Case Name: Strider & al. v. Winch. & Pot. R. R. Co.
Court: Supreme Court of Virginia
Jurisdiction: Virginia
Decision Date: 1871-08
Citations: 21 Gratt. 440
Docket Number: 
Parties: *Strider & al. v. Winch. & Pot. R. R. Co.
Judges: The other judges concurred in the opinion of Staples, J.
Reporter: Virginia Reports
Volume: 62
Pages: 872–874

Head Matter:
*Strider & al. v. Winch. & Pot. R. R. Co.
August Term, 1871,
Staunton.
Principal and Agent — Credit from Agent — Liability of Purchaser — Case at Bar. — C, president of a railroad company, and A. agent of the company, borrow money from H, and give their own bond for it. The money is borrowed for the use of the company, which is itself without credit, and itis immediately turned over to the company. A, as agent, receives money of the company, out of which he is expected to pay the debt; but the bond having been given for money in suit, he cannot pay it; and C and A become insolvent. Held:
1. Same — Same—Liability of Agent. — The money having been loaned to C and A individually, with the knowledge that it was for the use of the company, and H having chosen to take the responsibility of C and A, cannot afterwards make the company his debtor.
2. Same — Same-Same. ■ -The company haying put money into the hands of A to pay the debt, they are not liable in equity as having received the benefit of the loan.
This was a suit in equity in the Circuit court of Frederick county, brought in August 1869, by Isaac Strider and John Golds-borough against The Winchester & Potomac Railroad Company, to recover the amount of a bond for one thousand dollars, executed by W. R. Clark and 15. M. Aisquith to Andrew Hunter and IJdward E). Cooke, bearing date the 27th of December 1858, and pajmble on the 1st of May following. It appears that Hunter and Cooke had in their hands a large sum of money, which, under an order of the Circuit court of Jefferson county in a cause depending therein, they were directed to lend out; and Clark, who was the president of the Winchester & Potomac Railroad Company, and Aisquith, who was the agent of the company at the Charles-town depot, executed their individual *bond for the sum of $1,000 to Hunter and Cooke; and the money was received by Aisquith, and immediately sent to the treasurer of the company. Upon the final decision of the chancery suit in Jefferson county, this bond was directed to be transferred to the plaintiffs. The question of fact in this cause was, whether the money was borrowed by Clark, or Clark and Ais-quith, upon their individual responsibility, to be lent by them to the company, or whether it was borrowed for the company, and they executed their bond as security for the company. It is impossible to give the evidence on this question, without copying much of it. The view of it taken by this court will be seen in the opinio" of Judge Staples.
It appears that more than once Aisquith, out of moneys of the company in his hands, received as their agent at the Charlestown depot, offered to pay the bond to one of the obligees, but was told that the bond was filed in the Chancery court, and the obligees had no authority to receive it; and he then accounted for the money with the treasurer of the company; but from entries on the books of the company, he seems to have had in his hands, in July 1861, $1,210.23, derived from the same source, for the payment of this debt. Since the war both Clark and Aisquith had become insolvent, and Clark had died.
The court below dismissed the bill as to the railroad company; and thereupon Strider and Goldsborough applied to a judge of this court for an appeal; which was allowed.
The case was elaborately argued in printed notes by Barton & Boyd, for the appellants, and Robt. T. Conrad & Son, for the appel-lee.
See monographic note on “Agencies” appended to Silliman v. Fredericksburg, &c., R. R. Co., 27 Gratt. 119.

Opinion:
STAPJW5S, J.
I am of opinion this decree must be affirmed. The evidence, to my mind, is wholly insufficient *to establish the liability of the appellee for the claim asserted in the bill. It is true that some of the witnesses give it as their impression, that the money was loaned not to Clark and Aisquith individually, but to the appellees. It is, nevertheless, a mere impression, and however honestly entertained, it is not supported by the facts disclosed in this record. It is no doubt correct, that the loan was fully understood at the time to be for the use of the appellee, and that the proceeds were accordingly so applied ; but that is perfectly consistent with the idea that Clark and Aisquith borrowed the money in their own name, and on their own responsibility, agreeing to look to the revenues of the company for their indem-nitjT. All the facts and circumstances tend to sustain this view. At that time the company was utterly insolvent, and wholly unable to meet its engagements or to raise a dollar on its own credit. The fair inference is, that the holders of the fund did not desire to be embarrassed by any understanding or contract with a corporation in whose ability to pay they had no confidence; but preferred the obligation of two solvent and responsible individuals, upon whom a demand might be made when the fund should be needed. If the money was loaned to the company, and Clark and Aisquith were merely sureties, why was no bond ever executed by the company, why is it that the board of directors never sanctioned or recognized the transaction. Mr. Hunter was a member of the board; he was present at a meeting in November 1858, and also in January 1859. He must have been apprised of the resolution of 1840, declaring invalid any note or contract of any kind exceeding fifty dollars, made by any officer of the company, unless such note or contract was sanctioned by the board of directors. And, yet, on neither of the occasions referred to, nor at either of the other numerous meetings of the board in 1859 and 1860, was there the slightest allusion to the transaction, or any recognition of it as a loan to the company. Neither the clerk nor *the treasurer, nor any of the directors, ever heard it mentioned otherwise than as an arrangement by which Clark and Aisquith became the borrowers of the fund, and solely responsible to Messrs. Hunter & Cooke for its repayment.
