Case ID: ad_156/html/0795-01.html
Source: Caselaw Access Project
Author: {"author": "McLaughlin, J.: \n      Ingraham, P. J. (dissenting):", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Navarre Hotel and Importation Company, Appellant, v. American Appraisal Company, Respondent.
    First Department,
    May 29, 1913.
    Principal and agent — liability of third party to undisclosed principal — action to recover damages caused by negligent appraisal.
    A principal may maintain an action upon a contract not under seal made by his agent with a third person, although the agency was not disclosed when the contract was made. If the agent has authority to make a written contract not under seal and makes it in his own name, the principal, whether known or unknown, is liable and he in turn is entitled to the benefit of the contract and may sue thereon.
    Thus, where a creditor took a chattel mortgage on goods of its debtor in reliance upon a statement as to the value made by a professional appraiser, which valuation was grossly excessive, it may maintain an action against the ■ appraiser to recover the loss caused by such negligence although the appraiser was employed by the plaintiff’s attorneys who did not disclose their principal.
    
      It seems, that although an undisclosed principal may as a general rule enforce a contract made by his agent in his own name; there is an exception where personal trust or confidence is reposed by the third party in the agent who contracted in his own name.
    Ingraham, P. J., dissented, with opinion.
    Appeal by the plaintiff, the Navarre Hotel and Importation Company, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of New York on the 20th day of December, 1911, upon the dismissal of the complaint by the direction of the court at the' close of plaintiff’s case on a trial at the New York Trial Term.
    
      Lloyd M. Howell, for the appellant.
    
      Charles Blandy, for the respondent.
   McLaughlin, J.:

In January, 1909, one Gibbs was indebted to the plaintiff, a domestic corporation, in the sum of $1,590, which he was unable to pay. He had in his rooms in the plaintiff’s hotel certain furniture, bric-a-brac, paintings, and other personal property, upon which he offered to give a chattel mortgage to obtain an extension of the time within which payment might be made, and to secure the payment thereof. It was finally agreed between them that Gibbs should transfer such property to his wife, by bill of sale; that she should assume the debt; and give a mortgage upon so much of the property as would secure the payment thereof. The plaintiff had no knowledge of the value of such property and, acting through its attorneys, employed the defendant, a foreign corporation holding itself out as an expert On the subject of appraising personal property, to appraise the property and select so much of it as would secure the plaintiff’s claim and make a written report thereof. It selected certain designated pieces, upon which it placed a value, the aggregate of which amounted to $3,922. In the written report submitted as to such value it stated, The prices of these objects are based on a conservative view and should this property ever be sold to dealers or at auction a spirited public will bring twice the amount that our appraisal shows.” For making the appraisal and submitting the report the defendant charged $50, which was paid. The plaintiff, relying upon the report, took a chattel mortgage upon the pieces mentioned therein from Mrs. Gibbs, title in the meantime having been transferred to her, released Mr. Gibbs and extended the time of payment of the: indebtedness for one year. After the execution of the chattel mortgage the plaintiff took the property covered thereby into its possession and retained the same until the extension of the time for payment had expired, when, nothing having been paid, it proceeded, acting through the same attorneys, to sell. Before offering the property for sale, however, the attorneys consulted with the defendant as to the best method to be pursued and were advised that the goods be first advertised at private sale. This was done, but without success, and they were then turned over to a reputable auctioneer to be sold at public auction. This was done, due notice having been given, and the net amount realized upon such sale, upon the,property which had been appraised at $3,922, was $136.97. Action was then brought against Mrs. Gibbs and judgment secured against her for the balance,- upon which execution was issued and returned wholly unsatisfied. Thereupon this action Was brought to recover from the defendant the difference between the amount of the indebtedness and the amount realized on the sale, with interest, on the ground that such loss was due to its negligence in making the appraisal.

At the trial the plaintiff established the foregoing facts and also proved by a witness whose'testimony was not questioned that the actual value of the property appraised by the defendant did not exceed $300, and that some of the property which the defendant did not think it necessary to include in what was selected for the plaintiff was subsequently sold for $800. The trial court, at the conclusion of plaintiff’s case, dismissed the complaint on the ground that the plaintiff did not employ the defendant to make the appraisal, and, therefore, it was not in a position to complain of its negligent performance of the contract. It is true the defendant was not employed directly by the plaintiff, but it was through its agent, and the fact that the principal for whom the agent acted was not disclosed at the time the contract of employment was entered into did not release it from liability.

