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A WEEKLY RECORD

OF THE

LAW AND THE LAWYERS.

CONDUCTED BY

ISAAC GRANT THOMPSON,

C

VOL. VI.

FROM JULY, 1872, TO JANUARY, 1873.

10153

ALBANY:

WEED, PARSONS AND COMPANY.

1873.

Entered, according to act of Congress, in the year eighteen hundred and seventy-three,

BY WEED, PARSONS AND COMPANY,

In the office of the Librarian of Congress, at Washington.

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THE ALBANY LAW JOURNAL:

A WEEKLY RECORD OF THE LAW AND THE LAWYERS.

The Albany Law Journal.

ALBANY, JULY 6, 1872.

ON THE LIABILITY OF AN AGENT UPON A WRITTEN INSTRUMENT CONNECTED WITH THE SUBJECT OF HIS AGENCY.*

It is a popular fallacy, and an annoying one to him who is disposed to regard legal science from a logical point of view, that the common law is composed of a series of irregular precedents, laid down from time to time, according to the notions of this court or of that, contradictory of each other in an eminent degree, and destined to be overthrown whenever expediency shall require ita system unsymmetrical, illogical and unstable.

But it is, after all, in the results of judicial inquiry which stand to-day as the rules of civil action, that the true value of the common law in its slow development is to be found; in so far as the principles advanced ages ago it may be, by judges of very different mental habits, and under an infinite variety of circumstances, unite to form a harmonious whole; in so far as the rules applied in the ruder ages of society serve to-day in the far more complex system of affairs, so far must one recognize, beyond the uncouth formality and the clumsy fictions of the older law, that law in its symmetry as a science, advancing by self-evolution as all science, slowly and irregularly, but none the less surely toward its ultimate perfection.

Nowhere, perhaps, are these principles more clearly apparent than in the broad subject under discussion

that of agency-not forming, it may be, in strict truth, a distinct department of the law, but rather a modifying element of all departments. The rules governing it are in a high degree those of good sense and natural justice; first applied very many years ago as they were to a simple state of society, shut up within itself, so to speak, by the international jealousy of the times, yet, by their intrinsic force as rules of positive law, they rest firmly to-day in the vast

The following essay by John H. Inness, was awarded the $100 prize at the recent commencement of the Columbia College Law School.

complexity of commercial and financial affairs as the basis of the many and various rights and duties arising from delegated authority.

The relation of principal and agent, and its recognition by the law, is founded on the public good, as promoted by the facilitation of business transactions and the consequent ultimate increase of production, and it is to this policy that the rules of action, as laid down by the courts, are to conform. It is this policy which has led to the abandonment of the civil law doctrines in their harshness and illiberality, whereby contracts made through the instrumentality of an agent did not in general bind the principals to each other. 1 Dom. Civ. Law, B. I, title 15, § 3. Such laws are inconsistent with a spirit of trade and commerce. It is a far broader and more comprehensive view to hold every transaction of the agent as that of his principal, when such conclusion shall be just and reasonable toward all parties concerned.

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in this aspect, that the agent, supposing himself to possess the requisite power, has acted in the most perfect good faith, for it is a rule which, under the equitable doctrines to which the courts more and more incline, has almost attained the force of an axiom in law, that one who asserts that which he does not know to be true is equally at fault with one who asserts what he knows to be untrue; so that, where a person, in the absence of his friend, accepts a bill drawn upon him, without authority to do so, and merely to save the friend from future trouble, his laudable motives will not relieve him from liability to an innocent indorsee of the bill. Polhill v. Walter, 3 B. & Ad. 114.

Nor can an agent who has exceeded his authority, from a misconstruction of the same, set that up as discharging himself from liability, it being a mistake of law, not available as a defense either at law or in equity. This rule, founded on already existing principles of the common law (and recently affirmed in England in Kilner v. Baxter, E. L. R., 2 C. P. 174), was recognized at a very early period in the history of the jurisprudence of this State in the case of Dusenbury v. Ellis, 3 Johns. Cas. 70, where an attorney, who, under a mistake as to the extent of his powers, had signed a promissory note for his principal, was held liable as maker of the note. This case has been followed by many others, prominent among which are Meech v. Smith, 7 Wend. 315, and Palmer v. Stephens, 1 Denio, 471, holding substantially the same views, though in a late case in the court of appeals it was urged by Selden, J., that the liability of the agent in such cases rested rather upon the breach of an implied warranty of authority than upon the instrument itself. White v. Madison, 26 N. Y. 117. This view seems unsatisfactory when applied to the case of negotiable paper, and, certainly, ought not to be admitted as affecting injuriously the rights of indorsees in good faith.

