 213 111. 134; Over v. Schiffling, 102 Ind. 191;
Gott v. Dinsmore, 111 Mass. 45; Green Chapman v. Twitchell, 37 Me. 59,. 58
v. Boston, etc., R. Co., 128 Mass. 221, Am. Dec. 773; Armstrong v. Crump,
35 Am. Rep. 370. See also, cases 25 Okla. 452; Thayer v. Davis, 75 Wis.
cited in following section: 205.
Interpreters. When two persons This necessary qualification is
voluntarily agree upon a third to act made very clear in Rosenbury v.
as interpreter between them, each Angell, 6 Mich. 508. Here a person
makes the interpreter his agent to whose financial responsibility was in
communicate for him with the other, question referred the inquirer to
and each has the right to rely upon "the business men" of a certain vil-
what is so communicated as being an lage in another state where he had
authorized communication. Miller v. formerly lived. Held, that this did
Lathrop, 50 Minn. 91; Terrapin v. not make competent the statements
Barker, 26 Okla. 93; Sertant v. Crane of a business man living in that vil-
Co., 142 111. App. 49. Same rule ap- lage concerning certain specific acts
1350
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES
[ 1779
1779. Statements of agent impliedly referred to for information.
Instead of being expressly put foward to give information or answer
inquiries as contemplated in the preceding section, the express author-
ity of an agent may be directed to some other act, and yet the giving of
information, the answering of inquiries or the making of other state-
ments or representations, may be so incidental to the doing of the act
expressly authorized as fairly to be deemed to be included within the
scope of the agent's authority. Thus where a passenger by railroad in-
quired of the baggage-master and the station-master for his trunk,
which should have come as baggage, it was held that the statements of
these agents in response to the inquiry were admissible in evidence
against -the principal. "It was part of the duty of those agents," said
the court, "to deliver the baggage of passengers, and to account for the
same, if missing, provided inquiries for it were made within a reason-
able time. These declarations were therefore made by them as agents
of the defendants, within the scope of their agency, and while it con-
tinued." 4e So where a person who proposed to become a passenger on
defendant's railroad, desiring information respecting the sort of ticket to
of the person so referring while he to the plaintiffs' demand were made
lived in that village. Such a refer-
ence, said the court, could mean no
more than that the village in ques-
tion was a place where the inquirer
could properly make such investiga-
tions as he desired upon his own ac-
count; but the declarations of a par-
ticular resident could not be admis-
sible unless he had in some wise been
made agent to speak for the party
giving the reference, and that "where
the reference is made to all the busi-
ness men of a commercial town of
several thousand inhabitants, with-
out distinction of name or character,
the idea of agency becomes too ex-
travagant to be reconciled with the
theory of sanity in the party making
the reference." See also, Aldridge v.
Aetna L. Ins. Co., 204 N. Y. 83, 38 L.
R. A. (N. S.) 343.
46 Morse v. Conn. River Railroad
Co., 6 Gray (Mass.), 450. To same
effect see: Lane v. Boston & Al-
bany Railroad Co., 112 Mass. 455.
(The court here said: "The declara-
tions of their freight agent in answer
in the performance of his duty, and
therefore rightly admitted in evi-
dence against the defendants. The
form in which they were expressed
might affect the weight which the
jury would allow them, but did not
make them inadmissible.") Gott v.
Dinsmore, 111 Mass. 45; Green v.
Boston & Lowell Railroad Co., 128
Mass. 221, 35 Am. Rep. 370; Kivett v.
West. Un. Tel. -Co., 156 N. Car. 296;
Rutland v. Southern Ry. Co., 81 S.
Car. 448; Curtiss v. Avon, etc., Rail-
road Co., 49 Barb. 148; Baltimore &
Ohio R. R. v. Campbell, 36 Ohio St.
647, 38 Am. Rep. 617; Illinois Cent.
R. Co. v. Tronstine, 64 Miss. 834;
Lev! v. Missouri, etc., Ry. Co., 157 Mo.
App. 536; Burnside v. Grand Trunk
R. R. Co., 3 N. H. 554, 93 Am. Dec.
474; Lynchburg Tel. Co. v. Bokker,
103 Va. 594; Central Railroad &
Banking Co. v. Skellie, 86 Ga. 686;
McCotter v. Hooker, 8 N. Y. 497. Com-
pare Lafayette, etc., R. Co. v. Ehman,
30 Ind. 83.
1351
THE LAW OF AGENCY
[BOOK iv
purchase in view of certain facts, applied to the ticket agent for infor-
mation, it was held that he was justified in relying upon the informa-
tion which the agent gave him, there being nothing to indicate that it
was unauthorized, and that the company was bound by the information
so given. Said the court : "The plaintiff desires information. To whom
shall he go to obtain it ? To whom can he go but to the person appointed
by the company for the purpose of giving such information and selling
the proper tickets ?"* 7 So, in general terms, it was said by the supreme
court of the United States : "The declarations made by an officer or
agent of a corporation, in response to timely inquiries properly ad-
dressed to him and relating to matters under his charge, in respect to
which he is authorized in the usual course of business to give informa-
tion, may be given in evidence against the corporation." **
47 Burnham v. Grand Trunk Ry.
Co., 63 Me. 298, 18 Am. Rep. 220.
48 Xenia Bank v. Stewart, 114 U. S.
224, 29 L. Ed. 101.
Inquiries made of a station agent by
one about to load a car, whether there
were trains coming from which dan-
ger might be apprehended, are proper,
and his answers are in the line of his
duty and admissible. Chicago, etc.,
Ry. Co. v. Cox, 76 C. C. A. 127, 145
Fed. 157. To same effect, see Bachant
v. Boston & Maine R. R., 187 Mass.
392, 105 Am. St Rep. 408. So of
statements made by a conductor in
response to inquiries of a passenger
in regard to the dangerous appear-
ance of a fellow .passenger. St.
Louis T. M. &'S. Ry. Co. v. Green-
thai, 23 C. C. A. 100, 77 Fed. 150;
statements made by a general freight
agent, with whom the matter had
been taken up, that a car in question
had not been re-iced according to
contract. Pennsylvania R. Co. v.
Orem Fruit Co., Ill Md. 356. (To
same effect: Dean v. Toledo, etc., R.
Co., 148 Mo. App. 428.) And state-
ments by a telegraph agent as to
whether a message had been deliv-
ered. Garland v. Western Un. Tel.
Co., 118 Mich. 369, 43 L. R. A. 280.
Where a person having a claim
against an express company for lost
goods is referred from one agent to
another until he reaches a district
general manager who takes the mat-
ter up, the admissions and state-
ments of the latter are competent.
Hill v. Adams Express Co., 77 N. J.
L. 19. Same effect: Adams Express
Co. v. Berry, 35 App. D. C. 208, 31 L.
R. A. (N. S.) 309.
But where an express company was
sued for the loss of a physician's di-
ploma, a letter written by the attor-
ney of the company to the institution
issuing the diploma, stating that it
was claimed to be lost in transit and
making inquiries about obtaining a
duplicate, etc., is not admissible
against the company as an admission
that the company had received and
lost the diploma. Whiteside v.
Adams Express Co., 89 Neb. 430. The
court said that the letter was infor-
mal, casual, and not written for the
purpose of any step in the proceed-
ings.
So an agent sent by defendant to
get a statement from plaintiff as to
his claim is not thereby authorized
to bind defendant by admissions as
to the cause of plaintiff's injury.
Doyle v. St. Paul, etc., Ry. Co., 42
Minn. 79. But where the purpose of
what he said was to induce the
plaintiff's statement "to draw out a
1352
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES
[ 1780
1780. Statements of agent made as incidents of his position
General manager General agents, etc. Even though the making
of statements or declarations may not have been expressly authorized,
they may be authorized by implication because they are the natural and
ordinary incidents of the position which the agent occupies. Thus a
person may occupy such a managerial position, for example, that he will
be constantly called upon, in the performance of his duty, to give di-
rections, to adjust controversies, reject or accept performance of con-
tracts, give and receive notices, make and receive admissions, and the
like, because' all of these things must be done by somebody, and, in the
case in question the doing of them falls to the person who occupies his
position. In such a case, the agent's acts in these regards are binding
upon his principal because they are done by his authority. 49 This is
statement of any other injuries,"
etc., it may be admissible. McNich-
olas v. New England Tel. Co., 196
Mass. 138.
49 "The rule of law is entirely well
settled that when an agent is vested
with authority to perform any busi-
ness for his principal, his words, his
verbal acts, in conducting that busi-
ness and in relation thereto, are the
acts of the principal and may be
proved as against the latter." Hup-
fer v. National Distilling Co., 119
Wis. 417.
"A statement made by a general
agent of a corporation, in the course
of his employment, as to a fact
within his official knowledge touch-
ing the status of a matter entrusted
to him, is admissible in evidence ou
behalf of the party with whom the
corporation was dealing." Agricul-
tural Ins. Co. v. Potts, 55 N. J. L.
158, 39 Am. St. Rep. 637. To same
effect: Pierson v. Atlantic Nat. Bank,
77 N. Y. 304; Larson v. Metropolitan
St. Ry. Co., 110 Mo. 234, 33 Am. St.
Rep. 439.
"Where a corporation invests an
agent with general authority to ad-
just claims against it, the declara-
tions of that agent made while en-
deavoring to secure an adjustment
of the claim are competent evidence
against his principal." Adams Ex-
press Co. v. Harris, 120 Ind. 73, 16
Am. St. Rep. 315, 7 L. R. A. 214.
The statements of the general
manager of a railroad concerning the
condition of the track, which it was
his official business to know, upon
being informed of a wreck, are ad-
missible as the declarations of the
company whose alter ego he was as
to this matter. Krogg v. Atlanta,
etc., R. Co., 77 Ga. 202, 4 Am. St.
Rep. 79.
Statements of an agent in charge
of a business, e, g., an express car-
rier, as to the loss of goods delivered
to the carrier for transportation are
competent. Schmerler v. Barasch, 63
N. Y. Misc. 267. See also, McCotter
v. Hooker, 8 N. Y. 497; Fein v. Weir,
129 N. Y. App. Div. 299, aff'd, 199
N. Y. 540.
But they must be confined to losses,
etc., within the territory over which
the agent's authority extends. The
statements of an express agent in
Atlantic City as to what happened
in Chicago would not ordinarily be
competent. Yoshimi v. United States
Express Co., 78 N. J. L. 281.
A division superintendent of a
railroad company is held to have no
implied authority to answer ques-
tions or '. make exhibits as to the
1353
1781] THE LAW OF AGENCY [BOOK IV
strikingly true, of course, in the case of such a managing officer or
agent of a corporation which can speak only through an agent, and this
is the agent appointed for that purpose. 50
It is not indispensable in cases of this sort that the agent who thus
speaks shall have himself been an actor in the transaction of which he
speaks or that he shall speak of his own personal knowledge." He may
clearly be the mouthpiece of his principal to speak of that which was
done by other agents or servants of his principal, or to give informa-
tion, pass upon or make admissions concerning matters which have
been reported to him or which he has caused to be investigated.
Neither is it indispensable in these cases that what he says shall be
said at the time of or as a part of the act concerning which he speaks.
It is only essential that it shall be while his authority over the matter
still continues, and while he is acting in the course of his duty with ref-
erence to it.
In both of these respects, this case differs from the one to be consid-
ered in the next section, though the distinction is frequently not ob-
served.
Similar to the case of the general managing agent, is that of the agent
who has general authority over some matter or in some field. What he
says with reference to that matter while he is acting upon it and while
his authority over it still continues may be as binding upon his principal
as what he does.
It is indispensable, of course, in all these cases that the one who thus
speaks as manager or superintendent shall be the one authorized to deal
with the matter in question, and that what he says shall relate to matters
which are within his authority.
1781. Statements of agent made as incident to an authorized
act Res gestae. Somewhat similar to the cases referred to in the
preceding section though not resting upon precisely the same ground,
cause of an injury which has oc- ells Mining Co., 157 Ala 603; Moran
curred. Huebner v. Erie R. Co., 69 v. Power Co., 29 Wash. 292; Joslyn
N. J. L. 327. v. Cadillac Auto Co., 101 C. C. A. 77,
so See also Lynchburg Telephone 177 Fed. 863; Tenhet v. Atlantic
Co. v. Booker, 103 Va. 594; Virginia Coast Line R. Co., 82 S. Car. 465;
Chem. Co. v. Knight, 106 Va. 674; Western Un. Tel. Co. v. Yopst, 118
Myers v. San Pedro, etc., R. Co., 39 Ind. 248, 3 L. R. A. 224; Cleveland,
Utah, 198; Garfield Coal Co. v. Pa. etc., Ry. v. Closser, 126 Ind. 348, 9
Coal Co., 199 Mass. 22; Head v. L. R. A. 754.
Breeders' Club, 75 N. H. 449; Touch- ei Western Un. Tel. Co. v. Yopst,
berry v. Northwestern R. Co., 88 S. 118 Ind. 248, 3 L. R. A. 224.
Car. 47; Home Ice Factory v. How-
J354
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1782
are the statements, representations, declarations and admissions of an
agent which may be binding upon his principal because they are a part
of, or an incident to, some act or business which the agent was author-
ized to perform. Wherever the doing of a certain act or the transaction
of a given affair or the performance of certain business is confided to an
agent, the authority to so act will, in accordance with a general rule
often referred to, carry with it by implication the authority to do all of
the collateral acts which are the natural and ordinary incidents of the
main act or business authorized. 52 The speaking of words, the mak-
ing of statements, representations, declarations, admissions, and the
like, may as easily be such an incident as the doing of any other sort
of act. Their utterance is often described as a verbal act, and they do
not differ in substance from any other acts.
Since the authority for the doing of these incidental acts, however,
springs from the authority to do the main act, it must ordinarily end
with it. The incidental thing must be a part of the main thing. It must
occur before the main act is completely ended : it must take place while
that is still going on. To speak in the unnecessary and confusing Latin
often used to describe the situation, it must be a part of the res gestce,
although there is no more reason for using such a phrase to describe
these verbal acts than any of the other incidental ones which fall within
the same principle.
1782. Various statements of the doctrine. This gen-
eral doctrine has found expression in a great variety of forms. Thus
in a leading English case 53 it is said : "If P. was the agent of the de-
fendants, and it was within the scope of his duty and authority as agent
to do what the principal, if on the spot, would have done, what he says
while he is so acting is equally admissible as if said by the principal
himself." In an early case 54 in Maryland the rule is stated thus :
"Whatever is said by an agent, either in the making a contract for his
principal, or at the time, and accompanying the performance of any act,
within the scope of his authority, having relation to, and connected with,
and in the course of the particular contract or transaction in which he
is then engaged, is in legal effect, said by his principal, and admissible
in evidence ; not merely because it is the declaration or admission of an
agent; but on the ground, that being made at the time of, and accom-
52 See ante. 715. See also, ap- sa Kirkstall Brewery Co. v. Fur-
plying the principle to representa- ness Ry. Co., L. R. 9 Q. B. 468.
tions of agent Conkling v. Stand- 54 Franklin Bank v. Pennsylvania,
ard Oil Co., 138 Iowa, 596. etc., Co., 11 G. & J. (Md.) 28, 33 Am.
Dec. 687.
1355
THE LAW OF AGENCY 7TI [BOOK IV
panying the contract or transaction, it is treated as the declaration or
admission of the principal, constituting a part of the res gestcz, a part
of the contract or transaction, and as binding upon him as if in fact
made by himself." In an early case in Maine 5 it is said : "The declara-
56 Haven v. Brown, 7 Greenl. (Me.)
421, 22 Am. Dec. 208.
The following, selected from a
great number of cases, may serve as
illustrations of statements, represen-
tations or admissions held to be ad-
missible under this rule: Statements
by bridge tenders as to how they
preferred to have boats go through
the draw. Toll Bridge Co. v. Bets-
worth, 30 Conn. 380; statements
made by the president of a corpora-
tion, authorized to sell its land, as
to where the boundaries were.
Holmes v. Turner Falls Lumber Co.,
150 Mass. 535, 6 L. R. A. 283; state-
ments made and letters written by
the cashier of a national bank while
acting as such and respecting pay-
ment of claims left with the bank
for collection and with reference to
the ownership of collaterals pledged
to secure payment of these claims.
Xenia Bank v. Stewart, 114 U. S. 224,
29 L. Ed. 101. (But not if made
while not so acting. Gillespie v.
First Nat. Bank, 20 Okla. 768); ad-
missions of an insurance agent with
reference to the payment of pre-
miums which it was his duty to col-
lect and remit. Hall v. Un. Cent.
L. Ins. Co., 23 Wash. 610, 83 Am. St.
Rep. 844, 51 L. R. A. 288. To same
effect: Wright v. Stewart, 19 Wash.
179; declarations and admissions of
an agent authorized to receive deliv-
ery of goods under a contract that
the goods were in accordance with
the contract. Des Moines Land Co.
v. Polk County Homestead Co., 82
Iowa, 663. To same effect: Worth-
ington v. Given, 119 Ala. 44, 43 L. R.
A. 382; Rahm v. Deig, 121 Ind. 283.
See also, Pittsburg Plate Glass Co. v.
Kerlin, 58 C. C. A. 648, 122 Fed. 414;
statements and directions, concern-
ing materials and the manner of do-
ing the work, made by an architect,
put in charge of the construction of
a building, to the contractor. Wright
v. Reusens, 133 N. Y. 298; statements
of an agent who had acted in nego-
tiating a contract, made pending an
attempt at settlement between the
parties concerning it, as to what its
terms were. St. Louis Wire-Mill Co.
v. Consol. Barb Wire Co., 46 Kan.
773; statements made by conductor
of a car with reference to the pay-
ment of fare by a passenger, whom
he ejected and afterwards permitted
to return, made at the time. Robin-
son v. Superior Transit Co., 94 Wis.
345, 59 Am. St. Rep. 897, 34 L. R. A.
205; or of a ticket inspector as to
the reason why he rejected a ticket,
made at the time of the rejection.
Nichols v. Southern Pac. R. Co., 23
Ore. 123, 37 Am. St. Rep. 664, 18 L. R.
A. 55; statements made by an agent
whose duty it was to have repairs
made while calling attention to the
need of repairs and giving directions
to make them. Bundy v. Sierra
Lumber Co., 149 Cal. 772; oral and
written statements made by the
freight agent of defendant to whom
the property was delivered for car-
riage, relating to the investigation
of the loss and showing that the
property had been in the company's
possession. Green v. Boston, etc., R.
Co., 128 Mass. 221, 35 Am. Rep. 370;
see also, Illinois Cent. R. Co. v. Trons-
tine, 64 Miss. 834; statements of an
agent authorized to cut timber for
his principal, made while acting as
such, as to where he cut certain tim-
ber. Ayres v. Hubbard, 71 Mich.
594; statements of agents sent to
erect a range, made while erecting it,
as to why, owing to its peculiar con-
1356
CHAP. V]
[
tions of an agent, so far as they constitute a part of the res gesta, or in
other words, such as are made by him at the time he is engaged in mak-
struction, they erected it in a cer-
tain manner. Wrought Iron Range
Co. v. Graham, 25 C. C. A. 570, 80
Fed. 474; statements of the agent in
charge of a dock, with authority to
give directions to incoming vessels,
made to the master of a vessel pro-
posing to dock there, as to the depth
of the water. Garfleld Coal Co. v.
Rockland Line Co., 184 Mass. 60,
100 Am. St. Rep. 543, 61 L. R. A. 946,
a statement by an agent authorized
to employ a domestic servant as to
the nature of a disease known to
exist in the principal's family, made
to quiet the fears of the servant
about accepting the service. Kliegel
v. Aitken, 94 Wis. 432, 59 Am. St.
Rep. 900, 35 L. R. A. 249. The state-
ment of the agent in charge of a
station and yards used by two com-
panies as to which railroad's loco-
motive passed at a certain time.
Stroud v. Columbia, etc., Ry., 79 S.
Car. 447 (the court said it was simp-
ly a statement of fact, not an admis-
sion of liability). A statement rec-
ognizing the existence of a right of
way over the principal's land made
by an agent in charge of the land
and acting as superintendent of a
mill thereon situated. Bigelow
Carpet Co. v. Wiggin, 209 Mass. 542,
a statement made by a factory fore-
man that an employee was inexperi-
enced made on the occasion of the
foreman's transferring the employee
from one task to another less dan-
gerous. Comeau v. C. C. Manuel Co.,
84 Vt. 501, the statement of an at-
torney or other agent in presenting
a claim for personal injuries as to
the character of the claim or ex-
tent of the injury or how the client
claimed it occurred. Loomis v. New
York, etc., Ry., 159 Mass. 39; James
v. Boston Elev. Ry., 201 Mass. 263,
and, generally, that the statements,
representations and admissions of
facts of the agent made while act-
ing within the scope of his authority
and in reference to the business
which he is employed to transact,
may be received in evidence against
the principal, see Ball v. Bank of
Alabama, 8 Ala. 590, 42 Am. Dec.
649; First National Bank v. Alex-
ander, 161 Ala. 580; Montgomery-
Moore Mfg. Co. v. Leith, 162 Ala.
246; Perkins v. Bennett, 2 Root
(Conn.), 30; Mather v. Phelps, 2
Root (Conn.), 150, 1 Am. Dec. 65;
Willard v. Buckingham, 36 Conn.
395; Coweta Falls Mfg. Co. v. Rogers,
19 Ga. 416, 65 Am. Dec. 602; Galcer-
an v. Noble, 66 Ga. 367; Lindblom
v. Ramsey, 75 111. 246; Merchants,
etc., Trans. Co. v. Leysor, 89 111. 42;
Lafayette, etc., R. R. Co. v. Ehman,
30 Ind. 83; Mutual Ben. L. Ins. Co.
v. Cannon, 48 Ind. 264; Louisville,
etc., Ry. v. Henley, 88 Ind. 535;
Pennsylvania Co. v. Nations, 111 Ind.
203; United States Express Co. v.
Rawson, 106 Ind. 215; Wilson Sew.
Mach. Co. v. Sloan, 50 Iowa, 367; J.
I. Case Threshing Mach. Co. v. Fish-
er, 144 Iowa, 45; Central Branch U.
P. R. R. Co. v. Butman, 22 Kan. 639;
Haven v. Brown, 7 Greenl. (Me.)
421. 22 Am. Dec. 208; Hammatt v.
Emerson, 27 Me. 308, 46 Am. Dec.
598; Burnham v. Grand Trunk Ry.
Co., 63 Me. 298, 18 Am. Rep. 220;
Franklin Bank v. Pennsylvania, etc.,
Co., 11 Gill & John. (Md.) 28, 33 Am.
Dec. 687; City Bank v. Bateman, 7
Har. & J. (Md.) 104; Stiles v. West-
ern R. R. Co., 8 Mete. (Mass.) 44,
41 Am. Dec. 486; Tuttle v. Brown, 4
Gray (Mass.), 457, 64 Am. Dec. 80;
Zart v. Singer Sew. Mach. Co., 162
Mich. 387; O'Brien v. N. W. Imp.
Co., 82 Minn. 136; Dickman v. Wil-
liams, 50 Miss. 500; Robinson v.
Walton, 58 Mo. 380; McCormick v.
Demary, 10 Neb. 515; Union L. Ins.
Co. v. Haman, 54 Neb. 599; Burn-
1357
1783] THE LAW OF AGENCY [BOOK IV
ing a contract on the part of his principal, and having reference to the
subject matter of such contract, may be given in evidence to affect his
principal. They are admitted as the representations of the principal
himself, whom the agent represents while engaged in the particular
transaction to which the declaration refers. Representations made by
an agent, at the time he is contracting for his principal, constitute a
part of the contract, as much so as if they had been made by the prin-
cipal ; and a fact stated by an agent in relation to a transaction in which
he is then engaged, and while it is in progress, forms a part of that
transaction."
While these various statements differ more or less in form, they
agree in this, that the statements here referred to are admissible against
the principal because they are his acts done by his authorized agent.
Their admissibility depends upon the law of agency and not upon the
law of evidence. They are offered as the ultimate fact to be proved
and not merely as admissions to prove the truthfulness of the facts to
which they are supposed to refer.
1783. Limitations upon the rule. Tt will be evident
from the statement of the rule that it is subject to several limitations
which must be carefully observed. The statements are admissible be-
cause it is deemed that the principal, in authorizing the act, has author-
ized also the statements which are the usual and natural concomitants
and incidents of the doing of the act itself. In order, therefore, to bind
side v. Grand Trunk Ry. Co., 47 N. Chorpenning v. Royce, 58 Pa. 474;
H. 554, 93 Am. Dec. 474; Asl>more v. l.aurens Telephone Co. v. Bank, 90
Penn. Steam Towing Co., 38 N. J. S. Car. 50: Moore v. Bettis, 11
L. 13; Anderson v. Rome, etc., R. Humph. (Tenn.) 67, 53 Am. Dec.
R. Co., 54 N. Y. 334; White v. Mil- 771; St. Louis, etc., Ry. Co. v. Adams,
ler, 71 N. Y. 118, 27 Am. Rep. 13; 55 Tex. Civ. App. 245; Eddy v. Davis,
Fein v. Weir, 129 App. Div. 299, 199 34 Vt. 209; Dowdall v. Pennsylvania
N. Y. 540; Gazzam v. German Un. F. R. R. Co., 13 Blatch. (U. S. C. C.)
Ins. Co., 155 N. Car. 330; Albert v. 403.
Mut. L. Ins. Co., 122 N. Car. 92, 65 Where the business on which the
Am. St. Rep. 693; Needham v. Hal- agent Is engaged is a continuing one,
verson, 22 N. Dak. 594; Grover v. or is not fully ended by a single act,
Hawthorne, 62 Ore. 65, 121 Pac. "but requires a series of acts to oom-
808; Stockton v. Demuth, 7 Watts plete it according to the intention
(Pa.), 39, 32 Am. Dec. 735; Dick v. of the parties and commercial us-
Cooper, 24 Pa. 217, 64 Am. Dec. 652; ages," declarations made at any time
Sidney School Furn. Co. v. Waisau, during the transaction and relating
122 Pa. 494, 9 Am. St. Rep. 124; to it, are within the rule. Cleveland,
Baltimore, etc., Ass'n v. Post, 122 etc., Ry. Co. v. Closser, 126 Ind. 34S,
Pa. 579, 9 Am. St. Rep. 147; Stewart- 9 L. R. A. 754.
son v. Watts, 8 Watts (Pa.), 392;
1358
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES
[ 1783
the principal, by statements or admissions under the rule here in ques-
tion, it is essential (i) That the making of statements or admissions
of the class of those in question can fairly be regarded as incident to the
act authorized to be done. If there was no occasion to say anything,
or anything of the sort in question, there can be no foundation for their
admissibility. (2) They must be made by an agent authorized to act
with reference to the subject matter. The term authority as here used
has the same significance which it has in reference to the agent's act or
contract. If, therefore, the statements, representations or admissions
offered in evidence were made by one who either had no authority at
all, or had no authority to represent the principal at the time or the
place or respecting the matters concerning which they were made, they
are not admissible against the principal. 56 (3) The statements, represen-
ts Mobile, etc., R. R. v. Ashcroft,
48 Ala. 15; Memphis, etc., R. Co. v.
Maples, 63 Ala. 601; Green v. Ophir,
etc., Co., 45 Cal. 522; Central Georgia
Ry. v. Americus Cons. Co., 133 Ga.
392; Chicago R. R. Co. v. Riddle, 60
111. 534; Chicago R. R. Co. v. Lee,
60 111. 501; Rowell v. Klein, 44 Ind.
290, 15 Am. Rep. 235; Ft. Wayne,
etc., Traction Co. v. Crosbie, 169 Ind.
281, 14 Ann. Cas. 117, 13 L. R. A.
(N. S.) 1214; Mundhenk v. Central
Iowa Ry. Co., 57 Iowa, 718; Iowa R.
R. Land Co. v. Fehring, 126 Iowa, 1;
Lamm v. Port Deposit, etc., Ass'n, 49
Md. 233, 33 Am. Rep. 246; Fogg v.
Pew, 10 Gray (Mass.), 409, 71 Am.
Dec. 662; Stiles v. Western R. R. Co.,
8 Mete. (Mass.) 44, 41 Am. Dec. 486;
Corbin v. Adams, 6 Gush. (Mass.)
93; Wakefield v. South Boston R. R.,
117 Mass. 544; Robinson v. Fitch-
burg, etc., R. R. Co., 7 Gray (Mass.),
92; Crowley v. Boston Elevated Ry.,
204 Mass. 241; Riley v. Roach, 168
Mich. 294, 37 L. R. A. (N. S.) 834;
Gates v. Rifle Boom Co., 70 Mich.
309; Van Doren v. Bailey, 48 Minn.
305; Browning v. Henkle, 48 Minn.
544, 31 Am. St. Rep. 591; Rodes v.
St. Anthony Elev. Co., 49 Minn. 370,
Bernheim v. Hahn, 65 Miss. 459;
Williams v. Edwards, 94 Mo. 447;
Roberts v. Wabash Ry., 153 Mo. App.
638; Pannell v. Allen, 160 Mo. App.
714; Wood River Bank v. Kelley, 29
Neb. 590; Sheridan Coal Co. v. C.
W. Hull Co., 87 Neb. 117, 138 Am.
St. Rep. 435; Guerin v. New England
Tel. Co., 70 N. H. 133; Meyer v.
Virginia, etc., R. Co., 16 Nev. 341;
Yoshimi v. U. S. Express Co., 78 N.
J. L. 281; Anderson v. Rome, etc.,
R. R. Co., 54 N. Y. 334; New York
University v. Loomis Laboratory,
178 N. Y. 137; Corn v. Bergman, 145
N. Y. App. Div. 218; People v. Ter-
williger, 59 N. Y. Misc. 617; Cake's
Appeal, 110 Pa. 65; Plymouth County
Bank v. Gilman, 3 S. D. 170, 44 Am.
St. Rep. 782; Waldrop v. Green-
wood, etc., R. R. Co., 28 S. Car. 157;
Missouri Pac. Ry. Co. v. Sherwood,
84 Tex. 125, 17 L. R. A. 643; Belo v.
Fuller, 84 Tex. 450, 31 Am. St. Rep.
75; Gulf, etc., Ry. Co. v. York, 74
Tex. 364; Blain v. Pacific Express
Co., 69 Tex. 74; William Cameron
Co. v. Blackwell, 53 Tex. Civ. App.
414; Quanah, etc., Ry. v. Galloway
(Tex. Civ. App.), 140 S. W. 368;
Idaho Forwarding Co. v. Fireman's
Fund Ins. Co., 8 Utah, 41, 17 L. R.
A. 536; Jammison v. Chesapeake &
Ohio Ry. Co., 92 Va. 327, 53 Am. St.
Re]->. i3; Baltimore, etc., R. R. Co. v.
Chiistie, 5 W. Va. 325.
In Guerin v. New England TeL
1783]
THE LAW OF AGENCY
tations or admissions must have some inherent and rational relation to
the subject-matter of his agency. If admissible at all, it is because they
are incident to or a part of the act which he was authorized to do. The
mere idle, desultory or careless talk of the agent, having no legitimate
reference to or bearing upon the business of the principal confided to
the agent, obviously can not be binding upon the principal. (4) And the
statements, representations or admissions must have been made by the
agent at the time of the transaction, and either while he was actually
engaged in the performance, or so soon after as to be in reality a part
of the transaction.
This last qualification is the most difficult of all. The statements are
admissible because they are a part of the act. They must therefore be
made before the act is completed. To express this idea, it is often said
that they must be part of the res gestaz, which is only to repeat in Latin
what has already been said in English. This Latin phrase would be
well enough in itself and not objectionable if helpful, were it not for the
fact that it is constantly confused with another meaning of the same
expression, which has no connection with this use at all. This use de-
pends upon the law of agency : the other, which will be explained later,
Co., 70 N. H. 133, It Is said: "To
make the declarations of a servant
or agent binding upon his master
or principal, they must be made by
virtue of express authority, or be
required by the due and ordinary
prosecution of the business (Pemi-
gewasset Bank v. Rogers, 18 N. H.
255, 259); but 'the mere circumstance
of their having been made of and
concerning the business he was em-
ployed in, does not give them any
such effect, unless the servant had
been instructed to make them, or
unless they were so connected with
the service that they became neces-
sary in the due and effective dis-
charge of it.' Batchelder v. Emery,
20 N. H. 165, 167; Pemigewasset
Bank v. Rogers, supra; Woods v.
Banks, 14 N. H. 101, 113."
In Standard Oil Co. v. Linol Co.,
75 N. J. L. 294, it is said: "It can-
not be too often pointed out that
the mere fact that one employs
others to work for him does not
make him chargeable with what they
may say about him or his affairs
while in his employ; if he employs
them to talk for him a different case
may be presented. King v. Atlan-
tic City Gas Co., 70 N. J. L. 679."
An agent authorized merely to care
for or find a purchaser for property
real or personal has thereby no im-
plied authority to bind his princi-
pal by representations or state-
ments in disparagement or limita-
tion of his principal's title. Camer-
on v. Blackwell, 53 Tex. Civ. App.
414; Pier v. Duff, 63 Pa. 59; Sweeney
v. Sweeney, 119 Ga. 76, 100 Am. St.
Rep. 159.
The statements, etc., of the agent
which are held admissible under
the rule here being discussed must
usually be representations, etc., of
matters of fact, and not mere opin-
ions, conclusions or personal judg-
ments as to the principal's fault,
neglect, or liability. Plymouth
County Bank v. Gilman, 3 S. Dak.
170, 44 Am. St. Rep. 782.
1360
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES
depends wholly upon the law of evidence. This double use makes the
phrase a misleading and unfortunate one.
Whatever the phrase used, however, the idea is important. If there-
fore the statements offered in evidence were made before the perfor-
mance was undertaken, or after it was completed, or while the agent
was not engaged in the performance, or after his authority had expired,
they are not admissible. 57 In such a case they amount to no more than
- '
"Ricketts v. Birmingham St. Ry. Dec. 625; Gate v. Blodgett, 70 N. H.
Co., 85 Ala. 600; Tennessee River
Transportation Co. v. Kavanaugh,
101 Ala. 1; Western Union Teleg.
Co. v. West, 165 Ala. 399; Hender-
son-Mizell Co. v. C. D. Chapman Co.,
3 Ala. App. 296; Innis v. Steamer
Senator, 1 Cal. 459, 54 Am. Dec. 305;
Borland v. Nevada Bank, 99 Cal. 89,
37 Am. St. Rep. 32; Durkee v.
Central Pac. R. Co., 69 Cal. 533, 58
Am. Rep. 562; Anthony v. Easta-
brook, 1 Colo. 75, 91 Am. Dec. 702;
First Nat Bank of Canton v. North,
6 Dak. 136; Randel v. Chesapeake &
Del. Canal Co., 1 Harr. (Del.) 234;
Newton v. White, 53 Ga. 395; Adams
v. Humphreys, 54 Ga. 496; National
Bldg. Ass'n v. Quinn, 120 Ga. 358;
Lindblom v. Ramsey, 75 111. 246;
National Bank v. Farmers' Bank,
171 Ind. 323; Sweetland v. Illinois,
etc., Telegraph Co., 27 Iowa, 433, 1
Am. Rep. 285; May v. Sturdivant,
75 Iowa, 116, 9 Am. St. Rep. 463;
Phelps v. James, 86 Iowa, 398, 41
Am. St. Rep. 497; Swift v. Redhead,
147 Iowa, 94; Swenson v. Aultman,
14 Kan. 273; Roberts v. Burks, Lit-
toll's Sel. Gas. (Ky.) 411, 12 Am.
Dec. 325; Davis v. Whitesides, 1
Dana (Ky.), 177, 25 Am. Dec. 138;
Southern Express Co. v. Fox, 131
Ky. 257, 133 Am. St Rep. 241; Farm-
ers' Bank v. Wickliffe, 134 Ky. 627;
Louisville Times v. Lancaster, 142
Ky. 122; Zinsmeister v. Rock Island
Canning Co., 145 Ky. 25; Reynolds v.
Rowley, 3 Rob. (La.) 201, 38 Am.
Dec. 233; Haven v. Brown, 7 Greenl.
(Me.) 421, 22 Am. Dec. 208; Burn-
ham v. Ellis, 39 Me. 319, 63 Am.
316; Sandford v. Handy, 23 Wend.
(N. Y.) 260; First Nat Bank v.
Ocean Nat. Bank, 60 N. Y. 278, 19
Am. Rep. 181; White v. Miller, 71
N. Y. 118, 27 Am. Rep. 13; Wadele
v. New York Central, etc., R. Co., 95
N. Y. 274, 47 Am. Rep. 41; Cobb v.
United Engineering Co., 191 N. Y.
475; Statler v. Ray Mfg. Co., 195 N.
Y. 478; McComb v. Railroad Co., 70
N. C. 178; Southerland v. Wilming-
ton & W. R. Co., 106 N. C. 100;
Rounseville v. Paulson, 19 N. D.
466; Short v. Northern Pac. Elevator
Co., 1 N. D. 159; Sullivan v. Oregon,
etc., Co., 12 Ore. 392, 53 Am. Rep.
