Case Name: C. E. WISE & BRO. v. THE TEXAS COMPANY
Court: Supreme Court of North Carolina
Jurisdiction: North Carolina
Decision Date: 1914-09-30
Citations: 166 N.C. 610
Docket Number: 
Parties: C. E. WISE & BRO. v. THE TEXAS COMPANY.
Judges: 
Reporter: North Carolina Reports
Volume: 166
Pages: 610–624

Head Matter:
C. E. WISE & BRO. v. THE TEXAS COMPANY.
(Filed 30 September, 1914.)
Vendor and Purchaser — Principal and Agent — Contracts—Ratification — Knowledge—Fraud—T rials — Evidence—Nonsuit.
Por tlie unauthorized acts of an agent to bind his principal by ratification, it must appear that the principal acted with knowledge of the facts and circumstances in respect thereto, and where the person dealing with the agent is aware of the fact that he has exceeded his authority, and depends upon the agent’s statement that his principal may act favorably thereon, the burden is upon such third person to show the'matters necessary to bind the principal by his ratification of the agent’s unauthorized act. Thus where an agent for the sale of gasoline entered into a contract with the purchaser to supply him at the former price after the market had greatly advanced, by antedating the contract, and the purchaser was aware of the fact that, at that time, the agent was not only unauthorized to sell the gasoline at the price named, but had been forbidden to do so, and, notwithstanding, relied upon the assertions of the agent that “he would try to get the contract through,” the fact alone that the seller shipped out a part of the gasoline at the price specified, being deceived and imposed upon by the date appearing in the contract, is not evidence sufficient of his confirmation of the contract, and the burden of proof being upon the purchaser in his action to enforce delivery of the balance of the gasoline, at the price named, a judgment of nonsuit should be rendered.
Appeal by defendants from Ferguson, J., at Spring Term, 1914, of Daee.
This action was brought to recover $1,500 as damages for an alleged breach of contract to sell and .deliver to the plaintiffs at Norfolk, Ya., f. o. b., 350 barrels of motor gasoline, the balance of the entire lot of 500 barrels called for by the original contract. It is alleged that the contract was made through one C. C. Clark, agent of the defendants, and the price was 8% cents per gallon. Defendants refused to ship the- oil, and deny that any such contract was ever made. Plaintiffs put in evidence a written contract, signed by them and C. C. Clark, salesman, dated 19 August, 1911. It appears that this contract was not really made on the day of its date, but in the latter part of October, 1911, and dated back to 19 August, 1911, for the reason that the agent of defendants, C. C. Clark, had been forbidden by them to make any contracts after 19 August, 1911, for the sale of gasoline at 8% cents per gallon, the price of gasoline having advanced rapidly at the time the paper was signed in October and was still advancing, the price in October being 9% cents per gallon. The contract was as follows:
TI-IE TEXAS COMPANY.
Ship to 0. E. Wise & Bro., Stumpy Point.
When ship : As required. Route_ Freight allowance to_;.- Terms, 30 days. 500 barrels motor gasoline @ 8% cents, f. o. b. Norfolk.
In purchasing the above quantity it is the intention of the purchaser to cover his entire requirements for one year from date. If, however, purchaser shall be unable to use the entire quantity during the period indicated, the seller may cancel unused balance or extend period of delivery. ^ ^ Clare
Accepted: Salesman.
O. E. Wise & Bro.,
Purchasers.
Clark inclosed the contract to plaintiffs in a letter suggesting that they remit some money to keep the company in better humor.
E. F. Wise testified in_part: “We had a contract with the Texas Company about some oil. (The contract is in writing, and it is shown witness; it is signed by ‘O. E. Wise & Brother.’) I did it; the name ‘0. C. Clark, salesman,’ was written by 0. 0. Clark; I know him; I saw him here to-day; he is here. I had dealings with him, -buying oil from him, etc. I went over to the Texas office; I have been dealing with the Texas Company, through Mr. Clark, nearly a year. I know where the Texas Company’s office is in Elizabeth City. Mr. C. 0. Clark is in that office, acting for the company; he is the man who signed this paper, and was in the office of the Texas Oil Company in Elizabeth City when he signed the contract. We went to see him some time toward the latter part of October, 1911; Mr. Clark was in the office.”