2. Where the principal is undisclosed. In the case of dealings by an agent in his own name, and without reference to his principal, there is a certain want of fairness and candor toward the other contracting party, which, independently of the agent's part in the contract itself, would seem to throw a liability upon him. It is his duty to inform persons transacting business with him of the subordinate position which he holds: "He must say plainly," says Lord Ellenborough, "I am the mere scribe, or he will be liable." Leadbitter v. Farrow, 5 M. & S. 345. These principles became firmly settled in England by a series of cases toward the close of the last century, prominent among which was that of George v. Clagett, 7 Term R. 359, where it was held by Lord Kenyon, that where an agent sold goods in his own name, and the purchaser knew nothing of the principal, on the agent's becoming bankrupt and the principal demanding the price of the goods from the purchaser, the latter might set off a claim existing against the agent. This doctrine has

been followed in numerous cases (see 3 Burr. 1921), but was narrowed down, so as to relieve the agent from liability where the contracting party knew of the principal, or might have known of him, had he taken the trouble to inquire, as by examining the books of the agent containing the written contract. Baring v. Corrie, 2 B. & Ald. 137; see, also, Morrison v. Currie, 4 Duer, 79. The general liability of the agent in this class of cases is fully recognized in New York under the doctrines both of law and of equity (Mills v. Hunt, 20 Wend. 431; McComb v. Wright, 4 Johns. Ch. 659); and while the subsequent discovery of the principal operates to give the contracting party an additional security, it can in no way divest the agent of a liability thus acquired. Rossiter v. Rossiter, 8 Wend. 494.

It may be proper in this connection to note an apparent exception to the rules as just stated, but one which we cannot help thinking depends altogether upon the peculiar circumstances of the case in which it was presented. In The Bank of Rochester v. Monteath, 1 Denio, 402, the members of a copartnership had agreed that all their business in the city of Albany should be carried on by their agent at that place in his own name. An action being brought against the firm on several bills drawn upon the agent and accepted by him, it was held that the partners were liable, and this upon the ground that the agent's name was the partnership name for all the purposes of transacting the business of the firm at Albany; and the partners could bind themselves by that name as well as by any other. This decision leads to the conclusion that the agent had incurred no personal liability; yet, if under the same state of facts the agent - instead of being, as he was, a man of no financial credit whateverhad possessed large pecuniary resources, it would certainly seem most unjust that an innocent contracting party should be barred from resort to him in the event of the insolvency of the copartnership; and in such a case we think that this apparent exception would fail.

3. Where the agent acts for a foreign principal. — Where the principal resides in a foreign country, one who contracts with the agent cannot in general be supposed to have any accurate knowledge of the financial standing of the principal, and on that account a presumption arises that credit must have been given to the agent himself, which presumption the agent must rebut in order to escape liability. Paterson v. Gandasequi, 15 East, 62; Addison v. Gandasequi, 4 Taunt. 573. So it was held in the case of De Gaillou v. L'Aigle, 1 Bos. and P. 8 and 356, where a husband who resided out of England had given his wife in London a power of attorney to transact his business, that she was personally liable on her contracts, and this, too, in spite of her coverture. And ratification by the principal in this case, as in all others, cannot cut off the contracting party from any equities he might have against the agent.