364; Stewartson v. Watts, 8 Watts
(Pa.), 392; American Steamship
Co. v. Landreth, 102 Pa. 131, 48 Am.
Rep. 196; State Bank v. Johnson, 1
Mill. (S. Car.) 404, 12 Am. Dec. 645;
Cobb v. Johnson, 2 Sneed (Tenn.),
73, 62 Am. Dec. 457; North Am. Ac-
cident Ins. Co. v. Frazer (Tex. Civ.
App.), 112 S. W. 812; Ward v. Powell
(Tex. Civ. App.), 127 S. W. 851; St.
Louis, etc., Ry. v. Gilbert (Tex. Civ.
App.), 136 S. W. 836; Fort Worth,
etc., Ry. v. Dysart (Tex. Civ. App.),
136 S. W. 1117; Caldwell Bros,
v. Coast Coal Co., 58 Wash. 461;
Hawker v. Baltimore, etc., R.
Co., 15 W. Va. 628, 36 Am. Rep.
825; Keeley v. Boston, etc., R. R.
Co., 67 Me. 163, 24 Am. Rep. 19;
Franklin Bank v. Pennsylvania, etc.,
Co., 11 Gill & John. (Md.) 28, 33 Am.
Dec. 687; Whiteford v. Burckmyer,
1 Gill (Md.), 127, 39 Am. Dec. 640;
'Marshall v. Haney, 4 Md. 498, 59
Am. Dec. 92; Lobdell v. Baker, 1
86
1361
1784]
THE LAW OF AGENCY
[BOOK IV
a mere narrative of a past transaction, and do not bind the principal.
The reason is that, while the agent may be authorized to speak as well
as act at the time and within the scope of his authority, he is not author-
ized, at a subsequent time, after the act or transaction itself is finished,
to narrate what he had done or how he did it. To hold otherwise
would be to make the incident more important than the main act it-
self.
1784. Further limitations. It is also to be borne in
mind that not everything which an agent knows or thinks is competent
Mete. (Mass.) 193, 35 Am. Dec. 358; law of Agency, it is said in Red-
Gott v. Dinsmore, 111 Mass. 45; Mc-
Kenna v. Gould Wire Co., 197 Mass.
406; Murphy v. Ley, 210 Mass. 371;
Converse v. Blumrich, 14 Mich. 109,
90 Am. Dec. 230; Baker v. Temple,
160 Mich. 318; McDermott v. Hanni-
bal, etc., R. Co., 73 Mo. 516, 39 Am.
Rep. 526; Brooks v. Jameson, 55 Mo.
505; Robinson v. Walton, 58 Mo.
380; Adams v. Hannibal, etc., R. Co.,
74 Mo. 553, 41 Am. Rep. 333; Ryan
v. Gilmer, 2 Mont. 517, 25 Am. Rep.
744; Cleveland Co-op. Co. v. Hovey,
26 Neb. 624; Union Life Ins. Co. v.
Haman, 54 Neb. 599; Gate v. Blod-
gett, 70 N. H. 316; Bank of U. S. v.
Davis, 2 Hill (N. Y.), 451; North
River Bank v. Aymar, 3 Hill (N. Y.),
262; Thallhimer v. Brinkerhoff, 4
Wend. (N. Y.) 394, 21 Am. Dec. 155;
Hubbard v. Elmer, 7 Wend. (N. Y.)
446, 22 Am. Dec. 590; Randal] v.
Northwestern Tel. Co., 54 Wis. 140,
41 Am. Rep. 17; Stone v. The North-
western Sleigh Co., 70 Wis. 58f>;
Lee v. Munroe, 7 Cranch (U. S.),
366, 3 L. Ed. 373; Carpenter v.
American Ins. Co., 1 Story (U. S. C.
C.), 57; Brown v. Cranberry Iron
Co., 18 C. C. A. 444, 72 Fed. 96; Fi-
delity & Casualty Co. v. Haines, 49
C. C. A. 379, 111 Fed. 337; Woolsey
v. Haynes, 91 C. C. A. 341, 165 Fed.
391; Bree v. Holbech, 2 Doug. 654;
Fitzherbert v. Mather, 1 T. R. 12;
Fairlie v. Hastings, 10 Ves. Jr. 125.
Speaking of declarations of this
sort, i. e., those depending on the
1362
mon v. Metropolitan St. Ry. Co., 185
Mo. 1, 105 Am. St. Rep. 558: "Was
it [the statement] admissible on the
ground that the conductor was the
agent and representative of the com-
pany and made the statement by au-
thority and to a passenger who had
the right to demand the cause of his
injury? This must be solved by the
application of the law of principal
and agent. The admission or decla-
ration of his agent binds the princi-
pal only when it is made during the
continuance of the agency in regard
to the transaction then depending.
* * * Applying the rule just stat-
ed, the question arises in each case,
were the statements of the agent
contemporary with the transaction
and illustrative of its character, or
merely a subsequent narrative of
how it occurred or an explanation of
how it might have been avoided? If
the latter, they are inadmissible."
[It may be suggested, however,
that if the agent could be deemed to
be impliedly authorized by the com-
pany to give an answer to a pas-
senger who had a right to demand
the cause of his injury, such reply
must, in the nature of the case, be
given after the injury, and it might
conceivably be made some time af-
ter. Suppose, for example, that the
injured passenger remains uncon-
sciaus for an hour or more and then
asks.]
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES
[ 1784
simply because he happens to declare it while engaged in the perform-
ance of his authority. His statement must be one concerning that which
is within his authority, it must relate to matters connected with his busi-
ness, and it must be confined to those things concerning which he can
be deemed authorized to speak or to act. 58 This salutary principle
seems often to be ignored.
The rule of admissibility should also be confined, in the case of the
ordinary agent or servant, to such statements and declarations as are
made as part of some authorized transaction with third persons. Mere
reports or statements made by the agent to his principal ought not to
be competent against the latter except to show notice to him. They
certainly are not admissions by the principal, and the fact that they are
made to the principal as part of the agent's duty does not show that the
principal has consented to be bound by them to third persons. They
are ordinarily mere hearsay. 59 This salutary principle also seems often
to be overlooked.
68 A statement made by a work-
man sent to examine and repair a
gas stove, made while at work, that
there was something wrong with the
stove, held not admissible against
the gas company in an action for
injuries from gas poisoning: "Where
one authorizes another to speak for
him, he may be confronted by testi-
mony as to what his representative
said within the scope of his au-
thority; but where the employment
is purely mechanical, the master is
not bound by what his servant may
choose to say while at work." King
v. Atlantic City Gas, 70 N. J. L. 679.
An agent's statements concerning
his principal's intentions, or pur-
poses or motives, are ordinarily not
admissible. Walkeen Lewis Millin-
ery Co. v. Johnston, 131 Mo. App.
693.
59 Reports made ~by agent to prin-
cipal. Statements or admissions
made in reports made by the agent
or servant to his principal, or ma-
terial gathered by the latter from
the former in investigating acci-
dents, etc., when offered not for the
purpose of proving notice to or
knowledge in the principal but as
admissions of the truth of the mat-
ters stated therein, are .generally
held not admissible. See Carrol v.
East Tenn., etc., Ry. Co., 82 Ga. 452,
6 L. R. A. 214; Atchison, etc., Ry.
Co. v. Burks, 78 Kan. 515, 18 L. R.
A. (N. S.) 231; Wabash R. Co. v.
Farrell, 79 111. App. 508; North Hud-
son, etc., Ry. Co. v. May, 48 N. J. L.
401; Powell v. Northern Pac. Ry. Co.,
46 Minn. 249.
Contra: See Keyser v. Chicago,
etc., R. Co., 66 Mich. 390: Virginia,
etc., Chemical Co. v. Knight, 106 Va.
674.
Admissible to show notice or knowl-
edge. Texas, etc., Ry. Co. v.' Lester,
75 Tex. 56; Vicksburg, etc., Ry. Co.
v. Putnam, 118 U. S. 545, 30 L. Ed.
257. ' }
Some courts exclude such reports
upon the ground that they are privi-
leged communications. Cully v.
Northern Pacific Ry., 35 Wash. 241;
Ex parte Schoepf, 74 Ohio St. 1, 6
L. R. A. (N. S.) 325. But, contra,
see Petition of Bradley, 71 N. H. 54;
Carlton v. Western, etc., Ry., 81 Ga.
531; Wooley v. North London Ry., L.
R. 4 C. P. 602; Parr v. London, etc.,
Ry., 24 L. T. N. S. 558.
1363
17^ > 5~ 1 7^>7] THE LAW OF AGENCY [BOOK IV
1785. - How question determined. The question whether
a given act or fact is part of or incident to another act or fact is obvi-
ously one which is often extremely difficult to determine. What was
the main act, when did it begin, when did it end, must first be decided ;
then : was this representation or statement or admission a natural and
ordinary part of it ? The incidental verbal part of it may come at any
stage in the whole transaction. If that transaction be the delivery of
goods, for example, it may begin upon the agent's demand for them
and end only with his acknowledgment of their receipt. The question,
like other questions of implied or incidental authority, is usually a ques-
tion of 'fact. If the whole transaction is in writing, or, if though not in
writing, the facts are undisputed and admit of but one inference, the
court will usually decide it: otherwise it will be for the jury.
1786. Effect of these statements not dependent upon their be-
ing true. It must be observed that, in all of these cases in which
the agent is deemed to be authorized, expressly or by implication, to
make statements, representations or admissions, the responsibility of
the principal for them does not necessarily depend upon their being true.
The principal may have intended that true statements only should be
made, but the mistake or misconduct of the agent in this respect must,
so far as innocent third persons are concerned, ordinarily affect the
principal like any other unauthorized acts committed within the scope of
the authority. Neither is the principal exonerated merely because he
instructed the agent not to make them. Secret instructions have no
greater efficacy in this field than in others.
1787. Statements showing notice to or knowledge by the agent.
Where the question is whether an agent had notice or knowledge of
particular facts or conditions, conversations with or statements made by
or to him while he was acting with reference to the subject matter of
the notice or | knowledge and tending to show that he had the notice or
knowledge in question, are incident to his employment and admissible. 60
But here as elsewhere if the statement indicating notice or knowledge
ooBundy v. Sierra Lumber Co., 88 S. Car. 47; Gulf, etc., Ry. Co. v.
149 Cal. 772; Elledge v. National City Compton, 75 Tex. 667; Texas, etc.,
Ry. Co., 100 Cal. 282, 38 Am. St. Rep. Ry. Co. v. Lester, 75 Tex. 56; Mis-
290; Louisville & N. R. Co. v. Bohan, souri, etc., Ry. Co. v. Russell, 40 Tex.
116 Tenn. 271; St. Louis, etc., Ry. Co. Civ. App. 114; Soronen v. Von Pus-
v. Weaver, 35 Kan. 412, 57 Am. Rep. tau, 112 App. Div. 437; Anderson v.
176; Trickey v. Clark, 50 Oreg. 516; New York, etc., Co., 47 Fed. 38.
Touchberry v. Northwestern R. Co.,
1364
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1788, 1789
is made after the transaction is over, and after the agent's authority
in the premises has ceased, it is inadmissible. 61
1788. Statements of agent made to qualify or explain the act.
Closely connected in form with the sort of statements referred to in
the preceding section and often confused with them, though really en-
tirely distinguishable and depending upon different considerations, are
statements of the agent which may be material because they tend to
qualify, modify, or explain his act. Thus it was said by a learned
judge 62 whose words have often been quoted: "Declarations of a party
to a transaction, though he was not under oath, if they were made at
the time any act was done which is material as evidence in the issue be-
fore the court, and if they were made to explain the act, or to unfold its
nature and quality, and were of a character to have that effect, are
treated, in the law of evidence, as verbal acts, and as such, are not hear-
say, but may be introduced with the principal act which they accom-
pany, and to which they relate, as original evidence, because they are
regarded as a part of the principal act, and their introduction in evidence
is deemed necessary to define that act and unfold its true nature and
quality. But such declarations cannot properly be received as evidence,
unless the principal act which they accompany and to which they relate,
is, itself, material to the issue to be submitted to the jury, nor unless the
declarations were made at the time the principal act was done, nor un-
less they were of a character to explain that act, or to unfold its true na-
ture and quality, as they are only admissible as incident to the principal
act, and because they are a part of it, and are necessary to explain and
define its true character."
Statements of this sort are only admissible where the act itself is
equivocal or ambiguous and therefore needs explanation or qualifica-
tion ; they are admissible only where the act itself, to which the words
are mere incidents, is material ; they must have some tendency to ex-
plain or qualify it; and they must be made at the time of the doing of
the act which they are thus to modify or explain.
1789. Illustrations. Illustrations of the application of
this rule are numerous. Thus if the question arises whether in a given
i First National Bank v. Farm- 381, it is said: "Where the act may
ers' Bank, 171 Ind. 323; J. I. Case have been prompted by one of two
Plow Works v. Pulsifer, 79 Kan. 176. or more motives or objects, the dec-
62 Mr. Justice Clifford, dissenting, larations of the actor made at the
in Insurance Co. v. Mosley, 8 Wall. time and illustrative of the motive
(U. S.) 397 at p. 411, 19 L. Ed. or object are admissible in evi-
437. In Lewis v. Burns, 106 Cal. dence."
1365
THE LAW OF AGENCY [BOOK IV
transaction a person acted on his own account or as agent for another ;
whether the credit was extended to the agent personally or to his princi-
pal, and the like, his statements made at the time showing for whom
he purported to act would be admissible. 63 If the question were whether
the agent had impliedly warranted his authority, or, on the other hand,
had disclosed its nature and source to the other party so that he might
determine for himself, statements made by the agent at the time as to
the authority by which he purported to act would be admissible. If the
question were as to the possibility of ratification because the agent did
or did not purport to act as the agent of the person subsequently rati-
fying, 64 his statements made at the time as to the person for whom he
purported to act would be admissible.
These holdings would not conflict with the rule that the agent's au-
thority cannot be shown by his own statements. These statements are
not offered for the purpose of proving authority, which must be shown
in some other way, but only for the purpose of showing the capacity in
which the person making them at the time purported to act. 86
ea Lewis v. Burns, 106 Cal. 381; Al-
len v. Duncan, 11 Pick. (Mass.) 308;
Thomas v. Leonard, 5 111. 556; Roeb-
ke v. Andrews, 26 Wis. 311; Jefferds
v. Alvard, 151 Mass. 94; Bank v.
Kennedy, 17 Wall. (84 U. S.) 19,
21 L. Ed. 554: Simonds v. Clapp, 16
N. H. 222; Chattanooga, etc., R. Co.
v. Davis, 89 Ga. 708; Kentucky Stove
Co. v. Page (Ky.), 125 S. W. 170;
Henderson v. Coleman, 19 Wyo. 183;
Miller-Brent Lumber Co. v. Stewart,
166 Ala. 657.
So statements by one in possession
of goods as to whether he claimed
to hold for himself or his princi-
pal are admissible. Drum v. Harri-
son, 83 Ala. 384.
e* See ante, 386.
65 Thus in Roebke v. Andrews,
supra, where the question was as to
the admissibility of evidence that
certain persons in negotiating a
purchase professed to act as agents
of the defendant the court said:
"Such statements by them were not
proof of the fact of agency. It
would be necessary to prove that
fact in some other way, or to con-
nect the defendant with the consum-
mation of the bargain. But it is still
true that whatever bargain was
made, if any, was negotiated by
those parties. What that bargain
was, with whom and by whom it
was made, could only be proved by
showing what was done and said In
its actual negotiation. If they pro-
fessed to act for the defendant, that
fact entered into and formed apart
of the negotiation itself, and gave it
character. It was a part of the res
gestae and was admissible as such,
though without something further
it would have no binding effect upon
the defendant." So in Thomas v.
Leonard, supra, where the question
was as to the admissibility of state-
ments of defendant's daughters as
to the person on whose account they
bought certain goods the court said:
"The question, 'what did the daugh-
ters say, when they purchased said
goods?' was clearly a part of the res-
gestae, and competent to show what
took place when the goods were
purchased. This evidence was not
offered to prove that the defendant
1366
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1790
Such declarations are, moreover, admissible not only against the prin-
cipal but for him, as where, for example, the principal desires to show
that, in the transaction in question, the alleged agent purported to act
on his own personal account, or that he purported to act as his agent ;
though ordinarily the mere self-serving declarations of the agent are
not admissible in his principal's behalf. 66
1790. Statements indicative of the agent's state of mind.
Wherever the agent's state of mind at a particular time is material
where the question of his good faith, his alertness, his sense of duty OP
responsibility, his attention to duty, his motive, his appreciation of dan-
ger, and the like, is involved his statements, admissions or declarations
made at the time and indicating what his state of mind then was in ref-
erence to such matters, would be admissible in evidence either for or
against his principal wherever the principal would be affected by the
agent's state of mind, and it would be a proper subject of inquiry. This
is not upon any ground of agency, of course, but upon the ordinary
rules of evidence.
Thus if the issue were an agent's negligence, evidence of his declara-
tions at the' time tending to show that his thoughts and attention were
upon something else than his duty would be admissible ; 67 if the charge
were his recklessness, declarations showing his indifference to conse-
quences would be admissible ; 68 if the question was as to his malice,
was liable to pay for the goods. Canning Co., 145 Ky. 25; Insurance
That depended nron the onr-sfion Co. v. Guardiola, 129 U. S. 642, 32 L.
whether the daughters of the de- Ed. 802; Chicago v. McKechney, 205
fendant were to be considered as 111. 372; Royle Mining Co. v. Fidelity
the agents of the defendant in mak- Co., 161 Mo. App. 185.
ing the purchase of the goods. If Where two persons jointly em-
the answer had been, that thsy di- ploy the same agent one of them can-
rected that the goods should be not charge the other upon admis-
charged to some third person, this sions made by the common agent.
would have afforded a strong pre- Austin v. Rupe, Tex. Civ. App.
sumption that they were not acting , 141 S. W. 547.
as the agents of their father. This <" See Knittel v. United Ry. Co.,
testimony was therefore admissible 147 Mo. App. 677; Reddick v. Young,
to go to the jury; but whether it was I n d. , 98 N. E. 813.
sufficient to authorize a recovery, 68 See, for example, Nashville, etc.,
without other proof, is entirely a R- Co. v. Messino, 1 Sneed (Tenn.),
diiferent question, and one which 220; Wabash W. Ry. Co. v. Brow, 13
this court is not called upon to de- C. C. A. 222, 65 Fed. 941.
termine." Statements showing haste, where
oe Self-serving statements of agents that may have affected the result,
not admissible in principal's be- would be admissible. Gulf, etc., Ry.
half. Zinsmeister v. Rock Island Co. v. Compton, 75 Tex. 667; but not
179^. 1 79 2 ] THE LAW OF AGENCY [BOOK IV
declarations showing his dislike or hatred would be admissible; 89 and
the like.
Such evidence might be admissible for the principal as well as against
him. Thus if a master were defending against liability for a servant's
act, evidence of the servant's declarations at the time showing that the
act was the result of the servant's own, private desire for revenge
against an enemy rather than an act done for the master, would be com-
petent.
1791. Words themselves constituting or aggravating the wrong.
The principal may be liable, in many cases, on the ordinary princi-
ples of agency for words which in themselves constitute a wrong or
which aggravate a wrong. Thus the principal may be liable for a libel
published, or a slander uttered, by his agent or servant. A carrier of
passengers, owing a duty to protect them, may be liable for the verbal
abuse or attack upon them by his servant to whom he has confided the
duty of protecting them. 70
In many cases, too, an independent wrong may be aggravated by the
contumelious, abusive or derisive language of the servant or agent who
perpetrates the wrong.
In these cases liability does not depend upon whether the principal
can be thought to have authorized the words : he may expressly have for-
bidden them and still be liable because they were uttered while the agent
or servant was acting within the scope of his authority and about his
master's business.
1792. Admissions of agent generally not competent to charge
principal. The admissions of an agent, except in the cases already
referred to, 71 in which it can be said that he has been expressly or im-
pliedly authorized to make them, are generally not competent to charge
his principal. 72 The agent may make admissions which will charge
otherwise: Gardner v. Detroit St. Ry. bins v. Little Rock, etc., R. Co., 19
Co., 99 Mich. 182; statements show- Ark. 85, 9 Ann. Gas. 84.
ing anger: Cincinnati, etc., Ry. Co. 09 i n an action for malicious prose-
v. Evans, 129 Ky. 152. cution, the statement of the agent
But if the motive Is one which who Instituted the prosecution, show-
would not affect the principal, either ing his motive, are admissible.
at all or under the pleadings or al- Southern Car Co. v. Adams, 131 Ala.
legations, statements of the agent 147.
showing his animus would not be 7 Malecek v. Tower Grove Ry. Co.,
admissible. Gulf, etc., Ry. Co. v. 57 Mo. 17.
York, 74 Tex. 364; Dilllngham v. TI See ante, 1777-1781, et seq.
Russell, 73 Tex. 47, 15 Am. St. Rep. Fairlie v. Hastings, 10 Ves. Jr.
753, 3 L. R. A. 634; Butler v. Man- 127; Roberts v. Burks, Littell's Sel.
hattan R. Co., 143 N. Y. 417. 42 Am. Cas. (Ky.) 411, 12 Am. Dec. 325,
St Rep. 738, 20 L. R. A. 40; Dob- Clancy v. Barker, 71 Neb. 83, 115
1368
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1/93
himself, and the principal may make admissions to bind himself, but
usually one man can not admit things to charge another. An agent may
confess his own negligence or default so far as his own liability is con-
cerned, but he can not ordinarily be deemed authorised to confess his
principal's negligence or defaults. So far as the principal' is concerned,
if he does not care to admit matters affecting his liability or interests,
he is entitled to have the question tried by the regular and established
methods of determining liability. Unless he has authorized him to do
so, the principal certainly cannot have his liability fixed by the admis-
sions of a person who happens, for other purposes, to be his agent. As
stated long ago in the leading case 78 upon the subject, "The admission
of an agent cannot be assimilated to the admission of the principal. A
party is bound by his own admission, and is not permitted to contradict
it. But it is impossible to say, a man is precluded from questioning or
contradicting anything any person has asserted as to him, as to his
conduct or his agreement, merely because that person has been an
agent of his. If any fact, material to the interest of either party, rests
in the knowledge of an agent, it is to be proved by his testimony, not
by his mere assertion."
The fact that it is the negligence of the agent which is sought to be
proved against the principal does not make the agent's admission of his
own negligence competent against his principal. It is bad enough, in
many cases, for the principal to be liable for the negligence of his agent,
without also fastening his liability by the agent's admission.
The fact that principal and agent are sued together does not affect
the rule as to the principal, though the agent's admission might be used
to charge the agent.
1793. Declarations and admissions of agent as part of res ges-
tae Spontaneous utterances. Although they thus can not be re-
garded as authorized, the declarations and admissions of an agent may
often be put in evidence upon an entirely different ground, namely,
that they constitute part of what is called the "res gesta." Some refer-
ence to one use of this term has already been made. 74 That use de-
Am. St. Rep. 559, 8 Ann. Gas. 682, 69 122 Pa. 449; Jungworth v. Chicago,
L. R. A. 642; Norfolk, etc., R. Co. v. etc., R. Co., 24 S. D. 342; People v.
Suffolk Lumber Co., 92 Va. 413; Jam- Terwilliger, 59 N. Y. Misc. 617;
mison v. Chesapeake, etc., R. Co., 92 Guerin v. New England Tel. Co., 70
Va. 327, 53 Am. St. Rep. 813; Willis N. H. 133; and many other cases
v. Atlantic, etc., R. Co., 120 N. Car. cited in the following sections.
508; McDermott v. Hannibal, etc., 73 Fairlie v. Hastings, supra.
R. Co., 73 Mo. 516, 39 Am. Rep. 526; 74 See ante, 1781.
Oil City Fuel Supply Co. v. Boundy,
1369
1794] THE LAW OF AGENCY [COOK iv
pends, as has been pointed out, upon the law of agency, upon the fact
that the person who made the declaration in question was in some way
expressly or impliedly authorised to speak for his principal because
what he said was part of what he was authorized to do. The use here
contemplated is a different one though the two are constantly confused.
It does not necessarily depend upon the law of agency at all. 78 It is a
rule of evidence, and is just as applicable in a proper case to one who
was not an agent at all as to one who was an agent. Ordinarily one
who is to be affected by the statements of a person, whom he has not
authorized to speak for him, has a right to be confronted by the witness,
to have him put under oath, and to subject him to cross-examination.
The purpose of this is, of course, to make sure that he is telling the
truth. Exceptions to this rule have been admitted in various cases upon
the ground that there were some other peculiar circumstances present,
conducive to truth telling, which might serve as a substitute for the or-
dinary tests. A familiar illustration is the case of the so called "dying
declaration." Another illustration is found in the case before us. It
is that where some unusual and striking event has occurred, for ex-
ample, a railway accident or similar casualty, and a person, who has
participated in it, makes a statement concerning it either during it or
soon after it, while yet under the excitement and influence of it and be-
fore he has had time to consider the effects and consequences of what
he says, there is such likelihood that what he thus says will be true as
to dispense with the ordinary tests for assuring truthful utterance.
The theory is that the spontaneous utterances of one who speaks under
the excitement of the moment and before he has had time to deliberate
to concoct a self favoring story are likely to be true. 76
1794. Meaning of res gestae as here used. By reason
of the fact that the declarations here in question must concern some
main act, for example the accident, and must be made by one who was
present and affected by its influence and must be made while under that
influence, it has been said that the declaration must be a part of the
act a part of the res gesta. This use of the Latin phrase is to be de-
" See Hupfer v. National Distilling made the declaration while he was
Co., 119 Wis. 417. surrounded by an angry mob which
fIn Feldman v. Detroit United threatened him with personal vio-
Ry., 162 Mich. 486, the declarations lence.
were thought not to be spontaneous For the similarity, in principle, to
and were excluded because the dec- dying declarations, see Riggs v.
larant, the motorman of a car which Northern Pac. R. Co., 60 Wash.\292.
had struck and killed a child, had
1370
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1795
plored because it means no more than the English equivalent, is likely
to be confused with the other use of the same phrase, and particularly
because it is likely to be made the cover for loose thinking or careless
discrimination. It seems, however, to be firmly fixed in our legal
phraseology. This use, as stated above, is not confined to agents, or
to cases involving civil liability. The statements of any person present
may sometimes be admissible and may be used in criminal and other
cases as well as those involving a principal's or master's liability. In
the latter cases, however, which are the ones here being considered, it
is almost invariably an agent's or a servant's statement which is in-
volved, and the real if not the avowed purpose is to get the statement
into the case as an admission of the agent or servant which will bind
the principal. 77 There are doubtless cases wherein the statement of-
fered might be sustained under either use of the phrase res gcstce; and
there are many cases wherein statements admissible for some other rea-
son are erroneously justified under the loose assertion that "they were
part of the res gcsta." The result is that the rule of res gesta in the
law of agency is in an unsatisfactory condition.
1795. What sort of statements admissible. This being
the theory upon which such evidence is admissible, a number of limita-
tions at once suggest themselves. The person whose words are offered
must have been a participant in the transaction and thus have come
within its influence. 78 The statements offered must be relevant to the
" See Louisville, etc., Ry. Co. v. knew its cause which is the natural
Johnson, 131 Ky. 277, 20 L. R. A. (N. inference from his statement, if tru-
S.) 133. ly reported yet it is clear that
78 in Metropolitan R. Co. v. Collins, what he said, though near in point
1 App. Cas. D. C. 383, where the sub- of time, was narrative only of a past
ject matter of the inquiry was the transaction. It was not a spontane-
alleged sudden starting of a street ous outburst, incident to the occur-
car, statements made two to five rence or illustrative of it." [This
minutes later by the transfer-agent statement, however, should have
of the company to the effect that been inadmissible on another
the conductor "would get into ground; it was merely the witness's
trouble" were excluded. Said the conclusion or deduction as to what
court: "If the declarations offered would happen and not in any way a
had been made by the conductor of statement of fact.]
the car whose negligence, according What is said by by-standers after
to the plaintiff, caused the injury, the event as to the cause of it is
the error would not be so clear; not admissible. Detroit, etc., R. Co.
but the transfer agent was not an v. Van Steinburg, 17 Mich. 99; Lea-
actor in the occurrence and had hey v. Cass Ave. Ry. Co., 97 Mo. 165,
nothing to do with it. If it be con- 10 Am. St. Rep. 300; Missouri Pac.
ceded that he saw the accident and Ry. Co. v. Ivy, 71 Tex. 409, 10 Am.
1371
I795J
THE LAW OF AGENCY
[BOOK iv
transaction and such as would be provable if the person making them
was put upon the stand as a witness. Mere conclusions, opinions and
speculations of the declarant should therefore be excluded. 70 The
statement offered must relate to the transaction in question and not be
merely narrations, though made at the time of that transaction or soon
afterward, of other and previous facts, conditions, or events. 80 It
St. Rep. 758, 1 L. R. A. 500: Louis-
ville Ry. Co. v. Johnson, 131 Ky. 277,
20 L. R. A. (N. S.) 133. Statements,
though by a participant, as to what
other persons thought of the trans-
action, are not admissible. Boone
v. Oakland Transit Co., 139 Cal. 490.
Where the question was as to the
negligence of certain servants of a
railroad company, to wit, the bag-
gagemen, in leaving a baggage
truck in a passage way, declarations
of the telegraph operator, though
proximate in point of time, are not
admissible. He was not "an actor
or participant in that transaction."
Tiborsky v. Chicago, etc., Ry. Co.,
124 Wis. 243. Statements made
among themselves by the trainmen
of one train as to the speed of another
train which caused the injury but with
which they were in no way connect-
ed are inadmissible. Norfolk, etc.,
Ry. Co. v. Gesswine, 75 C. C. A. 214,
144 Fed. 56. Statements made by a
foreman, who did not see the act,
as to how it happened, are not ad-
missible. St. Louis, etc., Ry. Co. v.
Brisco, 42 Tex. Civ. App. 321. "Not
res gestae but purely hearsay," said
the court.
Thus in a great variety of cases
expressions of opinion as to whose
fault it was, who was to blame,
how it must have happened, what
would have been the case if some-
thing else had happened or been
done, and the like, though made at
or near the time, have been held
inadmissible, as mere "conclusions,"
"judgments pronounced after the
event," "narratives of past events,"
and the like. See Scott v. St Louis,
etc., R. Co., 112 Iowa, 54; Giberson
v. Patterson Mills, 174 Pa. 369, 52
Am. St. Rep. 823; Silveira v. Iverson,
128 Cal. 187; Plymouth County Bank
v. Oilman, 3 S. D. 170, 44 Am. St.
Rep. 782; Metropolitan Nat Bank
v. Commercial State Bank, 104 Iowa,
682; St. Louis, etc., Ry. Co. v. Barg-
er, 52 Ark. 78; Balding v. Andrews,
12 N. Dak. 267; Electric Ry. Co. v.
Carson, 98 Ga. 652; Ohio, etc., Ry.
Co. v. Stein, 133 Ind. 243, 19 L. R.
A. 733 (such a statement might, how-
ever, be admissible for the purpose
of showing knowledge of the defect-
ive condition. Young v. Seaboard
Airline Ry. Co., 75 S. Car. 190);
Adams v. Hannibal, etc., R. Co., 74
Mo. 553, 41 Am. Rep. 333; Nelson v.
Georgia, etc., Ry. Co., 68 S. Car. 462;
Ruschenberg v. Southern, Elec. R.
Co., 161 Mo. 70; Redmon v. Metro-
politan St. Ry. Co., 185 Mo. 1, 105
Am. St. Rep. 558; Dodge v. Childs,
38 Kan. 526; Ft. Wayne, etc., Trac-
tion Co. v. Crosbie, 169 Ind. 281, 14
Ann. Gas. 117, 13 L. R. A. (N. S.)
1214; Louisville, etc., R. Co. v. Webb,
99 Ky. 332; Louisville, etc., R. Co. v.
Ellis, 97 Ky. 330.
so Thus on the ground that it was
merely a narration of a past trans-
action, the statement of a street car
driver made soon after an accident
that he had previously reported the
car as having a bad brake, was held
not admissible. Wormsdorf v. De-
troit City Ry. Co., 75 Mich. 472. 13
Am. St. Rep. 453. So in an action for
killing stock evidence of statements
made afterwards by the section fore-
man as to the previous condition of
the fence, were held inadmissible.
1372
CHAP. Vj LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1796
seems scarcely necessary to decide that the statements offered must be
serious and not jocular. 81
And, finally, and above all, as will be more fully seen in the following
sections, the statements must be made under the excitement of the
event, they must be "the language of exclamation or surprise" and
not "the language of narrative with a full appreciation of the conse-
quences growing out of a transaction which is passed and complete." 82
As stated in another case, the statements admissible must be the "events
speaking for themselves through the instinctive words and acts of par-
ticipants, not the words and acts of participants when narrating the
events." 83
1796. What embraced within res gestae. The question
of what declarations and admissions constitute a part of the res gesta,
within this rule is one exceedingly difficult of determination, and upon
which the authorities are conflicting. It was formerly held, and the
doctrine still prevails in some jurisdictions, that the declarations and ad-
missions must be strictly contemporaneous with the act ; that if they
were not made until the act in controversy was completed, although
made immediately afterwards, and on the spot, they were not admissi-
ble. 84 This would undoubtedly be sound wherever their admissibility
depends upon the rules of Agency, if they must be authorized, they
must then constitute a part of the authorized act in order to be them-
selves authorized.
Where, however, the true ground for the admission of the declara-
tions is that they are made spontaneously and under the influence of
the main event, it is then possible that the influence may continue al-
though the act is ended, and the proper view should be to treat the mere
point of time as less material, and to look rather to the nature of the
Norman v. Chicago, etc., Ry. Co., 110 drews, 12 N. D. 267; Fredenthal v.
Iowa, 283. "It was but a narrative Brown, 52 Ore. 33; Johnson v. Mc-
of a past transaction," said the court, Lain Investment Co., 79 Kan. 423.
citing Treadway v. Railroad Co., 40 131 Am. St. Rep. 302.
Iowa, 526. 83 St. Louis, etc., Ry. Co. v. Kelley,
si In Holmes v. Washington Real 61 Ark. 52, quoting Wharton's Crim.
Estate Co., 20 R. I. 289, it was ex- Ev. 262.
pressly decided that statements evi- ^ See, for example, Adams v. Han-
dently made jocularly and so under- nibal, etc., R. Co., 74 Mo. 553, 41 Am.
stood by the hearers were not com- Rep. 333; Barker v. St. Louis, etc.,
petent as part of the res gestae. Ry. 'Co., 126 Mo. 143, 47 Am. St. Rep.
82Weinkle v. Brunswick, etc., R. 646, 26 L. R. A. 843; Ruschenberg v.
Co., 107 Ga. 367. See also, Citizens' Southern Elec. R. Co., 161 Mo. 70;
St. R. Co. v. Howard, 102 Tenn. 474; Koenig v. Union Depot Ry. Co., 173
Ohio, etc., Ry. Co. v. Stein, 133 Ind. Mo. 698; Redmon v. Metropolitan St.
243, 19 L. R. A. 733; Balding v. An- Ry. Co., 185 Mo. 1, 105 Am. St. Rep.
1373
i?97]
THE LAW OF AGENCY
[BOOK iv
statements and the circumstances under which they were made. Ac-
cording to this view, each transaction should be judged by its own pe-
culiar facts, without conclusive regard to a fixed interval of time, and
with more regard to the question whether the declarations or admissions
seem to have been made, not with deliberate consideration, but voltyi-
tarily and spontaneously, under the immediate influence of the princi-
pal transaction, and are so connected with it as to characterize or ex-
plain it. 88
All the cases, however, agree that if the admissions were made so
long after the event that they cannot be deemed to come within its in-
fluence, they are mere narrations of a past event, and are not competent
as evidence.
Most of the cases present the question of statements made after the
act ; but there is no reason why statements made before, if made under
its impending influence, should not be admissible. 88
1797. How admissibility determined. The subject here
considered being a matter of evidence, the question of the admissibility
of the declarations must, like the question of the admissibility of evi-
dence generally, be determined by the court. It has sometimes been
said that the admissibility of these declarations rests in the discretion
of the court ; but that can not be deemed to be true without qualifica-
tion. The trial court must of course determine whether the circum-
stances are such as to make the declarations admissible, as it must in
558; Cleveland, etc., R. Co. v. Mara,
26 Ohio St. 185; Tennis v. Consol.
Rap. Transit Co., 45 Kan. 503; Dodge
v. Childs, 38 Kan. 526; Balding v.
Andrews, 12 N. D. 267.
ss See People v. Vernon, 35 Cal. 49,
95 Am. Dec. 50; Keyser v. Chicago
& G. T. Ry. Co., 66 Mich. 390, [citing
Scaggs v. State, 8 Sm. & Mar. (Miss.)
722; Insurance Co. v. Mosley, 8 Wall.
(U. S.) 397, 19 L. Ed. 437; Common-
wealth v. McPike, 3 Gush. (Mass.)
181, 50 Am. Dec. 727; Harriman v.
Stowe, 57 Mo. 93; Crookham v. State,
5 W. Va. 51"0; Boothe v. State, 4 Tex.
App. 202; Regina v. Abraham, 2
Car. & K. 550; Hanover R. Co. v.