Q. What was said by you and him about entering into this contract at that time? A. He said that the company had quit accepting contracts after the 19th of August.
Q. What else ? A. He said that by dating it back, be thought that the company might accept it. He filled out the contract and signed and passed it to me and I signed it.
Q. What did you and he agree to do about it? A. He said that he was not positive that it would go through, but that he would send it to the Norfolk office and find out, and if it was accepted there it was all right.
Q. Anything else said? A. No, sir. ■ I left and went home and he signed the contract; he sent a letter with it, and I have it with me. It was about a week after Clark signed the contract before I received the contract through mail. . . . After looking at the letters and so on, I am willing to withdraw the statement positively that it was in November. It was in the latter part of October. I was in Elizabeth City when I made this arrangement with Clark. I didn’t date it back to August 19th; I haven’t anything to do with that part of it.
Q. Didn’t he tell you that he could not make the contract unless he dated it back? A. He told me that; yes, sir; but I didn’t have anything to do with that part of it. Mr. Clark didn’t tell me that he could make the contract; he said that the company had notified him not to accept any more contracts,- but that was his own business and not mine. He then said he would send it to the office; I don’t know whether oil had gone up at that time as much as a cent; it was worth 9 or 9% cents; he told me he would rather we sign a contract; that several others had signed it, and he would rather we would. I stated when I was on the stand before as follows: “Q. Why did he say he wanted it dated back to August 19th? A. Because that was the time the time expired for accepting, contracts; the company would not accej)t any more after that date.” That was my answer; as a matter of fact, he didn’t tell me that the company would not accept any more.
Q. You did testify to that before? A. I testified to that, but he must have known it by accepting it. He told me that the company would not accept any more after that date; he stated that he was not sure he could get it through, but that he would send it to the Norfolk office and see if he could get it accepted. Wien I got this contract, Mr. Clark told me he had instructions from the company not to take the contract, and it was dated back so that the company would furnish the oil. He told me the oil was going up, and that he received a wire not to make any more contracts at that price, and the only way he could make the contract was to date it back, and I agreed to take it with that understanding; that proposal was made to me by him.
Q. Wasn’t that a fact? A. Yes, sir; most of it was. He told me that the company had refused to accept the contract; he made the proposal to me to get this contract through; he presented the contract to me and said that the company had notified him not to take any more contracts, but that he thought he could get it through. I said to him, if he could get it through I would take the risk of the oil going up or down.
The following is a part of the testimony of E. E. Wise, one of the plaintiffs, on a former trial of this case at July Term, 1913:
Q. Then, did you get this under the contract? A. It must have been so.
Q. Then your contract was made before October 14th, wasn’t it? _A. I don’t think so.
Q. Will you explain to the court and jury how you got that 8Yz cents October 14th, if it wasn’t under the contract? A. I don’t know the exact date our contract was signed; I judged it to be in November.
Q. I am asking you to state whether or not this was under the contract? A. It must have been under the contract.
Q. Then, according to that, the contract was made before October 14th ? A. Yes, sir.
Q. When you got this contract, Mr. Clark told you that he had instructions from the company not to make the contract, didn’t he; and you had it dated back so that the company would furnish the oil ? A. Yes, sir; he dated it back and told me about it. He told me that oil was going up and he had received a wire not to make any more contracts at that price, and that the only way he could make the contract was to date it back, and I agreed to take it with that understanding.
Q. When be agreed to tbat, tben be signed tbe paper? A. I signed it and be signed it also.
Q. So, tben, at tbe time tbe contract was made, oil bad gone up bow mucb? A. It seems to me it'was about 9 cents.
Q. And tbe only way be could get tbat to you was to date tbe contract back? (Plaintiffs object; objection overruled, and tbe plaintiffs except.) A. Tbat was tbe only way to get it through, so be said.
Tbe defendant alleged and offered evidence to show tbat 0. C. ’ Clark bad no authority to make tbe contract, but bad been forbidden to do so, and tbat they would not have shipped any oil to plaintiffs under tbe terms of tbe paper bad it been known at tbe time tbat tbe contract bad been antedated in order to de-ceiye them and produce tbe impression upon them, which was done, tbat tbe contract was correctly dated and they were bound to ship tbe oil, as it was not forbidden by tbe special instructions given to Clark by tbe defendant.
