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JVi.



UNIVERSITY

OF CALIFORNIA

LOS ANGELES



SCHOOL OF LAW
LIBRARY



"2- C?



^



CASES ON
LAW OF ASSOCIATION






By

George Wharton Pepper, LL. D.



and



William Draper Lewis, Ph.-D.

Professor of Law in the Law School of the Unioersily of Pennsylvania



[Compiled in tlie Biddle Memorial Law Library of the University. of Pennsylvania.]



PHILADELPHIA:

INTERNATIONAL PRLNTING CO,
I915



T



COPYRIGHT 1910

BY

Gf.ori.e Wharton Pepper

AND

VVii.i.iAM Draper Lewis



CHAPTER I.



THE AGENT'S POWER TO SUBJECT HIS
PRINCIPAL TO LIABILITY.



SECTION I.— LIABILITY ON CONTRACT AND
FOR POSITIVE MISFEASANCE.



HERN z'. NICHOLS.
At Nisi Prius, before Holt, Chief Justice.

I Salkcld's Reports, 289.

In an action on the case for a deceit, the plaintiff set

forth, that he bought several parcels of silk for silk,

whereas it was another kind of silk; and that the defendant,

well knowing this deceit, sold it him for silk. On

trial, upon not guilty, it appeared that there was no actual
deceit in the defendant who was the merchant, but that it
was in his factor beyond sea: And the doubt was. If this
deceit could charge the merchant? And Holt, C. J., was
of opinion, that the merchant was answerable for the deceit
of his factor, though not criminalitcr, yet civiliter; for see-
ing somebody must be a loser by this deceit, it is more reason
that he that employs and puts a trust and confidence in the
deceiver should be a loser, than a stranger. And upon this
opinion the plaintiff had a verdict.



2 AGENT'S POWER TO SUBJECT PRLNXIPAL TO LIABILITY



BOULTON r. ARLSDEN.
At Nisi Prius, before Holt, Chief Justice, 1697.

3 Salk eld's Report, 234.

In this case it was held, that where a scrz'aiif usually
buys for his master upon tick, and takes up things in his
master's name, but for his own use, that the master is liable,
but it is not so where the master usually gave him ready
money, ^



WILTSHIRE z'. SIMS.
At Nisi Prius, before Lord Ellenborough. 1808.

I Campbell's Reports, 258.

Action for not transferring stock.

The only witness was W'atkins, the broker in this
transaction, who stated that the defendant gave him orders
to sell out £500 of the stock of the trustees of the Commer-
cial Road ; that on the 27th of August he agreed to sell it to
the plaintiff; that as the transfer could not be made till the
expiration of a fortnight, when there was to be a meeting
of the trustees, the plaintiff paid him for the stock by a
promissory note at fourteen days ; that in taking the note
he acted with a view to his employer's advantage, thinking
the stock might fall before the transfer could be made ; that
he paid in the note to his bankers, where it was attached for
a debt of his own; and that at the end of the fortnight the
defendant refused to make the transfer, as he had received
no part of the purchase money.



* The other declarations of principles of law are omitted. For
another report of the case purporting to give the facts, see i Lord
Raymond's Reports, 224.



WILTSHIRE V. SIMS 3

It was contended for the plaintiff, that the sale of the
stock on the 27th of August was binding on the defendant.
Watkins was his authorized agent, and had acted bona fide
for his benefit. He must be supposed to have empowered
his agent to sell the stock in the manner most for his interest,
and the loss ought to fall upon him, not upon the plaintiff,
who had paid for the stock, under the natural impression
that Watkins had authority to sell it immediately, though a
short time was to intervene before the stock could be trans-
ferred in the books ^ the trustees.

Lord Ellen .ough : When the defendant employed
the broker to seii .le stock, he employed him to sell it in the
usual manner. He made him his agent for common pur-
poses in a transaction of this sort. But did any one ever
Lear of stock being absolutely exchanged for a bill at four-
teen days? Has a broker in common cases power to give
credit for the price of the stock which he agrees to sell?
The broker here sold the stock in an unusual manner ; and
unless he was expressly authorized to do so, his principal is
not bound by his acts.

Plaintiff non-suited.



4 AGENT'S POWER TO SUBJECT PRINCIPAL TO LIABILITY



PECK z: HARRIOTT.
In the Supreme Court of Pennsylvania, 1820.