The company was reorganized in 1866. Since that time the board of directors have been diligently attempting to ascertain the indebtedness of the company arising out of transactions prior to the war, and although Messrs. Hunter and Cooke have been, during- this period, members of the board, this claim has not been alluded to by either of them as imposing a liability on the company, nor has such pretension been asserted by any other person, until the ascertained insolvency of the parties executing the bond. Against- this array of facts and circumstances an entry is produced made in 1860, in the day-book of the company, by a clerk who does not profess to be familiar-with the original transaction. In this entry mention is made of "company's note" to Cooke & Hunter. The clerk states that these words were taken from certain vouchers produced before him showing amount of revenues retained by Aisquith to indemnify him against the liability he had incurred, and because he supposed the money so retained was eventually paid to Messrs. Cooke & Hunter. He did not mean to convey the idea that the company had incurred any responsibility to these gentlemen ; or that its records and books disclosed any facts from which such responsibility could be inferred. On the contrary, the impression made upon his mind was, that Clark and Aisquith had borrowed the money in their individual capacities, for the use of the company, and let the company have the proceeds, to be retained from the Charles-town depot. I am satisfied that this is the true history of the transaction, that the loan w.as made to Clark and Aisquith and the credit given to them exclusively. If this be so no proposition can be clearer than that the company is not responsible for *the debt. This exemption is based upon the familiar principle that where exclusive credit is given to an agent in any transaction for a known principle, the creditor must abide by his election, and he will not afterwards be permitted to shift the responsibility upon the principal.
In Thomson v. Davenport, 9 Barn. & Cress. 78, Dord Teuterden laid down the rule as follows: "If at the time of sale the seller knows not only that the person who is nominally dealing with him is not principal, but agent, and also knows who the principal really is, and, notwithstanding all that knowledge, chooses to make the agent his debtor, dealing with him and him alone, then according to the cases of Addison v. Gandasequi and Paterson v. Gan-dasequi, the seller cannot afterwards, on the failure of the agent, turn round and charge the principal, having once made his election at the time when he had the power of choosing between the one and the other." Mr. Justice Story uses the following language on the same subject: "If the agent and principal are both known, and exclusive credit is given to the latter, the principal will not be liable, though the 1 agent-should subsequently fail; for it is competent to the parties to agree to charge the one, exonerating the otherand an election when once made, becomes conclusive and irrevocable." Story on Agency, § 447.
It is said, however, that a court of equity, looking to the fact that the company received all the benfit of the loan, and was the party beneficially interested, will upon principles ex equo et bono hold it liable, even though at law the form of the contract may impose upon it no valid obligation. This view would be entitled to much consideration, if it appeared that, the company had not accounted to any one for the amount of the loan. But the difficulty is that the company, in accordance with its agreement with Clark and Aisquith, permitted the latter to retain in his own hands its funds to an amount sufficient to meet the debt to Hunter and Cooke. This arrangement *was made by the company, under the impression that the credit was exclusively given to its agents, and without a suspicion it had incurred any liability to Messrs. Cooke and Hunter, and not until the clearly ascertained insolvency of these agents was any intimation given that the arrangement had been misunderstood. Under such circumstances the appellants are conclusively bound by the election of those having charge of the fund to rely upon the credit of the parties to the original obligation. It is true that ordinarily, when an agent without authority makes a contract, and the principal receives the benefit of it and retains the money or property acquired by it, the principal will be held to have ratified the contract, and will be responsible upon it. But where the creditor, knowing of the existence of the principal, contracts with the agent, takes his personal obligation, and suffers the principal to settle with his agent for the amount of the debt without disclosing his demand against the principal, he cannot afterwards charge the latter so as to make him a loser; but will be deemed to have elected the agent for his debtor. Story on Agency, § 449; and cases cited in note; Wyatt v. Marquis of Hertford, 3,Rasts. R. 147.
Ror these reasons I am of opinion the decree should be affirmed.
The other judges concurred in the opinion of Staples, J.
Decree affirmed.