On this part of tbe case, and with reference to tbe orders for oil sent in by plaintiffs, W. Thompson testified: “On 14 October, 1911, an invoice was sent to us, showing a delivery to 0. E. Wise & Bro. at 8% cents a gallon, which was 1 cent lower than prices were at tbat time; it was not in accordance with our prices; it was sent in for approval, but was not approved, and I refused to approve it and held tbe invoice up and would not allow them to enter it on our books, and I asked Mr. Clark why be had done so. He said be bad a contract with 0. E. Wise; I said, 'We have no record of it’; be said, 'It ought to have been sent to you.’ A short time after tbat be sent what purported to be a contract in; when it came it bore date of '19 August, 1911/ I took tbe contract in faith tbat it was made on tbe date shown. I first learned last term of court about its being dated back by bearing tbe testimony of Mr. Wise on tbe stand. Oil was worth, when tbe contract was sent in by Mr. Clark, 9% cents f. o. b. Norfolk, wholesale. Tbe oil would not have been delivered if I bad known it bad been dated back; I would not have sent any if I bad known it was made in October instead of August. There were 79 barrels shipped; tbe company made contracts at this time, from 1 May, 1911, to 19 August, 1911; on 19 August, 1911, our instructions to our salesmen were to increase tbeir price 1 cent a gallon, and to take no more contracts; I sent him instructions by telegram and called bim up over tbe phone; I have not the letter; I do not think we have been able to find it; we found a letter of 23 August, asking that Mr. Clark acknowledge receipt of our instructions; I instructed him to discontinue making contracts, to increase the price 1 cent a gallon, making 9% cents f. o. b. Norfolk instead of 8% cents. . . . We got this order the latter part of October or the first part of November.”
Q. Do you remember the first time you ever saw it? A. I cannot say that I do — that particular order. I remember its coming in; it came in the regular course of mail or was handed me by Mr. 0. Clark; I do not open the mail myself; the mail is brought in to me after it has been opened; I remember its arrival in the Norfolk office, and I say again that it came in my mail or was handed to me by Mr. Clark, I do not know which.
Q. Who handed it to you personally? A. I cannot say that.
Q. Was there anything else with it? A. I do not think there was. I do not remember that there was anything else with it. I took it, looked at it, and I saw it was dated 19 August; I had previously said something to Clark about it.
Q. Did he say anything about it to you? A. Not until'I took the matter up with him.
Q. Did you take it up personally with him? A. Yes, sir.
Q. Did you get it? A. Yes, sir.
Q. He told you he had it ? A. He did.
Q. It came in and you filled it? A. It came in the usual course of business and I filled it, thinking it was made on 19 August; Clark gave me the impression that it was a bona fide order. Mr. Clark informed me that he had this contract with C. E. Wise. We sent all the oil that was shipped during the year under this contract. I was in the Norfolk office when Mr. Clark and I had that conversation. When I asked Clark about the invoice which had been sent in on 14 October, he told me be bad a contract witb Wise, and I told bim tbat we bad no sucb record; be informed me tbat we ought to bave. I accepted order witb understanding it bad been made on 19 August, 1911; never beard of contract being dated back until tbe testimony of Mr. Wise.
Tbe following list shows deliveries of oil by defendants to plaintiffs in and after October, 1911:
1911.
Oct. 14. 5 iron barrels, 267 gals.
Nov. 1. 5 iron barrels, 267 gals.
Dec. 14. 6 iron barrels, 316 gals.
1912.
Feb. 1. 10 iron barrels, 530 gals.
Mar. 1. 6 iron barrels, 310 gals.
Apr. 4. 10 iron barrels, 536 gals.
Apr. 13. .4 iron barrels, 218 gals.
May 11. 10 iron barrels, 533 gals.
June 21. 14 iron barrels, 757 gals.
Aug. 6. bulk, 10 gals.
Aug. 9. 9 iron barrels, 481 gals.