6 Sergeant and Rawle's Reports, 146.

Duncan, J., delivered the opinion of the court. ^
The plaintiffs in error, being the owners of certain
lands in the counties of Erie, Crawford, Warren and Ve-
nango, on the 17th October, 181 5, constituted one Seth
Young, their attorney, in their names to contract for sale,
sell and convey, any parts or parcels of the lands, ratifying
and confirming all that their said attorney might lawfully
do in the premises. On the 29th December, in the same
year, Young contracted to sell to the defendants two parcels
of the lands. The vendees covenanted to pay the purchase
money in four annual instalments, with interest, and make
settlements, and certain specified improvements on the land.
The first instalment became due on the 29th December,
181 6, and in March and April, 181 7, the vendees paid
Young three hundred and seventy-six dollars fifty cents.
By this article the vendors by their attorney, covenanted, on
payment of the whole, or a satisfactory part of the money
and interest, within the specified time, the improvements
being completed, that they, or their representative, would
execute a conveyance, a good and sufficient warrantee deed
in fee, provided, such party should, on giving the said deed,
give bond and mortgage on the said premises for the con-
sideration money, or so much thereof as should be due.

This action was brought for the whole consideration
money, and the question submitted to the Court below was
on the validity of the payments. The Court adjudged they
were valid, and on this opinion we are now called on to
decide.



^ The statement of facts as given by the Reporter is omitted.



PECK V. HARRIOTT 5

Every general grant implies the grant of all things
necessary to the enjoyment of the thing granted, without
which it could not be enjoyed. Every general power neces-
sarily implies the grant of every matter necessary to its
complete execution. An attorney who has power ^o con-
vey, has so essentially the power to receive the purchase
money, that a voluntary conveyance, without receiving the
stipulated price or security for it, would be fraudulent, and
either the whole contract might be rescinded by the prin-
cipal or the vendee liable for the purchase money. The
principal authority includes all mediate powers which are
necessary to carry it into effect. The payment of the pur-
chase money was an intermediate act between the articles
and the conveyance. The receipt of the purchase money is
within the general scope of an authority to sell and convey,
as a mediate power, as an act without which the conveyance
would be fraudulent. No words could confer a more ample
authority than is conferred by this instrument. He has
power to contract for sale, and having so contracted, to
convey. All the acts he performs, necessary in the premises,
are ratified and confirmed.

I cannot yield to the argument, that having contracted
for sale, his power ended, because the language of the power
is very explicit, that he has not only power to enter into
executory contracts, but that, having entered into them, he
has power to execute them by conveyances, and we must not
stop at the words contract for sale, and say, that is a
distinct power, but must go on with the whole sentence,
sell and convey. Articles are the first step usual in the sale
of lands; the conveyance, the last act which the attorney is
authorized to perform. If he had conveyed on the receipt
of the whole purchase money, it is admitted that this would
have bound the principal. If he had power to receive the
whole, he had power to receive any part, and it surely lies
not in the mouth of the principal to say, that because he has
not conveyed, he has no right to receive the money ; for the



6 AGENT'S POWER TO SUBJECT PRINCIPAL TO LIABILITY

same objections would arise had he received the whole
money and refused to convey. The validity of the pay-
ment does not rest on the actual conveyance, but the power
to convey ; the payment is to precede the conveyance. There
is notliing in the nature of the thing, to justify such a con-
struction, nor in the words of the instrument, and it is a
proposition which never can be maintained, that he had only
power to receive the money when he had conveyed, and that
it is the conveyance which renders the payment valid;
whereas, the conveyance could only be good, if the money
were paid, if he had power to receive the money, and convey.
If he has received the money and not conveyed, the pay-
ment must, in all reason and justice, be binding on the
principal.

That the attorney here did not exceed his authority in
making the contract is admitted by this action calling for
its execution. If he did not exceed his authority in making
the contract, he had power to carry it into execution by
conveyance. In order to enable him to do this, payment of
the money, or security, was so necessary an incident, that
without it the act would be fraudulent. He had power to
convey ; to convey without payment, would have been a
fraud on the principal ; to receive the purchase money, could
not be a fraud.

It is not pretended, that the power was revoked; much
less, that notice of the revocation before payment, was given.
It is not made any part of the case, that there was any fraud
on the part of the defendants.

