Kip v. Howes — 32 N.Y. Super. Ct. 106

Majority

p. 106

ISAAC KIP, Jr., Plaintiff and Appellant, v. REUBEN W. HOWES et al., Defendants and Respondents.

[Decided December 31, 1869.]

Headnote

An agency may be terminated as to a third person by the existence of circumstances inconsistent with its continuance which have come to the knowledge of such third person and the principal.

The third person, however, although aware of the existence of such circumstances, may presume that the agency continues until after the lapse of a reasonable time for the communication thereof to the principal.

The authority will, notwithstanding such circumstances, continue in fact until notice thereof to the principal; but if the third party, after the lapse of a reasonable time for the communication to the principal, acts on the assumption that the authority still exists, he does so at the peril of its being shown that the principal had notice before he acted. What is such reasonable time will depend upon the circumstances of each case.

An agency terminated by the happening of circumstances inconsistent with its continuance, may be revived by subsequent acts of the principal, but an untruthful statement by an agent as to his having authority, the principal having done no act to induce a belief in the truth of the statement, will not revive an agency thus terminated.

Before Monell, Jones, and Fithian, JJ.

This case was tried before a referee.

The facts are as follows :

The firm of Morse & Co. (composed of Anthony W. Morse and J. Cady Brown) employed Charles E. Anderson, an exchange and general commission broker, to procure for them a loan on certain securities, and furnished him with the securities for that-purpose. Under this authority, Anderson procured a loan from defendants for said Morse & Co., and pledged to defendants, as security for such loan, the securities with which Morse & Co. had furnished him. At the maturity of the loan Anderson paid the defendants the amount of the loan, with the interest thereon, and took up the securities which had been pledged therefor. In this transaction of Anderson’s Morse & Co. acquiesced.

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Afterward, said Horse & Co. again, employed Anderson to procure for them a loan of $30,000 on certain securities, and furnished him with the securities for that purpose. Under this authority, Anderson procured the loan of $30,000 from defendants for Horse & Co., and pledged to defendants, as security for such loan, the securities with which Horse & Co. had furnished him.

At the maturity of this loan of $30,000, Horse & Co. furnished Anderson with the means to pay the same, and directed him to go to defendants, pay the loan, and take up the securities which had been pledged therefor.

Accordingly, Anderson went to defendants, tendered them the amount of the loan, and-interest thereon, and requested them to deliver the securities to him. Defendants refused to accept the tender or to deliver the securities, claiming that they had a fur-, ther lien on the securities for about $2,700, for a balance on a stock transaction.

Anderson thereupon on the same day returned to Horse & Co., and returned to them the means which they had furnished to him to pay said loan with, stating to them the demand of defendants for the payment of the balance on the stock transaction, to which demand Horse & Co. declined to accede.

After this, Anderson being in the office of defendants on several occasions, defendants had conversation with him about the settlement of the loan.

Thereafter one of the defendants met Anthony W. Horse in the street, and told him that defendants wanted the loan settled and paid; that Anderson had been to see them several times about it, but no settlement had yet been made, and defendants wished it closed. To which Horse replied that he would see to it and have it settled.

About five days after this conversation defendants sent for Anderson to come and see them. He came, and said “ he would get an offer from Horse & Co. in final settlement.” Hr. Howes, one of the defendants, said, “Very well, let us hear it.” Anderson then left defendants’ office, and afterward returned and

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made an offer which he said he had got. This offer was declined. Anderson again left and returned with an offer of $32,000, which he said was the best offer he could get from Morse & Co. This offer was accepted. The defendants then sent with Anderson a clerk with the securities. The clerk and Anderson went to the Phoenix Bank, when said Anderson pledged the securities to that bank for a loan of over $32,000 made by it to him.

Anderson, of the money thus loaned to him by the Phoenix Bank, paid to the deféndants $32,000 for the loan of $30,000, made by them to Morse & Co., the interest thereon, and about $1,500 on the stock transaction.

Anderson never went to see or had any communication with Morse & Co., or any member of the firm, after the occasion before mentioned on which he returned to them the means which they had provided him to pay said loan of $30,000, and take up the securities.

Meither Morse & Co., nor the plaintiff, their assignee, have ever received back the securities so pledged by them to defendants as security for said loan of $30,000.

