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George L. (George Louis) Reinhard.

A treatise on the law of agency in contract and tort; including special chapters on attorneys at law, auctioneers, bank officers, brokers, factors, insurance agents, traveling salesman, public agents and officers, master and servant online

. (page 50 of 82)
Online LibraryGeorge L. (George Louis) ReinhardA treatise on the law of agency in contract and tort; including special chapters on attorneys at law, auctioneers, bank officers, brokers, factors, insurance agents, traveling salesman, public agents and officers, master and servant → online text (page 50 of 82)
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recent English cases are as stated by Mr. Benjamin, the king's bench
decided in 1789 that the principal is liable in an action on the case
for deceit for a false "affirmation" made by the agent with intent to
defraud the third person, and that it is not necessary that the prin-
cipal should be benefited by the deceit. ^'^'^ Many of the American
cases, applying the rule that the principal is liable for all the acts
and representations of his agent made in the course of the perform-
ance of the business confided to him, hold that if within these limits
the agent has committed a fraud or other injury upon a third party,
whether authorized by the principal or not, or whether it was for the
benefit of the agent or of the principal, the principal is liable to such
third party, if the latter dealt with the agent in good faith.^*'^ The
theory upon which these cases proceed is that of estoppel: where
the third party is ignorant of the facts misrepresented by the agent,
and deals with such agent in good faith, and pursuant to the appar-
ent power conferred upon him, the principal is estopped to deny
the truth of the facts as represented by his agent, whom he has held
out to the world as worthy of credence ; the very fact of his authority
being a sufficient warranty of the truth of all representations made
by the agent in the course of the business for which he was em-
ployed. ^''-

" Benjamin Sales, §§ 462-467, etc., R. Co., 106 N. Y. 195, 60 Am.

where the cases are cited. Rep. 440.

'«' Benjamin Sales, § 466. "-Bank of Batavia v. New York,

'"* Pasley v. Freeman. .3 T. R. 51, etc., R. Co.. supra; Germania Nat'l

2 Smith Ld. Cas. (9th ed.) 1300. Bank v. Taaks. 101 N. Y. 442; Par-

'"' Bank of Batavia v. New York, ker v. Board of Supervisors, 106 N.



§ 345 PRINCirAL AXD AGENT. 350

§ 345. Elements requisite to bind principal. — Two elements seem
to be necessary, according to the cases cited and others that might
be mentioned, in order to bind the principal in such cases: 1. The
agent must have been acting within the real or apparent scope of his
authority; 2. The third party must have been acting in the utmost
good faith in the matter. If either of these elements be wanting,
there can be no liability on the part of the principal. Of course, the
agent would not be acting within the apparent scope of his authority
if he were a mere usurper, or one who had no authority whatever
to perform the act in the course of which the fraud was committed:
in that case, no one could be deceived by the agent's act ; hence, where
the agent is acting for himself, and that fact is known to third parties,
both of these elements would be absent; for there could not be good
faith on the part of the third person, nor could the agent be said to
be acting within the apparent scope of his authority.^"^

§ 346. Basis of the doctrine of the American cases. — The doctrine
of these American cases is more particularly applicable where the
apparent authority of the agent is such as is calculated to deceive
people of ordinary prudence and intelligence, and where the nature
of the business for which the agent is employed is such that it bears
the indicia of such apparent authority upon its face, so that it will
naturally be relied upon by third persons. In such cases the power
confided to the agent is such that it can not be executed by him with-
out making some sort of representation to such party, although it
may not have been contemplated by the principal that he should
make a false or fraudulent one. But if he was authorized to make
some representation, he is apparently authorized to make one that does
not prove to be true. The principal has therefore enabled the agent
to impose upon the third party, and must suffer the consequences.^'**
The character of the fraud or deceit is immaterial, if it has produced
an injury. The adjudications of this country have generally occurred
in connection with the sale by agents of shares in some stock company,

Y. 392; New York, etc., R. Co. v. Larned, 103 111. 293; Wichita Sav.

Schuyler, 34 N. Y. 30; Griswold v. Bank v. Atchison, etc., R. Co., 20

Haven, 25 N. Y. 595; Fifth Ave. Kan. 519.