The power of attorney, is unrestrained as to time,
credit, or condition. All the authority that the principals
could confer, they did. They substituted Young, with all their
powers, to part with their title ; to convey the estate in fee ;
to bind them with covenants of general warranty. He could
sell on credit, having the power to sell on credit; he could
receive the money from the vendee, unless there was some-
thing in the instrument restrictive of this. It would be



PECK V. HARRIOTT 7

rather an unusual mode of conducting business, to empower
an attorney to sell and convey, and restrain him from re-
ceiving tlie purchase money. Here, he is not so restricted,
and the implication would be a constrained one; it would be
dangerous for the Court to look for a hidden meaning,
where the terms are neither obscure, nor equivocal, or to
imply a restriction of a power granted in general terms.
The power is not required to be executed uuo flatii; there are
several acts to be done, at several times ; the last act, the
conveyance, not to be immeditely executed, not to be exe-
cuted until all the conditions were complied with by the
vendees. The several payments were to come around ; and
until paid, or a satisfactorj' part, and mortgage given for
the balance, under the general power to contract for sale,
and to convey, unrestrained as to the extent of authority,
unlimited in its duration, remaining in full force at the
time of payment, the Court of Common Pleas decided
rightly, in determining these payments to be valid ; and the
judgment is affirmed.
Judgment affirmed. -



-Compare: Penfold v. Warner, 96 Mich. 179, 1893. (A was the
owner of land X. A and his wife B joined in a power of attorney
authorizing C to sell any and all real estate belonging to them. A
quit claimed X to B. A died. C sold and conveyed X to D. B sold
and conveyed X to E. D brought ejectment against E. Judgment
in favor of E, affirmed on the ground that such powers of attorney
should be strictly construed, and that the power in question only
covered B's dower interest in X at the time of the execution of the
power. )

Payne v. Potter, 9 Iowa, 549, 1859. (B authorized C to sell his,
B's, horse. C purported to sell the horse to A, A giving his note there-
for. A took possession of the horse, and B brought an action of
replevin. At the trial the Court charged the jury "That an authority
to sellthe horse did not confer upon the agent authority to sell him
upon time, and if the defendant in justification shows simply an author-
ity to sell, he must in addition show that the sale was for cash." Judg-
ment for plaintiff. On appeal held, that the charge was correct.)



8 AGENT'S POWER TO SUBJECT PRINCIPAL TO LIABILITY



NORTH RIVER BANK v. AYMAR.
In the Supreme Court of New York, 1842.

3 Hill's Reports, 262.

Error to the Superior Court of the city of New York.
The action in the court below was by the North River Bank
against Aymar and Embury, executors, &c., of Pexcel
Fowler, deceased, on eleven promissory notes, six of which
purported to have been made on behalf of the defendants'
testator, and were signd thus : "Pexcel Fowler — Jacob D.
Fowler, att'y." Of these six notes, four were payable to
the order of David Rogers & Son, and by them endorsed ;
and the other two were payable to the order of Jacob D.
Fowler, and were endorsed by him, and by D. Rogers &
Son. The remaining five notes purported to have been made
by Jacob D. Fowler, payable to the order of Pexcel Fowler,
and were endorsed in the same form in which the other six
notes were signed — viz. : "Pexcel Fowler — Jacob D. Fow-
ler, att'y" — and were also endorsed by D. Rogers & Son.
The case, as it further appeared on the trial, was this : The
defendants' testator, in his lifetime, executed to Jacob D.
Fowler a letter of attorney in these words : "Know all men,
&c., that I, Pexcel Fowler, of, &c.. have made, &c., Jacob D.
Fowler, of, &c., my true and lawful attorney, for me and in
my name, place and stead, and to my use, to ask, demand,
&c., all such sum and sums of money, debts, &c., which are
or shall be due, owing, &c., to me, Sic. I do further authorize
and empower the said Jacob D. Fowler to draw all checks
or draffs upon any of the banks in the city of A-czv York
for all moneys deposited in my name, to endorse any promis-
sory note or notes, bills of e.rcluDige or drafts, to accept all
bills of exchange or drafts, or in my name to draw any note
or notes, to enter merchandise at the custom house, &c., and
to manage and negotiate any business from time to time in



