First National Bank v. Tenney

Wateemaít, P. J. One of the primary rules of the law of principal and agent, is that the principal is bound to indemnify the agent against the consequences of all lawful acts by him l)ona fide done in pursuance of the authority conferred. Evans’ Newell on Agency, 353; Mecchem on Agency, Sec. 653; Story on Agency, Sec. 339; Stocking v. Sage, 1 Conn. 519; Greene v. Goddard, 9 Metcalf, 212-222; Perry on Trusts, Sec. 910. Counsel for appellant do not contest the existence of this rule; their position is that the judgment against Tenney was rendered, not because of his relation to, or anything he did for, the bank, but on account of his being the attorney of Mrs. Jeffery, and the opinion entertained by the chancellor that he was the attorney of Mr. Jeffery. Counsel say: “The conspiracy which' Judge Tuley thought he saw, was a Jeffery affair, not a bank affair.” “Judge Tuley thought he saw a group of conspirators at work.” “ The bank was not there. Jeffery, Mrs. Jeffery, Pomeroy and representatives of the W. O. Tyler Paper Company were all there; and Tenney was there too, helping the others, who were his clients. The group was really innocently engaged, but Judge Tuley denounced them all as wicked plotters, and they suffered in consequence. Why does Tenney demand that .the bank shall indemnify him for this ?” Counsel also say that Tenney and others were suspected of a fraudulent conspiracy and consequently were punished together; that the bank was neither suspected nor punished. The decree hardly sustains this view. The decree found that the material allegations of the supplemental bill were sustained by the evidence. The supplemental bill alleges that in the proceedings for the formation of the Jeffery Printing Company (the new company) when it became necessary to procure subscriptions for the $150,000 capital stock, Lyman J. Gage, vice-president of the bank, with intent to aid in the consummation of the fraudulent scheme aforesaid (i. e., to wreck the John B. Jeffery Printing Company and defraud its creditors), entered, or pretended to have entered, upon the boobs of the bank a credit or credits as for sums of money to the aggregate amount of $150,000, etc.; and further alleges that the whole scheme and transaction (the formation of the new company) from beginning to end was part of the fraudulent schemes contrived as aforesaid by John B. and Emma Jeffery and Daniel K. Tenney, each of the persons participating in these transactions having full knowledge and notice of the fraudulent scheme. If the Circuit Court, in the decree by it rendered, had been content to merely speak of Tenney as a conspirator who had joined with Jeffery in the perpetration of what the court thought a fraudulent transaction, and had rendered no decree against him, Tenney could not have required the bank to remove the stigma from his name or pay damages for his injured reputation. The indemnity which a principal is bound to afford an agent, does not extend to giving compensation for odium he may incur, or unjust things said concerning his conduct in transacting the business he has been set to do. The Circuit Court, however, did not stop with merely characterizing Tenney’s conduct; it decreed that within thirty days he pay to the receiver it had appointed, the sum of $25,370.50, as being the part of the $75,000 bid by him upon the tangible assets of the John B. Jeffery Printing Co., which (in the language of the decree) “ he pretended to apply on the above mentioned judgment in his own favor,” with interest at six per cent per annum, “amounting, principal and interest, to $29,383.64.” The judgment alluded to was that of the bank; there was no pretense about applying the $25,307.50 on that judgment; he actually did so apply it with the knowledge of and by arrangement with the bank. It was to obtain relief from this decree. which became at once a lien upon his realty in Cook county, under which his personal property might have been seized and sold and by which his personal freedom was endangered (National Park Bank v. Halle, 41 Ill. App. 19), that he prosecuted an appeal. The court, concluding that he was a conspirator, did not decree that he make good'whatever the complainants had lost by reason of his acts as such, or order him to pay. what Mrs. Jeffery or any of his clients, save the bank, had obtained upon the judgments, by them, through his instrumentality, entered. He was held bound to pay simply what the bank, through him as its attorney and trustee, had received. It is clear, therefore, that because of his connection with and agency for the bank, this personal decree was entered against him. Thus held, the bank was bound to indemnify him. It may be true, as is urged, that the bank had no need for his services;’ that its security was so ample and its position so secure that it could have-done without his aid. The rule is not, as would seem to be suggested, that a principal is bound to indemnify only such agents as he necessarily employs, or for such acts as they necessarily do in his service; he is bound to indemnify whatever agents he sees fit to employ, for all authorized and lawful acts, bona fide done in his business. It is, therefore, quite immaterial if Tenney, as the attorney of Mrs. Jeffery, had more occasion to apply to the bank than the bank had to employ him, or that none of its interests demanded that its judgment should be entered in his name; it did employ him; it did authorize the entry of its judgment in his name; it did empower him to purchase the tangible assets as its trustee and to cancel its judgment by such purchase, and finally it received from him such assets and actively participated in the creation of a new corporation to which these assets were transferred. Tenney was held for the very amount it, through his agency, received, and it can not be permitted to now say that it never needed to employ him at all. This conclusion is not reached, solely because this court set aside the decree of the Circuit Court, although the fact that such reversal inured to the benefit of the bank, and it enjoys the fruits of the appeal Tenney prosecuted, is entitled to consideration. The right of an agent to indemnity for bona fide, lawful, authorized acts, is the same as against those which bring no fruit to the principal or cause him loss, as against those from which he receives a rich reward. The question here presented is not how the Circuit Court regarded what Tenney did for the bank, but were such acts lawful, authorized, done in good faith. It is urged that a principal has the right to take (he consequences of a decree against its agent for acts done in its behalf, and is not bound to appeal therefrom, and that this action, being for the costs and expenses of the agent’s appeal, must fail. The principal is not bound to appeal from a decree rendered against his agent; be may submit to it, but he is bound to indemnify his agent, and this means something more than that after the agent has paid the judgment, or under it been stripped of his goods by due process of law, that the principal will then afford remuneration. The principal may pay if he will, but he can not lie supinely by and let his agent suffer the consequences of a decree which he, as principal, is legally and morally hound to pay. Neither is the agent bound to wait indefinitely before he takes measures to protect himself; having notified, if practicable, the principal of the situation, he may proceed to measures for his own and his principal’s relief, measures which in the case of an appeal taken, are necessarily in the interest of the principal and tend to his exoneration. When sued for an act done in pursuance of his employment, he is not obliged to let judgment go against him, but may defend and recover the expenses of a defense bona fide made. Howe v. Buffalo, N. Y. & Erie R. R. Co., 37 N. Y. 297; Stocking v. Sage, 11 Conn. 519-522; Maitland v. Martin, 86 Penn. St. 120; Frixione v. Tagliaferro, 31 L. & Eq. 27; Powell v. Trustees of Newburgh, 19 Johns. 283; Saveland v. Green, 36 Wis. 612-617. In the present case, by virtue of the statutes of this State, Sec. 1, Chap. 77, all the real estate Tenney had in the county of Cook was fastened upon by the decree of the court. The obligation of the bank and the right of Tenney were clear. He proceeded "by appeal to remove the decree and thus relieved the bank from its obligation to pay; for his proper and reasonable costs, expenses and services in so doing he is entitled to be remunerated. Ho complaint is made as to the amount of the judgment rendered in this case, and it will be affirmed. "Judgment affirmed.