Lobdell v. Baker

Wilde, J. (After stating the facts.) Upon these facts, the case was submitted to the jury, who returned a verdict in favor of the defendant; whereupon the plaintiff’s counsel excepted to the rulings of the court in the admission and rejecting of the evidence objected to, and to the instructions to the jury. It was argued for the plaintiff, on the evidence, that the defendant procured the indorsement of Swan for the fraudulent purpose of giving a false credit to the note, and thereby to deceive and injure all such persons as might afterwards purchase the said note, believing the said indorsement to be valid and not voidable. The defendant’s counsel insisted, that there was no sufficient evidence of any fraudulent intent of the defendant in procuring Swan’s indorsement; that it was inadvertently done, and the intention of selling the note with Swan’s indorsement was immediately abandoned, and when he put the note into the broker’s hands, the broker was informed that Swan’s name was of no value. It was also contended, that if the jury should find that Swan’s indorsement was procured fraudulently, as charged in the declaration, yet the defendant was not liable unless the note was sold and put in circulation with a fraudulent intent. And on this point of defence, the defendant’s counsel principally relied. In order, therefore, to ascertain whether the note was sold and put in circulation with a fraudulent intent, the jury were instructed, that, if Swan’s indorsement was procured with a fraudulent intent, it would not be such a fraud as would render the defendant liable in this action, if, on the whole evidence, they should find that the defendant had no fraudulent intention when he put the note in circulation. If this instruction be incorrect, the plaintiff is entitled to a new trial; for although the jury may have found for the defendant on another ground of defence, namely, that no credit was given to Swan’s indorsement, yet this is uncertain, as some of the jurors might have agreed to the verdict on one ground, and some on another ; so that the verdict must be set aside if there — 200 — was any material misdirection in the defendant’s favor, as to either of the grounds of defence. The principal question is, whether it was necessary to be shown that the note sued was put in circulation with a fraudulent intent. The argument for the defendant is, that fraud is the gist of the action ; not carelessness or negligence : That the fraudulent intention, if any there was, with which the indorsement of Swan was procured, was immaterial, unless it continued up to the time when the note was sold ; and that the only material question is, whether the sale was fraudulent. On looking into the abstract of the declaration, we find that it is not averred, that the defendant sold the note with any fraudulent intention. It alleges that the indorsement of Swan was procured by the defendant with such an intention ; and that he offered to sell it to Stearns, who, relying on the indorsement of Swan as effectual, purchased the note of the defendant, and paid him therefor. If, therefore, the argument of the defendant’s counsel he well founded, and it is necessary to prove that the sale was made with a fraudulent intent, the defendant might prevail on a motion in arrest of judgment. But if a new trial should be granted, this defect, if it be one, might be supplied by an amendment. This question, therefore, is to be decided without any regard, in this particular, as to the form of the declaration. Several cases were cited on this point, which we think decisive. In Adamson v. Jarvis, 12 Moore, 241, it was averred in the declaration, that the defendant, having property of great value in his possession, represented to the plaintiff that he had authority to dispose of it, and the plaintiff thereupon purchased it; but it was not averred that the defendant knew he had no authority to make the sale. And after a verdict for the plainLif, it was held that a scienter was not necessary ; and the case vsas distinguished from that class of cases where a party, who has no interest in a matter about which his opinion is applied for, gives an honest though mistaken one, is not responsible. There is no question as to the scienter in the present case ; but the decision, in the case cited, shows that a party may render himself — 201 — liable in an action for damages to a party prejudiced by a false affirmation, though not made with any fraudulent intention. Several other cases were cited, by the plaintiff’s counsel, to establish a very familiar principle of law, in respect to which there can be no controversy. The principle is, that where a party affirms either that which he knows to be false, or does riot know to be true, to another’s loss and his own gain, he is responsible m damages for the injury occasioned by such falsehood. This is a very just and reasonable principle, and is well established. The only doubt, if there be any, is, whether it is applicable to the question now to be decided; There was no evidence that the defendant made any express declaration that the note sold was a valid note, and that the makers and indorsers were liable ; but we are all of opinion, that if he fraudulently procured the indorsement of Swan, and then authorized Winslow to sell the note without erasing the name of Swan, knowing, as he did, that Swan was a minor, and not by law liable on the note, all this would be equivalent to an express affirmation that the note was a valid contract, on which the makers of the note and the indorsers were by law liable. A party is to be presumed to have intended the consequences of his own acts. And if the defendant had repented the procuring of Swan’s indorsement, to render his repentance effectual he should have erased the indorsement before he put the note in circulation, so that no one might be deceived and defrauded thereby. For these reasons, we are of opinion that