Case Name: First National Bank Trenton, Respondent, v. The Badger Lumber Company, Appellant
Court: Missouri Court of Appeals
Jurisdiction: Missouri
Decision Date: 1895-01-14
Citations: 60 Mo. App. 255
Docket Number: 
Parties: First National Bank Trenton, Respondent, v. The Badger Lumber Company, Appellant.
Judges: Judge (Jill concurs. Judge Ellison dissents.
Reporter: Missouri Appeal Reports
Volume: 60
Pages: 255–267

Head Matter:
First National Bank Trenton, Respondent, v. The Badger Lumber Company, Appellant.
Kansas City Court of Appeals,
January 14, 1895.
Principal and Agent: unauthorized note: ratification. H. was defendant’s agent to sell lumber, extend credit and collect money; be became short in his accounts and executed defendant’s note without authority to the plaintiff and obtained therefor a draft which he forwarded to the defendant with directions to credit his account. Defendant without knowledge of the unauthorized note collected the draft and gave the credit as directed. Defendant refused to pay the note or return the proceeds of the draft. Meld, that defendant was liable on the note, affirming same ease, 54 Mo. App. 327. Ellison, J., dissenting, holds, where the unauthorized agent owes the principal and the principal, without a knowledge of the unauthorized act, applies the money so secured to the agent’s account, the principal does not ratify the means whereby it was obtained by refusing to refund the money, since the money is not received as on a contract with a third party, but on an independent legal cause, to wit, viz: The pecuniary obligation which the agent owes to him. Cases pro and eon discussed in the majority and dissenting opinions.
Appeal from the Grundy Circuit Court. — Hon. P. C. Stepp, Judge.
Affirmed.
Harter & Knight and Shannon C. Douglass for appellant.
(1) The law is well settled that a ratification of an act, previously unauthorized, must, in order to be binding upon the person, sought to be affected, by it, be made with a full knowledge of all the material facts, in connection with the transaction, and the receipt, even from an agent, of money paid him on a contract, does not bind the' principal to the contract, unless he knows on what account the money was received, and the terms of the contractThe burden of proving a ratification devolves upon the party asserting it. Penn. Co. v. Dundriclge, 8 Grill & J. 323; Baldwin v. Burrows, 47 N. Y. 312; Wins or v. Bank, 18 Mo. App. 665-675; Gulick v. Grover, 33 N. J. Law, 463; Fuller v. Ellis, 39 Yt. 345; Bees v. Medlock, 27 Tex. 120; Bell v. Cunningham, 3 Pet. 69; Owings v. Hull, 9 Pet. 607; Hickson v. Palmer, 8 N. Y. 398; Smith v. Tracy, 36 N. Y. 79; Manning v. Gasharu, 27 Ind. 399-413; Bohart v. O’Bern, 36 Kan. 284; Lathon v. Bank, 18 Pa. 824; Beynolds v. Ferney, 87 Ills. 570; Clark v. Lyon Co., 7 Nev. 755; Fletcher v. Dysart, 9B. Mon. 413; 1 Am. Lead. Cases, 573; Story on Agency, sec. 239; Eggleson v. Mason et al., 51 N. W. Rep. (Iowa) 1; the rule in Missouri is to the same effect. Hyde v. Larkin, 35 Mo. App. 365; Carson v. Cummings, 69 Mo. 328; Cravens v. Gilliland, 63 Mo. 28; Buggies v. Washington Co., 3 Mo. 497; Watson v. Bigeloio, 4 7Mo. 413; Davis v. Krum, 12 Mo. App. 279, announce a different doctrine, when considered with reference to the facts in each appearing and influencing the decision of the court. (2) The mere reception of the fruits or benefits of an unauthorized act of an agent, or, even the retention thereof, after acquiring knowledge of his fraud, does not necessarily amount to a ratification of his act, and make the principal liable therefor, as if for his own act. Smith v. Tracy, 36 N. Y. 79, and cases cited therein; GulicJc v. Grover, supra; Baldwin v. Burrows, supra; Bohcvrt v. O’Bern, supra; Buggies v. Washington Co., supra; Carson v. Cummings, supra. (3) It is proved, conclusively, that the draft was received and the money had by the defendant, without any knowledge of the transaction between Hershe and plaintiff, and not as the fruits of a contract made for it, or on its behalf, but upon an independent liability of Hershe to the defendant, and, the acceptance and keeping of the proceeds thereof, under such circumstances, did not amount to a ratification of Hershe’s unauthorized act, or render defendant liable in this action. To have the effect of a ratification, the proceeds must have been received, not only with the knowledge, but under such circumstance as to constitute a voluntary adoption by defendant of the contract between Hershe and the plaintiff, when the draft was obtained. Bohart et al. v. 0’Berne et al., supfa; Baldwin v. Burrows, supra; Penn. Co. v. Dundridge, 8 Grill & J. 323; Evans v. Weels, 22 Wend. 324, and cases last herein mentioned. Clark v. Lyons, supra; Carson v. Cummings, supra; Peckv. Bitchey, 66 Mo. 114.
Geo. Hall for respondent.
