Lewis v. Brehme

Alvey, J., delivered the opinion of the Court. It is conceded in this case that the defendant was the agent of the plaintiffs for the sale of goods, and that, in addition to the commission allowed the defendant as ordinary agent, an additional commission was agreed to be allowed, and was actually allowed, for and in consideration of the defendant’s ^guaranty of payment of all bills of goods purchased of the plaintiffs by a certain customer, who was, through the agency of the defendant, induced to deal with the plaintiffs, merchants in* Philadelphia, and such additional commission was to be paid whether the purchases were made by the particular customer directly of the plaintiffs, or through the defendant as their agent. The customer having purchased goods of the plaintiffs, and ])aid for them to the defendant, the agent, and the money having been lost in the manner disclosed in the evidence and stated in the prayers of the respective parties, the question is, upon whom is that loss to fall. It is insisted on the part of the plaintiffs that the defendant, being an agent, acting under a del eredere commission, is bound to pay, not conditionally, but absolutely, as if he were himself the vendee of the goods; and that, consequently, he did not discharge his liability by the purchase and transmission of the gold draft of the 27th of April, 1866. And even if the liability of the defendant, by reason of the del credere commission, be not maintainable to the extent contended for, still, the plaintiffs insist that as ordinary agent, whose duty it was to remit funds to his principal, the defendant having procured "the draft payable to his own order, and endorsed it to the plaintiffs without excluding recourse, is, under all the circumstances attending the- transaction, liable — 424 — as endorser, the drawer having failed, and the draft meeting with dishonor. On the other hand, the defendant contends that his relation to the plaintiffs was not that of a del credere agent or factor, strictly speaking; but that if he be so regardedjthe guaranty, in consideration of the commission, only extends to the payment of the money for the goods by the vendee, and not to its safe transmission to the vendor; and that, consequently, the guaranty was gratified and discharged when the money was paid by the purchaser to the defendant as the plaintiffs’ agent. He also contends that he is not liable as endorser of the draft transmitted, because of the relation of principal and agent existing at the time between the plaintiffs and himself, in reference to which, the draft was purchased, and that, acting for the convenience of the plaintiffs, he can only be held responsible fop good faith and ordinary diligence. These positions of the parties were sought to be maintained by them at the trial in the Court below, and with that view they propounded prayers for instruction to the jury; but the Court rejecting those of the plaintiffs, and granting those offered by the defendant, the plaintiffs have brought those rulings to this Court for review, and whether they be correct or otherwise, according to our judgment, will appear in the sequel of this opinion. We cannot resist the conclusion that the defendant was, at the time of the transactions involved in this controversy, strictly a del credere agent of the plaintiffs; although the nature and extent of the obligation imposed upon such an agent has' been variously stated, and, in regard to it, down even to the present time, no little conflict will be found to exist among Judges and authors of the highest repute. On the one hand there are those who maintain that an agent del credere for the sale of goods, makes himself absolutely and in the first instance liable to his principal for the pi’ice of the goods sold; while on the other hand it has been strongly maintained that such an agent only incurs a secondary res — 425 — ponsibility, that of mere surety, whereby he can bo required to pay only in the event of failure on the part of the principal debtor. And some of the authorities have gone to the extreme of maintaining that the undertaking of the agent under a del credere commission is a mere guaranty of the debt of another, and therefore within the Statute of Frauds, 'Which of these positions is correct depends, to a great extent, upon the state of the authorities, the question never having been finally adjudicated in this State. Whenever an agent, in consideration of additional commission, such as was agreed to be allowed in this case, guarantees to his principal the payment of debts that become due through his agency, he is said to act under a del credere commission. What then is the nature and extent of this guaranty? In Grove vs. Dubois, 1 T. Rep., 112, a case of a policy broker, Lord Mansfield answered this question in very plain and unqualified terms when he said, “ It is an absolute engagement to the principal from the broker, and makes him liable in the first instance. There is no occasion for the principal to communicate with the underwriter, though the law allows the principal, for his benefit, to resort to him as collateral security. But the broker is liable at all events.” In this Mr. Justice Btjller concurred, and said that he had known