Coyle, 55 Penn. St. 402; Brownell v.
Pacific R. Co., 47 Mo. 239; People v.
Vernon, 35 Cal. 49, 95 Am. Dec. 50;
Handy v. Johnson, 5 Md. 450; Carter
v. Buchannon, 3 Ga. 513; Mitchum
v. State, 11 Ga. 615; Courtney v.
Baker, 2 Jones & Sp. (N. Y.) 529;
O'Connor v. Chicago, etc., .Ry. Co.,
27 Minn. 166, 38 Am. Rep. 288; Ar-
mil v. Chicago, etc., R. R. Co., 70
Iowa, 130; State v. Koran, 32 Minn.
394, 50 Am. Rep. 583; Lund v.
Tyngsborough, 9 Cush. (Mass.) 36,
59 Am. Dec. 159].
See also, Walters v. Spokane
Intern. Ry. Co., 58 Wash. 293;
State v. McDaniel, 68 S. Car. 304,
102 Am. St. Rep. 661 (a criminal
case) ; McMahon v. Chicago City Ry.
Co., 239 111. 334; Denver City Ry.
Co. v. Brumley, 51 Colo. 251; An-
derson v. Great Northern Ry. Co.,
15 Idaho, 513; American Mfg. Co. v.
Bigelow, 110 C. C. A. 77, 188 Fed. 34;
Champlin v. Pawcatuck Val. St. Ry.
Co., 33 R. I. 572.
se See Northern Tex. Trac. Co. v.
Caldwell, 44 Tex. Civ. App. 374.
1374
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1 79$
the case of dying declarations, confessions, and the like ; and courts of
review are quite reluctant to overthrow the conclusion of the trial
judge; but the matter is, nevertheless, controlled by legal rules and is
not a matter of mere discretion. 87
The admissibility of these declarations does not depend, as seems
sometimes to be thought, upon the question whether the declarant is
dead or otherwise unable to testify.
1798. Illustrations of what has been called part of the res ges-
tae Inadmissible declarations. Attempts to give illustrations of
the actual rulings under a so-called res gestcs theory are unsatisfactory,
because the cases have sometimes gone upon one theory and sometimes
upon another. The following have been selected chiefly with reference
to the element of time involved, though it is obvious that there must be
much in each case besides the mere question of the time which has
elapsed.
In an action to recover damages caused by the derailment of a train,
statements of the engineer who was in charge of the engine at the time
of the accident, made six months or more afterwards, were held to be
too remote to constitute a part of the res gesta; 88 so an admission by
the general agent of a telegraph company of its liability for an accident,
alleged to have been caused by its negligence, two months after the ac-
cident, has been held to be not admissible ; 89 so in an action against a
railway company to recover damages for the misconduct of a conduc-
tor, statements made by the conductor about three weeks later to the
affect that he had been drinking on the day in question, were held in-
admissible ; 90 so evidence of the statement of a railroad roadmaster that
a certain employee, through whose incompetence an accident had hap-
pened, was incompetent, made several days after the accident, has been
held to be inadmissible ; 81 so the admissions made by the engineer of an
engine which had killed some cattle, made while he was still on the en-
ST See Pledger v. Chicago, etc., R. made more than a year afterward
Co., 69 Neb. 456; Walters v. Spokane were held inadmissible.
Intern. Ry. Co., 58 Wash. 293; Shel- 9 Randall v. Northwestern Tel. Co.,
ton v. Southern Ry., 86 S. Car. 98. 54 Wis. 140, 41 Am. Rep. 17.
ss Colorado Midland Ry. Co. v. o Louisville, etc., Ry. Co. v. Wil-
McGarry, 41 Colo. 398. In Gardner liamson (Ky.), 96 S. W. 1130; Radel
v. Schenectady Ry. Co., 113 N. Y. Co. v. Borches, 147 Ky. 506, 39 L. R.
App. Div. 133, the statement held A. (N. S.) 227.
inadmissible was made four years i McDermott v. Hannibal, etc., R.
before. Co., 73 Mo. 516, 39 Am. Rep. 526.
In Simms v. Forbes, 86 Miss. Statements were held inadmissible
412, statements of an agent that when made: "a few days" after-
he blamed himself for the accident wards (Robinson v. Fitchburg, etc.,
1375
1798]
THE LAW OF AGENCY
[BOOK iv
gine where it had been thrown from the track by the accident, but made
an hour after the accident, were held to be incompetent. 92 Upon such
cases as those just mentioned there would probably not be much dispute
under any theory. As the time grows shorter, the conflict becomes
greater. In an action against a railroad company for personal injuries
sustained by a passenger, evidence of the declarations of the conductor
and engineer "a few minutes" after the accident, was held incompe-
tent ; 03 so in two like cases evidence of similar declarations made, in one
.-)?/,- .anoii-
R. R. Co., 7 Gray (Mass.), 92); two Co. (Ky.), 92 S. W. 571; three quar-
and a half days afterward (Packet
Co. v. Clough, 20 Wall. (U. S.) 528,
22 L. Ed. 406); four or five days af-
ter (Paraffine Oil Co. v. Berry (Tex.
Civ. App.), 93 S. W. 1089); several
days after (Western Union Teleg.
Co. v. Jackson, 95 Miss. 471); the
day after (Harris v. Carstens Pack-
ing Co., 43 Wash. 647, 39 L. R. A.
491; Clancy v. Barker, 71 Neb. 83,
115 Am. St. Rep. 559, 69 L. R. A.
642, 8 Ann. Cas. 682; Maltby v. R.
R. Kirkland, 48 Fed. 760; Cook v.
Stimson Mill Co., 36 Wash. 36; Rapp
v. Easton Transit Co. (N. J.), 72
Atl. 38; Jefferson Fertilizer Co. v.
Houston, 3 Ala. App. 348); the next
morning (Wynnewood v. Cox, 31
Okla. 563; Havens v. Suburban Ry.
Co., 26 R. I. 48, 3 Ann. Gas. 617;
Caldwell v. Nichol, 97 Ark. 420);
the next night (Layzell v. Coal Co.,
156 Mich. 268).
82 Hawker v. Baltimore, etc., R.
Co., 15 W. Va. 628, 36 Am. Rep. 825.
So statements were held inadmis-
sible when made: ten hours after the
accident, Kyner v. Portland Mining
Co., 106 C. C. A. 245, 184 Fed. 43;
two hours after, Dodge v. Childs, 38
Kan. 526; an hour or two after,
Missouri Pac. Ry. Co. v. Ivy, 71 Tex.
409, 10 Am. St. Rep. 758, 1 L. R. A.
500; an hour after, Norfolk & C. R.
Co. v. Suffolk Lumber Co., 92 Va.
413: H. & St. L. R. Co. v. Davis
(Ky.), 106 S. W. 304; Cincinnati,
etc., Ry. v. Martin, 146 Ky. 260;
Balding v. Andrews, 12 N. D. 267;
half an hour to an hour after, Mar-
tin v. South Covington & C. St. Ry.
ters of an hour after, Henry v.
Seattle Elec. Co., 55 Wash. 444; half
an hour after, International, etc., R,
Co. v. Munn, 46 Tex. Civ. App. 276.
So in a number of cases in which
the time is not precisely stated but
was evidently a considerable time.
Louisville & N. R. Co. v. Ellis' Adm.,
97 Ky. 330; The Maurice, 135 Fed.
516; Moseley's Adm'r v. Black Dia-
mond Coal Co. (Ky.), 109 S. W. 306;
Gould v. Aurora, etc., Ry., 141 111.
App. 344.
3 Alabama, etc., R. R. Co. v. Hawk,
72 Ala. 112, 47 Am. Rep. 403. In this
case the court lay down the rule that
"Perfect coincidence of time between
the declaration and the main fact is
not of course required. It is enough
that the two are substantially con-
temporaneous;" but reach the con-
clusion "that the declarations of the
conductor and engineer cannot, un-
der a proper application of this prin-
ciple, be regarded as a part of the
res gcstae of the accident resulting
in 'injury to the plaintiff. The time
'a few minutes' does not appear
to be so proximate to the main trans-
action, nor are the declarations made
otherwise so closely connected with
it, as an elucidating circumstance, as
justly to authorize the conclusion
that they are not merely narrative
of a past occurrence, which at the
moment was finished and complete."
Eight minutes later, too late. Baker
v. St Louis, etc., R. Co., 126 Mo. 143,
29 L. R. A. 843. So of a statement by
an engineer "some minutes" after an
accident. Davis v. Louisville H. &
CHAP. Vj
LIABILITY OF PRINCIPAL TO THIRD PARTIES
case, 94 ten to thirty minutes, and in the other, 88 five minutes, after the
accident, was held inadmissible; so in an action for injuries sustained
by a passenger from the overturning of a stage sleigh, the declarations
St. L. Ry. Co. (Ky.), 97 S. W. 1122.
So a statement made two or three
minutes after. Morse v. Consolidated
Ry. Co., 81 Conn. 395; or one made
"a few seconds" after, Brauer v. New
York, etc., Ry. Co., 131 App. Div. 682.
See also, St Louis, etc., Ry. Co. v.
Pope, 100 Ark. 269; Blue Ridge Light
Co. v. Price, 108 Va. 652.
*Vicksburg, etc., R. R. v. O'Brien,
119 U. S. 99, 30 L. Ed. 290. "It was,"
said the court, "in its essence, the
mere narration of a past occurrence,
not a part of the res gestae simply
an assertion or representation, in the
course of conversation, as to a matter
not then pending, and in respect to
which his authority as engineer had
been fully exerted. It is not to be
deemed part of the res gestae simply
because of the brief period interven-
ing between the accident and the
making of the declaration. The fact
remains that the occurrence had
ended when the declaration in ques-
tion was made, and the engineer was
not in the act of doing anything that
could possibly affect it. If his decla-
ration had been made the next day
after the accident, it would scarcely
be claimed that it was admissible
evidence against the company. And
yet the circumstance that it was
made between ten and thirty min-
utes, an appreciable period of time
after the accident, cannot, upon
principle, make this case an excep-
tion to the general rule. If the con-
trary view should be maintained, it
would follow that the declarations of
the engineer if favorable to the com-
pany, would have been admissible in
its behalf as part of the res gestae
without calling him as a witness,
a proposition that will find no sup-
port in the law of evidence. The
cases have gone far enough in the
admission of the subsequent decla-
rations of agents as evidence against
87 1377
their principals. These views are
fully sustained by adjudications in
the highest courts of the States,"
[citing Luby v. Hudson River R. R.,
17 N. Y. 131; Pennsylvania R. R. Co.
v. Books, 57 Penn. 339, 98 Am. Dec.
229; Dietrich v. Baltimore, etc., R.
R., 58 Md. 347; Lane v. Bryant, 9
Gray (Mass.), 245, 69 Am. Dec. 282;
Chicago, etc., R. R. Co. v. Riddle, 60
111. 534; Virginia, etc., R. R. Co. v.
Sayers, 26 Gratt. (Va.) 328; Chicago,
etc., Ry. Co. v. Fillmore, 57 111. 265;
Michigan Cent. R. R. Co. v. Cole-
man, 28 Mich. 440; Mobile, etc., R. R.
Co. v. Ashcraft, 48 Ala. 15; Belief on-
taine Ry. Co. v. Hunter, 33 Ind. 335,
5 Am. Rep. 201; Adams v. Hannibal,
etc., R. R. Co., 74 Mo. 553, 41 Am.
Rep. 333; Kansas, etc., R. R. Co. v.
Pointer, 9 Kan. 620; Roberts v.
Burks, Litt. (Ky.) Sel. Cas. 411, 12
Am. Dec. 325; Hawker Y. Baltimore
6 Ohio R. R. Co., 15 W. Va. 628, 36
Am. Rep. 825]; Waite, C. J., and
Field, Miller and Blatchford, J. J.,
dissented. So a conductor's state-
ment that the accident was caused
by his negligence, made over ten
minutes after an accident, was held
inadmissible. Chesapeake & Ohio Ry.
Co. v. Reeves (Ky.), 11 S. W. 464;
so a statement fifteen minutes after,
Citizens' St. Ry. Co. v. Howard, 102
Tenn. 474; so a conductor's statement
eight to ten minutes after, Barker v.
St. Louis, etc., Ry. Co., 126 Mo. 143,
47 Am. St. Rep. 646, 26 L. R. A. 843.
SB Durkee v. Central Pacific R. R.
Co., 69 Cal. 533, 58 Am. Rep. 562. So
a statement by a motorman "seven
or eight minutes" after the collision
was held incompetent. Kimic v. San
Jose-Los Gatos Ry., 156 Cal. 379. Also,
Chicago Union Traction. Co. v. Daly,
129 111. App. 519; and Tennis v. Con-
solidated Rapid Transit Ry. Co., 45
Kan. 503.
THE LAW OF AGENCY
[BOOK IV
of the driver, made on the spot and immediately after the accident oc-
curred, that it happened through his carelessness, were held inadmissi-
ble; 98 so in an action against a railroad company for running over a
man, evidence of admissions by one trainman to another immediately
after the accident, was declared incompetent. 97
1799. Illustrations Admissible declarations. But on
the other hand in an action brought against a railroad company for
negligently injuring the plaintiff, declarations made by the engineer
immediately after stopping his train and backing up to the place of the
accident, as to the reason why he did not stop his train before the acci-
So where the statement was
"soon after." Willis v. Atlantic
& D. R. Co., 120 N. C. 508; Little
Rock Traction & Electric Co. v. Nel-
son, 66 Ark. 494; Weinkle v. Bruns-
wick & W. R. Co., 107 Ga. 367; Boone
v. Oakland Transit Co., 139 Cal. 490;
Lissak v. Crocker Estate Co., 119 Cal.
442. So a statement "just after,"
St. Louis S. Ry. Co. v. Brisco, 42 Tex.
Civ. App. 321. So a statement "short-
ly after," Harkins v. Queen Ins. Co.
of America, 106 N. Y. App. Div. 170;
and Dobbins v. Little Rock & E. Co.,
79 Ark. 85, 9 Ann. Cas. 84. So a
statement by a trainman immediately
after stopping the train, Memphis &
C. R. Co. v. Womack, 84 Ala. 149.
So engineer's statement at the next
town, Frye v. St. Louis, I. M. & S.
Ry. Co., 200 Mo. 377, 8 L. R. A. (N.
S.) 1069.
6 Ryan v. Gilmer, 2 Mont. 517, 25
Am. Rep. 744. The declaration of a
driver of a street car made as he was
getting off the car immediately after
running into the plaintiff, as to the
cause of the accident, held inadmiss-
ible in Luby v. Hudson River R. R.
Co., 17 N. Y. 131. So the declaration
of a street car driver immediately af-
ter an accident that it was his fault,
held inadmissible. Williamson v.
Cambridge R. R. Co., 144 Mass. 148;
and to same effect in Lane v. Bryant,
9 Gray (Mass.), 245, 69 Am. Dec. 282,
where Bigelow, J., says: "It is no
more competent because made im-
mediately after the accident than if
made a week or a month afterwards."
Statement a minute after accident
held inadmissible. Lecklieder v. Chi-
cago City Ry., 142 111. App. 139.
7 Adams v. Hannibal & St. Joseph
R. R. Co., 74 Mo. 553, 41 Am. Rep.
333; also Koenig v. Union Depot Ry.
Co., 173 Mo. 698; Butler v. Manhattan
Ry. Co., 143 N. Y. 417. 42 Am. St.
Rep. 738, 26 L. R. A. 46; St. Louis S.
M. & S. Ry. Co. v. Kelley, 61 Ark. 52;
Blackman v. West Jersey & S. R. Co.,
68 N. J. L. 1.
Impeachment of witness. State-
ments not admissible as part of the
res gestae may sometimes be admit-
ted for the purpose of impeaching a
witness who has given contradictory
or inconsistent testimony'; but in
such cases the effect of the statement
is to be confined to the impeachment
merely and is not to be regarded aa
evidence of the facts stated. Straight-
Creek Coal Co. v. Haney (Ky.), 87
S. W. 1114; International, etc., R. Co.
v. Munn, 46 Tex. Civ. App. 276; Louis-
ville, etc., R. Co. v. Davis (Ky.), 106
S. W. 304; Colorado Midland Ry. Co.
v. McGarry, 41 Colo. 398; Tennessee
River Transportation Co. v. Kava-
naugh, 101 Ala. 1; Radel v. Borches,
147 Ky. 506, 39 L. R. A. (N. S.) 227;
Kimic v. San Jose-Los Gatos Ry., 156
Cal. 379; Aldridge v. Aetna L. Ins.
Co., 204 N. Y. 83, 38 L. R. A. (N. S.)
343; Walsh v. Carter-Grume Co., 126
N. Y. App. Div. 229.
Contra: Simms v. Forbes, 86 Miss.
412, on the ground that the impeach-
ing statement was hearsay and in-
competent.
378
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES
[ 1799
dent, were not only held to be competent, but similar declarations made
by the engineer when he arrived at his destination about fifty minutes
later, in making a report to his superior officer, were also admitted ; 98
so in a case involving the liability of a railroad company for baggage
lost by fire, the declarations of the baggage master as to the origin of
the fire, made in view of the ruins but about fourteen hours after the
fire, were admitted ; 09 so in a case where the accident was brought about
by defective flanges on the wheels of the cars, the declarations of a
general superintendent of the railway made on the scene of the wreck
within three hours after it occurred were admitted ;* in the case of a
mine accident, statements as to the previous unsafe condition of the
appliances, made by a foreman on the ground while directing repairs
and at a time variously estimated as from "immediately" to "half an
hour" afterwards were admitted ; 2 in an action for injury caused by fire
the statements of the servant who started the fire, made on the morning
of the second day after, but while the fire was still burning, the injury
complained of being still incomplete and while the servant was on the
ground attempting to extinguish it were admitted ; 3 so statements made
under varying circumstances, fifteen minutes, 4 five to ten minutes, 5
six minutes, 6 five minutes, 7 three minutes, 8 two minutes 9 afterwards
ssKeyser v. Chicago & G. T. Ry.
Co., 66 Mich. 390. Both theories were
confused here.
9 Illinois Cent. R. R. Co. v. Tron-
stine, 64 Miss. 834. (Although the
court speaks of res gestae, this case
could properly be put upon the other
ground mentioned that the declara-
tions were made by one whose duty
it was to give such information.)
Contra: Michigan Cent. R. R. Co. v.
Carrow, 73 111. 348, 24 Am. Rep. 248.
i Roberts v. Port Blakely Mill Co.,
30 Wash. 25 (this case is certainly
doubtful on this point). See also,
Filkington v. Gulf C. & S. F. Ry. Co.,
70 Tex. 226.
a New York & Colo. Min. Syndi-
cate & Co. v. Rogers, 11 Colo. 6, 7
Am. St. Rep. 198. But the court
mentioned several other grounds up-
on which the statement might be ad-
mitted and seemed not to be entirely
clear as to the true one.
8 Yazoo & Miss. Valley Ry. Co. v.
Jones, 73 Miss. 229. It is to be noted
that the statement was made while
the fire was still raging and the in-
jury complained of still incomplete.
The point was not much elaborated.
To the same effect: see Mobile &
Ohio Ry. Co. v. Stinson, 74 Miss.
453; and Paraffine Oil Co. v. Berry
(Tex. Civ. App.), 93 S. W. 1089.
4 Missouri K. & T. Ry. Co. v. Vance
(Tex. Civ. App.), 41 S. W. 167. See
also, City of Austin v. Nuchols, 42
Tex. Civ. App. 5.
5 Hupfer v. National Distilling Co.,
119 Wis. 417. This case goes wholly
upon the theory of spontaneous
declarations, and not upon that of
agency, but the purpose of the decla-
rations was to show negligence of
the declarant as defendant's servant.
San Antonio, etc., Ry. Co. v. Gray,
95 Tex. 424.
T Dewalt v. Houston, E. & W. T. Ry.
Co., 22 Tex. Civ. App. 403.
s Wilson v. Southern Pacific Co., IS
Utah, 352, 57 Am. St. Rep. 766, 35
L. R. A. 611.
Gulf C. & S. F. Ry. Co. v. Tullis,
4 Tex. Civ. 'App. 219; Coll v.
1379
i8oo]
THE LAW OF AGENCY
[BOOK iv
have been held admissible ; so, in a number of cases, declarations made
within so short a time after the occurrence as properly to be designated
as immediately made have been held admissible. 10
1800. When principal bound by agent's representation of ex-
trinsic facts upon which authority depends. Where an agent's au-
thority to act in a given case depends upon the existence of certain
facts, it is ordinarily said to be incumbent upon a person proposing to
deal with the agent to ascertain whether those facts exist. 11 But where
the existence of those facts is a matter necessarily and peculiarly within
Easton Transit Co., 180 Pa. 618; Ohio,
etc., Ry. Co. v. Stein, 133 Ind. 243, 19
L. R. A. 733.
i O'Connor v. Chicago, etc., Ry.
Co., 27 Minn. 166, 38 Am. Rep. 288;
Hanover R. Co. v. Coyle, 55 Pa. 396;
McLeod v. Ginther, 80 Ky. 399; Lit-
tle Rock, etc., Co. v. Newman, 77
Ark. 599; Bass v. Chicago, etc.. Ry.
Co., 42 Wis. 654, 24 Am. Rep. i37;
Brownell v. Pacific R. R. Co., 47 Mo.
239; Toledo, etc., Ry. Co. v. Goddard,
25 Ind. 185. Where a boy who had
driven against a foot passenger on
the street immediately stopped his
horse and came back and said he
did not mean to, Judge Cooley said:
"It was as much a part of the res
gestae as would have been an ex-
clamation at the very instant the
plaintiff was struck." Cleveland V.
Newsome, 45 Mich. 62.
To same effect are: Little Rock,
etc., Ry. Co. v. Leverett, 48 Ark. 333,
8 Am. St. Rep. 230; Pierce v. Van
Dusen, 24 C. C. A. 280, 78 Fed. 693,
69 L. R. A. 705; Sample v. Consoli-
dated Light & Ry. Co., 50 W.
Va. 472, 57 L. R. A. 186; Kansas
City Southern Ry. Co. v. Moles,
58 C. C. A. 29, 121 Fed. 351;
Quincy Horse Ry. & Carrying Co.
v. Gnuse, 137 111. 264; South Coving-
ton C. St. Ry. Co. v. Riegler'-s Adm'r,
26 Ky. Law Rep. 666, 82 S. W. 382;
Cincinnati, etc., Ry. Co. v. Evans, 129
Ky. 152; Louisville Ry. Co. V. John-
Bon, 131 Ky. 277, 20 L. R. A. (N. S.)
133; Springfield Consolidated Ry. Co.
v. Welsch, 155 111. 511; Illinois Cent.
R. Co. v. Cotter (Ky.), 103 S. W. 279;
Zipperlan v. Southern Pac. Co., 7 Cal.
App. 206; Alsever v. Minneapolis,
etc., R. Co., 115 Iowa, 338, 56 L. R. A.
748; Ohio, etc., Ry. Co. v. Stein, 133
Ind. 243, 19 L. R. A. 733; United Ry.
Co. v. Cloman, 107 Md. 681.
In all the cases cited above the in-
jury was caused by the alleged negli-
gent management of cars or trains
and the statements admitted were
made while the person injured was
present and still upon the ground or.
under the car or wheels where he
was injured.
So statements have been admitted
where made "within a very few
minutes," Hermes v. Chicago & N.
W. Ry. Co., 80 Wis. 590; engineer's
statement about as soon as he stopped
his train, Hooker v. Chicago, Milwau-
kee & St. Paul Ry. Co., 76 Wis. 542;
"at a very brief interval thereafter,"
Gulf C. & S. F. Ry. Co. v. Pierce, 7 Tex.
Civ. App. 597; as soon after the ac-
cident as the injured man got quiet,
Young v. Seaboard Air Line Ry., 75
S. C. 190; twenty-five minutes after
but while trying to get help, Walters
v. Spokane International Ry. Co., 58
Wash. 293.
In Omaha, etc., Ry. Co. v. Chollette,
41 Neb. 578, the statements were
practically contemporaneous with the
event
11 See ante, 756. The Freeman v.
Buckingham, 18 How. (U. S.) 182, 15
L. Ed. 341.
1380
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ l8oi
the agent's knowledge, the question has arisen whether the party deal-
ing with him in good faith might not assume that giving information
upon that point was within the scope of his authority, and rely upon the
agent's representation ; and, particularly, whether, if the agent does the
act which could only be properly done in case the facts do exist, the
mere doing of the act, under such circumstances, may not properly be
regarded as such a representation on his part that the facts, which are
thus a condition precedent, do exist, as to bind his principal. This
question has already been so fully considered in an earlier chapter 12
that only a brief resume of it need be given here.
The question has been considered with great fulness in New York,
and in a leading case in that State 13 it is said : "It is a settled doctrine
of the law of agency in this State, that where the principal has clothed
his agent with power to do an act upon the existence of some extrinsic
fact necessarily and peculiarly within the knowledge of the agent, and
of the existence of which the act of executing the power is itself a rep-
resentation, a third person dealing with such agent in entire good faith,
pursuant to the apparent power, may rely upon the representation, and
the principal is estopped from denying its truth to his prejudice.
* * * If there be any exception to the rule within our jurisdiction,
it arises in the case of municipal corporations, whose structure and
functions are sometimes claimed to justify a more restricted liability." 14
It is to be observed in these cases that the question here is not as to
the existence, extent or nature of the agent's general authority : every
one knows what his authority is, the question is as to the existence
of certain extrinsic conditions or events upon which the right to exer-
cise that authority depends, and the fact of their existence is peculiarly
and necessarily within the agent's own knowledge.
1801. Illustrations Bills of lading Warehouse re-
ceipts Certified checks. In accordance with this rule, it was there
held that a carrier which had authorized an agent to issue bills of lad-
ing in its name, upon receipt of property for transportation, is liable
upon a bill of lading issued by such agent and transferred by the ship-
12 See ante, 759 et seq. R. R. Co., 65 N. Y. Ill, 22 Am. Rep.
is Bank of Batavia v. New York, 603.] See also, Van Dolsen v. Board
etc., R. R. Co., 106 N. Y. 195, 60 Am. of Education, 162 N. Y. 446; Bank of
Rep. 440, 35 Am. L. Reg. 573. [Cit- Monongahela Valley v. Weston, 172
ing North River Bank v. Aymar, 3 N. Y. 259.
Hill (N. Y.), 262; Griswold v. Haven, As to this, see Town of Solon v.
25 N. Y. 595, 82 Am. Dec. 380; New Williamsburgh Bank, 114 N. Y. 122;
York, etc., R. R. Co. v. Schuyler, 34 Hoag v. Town of Greenwich, 133 N.
N. Y. 30; Armour v. Michigan Cent. Y. 152.
I 3 8l
i8oi]
THE LAW OF AGENCY
[BOOK iv
per to one who, on the faith of it, had discounted a draft on the con-
signee, although in fact no property had been received by the carrier. 18
Upon this particular application of the rule, the weight of authority
is, doubtless, opposed, 16 but the doctrine of the New York court seems
most consonant with reason and justice, and is sustained by a consider-
able body of authority. 17 It is also adopted in the Uniform Bills of
Lading Act. 1 *
The New York court and others have applied the same doctrine to
warehouse receipts, 19 and to certificates of stock issued apparently
Bank of Batavia v. New York,
etc., R. Co., 106 N. Y. 195, supra, 60
Am. Rep. 440.
is Grant v. Norway, 10 C. B. 665.
(See also, Cox v. Bruce, 18 Q. B. Div.
147. Compare Montaignac v. Shitta,
15 App. Cas. 357); Friedlander v.
Texas & Pac. Ry. Co., 130 U. S. 416,
32 L. Ed. 991; Iron Mt. Ry. Co. v.
Knight, 122 U. S. 79, 30 L. Ed. 1077;
Pollard v. Vinton, 105 U. S. 7, 26 L.
Ed. 998; The Freeman v. Bucking-
ham, 18 How. (U. S.) 182, 15 L. Ed.
341; The Lady Franklin, 8 Wall. (U.
S.) 325, 19 L. Ed. 455. (See also,
Missouri Pac. Ry. Co. v. McFadden,
154 U. S. 155, 38 L. Ed. 944; The
Guiding Star, 10 C. C. A. 454, 62 Fed.
407; Planters' Fertilizer Co. v. Elder,
42 C. C. A. 130, 101 Fed. 1001; Eccles
v. Louisville, etc., R. Co., 198 Fed.
898); National Bank of Commerce v.
Chicago, etc., R. Co., 44 Minn. 224,
20 Am. St. Rep. 566; Williams v.
Wilmington, etc., R. Co., 93 N. Car.
42, 53 Am. Rep. 450; Louisiana Nat'l
Bank v. Laveille, 52 Mo. 380; Balti-
more, etc., R. Co. v. Wilkens, 44 Md.
11, 22 Am. Reo. 26 (immediately
changed by statute; Lazard v. Mer-
chants' Transportation Co., 78 Md.
1). See also, Fellows v. Steamer
Powell, 16 La. Ann. 316, 79 Am. Dec.
581; Hunt v. Miss. Cent. R. Co., 29 La.
Ann. 446; Sears v. Wingate, 3 Allen
(Mass.), 103; Dean v. King, 22 Ohio
St. 118; Lake Shore, etc., Ry. Co. v.
Nat. Live Stock Bank, 178 111. 506.
i 7 The New York rule is approved
1382
b^yrt li lo swuRVt land ^Ino
in Brooke v. New York, etc., R. R.
Co., 108 Penn. St. 529, reported also
In note 53 Am. Rep. 453; Sioux City
R. R. Co. v. First Nat. Bank, 10 Neb.
556, 35 Am. Rep. 488; Wichita Sav-
ings Bank v. Atchison, etc., Railroad
Co., 20 Kan. 519 (Semble).
The same doctrine was applied in
Wisconsin in a case in which a bank
had lands acquired in the payment
of debts and wished to sell them:
it was held that the question of
which lands the bank had so acquired
and had for sale was a fact peculiarly
within the knowledge of the cashier,
and his designation of the lands in
engaging a broker to sell them bound
the bank. Arnold v. National Bank,
126 Wis. 362, 3 L. R. A. (N. S.) 580.
is Paragraph 23.
is See Bank of New York v. Ameri-
can Dock & Trust Co., 143 N. Y. 559;
Hanover Nat. Bank v. Am. Dock &
Tr. Co., 148 N. Y. 612, 51 Am. St.
Rep. 721; Corn Exchange Bank v.
Am. Dock & Tr. Co., 163 N. Y. 332.
But not when issued by the agent to
himself, Bank of N. Y. v. Am. Dock
& Tr. Co., supra; Hanover Nat. Bank
v. Am. Dock & Tr. Co., supra. (Com-
pare Ruben v. Great Fingall Consoli-
dated, [1906] App. Cas. 439) unless
his principal had assented to or ac-
quiesced in such conduct. Corn Ex-
change Bank v. Am. Dock & Tr. Co.,
supra. The New York rule is adopted
in South Dakota. Fletcher v. Great
Western Elevator Co., 12 S. D. 643.
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES
upon the surrender of previous certificates, 20 but upon this point the
English cases are opposed as in the case of the bill of lading. 21
It is in accordance with the same principle that a bank is held liable
upon a check, which its cashier has certified as good, although in fact
the drawer had no funds, where third persons have in good faith ac-
quired rights in such check relying upon the certificate. 22
On the other hand, in Massachusetts, where an agent had authority
to pledge his principal's credit so that at any time not more than a
prescribed amount was involved, it was held that a third person in deal-
ing with the agent was bound to find out how much the indebtedness
incurred at any time actually was, and could not rely, as against the
principal, upon what the agent said. 23
20 New York, etc., R. Co. v. Schuy-
ler, 34 N. Y. 30; Fifth Ave. Bank v.
Forty-second St. R. Co., 137 N. Y.
231, 33 Am. St. Rep. 712, 19 L. R. A.
331; American Exch. Nat. Bank v.
Woodlawn Cemetery, 120 N. Y. App.
Div. 119; Jarvis v. Manhattan Beach
Co., 148 N. Y. 652, 51 Am. St. Rep.
727. See also, Tome v. Parkersburg,
etc., R. Co., 39 Md. 36, 17 Am. Rep.
540; Kisterbock's Appeal, 127 Pa. 601,
14 Am. St. Rep. 868; Allen v. South
Boston R. Co., 150 Mass. 200, 15 Am.
St. Rep. 185, 5 L. R. A. 716. But not
where the agent is acting for him-
self. Moores v. Citizens' Nat. Bank,
111 U. S. 156, 28 L. Ed. 385; Farring-
ton v. South Boston R. Co., 150 Mass.
406, 15 Am. St. Rep. 222, 5 L. R. A.
849. See also, Ruben v. Great Fingall
Consolidated, [1906] App. Cas. 439.
21 Whitechurch v. Cavanagh, [1902]
App. Cas. 117; British Mutual Bank-
ing Co. v. Charnwood Forest Ry. Co.,
18 Q. B. Div. 714. See also, Ruben v.
Great Fingall Consolidated, [1906]
App. Cas. 439. But in Hambro v.
Burnand, [1904] 2 K. B. 10, the court
of appeal, distinguishing the above
cases, held that where an agent had
written authority to issue policies of
insurance, a policy issued by him,
conforming to the terms of the pow-
er, was binding even though he is-
sued it with a wrong motive and in
abuse of his authority.
Negotiable instruments. With ref-
erence to strictly negotiable instru-
ments, the New York rule as laid
down in North River Bank v. Aymer,
3 Hill, 262, is, as has been seen (ante,
759, 760), generally followed. In
Louisville Trust Co. v. Louisville, etc.,
R. Co., 22 C. C. A. 378, 75 Fed. 433,
the New York rule was adopted to
uphold the guaranty of corporate
bonds in favor of bona fide purchas-
ers as against the objection that cor-
porate regulations had not been com-
plied with in its execution. See as
to this ante, 762.
22 Hill v. Nation Trust Co., 108
Penn. St. 1, 56 Am. Rep. 189; Mer-
chants' Bank v. State Bank, 10 Wall.
(U. S.) 604, 19 L. Ed. 1008; Espy v.
Bank of Cincinnati, 18 Wall. (U. S.)
604; Farmers', etc., Bank v. Butch-
ers', etc., Bank, 16 N. Y. 125, 69 Am.
Dec. 678; Irving- Bank v. Wetherald,
36 N. Y. 335; Pope v. Bank of Al-
bion, 59 Barb. (N. Y.) 226; Union
Trust Co. v. Preston Nat. Bank, 136
Mich. 460. See also, Second Nat.
Bank v. Averell, 2 App. Cas. D. C.
470, 25 L. R. A. 761. But not where
he certifies his own check. Lee v.
Smith, 84 Mb. 304, 54 Am. Rep. 101;
Claflin v. Farmers' Bank, 25 N. Y.
293; State v. Miller, 47 Oreg. 562, 6
L. R. A. (N. S.) 365.
23 Mussey v. Beecher, 3 Cush.
(Mass.) 511. See also, Baines v.
1383
1802, 1803] THE LAW OF AGENCY [BOOK IV
III
THE EFFECT UPON THE PRINCIPAL'S RIGHTS AND OBLIGATIONS OF
NOTICE TO OR KNOWLEDGE IN HIS AGENT
1802. In general. The question frequently arises whether the
principal may be affected not only by the agent's acts and contracts,
but also by the knowledge which he may possess, or the notice which
may come to him, respecting the subject matter of the agency, and
which would have affected the principal had it come to or been in him
while he was acting in person. The question has arisen in a great
variety of forms, but the answer has been substantially uniform, and
is commonly found stated in the language of the following section.
Many reasons have been assigned, but they are all predicated upon the
injustice which would result if the principal should be permitted to put
forward an agent to transact business for him and at the same time
escape the consequences which would have ensued from knowledge of
conditions or notice of the rights and interests of others had the princi-
pal transacted the business in person. "Policy and the safety of the
public," it was said in a leading case, 24 "forbids a person to deny knowl-
edge while he is so dealing as to keep himself ignorant, or so that he
may keep himself ignorant, and yet all the while let his agent know,
and himself perhaps profit by that knowledge. In such a case it would
be most iniquitous and most dangerous, and give shelter and encourage-
ment to all kinds of fraud, were the law not to consider the knowledge
of one as common to both, whether it be so in fact or not."
Stating this conclusion, first, in its most general and simple form
1803. General rule Notice to the agent is notice to the princi-
pal. It is the general rule, settled by an unbroken current of au-
thority, that notice to, or knowledge of, an agent while acting within
the scope of his authority and in reference to a matter over which his
authority extends, .is notice to, or knowledge of, the principal. 26 This
Ewing, 4 H. & C. 511, L. R. 1 Exch. Nixon v. Hamilton, 2 Dr. & W. 364, 1
320; Lowell Savings Bank v. Win- Ir. Eq. R. 46; Toulmin v. Steere, 3
Chester, 8 Allen (Mass.), 109. Mer. 210, 17 R. R. 67; In re Hennessy,
24 Lord Chancellor Brougham, in 2 Dr. & War. 555, 5 Ir. Eq. R. 259;
Kennedy v. Green, 3 Myl. & K. 699. Jennings v. Moore, 2 Vern. 609 (rati-
25 In re Payne & Co., 73 L. J. Ch. fication); Preston v. Tubbin, 1 Vern.
849, [1904] 2 Ch. 608, 91 .L. T. 777, 11 286; Espin v. Pemberton, 3 DeG. & J.
