Tripp v. Foster

KeRwin, J. It is established by the evidence that the defendant Foster held the stock in question as collateral security to a note of the “Bates-Odenbrett Automobile Company,” of which one Dr. E. W. Timm was president and the defendant Bates was secretary and treasurer from 1905 to 1912, and severed his official relations in January, 1912. On the back of the notes of said corporation was the indorsement of said Timm and Bates. On receipt of the collateral .■stock the defendant Foster executed the following: “I hereby agree on the payment of a certain sum of five thousand dollars ($5,000) together with the interest as specified by oné certain note of five thousand dollars ($5,000) due •October first, 1911, to deliver to the Bates-Odenbrett Auto ■Company stock certificate number eight (8). “J. W. FOSTER.” Bates made the representations to plaintiff about a month before plaintiff bought the stock. The $1,000 received by Bates from plaintiff went to the Bates-Odenbrett Automobile ■Company at Milwaukee, and later in May, 1911, the Bates-'Odenbrett Automobile Company sent a check for $1,000 to the defendant Foster to apply on the $5,000 note, and sent four notes of $1,000 each, which with the $1,000 cash took np the $5,000 note. It is established by the evidence and so found by the learned trial judge in his opinion that defendant Foster had no knowledge of any representations made by defendant Bates; that Foster did not own the stock, but merely held it ¡as collateral security and had it in his possession at the time ■of sale, and upon being informed by Bates of its sale executed [537] an assignment and sent it to Bates, who filled in tbe name of the pnrebaser and delivered it and received $1,000, which, was paid to defendant Foster and credited upon the debt which the stock in part secured. Upon the facts above stated and others found by the jury the court below held that the defendant Foster was liable for the fraud of Bates. Foster was not the owner of the stock. He merely held it in pledge as security for the debt of the Automobile Company to him. Bates sold the stock as the agent of the Automobile Company, which was the owner subject to the pledge. The Automobile Company redeemed the pledge and got possession of the stock by paying its value, or supposed value, to Foster, which was credited upon the debt. What the Automobile Company did with the stock after it was turned over to it through Bates was a matter of no concern to Foster. But the court below seems to have rested Foster s liability on the question of agency, namely, that by receipt of the $1,000 Foster ratified the sale and made Bates his agent. But the record shows that Bates was not the agent of Foster for any purpose, either by appointment or by ratification. It is clear from the undisputed evidence that Foster never appointed Bates as his agent to sell the stock, and he could not be bound by ratification of Bates’s fraud, because he had no knowledge of it and was in no way implicated in it or connected with the sale made by Bates. We think it clear upon principle and authority that Bates was not the agent of Foster for any purpose. Clark v. Dillman, 108 Mich. 625, 66 N. W. 570; Deering v. Starr, 118 N. Y. 665, 23 N. E. 125; 31 Cyc. 1632, 1644; Emmons v. Dowe, 2 Wis. 322; McGoldrick v. Willits, 52 N. Y. 612; First Nat. Bank v. Bentley, 27 Minn. 87, 6 N. W. 422; Gifford v. Landrine, 37 N. J. Eq. 127. The theory of the court below obviously was that when Foster received the $1,000 he ratified the acts of Bates re538 speeting tbe fraud in tbe sale of tbe stock. But Foster could not, by merely accepting tbe $1,000 due bim from a third person, make tbe agent of sucb third person bis agent or ratify an agency which was never attempted and which never existed, nor tbe fraudulent acts of one who was not bis agent, as to false representations of which be bad no knowledge. But Foster received tbe $1,000 from bis debtor, tbe corporation, and not from Bates, although tbe latter may have been tbe agent of tbe corporation in paying to Foster tbe money due bim. Tbe fact that it was a part payment, accompanied with a request that tbe security be split up and some of tbe shares retained by Foster as security for tbe balance due, cannot change tbe ordinary effect of tbe payment by a debtor to bis creditor. Tbe latter is not bound to inquire bow bis debtor got tbe money so long as it was at tbe time of payment tbe money of tbe debtor. 31 Cyc. 1251. Tbe plain situation is that Foster surrendered tbe stock held as collateral, receiving tbe agreed value, which was credited on tbe debt of tbe owner of tbe stock, and bad no connection with tbe frand committed by Bates, and had no knowledge of it when be surrendered tbe stock. Under sucb circumstances no case is made against tbe defendant Foster. Other questions discussed by counsel for appellant need not be treated. By the Court. — -The judgment is reversed, and tbe cause remanded with instructions to enter judgment for tbe defendant Foster dismissing tbe complaint as to bim.