Bank v. Forty-second St., etc., R. ^"^ Moores v. Citizens' Nat'l Bank,

Co., 137 N. Y. 231; Allen v. South 111 U. S. 156; Farrington v. South

Boston R. Co., 150 Mass. 200; Ap- Boston R. Co., 150 Mass. 406.

peal of Kisterbock, 127 Pa. St. 601; ^«New York, etc., R. Co. v. Schuy-

Armour v. Michigan, etc., R. Co., 65 ler, 34 N. Y. 30.

N. Y. Ill; St. Louis, etc., R. Co. v.



351 DUTIES OF PRIXCIPAL TO THIRD PERSONS. § 347

or the issuing of false bills of lading by the agents of common car-
riers."® But the doctrine has been extended to many other classes
of cases. Thus, a telegraph company has been held liable for the act
of its agent in sending a false telegram and receiving money there-
on;"® and a bank for the act of its cashier in drawing checks falsely
and using the money himself."' In a leading case in New York the
agent of the defendants had sold to the plaintiff sheep infected with
scab, — a fact at the time known to the agent but not to the defend-
ants. The plaintiff sued the defendants in an action on the case for
fraud, and the defendants were held liable not only for the loss of the
sheep that were sold to him by defendants' agent, but also for others
that had become infected by them.^"® The court in this case did not
confine the damages to such as the principal derived profit from, but
extended them so as to cover the entire injury sustained by the third
parties.^"'®

§ 347. English doctrine adopted by federal courts. — The federal
courts have adopted the doctrine now prevailing in England. Thus, it
is held by the supreme court of the United States that the agent
of a railroad or steamship company can not bind the company by
issuing a bill of lading for goods not actually placed in his posses-
sion or on board the conveyance ; as, where a person in collusion with
such agent fraudulently disposes of the goods represented therein
instead of shipping the same to their destination.^^''

§ 348. Public agents. — The rules of liability of principals for the
acts of their agents do not apply to public agencies: a public agent
or officer can perform no act by which he can render his principal
liable beyond the scope of his actual authority. Authority in such
eases is generally conferred by law, — that is, by statute or other public
acts, of which every one is presumed to have knowledge, — and hence
no one can be heard to say that he dealt with the agent ignorantly.
As a general rule, the government, whether state or federal, can not

^^ Armour v. Michigan, etc., R. ""See also, Bennett v. Judson, 21

Co., 65 N. Y. Ill; New York, etc., R. N. Y. 238.

Co. v. Scliuyler, supra. "" St. Louis, etc., R. Co. v. Kniglit,

"^McCord V. Western U. Tel. Co., 122 U. S. 79; Polland v. Vinton, 105

39 Minn. 181. U. S. 7; Friedlander v. Texas, etc.,

"" Phillips v. Mercantile Nat'l R. Co., 130 U. S. 416. See also, Ad-
Bank, 140 N. Y. 556. dison Torts, § 1209 and notes, and

'«« Jeffrey v. Bigelow, 13 Wend. (N, § 1213, et seq.
Y.) 518.