Manson, 437; Kennedy v. Green, 3 547, 28 L. J. Ch. 311; Brotherton v.
Mylne & Keen, 699; Dresser v. Nor- Hatt, 2 Vern. 574; Boursot v. Savage,
wood, 17 C. B. (N. S.) 466; Le Neve 35 L. J. Ch. 627, L. R. 2 Eq. 134;
v. Le Neve, Ambl. 436; Sheldon v. Frail v. Ellis, 16 Beav. 350, 22 L. J.
Cox, -2 Eden, 224; Ashley v. Baillie, 2 Ch. 467; Tweedale v. Tweedale, 23
Ves. 368; Maddox v. Maddox, 1 Ves. Beav. 341; Fuller v. Benett, 2 Hare,
61; Downesv. Power, 2 Ball & B. 491; 394, 12 L. J. Ch. 355; Atterbury v.
1384
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES
[ 1803
statement of it, however, is wholly tentative, and takes no account of
the various exceptions to it. The fuller and more accurate statement
Wallis, 8 DeG. M. & G. 454, 25 L. J.
Ch. 792; Kettlewell v. Watson, 51 L.
J. Ch. 281, 21 Ch. Div. 685, 46 L. T.
83; Majoribanks v. Hovenden, Dru.
11, 6 Ir. Eq. R. 238; Spaight v. Cowne,
1 Hem. & M. 359; Holland v. Hart, 40
L. J. Ch. 701, L. R. 6 Ch. 678, 25 L.
T. 191; Dickerson v. Matheson, 50
Fed. 73; Chicago St. P. M. & O. Co.
v. Belliwith, 28 C. C. A. 358, 83 Fed.
437; Hoffmann v. Mayaud, 35 C. C. A.
256, S3 Fed. 171; United States v.
Smith, 181 Fed. 545; Carter v. Gray,
79 Ark. 273; Union, etc., Ins. Co. v.
Robinson, 78 C. C. A. 268, 148 Fed.
358, 8 L. R. A. (N. S.) 883; Reed v.
Munn, 148 Fed. 737; McCalmont v.
Lanning, 154 Fed. 353; Brown v.
Cranberry Iron Co., 72 Fed. 96, 18 C.
C. A. 444; Alger v. Keith, 44 C. C. A.
371, 105 Fed. 105; Stanley v.
Schwalby, 162 U. S. 255, 40 L. Ed.
960; Armstrong v. Ashley, 204 U. S.
272, 51 L. Ed. 482; Russell v. Peavy,
131 Ala. 563; Kelly v. Burke, 132 Ala.
235; Lea v. Iron Belt. Merc. Co., 147
Ala. 421, 119 Am. St. Rep. 93; Trad-
ers Ins. Co. v. Letcher, 143 Ala. 400;
Wheeler v. McGuire, 86 Ala. 398, 2 L.
R. A. 808; Bessemer Land Co. v. Jen-
kins, 111 Ala. 135, 56 Am. St. Rep. 26;
Edson & Foulhe Co. v. Winsell, 160
Cal. 783; Carter v. Grey, 79 Ark. 273;
Allison v. Falconer, 75 Ark. 343;
Skillern v. Baker, 82 Ark. 86, 118
Am. St. Rep. 52, 12 Ann. Gas. 243;
Hunter v. Watson, 12 Cal. 363, 73 Am.
Dec. 543; Chapman v. Hughes, 134
Cal. 641; Pac. Lumber Co. v. Wilson,
6 Cal. App. 561; Farmers, etc.,
Bank v. Payne, 25 Conn. 444, 68
Am. Dec. 362; Johnson v. Tribbey, 27
App. D. C. 281; Decree 22 App. D. C.
368, affirmed Armstrong v. Ashley,
204 U. S. 272, 51 L. Ed. 482; New
York, etc., Ry. v. Russell, 83 Conn.
581; Saulsbury v. Wimberly, 60 Ga.
78; Thompson v. Overstreet, 80 Ga.
767; Githens v. Murray, 92 Ga. 748;
Am. St. Rep. 241; People's Savings
Bank v. Smith, 114 Ga. 185; Collins
v. C^ews, 3 Ga. App. 238; Pursley v.
Stahley, 122 Ga. 362; Burton v.
Perry, 146 111. 71; Fischer v. Tuohy,
186 111. 143; Booker v. Booker, 208
111. 529, 100 Am. St. Rep. 250; Cowan
v. Curran, 216 111. 598; Lowden v.
Wilson, 233 I1L 340; Merchants Nat
Bank v. Nichols, 223 111. 41; Sterling
Bridge Co. v. Baker, 75 111. 139; Shep-
pard v. Wood, 78 111. App. 428;
Mackay-Nisbit Co. v. Kuhlman, 119
111. App. 144; Shumacher v. Wolf, 125
111. App. 81; Merchants Nat. Bank v.
Nichols & Shepherd, 123 111. App. 430,
affirmed 223 111. 41; Marion Mfg. Co.
v. Harding, 155 Ind. 648; Field v.
Campbell, 164 Ind. 389, 108 Am. St.
Rep. 301; Miller v. Pfeiffer, 168 Ind.
219; Baldwin v. St. Louis K. & N. W.
Ry. Co., 75 Iowa, 297, 9 Am. St. Rep.
479; McMaken v. Niles, 91 Iowa, 628;
Mason v. Simplot, 119 Iowa, 94;
Campbell v. Park, 128 Iowa, 181;
Ware v. Heiss, 133 Iowa, 285; First
Nat. Bank v. Gunhus, 133 Iowa, 409.
9 L. R. A. (N. S.) 471; Sowler v. Day,
58 Iowa, 252; Condon v. Barnum
(Iowa), 106 N. W. 514; Merritt v.
Huber, 137 Iowa, 135; Van Buren
County v. Am. Surety Co., 137 Iowa,
490, 126 Am. St. Rep. 290; Roach v.
Karr, 18 Kan. 529, 26 Am. Rep. 788;
Hardten v. State, 32 Kan. 637; Bram-
blett v. Henderson (Ky.), 41 S. W.
575; Day v. Exchange Bank of Ken-
tucky, 25 Ky. Law Rep. 1449, 78 S.
W. 132; Sebald v. Citizens Bank
(Ky.), 105 S. W. 130; Connolley v.
Beckett (Ky.), 105 S. W. 446; Miller
v. Jones (Ky.), 107 S. W. 783; Ger-
man Ins. Co. v. Goodfriend, 30 Ky.
Law Rep. 218, 97 S. W. 1098; Schwind
v. Boyce, 94 Md. 510; Maryland Trust
Co. v. Nat. Mec. Bank, 102 Md. 608;
Jaquith v. Davenport, 191 Mass. 415;
Clark v. Roberts, 206 Mass. 235; Rus-
sell v. Sweezey, 22 Mich. 235; Sand-
Strickland v. Vance, 99 Ga. 531, 59 ford v. Nyman, 23 Mich. 326; Peoria
1385
i8o 3 ]
THE LAW OF AGENCY
[BOOK iv
of the rule is reserved for a later section, 28 after the subject has been
more completely developed.
Ins. Co. v. Hall, 12 Mich. 202; Taylor
v. Young, 56 Mich. 285; Campau v.
Konan, 39 Mich. 362; Thompson v.
Village of Mecosta, 141 Mich. 175;
Brown v. Harris, 139 Mich. 372; Geel
v. Goulden, 168 Mich. 413; Union
Central Life Insurance Co. v. Smith,
105 Mich. 353; Tilleny v. Wolverton,
50 Minn. 419; St. Paul & M. Trust
Co. v. Howell, 59 Minn. 295; Jeffer-
son v. Leithauser, 60 Minn. 251; Kel-
ley v. Citizens Mut Ass'n, 96 Minn.
477; Robertson Lumber Co. v. Ander-
son, 96 Minn.. 527; Lindgren v. Will-
iam Bros., 112 Minn. 186; Reynolds
v. Ingersoll, 11 Smedes & M. (Miss.)
249, 49 Am. Dec. 57; Ross v. Houston,
25 Miss. 591, 59 Am. Dec. 231; 111.
Cent. R. Co. v. Bryant, 70 Miss. 665;
Equitable Sureties Co. v. Sheppard,
78 Miss. 217; Hedrick v. Beeler, 110
Mo. 91; Hickman v. Green, 123 Mo.
165, 29 L. R. A. 39, 22 S. W. 455,
affirmed 27 S. W. 440; Priddy v.
MacKenzie, 205 Mo. 181; King v.
Rowlett, 120 Mo. App. 120; Coombs
v. Barker, 31 Mont. 526: Farmers
& Merchants Ins. Co. v. Wiard, 59
Neb. 451; Modern Woodmen of
America v. Colman, 68 Neb. 660;
Pringle v. Mod. Woodmen of Ameri-
ca, 76 Neb. 384; Henry v. Omaha
Packing Co., 81 Neb. 237; Brook-
house v. Union Pub. Co., 73 N. H. 368,
111 Am. St. Rep. 623, 6 Ann. Gas. 675,
2 L. R. A. (N. S.) 993; Warren v.
Hayes, 74 N. H. 355; Decree (Ch.
1905), 69 N. J. Eq. 580, affirmed,
Boice v. Conover, 71 N. J. Eq. 269;
Vulcan Detinning Co. v. American
Can Co., 70 N. J. Eq. 588; Clement
v. Young-McShea Amusement Co., 70
N. J. Eq. 677, 118 Am. St. Rep. 747;
Lockhart v. Washington Gold Min-
ing Co., 16 New Mex. 223; Weis-
ser v. Denison, 10 N. Y. 68, 61 Am.
Dec. 731; Consolidated Fruit Jar Co.
v. Wisner, 103 N. Y. App. Div. 453;
Badger v. Cook, 117 N. Y. App. Div.
328; Brooklyn Distil. Co. v. Standard
Distil. Co., 120 N. Y. App. Div. 237;
Gregg V. Baldwin, 9 N. D. 515; Aet-
na Indemnity Co. v. Schroeder, 12 N.
D. 110; Barnes v. McClinton, 3 Pen.
& Watts (Penn.), 67, 23 Am. Dec. 62;
Small v. Housman, 142 N. Y. App.
Div. 760; Jefferson County Bank v.
Dewey, 197 N. Y. 14; John Monks &
Sons v. West Street Improvement
Co., 149 N. Y. App. Div. 504; Lam-
bert v. Jenkins, 112 Va. 376; Cook
v. American Tubing Co., 28 R. I. 41,
9 L. R. A. (N. S.) 193; Salinas v.
Turner, 33 S. C. 231; American Free-
hold Land Mortgage Co. of London v.
Felder, 44 S. C. 478; Wardlaw v.
Troy Oil Mill, 74 S. C. 368, 114 Am.
St. Rep. 1004; Blowers v. Southern
Ry., 74 S. C. 221; Sparkman v. Sup.
Council American Leg. of Honor, 57
S. C. 16; Gibbes Machinery Co. v.
Roper, 77 S. C. 39; Lindquistv. North-
western, etc., Co., 22 S. Dak. 298;
Woodfolk v. Blount, 3 Hay. (Tenn.)
147, 9 Am. Dec. 736; Nashville, etc.,
R. R. Co. v. Elliott, 1 Coldw. (Tenn.)
611, 78 Am. Dec. 506; U. S. v. Schwal-
by, 87 Tex. 604; Grayson County Nat.
Bank v. Hall (Tex. Civ. App.), 91
S. W. 807; Flynt v. Taylor (Tex. Civ.
App.), 91 S. W. 864; Morrill v. Bos-
ley, 40 Tex. Civ. App. 7; Security
Mut. Life Ins. Co. v. Calvert (Tex.
Civ. App.), 100 S. W. 1033; Lips-
comb v. Houston & Texas, etc., Ry.,
95 Tex. 5, 93 Am. St. Rep. 804, 55
L. R. A. 869; Foote v. Utah Com-
mercial & Savings Bank, 17 Utah,
283; Black & Sons v. Johnson, 65 W.
Va. 518; Backman v. Wright, 27 Vt.
187, 65 Am. Dec. 187; Corliss v.
Smith, 53 Vt. 532; Mack Mfg.
Co. v. Smoot, 102 Va. 724; Fore-
man v. German Alliance Ins. Co.,
104 Va. 694, 113 Am. St. Rep.
1071, 3 L. R. A. (N. S.) 444;
26 See post, 1813.
I 3 86
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES
[ 1804
1804.
Illustrations. The cases in which this rule has
been applied are too numerous for specific statement, but the following
cases will serve as illustrations of the application of the rule. Thus,
where an agent acts for his principal in the purchase or other acqui-
sition of property or securities, notice to the agent of unrecorded
deeds 27 or mortgages, or of liens upon 28 or equities 29 against the prop-
erty, or of defects or infirmities in the title, 30 will be imputed to the
principal. So where an agent acts for his principal in the loaning of
money, the principal will be affected by the knowledge of the agent as
to who the real borrower is. 31 The same rule applies where an agent
authorized to purchase notes had notice that they were "tainted with
usury ;" 32 where an agent authorized to receive money had notice that
it was being taken from a trust fund; 33 where an agent buying stock
in a bank had notice that its capital was impaired ; 3 * where an agent
doing business with a firm had notice of the withdrawal of a partner ; 35
Traders & Trucksters Bank v. Black,
108 Va. 59; Lynch v. Kineth,
36 Wash. 368, 104 Am. St. Rep. 958;
Haynes v. Gay, 37 Wash. 230; Allen
v. Treat, 48 Wash. 552; Elliott v.
Knights of Modern Mac., 46 Wash.
320, 13 L. R. A. (N. S.) 856; Knott v.
Tidyman, 86 Wis. 164; Peterson v. El-
holm, 130 Wis. 1. [This list does
not purport to be complete.]
Under statutes. Whether notice
to an agent is notice to his princi-
pal under statutes providing for no-
tice, must depend upon the circum-
stances and the statute. In many
cases, it will be clear that a personal
notice was contemplated. See Street
Lumber Co. v. Sullivan, 201 Mass.
484, 16 Ann. Gas. 354.
2?McMaken v. Niles, 91 Iowa, 628;
Harrell v. Broocks, 52 Tex. Civ. App.
334; so a recorded mortgage. Field
v. Campbell, 164 Ind. 389, 108 Am. St.
Rep. 301.
28Schwind v. Boyce, 94 Md. 510;
Fischer v. Tuohy, 186 111. 143.
29 Knott v. Tidyman, 86 Wis. 164;
Morris v. Georgia Loan Co., 109 Ga.
12, 46 L. R. A. 506; Henry v. Sneed,
97 Mo. 407, 17 Am. St. Rep. 580; Mul-
lanphy Sav. Bank v. Schott, 135
111. 655, 25 Am. St. Rep. 401;
Johnston Harvester Co. v. Miller, 72
Mich. 265, 16 Am. St. Rep. 536; Hed-
1387
rick v. Beeler, 110 Mo. 91; Coombs v.
Barker, 31 Mont. 526; Huff v. Farwell,
67 Iowa, 298; Cassiday, etc., Co. v.
Terry, 69 W. Va. 572.
so Stanley v. Schwalby, 162 U. S.
255, 40 L. Ed. 960; Brown v. Cran-
berry Iron & Coal Co., 18 C. C. A.
444, 72 Fed. 96; Bramblett v. Hen-
derson (Ky.), 41 S. W. 575; Hick-
man v. Green, 123 Mo. 165, 29 L. R.
A. 39; so insurance agents' notice of
incumbrances on the property. Farm-
ers & Mer. Ins. Co. v. Wiard, 59 Neb.
451.
31 American Land Mortgage Co. of
London v. Felder, 44 S. C. 478;
Salinas v. Turner, 33 S. C. 231;
Strickland v. Vance, 99 Ga. 531, 59
Am. St. Rep. 241; Russell v. Peavy,
131 Ala. 563; so knowledge of the
cashier of a bank in regard to bor-
rower's security. Foote v. Utah,
Com. & Sav. Bank, 17 Utah, 283.
32 Haynes v. Gay, 37 Wash. 230;
Sheppard v. Wood, 78 111. App. 428.
33 Manson v. Simplot, 119 Iowa, 94;
Chapman v. Hughes, 134 Cal. 641.
3* Day v. Exchange Bank of Ken-
tucky, 117 Ky. 357.
ssGithens v. Murray, 92 Ga. 748;
Straus Gunst. Co. v. Sparrow, 148 N.
C. 309; Jenkins v. Renfrew, 151 N.
C. 323:
i8o 4 ]
THE LAW OF AGENCY
[BOOK iv
where an agent authorized to sell goods had notice of the mental in-
capacity of the vendee ; 38 where an agent making a sale of land had no-
tice as to who the real purchaser was ; ST where a sales agent had notice
of defects in machinery sold by him with a warranty ; 88 where an agent
in charge of a lumber yard had notice of the dangerous manner in
which the lumber was piled; 89 where a leasing agent had notice that
the lessee was making improvements; 40 where an agent in whose de-
partment it was to receive such notice had notice of the assignment of
a claim ; 41 where an agent charged with the duty of receiving goods
for export had notice that the exportation of the particular goods was
prohibited;* 2 where an agent charged with the control of a team of
horses had notice that they were in the habit of running away j 43 where
a coachman having charge of a dog had notice that the dog was vi-
cious. 4 * So knowledge of an attorney, present and acting for his client,
as to the character of a document signed by his client, is imputed to the
client.* 6 So where an agent had sufficient authority to institute an ac-
tion based on his own knowledge, the principal was held to have notice
of all the facts under which the agent acted. 46
38 Kelly v. Burke, 132 Ala. 235; or
of a notice not to sell to one who
was an habitual drunkard. Jackson
Co. v. Schmid, 141 Mo. App. 229.
37 Tilleny v. Wolverton, 50 Minn.
419.
ss Marion Mfg. Co. v. Harding, 155
Ind. 648; Buckeye Saw Co. v. Ruth-
erford, 65 W. Va. 395. But see, Neal
v. Smith, 54 C. C. A. 226, 116 Fed. 20.
so Baldwin v. St Louis K. & N. W.
Ry. Co., 75 Iowa, 297, 9 Am. St. Rep.
479.
40 Jefferson v. Leithauser, 60 Minn.
251.
*i Illinois Cent. Ry. Co. v. Bryant,
70 Miss. 665.
42Dickerson v. Matheson, 50 Fed.
73, affirmed 6 C. C. A. 466, 57 Fed.
524.
43 Lynch v. Kineth, 36 Wash. 368,
104 Am. St. Rep. 958; Gropp v.
Great Atlantic Tea Co., 141 N. Y.
App. Div. 372; Henry v. Omaha Pack-
ing Co., 81 Neb. 237.
44 Baldwin v. Casella, 26 L. T. Rep.
N. S. 707. Compare Stiles v. Cardiff
Steam Nav. Co., 10 L. T. Rep. N. S.
1388
844, 33 L. J. Q. B. 310. See also,
Brice v. Bauer, 108 N. Y. 428, 2 Am.
St. Rep. 454.
4G Chicago, etc., Ry. Co. v. Belli-
with, 83 Fed. 437, 28 C. C. A. 358.
46 Campau v. Konan, 39 Mich. 362.
Knowledge of an attorney engaged
in collecting a claim of mortgage not
properly recorded, is notice to his
principal. Littauer v. Houck, 92
Mich. 162, 31 Am. St. Rep. 572.
Where defendant's agent to con-
tract for the delivery of flues knew
or should have known the special
purpose for which the flues were
purchased, his knowledge is the
principal's in determining liability
for special damage to plaintiff for
breach of contract. Neal v. Pender-
Hyman Hdwe. Co., 122 N. Car. 104,
65 Am. St. Rep. 697.
Notice of a defective ceiling to an
agent to collect rent and make re-
pairs is chargeable to the principal
In an action of damages by the ten-
ant. Bollard v. Roberts, 130 N. Y.
269, 14 L. R. A. 238.
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES
[
In a great variety of cases, too numerous to be enumerated here, no-
tice to or knowledge of the agent acting for an insurance company has
been imputed to his principal. 47
1805. The theories of the rule a. Identification. Two gen-
eral theories prevail as to the foundation upon which this rule is based,
and the results of these respective theories are not entirely alike. The
first finds the reason of the rule in the legal identity of the agent with
the principal during the continuance of the agency in the fact that
the agent, while keeping within the scope of his authority, is, as to the
matters embraced within it, for the time being the principal himself, or,
at all events, the alter ego of the principal the principal's other self.
If the principal had acted in person, he would or would not, under the
same circumstances, have received the notice or knowledge in person.
In legal effect the situation should not be different where he acts by his
agent. Whatever notice or knowledge, then, reaches the agent during
this time and under these circumstances, in law reaches the principal,
whether it does so in fact or not. It is thought to be the legitimate and
necessary result of this view, therefore, that only such notice or knowl-
edge as comes to the agent, while he is agent, is thus binding upon the
principal. 4 *
4? See ante, 1066-1073. Creed
v. Sun F. Ins. Co., 101 Ala. 522, 23
L. R. A. 177; Phoenix Ins. Co. v.
Flemming, 65 Ark. 54, 39 L. R. A.
789; Home Ins. Co. v. Mendenhall,
164 111. 458, 36 L. R. A. 374; Hamil-
ton v. Dwelling House Ins. Co., 98
Mich. 535, 22 L. R. A. 527; Dailey v.
Preferred, etc., Ass'n, 102 Mich. 289,
26 L. R. A. 171; Humphreys v. Na-
tional Ben. Ass'n, 139 Pa. 264, 11 L.
R. A. 564; Bawden v. London, etc.,
Ass'n Co., F1892] 2 Q. B. 534. (This
list does not purport to be complete.)
48 "The agent stands in place of
the principal, and notice therefore to
the agent is notice to the principal;
but he cannot stand in the place of
the principal until the relation of
principal and agent is constituted,
and as to all the information which
he previously acquired, the principal
is a mere stranger." Sir John Leach
in Mountford v. Scott, 3 Madd. 34.
"It is only during the agency that
the agent represents and stands in
the shoes of the principal. Notice
to him, then, is notice to the princi-
pal. 'Notice to him twenty-four hours
before the relation commenced is no
more notice than twenty-four hours
after it has ceased would be."
Sharswood, J., in Houseman v. Gir-
ard, etc., Building Ass'n, 81 Pa. 256.
[But in Gunster v. Scranton, etc.,
Co., 181 Pa. 327, 59 Am. St. Rep. 650,
the rule is said to be based upon the
duty to communicate the informa-
tion to the principal.]
Somewhat of double ground was
taken by the Supreme Court of
Michigan: "The reason upon which
the doctrine of notice to the agent
being held notice to the principal
rests, is that the agent is substituted
in the place of, and represents, the
principal in, the particular trans-
action, and therefore while acting in
such matters he takes the place of
the principal, and the latter is bound
by the agent's act in the light of
the knowledge then possessed by the
1389
i8o6]
THE LAW OF AGENCY
[BOOK iv
A theory of identification, however, which shall take the agent as it
finds him, that is, with his then existing knowledge, is not difficult to
imagine. It exists in other fields. If, for example, I buy a horse and
then employ the former owner as driver, in determining my liability as
his master to third persons for his negligent driving, his previous knowl-
edge of the habits and characteristics of the horse would be taken into
account; in determining his liability to me for negligent use of the
horse, I should expect to take advantage of the same knowledge ; if now
I should authorize him as my agent to sell the horse, why should not the
same thing be true?
1806. b. Conclusive presumption of communication.
The other theory is based upon the rule that it is the duty of the agent
to disclose to his principal all notice or knowledge which the agent
may possess and which appears to be necessary for the principal's pro-
tection or guidance. This duty the law conclusively presumes the
agent to have performed, and, therefore, imputes to the principal what-
ever notice or knowledge the agent then possessed, whether he in fact
disclosed it or not. 40 According to this view it is immaterial when the
agent obtained the information, if he then possessed it.
agent." Marston, C. J., in Advertiser
& Tribune Co. v. Detroit, 43 Mich.
116.
In Boursot v. Savage, L. R. 2 Eq.
134, Kindersley, V. C., said: "It is
a moot question upon what principle
this doctrine rests. It has been held
by some that it rests on this: that
the probability is so strong that the
solicitor would tell his client what
he knows himself, that it amounts to
an irresistible presumption that he
did tell him; and so you must pre-
sume actual knowledge on the part
of the client. I confess my own im-
pression is that the principle on
which the doctrine rests is this:
that my solicitor is alter ego; he is
myself; I stand in precisely the same
situation as he does in the trans-
action, and therefore his knowledge
is my knowledge; and it would be a
monstrous injustice that I should
have the advantage of what he
knows without the disadvantage.
But whatever be the principle upon
which the doctrine rests, the doc-
trine itself is unquestionable."
49 "The general rule that a princi-
pal is bound by the knowledge of
his agent is based on the principle of
law, that it is the agent's duty to
communicate to his principal the
knowledge which he has respecting
the subject-matter of negotiation,
and the presumption that he will per-
form that duty." Bradley, J., in The
Distilled Spirits, 11 Wall. (U. S.) at
p. 367, 20 L. Ed. 167. See also,
Irvine v. Grady, 85 Tex. 120.
In New Jersey a somewhat differ-
ent theory apparently prevails and
the principal is only charged with no-
tice where he would have acquired
it if he had acted in person. See
Sooy v. State, 41 N. J. L. 394; Wil-
lard v. Denise, 50 N. J. Eq. 483, 26
Atl. 29, 35 Am. St. Rep. 788; Vulcan
Detinning Co. v. American Can Co.,
70 N. J. L. 588, 67 Atl. 339; Lanning
v. Johnson, 75 N. J. L. 259, 69 Atl.
490.
1390
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1807, l8o8
It is obvious that this is rather a justification of the. rule than a rea-
son for it. A rule based upon the performance of a duty which, so far as
the point here involved is concerned is one from which the agent can-
not escape, from which the principal can not release him, and which
the law conclusively presumes has been performed whether it has been
in fact or not, seems to differ little from a purely arbitrary requirement.
Its real justification is doubtless found in the conviction that it can
not be tolerated that an agent shall act in a transaction, with his mind
full of material knowledge respecting it, and yet the principal be wholly
unaffected by that knowledge, merely because the agent happened to
acquire it before the agency began.
The courts have not, however, always recognized these differences,
nor have their decisions in all cases been consistent with the theory
adopted.
1807. I. Notice acquired during agency. So far as that notice
or knowledge which is acquired during the agency is concerned, the
result under either theory is obviously the same.
Such notice or knowledge is chargeable to the principal in the same
manner, and with the same effect, as though it had been communicated
to or acquired by him in person.
As has been pointed out, it is, of course, entirely immaterial that the
agent has not in fact communicated his information to the principal.
If the. agent fails to do his duty in this respect, and the principal suffers
injury thereby, he has his remedy against the agent.
1808. II. Knowledge acquired prior to agency. With reference
to knowledge acquired before the agency began, however, there is more
difficulty, and the two theories lead to different results. The theory
based upon the legal identity of the parties, as has been seen, limits the
application of the rule to such notice or knowledge as was acquired dur-
ing the agency. This was at first adopted by the English courts, 50 and
has since been followed by many of the courts in the United States."
. (' :/ or .noVifloO
BO Preston v. Tubbin, 1 Vern. 287; ""It is well settled," said Shars-
Brotherton v. Hatt, 2 Vern. 574; wood, C. J., "that the principal is
Fitzgerald v. Fauconberg, Fitz Gib- only to be affected by knowledge ac-
bon, 207; Lowther v. Carlton, 2 Atk. quired in the course of the business
242; Warrick v. Warrick, 3 Atk. 291; in which the agent was employed."
Worsley v. Scarborough, 3 Atk. 392; Houseman v. Girard, etc., Ass'n, 81
Le Neve v. Le Neve, 3 Atk. 648; Pa. 256 [citing Hood v. Fahnestock,
Mountford v. Scott, 3 Madd. 34 s. c. 8 Watts (Pa.), 489, 44 Am. Dec. 147;
on appeal, 1 Turn. & Russ. 274; Bracken v. Miller, 4 Watts & Serg.
Hiern v. Mill, 13 Ves. Jr. 114. See (Pa.) 102; Martin v. Jackson, 2
also, Taylor v. Yorkshire Ins. Co.. Casey (27 Pa.), 504, 67 Am. Dec.
[1913] 1 Irish, 1. 489]. See also, Wetzel v. Linnard,
1391
1809]
THE LAW OF AGENCY
[BOOK iv
The other theory, however, based upon the duty of the agent to disclose
to his principal all knowledge and information actually possessed by the
agent in relation to the subject-matter of the agency, no matter when
acquired, and therefore charging the principal with it, has since been
firmly established by the English courts, 52 and has been adopted by the
supreme court of the United States, 53 and by many of the states. 54
1809. Requirement of present knowledge. It is indis-
pensable to this rule imputing to the principal knowledge which the
agent acquired before the creation of the agency, that it shall still be
present in the agent's mind when he becomes charged with the duty of
15 Pa. Sup. Ct. Rep. 503; Langen-
heim v. Anschutz-Bradberry Co., 2
Pa. Sup. Ct. 285; Bangor, etc., Ry.
Co. v. American Slate Co., 203 Pa. 6.
See also, the recent case declaring
this the rule in Pennsylvania, al-
though it is held otherwise by the
United States supreme court. Satter-
field v. Malone, 35 Fed. Rep. 445, 1
L. R. A. 35.
To the same effect are: Willis v.
Vallette, 4 Mete. (Ky.) 186; Howard
Ins. Co. v. Halsey, 8 N. Y. 271, 59 Am.
Dec. 478; McCormick v. Wheeler, 36
111. 114, 85 Am. Dec. 388; Mundine v.
Pitts, 14 Ala. 84; Pepper v. George,
51 Ala. 190; McCormick v. Joseph, 83
Ala. 401; Wheeler v. McGuire, 86
Ala. 398, 2 L. R. A. 808; Goodbar v.
Daniel, 88 Ala. 583, 16 Am. St. Rep.
76. [But see, Lea v. Iron Belt Merc.
Co., 147 Ala. '421, 119 Am. St. Rep.
93, 8 L. R. A. (N. S.) 279, since
overruled in Hall, etc., Mach. Co. v.
Haley Furn. Mfg. Co., 174 Ala. 190,
56 South. 726]; Pritchett v. Sessions,
10 Rich. (S. C.) L. 293; Weisser v.
Denison, 10 N. Y. 68; 61 Am. Dec.
731; Farmers, etc., Bank v. Payne, 25
Conn. 444, 68 Am. Dec. 362; Bank of
United States v. Davis, 2 Hill (N.
Y.), 451; Hayward v. National Ins.
Co., 52 Mo. 181, 14 Am. Rep. 400;
Blumenthal v. Brainerd, 38 Vt. 402,
91 Am. Dec. 349; Second Nat. Bank
v. Curren, 36 Iowa, 555; Atchison,
etc., R. R. Co. v. Benton, 42 Kan. 698;
Kauffman v. Robey, 60 Tex. 308, 48
Am. Rep. 264; Texas Loan Agency
v. Taylor, 88 Tex. 47; Allen v. Gar-
rison, 92 Tex. 546; Teagarden v.
Lumber Co., Tex. , 154 S. W.
973; Meyers V. Gerhart, 54 Wash.
657.
82 Dresser v. Norwood, 17 Com.
Bench (N. S.), 466; Rolland v. Hart,
L, R. 6 Ch. App. 678.
53 The Distilled Spirits, 11 Wall.
(U. S.) 356, 20 L. Ed. 167.
"Schwind v. Boyce, 94 Md. 510;
Trentor v. Pothen, 46 Minn. 298, 24
Am. St. Rep. 225; Hunter v. Watson,
12 Cal. 363, 73 Am. Dec. 543; Bierce
v. Red Bluff Hotel, 31 Cal. 160; Hart
v. Bank, 33 Vt. 252; Whitten v. Jen-
kins, 34 Ga. 297; Day v. Wamsley,
33 Ind. 145; Cummings v. Harsa-
brauch, 14 La. Ann. 711; Hovey v.
Blanchard, 13 N. H. 145; Bank v.
Campbell, 4 Hump. (Tenn.) 394;
Campau v. Konan, 39 Mich. 362;
Chouteau v. Allen, 70 Mo. 290; Leb-
anon Savings Bank v. Hollenbeck, 29
Minn. 322; Abell v. Howe, 43 Vt. 403;
Yerger v. Barz, 56 Iowa, 77; Fairfleld
Savings Bank v. Chase, 72 Me. 226,
39 Am. Rep. 319; Suit v. Woodhall,
113 Mass. 391; Shafer v. Phoenix
Ins. Co., 53 Wis. 361; Brothers v.
Bank, 84 Wis. 381, 36 Am. St. Rep.
932; Wilson v. Minnesota, etc., Ins.
Ass'n, 36 Minn. 112, 1 Am. St. Rep.
659; Constant v. University of Ro-
chester, 111 N. Y. 604, 7 Am. St. Rep.
769, 2 L. R. A. 734; Gaspard v. Four-
teenth St. Store, 143 N. Y. App. Div.
402; Snyder v. Partridge, 138 III.
173, 32 Am. St. Rep. 130; Wright
v. Hooker, 55 Tex. Civ. App. 47;
Cabin Branch Min. Co. v. Hutchison,
1392
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES
[ I80 9
acting with reference to the matter to which the knowledge relates. 55
A principal may be affected by knowledge which he himself once had,
but has now forgotten. He may also be affected by knowledge which
his agent acquired or had during the agency and under such circum-
stances as to make it notice, but which the agent has since forgotten. 58
But he cannot be affected by information which one who is now his
agent once had, but had forgotten before he became agent and before
112 Va. 37, Ann. Gas. 1912, D. 93, and between the acts, it was said that no
the many other cases cited in the
following notes.
ss Lebanon Savings Bank v. Hol-
lenbeck, 29 Minn. 322; Dresser v.
Norwood, 17 C. B. (N, S.) 466; The
Distilled Spirits, 11 Wall. (U. S.)
356, 20 L. Ed. 167; Fairfield Savings
Bank v. Chase, 72 Me. 226, 39 Am.
Rep. 319.
Knowledge or notice will not bind
if it does not appear to have been
retained. Yerger v. Barz, 56 Iowa, 77.
To the same effect: Brothers v. Bank
of Kaukauna, 84 Wis. 381, 36 Am.
St. Rep. 932; Wilson v. Minn. Farm-
ers Ins. Ass'n, 36 Minn. 112, 1 Am.
St. Rep. 659; Gregg v. Baldwin, 9
N. D. 515.
In Constant v. University of Ro-
chester, 111 N. Y. 604, 7 Am. St. Rep.
769, 2 L. R. A. 734, where an agent
who acted for the defendant in tak-
ing a mortgage, the agent, being an
attorney in active practice, had
eleven months before acted for the
plaintiffs in taking a mortgage upon
the same premises which was not re-
corded, it was held that in the ab-
sence of clear and satisfactory show-
ing that the agent remembered the
existence of the plaintiffs' mortgage
when he acted for the defendant, no
notice of the existence of the first
mortgage could be imputed to de-
fendant. To the same effect: Slat-
tery v. Schwannecke, 118 N. Y. 543;
Comey v. Harris, 133 N. Y. App. Div.
686.
In Equitable Securities Co. v.
Sheppard, 78 Miss. 217, where the
same sort of question was involved,
court could assume, in the absence
of clear and satisfactory proof, that
the first act was present to the
agent's mind.
In Badger v. Cook, 117 N. Y. App.
Div. 328, where a person had acted
as agent in a transaction involving
the ownership of cattle, and it ap-
peared that while the cattle were
still calves and before he became
agent he had received notice of cer-
tain facts respecting their owner-
ship, it was held that this notice
could not be imputed to his princi-
pal unless it was shown by clear and
satisfactory proof that he actually
remembered it at the time of the
transaction in question.
In a number of cases information
acquired apparently before the com-
mencement of the agency has been
held to be binding upon the princi-
pal, no question being raised as to
whether the agent ill fact remem-
bered it or not; but they were all
cases wherein the events constituted
practically one continuous transac-
tion, and there was probably no
room for question that the agent ac-
tually remembered. See Henry v.
Omaha Packing Co., 81 Neb. 237;
Walker v. Grand Rapids Flouring
Mill Co., 70 Wis. 92; Brothers v.
Bank of Kaukauna, 84 Wis. 381, 36
Am. St. Rep. 932; White v. King, 53
Ala. 162; Dunklin v. Harvey, 56 Ala.