On the 19th day of April, 1864, Morse & Co. assigned to the plaintiff the said securities so pledged to defendants on condition that plaintiff should pay the loan and interest.

After the assignment the plaintiff tendered to defendants the amount of the loan of $30,000, and interest, and demanded the securities, with which demand defendants refused to comply.

This action is brought to recover damages for the conversion, by defendants, of the securities.

The referee before whom the action was tried reported that the delivery of the securities to Anderson discharged the defendants from all liability or accountability to Morse & Co., or to plaintiff, for the same or any part thereof, and further reported that defendants were entitled to judgment, and that the complaint be dismissed, with costs.

On this report judgment was entered that the complaint be dismissed on the merits of the action, and that defendants recover of plaintiff $1,151.14, their costs in the action.

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From this judgment plaintiff appeals to the General Term.

On the argument it was conceded that defendants had no lien on the securities for the alleged balance due on the stock transaction.

Mr. H. C. Van Vorst for appellant.

The defendants had no lien on the 361 shares of stock for any sum or amount except the $30,000 loaned on the security of the same; there is no agreement shown that the same was to be held as security for any debt, claim, or balance in favor of defendants against Morse & Co., except the loan of $30,000.

Anderson had not any actual authority from Morse & Co., or from the plaintiff, to settle or pay the $30,000 loan, or to receive the 361 shares from the defendants at any time after he made the tender in May, 1864, which was refused by the defendants.

Anderson’s only business in regard to the matter was to negotiate the loan of $30,000, which he did while Morse & Co. were solvent; this ended his relation, except the further duty subsequently enjoined on him to tender the debt and interest. This tender was refused. lie was not further authorized to do any thing; certainly never to compromise a debt of which he knew nothing, and which Morse & Co. repudiated. Defendants acted at their peril after they declined the tender of debt and interest in treating with Anderson.

By this tender and refusal, the defendants’ lien on the 361 shares ceased. They lost all claim to retain them as security for the loan of $30,000. Morse & Co., or the plaintiff, as their assignee, might have recovered the shares at any time thereafter without paying or tendering to pay the loan. The defendants were simply creditors of Morse & Co. for an unsecured amount of $30,000 and interest (Kortright v. Cady, 21 H. Y. R., 342, 348, 354, 366, 368, and authorities cited, p. 348).

By detaining the shares after the tender in May, 1864, the defendants became wrongdoers, and answerable for them in all

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events. Their detaining them was the reason of the plaintiff’s loss through the subsequent fraud of Anderson (Lord Holt, Coggs v. Bernard, Raymond’s R., 909; 1 Smith’s Leading Cases, 92).

By the tender and refusal, the relation of the parties to each other were wholly changed. Instead of being pledgor and pledgee, Morse & Co. were owners of shares illegally detained by the defendants, and the defendants were simple contract creditors of Morse & Co. without security.

Mr. F. C. Barlow for respondents.

Anderson had both real and apparent authority to pay the loan and receive the stocks.

The long course of previous dealing between the parties, in which Anderson <Md pay precisely similar loans, warranted the referee in finding that Anderson had aetual authority to pay the loan in question, and, that even if he had not actual authority in this particular case, yet he had apparent authority, which binds Morse & Co. by way of estoppel.

The defendants knew that Anderson was a broker, and it is a-presumption of law that a broker is dealing for others (Baxter v. Duren, 29 Maine, 434; Baring v. Coine, 2 Barn. and Adol., 144, 148).

That Anderson had authority to make the loan, and to furnish more stock when called on, and had actually been once sent to pay the loan, justified the defendants in trusting in his authority to pay the loan, upon much less evidence than if no authority in regard to the subject-matter had been shown (Prescott v. Flynn, 9 Bingham, 22).

The evidence of the previous dealings and of the interview with Morse amply justified a finding of aetual authority (Wood v. Auburn R.R. Co., 4 Seld., 167).

The payment by Anderson of more than the amount due is of no consequence. H we had sufficient ground to believe he had authority to pay the amount of the loan and interest, the fact

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that he chose to pay more, and to settle a doubtful claim is a mere matter of excess of authority, as between Anderson and his principals.

Anderson having apparent (equivalent to actual) authority to receive the stock, it does not concern the defendants that instead of carrying it to his principals he tortiously pledged it to other parties.