many actions to have been brought against brokers with commission del credere, and that he had never heard any inquiry made in such cases, whether there had been a previous demand upon the underwriter and refusal; and he declared that such was not the practice. Thus showing, according to the opinions of these great Judges, that the obligation of such undertaking was primary and absolute in its character, and that the agent was regarded as standing in the relation to his principal of an original debtor. Ten years after the case of Grove vs. Dubois, the case of Mackenzie vs. Scott, 6 Bro. P. C., 280, occurred in the House of Lords, on an appeal from the Court of Sessions in Scotland. That case was very analogous in its circumstances to — 426 — the one before us. There, a factor under a commission del credere, sold goods and took accepted bills from the purchasers, which' he endorsed to a banker at the place of sale, and received the banker’s bill for the amount, payable to his, the factor’s, own order, on a house in London. This banker’s bill the factor endorsed and transmitted to his principal, who got the same accepted. The acceptors and drawer having failed before payment, it was held, according to the head note of the case, that the factor was answerable for the amount of the bill, being personally liable under his commission del credere, to satisfy his principal the price of the goods sold. It was insisted in that case, as it has been in this, that the del credere obligation extended only to guaranteeing the payment of the price of the goods by the vendee, and that the remittance of the money by the factor was a transaction entirely different and distinct. But, if the uniform interpretation of that case be correct, (there being no reasons assigned for the judgment given,) the argument in that respect did not avail; and, in view of the law as it had been announced in Grove vs. Dubois, it is not difficult to perceive upon what ground that decision was based. And afterwards, in 1803, the same general proposition was again pointedly asserted as the law of England in the case of Houghton vs. Matthews, 3 Bos. & Pull., 489. By these decisions the law was regarded as settled in England, until about the year 1816; and all the text writers, and authors of elementary treatises upon the subject of commercial contracts before that time laid it down, as the unquestionable law, that an agent, acting under a commission del credere, was bound to his principal in the first instance and as an original debtor. The law will be found so stated by Liver-more, in his ivorle on Agency, 409, 410 ; by Paley on Agency, 40; by Comyn on Contracts, 1 vol., 253; and by Chitty in his worh on Com. Law, 3 vol., 222. But it is said that the cases to which we have referred do not now announce the law as accepted in England, and we — 427 — are referred to the ease of Morris vs. Cleasby, 4 Maul. & Selw., 566, decided in 1816, and the cases following on its authority, to show how the rule has been qualified if not entirely changed. It is true, in the case of Morris vs. Cleasby, Lord Ellenborough did express a decided dissent from the principle announced in the previous decisions, both as to the nature and scope of the del credere obligation. lie said that the guarantor, in consideration of the commission, is only to answer for the solvency of the vendee, and to pay the money if the vendee does not; and that, on the failure of the vendee, the agent is to stand in his place and make his default good. Thus clearly placing the agent in the position of mere surety to the purchaser of the goods. And if such, be the true nature and character of the contract, seeing that it is entirely collateral and secondary, it is difficult to perceive how it can escape the operation of the Statute of Frauds. Be that, however, as it may, the decision of Lord Ellenbokottgh was sanctioned by the case of Peele vs. Northcote, 7 Taunt., 478, and also impliedly sanctioned by the case of Gall vs. Comber, 7 Taunt, 558, in the Common Pleas. And from the time of these last decisions, until very recently, all the treatises on commercial contracts have stated the law in accordance with the opinion of Lord Ellenbobough, taking the doctrine of Lord Mansfield to have been overruled. It is so stated in Chitty on Contracts; Russell on the Law relating to Factors and Brokers; Smith’s Commercial Law, and in other works treating of the subject. Nor has there been uniformity of decision on the subject in the Courts of this country; though wo think the tdecided weight of authority is in support of the doctrine as announced in Grove vs. Dubois. In the case of Thompson vs. Perkins, 3 Mason C. C. Rep., 232, before Judge Stoet, in 1823, the principle of Grove vs. Dubois was repudiated as being incorrect, and that of Morris vs. Cleasby sanctioned; though the facts of the case do not appear to have required a distinct ruling upon the particular question now presented. It was — 428 — an action of assumpsit by the principal against the assignee of the factor del credere who had sold the goods of his principal, and taken negotiable notes payable on time, in his own name, for the amount of sales; and afterwards, and before the notes became due, the factor failed, and