177; Wiley, Banks & Co. v. Knight,
27 Ala. 336; Miller v. Jones (Ky.),
107 S. W. 783.
so Cox v. Pearce, 112 N. Y. 637, 3
L. R. A. 563.
but more than six years had elapsed
88 1393
i8io]
THE LAW OF AGENCY
[BOOK iv
there were any facts to make it significant or any duty to report it or
remember it or to govern one's conduct with reference to it. The
agent's recollection must be not simply hazy and indefinite, but as defi-
nite and precise as would be required if now coming to the agent for
the first time. 57 It must also be present to his mind so nearly at least
in relation to the actual transaction which it affects as to impose upon
the agent the obvious duty to communicate it in reference to that trans-
action ; it is sometimes said that it must be "present to his mind at the
very time of the transaction in question." 58 The question is a question
of fact, 59 and the burden of proving that the agent had such recollec-
tion is held to be upon the party alleging it, and not upon the principal
to show that the agent did not have it. 60
The same considerations apply to the case in which the agent during
the agency acquires knowledge respecting a matter not then so related
to his authority as to make it notice, but which, it is alleged, subse-
quently became notice because, with the information still in mind, he
acts as agent respecting the subject matter to which the notice relates.
1810. There may, however, doubtless be cases in which
the information was received so immediately before the transaction as
ST See Burton v. Perry, 146 Til. 71;
Roderick v. McMeekin, 204 111. 625;
Snyder v. Partridge, 138 111. 173, 32
Am. St. Rep. 130.
ss This is the language of Constant
v. University of Rochester, 111 N. Y.
604, 7 Am. St. Rep. 769, 2 L. R. A.
734; Slattery v. Schwannecke, 118 N.
Y. 543.
so Gregg v. Baldwin, 9 N. D. 515.
That the agent had received notice
may be shown by circumstances as
well as by direct evidence. Fore-
man v. German Ins. Ass'n, 104 Va.
694, 113 Am. St. Rep. 1071, 3 L. R.
A. (N. S.) 444. But it must be fol-
lowed up with proof that it was
present in the agent's mind at the
time of the transaction in question.
Brown v. Cranberry Iron Co., 18
C. C. A. 444, 72 Fed. 96.
eo Constant v. University of Ro-
chester, 111 N. Y. 604, 7 Am. St. Rep.
769, 2 L. R. A. 734; Denton v. On-
tario Bank, 150 N. Y. 126; Equitable
Securities Co. v. Sheppard, 78 Miss.
217; Morrison v. Bausemer, 32 Gratt.
(Va.) 225; Johnson v. Nat. Exch.
1394
Pank, 33 Gratt. (Va.) 473; Foreman
v. German Ins. Ass'n, 104 Va. 694,
113 Am. St. Rep. 1071; Brown v.
Cranberry Iron Co., 18 C. C. A. 444,
72 Fed. 96; Red River Val. Land &
Inv. Co. v. Smith, 7 N. D. 236.
Not only is the burden of proof up-
on the party alleging recollection, but
in Constant v. University, supra, it is
said that the burden is on the plaintiff
to prove "clearly and beyond question"
that the agent remembered; that the
proof must be "clear and satisfac-
tory," and that language is repeated
in many New York cases. The same
language is used in Equitable Secur-
ities Co. v. Sheppard, supra. In Mor-
rison v. Bausemer, supra, it is said
that there must be "very strong evi-
dence."
In Equitable Securities Co. v.
Sheppard, supra, the court goes so
far as to say that it "appears that
the courts will presume forgetfulness
until overcome by evidence unless
the occurrence was so recent as to
make it incredible."
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ l8ll, l8l2
to warrant the presumption that it could not have been forgotten. "It
may fall to be considered," said Lord Eldon, "whether one transaction
might not follow so close upon the other as to render it impossible to
give a man credit for having forgotten it. I should be unwilling to
go so far as to say that, if an attorney has notice of a transaction in
the morning, he shall be held in a court of equity to have forgotten it
in the evening; it must in all cases depend upon the circumstances." ul
1811. This theory, however, recognizes certain excep-
tions which are clearly founded upon and consistent with it. Thus the
agent could not reasonably be expected to disclose information which,
though once possessed by him, had been, in fact, forgotten. So the law
would not compel him to disclose what it was his legal duty to conceal.
So the agent could not be deemed to have disclosed information where,
from his relations to the subject-matter, or his previous conduct, his
agency relation was practically non existent. Subject to these excep-
tions, it is believed that this theory is supported by the better reason
and by a clear preponderance of authority.
1812. What is meant by notice acquired "during the
agency" or "prior to agency." When it is said that notice received
by the agent "during the agency" is imputed to the principal it is neces-
sary to consider when the agency in this respect is to be deemed to
begin. When the agency relates to a single non-continuing transaction
it would be clear that the notice to be imputed to the principal under
this rule must relate to that transaction and come to the agent after
he has undertaken to act with reference to it. Where the agent is em-
ployed for a continuing period, but is to act with reference to a series
of disconnected and unrelated transactions, the notice which is to af-
fect the principal with reference to any such transactions must ordi-
i In Mountford v. Scott, 1 Turn, that "it will be presumed that the
& Russ. 274. agent retains the knowledge for a
In Brothers v. Bank of Kaukauna, reasonable time." By this it is as-
84 Wis. 381, 36 Am. St. Rep. 932, it sumed that the court means nothing
is said "if the agent acquires his in- more than is meant by the quotation
formation as recently as to make it above from the Wisconsin court,
incredible that he should have for- "Knowledge acquired not only dur-
gotten it, his principal will be bound, ing the continuance of his agency,
although not acquired while trans- but also that possessed by him so
acting the business of the principal." shortly prior to his employment as
To same effect: see McDonald v. necessarily to give rise to the infer-
Fire Ass'n of Phila., 93 Wis. 348; ence that it remained fixed in his
Red River Val. Land & Inv. Co. v. memory when the employment be-
Smith, 7 N. D. 236. gan," binds the principal. Chouteau
In McClelland v. Saul, 113 Iowa, v. Allen, 70 Mo. 290.
208, 86 Am. St. Rep. 370, it is said
1395
1813] THE LAW OF AGENCY [BOOK IV
narily, to be deemed to be notice acquired during the agency, be notice
which came to the agent after he had undertaken to act with reference
to that transaction. "But where the agency is continuous and con-
cerned with a business made up of a long series of transactions of a
like nature, of the same general character, it will," it is said in one
case, 62 "be held that knowledge acquired as agent in -that business, in
any one or more of the transactions, making up from time to time the
whole business of the principal, is notice to the agent and to the princi-
pal, which will affect the latter in any other of those transactions in
which that agent was engaged, in which that knowledge is material."
Some consideration of the latter rule is necessary. Suppose an agent
is employed for a period to buy cattle for his principal. While so em-
ployed he receives information concerning the cattle of A. At that
time it is not his duty and he does not expect then or ever to buy the
cattle of A, for his principal, and he does not know and has no reason
to believe that the principal then or ever expects to buy the cattle of A,
either in person or through some other agent. 63 If, notwithstanding
this, the principal should, either in person or through some other agent,
buy the cattle of A, would he be affected with notice of the information
which his agent had so received? It is assumed that he would not be.
If, however, the purchase of A's cattle was an act which it was ex-
pected this agent would perform and which he afterwards did perform,
the notice would doubtless bind the principal, even though it was re-
ceived before the agent had actually entered upon the negotiation of
that particular purchase. And so even though the agent, as first sup-
posed above, had, at the time he received the notice, no duty or expec-
tation of buying the cattle of A, yet if he afterwards did buy them,
with the information still in mind, the notice would' be imputed, in those
states at least in which notice is imputed if actually remembered, though
acquired previously, even though it were held not to be imputable un-
der the rule above quoted, as notice acquired during the agency.
1813. The resulting rule. After this much of consideration it
is, perhaps, now desirable and possible to frame a rule which will be
62Holden v. New York & Erie notice to the general attorney of a
Bank, 72 N. Y. 286; Cragie v. Had- railroad company of a certain claim
ley, 99 N. Y. 131, 52 Am. Rep. 9; given while no suit was pending in
Brothers v. Bank of Kaukauna, 81 respect to it, before the matter had
Wis. 381, 36 Am. St. Rep. 932; Foote been referred to him in any way, and
v. Utah Commercial Bank, 17 Utah, while he had no duty in respect to
it or any reason to attach import-
es Thus in Atchison, etc., R. Co. v. ance to it, was not notice to the com-
Benton, 42 Kan. 698, it was held that pany.
1396
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [
fuller and more accurate than the general statement with which the
discussion began. Stated with the qualifications which have been thus
suggested, the rule deducible from these authorities may be said to be
the followng:
The law imputes to the principal, and charges him with, all notice
or knowledge relating to the subject-matter of the agency which the
agent acquires or obtains while acting as such agent and within the
scope of his authority, or, according to the weight of authority, which
he may previously have acquired, and which he then had in mind, 64 or
which he had acquired so recently as to reasonably warrant the assump-
tion that he still retained it. 85 Provided, however, that such notice or
knowledge will not be imputed : (i) Where it is such as it is the agent's
duty not to disclose; 68 (2) Where the agent's relations to the subject-
matter are so adverse as to practically destroy the relation of agency ; 6T
and, (3) Where the person claiming the benefit of the notice, or those
whom he represents, colluded with the agent to cheat or defraud the
principal. 68
This rule does not depend, in either case, upon the fact that the agent
has disclosed the knowledge or information to his principal ; subject to
the exceptions named, the law conclusively presumes that he has done
so, and charges the principal accordingly. 69
The rule applies as well in the case of a servant as of an agent if the
servant is really the master's representative in the matter ; 70 to the case
of an undisclosed principal as to a disclosed one ; n and to the case of
a special agent as well as to that of a general one. 72
And when once notice has attached, the fact that there is no occasion
to act upon or heed it until after the agent through whom it was ac-
quired has ceased to be such or has changed his position, and the like,
will be immaterial. 73
e* See ante, 1809. 137 Iowa, 135; Martin v. Richards,
es See ante, 1810. 155 Mass. 381; Lingren v. Williams
66 See post, 1814. Bros. Mfg. Co., 112 Minn. 186; Schaaf
67 See post, 1815. v. St. Louis Basket Co., 151 Mo. App.
es See post, 1826. 35. Compare 1834, post.
SB See The Distilled Spirits, 11 71 Street Lumber Co. v. Sullivan,
Wall. (U. S.) 367; Dresser v. Nor- 201 Mass. 484, 16 Ann. Gas. 354.
wood, 17 C. B. (N. S.) 466, and Brown v. Peoples Nat. Bank, 170
many other cases cited in subsequent Mich. 416, 40 L. R. A. (N. S.) 657.
sections. Of course, if notice which " Birmingham Trust Co. v. Louisi-
would not be imputed is actually ana Sav. Bank, 99 Ala. 379, 20 L. R.
communicated, it is effective. Hicks A. 600; Bland v. Shreveport Ry. Co.,
v. Southern Ry. Co., 63 S. Car. 559. 48 La. Ann. 1057, 36 L. R. A. 114;
TO Higman v. Camody, 112 Ala. 267, United States National Bank v. For-
57 Am. St. Rep. 33; Merritt v. Huber, stedt, 64 Neb. 855; Loring v. Brodie,
1397
i8i4]
THE LAW OF AGENCY
[BOOK iv
Although the rule of notice is ordinarily invoked to charge the prin-
cipal, it is also held that he may have the benefit of it in a proper case. 74
The several qualifications upon the rule must now receive more de-
tailed consideration.
1814. The first exception Privileged communications. The
first of the exceptions referred to in the statement of the rule, namely,
that relating to knowledge which it is the agent's duty to some other
principal not to disclose, is well settled, both in England and in this
country. It is most frequently applied to the case of attorneys and
134 Mass. 453. But in Great Western
Ry. v. Wheeler, 20 Mich. 419, it was
held that notice acquired by a form-
er agent of such a casual and non-
continuous fact as that certain ini-
tials marked upon goods received for
shipment indicated a certain con-
signee would not be imputed to the
company after he had ceased to be
agent.
74 Haines v. Starkey, 82 Minn. 230
(a partnership case wherein an un-
disclosed principal was given the
benefit of his agent's knowledge as
to the existence of a partnership);
Harrison v. Legore, 109 Iowa, 618.
75 Notice to attorney. The general
question of notice to attorneys will
be considered in the chapter devoted
to attorneys. A distinction may be
made between the attorney's employ-
ment as a lawyer and as an agent,
though the distinction is not always
observed. The question here arises
where he is employed as an agent-.
It is held in many cases that notice
to an attorney, while engaged in the
performance of the business of his
principal, is notice to the principal.
Price v. Carney, 75 Ala. 546; Bierce
v. Red Bluff Hotel Co., 31 Cal. ICC,
Sweeney v. Pratt, 70 Conn. 274, 66
Am. St. Rep. 101; Brown v. Oattis, 55
Ga. 416; Hass v. Sternbach, 156 111.
44; Blake v. Clary, 83 Me. 154; Shart-
zer v. Mountain Lake Park Ass'n, 86
Md. 335; Mayor v. Whittington, 78
Md. 231; Bates v. Johnson, 79 Minn.
354; Edwards v. Hillier, 70 Miss.
803; Bank of Commerce v. Hoeber,
88 Mo. 37, 57 Am. Rep. 359; Peeplrs
v. Warren, 51 S. C. 560; Riordan v.
Britton, 69 Tex. 198, 5 Am. St. Rep.
37; Hyman v. Barmon, 6 Wash. 516;
Rogers v. Palmer, 102 U. S. 263, 26 L.
Ed. 164.
It has, however, been held general-
ly in many cases that knowledge ac-
quired by an attorney while acting
for one client will not affect a sub-
sequent client. Hood v. Fahnestock,
8 Watts (Pa.), 489, 34 Am. Dec. 489;
Willis v. Vallette, 4 Mete. (Ky.) 186;
McCormick v. Wheeler, 36 111. 114,
85 Am. Dec. 388; Herrington v. Mc-
Collum, 73 111. 476; McCormick v.
Joseph, 83 Ala. 401; Pepper v.
George, 51 Ala. 190; Terrell v. Bank,
12 Ala. 502; Chapman v. Hughes, 134
Cal. 641; Wittenbrock v. Parker, 102
Cal. 93, 41 Am. St. Rep. 172, 24 L. R.
A. 197; Bierce v. Red Bluff Hotel Co.,
31 Cal. 160; Martin v. Jackson, 27
Pa. 504, 67 Am. Dec. 489; Allen v.
McCalla, 25 Iowa, 464, 96 Am. Dec.
56; Sante Fe R. R. v. Benton, 42 Kan.
698; Haven v. Snow, 14 Pick. (Mass.)
28; Lowther v. Carlton, 2 Atk. 242;
Worsley v. Scarborough, 3 Id. 392;
Warrick v. Warrick, 3 Id. 291; Camp-
bell v. Benjamin, 69 111. 244; Warner
v. Hall, 53 Mich. 371; Fidelity Trust
Co. v. Baker, 60 N. J. Eq. 170; Tuck-
er v. Tilton, 55 N. H. 223; Arrington
v. Arrington, 114 N. C. 151; Neilson
v. Weber, 107 Tenn. 161; Denton v.
Ontario Co. Nat. Bank, 150 N. Y. 126;
Akers v. Rowan, 33 S. Car. 451, 10 L.
R. A. 705; Steinmeyer v. Steinmeyer,
55 S. C. 9; Meuley v. Zeigler, 23 Tex.
I 39 8
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES
[ i8is
others, upon whom rests the duty of maintaining a professional secrecy.
This secrecy the law will not permit, much less require, to be violated.
As is well said by Mr. Justice Bradley, "When it is not the agent's duty
to communicate such knowledge, when it would be unlawful for him to
do so, as, for example, when it has been acquired confidentially as at-
torney for a former client in a prior transaction, the reason of the rule
ceases, and in such a case an agent would not be expected to do that
which would involve the betrayal of professional confidence, and his
principal ought not to be bound by his agent's secret and confidential
information." 7e
1815. The second exception Agent acting adversely to prin-
cipal. The rule imputing notice is usually based, as has been seen,
upon the theory that it is the duty of the agent to communicate to his
principal the knowledge possessed by him relating to the subject-matter
of the agency, material to the principal's protection and interests, and
the presumption that he has performed this duty. This presumption,
however, it is said, will not prevail where it is certainly to be expected
that the agent will not perform his duty, as where the agent, though
nominally acting as such, is in reality acting in his own or another's in-
88; Pacific Mfg. Co. v. Brown, 8
,Wash. 347; Melms v. Pabst Brewing
Co., 93 Wis. 153, 57 Am. St. Rep. 899;
Union Nat. Bank v. German Ins. Co ,
18 C. C. A. 203, 71 Fed. 473.
JMany of these cases can be recon-
ciled upon the ground already point-
ed out, namely, that the theory of
legal identification, which is adopted
in several states as the foundation
for imputing notice, confines the ef-
fect of the notice to the time when
such identification exists, namely,
the period when the agent is actually
representing the principal. Other of
the cases seem to have adopted the
rule, without much consideration, as
one peculiar to attorneys. Still oth-
er of them, such as Wittenbrock v.
Parker, supra, may be distinguished
upon the ground that there was 110
evidence that the attorney at the
time actually remembered the infor-
mation; or, like Tucker v. Tiltoii,
Fidelity Trust Co. v. Baker, Arring-
ton v. Arrington, supra, upon the
ground that the notice formerly re-
ceived had no real relation to the
service which he was now called
upon to perform.]
And feo it has been held that
knowledge acquired by an attorney
while acting for one client will not
affect another client for whom he is
acting in another matter at the same
time. Ford v. French, 72 Mo. 250.
But if notice acquired before the
agency is to be imputed in any case,
and if the attorney really acts not
as a lawyer, but as an agent, no rea-
son is seen why he should stand up-
on a different ground than other
agents, and the better rule is be-
lieved to be that in either case such
notice binds the principal unless ac-
quired under such circumstances as
to make it privileged. Abell v. Howe,
43 Vt. 403; Hunter v. Watson, 12
Cal. 363, 73 Am. Dec. 543; Hart v.
Bank, 33 Vt. 252; The Distilled
Spirits, 11 Wall. (U. S.) at p. 367, 20
L. Ed. 167.
TO The Distilled Spirits, 11 Wall.
(U. S.) 356, 20 L. Ed. 167; Melms v.
1399
THE LAW OF AGENCY
[BOOK iv
terest, and adversely to that of his principal." Much less will it be en-
tertained where the agent is openly and avowedly acting for himself
and not as agent. 7 * In such cases the presumption is that the agent will
conceal any fact which might be detrimental to his own interests, rather
than that he will disclose it.
Pabst Brewing Co., 93 Wis. 153, 57
Am. St. Rep. 899; Sebald v. Citizens
Bank (Ky.), 105 S. W. 130.
T> Thus in a leading case in this
country, it is said: "While the
knowledge of an agent is ordinarily
to be imputed to the principal, it
would appear now to be well estab-
lished that there is an exception to
the construction or imputation of
notice from the agent to the princi-
pal in case of such conduct by the
agent as raises a clear presumption
that he would not communicate thft
fact in controversy, as where tho
communication of such a fact would
necessarily prevent the consumma-
tion of a fraudulent scheme which
the agent was engaged in perpetrat-
ing." Devens, J., in Innerarity v.
Merchants' National Bank, 139 Mass.
332, 52 Am. Rep. 710 [citing Ken-
nedy v. Green, 3 Myl. & Keene, 699;
Cave v. Cave, 15 Ch. Div. 639; In re
European Bank, 5 Ch. Ap. 358; In re
Marseilles Extension Ry., L. R. 7 Ch.
Ap. 161; Atlantic National Bank v.
Harris, 118 Mass. 147; Loring v.
Brodie, 134 Mass. 453.]
This rule, however, went beyond
the needs of the case at bar, as the
agent was there acting openly as an
adverse party. It is believed to be
too wide, though some of the cases
cited do seem to give it support.
See also, Kennedy v. Green, 3 Myl.
& Keene, 699; Dillaway v. Butler, 135
Mass. 479; Findley v. Cowles, 93
Iowa, 389; Shephard & Morse Lumber
Co. v. Eldridge, 171 Mass. 516, 68 Am.
St. Rep. 446, 41 L. R. A. 617; Indian
Head Nat. Bank v. Clark, 166 Mass.
27; United Security Co. v. Central
Nat. Bank, 185 Pa. 586; Houghton v.
Todd, 58 Neb. 360.
Obviously, as between the princl-
pal and his agent, the latter cannot
claim that the principal must be
deemed to have constructive notice
of the agent's fraudulent acts which
the agent was in fact diligently con-
cealing from him. Sankey v. Alex-
ander, Ir. Rep. 9 Eq. 259.
In American Surety Co. v. Pauly,
170 U. S. 133, 42 L. Ed. 977, supra,
it is said: "The presumption that
the agent informed his principal of
that which his duty and the interests
of his principal required him to
communicate does not arise where
the agent acts or makes declara
tions not in execution of any duty
that he owes to the principal, nor I
within any authority possessed by /
him, but to subserve simply his own
personal ends or tp_ commit soniqj
foaud agamsttheprincipal. In such'
cases the "priricTpaT^s^ot bound by
the acts or declarations of the agent
unless it be proved that he had at
the time actual notice of them, dr.
having received notice of them,
failed to disavow what was assumed
to be said and done in his behalf."
See also, Fidelity & Deposit Co. v.
Courtney, 186 U. S. 342, 362, 46 L.
Ed. 1193.
Agent practicing fraud on third j
person, not on principal. The fact *"
that the agent is engaged in practic-
ing a fraud not on his principal but
upon the other party does not, it is
held, defeat the rule imputing no-
tice. Lockhart v. Washington Gold
Min. Co., 16 N. Mex. 223.
78 Speaking of the general rule,
in Frenkel v. Hudson, 82 Ala. 158.
60 Am. Rep. 736, Somerville, J., says:
"It has no application, however, to a
case where the agent acts for him-
self, in his own interest, and ad-
versely to that of the principal. Hia
1400
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES
[ 1815
The case most frequently arising is that in which the agent is secretly
engaged in prosecuting some fraudulent or illegal enterprise the suc-
cess of which would be impaired or defeated by the disclosure to his
principal of the notice or knowledge now sought to be imputed. The
application of the rule is not, however, confined to cases of such actual
fraud, but will extend, as has been stated, to cases in which the agent /
is temporarily acting on his own account and adversely to his principal. *
This exception has been applied in a great number and in a great
variety of cases. 79 In many of them it seems to have been applied quite
adversary character and antagonistic
interests take him out of the opera-
tion of the general rule, for two rea-
sons: first, that he will very likely,
in such case, act for himself, rather
than for his principal; and, secondly,
he will not be likely to communicate
to the principal a fact which he is
interested in concealing. It would
be both unjust and unreasonable to
impute notice by mere construction
under such circumstances, and such
is the established rule of law on this
subject." [Citing Terrell v. Branch
Bank of Mobile, 12 Ala. 502; Lucas
v. Bank of Darien, 2 Stew. (Ala.)
280; Wickersham v. Chicago Zinc
Co., 18 Kan. 481, 26 Am. Rep. 784;
Angell & Ames on Corp., 308,
309; Story on Agency, 140.] See
also, La Brie v. Cartwright, 55 Tex.
Civ. App. 144; Commercial Bank v.
Burgwyn, 110 N. Car. 267, 17 L. R.
A. (N. S. }326; Johnston v. Short-
ridge, 93 Mo. 227; First National
Bank v. Briggs, 70 Vt. 594.
79 Thus, see Whelan v. McCreary,
64 Ala. 319; Frenkel v. Hudson, 82
Ala. 158, 60 Am. Rep. 736; Pursley
v. Stahley, 122 Ga. 362; Seaverns v.
Presbyterian Hospital, 173 111. 414,
64 Am. St. Rep. 125; Cowan v. Cur-
ran, 216 111. 598; Merchants Nat.
Bank v. Nichols & Co., 223 111. 41,
7 L. R. A. (N. S.) 752; Metcalf v.
Draper, 98 111. App. 399; Hummel v.
Bank of Monroe, 75 Iowa, 689; Se-
bald v. Citizens Bank (Ky.), 105 S.
W. 130; Seixas v. Citizens Bank, 38
La. Ann. 424; Richardson v. Watson,
51 La. Ann. 1390; Allen v. South
Boston Ry., 150 Mass. 200, 15 Am. St
Rep. 185, 5 L. R. A. 716; Corcoran v.
Snow Cattle Co., 151 Mass. 74;
Brown v. Harris, 139 Mich. 372;
Fort Dearborn Bank v. Seymour, 71
Minn. 81; Keyser v. Hinkle, 127 Mo.
App. 62; Houghton v. Todd, 58 Neb.
360; Graham v. Orange Co. Bank,
59 N. J. L. 225; Camden Safe De-
posit Co. v. Lord, 67 N. J. E. 489;
Henry v. Allen, 151 N. Y. 1, 36 L. R.
A. 658; Benedict v. Arnoux, 154 N.
Y. 715; First Nat. Bank v. German
Am. Ins. Co. (N. Dak.), 134 N.
W. 873; Gunster v. Scranton Illumi-
nating Co., 181 Pa. 327, 59 Am. St.
Rep. 650; Knobelock v. Germania
Savings Bank, 50 S. Car. 259; Cooper
v. Ford, 29 Tex. Civ. App. 253;
Jungk v. Reed, 12 Utah, 196; First
Nat. Bank v. Foote, 12 Utah, 157;
Victor Gold, etc., Min. Co. v. Bank,
15 Utah, 391; Traders, etc., Bank v.
Black, 108 Va. 59; Baker v. Berry
Hill, etc., Co., 112 Va. 280: In re
Plankinton Bank, 87 Wis. 378; Cole
v. Getzinger, 96 Wis. 559; Rock
Springs Nat. Bank v. Luman, 5 Wyo.
159; Thompson-Houston 'Co. v. Capi-
tal Blec. Co., 12 C. C. A. 643, 65 Fed.
341; Investment Co. v. Ganzer, 11 C.
C. A. 371, 63 Fed. 647; Hudson v.
Randolph, 13 C. C. A. 402, 66 Fed.
216; Hart v. Bier, 74 Fed. 592; Waite
v. Santa Cruz, 89 Fed. 619; Bank of
Overton v. Thompson, 56 C. C. A.
554, 118 Fed. 798; Union Central Life
Ins. Co. v. Robinson, 78 C. C. A. 268,
148 Fed. 358, 8 L. R. A. (N. S.) 883;
Reed v. Munn, 80 C. C. A. 215, 148
Fed. 737; American Surety Co. V.
1401
i8i6]
THE LAW OF AGENCY
[BOOK iv
arbitrarily and without much consideration of the reasons involved.
Many conflicting results have necessarily ensued, and have led to the
necessity of a more careful investigation into the reason and scope of
this exception.
1816. Reasons for the exception. The reasons given
Ifor the exception are not always the same. That most commonly given
and relied upon is the one already stated, namely, that there is, from
the circumstances, a presumption that the agent will not perform his
duty. Another reason which has been suggested is that inasmuch as
the pretended agent is, by the hypothesis, really acting on his own ac-
count, he does not receive the notice as agent and while acting within
the scope of his authority. 80 This is, of course, the identification the-
ory. Another, which is very similar, is that inasmuch as he is really
acting in pursuance of a fraudulent design and committing an inde-
pendent fraud, his whole act, including the notice, is beyond the scope
of his employment and therefore neither the act nor the knowledge re-
lating to it, as matter of law, can be imputed to his principal. 81
Pauly, 170 U. S. 133, 42 L. Ed. 977;
Real Estate Trust Co. v. Washington,
etc., Ry., 113 C. C. A. 124, 191 Fed.
566; Lilly v. Hamilton Bank, 102 C.
C. A. 1, 178 Fed. 73; Eccles v. Louis-
ville, etc., R. Co., 198 Fed. 898. [This
list does not purport to be exhaust-
ive.]
so Thus in In re Plankinton Bank,
87 Wis. 378, it is said: "Where an
officer or agent of the corporation
himself deals with the corporation,
it will not be charged with notice of
the information which he possesses
relating to the transaction, and which
he does not disclose, for the reason
that in such case he does not rep-
resent the corporation, but is acting
for himself, and ceases, pro hoc vice,
to act as an agent of the corporation.
The corporation, in such case, is in
reality the adverse party, and the of-
ficer does not act for it as its agent
at all."
So in Pursley v. Stahley, 122 Ga.
362, it is said: "But when the agent
departs from the scope of the agency,
and begins to act for himself and not
for the principal; when his private
interest is allowed to outweigh his
duty as a representative; when to
communicate the information would
prevent the accomplishment of his
fraudulent scheme, he becomes an op-
posite party, not an agent. The rea-
son for the rule then ceases. Where,
therefore, the agent who is an inter-
mediary is guilty of independent
fraud for his own benefit, the law
does not impute to the principal no-
tice of such fraud."
si In Allen v. South Boston Rail-
road, 150 Mass. 200, 15 Am. St. Rep.
185, 5 L. R. A. 716, it 'was said:
"The general rule is that notice to
an agent, while acting for his princi-
pal, of facts affecting the character of
the transaction, is constructive notice
to the principal. There is an exception
to this rule when the agent is en-
gaged in committing an independent
fraudulent act on his own account,
and the facts to be imputed relate to
this fraudulent act. It is sometimes
said that it cannot be presumed that
an agent will communicate to his
principal acts of fraud which he has
committed on his own account in
transacting the business of his prin-
cipal, and that the doctrine of im-
1402
CHAP. V] LIABILITY OF PRINCIPAL TO THIRL) PARTIES
[
1817.
Further of these reasons, A serious difficulty in
the way of the adoption of the reason first assigned is found in the fact
that it is not ordinarily a satisfactory theory for exempting the princi-
pal to presume that his agent will not do, or has not done, his duty.
That suggestion usually and properly meets with very little favor and
it is certain that the exception cannot be sustained upon the grounds
usually assigned for it. A more satisfactory reason would be to say,
as has been suggested, that the assumed agent is not really acting as
agent at all and therefore the general rule imputing knowledge has no
application. Where the agent is openly and avowedly acting adversely
or otherwise than as an agent, and the principal or some other agent
is representing the principal's interests, there is little difficulty in reach-
ing this conclusion. 82 And even where he is not openly acting ad-
puted knowledge rests upon a pre-
sumption that an agent will com-
municate to his principal whatever
he knows concerning the business he
is engaged in transacting as agent.
It may be doubted whether the rule
and the exception rest on any such
reasons. It has been suggested that
the true reason for the exception is
that an independent fraud committed
by an agent on his own account is
beyond the scope of his employment,
and therefore knowledge of it, as
matter of law, cannot be imputed to
the principal, and the principal can-
not be held responsible for it. On
this view, such a fraud bears some
analogy to a tort wilfully committed
by a servant for his own purposes,
and not as a means of performing the
business intrusted to him by his mas-
ter. Whatever the reason may be,
the exception is well established."
82 This was the fact in the leading
case of Innerarity v. Merchants Na-
tional Bank, 139 Mass. 332, 52 Am.
Rep. 710, cited above (though it has
been overlooked in many of the cases
which purport to follow it). There
an agent, who was also a director in
the bank, undertook to pledge, for a
loan to himself, a bill of lading which
really belonged to his principal. He
first negotiated the loan on this se-
curity with the president of the bank.
Later, when the board of directors
met, the president laid this loan, with
others, before the board for approval.
The agent was present at this meet-
ing, though the case says it does not
appear what part, if any, he took in
the action upon this loan. The board
approved the loan. It was held that
his knowledge was not imputable to
the bank, and the court treated him
like any other outsider who applied
for a loan. It is clear that he was
not the agent through whom the
bank acted.
The same is true of Corcoran v.
Snow Cattle Co., 151 Mass. 74; Louisi-
ana State Bank v. Senecal, 13 La.
525; English- American Loan Co. v.
Hiers, 112 Ga. 823; Traders Bank v.
Black, 108 Va. 59; In re Plankinton
Bank, 87 Wis. 378.
This is also the ground upon which
Lilly v. Hamilton Bank, 102 C. C. A.
1, 178 Fed. 53, 29 L. R. A. (N. S.)
558 is to be based. The court point
out that the two agents, through
whom notice to the bank might have
been imputed, "studiously refrained
from acting to any extent whatever
as agents of the bank," but proposed
to deal with the bank and left other
agents of the bank to decide whether
the proposal should be accepted.
Similar are, National Bank v. Fen-
ney, 9 S. Dak. 550, 46 L. R. A. 732;
M03
l8l8] THE LAW OF AGENCY [BOOK IV
versely but has secretly such an adverse interest that he would not be
permitted to become or remain an agent without his principal's full and
intelligent consent, it would seem that the same result should ensue
and that he should be treated as practically not an agent of the prin-
cipal whose interests he is, for the promotion of his own ends, secretly
betraying or ignoring. If this be done, however, what is the result?
Either that the principal was in that transaction not represented by an
agent at all and therefore, so far as it depends upon agency, there was
no act of the principal, unless the principal later with knowledge elects
to stand by it; or that the assumed agent dealt in this transaction as
an independent party, giving to the principal the same rights and the
same obligations which he would have if he were dealing with any
other independent party. Where the principal did not, in fact, know
anything about the transaction at the time and the whole matter was
confined to the hands of the agent alone, the latter alternative seems too
contrary to the facts to be accepted.
1818. If it be said that there was no act, because there
was no agent, then any contract or transfer involved in it must be of
no effect, and if anything has come to the principal's possession by rea-
son of the act, it must be surrendered if the act be repudiated. 83 Inas-
much as the principal may consent to being represented by an interested
agent, and may do so after the act as well as before, he may well, if he
First Nat. Bank v. Babbidge, 160 cannot be fully applicable to a case
Mass. 563; Louisiana State Bank v. where one party, having knowledge
Senecal, 13 La. 525; Westfleld Bank of the invalidity of a paper of which
v. Cornen, 37 N. Y. 320, 93 Am. Dec. he is the ostensible owner, discounts
573. See also, Knobelock v. Germania it in a bank of which he is the duly
Savings Bank, 50 S. Car. 259; Sproul authorized agent, and is himself the
v. Standard Glass Co., 201 Pa. 103. only actor for the bank and by his
83 in Morris v. Georgia Loan, Sav- act enables the bank to collect and
ings & Banking Co., 109 Ga. 12, 46 L. retain the proceeds of such paper
R. A. 506, the cashier of the bank against the rights of the true owner,
was individually interested in a note In such a transaction he is either the
which he knew to be without con- agent of the bank to discount the
sideration. He discounted it to the paper, or he is not. If he is not,
bank, and the bank claims now to be then the discounting was illegal, and
a bona fide holder, without notice of the owner is entitled to it or its pro-
the defense. The court, however, ceeds. If he is the agent of the bank,
held it must stand charged with the and the facts insisted on here existed,
notice of the cashier if it ratified his his action would be a fraud upon the
act and claimed to own the note so rights of the owner, of which the
discounted by it. The court distin- bank cannot take advantage." The
guished the principle recognized court then adopts the excerpt from
where an officer of a corporation is First Nat. Bank v. New Milford, 36
the adverse party, and said: "But Conn. 93, quoted in the following
the principle involved in those cases note.
1404
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES
[ 1818
attempts with knowledge to obtain or retain benefits flowing from the
act, be held to have approved it with all its incidents. 84
84 Thus in a number of cases in
which an agent, acting for both par-
ties and being in default to one of
them, has secretly abstracted funds
or securities from the other to make
good his deficiency to the former,
it has been held that the one
to whom they have been so trans-
ferred cannot keep or enforce them,
after knowledge, without being
chargeable with notice. See Bank of
New Milford v. Town of New Mil-
ford, 36 Conn. 93. (The court
said: "He [the cashier] as agent of
the bank had full knowledge, there-
fore, of the fraud; and now the bank,
if they ratify his contract and con-
firm his agency, must accept his
knowledge and be bound by it, pre-
cisely as if the loan had been made
and the knowledge had by the board
of directors.") Loring v. Brodie, 134
Mass. 453; Atlantic Cotton Mills v.
Indian Orchard Mills, 147 Mass. 268,
9 Am. St. Rep. 698. (The court said:
"It [the plaintiff] must be deemed to
have known what he knew; and it
cannot retain the benefit of his act
without accepting the consequences
of his knowledge. The plaintiff can-
not obtain greater rights from his act
than if it did the thing itself, know-
ing what he knew.") Holden v. New
York & Erie Bank, 72 N. Y. 286.
(The court said: "The knowledge of
Ganson [the common agent] as an
individual or an executor was not
imputable to the bank merely be-
cause he was its president, but be-
cause when it acted through him as
president, in any transaction where
that knowledge was material and ap-
plicable, it acted through an agent
who at that very time had knowl-
edge of facts which gave a character
to the transaction . . . and whose
duty it was to make that knowledge
known to his principal." And, hav-
ing such knowledge, it was the bank's
"duty to those interested in that
money to refuse to take it upon de-
posit to his individual account.")
Fishkill Savings Institute v. Bost-
wick, 19 Hun (N. Y.), 354; Fouche v.
Merchants Nat. Bank, 110 Ga. 827.
(The court said: "We do not see how
it could claim the advantages and
privileges of this possession and
ownership without becoming charge-
able with notice of the burdens
it had likewise assumed, of which
it had knowledge, through its
president, when it thus became
the owner of this property.")
Singleton v. Bank, 113 Ga. 527;
First National Bank of Monmouth
v. Dunbar, 118 111. 625. (The
case can be sustained on the ground
that the bank acquired no right to
the bonds except through the act of
its cashier. If the cashier was au-
thorized to receive these bonds, his
notice is its notice. If he was not so
authorized, the bank must ratify or
repudiate his act. If it repudiates
it, then it has never had any claim
to them; if it ratifies the act, it must
be charged with all knowledge its
agent had. The case also comes with-
in the exception to the general ex-
ception suggested by the editors of
the Case Note appended to Brook-
house v. Union Publishing Co., 2 L.
