Case Name: Tripp, Respondent, vs. Foster, imp., Appellant
Court: Wisconsin Supreme Court
Jurisdiction: Wisconsin
Decision Date: 1914-04-09
Citations: 156 Wis. 534
Docket Number: 
Parties: Tripp, Respondent, vs. Foster, imp., Appellant.
Judges: BarNES, J. I concur in tbe foregoing.
Reporter: Wisconsin Reports
Volume: 156
Pages: 534–544

Head Matter:
Tripp, Respondent, vs. Foster, imp., Appellant.
February 26
April 9, 1914.
Principal and, agent: Sale of pledged stock by agent of pledgor: Fraud: Ratification: Liability of pledgee.
Defendant, tie holder of a note given hy a corporation, held stock of the corporation as collateral security. An agent of the corporation, who did not act or assume to act as agent of defendant, sold a-part of said stock to the plaintiff by means of fraudulent representations as to its value. Defendant took no part in the sale and had no knowledge of the fraud; but on receiving from the corporation, the proceeds of the sale he assigned and surrendered the shares so sold. Held, that he did not thereby ratify the acts of the agent of the corporation so as to become liable either to return the consideration paid by the- purchaser or to answer in damages for the fraud. Mab-shaxIí, J., dissents.
Appeal from a judgment of the circuit court for Eond du Lac county. Ohesteb A. Eowlee, Circuit Judge.
Reversed.
This action was brought to recover on two alleged causes of action, $1,000 on the first and $500 on the second, alleged to have been procured from the plaintiffs hy fraud in the sale of a portion of the capital stock of the Bates-Oden-brett Automobile Company, a corporation. The sale was made by one Bates, and it is claimed that he was acting as the agent of defendant Foster in making such sale.
Foster answered denying specifically that Bates was his agent or had any authority to act for him, that he received •any benefits from the acts of Bates, that he was the owner of any of the stock in the alleged corporation, and denying generally other allegations of the complaint.
The jnry returned the following verdict:
“(1) Did Mr. Bates, to induce Mr. Tripp to purchase the stock, represent to him, in substance, that the company was then doing a successful and profitable business ? A. Yes.
“(2) Was such representation false? A. Yes.
“(3) If false, did Mr. Bates know it to be false ? A. Yes.
“(4) If false, then ought Mr. Bates to have known it was false? A. Yes.
“(5) Did Mr. Tripp rely on such representation ? A. Yes.
“(6) Was Mr. Tripp induced by such representation to purchase the stock ? A. Yes.
“(7) Did Mr. Bates, to induce Mr. Tripp to purchase the stock, represent to him, in substance, that the company had paid fifteen to twenty per cent, dividends annually since its organization? A. Yes.
“(8) Did Mr. Tripp rely on such representation? A. Yes.
“(9) Was Mr. Tripp induced by such representation to purchase the stock ? A. Yes.
“(10) Did Mr. Bates, to induce Mr. Tripp to purchase the stock, point out to him the automobiles in the salesroom and say to him that they all belonged to the company and were all paid for ? A. Yes.
“(11) Was such representation false to any material degree? A. Yes.
“(12) Did Mr. Tripp' rely on such representation? A. Yes.
“(13) Was Mr. Tripp induced' by such representation to take the stock? A. Yes.
“(14) What was the stock worth at the time of the purchase ? A. Nothing.
“(15) What would the stock have been worth had such of these representations been true as you find were made and were false? A. One thousand ($1,000) dollars.”
The defendant Foster insists that a verdict should have been directed, or a nonsuit granted as to him, • or judgment should have been rendered in his favor notwithstanding the verdict.
Judgment was entered against the defendants for $1,138 ■damages on the first canse of action and costs, from which judgment the defendant Foster appealed to this court.
Eor the appellant there was a brief by T. L. Doyle, attorney, and Marslmtz & Hoffman, of counsel, and oral argument by Mr. Doyle and Mr. J. H. Marshutz.
Andrew Gilbertson, for the respondent.

Opinion:
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 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 re- 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.