§ 3-18 PRIXCIPAL AXD AGEXT. 353

be sued without its consent; but assuming that this objection is
waived or otherwise overcome, there is yet no liability. "In respect
to the acts and declarations and representations of public agents,"
says Story, "it would seem that the same rule does not prevail, which
ordinarily governs in relation to mere private agents. As to the latter
(as we have seen), the principals are in many cases bound where they
have not authorized the declarations and representations to be made.
But in cases of public agents, the government or other public author-
ity is not bound, unless it manifestly appears that the agent is acting
within the scope of his authority, or he is held out as having authority
to do the act, or is employed, in his capacity as a public agent, to
make the declaration or representation for the government. Indeed,
this rule seems indispensable, in order to guard the public against
losses and injuries arising from the fraud or mistake, or rashness
and indiscretion of their agents. And there is no hardship in requir-
ing from private persons, dealing with public officers, the duty of
inquiry as to their real or apparent power and authority to bind the
government."^ ^^ Hence, when third parties deal with public agents,
in such matters as contracting with municipal authorities or city
commissioners for public work, etc., they must know the powers of such
agents or officials as they are contained in the city ordinances or other
public law which contains the grant, and the legal effect thereof;
and if they fail to do so, and trust to the representations of such agent
or official, they do so at their peril, for the municipality will in no
case be liable beyond the express authority of such agents and that
necessarily incident thereto.^^- But the authority properly delegated
to a public agent carries with it all the necessary incidental powers
to execute such authority, and to this extent third parties are justifia-
ble in trusting to appearances. Hence, where a county judge was em-
powered by statute to provide a public courthouse for the counts', it was
held that the performance of this duty involved the power to enter
into all necessary contracts and to bind the county for the same,
but that he would have no authority to issue negotiable bonds, bear-
ing a high rate of interest, in discharge of such contract.^" But
a commissioner having authority to let a public contract has not the
implied or incidental power to agree to changes or alterations, so

^" Story Ag., § 307a. v. Bank of Missouri. 45 Mo. 528;

1" Mayor, etc., v. Eschbach, 18 Md. Mayor, etc., v. Poultney. 25 Md. 18.
276; Peirce v. United States, 1 N. & ^^= Hull v. County of Marshall, su-

H. (Ct. of CI.) 270; Hull v. County pra.
of Marshall. 12 Iowa 142; Missouri



353 DUTIES OF PRINCIPAL TO THIRD PERSONS. § 349

as to render the municipality liable for additional work not embraced
in the authorized contract, nor to agree to submit the matter to
arbitration.^^* Public officers are not generally liable for the acts
of their deputies or subalterns, though there are exceptions in some
cases, such as those of sheriffs and constables, in which it is the
policy of the law to make the superior officer responsible within cer-
tain limits for the official actions of the subordinate.^^ ^

§ 349. Principal not liable when act was result of collusion
between agent and third party. — Nor will the principal in such a
case be held liable if the contract has been entered into through col-
lusion or fraud between the agent and the third party; and this is
true whether the agency be a public or a private one. Hence, where
there is an agreement or understanding between the agent and a third
person that the agent is to receive a commission or reward, if he will
induce the principal to consent to a contract with such person, or
enter into a contract with him for his principal, this being a fraud
upon the latter, a contract so entered into can not be enforced against
the principal, unless, with knowledge of the fraud, the principal
elect to take the benefit of such contract. ""^ The same doctrine
applies where the agent is in reality the principal on the adverse side,
or is secretly acting in the interest of the third party with the latter's
knowledge or connivance: the principal may then avoid the con-
tract."^

§ 350. When principal bound by admissions of agent. — The prin-
cipal is bound also by the admissions and declarations, as well as
the acts of his agent, when made while in the performance of the
business of the employment ;^^^ but before the principal can be af-
fected by such declarations it must be shown that the party making
them was in fact the agent of the person sought to be so affected, or
that he had authority to perform the act in relation to which the
declarations were made."** It is also an essential requisite, to make

"' Mayor, etc., v. Reynolds, 20 Md. of Alabama, S Ala. 590, 42 Am. Dec.

1, 83 Am. Dec. 535. 649; Dick v. Cooper, 24 Pa. St. 217,

"= Wharton Ag., § 550. 64 Am. Dec. 652; White v. Miller, 71

""City of Findlay v. Pertz, 66 Fed. N. Y. 118; Rowell v. Klein, 44 Ind.

427. 290.

'" Wassell v. Reardon, 11 Ark. 705, '"Rowell v. Klein, supra; Coon v.

54 Am. Dec. 245. Gurley, 49 Ind. 199; Wakefield v.

"'Vicksburg, etc., R. Co. v. South Boston R. Co., 117 Mass. 544.
O'Brien, 119 U. S. 99; Ball v. Bank
23 — Principal and Agent.