R. A. (N. S.) 993.)
In Warren v. Dixon, 74 N. H. 355,
the plaintiff had been defrauded of
land, on which the defendant after-
ward acquired, in good faith and for
value, a mortgage. The defendant
sent J. B. Dixon, an agent, who knew
of the fraud on plaintiff, to collect
the mortgage. The agent procured a
conveyance of the land to defendant
in satisfaction of her mortgage, but,
in so doing, was in reality acting in
the interests of the defendant's mort-
gagor. The plaintiff seeks to compel
her to hold the legal title impressed
with notice of the fraud on him. The
defendant denies the agency of her
1405
i8i8]
THE LAW OF AGENCY
[BOOK iv
Of course, however, if the principal does not thus take with notice,
the fact that he may afterwards acquire it will be as immaterial here as
it is in other similar cases.
representative, as he acted for the
mortgagor, and she apparently claims
nothing by the deed to her, but falls
back on her mortgage which was hon-
estly acquired. As to whether she is
estopped to deny his agency for her,
the court says: "Although the plain-
tiff cannot maintain this action by
merely showing that J. B. Dixon was
in Mrs. Dixon's employ when the con-
veyance was made, she cannot set
that conveyance up to defeat the
plaintiff's right to redeem the prop-
erty from her. The reason is, not
that she is charged with J. B. Dix-
on's knowledge, but because a person
cannot claim the benefit of so much
of his agent's unauthorized act as is
beneficial to him and repudiate the
remainder. If he accepts any bene-
fit from it after he knows and appre-
ciates what his agent has done, he
will be estopped to deny that the
agent was acting for him. In other
words, such conduct constitutes a
ratification of the agent's act." See
also, Morris v. Georgia Loan Co., 109
Ga. 12, 46 L. R. A. 506; Brobston v.
Penniman, 97 Ga. 527.
To the same effect: Curtis v. Stur-
gis, Jackson & Co., 64 Mo. App. 535;
Smith v. Farrell, 66 Mo. App. 8; Wil-
son v. Pauly, 18 C. C. A. 475, 72 Fed.
129. See also, Black Hills Nat.
Bank v. Kellogg, 4 S. Dak. 312.
It is not to be denied that there are
cases opposed to this view. Certain
of the New Jersey cases, for exam-
ple, can not be reconciled with it,
though it does not appear that the
point now urged against them was
raised. See DeKay v. Hackensack
Water Co., 38 N. J. Eq. 158; Camdpn
Safe Deposit Co. v. Lord, 67 N. J. Eq.
489; Barnes v. Trenton Gas L. Co., 27
N. J. Eq. 33, though it does not clear-
ly appear in all of them whether
there was another agent acting for
the principal or not. Cole v. Getz-
inger, 96 Wis. 559, is apparently op-
1406
posed. So in First National Bank v.
Foote, 12 Utah, 157, where it is said,
"This is a distinction which seems
to us less substantial than technical."
Fort Dearborn Bank v. Seymour, 71
Minn. 81, admits the principle, but
denies its application to the facts at
bar.
In Hummell v. Bank of Monroe, 75
Iowa, 689, one A was cashier of the
defendant bank, to which he was con-
siderably indebted. By fraudulent
representations he procured from the
plaintiff an accommodation note. In
violation of his promise to the plain-
tiff he negotiated this note to the Des
Moines bank, receiving therefor a
draft, which he cashed at his own
bank, and therewith paid his in-
debtedness and received non-nego-
tiable cashier's checks for the resi-
due. The plaintiff seeks to pur-
sue the entire fund into defendant's
hands, on the ground that the
notice of their cashier being im
puted to it, it had knowledge of the
fraud by which the money was pro-
cured. The court refused to charge
it with such notice and held it was
only liable for such sum as remained
to A's credit when the bank was ac-
tually-notified of the fraud. It was
held that the doctrine of ratification
did not apply to the case. The con-
clusion in this case cannot be sus-
tained except by force of the strict
application of the exception to the
rule of notice as it is ordinarily stat-
ed. The bank acquired the drafts in
question only through the act of its
cashier. If it repudiated that act it
could not retain the draft. It. would
not seem that the bank could stand
in the attitude 'of a purchaser from
the cashier as an independent person
because he did not deal with the
bank as an independent person, and
the bank was not Represented in the
transaction by any other agenL.
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES
[ 1819
1819. But there may also be cases in which, because no
act of agency resulted, the principal would be entitled to stand upon
the footing of a transferee from the agent, or from the other principal
whom he represented, and be entitled to protection to the same extent
as any purchaser for value without notice. In such a case, there be-
ing really no agency relation, notice could not be imputed upon that
ground, and, if the principal had no notice which would bind him other-
wise, he would be protected. 85 This result would not seem to be pos-
ss Thus, in a number of cases in
which the same person was ordinarily
agent for each party but in the given
case was acting as an outside party
:so far as the principal in question
was concerned, it has been held that
if he fraudulently obtains from one
principal that which he sells or trans-
fers to the other who is acting for
Jiimself, the latter who takes in good
faith and for value cannot be charged
with what the agent knew, since in
this transaction he was not agent for
the latter.
Thus in Thompson-Houston Elec-
tric Co. v. Capitol Electric Co., 12 C.
C. A. 643, 65 Fed. 341, it appeared that
one D., who was the agent of Mrs. R.
to loan her money upon securities
and who had received money from
her for that purpose, which it was
his duty to account to her for from
time to time, was also the secretary,
treasurer and general manager ol a
certain corporation. He owed this
corporation upon a note, and the note
was secured by a deposit with the cor-
poration of certain bonds which be-
longed to D. This note and bonds
were in his custody among the other
papers of the corporation. In order
to settle his account with Mrs. R. he
induced an irresponsible person to
give him a note. He them abstracted
the bonds from the papers of the cor-
poration, attached them to the note
BO procured as though they had been
Civen to secure it, and delivered the
note and the bonds to Mrs. R. in
Gettlement of his account with her.
Mrs. R. received them in good faith
and without actual notice of the claim
of the corporation to the bonds. In
an action to determine the title to
them, it was contended that Mrs. R.
must be charged with the knowledge
which D. had respecting the rights
of the corporation, and that therefore
she cowld not hold the bonds as
against it. It was held that his
knowledge would not be imputed to
her, and the exception now under
discussion to the general rule was
relied upon. But more specifically
the court said: "When he abstracted
the bonds he was not taking them for
Mrs. R.; he was taking them for
himself, so that he might use them
to obtain money from Mrs. R. He
was not abstracting them for the
benefit of Mrs. R. any more than for
the benefit of any stranger to whom
he might have sold them for value.
In delivering these bonds to Mrs. R.,
D was actually dealing with her as a
purchaser from him and not as her
agent." And, by another judge: "In
the present case I do not think D.
was acting as agent of either of the
supposed principals, but, having pos-
session of the bonds entrusted to him
by the company, made the manual
abstraction and tradition of them
which brought them to the hands of
an innocent holder." Atlantic Cot-
ton Mills v. Indian Orchard Mills, 147
Mass. 268, supra, was distinguished.
To same effect: Henry v. Allen, 151
N. Y. 1, 36 L. R. A. 658, 9 Am. St.
Rep. 698; Allen v. South Boston Ry.
Co., 150 Mass. 200, 15 Am. St. Rep.
1S5, 5 L. R. A. 716; Clark v. Marshall,
62 N. H. 498.
1407
1820]
THE LAW OF AGENCY
sible, however, in cases in which the agent was the sole actor on both
sides.
jgao. In many cases the matter seems to resolve itself
into the familiar but always difficult question of which of two innocent
parties should bear the loss. This is often settled by the application of
the alleged maxim that he should bear it by whose act it was made pos-
sible. 86 In other cases the only solution seems to be to leave it where
se This is the ground upon which
Real Estate Trust Co. v. Washington,
etc., Ry. Co., 113 C. C. A. 124,
191 Fed. 566 (reversing Washing-
ton, etc., Ry. Co. v. Real Es-
tate Trust Co., 177 Fed. 306) is
really based. Here the complain-
ant had left in the possession of
two of its officers certain uncancelled
bonds after they had in fact become
obsolete. One of these officers pledged
these bonds to the defendant Held,
that defendant was to be protected.
The court also says that this Is one
of the cases in which notice would
not be imputed. See also, Witten-
brock v. Parker, 102 Cal. 93, 41 Am.
St. Rep. 172, 24 L. R. A. 197.
In Smith v. Boyd, 162 Mo. 146, two
separate mortgages, both duly re-
corded, securing notes, were outstand-
ing upon the same land. The second
of these had really been given in sub-
stitution for the first, and with the
understanding that the first should
be cancelled and discharged. This,
however, was not done, but the holder
transferred the second note and mort-
gage to ' Smith, falsely assuring him
that it was a first note and mortgage.
Smith afterward foreclosed his mort-
gage and bid in the land, not yet be-
ing actually apprised of the existence
of the first mortgage, although it was
duly recorded. Later proceedings
were instituted to foreclose the first
mortgage, and Boyd entered into ne-
gotiations through one King for the
purchase of the land at or after the
foreclosure sale. An abstract was
procured, which showed the existence
of the mortgage to Smith and its
foreclosure, but Boyd was advised
that the first mortgage, called the
Tyler mortgage, would take preced-
ence over the title held by Smith,
and he entered into a contract with
King, by which he agreed to take the
land from King, either upon a deed
from King or upon the deed made at
the foreclosure sale, and King bought
the property at the foreclosure sale
and had the deed made to Boyd. Boyd
had no knowledge of the fact that the
mortgage under which he claimed had
really been satisfied by the execution
of the mortgage under which Smith
claimed and that it should have been
discharged of record, but King knew
all these facts. Smith brought
this action to cancel the convey-
ance to Boyd, claiming that King
was Boyd's agent in the purchase,
and that King's knowledge would
be imputed to Boyd. * The court
held that even if King could be
regarded as Boyd's agent, King'&
knowledge could not be imputed to
Boyd, as he was acting adversely.
The court also held that King was
not really an agent, but a seller, and
therefore the ordinary rule imputing
the agent's knowledge would not be
implied, and finally also held that in-
asmuch as Smith had constructive
knowledge of the existence of the first
mortgage, from the fact of its being
recorded, and did nothing for a con-
siderable period to correct the record,
and inasmuch as Boyd relied upon
the record priority of the mortgage
under which he purchased, Smith
must bear the loss, even though act-
ually as innocent as Boyd, upon the
principle that it was his act or fail-
ure to act that had made the loss
1408
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES
[ 1821
it has fallen, since there is no reason or justification for shifting it to
the other party. 87
1821. In a few cases it has been said that the principal
could not be held because he really had not participated in the transac-
tion, that he had at most been a mere unconscious party or a mere
conduit, and that therefore no responsibility could be attached to him. 88
possible. In re Marseilles Extens.
Ry. Co., L. R. 7 Ch. 161, belongs to
'this class.
87 in Gunster, Assignee of The
Scranton Bank v. The Scranton Il-
luminating, etc., Co., 181 Pa. 327, 59
Am. St. Rep. 650, one Jessup was vice-
president of the plaintiff bank, and its
principal manager, and, in the trans-
action in question, its sole repre-
sentative. He was also treasurer of
the defendant corporation, and as
such treasurer drew the notes of such
company to the bank, which the bank
discounted and gave the defendant
company credit for the proceeds. Jes-
sup then, by check of the company,
drew this fund from the bank and
appropriated it to his own use. The
company defends in a suit to collect
the notes, claiming that the bank
knew of the fraudulent inception of
them, because Jessup, its cashier,
knew of it. But the court refused to
charge the bank with such knowl-
edge, and, aftsr discussing that ques-
tion, says: "But we do not regard
knowledge as the pivotal point of the
case. Upon that point both parties
would stand equal. Both might by
mere inference be charged with
knowledge, as the fraud was commit-
ted by an agent with authority to act
for both, but in fact neither had or
in the nature of things could have
any knowledge at all, and neither
was under any obligation to presume
that its agent would be guilty of
fraud. The real question is, in what
capacity did Jessup commit the
fraud? And it is clear that it was as
treasurer of the appellee. It was as
treasurer he presented the notes for
discount, and as treasurer he drew
the checks for the proceeda Both
acts were within his authority as
treasurer and would have been lawful
if they had been honest, but he drew
the money on drafts which were the
property of the company, and when
he embezzled the money it was the
money of the company. The bank had
no part in his act, and gained noth-
ing by it. The fraud had its incep-
tion and its consummation in acts
done in his capacity of treasurer of
the defendant company, and it should
bear the loss."
In Lyndon Mill Co. v. Lyndon Lit-
erary Institution, 63 Vt. 581, 25 Am.
St. Rep. 783, the court says that the
question of imputing notice "depends
upon the circumstances of each case."
Innerarity v. Merchants National
Bank, supra, and Fairfleld Savings
Bank v. Chase, 72 Me. 226, 39 Am.
Rep. 319, are cited, but neither is an-
alogous in its facts.
ss in Bank of Overton v. Thompson,
56 C. C. A. 554, 118 Fed. 798, the cash-
ier of the bank, one Hardinger, and
the complainant were jointly inter-
ested in some cattle. The cashier
sold them and received therefor from
the buyer a draft and somo credit
slips. These he deposited with the
bank to his individual credit, and af-
terward checked out on his personal
check the entire amount, using it all
himself and making no settlement
with the complainant. In all the
transactions he was the sole repre-
sentative of the bank, no other per-
son connected therewith having any
knowledge of the complainant's in-
terest in the funds. The complainant
seeks to hold the bank as construc-
tive trustee, alleging that it knew,
through its cashier, when it received
the funds, that they belonged to the
8 9
1409
1822]
THE LAW OF AGENCY
[BOOK IV
1822. The true exception. For the reasons that have
been advanced, it is believed that this second exception, as it is ordi-
narily stated, is ill-founded and too broad. It rests properly upon the
ground that, under the circumstances, there was really no agency, and
not upon the ground that the law presumes that the agent will violate
his duty. It should be confined, therefore, to the cases which really
fall within the reason : and notice should be imputed wherever there is
agency or ratification.
complainant. The court held that the
bank could not be so held, but seemed
to put the case on another ground,
wherein the question of notice would
not arise, commenting in the follow-
ing language: "In the present case,
Hardinger, for his own purposes, and
without the knowledge of anyone else
connected with the defendant bank,
deposited the proceeds of the sale of
the cattle, as his own money, in de-
fendant bank, and, while the facts re-
mained wholly unknown to anyone
connected with the bank but himself,
by his own act he withdrew the same
money from the bank. As depositor,
both in making and withdrawing the
deposit, his interests were adversary
to the bank. If he was engaged in de-
frauding the complainant, the pre-
sumption is that he would not dis-
close to the bank his fraud, or com-
plainant's interest in the fund, and
the evidence of the actual fact corres-
ponds to this presumption. The bank
had no knowledge of any interest of
complainant in the fund, and was un-
der no obligation to him. The com-
plainant, by authorizing Hardinger to
sell the cattle, authorized him to re-
ceive the money for them and to care
for it. In caring for it, he placed it
temporarily in defendant bank, but
retained, as he properly might, the
control over it, and afterwards re-
sumed, as he had a right to, the pos-
session of it. If it was a trust fund,
Hardinger was the complainant's
trustee. He might put it in a bank,
and remove it at his discretion to an-
other bank, or put it in his pocket."
In Brookhouse v. Union Publishing
Co., 93 N. H. 368, 111 Am. St. Rep.
623, 2 L. R. A. (N. S.) 993, the facts
alleged were that one M was the
guardian of the plaintiff. He was al-
so the treasurer of the defendant cor-
poration, and used it for his private
banking purposes, depositing money
with its general funds and crediting
his account, and charging his account
as he withdrew it. He withdrew from
his guardian bank account money, for
which he received drafts payable to
himself as guardian, or order. These
he endorsed and directed the assist-
ant treasurer of defendant to deposit
to his credit. For his personal pur-
poses he afterward checked out the
money. In this action the ward seeks
to charge the defendant with notice
of the fraudulent character of the
transaction. The court held that the
defendant was an innocent conduit,
through which the guardian temporar-
ily passed the money, and that it
could not be charged therefor. The
court said: "In the case at bar the
defendant does not set up any claim
to the funds in dispute. The funds
have passed beyond its reach without
being of any advantage to it." And
again: "The defendant was not real-
ly the principal of Moore in respect to
the deposits and withdrawals of the
plaintiff's money in and from its bank
account; it was his agent. The trans-
actions were solely on his account
and for his benefit. The defendant re-
ceived no substantial benefit from
them. The only authority conferred
upon Moore by it which he used was
the authority to use its bank account
for his private purposes. In drawing
I4IO
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1823-1825
1823. It is not enough to prevent the application of the
general rule that an agent to whom notice comes which would other-
wise be imputed, shall, however wickedly or fraudulently, fail to com-
municate it to his principal. An innocent third person, not claiming
through the agent's act, and otherwise entitled to the benefit of notice,
can not be denied it merely because the agent, for some fraudulent pur-
pose of his own, conceals the notice from his principal. The rule can
only apply where the person claiming the benefit of the notice is a party
to the transaction or claims through the agent's act, and the agent must
also have some interest or motive of his own, adverse to his principal's
interests, which prompts him to conceal his knowledge and which prac-
tically destroys the agency relation. 89
1824. Inasmuch as an agent, with the full knowledge
and consent of his principal, may also act for himself or for the ad-
verse party, notice acquired by the agent in the course of his agency,
though while he was also acting for the adverse party with the prin-
cipal's knowledge and consent, will be imputed to the principal. 90
1825. Applicability of exception to corporate agents.
The exception to the general rule applies ordinarily to the agents of
corporations as well as of natural persons. A doubt, however, has been
suggested "whether this exception can apply to directors, presidents
and other such managing officers of a corporation, through whom alone
the corporation can act ;" 01 but this distinction has not been generally
approved, 92 and no sound reason is perceived why such a distinction
should be made.
A different distinction has also been suggested, namely, that the ex-
ception in question will not apply where the agent, "though he acts
for himself or for a third person, is the sole representative of the cor-
checks, he fulfilled its obligation to principal, but upon the other party,
himself. He was really acting for does not, it is held, alter the general
himself." rule. Lockhart v. Washington, etc.,
89 Armstrong v. Ashley, 204 U. S. Min. Co., 16 N. Mex. 223.
272, 51 L. Ed. 482; Boursot v. Savage, eo pi ne Mt. Iron Co. v. Bailey, 36
L. R. 2 Eq. 134. Letters which come C. C. A. 229, 94 Fed. 258.
to the hands of the agent of a bank i Pomeroy's Equity Jurisprudence,
authorized to receive them must be 675, note. Mr. Pomeroy refers to
deemed to be received by the bank, Holden v. N. Y. & Erie Bank, 72
even though the agent suppresses N. Y. 286, and First Nat. Bank v.
them in order to prevent discovery Town of New Milford, 36 Conn. 93,
of irregularities of his own. First [cited in 1818, supra].
Nat. Bank v. Fourth Nat. Bank of f* 2 See, for example, Brookhouse v.
Louisville, 6 C. C. A. 183, 56 Fed. 967. Union Publishing Co., 73 N. H. 368,
The fact that the agent is engaged in 111 Am. St. Rep. 623, 6 Ann. Gas. 675,
practicing fraud, not upon his own 2 L. R. A. (N. S.) 993.
1411
1826] THE LAW OF AGENCY [BOOK IV
poration in the transaction in question." 93 This distinction, however,
like the preceding one, seems not to get to the root of the matter. It
is, of course, true that a corporation can only act through some agent,
and where it acts through a single agent knowledge must come through
him if it conies at all. But it seems to beg the question to say that it
must come at all, and especially to say that it must come in every case
in which the corporation is represented solely by the agent who had the
knowledge. Another distinction, though well settled, namely, that
knowledge will not be imputed where the principal was represented by
another agent in the transaction in question, 04 seems not to furnish jus-
tification for the distinction thus suggested.
The real ground upon which this situation rests is believed to be that
already stated, namely, that where the agent is the sole representative
of the corporation, the corporation can not claim anything except
through him and that therefore if it claims through him, after notice
of the facts, it must accept his agency with its attendant notice.
1826. The third exception Collusion of party claiming benefit
of notice. The rule which imputes to the principal the knowledge
of his agent is, as has been seen, commonly based upon the legal pre-
sumption that the agent has done his duty by communicating it to his
principal, a presumption which, it is said, is demanded by a sound
public policy for the protection of those who deal with the agent. Ob-
viously no policy requires that such a presumption shall be made for
the protection of a person who has conspired with the agent to defraud
the principal and who now seeks the benefit of a presumption that a
duty has been performed which he himself was interested in having
violated. Thus in a leading case in New York, where this question
was involved, the court said: "If a person colludes with an agent to
cheat the principal, the latter is not responsible for the acts or knowl-
edge of the agent. The rule which charges the principal with what the
agent knows is for the protection of innocent third persons, and not
those who use the agent to further their own frauds upon the princi-
pal." 95
s This distinction is worked out s National Life Ins. Co. v. Minch,
with much care and fullness of cita- 53 N. Y. 144. See also, to same ef-
tions in a note by the editors, ap- feet: Morrill v. Bosley, 40 Tex. Civ.
pended to the case of Brookhouse v. App. 7; Elliott v. Maccabees, 46
Union Publishing Co., in 2 L. R. A. Wash. 320, 13 L. R. A. (N. S.) 856;
(N. S.) 993, supra. It is also ap- Traders, etc., Bank v. Black, 108 Va.
proved in the late case of Cook v. 59; Van Buren County v. American
American Tubing & Webbing Co., 28 Surety Co., 137 Iowa, 490, 126 Am. St.
R. I. 41, 9 L. R. A. (N. S.) 193. Rep. 290; Hickman v. Green, 123 Mo.
*See post, 1837. 165, 29 L. R. A. 39; Cooper v. Ford,
1412
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1827, 1828
The identification theory would reach a similar result here upon the
ground that the collusion destroyed the agency and with it the founda-
tion for identification.
1827. Who can avail himself of the notice. The rule respecting
the imputation of notice is usually resorted to by third persons seeking
a remedy against the principal. Ordinarily they are persons who have
dealt with the principal through the agent in question ; but it is not es-
sential that they shall have dealt with the agent. The rule respecting
notice may apply although they have not known of or dealt with the
agent, if they have had dealings with the principal, or with some other
agent of his, which make the matter of notice material to the protection
of their interests. 90 As has been seen, however, they will not be permit-
ted to avail themselves of the rule, where they were colluding with the
agent to defraud the principal. 97
As has already been stated, it has been held that the principal him-
self, in his dealings with third persons, may avail himself of the rule,
although the agent has not in fact communicated his knowledge to
him. 98
The agent himself, however, in his relations to his principal, could
rarely, if ever, be permitted to set up, as constructive notice to his prin-
cipal, information which, in disregard of his duty, he had failed to com-
municate to the principal. 99
1828. What notice includes Actual and constructive notice.
The notice which will affect the principal may be the direct and un-
equivocal information of the fact, or it may, in certain cases, be infer-
red from the existence of other facts. The former is sometimes termed
actual notice, and the latter constructive notice. The distinction, how-
ever, is not of any great practical importance, and perhaps, strictly, the
latter is to be deemed as much actual notice as the former. In either
event, it is well settled that the principal may ordinarily be bound by
29 Tex. Civ. App. 253; Benedict v. same principle. Ga. Civ. Code, 3028.
Arnoux, 154 N. Y. 715; Brooklyn Dis- Socute des Mines v. Mackintosh, 5
tilling Co. v. Standard Distilling & Utah, 568.
Distributing Co., 120 N. Y. App. Div. Armstrong v. Ashley, 204 U. S.
237; Traber v. Hicks, 131 Mo. 180; 272, 51 L. Ed. 482.
Cowan v. Curran, 216 111. 598; Ham- ST See ante, 1826.
burg-Bremen Ins. Co. v. Lewis, 4 App. See ante, 1813. Haines v.
D. C. 66; Western Mfg. Co. v. Ganzer, Starkey, 82 Minn. 230; Harrison v.
11 C. C. A. 371, 63 Fed. 647; Hudson Legore, 109 Iowa, 618.
v. Randolph, 13 C. C. A. 402, 66 Fed. See McDermott v. Hayes, 116 C.
216. C. A. 553, 197 Fed. 129; Sankey v.
The Georgia Civil Code declares the Alexander, Ir. Rep. 9 Eq. 259.
1413
1829]
THE LAW OF AGENCY
[BOOK IV
the one as fully as by the other. 1 The rule as to what will constitute
constructive notice may be said to be that wherever a party has knowl-
edge of any fact sufficient to put a prudent man upon an inquiry which,
if prosecuted with ordinary diligence, would lead to actual notice, he
will be charged with the knowledge which might have been acquired
by such diligence. 2 The presumption that he would have acquired such
knowledge is not, however, indisputable, and it is always open to the
party to show that he used such diligence without avail. 8
Within this rule constructive notice to the agent which would, if fol-
lowed with reasonable diligence, have led to further information, would
doubtless charge the principal with notice of the information which
might have been so obtained.*
1829. Whether the principal can be charged with con-
structive notice by reason of what the agent knew, but which would
not be constructive notice to the agent, would seem to be doubtful. 5
If, for example, information comes to an agent which reasonably seems
to him immaterial, but which, if he had known what the principal knew,
would have led to material information, can it be said that the princi-
pal is chargeable with the latter information? If he had acted in per-
1 But constructive notice alone will
not suffice where actual knowledge is
required, e. g., in conspiracy, etc.,
Benton v. Minneapolis Tailoring Co.,
73 Minn. 498; Reisan v. Mott, 42
Minn. 49, 18 Am. St. Rep. 489.
2 Williamson v. Brown, 15 N. Y.
354; Baker v. Bliss, 39 id. 70; Cam-
bridge Valley Bank v. Delano, 48 id.
326; Hood v. Fahnestock, 1 Pa. 470,
44 Am. Dec. 147; Chapman v. Glas-
sell, 13 Ala. 50, 48 Am. Dec. 41. The
mere fact that there was opportunity
to learn where there was nothing to
suggest any necessity or occasion to
know, is not enough. Economy Sav.
Bank v. Gordon, 90 Md. 486, 48 L. R.
A. 63.
s Williamson v. Brown, 15 N. Y. 354.
* Furry v. Ferguson, 105 Iowa, 231;
Field v. Campbell, 164 Ind. 389, 108
Am. St. Rep. 301; Wiley v. Knight,
27 Ala. 336; Pepper v. George, 51 Ala.
190; Gallagher v. Equitable Gas L.
Co., 141 Cal. 699; Wells v. McMahon,
3 Wash. Ter. 532.
Where the agent owes a duty to
investigate, as in the case of an
agent charged with the master's duty
to keep premises, etc., in repair, what
he would have learned is imputable.
Johnson v. First Nat. Bank, 79 Wis.
414, 24 Am. St. Rep. 722.
5 In Wittenbrock v. Parker, 102 Cal.
93, 41 Am. St. Rep. 172, 24 L. R. A.
197, where T and H were lawyers
and partners, and T while acting for
one client acquired certain informa-
tion, it was held that this would not
be imputed to Y, a client who sub-
sequently acted with H respecting the
same property, both Y and H being
actually ignorant of what T knew.
The court said that while, for the
purposes of his liability as a member
of the firm of T and H, H might be
charged with constructive notice of
what his partner T knew, Y, the
client of H, was not to be charged
with constructive knowledge of the
same matter of which for some pur-
poses H had thus constructive but not
actual knowledge.
1414
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1830, 183!
son he would be chargeable. But if the duty of the agent to communi-
cate is limited to the communication of that which, from his standpoint,
reasonably seems material to the principal's interests as must cer-
tainly be the case if the duty is considered from the standpoint of the
principal and the agent and if the obligation of the principal depends
upon the presumption that the agent has performed his duty, the knowl-
edge imputed to the principal could not include the information in ques-
tion. The same result would seem to flow from the theory of the legal
identity of the principal and agent, unless we are prepared to say that
that theory leads to the conclusion that the principal knows what the
agent knows, and is therefore bound by the results of an investigation
which the knowledge of two facts would have prompted, although as a
matter of fact he is actually ignorant of one of them.
1830. Agent must be agent of person to whom notice is to be
imputed. It would seem to go without saying that notice can not
be imputed under the rules here being considered unless the agent who
had the notice or knowledge stood in that relation to the person to
whom the notice is sought to be imputed. If he was the agent of the
other party only, or only of some one else than the alleged principal, his
notice or knowledge cannot be imputed to the person in question. 8
1831. Rule applies only to notice respecting matters within
agent's authority. This rule which imputes to the principal the
knowledge possessed or notice received by the agent applies only to
cases where the knowledge is possessed or notice received by an agent
within the scope of whose authority the subject-matter lies. An agent,
may be put forward for the express purpose of receiving notice, or be
referred to as the one to whom notice may be given, and in such a case,
of course, no further evidence of authority to receive it would be re-
quired. 7 An agent may also be put in such a position of general
authority, in such a managerial or directing situation, as in the
case of the chief officer of a corporation or of an individual, that
notice to him will be notice to his principal because it must be
deemed within his authority to receive it, even though he never
personally acts in respect of the matters to which the notice re-
lates. 8 But^ in other cases,_notice binds the principal because the
See Goodwynne v. Bellerby, 116 * See Hardin Grain Co. v. Chicago,
Ga. 901; International Building & L. etc., Ry. Co., 134 Mo. App. 681.
Ass'n v. Watson, 158 Ind. 508; s gee Cragie v. Hadley, 99 N. Y.
Weightman v. Washington Critic Co., 131, 52 Am. Rep. 9 (the president of
4 App. Gas. D. C. 136 (mere rela- a bank); New Hope Bridge Co. v.
tion of husband and wife not Phenix Bank, 3 N. Y. 156 (same);
enough). Mihills Mfg. Co. v. Camp, 49 Wis.
1415
[BOOK iv
receipt of it can be deemed to be an incident to the act which the
agent is authorized to perform, and it can not be notice unless
it is such an incident. In other words, the knowledge or notice
must come to an agent who has authority~~to deal in reference to
those matters which the knowledge or notice affects, and whose
duty_it therefore is to communicate it to his principal. The fact
that some other agent, employed in reference to different and distinct
transacti6ns, may have had notice or knowledge will not affect the
princ ipul. ''^X*'
130; Port Jervis v. First National the latter is employed, unless the
Bank, 96 N. Y. 550 (president
and executive head of bank); Lea
v. Iron Belt Co., 147 Ala. 421, 119
Am. St. Rep. 93, 8 L. R. A. (N. S.)
279 (president and chief executive).
But the divisions of function be-
tween the officers of a corporation
may be so narrow that notice to a
president, for example, of some mat-
ter within another officer's sphere,
will not be notice to the corporation.
Bank v. Craig, 6 Leigh (Va.), 399.
Congar v. Chicago, etc., Ry. Co.,
24 Wis. 157, 1 Am. Rep. 164; Stewart
v. Sonneborn, 49 Ala. 178; Cook v.
Anamosa, 66 Iowa, 427; Russell v.
Cedar Rapids Ins. Co., 78 Iowa, 216,
4 L. R. A. 538; Tate v. Hyslop, 15
Q. B. Div. 368; Columbia Paper
Stock Co. v. Fidelity & Casualty
Co., 104 Mo. App. 157; Trentor
v. Pothen, 46 Minn. 298, 24 Am. St.
Rep. 225; Strauch v. May, 80 Minn.
343; Comey v. Harris, 133 N. Y.
App. Div. 686; Johnson v. Valido
Marble Co., 64 Vt. 337; Walker v.
Hannibal, etc., R. Co., 121 Mo. 575,
42 Am. St. Rep. 547, 24 L. R. A. 363;
Missouri, etc., Ry. Co. v. Belcher, 88
Tex. 549; Topliff v. Shadwell, 68 Kan.
317; Fidelity Trust Co. v. Baker, 60
N. J. Eq. 170; Foote v. Getting, 195
Mass. 55, 15 L. R. A. (N. SO 693.
In Warren v. Dixon, 74 N. H. 355,
the court, commenting on the gen-
eral rule, said: "That rule does not
charge the principal with his agent's
knowledge of facts affecting the sub-
ject matter of the business in which
agent, in fact, acts for the principal
in what he does in the matter in re-
spect to which it is sought to charge
the principal with his knowledge.
Henry v. Allen, 151 N. Y. 1, 10, 36
L. R. A. 658. In other words, the
principal is not charged with his
agent's knowledge in respect to a
particular transaction, unless the lat-
ter's acts in respect to it were with-
in the scope of his employment. To
illustrate: If a person employs an
agent to buy property and the latter,
instead of buying, sells to the princi-
pal property procured from a stranger
by fraud, the agent's knowledge of
that fraud will not be imputed to the
principal (Allen v. Railroad, 150
Mass. 200, 206, 5 L. R. A. 716, 15 Am.
St. Rep. 185); but, if the agent buys
property for the principal, the latter
will be charged with the agent's
knowledge of any defects in the grant-
or's title (Hovey v. Blanchard, 13 N.
H. 145, 149). The test, therefore, to
determine whether an agent's knowl-
edge is to be imputed to his princi-
pal is to inquire whether or not the
agent was acting for the principal
when he did that in respect to which'
it is sought to charge the principal
with his knowledge. Clark v. Marsh-
all, 62 N. H. 498, 500; Brookhouse v.
Company, 73 N. H. 368, 374, 111 Am.
St. Rep. 623, 6 Ann. Cas. 675, 2 L.
R. A. (N. S.) 993; Gunster v. Com-
pany, 181 Pa. 327, 59 Am. St. Rep.
650, 658, note; Akers v. Rowan, 36
S. C. 87, 10 L. R. A. 705, 706, note."
1416
CHAP. Vj LIABILITY OF PRINCIPAL TO THIRD PARTIES
[ 1831
"This," says Dixon, C. J., "seems very clear when we consider
the reason and ground upon which this doctrine of constructive
Where the principal had undertak-
en through an agent to effect insur-
ance on an overdue ship, and failed,
that agent knowing the ship was lost
but not communicating the fact to
any one, insurance effected by the
principal through another agent will
not be avoided on the ground that the
first agent's knowledge was the
knowledge of the principal. Black-
burn Low & Co. v. Vigors, 12 App.
Cases, 531.
In the following cases notice was
not imputed because the matter to
which the knowledge related was not
within the agent's authority. King
v. Rowlett, 120 Mo. App. 120 (an ac-
tion for buying corn grown, on plain-
tiff's land, where defendant's serv-
ant, hired to weigh and receive the
corn, knew where it was grown);
Cook v. Anamosa, 66 Iowa, 427 (ac-
tion against a city, where the mar-
shal had notice of the defects in the
sidewalk, but no authority to repair
it); Arrington v. Arrington, 114 N.
C. 151 (where an attorney, employed
to examine title, knew from other
sources facts affecting title); Trentor
v. Pothen, 46 Minn. 298, 24 Am. St.
Rep. 225 (same effect); (but see Al-
lison v. Falconer, 75 Ark. 343, where
notice was imputed in the case of an
attorney to examine title and procure
the execution of the proper papers to
effect the conveyance); Hickman v.
-7 Green, 123 Mo. 165, 29 L. R. A. 39
(where a real estate firm hired "to
effect an exchange," but not to ex-
amine title, knew of an unrecorded
deed); Mackay-Nisbet Co. v. Kuhl-
man, 119 111. App. 144 (action for
goods sold, where, in a social con-
versation before the sale, defendant
told plaintiff's salesman, employed in
another territory, that he had sold
the business); Collins & Toole v.
Crews (Ga.), 59 S. E. 727 (a similar
case involving notice of bankruptcy) ;
German Ins. Co. v. Goodfrlend, 97
S. W. 1098 (Ky.) (notice to a clerk
in plaintiff's store that an insurance
company would not renew plaintiff's
policy) ; McCalmont v. Lanning, 154
Fed. 353 (where a bank president
knew from his official position in an-
other corporation, of the fraudulent
inception of a note, purchased by an-
other officer without the president's
knowledge) ; Stringfellow v. Brasel-
ton, 54 Tex. Civ. App. 1 (where a
notary, the grantee's agent to obtain
the signatures in a deed, knew of cir-
cumstances of a wife's joining in her
husband's deeds) ; Lowden v. Wilson,
233 111. 340 (where an agent entrusted
with a check to be handed over when
delivery of possession of property was
made knew of an adverse claim);
Tennent v. Union Life Ins. Co., 133
Mo. App. 345 (where a husband au-
thorized by his wife to pledge Iris in-
surance policy of which his wife was
beneficiary, knew that the company
subsequently made an irregular sale
of the policy) ; Pennoyer v. Willis,
26 Ore. 1, 46 Am. St. Rep. 594 (where
an agent to care for but not invest
funds knew of a defect in a security
offered for a loan of the funds);
Strauch v. May, 80 Minn. 343 (where
a "cashier" to pay as the principal or-
dered had notice of an assignment of
wages); Atchison, etc., R. R. Co. v.