NORTH RIVER BANK v. AYMAR 9

the same manner as if I was personally present. Giving
and granting unto my said attorney full power and authority
in and about the premises, &c. In witness," &c. About the
time this power was executed, Pexcel Fowler and Jacob D.
Fowler called together at the banking house of the plaintiffs
and left it in their possession, where it had ever since re-
mained. The notes in question were all made during the
life of the defendants' testator, and after the execution of
the power. Nine of them were not made or endorsed in the
business of the defendants' testator, nor for his use or
benefit, but for the accommodation of David Rogers & Son,
under an agreement between them and the firm of Fowler,
Gordon & Co. (of which Jacob D. Fowler was a member)
for the mutual exchange of accommodation paper. Fowler,
Gordon & Co. failed in business, leaving unpaid a large
number of notes made and endorsed under this agreement,
on which D. Rogers & Son were liable, and which had been
discounted by the plaintiffs. The notes in question were
procured by D. Rogers & Son for the purpose of relieving
themselves from such liability, and were passed by them to
the plaintiffs in exchange for the said notes of Fowler, Gor-
don & Co. At the time the notes in question were received
by the plaintiffs, Samuel D. Rogers, a member of the firm of
D. Rogers & Son, and who was also one of the directors of
the bank, declared the notes to be business paper, given for
goods sold. The defendants admitted that the plaintiff's
were entitled to recover on two of the eleven notes ; and, in
respect to the others, the Court charged the jury that Jacob
D. Fowler exceeded his authority — that the power being
special, the plaintiffs were affected by the excess, and were
not therefore entitled to recover. The plaintiffs excepted.
The jury rendered a verdict for the amount of the two notes
in favor of the plaintiffs, who, after judgment, sued out a
writ of error. Some other facts necessary to a more full
understanding of the case will he found stated in the follow-
ing opinions.



10 AGENT'S POWER TO SUBJECT PRIXXIPAL TO LIABILITY

CowEN, J. : As the notes in question were received by
the plaintiffs in exchange for the notes of Fowler, Gordon
& Co., the former are entitled, so far as their rights are in
question on this writ of error, to be considered bona fide
holders in the fair course of trade and for a valuable con-
sideration.

That the power conferred by the letter of attorney was
limited to notes in the proper business of the testator, and
that it would have been so independently of the words to his
use, there can be no doubt. {St airier v. Tysen, post, p. 279;
Nichol V. Green, Peck's Rep. 283 ; Butcher v. Tysen, U. S.
Circ. Court, Nov., 1840, 4 Hunt's Merch. Mag. 456.) To
fulfil this purpose of the power, it was essential that the
making and endorsing should be upon a consideration pass-
ing to Pexcel Fowler, the testator. There is nothing in the
nature or effect of such a power which authorizes the attor-
ney to use it for his own benefit or the benefit of any one
excepting the principal. And if this limitation be such that
an appointee would be bound to notice the fact that the attor-
ney overstepped it, then these plaintiffs were properly cut
off b}^ the Court below from their claim upon the contested
notes and endorsements.

The general rule, that when an attorney does any act
beyond the scope of his power, it is void even as between
the appointee and the principal, has always prevailed, and is
indeed elementary in the doctrine of powers. The ground
on which the rule rests is familiar. The appointee need not
deal with the attorney unless he choose; and it is very rea-
sonable that he should be bound to inspect the power, when
in writing, or to learn its language in the best way he can,
when it is by parol. On becoming acquainted with it, he
shall be holden to understand its legal effect, and must see,
at his peril, that the attorney does not transgress the pre-
scribed boundary in acting under it. I say in acting under it ;
for it is easy to compare the act with the words to which it
must conform ; and so far, there is nothing unreasonable —



NORTH RIVER BANK v. AYAIAR 11

nothing impossible or even difficult. In speaking of the
attorney's acts, I certainly mean to include his declarations
made at the time, or in the business which he transacts under
the power; for his declarations are a part of the res gestae,
and bind his principal equally with the act to whii:h they
relate. They are always received as evidence against the
principal. I authorize a man to borrow a sum of money for
me. The power being limited, he has no authority to borrow
for himself or his neighbor. He goes to the lender and
borrows in my name, showing him my written power, and
declaring at the same time that he takes the loan on my
account. Both his acts and declarations are evidence against
me.