Tbe total deliveries amounted to 79 barrels during tbat period. On 5 August, 1912, tbe plaintiffs, supposing tbat they bad received 150 instead of 79 barrels, demanded tbe delivery of tbe remaining 350 barrels. This was about two weeks before tbe contract expired. Defendants, believing still tbe contract bad been correctly dated and was binding upon them, offered to let them bave 100 more barrels, but this offer was thereupon refused. There was evidence tbat plaintiffs sold some of tbe oil they received from defendants under tbe alleged contract at 4% cents less than tbe market price. They explained this by saying tbat they did not want to bave more than they could handle, and tbat it sold for less at wholesale than retail; but tbe court charged tbat they were not entitled under tbe contract, if valid, to sell it wholesale, as they were engaged in tbe retail trade, and tbe oil demanded for tbat purpose tbe judge directed to be excluded from tbe estimate of damages.
The defendants requested the court to nonsuit the plaintiffs, and to charge that there was no legal ratification of the unauthorized act of C. 0. Clark, as agent, unless defendants acted with full knowledge of the real facts and as to the true date of the contract. There were also requests upon the measure of damages, which are not material, in our view of the case. These requests for instructions were denied by the court.
Judgment was entered upon the verdict, and defendants appealed. .
Ehringlmus & Small and IEard & Thompson for plaintiffs.
Aydlett & Simpson and Guy Stevens for defendant.

Opinion:
Walker, J.,
after stating the factsThis case, in one material aspect of it, turns upon the point whether there is any evidence of ratification by defendants of the unauthorized act of its agent, in contracting for them to sell the gasoline below the market price, and in positive violation of express instructions not to do so. In order to decide this question, we must consider the evidence in the most'"favorable light for the plaintiffs; but when it is thus viewed, we are of the opinion there was no ratification, and the nonsuit should have been granted.
We start out with the fact admitted that the plaintiffs knew, when the contract was made, that C. C. Clark, the agent, had no authority to make it in behalf of his principal. He so stated to them, and told them of his recent instructions, and they knew well why the defendants had withdrawn the authority to sell from him, because the price of gasoline w;as rapidly advancing, having risen to a point quite a full cent per gallon over the price mentioned in the alleged contract, and still advancing, and reaching within the ensuing year a price nearly double that at which they proposed to buy. The contract was made under very suspicious circumstances, sufficient to warrant the inference, or even to produce the conviction, that it was intended to deceive the defendants and to induce them, unsuspectingly, to believe that their agent had made the contract at a time when he was authorized to do so, by antedating it and making it appear, on its face, to be within his authority as agent, and, therefore,. valid as against tbe defendants. Tbe entire evidence shows tbat defendants were, at tbe time, and remained ignorant'of tbe real nature of tbe transaction, and tbat, believing it to be regular in all respects and to bave been made on tbe day of its date, tbey naturally concluded tbat tbey were bound by it, and for tbat reason shipped 79 barrels of' gasoline, from time to time, upon tbe orders of tbe plaintiffs. "No doctrine is better settled, both upon principle and authority, than this: tbat tbe ratification of an act of an agent previously unauthorized must, in order to bind tbe principal, be with full knowledge of all tbe material facts. If tbe material facts be either suppressed or unknown, tbe ratification is treated as invalid, because founded on mistake or fraud." 1 Clark & Skyles on Agency (1905), sec. 106; Owings v. Hull, 9 Peters (U. S.), 607 (9 L. Ed., 246); Mechem on Agency (1889), sec. 129; Eeinbardt on Agency (1902), sec. 109. Tbe rule has been thus stated: "Unless tbe party undertaking to ratify knew tbat be was not liable without such ratification, be will not be bound." P. & S. R. R. v. Gazzam, 32 Pa. St., 340; Reinbardt on Agency, supra. 31 Cyc., 1253, states tbe rule in this way: "In order tbat a ratification of an unauthorized act or transaction of an agent may be valid and binding, it is essential tbat tbe principal bave full knowledge, at tbe time of tbe ratification, of all material facts relative to tbe unauthorized transaction. And in order to make'this rule operative, tbe principal must know tbe actual facts and not merely what thé agent supposed were tbe facts. If tbe material facts bave been suppressed or are unknown, there is no ratification, and tbe principal is at liberty to repudiate bis assent and assert bis rights in other ways, and it matters not whether tbe principal's want of knowledge was due to designed or undesigned concealment, or whether tbe question arises between tbe principal and tbe agent or as to third persons." And this statement of tbe rule has met with tbe approval of this Court in Brittain v. Westall, 137 N. C., 30. "We, therefore, find it to be of tbe very essence of ratification, as of an election, tbat it be done advisedly, with a full knowledge of tbe party's rights. Baldwin v. Burrows, 47 N. J., 199, 211. In Thorndike v. Godfrey, 3 Me. at p. 432, tbe Court, in. applying the rule, said: "We can never consider consent and ratification as implied, in those eases where there is no knowledge of the facts, to which it is said consent and ratification extend. This would be an effect without a cause." The authorities are uniformly to the same effect.