Benton, 42 Kan. 698 (where, before
action was brought, a general at-
torney of a railroad company had
notice of matters connected with its
land department); Day v. Exchange
Bank, 117 Ky. 357 (deceit for mis-
representations in a sale of bank
stock, where the question was on the
running of the statute of limitations
from time of plaintiff's purchase,
plaintiff's agent appeared to have had
notice in subsequent sales of the
stock to third persons or in other
transactions); Davis v. Steeps, 87
Wis. 472, 41 Am. St. Rep. 51, 23 L. R.
A. 818 (where the vendor of land,
1417
1832]
THE LAW OF AGENCY
[BOOK iv
notice rests. The principal is chargeable with the knowledge of
his agent because the agent is substituted in his place and represents
him in the particular transaction ; and it would seem to be an obvious
perversion of the doctrine, and lead to most injurious results, if, in the
same transaction, the principal were likewise to be charged with the
knowledge of other agents, not engaged in it and to whom he had del-
egated no authority with respect to it, but who were employed by him
in other and wholly different departments of his business." 10 Whether
the rule be based upon the ground specified by the learned judge, or
upon the duty of the agent to communicate, the result is the same,
no duty of communication would rest upon an agent where, from the
nature of the acts to be performed by him, the knowledge or notice
would appear to have no relation to or connection with those acts.
1832. Notice after termination of authority does not bind. It
follows as a necessary conclusion from the principles considered that
notice to an agent, after his authority has entirely ceased, or after his
authority to represent the principal in respect to the matters to which
the notice relates has terminated, is not ordinarily notice to the princi-
pal. 11 Under neither of the theories discussed could such notice be
imputed to the principal.
who, though not the vendee's agent
for any purpose concerning the con-
veyance, furnished the abstract of
title, had notice of a judgment lien);
Boy.d v. Boyd, 128 Iowa, 699, 111 Am.
St. Rep. 215 (a similar case, where
the knowledge of the mortgagor's
agent who prepared the abstract was
not imputed to the mortgagee) ; Labbe
v. Corbett, 69 Tex. 503 (where, under
a contract to deliver sheep, diseased
animals' were delivered, and vendee's
servants to assist in driving and car-
ing for the sheep knew this); Storms
v. Mundy, 46 Tex. Civ. App. 88 (where
an agent to see if he could obtain an
increase in the price of land, but not
to negotiate or make the sale, ap-
peared to have notice of fraud con-
nected with the sale); Lewis v.
Equitable Mortgage Co., 94 Ga. 572
(knowledge of an equity in land by
an agent to inspect merely); Hock-
field v. Southern Ry. Co., 150 N. C. 419,
134 Am. St. Rep. 945 (where notice
of arrival of goods was given to a
transfer company in the habit of haul-
ing goods for consignee, but not told
to haul the goods in question); but
see, Rothchild v. Northern Pac. Ry.
Co., 68 Wash. 527, 40 L. R. A. (N. S.)
773 (where the transfer company was
employed to receive the goods, and
notice was imputed). See also,
Mims v. Brooks, 3 Ga. App. 247.
10 In Congar v. Chicago, etc., Ry. Co.,
24 Wis. 157, 1 Am. Rep. 164, cited,
supra.
nBoardman v. Taylor, 66 Ga. 638;
Great Western Ry. v. Wheeler, 20
Mich. 419; Irvine v. Grady, 85 Tex.
120; Traber v. Hicks, 131 Mo. 180;
First Nat. Bank of Emmetsburg v.
Gunhus, 133 Iowa, 409, 9 L. R. A. (N.
S.) 471.
Notice to former agent of a corpora-
tion is not notice to the corporation
after the agent has severed his con-
nection with it. Great Western Ry. v.
Wheeler, supra.
So notice to an agent while nego-
tiating for the purchase of some cat-
tle is not notice to his principal,
where the agent's negotiations were
1418
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1833, 1834
The case of an agent accredited to receive notice and whose author-
ity had been terminated without the knowledge of the other party
would, of course, stand on different ground.
1833. Notice must be of some material matter. The
knowledge or notice which is to bind the principal must under the the-
ory of a duty to disclose, at least, be of some matter so material to the
transaction as to make it the agent's duty to communicate it to the prin-
cipal, 12 and, doubtless, the identification theory would not lead to prac-
tically different result. It must also come from such an apparently au-
thentic and reliable source that an ordinarily prudent man would be
required to give heed to it. But neither the principal nor the agent is
bound to regard that which appears to be mere idle and baseless rumor
or report. 13 ' ^ o
1834. Notice must come to someone who is an agent. In' or-
der to bind the principal, the notice must come to someone who stands
in the attitude of an agent to him that is to say, someone 'Who repre-
sents him, who owes him some duty, to whom the principal looks for
protection of his interests in the field in question. 14 Thus notice to an
broken off and the purchase subse-
quently consummated by the princi-
pal in person. Irvine v. Grady, supra.
Nor does the fact that the cashier
of the plaintiff bank had at one time
been a stockholder in and the presi-
dent of the defendant bank, and his
successor had never been elected,
charge the plaintiff with knowledge
of the character of a transaction car-
ried on by defendant's cashier. First
Nat. Bank v. Gunhus, supra.
Notice to attorneys after termina-
tion of relation does not bind former
client. Chicago Sugar Ref. Co. v.
Jackson Brew. Co. (Tenn. Ch.) 48 S.
W. 275; Beck v. Avondino, 20 Tex.
Civ. App. 330; Pedlar v. Stroud, 116
Cal. 461.
12 Fairfield Savings Bank v. Chase,
72 Me. 226, 39 Am. Rep. 319.
is Thus in Stanley v. Schwalby, 162
U. S. 255, it is said, p. 276, 40 L. Ed.
960: "In order to charge a purchaser
with notice of a prior unrecorded con-
veyance, he or his agent must either
have knowledge of the conveyance,
or, at least, of such circumstances as
would, by the exercise of ordinary
diligence and judgment, lead to that
knowledge; and vague rumor or sus-
picion is not a sufficient foundation
upon which to charge a purchaser
with knowledge of a title in a third
person."
See also Kerns v. Swape, 2 Watts
(Pa.) 75; Mulliken v. Graham, 72 Pa.
484; Jaques v. Weeks, 7 Watts (Pa.),
261; Pittman v. Sofley, 64 111. 155;
Vance v. Hickman, 95 111. App. 554.
14 See, for example: Booker v.
Booker, 208 111. 529, 100 Am. St. Rep.
250; Jummel v. Mann, 80 111. App.
288; Doyle v. Teas, 4 Scammon
(111.), 202; Aetna Indemnity Co. v.
Schroeder, 12 N. D. 110; Columbia
Paper Stock Co. v. Fidelity & Casu-
alty Co. (Mo. App.), 78 S. W. 320;
Central Coal Co. v. George S. Good &
C6., 120 Fed. 793, 57 C. C. A. 161;
Wyllie v. Pollen, 3 De Gex, J. & S.,
596, 601.
The circumstances of a mortgagor
being a solicitor, and preparing the
mortgage deed, and of the mortgagee
employing no other solicitor, are not
sufficient to constitute the former the
solicitor of the -latter, so as to affect
1419
1834]
THE
AGENCY
[BOOK iv
independent contractor, a mere bailee, a carrier, a postman, and the
like, would not ordinarily be imputed. It is sometimes said that notice
to a mere messenger or to one acting merely in a ministerial capacity
would not be imputed. If the theory upon which notice is to be im-
puted be the legal identity of the principal with the agent, then the per-
son to whom the notice comes must be such a person and acting in
such a capacity that it may fairly be said that, for the time being, he
is the principal. If the true theory be that the agent owes a duty to
communicate, then the person to whom the notice comes must be such
a one and acting in such a capacity that it may fairly be said that
the principal looks to him for information concerning the subject-mat-
ter ; that he is the person to whom information is likely to come, and
whose duty it would be to communicate it. Such a rule would seem
to exclude all persons having merely such a casual, temporary, me-
chanical, non-discretionary relation to the subject-matter that they
owe no duty to heed or report the information. 16
him with notice of an incumbrance chase, it was held that the vendor in
obtaining and making over the quit
claim did not stand as an agent of
the vendee so as to charge vendee
with notice of an outstanding unre-
corded deed. Riley v. Robinson, 128
App. Div. 178, affirmed without opin-
ion in 202 N. Y. 531.
is In Royle Min. Co. v. Fidelity
etc., Co., 161 Mo. App. 185, it is said
that the rule imputing notice does not
apply "where the agent is acting in a
merely ministerial capacity. When
so acting, the agent does not act a$ a
substitute for the principal, nor is
there imposed upon the agent the
duty of communicating to his princi-
pal the knowledge thus acquired."
To the same effect are: Labbe v. Cor-
bett, 69 Tex. 503; Storms v. Mundy,
46 Tex. Civ. App. 88.
But see Conrad v. Graham, 54
Wash. 641, 132 Am. St. Rep. 1137,
where notice to a "messenger" sent
out to buy a certain article was held
to be notice to the employer.
In Edson & Foulke Co. v. Winsell,
160 Cal. 783, where notice to a ditch
tender of the third person's adverse
claim was held to bind the principal.
"It matters not how lowly may be the
position of the agent or servant of a
known to the solicitor. Espin v.
Pemberton, 3 De G. & J. 547. Notice
to a sub-contractor is not notice to
the contractor. Coal & Coke Co. v.
Good & Co., supra. One employed as
a messenger and not a negotiator is
not an agent within the rule. Doyle
v. Teas, supra; Booker v. Booker,
supra.
Where a surety company requests
one agent of a concern to inform an-
other that a bond is required from
the latter and he does so, this does
not make the first agent an agent in
procuring the bond so that knowledge
which he may have had of the other's
conduct was imputable. Aetna In-
demnity Co. v. Schroeder, supra.
A trustee under a deed of trust is
not the agent of the holder of securi-
ties. Jummel v. Mann, 80 111. App.
288. Notice to an officer employed to
make an attachment is notice to the
plaintiff. But notice to the plaintiff's
of a tax title required the vendor to
provide a quit claim deed from the
last regular owner of record before
the vendee would complete the pur-
tachment, would not be. Tucker v.
Tilton, 55 N. H. 223. Where a vendee
attorney, who sued out the writ of at-
1420
CHAP. Vj LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1835-1837
1835. Ratification. Although the one who acted may
not have been an agent, or an agent for the act in question, at the
time the act was done, responsibility for the act with the notice af-
fecting it may be assumed by ratification with full knowledge of the
facts. But knowledge of the facts to which the notice relates would
usually be deemed as material and essential to be known as any others,
and, notwithstanding an occasional utterance to the contrary, the rules
of ratification can be based only upon actual knowledge and not merely
upon imputed knowledge. 16
It must be kept in mind, however, that the result of an alleged rati-
fication without knowledge is that the whole act fails, and not that it
can be affirmed as to all the beneficial parts and rejected as to the
burden of the notice. 17
It is also to be observed that, though one may not have had knowl-
edge at the outset, to insist upon retaining or enforcing the benefits,
after knowledge of the means by which they were obtained, must also
often count as a ratification with knowledge.
1836. Releasing agent from duty Enlarging it. In seeking for
a duty to communicate, reference must ordinarily be had to the duty
which the law would impose. It surely cannot be true that the prin-
cipal can save himself from the effects of notice by attempting to ex-
onerate the agent from a duty to communicate it, whatever might be
the effect of such exoneration between the principal and the agent
themselves. On the other hand, it is doubtless true that the princi-
pal's obligations might be enlarged by his expressly imposing a duty
or authority to receive notice greater than that which the law would
otherwise imply.
1837. Agent of two principals. Where the same person acts
with their consent, as agent of two or more principals, all interested in
the same subject-matter, and concerning which he owes a duty of com-
munication to each, notice to this agent must doubtless be deemed no-
tice to all his principals in accordance with the ordinary rules. 18
company or corporation; If, within the text (though not always made
the limits of his assigned duty, he clear in the opinions), that cases like
has notice, or is charged with notice the following are to be upheld:
of a particular matter or thing, apper- Haas v. Sterabach, 156 111. 44; Rus-
taining to that duty, that notice is no- sell v. Peavy, 131 Ala. 563; Singleton
tice to his principal." v. Bank of Monticello, 113 Ga. 527;
ie Thomson v. Central Pass. Ry. Backman v. Wright, 27 Vt. 187, 65
Co., 80 N. J. L. 328; Bohanon v. Bos- Am. Dec. 187.
ton & Me. R. Co., 70 N. H. 526. " See Sullivan Co. R. Co', v. Con-
" It is, of course, upon this ground necticut Riv. Lum. Co., 76 Conn. 464;
and that of the following clause in Consolidated Ice Mach. Co. v. Keifer,
1421
i8 3 8]
l THE LAW OF AGENCY
[BOOK iv
Where, however, the same person happens to be agent of two princi-
pals not thus interested, notice to him will not necessarily be notice
to both principals. To make it so there must be some duty imposed
upon him to communicate it to the principal sought to be affected. 19
1838. Where an agent stands in such a relation to two
principals (who have not knowingly consented to his double employ-
ment) that his present duty to one conflicts with his present duty to
the other, it is said that notice which he has with reference to the busi-
ness of one principal will not be imputed to the other. 20
134 111. 481, 23 Am. St R. 688; Holden
v. New York, 'etc., Bank/72 N. Y. 286;
Berry v. Rood, 168 Mo. 316; Gale v.
Lewis, 9 Q. B. 730.
19 Where one person is an officer of
two companies, it was held In re
"Hampshire Laiid Co., [18961 2 Ch.
.Div. 743, that knowledge which he
has acquired as officer of one .com-
pany will not be imputed to the other
company unless he has some duty im-
posed upon him to communicate his
knowledge to the company sought to
be affected by the notice, and some
duty imposed upon him by that com-
pany to receive the notice.
.. This holding was followed In In re
Fenwick, [1902] 1 Ch., 507; In re
David Payne & Co., [1904] 2 Ch. 608;
"where two companies have the same
person as director, and enter into
dealings with each other, the knowl-
edge of the common director cannot
He attributed to either company in a
transaction In which he did not rep-
resent it." Martin v. South Salem
Land Co., 94 Va. 28; Benton v, Ger-
man Am. Nat. Bank, 122 Mo. 332.
Where there is a common agent
whose duty It would be on one side
to give and on the other to receive
notice, notice to him will be imputed.
Mason v. United Press, 94 N. Y. App.
Div. 617.
20 In Constant v. The University of
Rochester, 111 N. Y. 604, 7 Am. St.
Rep. 769, 2 L. R. A. 734, an agent act-
ing for Constant had taken a mort-
gage for-him which it was the agent's
duty to promptly put upon record.
Instead of recording this mortgage.
'
however, he left it In his safe,
through what was claimed to be an
oversight. Some months later, but
while this mortgage was still in his
safe, and while he owed a constant
and present duty to have it recorded,
he acted for the university in taking
another mortgage, supposed by the
university to be a first mortgage upon
the same premises. This second mort-
gage was also left with the agent to
be recorded, and it was recorded. For
a short period, therefore, the agent
had in his hands two unrecorded
mortgages and owed to each princi-
pal the duty to record his first so as
to secure priority. It was urged that
the notice which the agent had of the
first mortgage, though unrecorded,
should be imputed to the university
and that therefore its mortgage was
subordinate to the first one. But the
court said that it could not be im-
puted, though it was not necessary to
decide it.
Compare Rolland v. Hart, L. R. 6
Ch. 678, where a solicitor induced a
client to loan money upon a mortgage
on certain lands and soon afterward
induced another client to do the
same without advising him of the
first. The second mortgage was first
recorded. Held, subject to the first.
The solicitor does not appear to have
expressly undertaken to record .either
mortgage.
In Pursley v. Stahley, 122 Ga. 362,
A, an illiterate person, owed X, who
had been her attorney, $50. At his
request and to enable him to get the
money,. A consented to give a note
1422
CHAP. V] ' LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1839,
If, however, anything more is meant by- this than one of the excep-
tions already considered, it is believed to be unfounded and not to be
approved.
1839. Where such an agent attempts dealings between
his two principals (both not having consented thereto) either may, in
accordance with well settled rules, repudiate the dealings. If, however,
either one, instead of repudiating, elects to affirm the transaction and
seeks to acquire or retain a benefit from it after knowledge of the facts,
he must take the benefit subject to the means by which it was acquired.
This is frequently exemplified in the cases already cited in which such
an agent, for his own purposes, abstracts from one principal and at-
tempts to convey to the other neither one being represented by any
other agent : if the latter principal claims the benefit of the act he must
take it subject to his agent's knowledge. If A, being the agent of X
and also of Y, and being indebted to Y, abstracts bonds from X and
receives them for Y as security for that debt, then, though when he
attempts to transfer them he may be acting as agent for X, yet when
he attempts to receive them and acquire title to them he is acting as
agent for Y. Y did not act in person, no one else than A acted for
him, if Y has obtained any title he obtained it through A, and he must
be charged with the knowledge his agent had at the time.
1840. Two agents of same principal. Where two or more per-
sons are jointly acting as agents for one principal, with reference to
the same subject-matter, notice to any one of them would be ordinarily
deemed notice to the principal within the rules already considered. 21
for that amount. X fraudulently held that this would not be imputed
made the note for $500 and A signed to client Y, who subsequently acted
ft. The note was made payable to B, with B respecting the same subject
who had money to lend and who was matter, B having actually no notice
also a client of X. The latter ob- of what A knew. In Phoenix Ins. Co. .
tained the money on the note from B v. Flemming, 65 Ark. 54, 39 L. R. A.
and kept it. Held, that B was not 789, 67 Am. St. R. 900, where two
chargeable with notice of the fraud partners were insurance agents and
of X. The court said that X was one of them issued a policy contain-
really not the agent of either A or B, ing a provision against the keeping
but, if he were agent, he was as much of fire-works, the fact that the other
the agent of A as of B. partner later happened to purchase
21 Bank of United States v. Davis, fire works for his own individual use
2 Hill (N. Y.), 451; Brown v. at the store does not charge the com-
Oattis, 55 Ga. 416. In Witten- pany with notice, where he never
brock v. Parker, 102 Cal. 93, 41 acted with reference to this insnr-
Am. St. Rep. 172, 24 L. R. A. ance, or knew that this policy had
197, where A and. B were lawyers and been issued.
partners, and A acting for client X Suretyship Imputing knowledge
acquired certain knowledge, it was l>y one agent of default of another
1423
1841]
THE LAW OF AGENCY
[BOOK iv
But where the agents are several, and only one acts, the knowledge of
the others who did not act would not ordinarily be imputed.
Where two agents are successively employed to accomplish the same
object, it has been held that notice to, or knowledge by, one of them
only, is not notice to the principal, where the one to whom notice is
given is not the one who finally accomplishes the object, but he has
ceased to act before that time and he did not impart the notice or
knowledge to his principal. 22
This rule, however, must be subject to the qualification that if the
first agent were such an one that notice to him woud be at once deemed
notice to his principal, the fact that he subsequently ceased to act would
not change that result.
1841. Notice to subagent when notice to principal. The ques-
tion whether notice to a subagent is notice to the principal depends
upon considerations already stated. 23 If the subagent be one whom
the agent was expressly or impliedly authorized to appoint, he is to
be deemed to be the agent of the principal, and notice to such subagent
would be notice to the principal as in the case of other agents. 84 But
agent to release a surety. In a num-
ber of cases, put upon varying
grounds, it has been held that a
surety company which has given bond
for the conduct of one agent is not
released by the fact that other agents
of the same principal subsequently
learn that the agent in question is
violating the terms of the bond but
do not report it to the principal.
Fidelity Co. v. Courtney, 186 U. S.
342, 46 L. Ed. 1193; Fidelity Co. v.
Gate City Nat Bank, 97 Ga. 634, 33
L. R. A. 821, 54 Am. St. R. 440; Pitts-
burgh, etc., R. Co. v. Shaeffer, 59 Pa.
350.
22 In Blackburn v. Vigors, 17 Q. B.
Div. 553, the plaintiff had instructed
a broker to effect for him a reinsur-
ance upon an over-due ship. While
this broker was acting on behalf of
the plaintiff, he received information
of a material fact tending to show
that the ship was lost. He did not
communicate this information to the
plaintiff and failed to effect the insur-
ance. Afterwards the plaintiff em-
ployed another broker who obtained
insurance from the defendant upon
the ship, lost or not lost. Subsequent
events showed that the ship had in
fact been lost some time before the
plaintiff attempted to 'effect the rein-
surance, but neither the plaintiff nor
the broker who finally obtained the
insurance knew of, or concealed from
defendant, any fact tending to show
that the ship was lost. It was held
by the Court of Appeal, that the
knowledge of the first broker must be
imputed to the plaintiff and that he
could not recover on the policy, cit-
ing Fitzherbert v. Mather, 1 T. R. 12;
Gladstone v. King, 1 M. & S. 35, and
Proudfoot v. Montefiore, L. R. 2 Q. B.
511.
This case was, however, reversed
by the House of Lords in 12 App.
Cases, 531. Lord Halsbury said:
"When a person is the agent to know,
his knowledge does bind the princi-
pal. But in this case I think the
agency of the broker had ceased be-
fore the policy sued upon was ef-
fected."
23 Ante, 332, 333.
2*Merritt v. Huber, 137 Iowa, 135;
Bates v. American Mtg. Co., 37 S. C.
1424
CHAP. VJ LIABILITY OF PRINCIPAL TO THIRD PARTIES
if the subagent be the agent of the agent merely, then there is no priv-
ity between him and the principal, and his knowledge cannot be im-
puted to the principal. 25
1842. Notice of what sort of facts imputed Agent's own de-
fault. The notice or knowledge which is to be imputed to the prin-
cipal is ordinarily that of extrinsic facts relating to the subject matter
of the agency as distinguished from the fact that the agent in acting
has violated his duty or done an unauthorized act. 20 Such acts would
88, 21 L. R. A. 340; Carpenter v. Ger-
man-Am. Ins. Co., 135 N. Y. 298;
Bergeron v. Pamlico Ins. & B. Co., Ill
N. C. 45; Phoenix Ins. Co. v. Ward, 7
Tex. Civ. App. 13; Goode v. Georgia
Home Ins. Co., 92 Va. 392, 53 Am. St.
Rep. 817, 30 L. R. A. 842; Arff v.
Star Fire Ins. Co., 125 N. Y. 57, 21
Am. St. Rep. 721, 10 L. R. A. 609.
25 Hoover v. Wise, 91 U. S. 308, 23
L. Ed. 392; Boyd v. Vanderkemp, 1
Barb. Ch. (N. Y.) 273; Waldman v.
North British Ins. Co., 91 Ala. 170, 24
Am. St. Rep. 883.
26 See Shepard & Morse Lumber Co.
v. Eldridge, 171 Mass. 516, 68 Am. St.
Rep. 446, 41 L. R. A. 617. In Fidelity
Co. v. Courtney, 186 U. S. 342, 46 L.
Ed. 1193, it is said that the rule that
knowledge of an agent is in law the
knowledge of his principal, "is in-
tended for the protection of the other
party (actually or constructively) to
a transaction for and on account of
the principal had with such agent.
In the very nature of things, such a
principle does not obtain in favor of
a surety who has bonded one officer
of a corporation, so as to relieve him
from the obligations of his bond, by
imputing to the corporation knowl-
edge acquired by another employee
subsequent to the execution of the
bond (and, from negligence or wrong-
ful motives, not disclosed to the cor-
poration) of a wrong committed by
the official whose faithful perform-
ance of duty was guaranteed by the
bond." ( See other cases, 1840.)
But the real reason in this case
was that the agent who had the no-
tice owed no duty to report it as
against the other agent; and, with
deference, it is believed that the
statement above quoted is too wide.
Agent's knowledge of his own con-
dition. Whether the agent's knowl-
edge of his own condition, e. g., that
he has, or has been exposed to, a con-
tagious disease, can be imputed to his
principal so as to make him liable for
its communication to the principal's
patrons, e. g., passengers dealing with
a ticket agent who is infected, is dis-
puted. It was denied in Long v. Chi-
cago, etc., R. Co., 48 Kan. 28, 30 Am.
St. Rep. 271, 15 L. R. A. 319, but af-
firmed in Missouri, etc., R. Co. v.
Raney, 44 Tex. Civ. App. 517.
Knowledge by agent of His own
forgeries Duty to examine the prin-
cipal's oanJc vouchers. Forgery by
an agent is not ordinarily an act for
which the principal is responsible.
See Weisser v. Denison, 10 N. Y. 68,
61 Am. Dec. 731; Hardy v. Chesa-
peake Bank, 51 Md. 562, 34 Am. Rep.
325. Whether a principal owes the
bank the duty to examine his bank
vouchers with a view to the detection
of a possible forgery, is a question
upon which the authorities are not
agreed. That there is no such duty,
see Weisser v. Denison, 10 N. Y. 68,
61 Am. Dec. 731; Welsh v. German
American Bank, 73 N. Y. 424, 29 Am.
Rep. 175; Frank v. Chemical Nat.
Bank, 84 N. Y. 209, 38 Am. Rep. 501;
Shipman v. Bank of N. Y., 126 N. Y.
318, 22 Am. St. Rep. 821, 12 L. R. A.
791; Manufacturing Bank v. Barnes,
65 111. 69, 16 Am. Rep. 576. But com-
pare Critten v. Chemical Nat. Bank,
171 N. Y. 219, 57 L. R. A. 529.
9
1425
1843]
THE LAW OF AGENCY
[BOOK iv
ordinarily be done under such circumstances of adverse interest that
notice of them would be non-imputable under the second exception al-
ready discussed ; 27 but where the purpose is to impute them and then
draw an inference of ratification or acquiescence, the attempt is met
by the sound rule of ratification that ratification with knowledge must
be based upon actual knowledge and will not be predicated upon a
mere fiction like that of imputed knowledge.? 8
1843. These rules apply to corporations Notice to officer or
agent. These rules apply with particular force to the case of cor-
porations. From the very nature of the case, the executive functions
of a corporation can only be exercised through the medium of the cor-
porate agents to whom and through whom all notice to the corpora-
tion must come. Notice to the officers and agents of a corporation
therefore, in reference to those matters to which their authority re-
lates, is, in general, notice to the corporation. 29
That there is such a duty, see Dana
v. National Bank, 132 Mass. 156;
First Nat Bank v. Allen, 100 Ala.
476, 46 Am. St. Rep. 80, 27 L. R. A.
426; Leather Mfrs. Nat. Bank v. Mor-
gan, 117 U. S. 107, 29 L. Ed. 819.
Where the duty is held to exist and
the principal confides the perform-
ance of the duty to an agent and this
agent commits the forgery, the duty
is not performed. Many of the cases
say that in this instance the knowl-
edge of the examining agent of his
own forgery is imputed to the prin-
cipal. See First Nat. Bank v. Allen,
100 Ala. 476, 46 Am. St. Rep. 80, 27
L. R. A. 426; Dana v. National Bank,
132 Mass. 156; First Nat. Bank v.
Richmond Elec. Co., 106 Va. 347, 7
L. R. A. (N. S.) 744. But it would
seem that the question of notice is
not material in these cases, which
may well rest on the non-perform-
ance of the duty. See Myers v.
Southwestern Nat. Bank, 193 Pa. 1.
27 Thus in American Surety Co. v.
Pauly, 170 U. S. 133, 42 L. Ed. 977,
it is said: "The presumption that
the agent informed his principal of
that which his duty and the inter-
ests of his principal required him to
communicate does not arise where
the agent acts or makes declarations
not in execution of any duty that he
owes to the principal, nor within
any authority possessed by him, but
to subserve simply his own personal
ends or to commit some fraud
against the principal. In such cases
the principal is not bound by the
acts or declarations of the agent un-
less it be proved that he had at the
time actual notice of them, or having
received notice of them, failed to
disavow what was assumed to be
said and done in his behalf." See
also Thomson v. Central Pass. Ry.
Co., 80 N. J. L. 328; Brown v. Har-
ris, 139 Mich. 372'; Traders Bank v.
Black, 108 Va. 59; Shepard & Morse
Lumber Co. v. Eldridge, 171 Mass.
516, 68 Am. St Rep. 446, 41 L. R. A.
617.
28 See ante, 403, 407.
There is language in United States
Fidelity Co. v. Shirk, 20 Okla. 576,
which seems contrary and from
which the present writer is con-
strained to dissent, though the con-
clusion can probably be sustained
upon the ground that the company
actually knew that only one agent
was signing the bonds (p. 579).
2 Holden v. New York, etc., Bank,
72 N. Y. 286; Union Bank v. Camp-
bell, 4 Humph. (Tenn.) 394; Waynes-
1426
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1844
But the peculiar characteristics of corporations render it imperative
that this rule be kept within its proper limits. Not every person who
is a member of a corporation, or who is connected with it, is its agent.
Nor is every agent to be deemed to be an agent for all purposes. The
magnitude of their business and the extent of territory over which their
operations extend require, in the case of many corporations, that their
business be divided into several departments, each with its own com-
plement of superior and inferior agents, and that' agents be employed
in various capacities, at different points. Attention/ then, must be
given to the questions whether the assumed agent is, in reality, the
agent of the corporation in the given transaction/and, if so, does the
notice or knowledge relate toma'ttejg^TtHin 1 the scope of his authority. ^^
S* 1844. -~Wriat" "officer or agent. The officer oFlagent of
the corporation may be of such a general, managerial, alter ego, sort
that notice to him concerning matters in which the corporation is inter- c^
ested niay be notice to it nierely_J^yjrtjii^^ though _
such cases are not common.
The president of a BanTT or other corporation for 'example, is not
usually per ^ such an agent, although he undoubtedly may be made
such. 81 Usually notice to him is notice to the corporation, as in the
case of other agents, only when it concerns something which falls
within the sphere of his authority or concerning which he acts as agent
with the knowledge in his mind. Notice or knowledge coming to him
in his private and unofficial capacity, concerning matters in which he
does not act as agent of the corporation, is not imputed to it. 82 The
ville Nat. Bank v. Irons, 8 Fed. Rep. officer and agent and the sole stock-
1; Hart v. Farmers', etc., Bank, 33 holder with the exception of one per-
Vt. 252; Mihills Mfg. Co. v. Camp, 49 son who was non-resident and inac-
Wis. 130; Webb v. Graniteville Mfg. tive. Lea v. Iron Belt Merc. Co., 147
Co., 11 S. C. 396, 32 Am. Rep. 479; Ala. 421, 119 Am. St. Rep. 93, 8 L. R.
Farmers', etc., Bank v. Payne, 25 A. (N. S.) 279. To same effect: An-
Conn. 444, 68 Am. Dec. 362; Wilson derson v. Kinley, 90 Iowa, 554;
v. McCullough, 23 Pa. 440, 62 Am. Huron Printing Co. v. Kittleson, 4
Dec. 347; Fairfleld Savings Bank v. S. Dak. 520; Steam Stonecutter Co.
Chase, 72 Me. 226, 39 Am. Rep. 319; v. Myers, 64 Mo. App. 527.
Maryland Trust Co. v. National Me- 31 Thus in Cragie v. Hadley, 99 N.
chanics Bank, 102 Md. 608; Petersen Y. 131, 52 Am. Rep. 9, it was found
v. Elholm, 130 Wis. 1; Scripture v. that "the entire control and manage-
Francistown Soapstone Co., 50 N. H. ment of the bank was in fact in-
571; Mechanics Bank v. Schaumburg, trusted to and conducted by its presi-
38 Mo. 228. dent."
s This is said to be necessarily and 32 Peoples Bank v. Exchange Bank,
particularly true where the agent 116 Ga. 820, 94 Am. St. Rep. 144;
who receives the notice is practically Platt v. Birmingham Axle Co., 41
the corporation itself, being the only Conn. 255; McCalmont v. Lanning,
1427
1845] THE LAW OF AGENCY [BOOK IV
same would be still more true perhaps of the vice-president. 88 Cashiers
of banks have usually a wide range of authority respecting financial
transactions, and notice to them in transactions in which they act is im-
puted to the bank. 34 Where the cashier is made the chief executive of-
ficer and manager of the bank, his authority to receive notice is corre-
spondingly increased. 85
Where the officer or agent is not thus one to whom notice may be
given because of his position, it must, as in other cases, be notice or
knowledge of one who is agent with reference to the subject matter to
which it relates^jj^*
1845. Ordinary exceptions apply here. Regard must
also be had to the exceptions to the general rules which have been pre-
viously considered. Thus, where an officer or agent of the corporation
himself deals openly as a party in interest, with the corporation, selling
it property, borrowing money of it, discounting notes with it, and the
like, the corporation will not be charged with notice of the informa-
tion which he possesses relating to the transaction and which he does
not disclose. In such a case the assumed agent is in reality the adverse
party, and cannot be treated as an agent at all. He is seeking to pro-
mote and protect his own interests, and it is not to be expected that he
can or will at the same time protect and advance those of the corpora-
tion. 37 The same rule applies, as in the other cases already discussed,
84 C. C. A. 138, 154 Fed. 353; Smith 34 See Birmingham Trust Co. v.
v. Carmack (Tenn. Ch.), 64 S. W. Louisiana Nat. Bank, 99 Ala. 379;
372; Mathis v. Pridham, 1 Tex. Civ. Loring v. Brodie, 134 Mass. 453;
App. 58; Curtice v. Crawford County Black Hills Nat. Bank v. Kellogg, 4
Bank, 110 Fed. 830. S. Dak. 312; Niblack v. Cosier, 26 C.
But where he acts for the corpora- C. A. 16, 80 Fed. 596; Cooper v. Hill,
tion in the matter with the knowl- 36 C. C. A. 402, 94 Fed. 582. ^
edge in his mind it is imputed. This was the fact in Bank v. Pen-
Louisville Trust Co. v. Louisville, land, 101 Tenn. 445.
etc., R. Co., 22 C. C. A. 378, 75 Fed. 36 McDermott v. Hayes, 116 C. C. A. L-
433; Willard v. Denise, 50 N. J. Eq. 553, 197 Fed. 129.
482, 35 Am. St. Rep. 788. But see 37 Wickersham v. Chicago Zinc Co.,
Lanning v. Johnson, 75 N. J. L. 259. 18 Kan. 481, 26 Am. Rep. 784; First
^Very wide range is given to the Nat. Bank of Hightstown v. Christo-
president of the bank to receive no- pher, 40 N. J. L. 435, 29 Am. Rep.
tice in Port Jervis v. First National 262; Innerarity v. Merchants' Nat.
Bank, 96 N. Y. 550. Bank, 139 Mass. 332, 52 Am. Rep. 710;
Knowledge by the treasurer of the Washington Bank v. Lewis, 22 Pick,
acts of the president was imputed (Mass.) 24; Winchester v. Baltimore,
in Hotchkiss, etc., Co. v. Union Nat. etc!, R, R., 4 Md. 231; Louisiana State
Bank, 15 C. C. A. 284, 68 Fed. 76. Bank v. Senecal, 13 La. 525; Seneca
33 Aycock Bros. Lumber Co. v. First County Bank v. Neass, 5 Den. (N. Y.)
National Bank, 54 Fla. 604; Holm v. 329; National Bank of Commerce v.
Atlas Nat. Bank, 28 C. C. A. 297, 84 Feeney, 9 S. Dak. 550, 46 L. R. A.
Fed. 119. 732; Commercial Bank v. Burgwyne,
LIABILITY OF PRINCIPAL TO THIRD PARTIES
[ 1847
CHAP. Vj
where the corporate agent, though not acting openly as the adverse
party, is secretly engaged in furthering some fraudulent scheme ad-
verse to his principal's interest, and which would destroy the agency
relation between them. 38
1847. These cases, however, are to be distinguished
from those in which the agent, for some purpose of his own, fraudu-
lently assigns, conveys or appropriates to the use of his principal the
property of another. In such a case, if the principal after knowledge
of the fraud seeks to appropriate and retain the benefit derived from
the agent's fraud, he will ordinarily be held to have ratified the act
and to have assumed responsibility for the means through which it
was brought about. This question has already been fully considered
in a preceding section. 39
110 N. C. 267, 17 L. R. A. 326; Rob-
erts v. Hughes, (Vt.) 83 Atl. 807;
Lee v. Elliott, 113 Va. 618; Arlington
Brewing Co. v. Bluethenthal, 36 App.
Cas. (D. C.) 209, Ann. Gas. 1912, C.
294; Whittle v. Vanderbilt Mining
Co., 83 Fed. 48; First Nat Bank v.
German Am. Ins. Co., N. Dak. ,
134 N. W. 873; Findley v. Cowles, 93
Iowa, 389; First Nat Bank v. Foote,
12 Utah, 157; American 'Nat. Bank v.
Ritz, 70 W. Va. 409, 40 L. R. A. (N.
S.) 156; Merchants Nat. Bank v. Lov-
ett, 114 Mo. 519, 35 Am. St. Rep. 770;
Seaverns v. Presbyterian Hospital,
173 111. 414, 64 Am. St Rep. 125; Dorr
v. Life Ins. Co., 71 Minn. 38, 70 Am.
St. Rep. 309; National Bank v.
Feeney, 9 S. Dak. 550, 46 L. R. A.