A question often arises upon this and the like cases, how
far the appointee is responsible for the agent's ndelity. Take
it, in the instance supposed, that his acts and professions
make out a case within the terms of his authority ; is the man
who advances his money accountable for the truth or the
good faith of a transaction winch, so far as he can see and
has reason to believe at the time, is in honest conformity
with such authority ? Take it that the attorney comes with a
falsehood, meaning the loan for his own use, or the use of
another whom he desires to accommodate ; must the ap-
pointee lose his money ? He brings his action against the
principal, and proves the letter of attorney and the loan as
stated ; is it necessary to do more ? or can the principal turn
round upon him and show that his attorney was false to his
interest, and so infer that the man who trusted to his letter
and made a loan apparently according to its purview, must
himself be visited with the consequences of the fraud? I
confess that, until I heard the argument in this cause, I had
supposed the mere statement of such a case furnished its
own answer; and that to allow such a defence, would be
pushing the duty of enquiry on the part of the appointee far
beyond the principle on which it is founded — indeed, to an
extent absolutely impracticable.



12 AGENT'S POWER TO SUBJECT PRINXIPAL TO LIABILITY

The case I have instanced is, in principle, the one now
before us. The plaintiffs were apprised that Jacob D. Fow-
ler had power to make and endorse notes in the business of
the testator; and notes actually made and endorsed by the
attorney, and purporting to have been so made and endorsed
in conformity with the power, were presented to and, in
effect, discounted by the plaintiffs. This act was equivalent
to an express declaration that the notes were made and
endorsed in the business of the testator. A man gives a
power to sell land, and the attorney executes a deed in the
name of the principal. The transaction imports the same
thing as a recital or express declaration referring to the
power ; and the principal is equally estopped to deny that the
authority has been pursued.

There are a few general principles entirely settled and
universally acted upon, especially in dealing with negotiable
paper, which it may be well to remember. One was laid
down in Hem v. N^ichoh (i Salk. 289). The defendant's
factor being authorized to sell silk, defrauded the vendee ;
and Holt, Ch. J., held, that the principal was liable for the
deceit; "for," said he, "seeing somebody must be. a loser by
this deceit, it is more reason that he that employs and puts a
trust and confidence in the deceiver, should be a loser, than a
stranger." (Sec also Bozvlcs v. Stczvart, i Sch. & Lef. 222;
The Monte AUegre, 9 Wheat. 644.) An application of this
principle to men who had authorized an agent to endorse for
them was made in Putnam v. Sullivan (4 Mass. Rep. 45),
a case coming very near if not quite up to the one before us.
The defendants, who were merchants, having occasion to be
absent, left their names with a clerk on blank paper, to be
filled up by him and advanced on the sale of goods by the
house upon commission, or to renew the notes of the house
when due at the banks. On some he was authorized to bind
them as makers, and on others as endorsers. A man ob-
tained one of the latter from the clerk by false pretences,
wrote and signed a note on the other side, and got money



NORTH RIVER BANK i: AYMAR 13

Upon it for his own use on the credit of th.e endorsement, the
lenders having no notice of the fraud. The defendants were
held liable. The plaintiffs were informed, too, that it was a
blank endorsement which had been left with the clerk, to be
used in the business of the defendant. Parsons, Ch. JL, said :
"Here one of two innocent parties must suffer. The en-
dorsees confided in the signature of the defendants; and
they could have no reason to suppose that it had been im-
properly obtained. On the other hand, the loss has been
occasioned by the misplaced confidence of the endorsers iu a
clerk too young or inexperienced to guard against the arts
of the promisor." Looking at the fact that the plaintiffs
knew the clerk was limited to use the note in the business of
his principals, the power was the same in respect to them,
as that of Jacob D. Fowler here in respect to the bank.
They found, as the bank did, that the agent had delivered out
the note to the promisor, but not that he had exceeded his
power, though he had done so in fact. Why not require
them to stop and ascertain whether it had been delivered
out upon a consideration passing to the defendants? The
answer is, that they had put their agent in a condition which
enabled him to impose upon strangers by apparently pursuing
his authority. They had given him a discretion to speak for
them, both by words and actions. The neglect or falsehood
of their agent, therefore, was legally imputable to them.
The paper being issued without consideration, whether by
their agent or themselves, was indeed void as between the
original parties; but there being in each case a power to issue
paper valid in form, it could not be impeached in the hands
of a bona fide holder. Everybody knows that a partner who
issues a note of the firm for his own benefit, exceeds his



Online LibraryGeorge Wharton PepperCases on the law of association → online text (page 1 of 88)