assigned the notes to his assignee, for the benefit of his creditors, and the assignee after-wards receiving the money due on the notes, it was held that the prin'cipal was entitled to recover the money so received from the assignee, subject to a deduction of the amount of the lien of the factor for his commissions and charges. Upon such state of facts, it is clear, the right to recover was equally the result of the doctrine of Lord Mansfield as that of Lord Ellenborough. All the cases concede it to be the right of the principal to forbid payment to the agent, and to maintain an action himself against the buyer to recover the price of the goods; or to pursue his goods, or the notes taken for them, into the hands of third parties precisely as if no del credere contract existed. And though such right in the principal would seem to consist only with a collateral undertaking by the agent, yet, in the contract del credere, being sui generis, it is held in no wise to change the original and independent character of the agent’s undertaking to his principal. In the case of Swan vs. Nesmith, 7 Pick., 220, occurring a few years after the case in 3 Mason, the Supreme Court of Massachusetts decided that the legal effect of a commission del credere was to make the agent liable at all events for the proceeds of the sale, so that he might be charged in indebitatus assumpsit, as for goods sold to him. There the contract was admitted to be original and not collateral, and therefore not -within the Statute of Erauds; and the necessary conclusion is, that the Court intended fully to sanction the principle of Grove vs. Dubois, to which, and the case of Mackenzie vs. Scott, they refer for the definition of the nature of the commission del credere. And so in New York, the same principle is established, as will be seen by reference to Wolf vs. Koppel, 5 Hill, 458, and same case on appeal, 2 Denio, 368, — 429 — and Sherwood vs. Stone, 14 N. Y., 267. The two last cases, being in the Court of last resort, fully approve and adopt, as far as wo can discover from the opinions delivered, the principle of the cases of Grove vs. Dubois and Mackenzie vs. Scott. Judge Stoky, however, in his work on Agency,"section 215, adopting his own view of the law as found in Thompson vs. Perkins, supported by Morris vs. Cleasby, and the cases in the Common Pleas, says that the true engagement of the agent del credere is merely to pay the debt, if it is not punctually discharged by the buyer. That, in legal effect, he warrants or guaranties the debt; and thus he stands more in the character of a surety for the debt, than as debtor. And the principle is so stated in other American treatises. But, with all due deference to the high authority of Judge Stoky, we think the decided -weight of authority is against his position. In England the question has been recently under discussion and re-examination, and the result of which is quite at variance with the doctrine laid down in Morris vs. Cleasby. In Couturier vs. Hastie, 8 Exch., 39, the action was brought by the principal against his factor who, on commission del credere, had sold a cargo of corn, and the purchaser refusing to comply with the contract on insufficient grounds, and afterwards becoming bankrupt, the question was whether the factor was liable for the non-fulfilment- of the contract, by reason of his del credere commission, there being no guarantee in writing; and the Court held the factor liable, not regarding the undertaking as one simply to pay the debt of another, within the 4th section of the Statute of Frauds; and the decision in Wolf vs. Koppel, 5 Hill, 458, was referred to and adopted as containing sound law upon the subject. And in the more recent case of Wickham vs. Wickham, 2 Kay & John., 478, Sir Wm. Page Wood, then the Vice-Chancellor, and at present the Lord Chanoellob, of England, in refer-' ring to the case of Couturier vs. Hastie, as authority, said: “When I look at the whole of that case, and consider the — 430 — reasons given by the Judges in delivering their judgments, though given very cautiously and guardedly, I cannot but conclude that they considered that an agent entering into a contract in the nature of a del credere, agency, entered in effect into a new substantial agreement with the persons whose agency he undertook; that the agreement so entered into by him was not a simple guarantee, but a distinct and positive umdertalcing on his part, on which he would become primarily liable: Otherwise, I cannot see how the learned Judges could arrive at the conclusion that the undertaking was not within the Statute of Frauds.” Supposing this to be the correct conclusion deducible from the present state of the authorities, of which we have no doubt, the contract being distinct and positive, rendering the agent primarily liable, it necessarily follows that the agent stands in no snch relation to his principal as that of mere surety,for the price of the goods sold. His relation to his principal is that of debtor as well as agent; and being so, the legal consequences of the debtor relation must follow. Indeed, it was conceded in the case of Leverick vs. Meigs, 1 Cow., 645, where the liability of such an agent was attempted to be restricted, that if by