732; First Nat. Bank v. Tompkins, 6
C. C. A. 237, 57 Fed. 20; Third Nat.
Bank v. Harrison, 10 Fed. 243. Thus
where the general superintendent of
a corporation conveyed to it, with
warranty, lands which he had pur-
chased in his own interests and
which were subject to a prior lease,
of which he had actual knowl-
edge, it was held that his knowl-
edge could not be imputed to
the corporation. Wickersham v. Chi-
cago Zinc Co., 18 Kan. 481, 26 Am.
Rep. 784. So where the president of
a corporation conveyed to it land
subject to a prior equity against him-
self, the corporation was held not
chargeable with his knowledge.
Frenkel v. Hudson, 82 Ala. 158, 60
Am. Rep. 736.
as See ante, 1815 et seq.
3 See ante, 1818, note 84. Thus
if the cashier or other officer of a
bank who is secretly a defaulter
takes or uses the money of A with-
out authority to make good or cover
up his default, the bank, if it seeks
to retain the money after notice of
the fraud will be held charged with
the cashier's fraud and can acquire
no title against A. Atlantic Cotton
Mills v. Indian Orchard Mills, 147
Mass. 268, 9 Am. St Rep. 698. So a
bank is chargeable with notice of
facts vitiating the title to securities
obtained by the collusion of its teller
with an officer of another bank, by
certifying as "good" the check of an
irresponsible person which is taken
by such other bank. Atlantic Bank
v. Merchants' Bank, 10 Gray (Mass.),
532. So where the treasurer of a
town, being also cashier of a bank,
gave a note as treasurer of the town
to raise money for his private use,
and discounted the note as cashier,
the bank was held charged with
knowledge of his fraud. First Nat.
Bank of New Milford v. Town of
New Milford, 36 Conn. 93. So where
the cashier of a bank, who was also
treasurer of another corporation, de-
posited securities of the latter to ob-
1429
1848] THE LAW OF AGENCY [BOOK IV
1848. When notice must be acquired. It has been said
in many cases that notice to an officer or agent of a corporation will
not be notice to the corporation unless such notice was received while
the officer or agent in question was actually acting as such ; or, to put
it in a- different form, that the corporation will not be charged with
notice which comes to its officer or agent while the latter was acting
in his private or individual capacity. 40 This question deserves a some-
what closer analysis than it ordinarily receives. As has already been
pointed out, it is held by some courts, proceeding upon the theory of
the legal identification of the principal with his agent, that notice re-
ceived prior to the commencement of the agency is not to be imputed
to the principal, because at that time it was impossible that they
should be identified. Certain of the cases referred to can be dis-
posed of upon this ground, and are entirely consistent with it. The
same statement, however, is riot infrequently made by courts which
base the imputation of notice upon the agent's duty to communicate,
and these are the cases which chiefly require consideration. The ex-
planation here is simple and consistent. If information comes to an
agent while he is actually acting about the subject-matter of his
agency, and the information relates to it, such information is imputa-
ble to the principal under either rule. This is notice per se, and if is
immaterial whether the agent heeds it or forgets it or not. If, how r
ever, the information comes to him while he is not actually engaged
in the exercise of his agency, even though it be conceded that he was
agent at the time, the question whether it is to be imputed to his princi-
pal will depend upon a variety of circumstances. Under the second
tain a loan for the use of the former 72 Me. 226, 39 Am. Rep. 319; General
bank. Fishkill Savings Inst v. Bost- Ins. Co. v. United States Ins. Co., 10
wick, 19 Hun (N. Y.), 354. See also, Md. 517, 69 Am. Dec. 174; Washing-
Holden v. New York, etc., Bank, 72 ton Bank v. Lewis, 22 Pick. (Mass.)
N. Y. 286. But see Hummell v. Bank 24; First Nat. Bank v.' Christopher,
of Monroe, 75 Iowa, 689. 40 N. J. L. 435, 29 Am. Rep. 262;
*o People's Bank of Talbotton v. Casco Nat. Bank v. Clark, 139 N. Y.
Exchange Bank of Macon, 116 Ga. 307, 36 Am. St Rep. 705; Westfleld
820, 94 Am. St Rep. 144; The Texas Bank v. Cornen, 37 N. Y. 320, 93 Am.
Loan Agency v. Taylor, 88 Tex. 47; Dec. 573; Bank of U. S. v. Davis, 2
Reid v. Bank of Mobile, 70 Ala. 199; Hill (N. Y.), 451; Bank of Pittsburg
Brennan v. Emery, etc., Dry Goods v. Whitehead, 10 Watts (Pa.), 397, 36
Co., 99 Fed. 971; Grayson Co. Nat. Am. Dec. 186; Kearney Bank v. Fro-
Bank v. Hall, 91 S. W. 807 (Tex. Civ. man, 129 Mo. 427, 50 Am. St. Rep.
App.); Farmers, etc., Bank v. Payne, 456; Benton v. German American
25 Conn. 444, 68 Am. Dec. 362; Lyne National Bank, 122 Mo. 332; Penfield
v. Bank of Ky., 5 J. J. Marsh. (Ky. ) Invest. Co. v. Bruce, 132 Mo. App.
545; Mercier v. Canonge, 8 La. Ann. 257.
37; Fairfield Savings Bank v. Chase,
1430
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1849
theory, the question at once arises, was it his duty to communicate it to
his principal ? This will depend upon two considerations, i. Whether
he is such a general, managerial officer that notice to him is notice
to the corporation merely by virtue of his position ; and 2. Whether
though it is not imputable per se, it becomes notice because the
agent afterward acts with reference to the subject matter with the
knowledge present in his mind. Suppose an agent, who regularly and
habitually acts, during business hours, with reference to a certain sub-
ject, during the evening, while away from his place of business and at
his home or in some social gathering, receives in his "private and in-
dividual capacity" information pertinent and material to the subject
upon which he has been acting during the day and upon which he re-
sumes action at the opening of business on the morrow, with this in-
formation actually in his mind. Would it be contended, under either
rule, that this information would not be imputed to his principal?
1849. Suppose that the president of a bank, while ab-
sent from the bank and engaged upon his private affairs, learns some-
thing concerning X. X is not at that time a customer of the bank,
and, so far as the president knows, neither has nor contemplates hav-
ing any business relations or dealings with it. Suppose, however, that
the next day X, without the knowledge of the president, and with ref-
erence to matters not within the president's authority, has dealings,
with the bank through its cashier or board of directors, to which deal-
ings the information received by the president would be material.
Would it now be contended that such information would be imputed?
Obviously it could not be, because it did not come to an agent who
had any authority or duty with reference to the subject-matter to
which it related, and there was nothing to suggest to him that it was
a matter of any consequence to his principal or to impose any duty to
communicate it. The result would not have been different if the im
formation had come to the president while he was sitting in his office
at- the bank and actually transacting its business, if, as before, there
was nothing to suggest that it was a matter in which he or the bank
had any interest. 41 Suppose, however, that though, when the presi-
dent received this information, it seemed of no importance to the
bank, he should be called upon next day, or at any other time while
the information was actually fresh in his mind, to deal with X for the
bank with reference to a matter to which the information was material.
Would it be doubted now that the information would be imputed to the
See Washington Nat. Bank v. Pierce, 6 Wash. 491, 36 Am. St. Re-p. 174.
1431
1850, 1851] THE LAW OF AGENCY [BOOK IV
bank? Suppose still further, in the latter case, that because, when
he received it, it seemed to be a matter of no interest to him or to his
principal, the president paid little or no attention to it ; or that, for the
same reason, it soon passed from his mind, and later, when he was
unexpectedly called upon to act, the information had actually been for-
gotten. Would it now be imputed ? It is assumed that it would not be.
1850. The question, then, in all these cases, would seem
to be, not whether the information was received by the agent in his
private or individual capacity, but whether it was received at such
time and under such circumstances as to impose upon him the duty
to give heed to it or whether he afterwards acted with it present in
his mind. In the former case it is notice in itself. On the other hand,
notice or information coming to an agent of a corporation in his pri-
vate and individual capacity concerning a matter as to which he had
no authority or duty to act, or as to which he never did in fact act,
would not be imputed to the corporation, even though the corpora-
tion, through some other agent, who did not have the information,
should act upon the subject-matter to which it related. So notice com-
ing to an agent, even while acting generally in the execution of his
agency, but which had no such present relevancy or importance as to
impose a duty to communicate it, would not be imputed. 42 But if, in
any of these cases, the agent later acted as such upon some matter to
which that notice was relevant and with the knowledge still present
in his mind, it would then be notice.
1851. When notice to director is notice to corporation.
The question frequently arises whether notice to a director of a corpo-
ration is notice to the corporation. In dealing with this question, re-
gard must be had to the scope and nature of the director's powers.
The directors of a corporation are not individually its agents for the
transaction of its ordinary business, which is usually delegated to its
executive officers, such as its president, secretary, treasurer and the
like. Directors are, it is true, possessed of extensive powers even to
the extent of absolute control over the management of its affairs, but
these powers reside in them as a board and not as individuals, and only
when acting as a board in their collective capacity are they the repre-
sentatives of the corporation. Notice to them when assembled as a
See McDennott v. Hayes, 116 ence to that matter with the informa-
C. C. A. 553, 197 Fed. 129. But tion still in his mind, it would then
though the information was not no- be imputed. Pennoyer v. Willis, 26
tice when acquired, if the agent is Ore. 1, 46 Am. St. Rep. 594.
later called upon to act with refer-
1432
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES
[ 1852
board would undoubtedly be notice to the corporation. 43 So notice
to an individual director which is in fact communicated to the board
by him is notice to the corporation, for this thus becomes notice to the
board. 44
1852. But it is well settled, as a general rule, that the
mere private knowledge of one or more individual directors concern-
ing any business of the corporation (as to which such director has
then no special duty or authority to act, or upon which he does not
subsequently act with such knowledge in his mind, and which he does
not communicate to the board) is not to be imputed to the corpora-
tion. 45 This rule, however, is subject to certain exceptions resting
upon obvious principles. Thus it has been said that notice communi-
cated to a director officially for the express purpose of being com-
municated to the board is notice to the board, although he may have
failed to do so, as it is clearly his duty to so communicate it and he
ought to be conclusively presumed to have done his duty. 48 Whether
this is true, however, may perhaps be open to question.
First National Bank of Rights-
town v. Christopher, 40 N. J. L. 435,
29 Am. Rep. 262; Fulton Bank v.
New York, etc., Canal Co., 4 Paige
(N. Y.), 127; Toll Bridge Co. v. Bets-
worth, 30 Conn. 380; In re Marseilles,
etc., Ry. Co., 7 Ch. Ap. 161.
44 Farmers, etc., Bank v. Payne, 25
Conn. 444, 68 Am. Dec. 362; Bank of
Pittsburgh v. Whitehead, 10 Watts
(Pa.), 397, 36 Am. Dec. 186.
45 Ayers v. Green Gold Mining Co.,
116 Cal. 333; Lothian v. Wood, 55
Cal. 159; Murphy v. Gumaer, 12 Colo.
App. 472; Farmers, etc., Bank v.
Payne, 25 Conn. 444, 68 Am. Dec. 362;
Farrel Foundry v. Dart, 26 Conn.
376; Home Bank v. Peoria Ag'l So-
ciety, 206 111. 9, 99 Am. St. Rep. 132;
Lyne v. Bank of Ky., 5 J. J. Marsh.
(Ky.) 545; Louisiana State Bank v.
Senecal, 13 La. 525; Mercier v.
Canonge, 8 La. Ann. 37; Fairfleld
Savings Bank v. Chase, 72 Me. 226,
39 Am. Rep. 319; B. & O. R. R. Co. v.
Canton Co., 70 Md. 405; Winchester
v. Baltimore, etc., R. R. Co., 4 Md.
231; General Ins. Co. v. United
States Ins. Co., 10 Md. 517, 69 Am.
Dec. 174; United States Ins. Co. v.
Shriver, 3 Md. Ch. 381; Sawyer v.
Pawners Bank, 6 Allen (Mass.), 201;
Washington Bank v. Lewis, 22 Pick.
(Mass.) 24; Kearney Bank v. Fro-
man, 129 Mo. 427, 50 Am. St. Rep.
456; Yello.w Jacket Silver Min. Co.
v. Stevenson, 5 Nev. 224; First Nat.
Bank of Hightstown v. Christopher,
40 N. J. L. 435, 29 Am. Rep. 262;
Casco Nat. Bank v. Clark, 139 N. Y.
307, 36 Am. St. Rep. 705; Merchants
Nat. Bank v. Clark, 139 N. Y. 314, 36
Am. St. Rep. 710; Westfleld Bank v.
Cornen, 37 N. Y. 320, 93 Am. Dec.
573; Bank of U. S. v. Davis, 2 Hill
(N. Y.), 451; National Bank v. Nor-
ton, 1 Hill (N. Y.), 572; Atlantic
Bank v. Savery, 18 Hun, 36, s. c. 82
N. Y. 291; Getman v. Second National
Bank, 23 Hun (N. Y.), 498; La Farge
Fire Ins. Co. v. Bell, 22 Barb. (N. Y.)
54; Wilson v. McCullough, 23 Pa.
440, 62 Am. Dec. 347; Bank of Pitts-
burg v. Whitehead, 10 Watts (Pa.),
397, 36 Am. Dec. 186; Custer v.
Tompkins Co. Bank, 9 Pa. 27; Ward-
law v. Troy Oil Mill, 74 S. C. 368, 114
Am. St. Rep. 1004; Continental Nat.
Bank v. McGeoch, 92 Wis. 286; Law-
rence v. Holmes, 45 Fed. 357.
46 United States Ins. Co. v. Shriver,
3 Md. Ch. 381; Boyd v. Chesapeake,
1433
1853]
THE LAW OF AGENCY
[BOOK iv
1853. ' ' So it has been held that a corporation is properly
to be charged with information possessed by an individual director,
whether disclosed or not, if, while possessing such knowledge, he acts
with the board and as a member of it, upon the very matter to which
the information relates. 47 In such a case there is the strongest possi-
ble duty resting upon the director to communicate his information to
the board, and it may well be presumed, as against the corporation,
that he has done so. But, in accordance with the exception which has
been heretofore noticed, that the agent will not be presumed to com-
municate information hostile to his own interests, it has been held that
when a director is himself dealing as the other party with the corpo-
ration, the corporation will not be charged with notice of that knowl-
edge possessed by the director which his own interest impelled him to
conceal, 4 * even though he is present but does not act with the board in
etc., Canal Co., 17 Md. 195, 79 Am.
Dec. 646.
See also the case of Tryon v. White,
etc., Co., 62 Conn. 161, 20 L. R. A.
291, where the statement of a director
that he would advise the board about
a certain matter which he did not
do was held admissible. .Two judges
dissented.
47 Beacon Trust Co. v. Souther, 183
Mass. 413; National Security Bank v.
Cushman, 121 Mass. 490; Innerarity
v. Merchants' National Bank, 139
Mass. 332, 52 Am. Rep. 710; Union
Bank v. Campbell, 4 Humph. (Tenn.)
394; Bank of United States v. Davis,
2 Hill (N. Y.), 451; Clerk's Savings
Bank v. Thomas, 2 Mo. App. 367.
48 "A bank or other corporation can
act only through agents, and it Is
generally true, that if a director, who
has knowledge of the fraud or illegal-
ity of the transaction, acts for the
bank, as in discounting a note, his
act is that of the bank and it is af-
fected by his knowledge. National
Security Bank v. Cushman, 121 Mass.
490. But this principle can have no
application where the director of the
bank is the party himself contracting
with it. In such case the position he
assumes conflicts entirely with the
idea that he represents the interests
of the bank. To hold otherwise
might sanction gross frauds by im-
puting to the bank a knowledge those
properly representing it could not
have possessed." Devens, J., in Inne-
rarity v. Merchants' National Bank,
139 Mass. 332, 52 Am. Rep. 710. In this
case A shipped a cargo to B for sale
on A's account, but gave B a bill of
lading in latter's name. B was a di-
rector in defendant's bank. B bor-
rowed a large sum of money of the
bank and, without authority of A,
pledged the bill of lading as security.
B met (though he seems not to have
acted) with the board in approving
the loan but gave the board no notice
of the true ownership of the cargo,
nor did the bank have notice
from any other source. In an action
by the owner of the cargo it was held
that the bank could not be charged
with knowledge of the director's
fraud.
In First National Bank of Hights-
town v. Christopher, 40 N. J. L. 435,
29 Am. Rep. 262, P, a member of a
firm, procured at a bank of which he
was a director, the discount of a note
belonging to the firm, knowing that
the note had been obtained by fraud,
but not disclosing this fact to the
other officers of the bank. The bank
sued upon the note and were allowed
to recover, the court holding that the
1434
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES
[ 1854
reference to it. 49 A director may, also, either by custom, acquiescence
or express appointment, be charged with the performance of certain
corporate duties, in respect to which he is to be regarded like any other
agent of the corporation, and notice to him regarding such matters
will be notice to the corporation. 50
1854. Notice to stockholder not notice to the corpora-
tion. The stockholders of a corporation, as such, are in no sense
the agents of the corporation. They may, of course, be invested, like
other individuals, with representative powers by the corporation, and
would in that event be treated like other agents ; but their mere posi-
tion as stockholders gives them no such authority. Notice to one or
a part of the individual stockholders is, therefore, not notice to the
corporation unless actually communicated to it. 51
knowledge of the director could not
be imputed to the bank. [But as to
this case, see the case of Lanning v.
Johnson, 75 N. J. L. 259.] To same
effect: Commercial Bank v. Cunning-
ham, 24 Pick. (Mass.) 270, 35 Am.
Dec. 322; National Security Bank v.
Cushman, 121 Mass. 490; Frost v.
Belmont, 6 Allen (Mass.), 152. See
also, Atlantic Cotton Mills v. Indian
Orchard Mills, 147 Mass. 268, 9 Am.
St. Rep. 698.
In Mayor, etc. v. Tenth Nat. Bank,
111 N. Y. 446, the commissioners for
the building of the court house fraud-
ulently raised checks, and the de-
fendant paid them. Three of the
commissioners were directors of the
bank, but did not act for the bank
in this matter, Bliss, its president,
representing it solely, and he was
innocent of the fraud. The court re-
fused to charge the bank with the
knowledge of the fraudulent raising
of the checks, because the directors
of the bank, who participated in the
fraud, had such knowledge. English-
American Loan Co. v. Hiers, 112 Ga.
823; Martin v. South Salem Land
Co., 94 Va. 28; Hatch v. Ferguson, 15
C. C. A. 201, 66 Fed. 668.
4 Innerarity v. Merchants' Na-
tional Bank, 139 Mass. 332, 52 Am.
Rep. 710; Custer v. Tompldns County
Bank, 9 Pa. 27; Terrell v. Branch
Bank of Mobile, 12 Ala. 502.
United States Bank v. Davis, 2 Hill
(N. Y.), 451; and Union Bank v.
Campbell, 4 Hump. (Tenn.) 394, are
sometimes thought to be contra, but
there the director acted in the first
case, and in the second he withdrew
for the moment, but this was thought
to be colorable. These cases have
been criticised and denied. See In-
nerarity v. Merchants' National
Bank, supra. They are cited with
approval in Tagg v. Tennessee Na-
tional Bank, 9 Heisk. (Tenn.) 479.
50 Smith v. South Royalton Bank,
32 Vt. 341, 76 Am. Dec. 179.
51 Pittsburgh Bank v. Whitehead, 10
Watts (Penn.), 397, 36 Am. Dec. 186;
Union Canal v. Loyd, 4 Watts & S.
(Penn.) 393; Custer v. Tompkins Co.
Bank, 9 Pa. St. 27; Wilson v. McCul-
lough, 23 Pa. 440, 62 Am. Dec. 347;
Housatonic, etc., Bank v. Martin, 1
Mete. (Mass.) 294; Burt v. Batavia
Mfg. Co., 86 111. 66; Franklin Min.
Co. v. O'Brien, 22 Colo. 129, 55 Am.
St. Rep. 118; Mercantile Nat. Bank
v. Parsons, 54 Minn. 56, 40 Am. St.
Rep. 299; Seeger Refrig. Co. v. Amer-
ican Car Co., 171 Fed. 416; First Nat.
Bank v. Anderson, 28 S. C. 143.
See also, Pearsall v. Western Union
Tel. Co., 124 N. Y. 256, 21 Am. St.
Rep. 662.
Notice to promoter is not usually
notice to corporation. Franklin Min.
Co. v. O'Brien, supra.
1435
l &55> ^56] THE LAW OF AGENCY [BOOK IV
But there are many cases in which notice to all of the stockholders
must be deemed notice to the corporation. Thus where all the per-
sons who organized a corporation had notice of a defect in the title to
property acquired by the corporation through them, it was held that
the corporation must be deemed to be affected by their knowledge or
notice. 52
IV.
THE LIABILITY OF THE PRINCIPAL FOR HIS AGENT'S TORTS AND CRIMES
1855. In general. The question of the liability of the principal
for the wrongful acts of his agent may present itself in a great variety
of forms and may involve a great variety of considerations. In the
first place with reference to the nature of the act, the thing 'complained
of may be the agent's negligence ; it may be his wanton, wilful or ma-
licious act; it may be an act of fraud, misrepresentation or deceit; it
may be an act prohibited under penalty ; it may be an act that consti-
tutes a crime. With respect to the circumstances under which the act
was done, the particular act may have been specifically directed by
the principal; it may be the direct and immediate result of some act
specifically directed by the principal ; it may be an act expressly for-
bidden by the principal ; it may have been an act which the principal
feared and specifically warned against ; it may have been an act wholly
unforeseen and unanticipated by the principal ; it may have been an act
which in its precise form could not fairly have been anticipated and
was not reasonably to be foreseen.
With respect to either of these matters this enumeration of possibil-
ities is by no means exhaustive.
In many of the cases in which the questions here suggested will
arise, the relation will be more likely to be that of master and servant
than that of principal and agent. But the two relations, even if there
be a clear distinction between them, are here so much alike and the
rules governing them are in general so similar that it seems entirely
permissible to take illustrations from either field.
1856. Theories of liability. In dealing with the question of
the principal's liability in these cases, the question may perhaps be ap-
propriately asked at the outset, why should a principal be liable for
52 Simmons Creek Coal Co. v. Hoffman Steam Coal Co. v. Cumber-
Doran, 142 U. S. 417, 35 L. Ed. 1063. land Coal Co., 16 Md. 456, 77 Am.
See also, Carter v. Gray, 79 Ark. Dec. 311. See also, ante, 1844, note
273; Deal v. Chase, 31 Mich. 490; 30.
1436
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1856
the wrongful acts of his agent at all. It is, in general, true that one
man answers for his own wrongful acts only and not for those of an-
other. If an agent or servant commits a wrongful act, why, in these
days when every man is sui juris, should not the servant or agent an-
swer for his act rather than his principal or master. A great variety
of answers has been suggested and some of the cases may not be dif-
ficult to deal with. If the act be one which was specifically and immedi-
ately directed by the principal, it may be charged to him as being really
his own act, the servant or agent intervening merely as a mechanical in-
strument. The same result may perhaps be reached where the act,
though not specifically commanded, is the direct, immediate, to be ex-
pected, consequence of some act which was commanded. Again there
are many cases in which it is not difficult to see that the principal or
master was guilty of some personal default or negligence, and responsi-
bility may be traced to him on that ground. Such a case may be one
where the principal or master has been negligent in the selection or re-
tention of the servant or agent, or has failed to use proper care in su-
pervising the act or in guarding against danger. But suppose the act
cannot be brought under either of these heads, and that the principal
or master is not himself at fault, but has exercised all reasonable care
and caution in the selection and retention of his servant or agent, and
in supervising and controlling the work to be done ; and suppose further
that the work is such as can be done in safety, under the conditions
which the principal or master has selected, if now the servant or agent
injures some third person by his negligence or misconduct, why should
the principal or master, who is not himself at fault, be held responsi-
ble, instead of the servant or agent who is at fault? Many answers
to this question have been proposed, no one of which seems entirely
satisfactory. Attempts have been made to account for it on purely his-
torical grounds, but if it had no other foundation it probably should
not and would not long continue. It is sometimes said that, as the prin-
cipal or master is the one who put the force in motion, he is the one
who should answer for its consequences ; but this seems to put the em-
ployment of an agent or servant on the same perilous footing as the
keeping of a wild beast or the employment of unusually dangerous
forces. It is sometimes said that the principal or master is the one who
is to get the benefit, and therefore he should take the burdens also.
But it is not true in the ordinary case that the principal or master is
the only one who receives the benefit. Being employed may be just as
great a benefit to the servant or agent and may be just as much his
business or profession in life, as employing him may be beneficial to
the principal or master and constitute his business or calling in life.
1437
1857, !858] THE LAW OF AGENCY [BOOK IV
From the standpoint of society at large, the employment of each may
be equally beneficial. It is sometimes said that employers, as a class, '
are more likely to be pecuniarily able to respond in damages than em-
ployees as a class, and therefore, for the protection of third persons, a
remedy should be given against the employer. But this argument is
one which obviously must be confined within very narrow limits. Pe-
cuniary ability to meet it is, when standing alone, a not very just
ground for imposing a liability. Sympathy for the unfortunate, per-
haps, in some degree, prejudice against the more fortunate, neither of
them of course good legal reasons, undoubtedly often enters in.
As a result, however, of some of these reasons, perhaps of a combi-
nation of all of them, it has for many years been a definitely formu-
lated principle in our legal system that the principal should answer for
the acts of his agent, and the master respond for the conduct of his
servant, in a great variety of cases, in which no personal misconduct
or default on the part of the principal or master would furnish an ade-
quate explanation. Moreover, instead of. diminishing with the pro-
gress of time, the tendency everywhere seems to be to enlarge the lia-
bility of the principal or master, either by judicial decision or by direct
legislation.
1857. Accepting as a fact that the principal or master.
may be held liable, in many cases, for the misconduct of his agent or
servant, the effort must be to determine in what cases the liability will .
so attach, and what will be the extent of the liability. For this pur-
pose it may be convenient to consider the liability of the principal or
master, first, for acts expressly directed by him; second, for the negli-
gence of his servant or agent; third, for the wanton, wilful or ma-
licious acts of the servant or agent; fourth, for the fraud, misrepre-
sentation or deceit of the servant or agent ; fifth, the principal's civil
liability for the penal or criminal act of his servant or agent ; and sixth,
the penal or criminal liability of the principal or master for the penal
or criminal act of his servant or agent.
Before taking up these questions, however, a preliminary question
of much importance must be considered, namely whether the relation
of principal and agent or master and servant actually exists.
, ,[., .-, v fj >i--nter>ni.-io ifiqhnhij oflf lfjf!j hip? esmjJomo? ?.t il < -.a^cacfl
1. Did Relation of Principal and Agent or of Master and Servant Exist.
1858. Necessity for existence of relation. In all of the discus-
sions of this question, it is constantly assumed, and it is always a con-
dition precedent, that the relation of principal and agent, or master
and servant, shall actually exist. That this is so seems often to be
1438
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES [ 1859
easily overlooked, and it cannot very well be unduly emphasized. Two
quotations from a single court, out of many similar ones, may there-
fore be justified.
"A person, either natural or artificial, is not liable for the acts or
negligence of another, unless the relation of master and servant or
principal and agent exists between them." B3
"There can be no recovery against one charged with negligence upon
the principle of respondeat superior, unless it be made to appear that
the relation of master and servant in fact existed, whereby the negli-
gent act of the servant was legally imputable to the master." 5 *
The relation must also exist at the time in question. If it had not
yet begun, or if it had already terminated, 55 no liability can ordinarily
arise.
1859. When relation exists. It being thus true, as has been
pointed out, that in order to hold one man responsible for the torts of
another, it is. in general necessary to show that the one sought to be
held responsible stood in the relation of principal or master of the
wrongdoer with respect of the act done, it becomes material to dis-
cover the tests by which the existence of that relation, in a given case,
may be determined. In the ordinary case the matter presents no es-
sential difficulty. He is the principal or master who is designated as
such by the acts of employing and paying compensation. But, as has
been seen, formal employment is not always essential to the existence
of the relation ; neither is payment of compensation. 56 A father, for
ss Painter v. Mayor, etc., of Pitts- servant after he has been discharged,
burg, 46 Pa. 213. Johnson v. Martin, 11 La. Ann. 27, 66
s*Patton v. McDonald, 204 Pa. 517 Am. Dec. 193.
(at p. 528). See also Beard v. Lon- 56 A person is responsible as mas-
don Omnibus Co., [1900] 2 Q. B. 530. ter for the negligence of another
6 That there is no liability ordi- whom he has engaged as chauffeur
narily for what the former servant of his automobile and whom he is
or agent does after the relation is teaching to run it and to whom he
terminated, is taken for granted in has extended the use of it, even
Baston v. Hitchcock, [1912] 1 K. B. though such chauffeur is still em-
535, and therefore plaintiff attempted ployed and paid by some one else,
to establish a warranty on the part Irwin v. Judge, 81 Conn. 492.
of the principal that his agents Where a man was allowed to take
would not, after the termination of an automobile with a view to show-
the agency, disclose information ac- ing it to a possible purchaser, and,
quired during the agency. The at- after having done so without selling
tempt was unsuccessful. it, to keep it several days without
As to persons to whom the master further authority, during which time,
is not obliged to give notice of ter- while using it for his own purposes,
mination, and where there is no ele- he negligently injured the plaintiff,
ter is not liable for the acts of the it was held that there was neither
ment of estoppel involved, the rnas- such a relation of agency or of mas-
1439
1859]
THE LAW OF AGENCY
example, may make his child his servant without either of these acts ; 57
and one person may, expressly or tacitly, so far accept and adopt even
the voluntary and gratuitous service of another as to assume responsi-
bility, in legal contemplation, for his acts. 58
It is not essential, moreover, that the person sought to be held as
principal or master shall, in person, have employed or authorized the
servant or agent. He may, either expressly or by implication, confide
the performance of this act to an agent, or he may subsequently ratify
what some one without authority has assumed to do in this respect
as his agent.
It is also not indispensable that the alleged servant or agent shall ac-
tually know who was his master or principal. That is a question of
ter and servant as would make the
owner liable. Goodrich v. Musgrave
Fence & Auto Co., 154 Iowa, 637.
Range of choice as to selection
Licensed employee Compulsory
Pilots. The mere fact that one may
employ only a licensed or certified
person as servant, does not affect the
relation, where there is in fact a sub-
stantial range of choice and he may
exercise over the employee the ordi-
nary power of control. Martin v.
Temperley, 4 Q. B. 298.
A statute requiring the employ-
ment of a licensed mine foreman, and
which the court construed as prac-
tically taking away the owner's right
of control, was held unconstitutional
in Durkin v. Kingston Coal Co., 171
Pa. 193, 50 Am. St. Rep. 801, 29 L. R.
A. 808.
Not followed in Fulton v. Wilming-
ton Star Min. Co., 66 C. C. A. 247, 133
Fed. 193, relying on other cases in
Illinois.
Where the owner of a ship must
take a pilot, to be chosen arbitrarily,
e. g., the one who first offers his serv-
ices, and must give him full control
of the vessel, he cannot be held, at
common law, for his default. Rams-
dell Transp. Co. v. Compagnie Gen.,
182 U. S. 406.
57 In Stowe v. Morris, 147 Ky. 386,
39 L. R. A. (N. S.) 224, it was held
that where a father provided an au-
tomobile for family use and allowed
his son to use it whenever the family
pleasure suggested, the son in taking
it out and using- it for a pleasure ride
of himself, his sister and some invited
friends must be deemed to be using
it as the father's servant. Daily v.
Maxwell, 152 Mo. App. 415, and Lash-
brook v. Patten, 1 Duv. (Ky.) 316,
were relied upon. Doran v. Thomsen,
76 N. J. L. 754, 19 L. R. A. (N. S.)
335; McNeal v. McKain, 33 Okla. 449,
41 L. R. A. (N. S.) 775, reach the op-
posite conclusion on much the same
facts. (See also Moon v. Mathews,
227 Pa. 488, 136 Am. St. Rep. 902, 29
L. R. A. (N. S.) 856; Smith v. Jor-
dan, 211 Mass. 269.)
In Brittingham v. Stadiem, 151 N.
C. 299, there was evidence that the
defendant's minor son was prac-
tically made a clerk in defendant's
gun shop so as to charge the father
with the son's negligence.
ss Thus, in Hill v. Morey, 26 Vt.
178, where the defendant was repair-
ing a fence between his own and the
the plaintiff's land and a neighbor
began assisting the defendant, with-
out any request, but merely with the
instruction from the latter not to cut
on the plaintiff's land, the defendant
was held liable for a trespass by the
neighbor upon the plaintiff's land.
1440
CHAP. V] LIABILITY OF PRINCIPAL TO THIRD PARTIES
[ i860
law, which can not be controlled by what the agent or servant happened
to think or believe about it.
1860. Several masters of one servant General and spe-
cial master Lending servants Adopting servants of others. It. is
entirely possible, also, that two different persons may at the same time
severally stand in the attitude of principal or of master in some re-
spect of the same agent or servant, with reference to different acts
which he may perform. One may be his principal as to one act or class
of acts and the other his principal as to other acts. 50 One may be what
is often called "the general master," while the other may be "the spe-
cial master." Thus a master may, with the consent of his servant,
lend his servant to another in such a way that, while the original con-
tract of employment may still continue and the first master may con-
tinue to pay the servant's compensation, the servant will, nevertheless,
become so far the servant for the time being of the borrower as to
make the latter responsible to third persons for injuries caused by him
during the performance of the work of the borrower. 60
59 The question in such a case must
usually be, for which of his several
masters the act in question was per-
formed to whose service did it be-
long for whom was he acting when
he performed it?
Thus in a recent case a deputy
sheriff, who had been appointed at
the request of a railway company by
whom he was paid, and who spent
most of his time in guarding its prop-
erty, shot a person under circum-
stances which did not afford justi-
fication; it was held as a matter of
fact that his act was done in his ca-
pacity as private watchman of the
railway company rather than in his
capacity as a public officer, and there-
fore the company was liable. Texas,
etc., R. Co. v. Parsons, 102 Tex. 157,
132 Am. St. Rep. 857.
Many other cases involving the
same question are cited in the notes
to 1973, post.
eo Where the principal or master,
as a mere matter of courtesy or ac-
commodation, undertakes to do some
service for another involving the em-
ployment of a servant, the servant
will usually remain the servant of
the principal or master who so un-
dertakes. If I offer to send a guest
home in my carriage, or invite him
to take a ride in it, the driver will
usually remain my servant in so do-
ing. The fact that the guest gave
the general directions or chose the
route would usually be immaterial.
See Corliss v. Keown, 207 Mass. 149.
If I send my servant to assist a guest
or a friend, the servant, In so doing,
will usually remain my servant.
Performing the act of courtesy or
friendship in such a case is clearly
my business. On the other hand,
where one person lends his servant
to another to be used by the latter in
the performance of his business and
under his direction and control,
the servant, while so employed, is
usually the servant of the lat-
ter, even though the former may
continue to pay him. (It is, of
course, necessary that the servant
shall, expressly or impliedly, consent
to the arrangement and put himself
under the direction of the borrower.)
Delaware, Lackawanna & Western
R. R. v. Hardy, 59 N. J. L. 35; Hig-
gins v. Western Un. Tel. Co., 156 N. Y.
75, 66 Am. St. Rep. 537; Hasty v.
Sears, 157 Mass. 123, 34 Am. St. Rep.
1441
i860]
THE LAW OF AGENCY
[BOOK iv
Precisely the same situation may result where, instead of simply
lending his servant to another, the master, with the servant's consent,
hires him for a period to another person, not to perform any service
in which his general master is interested, but simply to perform serv-
ice for the latter as the latter's servant. 61
One person may, moreover, as to some particular act or service, so
far adopt as his own servant one who is regularly the servant of an-
other person, as to make himself liable for the conduct of such servant
in the performance of that act or service. 62
-3flB 'J(li" 3d VKfft 13fho 'Jill "ililfw "
267; Wood v. Cobb, 13 Allen (Mass.),
58; Kimball v. Cushraan, 103 Mass.
194, 4 Am. Rep. 528; Grace & Hyde
Co. v. Probst, 208 111. 147; Philadel-
phia, etc., Coal Co. v. Barrie, 102 C.
C. A. 618, 179 Fed. 50; Parkhurst v.
Swift, 31 Ind. App. 521; McCarthy v.
McCabe, 131 N. Y. App. Div. 396;
Rourke v. White Moss Colliery Co., L.
R. 2 C. P. Div. 205; Murray v. Currie,
L. R. 6 C. P. 24 (but compare
Standard Oil Co. v. Anderson, 212
U. S. 215); Donovan v. Laing, [1893]
1 Q. B. 629 (but compare Union
Steamship Co. v. Claridge, [1894]
App. Gas. 185, where the general
master did not relinquish control).
See also Muldoon v. City Fireproof-
ing Co., 134 N. Y. App. Div. 453; An-
derson v. Boyer, 156 N. Y. 93; Calla-
han v. Munson S. S. Line, 141 App.
Div. 791; Western Un. Tel. Co. v.
Rust, 55 Tex. Civ. App. 359.
The same result was reached
where, though the defendant did not
loan his servant, the latter, without
the knowledge or consent of defend-