It is elementary that a principal is entitled to maintain an action upon a contract not under seal, made by his agent with a third person, although the agency is not disclosed at the time the contract is made. If the agent possesses authority to make a written contract not under seal, and makes it in his own name, the principal, whether known or unknown, may be made liable, and he, in turn, is entitled to the benefit of the contract and may sue thereon. (Nicoll v. Burke, 78 N. Y. 580; Brady v. Nally, 151 id. 258; Henderson, Hull & Co. v. McNally, 48 App. Div. 134; affd. on opinion below, 168 N. Y. 646; Kelly Asphalt Block Co. v. Barber Asphalt Paving Co., 136 App. Div. 22.) Referring to this rule, Judge Andrews, in Briggs v. Partridge (64 N. Y. 357), said: “A principal may be charged upon a written parol executory contract entered into by an agent in his own name, within his authority, although the name of the principal does not appear in the instrument and was not disclosed, and the party dealing with the agent supposed that he was acting for himself, and this doctrine obtains as well in respect to "contracts which are required to be in writing, as to those where a writing is not essential to their validity;” and the presiding justice of this court, in Moore v. Vulcanite Portland Cement Co. (121 App. Div. 667), said: “It is undoubtedly the well-settled general rule that where an agent enters into a contract as though made for himself, and the existence of a principal is not disclosed, the principal may, as a general rule, enforce the contract.’” There are, however, exceptions to the general rule, one of which is where a personal trust or confidence is reposed by the other party in the agent who contracted in his own name. (1 Am. & Eng. Ency. of Law [2d ed.], 1171.) This rule is predicated upon the right which every one has to select and determine for himself the skill, reputation and ability of the one with whom he contracts. (New York Bank Note Co. v. Hamilton Bank Note Co., 180 N. Y. 280; Arkansas Smelting Co. v. Belden Co., 127 U. S. 379; Winchester v. Howard, 97 Mass. 303.) But there is nothing here to take the case out of the general rule or bring it within any of the exceptions to which my attention has been called. The attorneys who employed the defendant were, concededly, acting for the plaintiff, and there is nothing in the record to show, or . even suggest, that the employment would not 'have been accepted as readily if defendant. had, in fact, known for whom it was to render the service. The employment was not accepted by defendant- by reason of any personal trust or confidence in the attorneys.

.The price at which the goods sold at public auction was some evidence to be considered by the jury in arriving at their value. (Campbell v. Woodworth, 20 N. Y. 499; Matter of Johnston, 144 id. 563; Parmenter v. Fitzpatrick, 135 id. 190; Latimer v. Burrows, 163 id. 7.) Besides, the plaintiff proved by other evidence that the total value of the goods did not exceed $300, and that the articles which the defendant failed to include in the list appraised were, subsequent to the appraisal, sold for $800. Defendant, as stated, "offered no evidence. The juiy, therefore, - would have been justified in finding that the loss which the plaintiff sustained was due to - the negligence of the defendant.

The judgment appealed from, therefore, is reversed and a new trial ordered, with costs to appellant to abide event.

Clarke, Scott and Laughlin, JJ., concurred; Ingraham, P. J., dissented.

Ingraham, P. J. (dissenting):

On January 18, 1909, G-oeller, Shaffer & Eisler, a firm of lawyers in the city of New York, wrote a letter to the defendants, as follows: “Gentlemen.— Kindly make an appraisal of the property of Dr. J. W. Gibbs situated in Room 618 of the Hotel Navarre. Dr. Gibbs is indebted to us to the extent of $1530.07 and has agreed to give us a chattel mortgage on his furniture and effects sufficient to cover this. You are to give us an appraisal of a sufficient amount in your judgment to secure this indebtedness of Dr. Gibbs.” At the time this letter was written there was no statement to the defendant that this firm was acting for plaintiff or in a representative capacity. In reply to this letter, on January 20, 1909, the defendant addressed a letter to the law firm stating that according to their request they had made an appraisal of the property of Dr. J. W. Gibbs situated in room 618 of the Hotel Navarre, “the total amount of which is sufficient to cover his indebtedness to you.” The complaint alleged that Goeller, Shaffer & Eisler were the attorneys, agents and representatives of the plaintiff; that the said Gibbs was indebted to the plaintiff in the sum of $1,590, and was the owner of certain furniture, bric-a-brac, paintings and other personal property situated in the apartment occupied by the said Gibbs in the Hotel Navarre; that the plaintiff duly informed the defendant of the facts alleged, and entered into an agreement with defendant whereby the defendant agreed to examine and appraise the personal property and to report to the plaintiff the true market value thereof; that on January 19, 1909, the defendant, in pursuance of the agreement, proceeded to appraise the said personal property, but wholly failed to exercise the usual and ordinary care, skill, diligence, prudence, ability and industry used by appraisers- in such matters in making the said appraisal, and negligently to the damage of the plaintiff, selected and appraised only a small part of the said personal property, to wit, the articles set forth in a schedule annexed to the complaint, and reported the value thereof to the plaintiff as $3,922, whereas in fact the same was worth only the sum of $170.85; that the plaintiff, relying upon the appraisal and. report made by the defendant, and believing that the defendant had used, on behalf of the plaintiff, the usual and ordinary care, diligence and prudence used by appraisers in such matters, and that the aforesaid selection and appraisal made by the defendant was carefully and skillfully made, and that the personal property selected by the defendant was of the value of $3,922, duly accepted the offer made by Gibbs and refrained from bringing suit against him, and accepted a chattel mortgage on the property appraised, and in pursuance of the said offer the plaintiff ‘did discharge and release the said Gibbs from the said indebtedness and obligation to the- plaintiff; that the plaintiff subsequently obtained a judgment against Mary E. Gibbs, who gave the chattel mortgage, the wife of Dr. J. W. Gibbs, but had been unable to collect the amount of the judgment on execution; and that if defendant had duly, prudently, diligently, carefully, and in accordance with the usual custom and course of business of appraisers, performed its duty arising under and by virtue of the agreement, and had so made the . selection of sufficient' of the personal property of the said Gibbs amply to secure plaintiff for the payment of the indebtedness, which defendant had agreed to do, the plaintiff would have been amply secured for the payment of the said indebtedness, and would have realized and collected the full amount of said indebtedness, secured by said mortgage; but that by reason of the aforesaid negligent failure of the defendant to perform its duty as aforesaid the plaintiff had suffered damage in the sum of $1,453.03.