the engagement the agent became a debtor absolutely, as if he were himself the purchaser, he would be bound for the remittance of the money, as well as for its payment by the buyer. “ This arises from the general principle, that the debtor is bound to make payment to his creditor, and consequently, if he remits a bill which turns out of no avail, it is no payment. It does not discharge a precedent debt, unless it be so expressly agreed between the parties;” (1 Salk., 124; 2 John. Cas., 441; Glenn vs. Smith, 2 Gill & John., 493;) or, unless the creditor parts with the bill, or is guilty of laches, to the prejudice of the debtor, in not presenting it for acceptance or payment in due time. Of course, the agent, acting under a commission del credere, where the goods have been sold on an authorized credit, cannot be required to account to his principal before the expira — 431 — tion of the credit given to the buyer. And if the money which comes into his hands be remitted under special instruction from the principal, then it will be at the risk of the latter, provided the instructions are observed with proper caution and diligence on the part of the agent. But in this case, it is not pretended that there were any special instructions in regard to the manner of remitting the money received by the defendant. The remittance therefore was at his risk, as it would be of any other debtor remitting funds to discharge a debt due by him. Such being our view in regard to the liability of the defendant as an agent acting under a commission del credere, we are of opinion that there was error committed by the Court below in refusing to grant the first prayer of the plaintiffs, which was intended to present the case as within the principle of Grove vs. Dubois and Mackenzie vs. Scott, and particularly the latter, to which this case bears a strong analogy. But as it has been earnestly contended in argument that the contract del credere only extends to the payment of the price of the goods, and not to the remittance of the moneyj to the principal, and the Court below having so instructed the juiy, let us examine the case briefly upon that supposition, in order to determine whether the defendant be not liable as indorser of the gold draft transmitted to the plaintiffs. The defendant upon collecting the amount due from Akers, -placed the money in his own account with his bankers, and purchased of them the gold draft that was afterwards dishonored, by a check on his account. This draft he caused to be made payable to his own order, without reference to his character as agent, and after indorsing it to the plaintiffs, or their order, it Avas transmitted to them to pay not only the price of the goods sold to Akers, bat a balance due from the defendant himself. The draft proving worthless, and having been purchased without special directions, Avhat is the liability of the defendant by reason of his unqualified indorsement ? — 432 — Judge Story, in his work on Agency, sec. 157, states the rule as an unqualified one, that an agent, though known as such, who indorses a bill or note generally, makes himself personally responsible; “ for, in such a case, although he is a known agent, the making, or accepting, or indorsing of the instrument, is treated as an admission that it is his personal act, not only in respect to third persons, but also in respect to his principal.” And for this proposition, as stated, he cites many respectable authorities. So Chitty in his work on BilIs, on page 46, states the same general principle, and says, “ if a person employed by the plaintiff to purchase bills for him, obtain them payable to himself, and indorses them generally, he will be liable upon that indorsement,'even to his own employer, although he had no guarantee commission; ” and the Court, in deciding one of the cases referred to, observed that the defendant might have specially indorsed the bill sans recours, and not having thought fit to do so, he was personally liable. And for other authorities supporting the same general proposition, see Smith on Mercantile Law, 164; Russ. on Brokers and Factors, 263, 264; Parsons on Notes and Bills, 102. Notwithstanding, however, the rule is thus generally and unqualifiedly stated, we think, on the more recent authorities, it is not to be applied, as between the principal and agent themselves, without some limitation. The indorsment, of course, if unqualified, is to be taken as importing prima facie liability on the part of the agent. He should be allowed to show, however, as matter of defence, that it was not the intention that he should be personally charged by his indorsement; and if there be no intention to create personal liability, none will exist as between himself and his principal. ’Whether such intention exists will, in all cases, depend upon the circumstances of the transaction. But, as was said by. Mr. Chief Justice Tilghman, in Miles vs. O’Hara, 1 Sergt. & Rawle, 32, the circumstances should be dear and strong to take off the presumption which arises — 433 — from the indorsement. See the case of Castrique vs. Battigieg, 10 F. F. Moore, 94, before the Privy Council. Such being the law, the next question is, has the liability of the defendant been fixed by the proper