(1) Under the proof in this case it is undisputed that Hershe was the agent and manager of appellant’s business, and as such agent, and in the name of appellant, he borrowed the money of respondent. Although Hershe may not have been authorized to borrow the money, appellant received the same, and after learning the unauthorized manner in which it had been procured it was appellant’s duty to refund the same. By keeping the money it ratified the acts of the agent. Watson v. Bigelow, 47 Mo. 413; Davis v. Krum, 12 Mo. App. 279-287; Bankv. Lumber Co., 54 Mo. App. 327; Leavitt v. Siger, 52 N. W. Rep. 832, Loc. Cit. 833; Rogers v. Harckvare Co., 39 N. W. Rep. 844; Ripley v. Case, 49 N. W. Rep. (Mich.) 46; Busch v. Wilcox, 47 N. W. Rep. (Mich.) 328. (2) One who receives the avails of notes taken by his agent and indorsed by him as agent for discount can not deny the agents’ authority to make the indorsement. Bankv. Colliery Co., 14 N. Y. Sup. 21; 59 Hun, 627; Cotton Mills v. Indian Orchard Mills, 147 Mass. 268, 17 N. E. Rep. 496-9, Am. S. Rep. 698; Mining Co. v. Mining Co., 11 Col. 223, 7 Am. S. Rep. 226; Nichols, Shepard & Co. v. Kern, 32 Mo. App. 1; State exrel. v. Harrington, 100 Mo. 170; Bank v. Bank, 101 U. S. 181.

Opinion:
Smith, P. J.
In vain has been our search through the record of the case now before us to ascertain wherein, if at all, it is to be distinguished in its essential features from that reported in 54 Mo. App. 327.
When the case was here on the former appeal the judgment was reversed and the cause remanded to be proceeded with in accordance with the view of the law expressed in the majority opinion. Since then the case has been retried, and the court in its instructions to the jury adopted for its guide the law as declared in that opinion. By its instruction for plaintiff it plainly told the jury that, if Hershe was the agent and manager of defendant's lumber yards at Trenton, and that while so being he executed to plaintiff the note read in evidence, and that the cashier of plaintiff in good faith, believing Hershe had authority to execute said note and borrow money for defendant, drew and delivered to Hershe a draft for $500 for said note, which draft Hershe sent to defendant and that defendant received the same and collected the money thereon and refused to return the same to plaintiff after it learned the manner in which Hershe procured said draft from the plaintiff, even though Hershe had no authority to execute said note or to borrow money; and, even though the defendant did not know the manner in which Hershe procured said draft at the t-ime, it received the same and collected the money thereon. The proposition of law embodied in the defendant's instructions is the exact converse of that announced by those given for plaintiff. These two theories are in direct opposition the one to the other.
The contention of the counsel for defendant is, therefore, that there could be no ratification of the unauthorized act of Hershe as agent of the defendant in consequence of the acceptance by defendant of the fruits of Hershe's unauthorized acts. The defendant objects that the ratification of the unauthorized act of Hershe in making the note and procuring the draft therefor, to be effective, must have come to the knowledge of the defendant before or at the time of the receipt of the money on the draft. This objection, we think, was fully met and answered by what was said in the majority opinion when the case was here before. There is nothing suggested in the very elaborate brief of the industrious counsel for the defendant that in the least tends to unsettle the conviction then expressed. The authorities then cited and relied on by us we feel more than ever assured fully justified the conclusion there stated. Our convictions have been strengthened by an examination of the following further authorities to which we have been cited. Rogers v. Empire Hardware Co., 24 Neb. 653; Leavitt v. Seger, 52 N. W. Rep. 832; Busch v. Wilcox, 82 Mich. 315; Ripley v. Case, 86 Mich. 261.
In the dissenting opinion by Mr. Justice Ellison, it was said: "The money which is here sued for was not paid or turned in to defendant as defendant's money or as money which had arisen on any of the defendant's transactions. It was paid by the agent and received by defendant as the agent's money in discharge of his debt." If the evidence contaihed in the record in the former appeal tended to show the state of facts set out in the paragraph just quoted, that in the present record shows just the contrary. This will be seen by reference to the testimony of Mr. Toll, president of the defendant, in response to the following questions propounded to him by plaintiff:
"Q. I will ask you how you kept your account with your Trenton office? A. We kept our account with our Trenton office in our daily balance after we transcribed it in a book at Kansas City.
"Q. Who did you charge it to, your frentón office? A. Yes, sir; to the Trenton office.
"Q. The Trenton Yard, I mean; and you had your debit and credit all through to the Trenton yard? A. Yes, sir.
"Q. From beginning to end? A. Yes, sir."
In addition to this, the whole testimony of the-defendant's officers show that they thought thé draft represented the proceeds of the sale of. defendant's own lumber. The transaction of Hershe with the- plaintiff showed that the note was executed as that of defendant, and the draft was given for the same payable to defendant. The remittance was by Hershe as the agent of defendant as money received for sale of lumber and on collections due defendant. In the face of these facts how can it now be said that the draft was received by defendant as the agent's money in discharge of his debt? If, as suggested by counsel for plaintiff, the monies made way with by Hershe were his own, how could the defendant have succeeded, as it appears to have done, in convicting him of the crime of embezzling the same? It is clear that the facts upon which the opinion just referred to was principally based are not to be found in the record of the present case.
The ease, as already remarked, has been tried in conformity to the directions approved by us when the case was here before, and since no new fact has been introduced into the present case, as appears from the record, we are, if for no other reason, bound under the principle of stare decisis to adhere to our ruling in the former appeal. Hombs v. Corbin, 34 Mo. App. 393.
It follows 'the judgment must be affirmed.
Judge (Jill concurs. Judge Ellison dissents.