§ 351 PRINCIPAL AXD AGEXT. 354

such declarations binding upon the principal, that they should have
been made so as to be a part of the res gestae; that is to say, so as to
be a part of the transaction, or made in the course of the transaction,
and not before or afterward. ^-'^

§ 351. When act is within res gestae. — As to when an act or
declaration is of the res gestae is not always clear. If the contro-
versy be one growing out of a contract, it is not so difficult to deter-
mine; for the res gestae then covers the period of the negotiations
only, and embraces but the time between the opening of the same
and that of closing the contract.^^^ If, however, the injury com-
plained of be a tort, and the declarations of the agent or employe
are claimed to be competent as being a part of the res gestae^ the ques-
tion is not so easy of solution. It must be borne in mind, in such
cases, that the testimony can be admitted only if the declaration or
statement is so connected and interwoven with the main transaction
as to be spontaneous and not the result of design and afterthought,
and pertains to and characterizes the main trar^saction : the state-
ment must be one naturally accompanying the act or calculated to
unfold its character or qualit3^^-^ A statement made by an injured
brakeman concerning the manner in which he received the injury,
made ten minutes after the happening of the accident, and after
he had been removed two hundred feet from the scene, was held by
the appellate court of Indiana not a part of the res gestae, and, there-
fore, not admissible as evidence against the principal or master.^ -^
And on the same theory, it was held by the same court that the
statements of a child injured by a street car, made ten minutes after
the injury happened, and while the child was being taken to the hos-
pital in an ambulance, were not parts of the res gestae.'^-* But
whenever what the agent did is admissible in evidence, what
he said about the act while doing it will be admissible also; for what
he said was but a verbal act, and is not regarded as hearsay. But
whenever the right or power to act has ceased, the principal can no
longer be affected by the declaration, and it becomes mere hearsay,
and, consequently, incompetent as evidence against the principal.^-^

^=0 Roberts v. Burks, Litt. Sel. Cas. "^Cleveland, etc., R. Co. v. Sloan,

(Ky.) 411, 12 Am. Dec. 325. 11 Ind. App. 401.

'-^ Bolds V. Woods, 9 Ind. App. 657. '" Citizens', etc., R. Co. v. Stod-

' - Butler V. Manhattan R. Co., 143 dard, 10 Ind. App. 278.

N. Y. 417; Baker v. Gausin, 76 Ind. '-= Greenleaf Ev. (16th ed.), § 184c;

317; Ohio, etc., R. Co. v. Stein, 133 Story Ag., §§134-137.

Ind. 243.



355 DUTIES OF PEIXCIPAL TO THIRD PERSONS. § 352

§ 352. Agent's statements need not have been made at precise
moment of occurence of act to be of res gestae. — There is considerable
confusion in the decided cases as to the point of time, relative to the
main transaction, at which the declaration must have been made,
in order to be a part of the res gestae. The current of modern au-
thority, however, seems to support the view that the statement need
not have been made at the precise moment of the main act or occur-
' renee : it is sufficient if it springs out of the principal transaction,
tends to explain it, and is made "at a time so near it as to preclude
the idea of deliberate design."^^^ "Whether the declarations of an
agent made in regard to transactions already past, but while the
agency for similar objects still continues, will bind the principal,
does not appear to have been expressly decided; but the weight of
authority is in the negative."^-" The declaration, to bind the prin-
cipal, must also have been made in relation to the subject-matter of
the agency. "The mere idle, desultory, or careless talk of the agent,
having no legitimate reference to or bearing upon the business of his
principal, can not be binding upon the latter."^-^

§ 353. Declarations of agent not admissible until proof of agency
has been made. — It is to be remembered, however, that the admission
in evidence of the declarations of the agent is predicated on the as-
sumption that proof of the agency, independently of the admissions,
has been made sufficient to satisfy the jury, or court sitting as such,
that the relation subsists; in the absence of such independent proof
of the agency, the admissions are not competent. They are admissible
only upon the theory of the legal identity of the principal and the
agent, for otherwise they would be hearsay ; and the fact of the agency
must, therefore, be established before effect can be given to that
theory. The agency itself — that is to say, the delegation of authority
- — can not, in such a case, be shown by the declarations or admissions