evidence of due demand and notice? ISTo direct proof of demand and notice was offered at the trial. In the absence of such evidence, the liability was sought to be fixed by reason of the conduct and declarations of the defendant subsequent to the protest of the draft. The plaintiffs’ second prayer enumerates the facts that were supposed to have fixed the defendant’s responsibility as indorser; and whether they are sufficient for that purpose is the question to be decided. If, in point of fact, there had been no demand and notice of dishonor, or insufficient demand and notice, we think this second prayer defective, because it does not submit to the jury to find whether the defendant was fully informed, at the time of the promise and other conduct relied on, of all the facts and circumstances of the neglect to make demand and to give the notice. The promise and other circumstances stated in this prayer would certainly be sufficient to charge the defendant as indorser, if he possessed full knowledge at the time. Without such knowledge, however, his promise or acknowledgment would not bind him. It is, therefore, essential, in this aspect of the case, that the fact of knowledge be found by the jury, in addition to the fact of the defendant’s treating the debt as his own and promising to pay it to the plaintiffs. Beck vs. Thompson, 4 H. & J., 531; 1 Parsons on Notes and Bills, 595, and the authorities there cited. But if the party is sought to be charged on his indorsement, and his promise or assumption be used as evidence of the previous demand and notice, a different principle applies. In such case, any promise to pay, or admission made by the indorser that he continues liable, subsequent to the dishonor, is good evidence upon which to found a presumption that every thing has been properly done to render him liable. — 434 — This is a principle now well established. As in the case of Lundie vs. Robertson, 7 East, 231, which was an action by an indorsee against an indorser, and the only evidence of notice of dishonor being the promise of the defendant, Lord Ellenbobough said: “ When a man against whom there is a demand promises to pay it, for the necessary facilitating of business between man and man, every thing must be presumed against him. It was therefore to be presumed prima facie from the promise so made, that the bill had been presented for payment in due time and dishonored, and that due notice had been given of it to the defendant.” And so in the case of Hicks vs. Beaufort, 4 Bing. N. C., 229, where the question was similar to that in Lundie vs. Robertson, Tindall, C. J., said: “ The cases go on this point only; that if, after the dishonor of a bill, the drawer distinctly promises to pay, "that is evidence from which it may be inferred he has received notice of the dishonor, because men are not prone to make admissions against themselves; and therefore when the drawer promises to pay, it is to be presumed he does so because the acceptor has refused.” This presumption, however, is one of fact for the jury, and not an absolute legal conclusion to be drawn by the Court. It is prima facia only, and liable to be rebutted. 4 Bing. N. C., 229; Booth vs. Jacobs, 3 Nev. & Man., 351; Picken vs. Graham, 1 Cr. & Mee., 728; Brownwell vs. Bonney, 1 Q. B., 39. If no demand had been made and notice given, the defendant would be entitled ito prove the omission, and the further fact that his promise or acknowledgement had been made without knowledge of the plaintiffs’ neglect in this respect, and thus rebut the presumption. The jury should be required to find from the evidence whether due demand and notice had occurred, as ground of the plaintiffs’ right to recover. This being so, the plaintiffs’ second prayer is also erroneous in not requiring due demand and notice to be found by the jury. Instead of making the right of recovery depend upon the legal conclusion to be drawn from the facts stated, — 435 — the jury should have been instructed that it was competent to them, from the facts enumerated, if found to exist, to infer and conclude, as matter of fact, that due demand had been made and notice of dishonor given, and if they should so find, that then the plaintiffs were entitled to recover. It follows, therefore, that the plaintiffs’ second prayer was- properly rejected by the Court below. (Decided 12th January, 1871.) It results necessarily from, what has been said that thc^ defendant’s first prayer was erroneous, and should not have been granted. It assumed that the contract resulting from the del credere commission was discharged in the payment of the money by Akers to the defendant. This, as we have seen, was an erroneous view of the law. It also follows from what we have said in reference to the plaintiffs’ second prayer, that the second prayer of the defendant should not have been granted. It assumed that the defendant could not be held liable, after the receipt of the money from Akers, either by virtue of the commission del credere, or his indorsement of the draft, if he used ordinary diligence in transmitting the money to the plaintiffs. This, as we have shewn, is not maintainable. The judgment below will be reversed, and a. new trial awarded. Judgment reversed, and new trial awarded.