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It seems to be the view that for the purpose just noticed, the States of the Union are foreign to each other. Taintor v. Prendergast, 3 Hill, 72.

agent, and, accordingly, we find such execution limited by a variety of restrictions, as, for example, that it must be by virtue of a power of as high author

4. Where the agent voluntarily incurs liability.— Anity as the instrument is itself to possess, that the covagent may, unquestionably, by giving to the other enants in the instrument must purport to be those party the support of his personal credit, become of the principal by his agent, and that none of the not only secondarily liable, as guarantor, but in some necessary minor formalities shall be omitted. See cases primarily so. Jones v. Littledale, 6 Ad. & El. Combe's Case, 9 Coke, 75. If these conditions 486; Tanner v. Christian, 29 Eng. L. and Eq. 103; have been complied with, it is universally admitted White v. Skinner, 13 Johns. 307. Still, in the case that the principal is liable, and he alone; if they have of an agent of a known principal acting within the not, the rule is as widely accepted that the principal bounds of his authority, the evidence must be very is discharged and the agent is responsible. clear that personal credit was given to the agent rather than to the principal, since there is a presumption to the contrary, which must be rebutted by the party who seeks to establish the agent's liability. Nevertheless it seems to be the law in New York that, when an action is brought against a principal upon a contract made by his agent, he may set up as a defense the fact that exclusive credit had been given to the agent. Meeker v. Claghorn, 44 N. Y. 349.

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But this very rigor of construction of which we have spoken requires that, if the covenants are not those of the principal-by reason of a defective execution or a lack of authority by the agent, or whatever the cause may be-yet the agent shall only be held upon them, when the language used or the mode of signing may reasonably be considered to have the effect of making him a party to the instrument. Hopkins v. Mehaffy, 11 Serg. & R. 126; Stone v. Wood, 7 Cow. 453; White v. Skinner, 13 Johns. 307. To go beyond this would be to trespass upon the rule forbidding the introduction of parol evidence to vary a written contract; accordingly, in all cases not within the principle as just stated, the remedy is to be found in an action of tort against the agent for damages sustained from his wrongful act. Abbey v. Chase, 6 Cush. 56.

5. Where there is no responsible principal.· Where one representing an irresponsible person enters into contracts as agent of that person, it is a just and equitable rule that such agent shall answer upon the contract personally. A good illustration of this principle is found in the case of Turrell v. Collet, 1 Esp. 320, where a father, to whom a business belonged, had from old age become impaired in mind to such an extent that he was utterly incapable of attending to his affairs. Here it was held, that his son, who carried on the business for him, was, in reality, liable, and the proposition was laid down by Lord Kenyon, that it is upon the ostensible conductors of business that contracting parties have a right to rely. Similar questions have arisen in the case of infants and lunatics, where substantially the same views have obtained. See Thacher v. Dinsmore, 5 Mass. 299; Forster v. Fuller, 6 id. 58. On like grounds, where parties entered into a contract in favor of a company not at the time incorporated, they were held personally liable. Kelner v. Baxter, Eng. L. R., 2 C. P. 174.

2. Written agreements not under seal. Questions concerning the liability of an agent upon instruments of this class are of extreme frequency, and the adjudicated cases present a bewildering conflict of views. Yet it is believed that the diversity of opinion arises rather upon the nature of the liability than upon the fact of liability itself, and that the agent's responsibility, in some form or another, is very generally recognized by the courts in the various instances previously mentioned, such as lack of authority, undisclosed principal, etc. The real point of discussion, however, is, whether the agent is so responsible, ex contractu, upon the instrument itself, or in an action on the case for damages.

There is a desire on the one hand that the contract shall rather stand than fall, which has led to a very great liberality, to say the least, of construction, for the purpose of bringing in the agent as a party when the principal cannot be held. This view prevailed generally in the earlier English cases, prominent among which is that of Cass v. Rudele, in 1692, where the court of chancery entertained a bill against an agent who had entered into articles of agreement for the purchase of several houses in the island of Jamaica, and, after performing the contract in part, refused to complete performance on the ground of having no effects of the principal in his hands. A decree for specific performance of the contract was given, and this, though the houses had, pending the suit, been destroyed by an earthquake. The decree was after

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SECTION II.

THE LIABILITY OF AN AGENT ON VARIOUS CLASSES OF
WRITTEN INSTRUMENTS.

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The various instruments upon which an agent may incur liability may be grouped into three general classes: 1. Sealed instruments; 2. Written agreements not under seal; and 3. Negotiable paper.

1. Sealed instruments. The importance attached by the old common law to sealed instruments, arising, as it did, from the solemnity attendant upon their execution, led to a great degree of rigor in construing them, and a jealous care that the requisite formalities should be complied with. It is obvious, that this watchfulness was in no case likely to be more stringent than in the execution of sealed instruments by an

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