^'People V. Vernon, 35 Cal. 49, 95 72 Ga. 217, 53 Am. Rep. 838; Mc-

Am. Dec. 49; Com. v. McPike, 3 Leod v. Ginther, 80 Ky. 399; Elkins

Gush. (Mass.) 181, 50 Am. Dec. 727; v. McKean, 79 Pa. St. 493; O'Con-

lUinois, etc., R. Co. v. Tronstine, 64 nor v. Chicago, etc., R. Co., 27 Minn.

Miss. 834; Keyser v. Chicago, etc., 166; Williamson v. Cambridge R.

R. Co., 66 Mich. 390; Cleveland v. Co., 144 Mass. 148; Elledge v. Na-

Newsom, 45 Mich. 62; Toledo, etc., tional, etc., R. Co., 100 Cal. 282.

R. Co. v. Goddard, 25 Ind. 185; '=" Greenleaf Ev. (16th ed.),

Louisville, etc., R. Co. v. Buck, 116 § 184c, note 5, by Wigmore.

Ind. 566; Augusta Factory v. Barnes, "* Mechem Ag., § 714.



§ 354 PRINCIPAL AXD AGEXT. 356

of the agent.^'^ The authority of the agent, or ratification of the act,
must be shown, at least prima facie, before the principal can be bound
by the agent's acts or statements. The agent himself is, however, a
competent witness.^^"

§ 354. Principal bound by notice to agent. — It is, moreover, an
old and well established rule that the principal is bound by any notice
acquired by Ms agent during the course of the agency ; "notice to the
agent," it is said, "is notice to the principal."^^^ If A, by his agent, B,
purchase property of C, to which E claims an equitable title superior
to the legal title of C, A would not be bound by the equity of E, un-
less he had knowledge or notice thereof; but if at the time of the
purchase, B, the agent of A, had information as to E's equity, A is
bound by it the same as if the information or knowledge had been
possessed by A himself. This is upon the theory that A and B are
identical, and that whatever notice or knowledge B, as such agent,
has received concerning the matter, A is conclusively presumed
to have received also, whether in point of fact this is true or not.^^-
In the case supposed, had A and his agent, B, both been ignorant
of E's equity, A would doubtless have obtained a clear title; and the
same would be true had A contracted with C personally, and without
the intervention of an agent ; but having purchased through an agent
who had knowledge, A will be affected with constructive notice.^ ^^
The rule of constructive notice is based not only upon the doctrine
of the identity of the principal and agent, but also upon the theory
that whereas it is the duty of the agent to disclose to his principal
all information which he may have respecting the subject-matter of
the agency, it will be presumed that he has discharged that duty
by giving the principal the information in question."*

"'Greenleaf Ev. (16th ed.), § 184d. 125 N. Y. 57; Evans Pr. & Ag. (Bed-

1*^ Smith V. Kron, 96 N. C. 392; ford's ed.) 194, et seg.; Corneille v.

Hatch V. Squires, 11 Mich. 185; Pfeiffer, 26 Ind. App. 62.

Graves v. Horton, 38 Minn. 66; '^= Mountf ord v. Scott, 3 Madd. 34,

Howe Machine Co. v. Clark, 15 Kan. 40; Houseman v. Girard, etc., Ass'n,

492. 81 Pa. St. 256.

"1 Farmers', etc., Bank v. Butch- '^' Per Pollock, C. B., in Dresser

ers', etc.. Bank, 16 N. Y. 125, 69 Am. v. Norwood, 17 C. B. (N. S.) 466.

Dec'. 678; Hill v. Nation Trust Co., ^^ Hyatt v. Clark, 118 N. Y. 563;

108 Pa. St. 1, 56 Am. Rep. 189; Car- Story Eq. Juris., § 408, note 2; Story

penter v. German, etc., Ins. Co.. 135 Ag., § 140.