By the Court:

I think the evidence amply sufficient to prove an authority in Anderson as to the defendants to repay to them the loans obtained from them, and to take up the securities pledged by him therefor. Such authority would continue as to the defendants until they were apprised of its termination. A notice to them of the revocation of the authority would terminate it as to them; but it may be terminated as to them in other ways, such as a knowledge of circumstances inconsistent with its continuance. °

In this case Anderson, as he had before done, went to the defendants with funds to repay the loan of $30,000, and take up the securities; he tendered the amount due on the loan and demanded the securities, but defendants refused to receive the amount and deliver up the securities, on the ground that they had a demand against Morse & Co., arising out of a stock transaction which they claimed was a lien on the securities, and should be paid before they surrendered the securities.

How, it is clear that Morse & Co. had given Anderson no power either to adjust any such claim, or to pay the same as a condition of receiving back the securities, nor had they done any thing which could lead the defendants to believe that Anderson was invested with such a power. Hence we find that Anderson did not, at that time, enter into negotiation concerning this additional claim, or make any offer concerning it, but, on the refusal of the defendants to accept the amount due on the loan and redeliver the securities, left their office with the amount in his possession—leaving the securities in defendants’ possession.

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The attitude of the defendants, then, was that of retaining the securities under a claim to hold them for a demand which Anderson had no authority to allow or settle; and this was known to them.

That claim could only be settled with tire principals.

The insistence on the claim placed the matter in a position in which the agent could no longer act under his authority, and was a circumstance inconsistent with the continuance of an authority which, by reason thereof, was wholly inadequate to deal with the altered condition of matter's, and the continuance whereof would, consequently, be wholly aimless and purposeless.

All this was known to defendants.

But as the termination of the authority, by reason of such a circumstance, depends on the presumption (founded on a knowledge of the human character, and of the motives, passions, and feelings by which the mind is usually influenced, which knowledge every man is presumed to have acquired from experience) (1 Starkie Ev., p. 48-50), that a principal will not continue an authority which is inapplicable and of no use under the circumstances which have arisen since it was conferred, it follows that a party may, even though he is aware -of circumstances which, when they come to the knowledge of the principal, would operate to determine the authority of the agent, assume that the agency continues until the lapse of a reasonable time for the communication of the circumstances to the principal, since, until such communication, there can be no presumption of a withdrawal of the original authority. Indeed, the authority would ’ continue until actual notice to the principal; but if the third party suffers a reasonable time for the communication to be made to elapse, and thereafter acts on the assumption that the authority still exists, he does so at the peril of its being shown that the principal had notice before he acted, for he is bound to recognize the presumption that, in the ordinary course of business matters, and of the general affairs of men, communication of the facts will be made to the principal within a reasonable

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time. What that reasonable time will be, will depend, of course, on the circumstances of each case.

In the present case, all the partners did business in the lower part of the city; a reasonable time to allow for the communication to Morse & Co. of the defendants’ insistence on the further claim could not exceed the day of the transaction. In fact, Morse & Co. had notice of such insistence immediately.

It follows that at the time of negotiation and settlement, hereafter mentioned, the authority of Anderson to receive the securities on the payment of the loans was terminated as to the defendants. As, however, an authority terminated by actual notice may be revived by subsequent acts of the principal, so may one terminated by the happening of circumstances inconsistent with its continuance.

The only act of Morse & Co. which can possibly have such an effect is the conversation found by the referee to have been had between Anthony W. Morse and Mr. Howes, which was as-follows:

“ I (Howes) met Mr. Anthony W. Morse in William street, in Hew York, and stated to him that Anderson had been to see us (the defendants) several times in reference to the loan of $30,000, but no settlement has been made, and we wanted it closed up. Mr. Morse answered that he would see to it, or words to that effect.”

This conversation clearly conferred no actual authority on Anderson to receive the securities.

The question then is—was it calculated to induce in the mind of Mr. Howes a belief that Anderson was authorized to adjust the dispute about that loan, and to receive the securities; and did defendants act on the belief thus induced ?

Anderson had been the broker through whom the loan was procured from defendants.