Applying the principle to this case, we find no evidence of ratification of Clark's unauthorized act by the defendants. It is true, the defendants shipped 79 barrels of gasoline, but this is perfectly consistent with their ignorance of the facts at the time of the shipment.
It has been said that the act which is claimed to be a ratification must be with knowledge of the facts and. "inconsistent with the existence of an intention not to adopt, and hence conduct which would have been within the principal's right in casé he repudiated the transaction will not amount to ratification. And if the principal is ignorant of material facts, as where he accepts moneys from an agent without knowledge that they are the proceeds of an unauthorized sale, intention to ratify cannot be implied." Tiffany on Agency, p. 66.
The cases are numerous where the courts have held that the sale or acceptance of goods, or the doing of other acts, under an unauthorized contract made by an agent, when the principal proceeds without knowledge of the facts, is not a valid ratification ; otherwise where the principal acts with knowledge or with what is equivalent to it. "If an agent, having unwritten authority to make leases of real property, execute a lease for more than three years, the knowledge of his principal that the tenant is in possession and paying rent is not sufficient to work either ratification or estoppel." Clement v. Young, 70 N. J. Eq., 677. The 'same was held in a case where the wife paid interest on a note of her husband and her mortgage to secure it, under the belief on her part that the mortgage was' binding upon her, the Court saying that there was no ratification. Brown v. Rouse, 104 Cal., 672. So in Nichols v. Bruns, 5 S. D., 28, it was decided that one cannot be held liable for the fraudulent representations of an unauthorized agent by accepting the benefits without knowledge of the fraud, and where the court charged tbe jury if tbe principal accepted tbe benefits be was liable for tbe representation, beld error, as tbe mere acceptance of benefits did not imply knowledge of tbe facts. Where bailiffs dis-trained for rent in a manner not authorized by tbe landlord, be was said not to be liable, tbougb be received tbe proceeds of property taken and sold to pay tbe rent, unless be bad knowledge of tbe unauthorized acts of bis agents. Lewis v. Read, 13 M. and W., 834. See, also, Freeman v. Rosher, L. R., 13 Q. B., 780; Combs v. Scott, 94 Mass. (12 Allen), 493; Wheeler v. N. S. Co., 39 Fed., 347, in which many cases of tbe same kind are collected.
Tbe principle was strongly and clearly stated by tbe Court in Bell v. Cunningham, 3 Peters (U. S.), 69: "If tbe principal, after a knowledge that bis orders have been violated by bis agent, receives merchandise purchased for him contrary to orders, and sells tbe same without signifying any intention of disavowing tbe acts of tbe agent, an inference in favor of tbe ratification of tbe acts of tbe agent may be fairly drawn by tbe jury. But if tbe merchandise was received by tbe principal under a just confidence that bis orders to bis agent bad been faithfully executed, such an inference would be in a high degree unreasonable." And tbe doctrine is well stated in Roberts v. Rumley, 58 Iowa, 306, 307: "It does not appear that tbe defendants ever bad any intimation of tbe agreement which tbe plaintiff now alleges to exist, and which be is seeking to enforce, until tbe commencement of this suit. They could not have ratified and adopted an act about which they knew nothing. . . . To bold that tbe principal is bound by agreements between tbe special agent and tbe person with whom be contracts, not authorized by tbe agent's appointment, and of 'which be bad no knowledge when be accepted tbe benefits of tbe contract, would be entirely subversive of tbe whole doctrine of special agency, and instead of requiring tbe persons dealing with tbe agent to ascertain, at bis peril, that tbe agent has kept within bis special authority, would require tbe principal to inquire, at bis peril, whether tbe agent bad gone beyond it." Here plaintiffs bad full notice of tbe lack of authority.