the plaintiff is entitled to a new trial. The same reasons have a bearing also or another question, which may be of importance on a new trial. The plaintiff offered to give evidence of the declarations and representations of Winslow, made to Stearns and the plaintiff, at the time of the sale of the note, as to the parties to the same. This evidence we think is relevant to the issue, and ought, to have been admitted. It was rejected, on the ground that the defendant was not responsible for any misrepresentation made by his agent, without authority, and contrary to the defendant’s express instructions. This is undoubtedly the law ais to all particular and special agents ; for it is the duty of the person deal — 202 — ing with such an agent, to ascertain the extent of his authority. And if the agent exceeds the limited authority conferred on him, the principal is not bound by his misrepresentations, or any other unauthorized acts, unless the acts so done are within the scope of his authority, in the performance of the act he was authorized by the principal to perform ; or unless the principal had held him out as his general agent; or as one having a me re enlarged authority. Story on Agency, 122. But this rule of law is not applicable to the present case ; for the authority of a general agent cannot be limited by any private instructions, unless they were known to the person dealing with him ; and this rule extends to factors and brokers, acting in the line of their employment. And it makes no difference, as Judge Story remarks, whether the factor or broker had been ordinarily employed by the principal, or it is the first instance when he was so employed. This distinction between general and special agents is discussed by Judge Story, with his usual fulness and ability, in his Commentaries on the Law of Agency ; and he approves the rule laid down by Smith, in his work on Mercantile Law, p. 59. “ A general agent,” he says, “ is a person whom a man puts in his place, to transact all his business of a particular kind ; thus, a man usually retains a factor to buy and sell goods, and a broker to negotiate all contracts, of a certain description; and so in other instances. The authority of such an agent to perform all things usual in the line of business in which he is employed, cannot be limited by any private order or direction not known to the party dealing with him. But the rule is directly the reverse concerning a particular agent, that is, an agent employed specially in one single transaction; for it is the duty of the party dealing with such a one, to ascertain the extent of his authority; and if he do not, he must abide the consequences.” Story on Agency, 116, note. This seems to be a reasonable rule, which is founded on public policy, and is well supported by the authorities. In the case of Pickering v. Busk, 15 East, 43, Lord Ellenborough says, he could “not subscribe to the doctrine, that a broker’s engagements are necessarily, and in all cases, limited to his actual authority ; for it is clear, that he may bind his prin — 203 — cipal within the limits of the authority with which he has been apparently clothed by the principal, in respect to the subject matter ; and there would be no safety in mercantile transactions, if he could not.” So Bayley, J. remarks, that “if the servant of a horse dealer, with express directions not to warrant, do warrant, the master is bound ; because the servant, having a general authority to sell, is in a condition to warrant, and the master has not notified to the world that the general authority is circumscribed.” This doctrine is conformable to the well established principle, that when one of two innocent persons must suffer by the fraud or negligence of a third, he is to bear the loss who enabled the third person to do the injury, by giving him credit, and holding him out to the world as his agent. J1 fortiori, if an innocent person sustains a loss, occasioned by the fraud or misconduct of another person, the latter will be held responsible, although he can show that the loss would not have been incurred, but for the misconduct of a third person, especially if that person is his agent. There is also another satisfactory reason for admitting evidence of the representations made by Winslow, at the time of the sale of the note ; because the evidence might have an important bearing on the question, whether the plaintiff or Stearnspurchased the note, with any reliance on, or giving credit to, the indorsment of Swan. A question upon which, as it seems, the jury entertained some doubts. As to the admission of the evidence in favor of the defendant, to which the plaintiff excepted, we are of opinion that the exception is not well founded. But the evidence will be of no importance, on the new trial, in consequence of the decision of the court, on the principal question raised by the exception to the instructions to the jury. For if the defendant fraudulently procured the indorsement of Swan, he cannot, in our judgment, exculpate himself, by proving that he repented of his intended fraud ; for it was his duty to erase the name of Swan, so that no person could possibly be defrauded by his indorsement. This evidence undoubtedly affects favorably the defendant’s character ; but has no effect on his legal liability, if the indorsement — 204 — of Swan were procured by him with the fraudulent intention of putting the note in circulation, and giving to it a false credit. If Winslow was directed not to sell the note on the credit of Swan’s indorsement, still if he did represent it as a valid indorsement, the rule in this action applies, respondeat superior. This rule is founded on a just and salutary principle of public policy, however hard its operation may be on the defendant, if he did not intend to sell the note on the credit of Swan’s in dorsement, and it was so sold by Winslow, contrary to the defendant’s directions. New trial granted,.