N. Y. 298; Arff v. Star F. Ins. Co.,



357 DUTIES OF PKIXCIPAL TO THIRD PERSONS. § 355

§ 355. Notice must have been received by agent in course of
agency — Exceptions. — There can be no question of the correctness
of the rule just stated, respecting constructive notice, provided the
notice was received by the agent in the course of the agency. If,
however, the notice came to liim before the relation commenced, it
is not so clear that it is the duty of the agent to disclose the informa-
tion to the principal, or that a presumption can be predicated that
such information has Ijeen communicated.^^^ And as to the doctrine
of identity, it can not apply but during the time of the agency.
If, however, the knowledge was actually present in the mind of the
agent at the time of the transaction in question, or if it had been
acquired by him so recently as to raise a reasonable presumption
that he must have had it in mind, it is now generally held that the
principal is affected by it, although it was not acquired in the course
of the agency, or was received prior to the commencement of the
relation. ^^® According to some authorities, however, it is the better
doctrine that in order to bind the principal, the knowledge, if ac-
quired outside of the course of the agency, must be actually present
in the mind of the agent, and that the evidence must establish this
in order to bind the principal. ^^^

§ 356. When principal not bound by notice to agent. — If, how-
ever, the knowledge was such as the agent was in duty bound not to
disclose, or such as it was reasonable to presume he would not disclose,
or if there was between the agent and third party a collusion or con-
spiracy to defraud the principal, the latter will not be affected by
the agent's knowledge, though it was received by the agent in the
course of the agency. ^^^ And although the agent's knowledge was
obtained in the course of the agency, if the agent is known to be ad-
versely interested in the transaction, the principal is not affected by

'"Willis v. Vallette, 4 Mete. (Ky.) -"'Constant v. University of Roch-

186; Martin v. Jackson, 27 Pa. St. ester. 111 N. Y. 604; Yerger v.

504; Yerger v. Barz, 56 Iowa 77; Barz, 56 Iowa 77; Willis v. Vallette,

Shaffer v. Milwaukee, etc., Ins. Co., 4 Mete. (Ky.) 186; Fairfield Sav.

17 Ind. App. 204. Bank v. Chase, supra.

'^Brothers v. Bank, 84 Wis. 381; '=' The Distilled Spirits, supra;

Lebanon Sav. Bank v. Hollenbeck, Fairfield Sav. Bank v. Chase, supra;

29 Minn. 322; The Distilled Spirits, National Life Ins. Co. v. Minch, 53

11 Wall. (U. S.) 356; Fairfield Sav. N. Y. 144; Innerarity v. Merchants'

Bank v. Chase, 72 Me. 226, 39 Am. Nat'l Bank, 139 Mass. 332, 52 Am.

Rep. 319; Dresser v. Norwood. 17 C. Rep. 710; Dillaway v. Butler, 135

B. (N. S.) 466; Schwind v. Boyce Mass. 479.
(Md.), 51 Atl. 45.



§ 357 PRINCIPAL AND AGENT. 358

such knowledge. ^■''^ The reason for this exception to the general
rule is that one who has an interest to act a certain way can not be pre-
sumed to act another waj'.^***

§ 357. Principal bound by knowledge actually in agent's mind
at time of transaction. — Whether knowledge was actually communi-
cated to the principal or not seems to be immaterial ; for the presump-
tion, in the absence of the exceptions named, is conclusive, and can
not be overcome by proof that the agent in fact did not transmit
such notice to the principal.^*^ And whether the time in which the
information was received by the agent is so far past as to overcome
the presumption that it was present in his mind is a question, it
seems, to be decided by the circumstances of each case.^*^ The bur-
den of proof is upon the party alleging the existence of the knowl-
edge or notice relied upon.^*^^ Some of the cases hold, as has been
said above, that the principal is never affected by the notice unless it



Online LibraryGeorge L. (George Louis) ReinhardA treatise on the law of agency in contract and tort; including special chapters on attorneys at law, auctioneers, bank officers, brokers, factors, insurance agents, traveling salesman, public agents and officers, master and servant → online text (page 50 of 82)