Frick & Co. v. C. G. Larned & Co.

The opinion of the court was delivered by Johnston, J.: By the first count of the petition, the plaintiff seeks to recover the unearned portion of the commission paid by it to its agents, and no reason is seen why the facts alleged do not warrant a recovery. The amount of the commission which the agents should receive was fixed by the contract, and no commission was to be paid on any sales made by the agents to irresponsible parties, nor where the debts for which machinery was sold were uncollectible. The plaintiff alleges that certain machinery was sold to certain parties on credit, for $1,765, and that the total amount which the plaintiff had been able to collect from the parties and upon the security which had been given by them was $527.59. The commission on the amount for which the machinery was sold was $300.05, while the commission upon the amount collected was only $89.69. It is alleged that the plaintiff was unable to collect any more than $527.59, for the reason that the debtors were and are insolvent. Under the contract, no commissions were due or payable for that part of the selling price which could not be collected, and as $1,237.41 of the selling price of the machinery in question was uncollectible, no commission was earned thereon, and the defendants had no right to retain the commission on that amount. It is true that another provision of the contract provided that the defendants should receive commissions out of cash payments only, but that is coupled with the further provision that the agents should retain commissions only on such payments as should be made. [784] 1. Agent-comissions overpaid—recovery -limitation of action. [783] It is contended by the defendants that, as the plaintiff had advanced the commission before the payments were made, it departed from the contract, and cannot now recover such [784] commission back. This is met by the allegation that the defendants represented to the plaintiff that the notes were good and would be paid at maturity, and, relying upon their statements, the plaintiff paid the commission in full. From the petition, it does not appear that any new contract was made between, the parties, but that the commissions were advanced upon the schedule of rates fixed by the written contract, and upon the representation and assumption that the sales had been made to responsible parties, and that the paper would be paid at maturity. The fact that the commissions were advanced to or retained by the defendants before it was developed that their representations were untrue, or that a portion of the debt could not be collected, gives them no right to retain the unearned portion of the commission. According to the averments of the petition, it was agreed that they should not receive or retain a greater sum as commission than 17 per cent, of the amount which was or could be collected on the sales made; and it was further provided, that they would reimburse the plaintiff for any losses resulting from any deviation from their agreement. As the commissions were advanced upon the representation of the defendants that the notes taken by them were good and collectible, the advance of commission can hardly be treated as a voluntary payment. The allegations of the petition are not as full and definite as they should be, but, assuming that the facts alleged are true, as we must, we think they are sufficient to show that the plaintiff is entitled to -. . . recover the difference between the commission which was paid and the amount actually earned by the defendants. It is contended that the action sounds in tort, and is therefore barred by the two-years statute of limitations. From what has been stated, it is clear that the action arises on contract, and does not fall within that limitation. The allegations of the second count are set out at length in the statement, and from it and the exhibits it appears that the defendants agreed to take orders for machinery and for [785] ward the same to the plaintiff for approval. Blanks were to be furnished for that purpose, and in connection with each order they were to take and forward a statement of the financial ability of the purchasers to meet their obligations. These statements were to be invariably filled out where sales were made on credit, and no orders were to be forwarded to the plaintiff for approval until the agents had thoroughly convinced themselves that the statements of property were based on a fair valuation; and they were required, either by examination of the records or by making full inquiry of residents in the locality of the intended purchaser, or by other means, to ascertain and assure themselves as to the correctness of the statement made. It was further provided, that the notes taken should be from parties of well-known responsibility and good reputation for veracity and prompt payment of debts. Now, it is alleged that the parties to whom the sale was made in this instance were insolvent. One of them, Jonathan Anderson, made a property statement that he owned a certain quarter section of land worth $2,000, free from all incumbrances, except $500, and that he owned $2,000 worth of personal property over and above his indebtedness. It is averred that at that time Anderson had no land, and that his statement of his property and his ability to pay, taken by the defendants and forwarded to the plaintiff, was wholly untrue. It is then averred that the defendants never made inquiry as to the truth of the statement which they had taken and forwarded, and never made any examination of the record, as the contract required. These averments, fairly interpreted, show a liability of defendants for the losses occasioned by their noncompliance with the contract and their neglect. [786] 2. Negligent agent-loss-principal. [785] The law requires fidelity and reasonable care and diligence on the part of agents in the transaction of business for their principals. In the absence of any specific provisions as to the care of agents in ascertaining the responsibility of persons to whom sales were made on credit, they would be held to a careful examination of the credit of a proposed purchaser and to the exercise of reasonable care in ascertaining [786] from the usual sources of information as to his ability to meet payments when they were to be made. In this case care and diligence were especially enjoined upon the agents, and while they did not become guarantors of the responsibility of the persons to whom sales were made, they bound themselves to a high degree of care and diligence in ascertaining the financial standing and ability of the persons from whom orders were taken. The property statement made by the proposed purchaser was treated as an important feature of a proposal to purchase machinery. It was to be invariably filled out and forwarded with the order. The agents were required to thoroughly convince themselves that the valuation put upon the property by the proposed purchaser was fair, and either by examination of the record or full inquiry of residents in the locality of the intended purchaser, or by other means, they were to assure themselves of the correctness of the statement made. The statement thus made, and attested and' sanctioned by the agents, was made the basis upon which the principal determined whether a sale should be made. It is averred that the plaintiff relied upon the performance of these duties by the agents, and if they failed to exercise the care and diligence required of them they are liable to the plaintiff for the loss sustained by reason of their neglect. It is said by the defendants that ample security was taken, upon which the plaintiff relied, and that the loss was occasioned by its own neglect. These are matters to be set up in an answer, and which do not appear from the allegations of the petition. Taking the facts alleged in the petition to be true, we think it stated a cause of action against the defendants, and that the general demurrer should have been overruled. The judgment of the district court will be reversed, and the cause remanded for another trial. All the Justices concurring.