The action, therefore, is to recover for the damages sustained by plaintiff by reason of the unskillful performance of the duty that defendant undertook to perform under its employment by a firm of lawyers, and the question squarely presented is whether plaintiff, who made no contract with the defendant and who had not employed the defendant to perform any service for it, can recover for the negligent performance of the duty which defendant undertook to perform for this firm of •lawyers. The action is based upon negligence, i. e., negligent performance of a duty and not for a breach of a contract. In Savings Bank v. Ward (100 U. S. 195) the question was presented whether a lawyer was responsible to a party who had not employed him, but who relied upon a certificate he had given to another person that such third person had good title to real property which the third party had pledged to plaintiff as security for a loan of money. The court, in deciding that the lawyer was not responsible, said: It is not pretended by the plaintiffs that they ever employed the defendant to examine the title to the lot, and it appears that the report was made at the sole request of the claimant of the lot, without any knowledge on the part of the defendant as to the purpose for which it was obtained. All that is conceded by the plaintiffs; but they gave evidence to show that the claimant of the lot presented the certificate to certain brokers and employed them to negotiate a loan upon the property in his favor * * *. on the faith of that certificate.” The court, adopting the principle established in Fish v. Kelly (17 C. B. [N. S.] 194), held that the attorney was not liable, it there being held that there must be privity of contract between the parties to justify a recovery., and further citing the opinion of Beasley, Ch. J., in Kahl v. Love (37 N. J. L. 5), that The limit of the doctrine relating to actionable negligence is that the person occasioning the loss must owe a duty, arising from, contract or otherwise, to the person sustaining such loss.” In conclusion the court said: “ Suffice it to say these parties never met, and there was no communication of any kind between the defendant and the brokers, or the lenders of the money. Nothing of the kind is pretended, the only suggestion in that direction being that it may be held that the applicant for the loan, when he employed the defendant, may be regarded as the agent of the plaintiffs. Such suggestion being entirely without evidence to support it, is [entitled] to no weight, especially as' it appears that the principal certificate was procured several days before any interview upon the subject of the loan took, place between the brokers and the plaintiffs.”

I do not find that the principle established in that case has been questioned in this State, and although, of course, it is conceded that an undisclosed principal can "maintain an action on a contract not under seal, made on his behalf, although the principal is not disclosed, there are exceptions to that rule, to which attention was called in Moore v. Vulcanite Portland Cement Co. (121 App. Div. 667), which was generally based upon the principle stated hy Hr.'Justice Gray ■ in Arkansas Smelting Co. v. Belden Co. (127 U. S. 379): Every one has a right to select and determine with whom he will .contract, and cannot have another person thrust upon him without his consent. In the familiar phrase of Lord Denman, ‘ You have [a] right to the benefit you [contemplate] from the character, credit and substance of the party with whom you contract.” (Humble v. Hunter, 12 Q. B. [A. & E. (N. S.)] 310.) Here the defendant was employed by a firm of lawyers to make an estimate or appraisal of certain personal property for them; the defendant had- no contract relation with the plaintiff, did not undertake to work for the plaintiff in any capacity, gave no certificate to the plaintiff as to the appraisal; and the person, with whom defendant did contract, has suffered no damage by reason of any error or negligence of the defendant. Because the plaintiff was willing to rely upon the appraisal given by the defendant, with whom it had no contract relation, does not justify the plaintiff in holding the defendant liable for negligence-or the breach of -an implied contract with defendant’s- employers, that they would exercise reasonable care and skill in making the appraisal.

I, therefore, think this judgment should be affirmed.

Judgment reversed and new trial ordered,- with costs to appellant to abide event. Order to be settled on notice.