It was natural that defendants should apply to him to endeavor to procure a settlement, and it would be equally natural that he should feel some interest in having it settled. The conversation in question, taking place under these circum

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stances, is, in my view, insufficient to induce a belief that Anderson was authorized to make a settlement and receive the securities. Howes mentions a fact which, under the circumstances, was well attributable to causes other than an assumption on the part of Anderson to act as agent for Horse & Co. Morse does so attribute it; and, in his answer, says not “I will see him ” or “ settle it with him,” but “ I will see to it;” thereby intimating that he himself, and not Anderson, would attend to the settlement of the matter. This view is strengthened by what subsequently took place.

After the conversation Anderson did not of his own accord go to the defendants to make a settlement, but defendants sent for him. When he came he said he would get an offer from Morse & Co. in final settlement.

This clearly shows that Anderson did not himself consider that he had any power under any previous authority to act further in the matter without instructions from Morse & Co., and plainly indicated to defendants that he had no such power. He does not come himself to propose a settlement, which might be a holding out by him that he came at the direction of Morse & Co.; but he comes at the request of the defendants, and he, in effect, clearly says: I have no power, but will go to Morse & Co. and see if I can get power.

How, if defendants had derived the impression from the conversation that Anderson was empowered to make a settlement, this statement of Anderson would naturally create surprise, and call forth an allusion to the conversation. If defendants did get an impression from the conversation that Anderson was empowered to act, it seems to me it must have been a very weak ■one, and must have been entirely dissipated by the action of Anderson when they sent for him.

These views lead to the conclusion that plaintiffs acted on the statement of Anderson that he was authorized to make an offer which he had no authority to make, and which Morse & Co. had not by any act .of theirs induced defendants to believe that he had authority to make.

Concurrence

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Having relied on such untruthful statements, they can look to Anderson only for indemnity against loss arising therefrom. Judgment reversed, new trial ordered, and order of reference vacated, with costs of appeal to the appellant to abide the event.

Fithian, J., concurred.

in concurring to reverse the judgment, gave the following opinion:

The evidence in this case establishes that Anderson was authorized to take up the $30,000 loan, and receive the stock. To do this he was authorized to procure another loan from other parties, and with it to pay the defendants. Such authority continued and existed at the time the loan was made of the Phoenix Bank, and justified such loan; and had Anderson paid to the defendants merely the amount of the loan and interest, no question could be raised.

It is, however, equally clear that the allowance and payment of a part of the debt of the old firm, was entirely in excess of Anderson’s authority. The stock had been specifically pledged, and could not, without the consent of the pledgors, be applied to any other indebtedness. Besides, Morse & Go. not only refused to allow their agent to pay the old debt, but the defendants were apprised of such refusal; so that when- they accepted the offer of $32,000, which included about $1,500 of the old debt, they knew that Anderson had no authority to make the payment.

But Anderson’s agency in respect to the payment of the loan had not, at the time of the payment, been revoked, either expressly or by implication. There was no proof of any express revocation, and the only fact from which a revocation could by any possibility be implied, is, that the check of Morse & Go. tendered by Anderson in payment of the loan, was refused (the defendants claiming a further sum), and such refusal and the grounds of it reported to his principals. There is nothing in this, however, tending to show that Morse & Go. intended to terminate

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the agency so- far as the loan was concerned, whatever effect it might have had upon his right to settle the old debt.

When, therefore, he made the settlement he merely exceeded his authority. The payment of the $30,000 and accrued interest was within his powers; the allowance of any part of the old debt was in excess of them. The act in excess was void, but not the act which was done within the authority. Story says (Story on Ag., § 166), when there is a complete execution of the authority, and something ex abundanti is added, which is improper, then the execution is good and the excess only is void. See the cases cited in sections 167-170 as illustrations, and which establish that a principal .is bound so far as the authority is possessed by his agent.

The defendants not having any right to hold the stock upon the old debt, and the settlement with Anderson being unauthorized, it follows that they have no right to retain the sum they received on that account.

It is not, however, entirely clear that the sum thus wrongly received can be recovered by the plaintiff. But I am inclined to think it can be. The pledged securities were assigned to the plaintiff, and the defendants received payment out of those securities. Such payment deprived the plaintiff of so much of the securities, and I think he can require the return of whatever the defendants received over that indebtedness.

There should be a new trial, when, if my views are correct, the recovery will be confined to the amount paid on the settlement of the old debt.