Ratification of an unauthorized act of the agent to be binding must not only be made with full knowledge of all material facts, but the burden is upon the party relying upon it to prove adoption of the agent's act with such knowledge. Tiffany on Agency, p. 73; Moore v. Ensley, 112 Ala., 333; Combs v. Scott, supra; Wheeler v. N. S. Co., supra.
In this case there is no evidence that defendants had knowledge of the fact that his agent and the plaintiffs had wrongfully antedated the contract, which, of course, was calculated to mislead and deceive the plaintiffs, unless we should hold, contrary to principle and authority, that the mere shipment of the gasoline was sufficient to show such knowledge. On the contrary, the only evidence upon the question tends strongly to show that the defendants had no knowledge of the facts until the first trial of this case, when one of the witnesses testified that the contract had been incorrectly dated. If there was such prior knowledge on the part of the. defendants, the plaintiffs, upon whom rested the burden of proving it, had the means of doing so by the agent himself, who was not called to the stand. They should have known the facts, as a man would hardly ratify an unauthorized act, which was not binding upon him, and thereby entail a heavy loss upon himself, when he could so easily escape the liability by repudiating the wrongful act.
• The case does not present a favorable aspect for the plaintiffs in any view we may reasonably take of it. It has not the right complexion. There is no satisfactory explanation of the order for 350 barrels of the oil, sent in just before the expiration of the year fixed by the alleged contract, when they had only- ordered during the nine preceding months 79 barrels as fully sufficient to supply their wants for that period, and supposed (why, is not clear) that they had already ordered 150 barrels. The whole ease shows that defendants were ignorant of the facts from the beginning to the end of this transaction.
It is perfectly evident that when the agent promised to "get the contract through" he expected to do so, and did do so, by a deception practiced upon his principals, and plaintiffs must have been cognizant of this purpose. There was no use at all in mis- dating the contract i£ such was not the object, because if a fair submission of the matter to the defendants for the purpose of having an exception made, in this instance, to the agent's instructions was the intention of the parties, there would have been a full disclosure of the facts -and no suppression of the true date, or, to speak more accurately, no misrepresentation of it. The transaction would have been a normal one and would not have taken so unusual and deceptive a form. The principal was entitled to know what his agent had done, if beyond- the limit of his authority, and especially if directly in violation of his instructions, and there should have been no concealment of the facts under the guise of a false date.
The plaintiffs, having the burden of proof upon them, have not met the requirement of the law in such cases. The agent "put the contract through," but in disobedience of positive instructions, and, as the case shows, by imposition upon his principal, who was ignorant of the real transaction. ' It is hardly reasonable or conceivable to suppose that defendants would have assented to a losing contract, or that plaintiffs could have believed that they would do so. That would be presuming too much upon their charity and benevolence; and besides, if a fair and honest request for such a contract was intended, why falsify the date, instead of proceeding according to the natural and ordinary course of business dealings where the parties.are inspired by perfect good faith? The whole trend of the evidence produces the conviction that the defendants were the victims of the deception, and there is nothing to relieve the transaction of the taint which, in law, vitiates it. As Chief Justice Wilmot said in Collins v. Blanton, 1 Wilson, 341 (1 Smith's Leading Cases (9 Ed.), 646): "The manner of the transaction was to gild over and conceal the truth, and wherever courts of law see such attempts made to conceal such wicked deeds, they will brush away the cobweb varnish, and show the transactions in their true light. . . . All writers upon our laws agree in this: no polluted hand shall touch the pure fountains of justice. . . . You shall not have a right of action when you come into a court of justice in this unclean manner." Ex dolo malo non oritur actio.
E. E. Wise testified: "Mr. Clark told me be bad instructions from tbe company not to take tbe contract (not to sell after 19 August), and it was dated back so tbat tbe company would furnish tbe oil. . . . Tbe only way be could make tbe contract was to date it back, and I agreed to take it witb tbat understanding." And again: "Q. Tbe only way be could get tbat to you was to date tbe contract back? A. Tbat was tbe only way to get-it through, so be said." This is a fair specimen of tbe evidence, which shows tbat plaintiffs participated in tbe wrong of tbe agent. Tbe law will not countenance any such transaction.
Tbe nonsuit should have been allowed.
Reversed.