Case Name: Kelly v. The Tracy & Avery Co.
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1905-01-03
Citations: 71 Ohio St. 220
Docket Number: No. 8700
Parties: Kelly v. The Tracy & Avery Co.
Judges: Spear, O. J., Davis, Shauck, Crew and Summers, JJ., concur.
Reporter: Ohio State Reports, New Service
Volume: 71
Pages: 220–250

Head Matter:
Kelly v. The Tracy & Avery Co.
Authority to purchase goods — As agent for another — Not to he' implied from special authority to sell, when — Chattel mortgage given hy vendee to vendor to secure purchase notes— Mortgage to cover additional goods bought hy vendee — Mortgagor retains possession of goods and is made agent of mortgagee — Mortgagee sells notes to third party — A merchant sells goods to vendee — And loots to transferee of mortgage notes-as principal of mortgagor — Law of sales — Law of agency — • Chattel mortgages.
1. Authority to purchase goods as agent for another and on his credit, cannot be implied from special authority given such agent to sell goods and devote the proceeds to a particular purpose.
2. On the eleventh day of January, 1899, H, being the owner of' a retail grocery, sold the same with its fixtures to S for an agreed price, part of which was then paid, and to secure-promissory notes for the deferred payments, S executed and delivered to H a chattel mortgage on the same stock and fixtures, which mortgage provides: “It is hereby understood that the mortgage is to include and cover all other goods, wares and merchandise which may be purchased and placed in said store building in place and stead of any portion of the said above mentioned goods, wares and merchandise now located in said store building.”
The mortgage further provides: “It is expressly agreed by and. between the grantor (S, the mortgagor), and the grantee, (H, the mortgagee), that the above described property is. now by these presents, delivered by the grantor (mortgagor), to the said grantee (mortgagee), the same to remain in the-possession and under the control of said grantee as hereinafter provided.
“It is further agreed by and between said grantor and said grantee, that the said grantor (mortgagor) is by these-presents placed in possession of said property, goods and chattels, as the agent of said grantee (mortgagee), such, possession to be the possession of said grantee. The said, grantor as such agent, to sell and dispose of said property,, and to account and turn over to- said grantee the proceeds of all such sales, at the maturity of said promissory notes from the date hereof, such sales to be made for cash only; books?. to be at once opened In tbe name of tbe grantee (mortgagee), and accounts of sales to be kept in the name of such grantee.”
The mortgagor, while acting as such agent, was to receive weekly compensation for his services in that behalf to be paid out of proceeds of sale, and balance to be applied in satisfaction of the mortgage debt as it matured.
In March, 1900, H, the mortgagee, sold and transferred by endorsement, to K, two notes secured by the mortgage which then remained unpaid, and while S was still in possession of the retail store as owner, and acting as agent of H; after which time the defendant in error sold and delivered to S .several bills of goods which were charged to him and which were placed in stock with his other goods, covered by the mortgage, and failing to receive payment for these new goods from S it brought its action against K, the purchaser of the notes from H, to recover the price of .the goods.
.Eeld: That the agency of S is created, defined and limited by the written provisions of the chattel mortgage, and while they give him authority to sell the mortgaged goods as the agent of H, the mortgagee, and to apply the proceeds on the mortgage debt, they do not confer authority on S to purchase other goods on the credit of the mortgagee or his assigns.
Nor can such authority be implied from the relations created by the terms of the chattel mortgage.
:3. On the trial of such action, it was error for the court to charge, that “if the jury find from the evidence that the defendant, Jamison Kelly, acquired from C. F. Hurr the two notes of E. A. Smith, executed and delivered to C. F. Hurr and secured by the chattel mortgage, then the court charges you as a matter of law, that the said Kelly thereupon established such relations between himself and E. A. Smith as theretofore existed between said C. F. Hurr and said E. A. Smith, and the said Smith in the future conduct of the grocery business and in making the subsequent purchases of goods from plaintiff, for which suit is brought, acted as agent for said Kelly, and said Kelly under such state of facts is liable to pay for said goods.”
It was also error to further charge the jury — “Now it is claimed that this agent E. A. Smith was not the agent of Hurr to purchase goods, but was only the agent to sell goods; that he had no authority whatever to purchase any goods, but according to the terms of the chattel mortgage, this agent had no- authority to purchase — no right to purchase for his trade; could go out and purchase goods and chattels, and the very moment these goods and chattels landed in his store building — purchased and brought there by this agent that they became the absolute property of this man Hurr. The law will not permit any such transaction. If he had authority enough by his purchase of these goods to transfer the ownership of these goods from the seller of the goods to Mr. Hurr, he had authority enough as agent to bind Mr. Hurr in the purchase of these goods, and for all purposes he would be the agent of Mr. Hurr in the purchase of the goods as well as in the sale of the goods.”
The court also erred in. the following charge: “Therefore, if you find from the evidence, that after the notes secured by the mortgage from Smith to Hurr, were sold and assigned to the defendant (Kelly), and that there were goods purchased by E. A. Smith, or by some person acting for and by the authority of said E. A. Smith, or defendant; and that said goods were placed in the store and with the goods mortgaged by E. A. Smith as aforesaid, and that said goods were disposed of and accounted for and sold as the goods described in said chattel mortgage, then you will find for the plaintiff in such amount as you find such goods were sold for, together with interest from August 21, 1900.”
(No. 8700
Decided January 3, 1905.)
Error to the Circuit Court of Crawford county.
On the eleventh day of January, 1899, one C. F. Hurr was the owner of a retail grocery store in the city of Bucyrus, Ohio, and on that day, he sold the stock of groceries to E. A. Smith for the agreed price of $1,405.00, $405.00 of which was paid in cash by Smith, and for the balance of the purchase price, he executed and delivered to Hurr four promissory notes of that date, for the respective sums of $166.00, $166.00, $334.00 and $334.00, payable July 1, 1899, January 1, 1900, January 1, 1901, and January 1, 1902, respectively, each note bearing six per cent, interest per annum, payable annually. To secure the payment of each of these notes, Smith, the pur chaser, executed and delivered to Hurr, the vendor, a chattel mortgage on the stock of goods so purchased, which was duly verified and filed with the recorder of Crawford county, whose office is in Bueyrus, the county seat of that county. Some of the conditions and provisions of the mortgage are important to the determination of the controversy between the parties, and we quote them, because they are relied upon by the defendant in error to support its right to recover of plaintiff in error.
The granting clause is in the form usually found in mortgages of chattels, and the goods and fixtures conveyed thereby are described in detail as being situate in a building on a certain lot in the city of Bucyrus. Then follows the clause: “It is hereby understood that the mortgage is to include and cover all other goods, wares and merchandise which may be purchased and placed in said store building in place and stead of any portion of the said above-mentioned goods, wares and merchandise now located in said store building. To have and to hold all and singular, the goods, chattels and property above granted, bargained and sold, or intended to be so granted, bargained and sold, unto said C. F. Hurr, grantee, and his executors, administrators, successors and assigns forever.”
Next follows the condition of the mortgage, describing the notes as above, and providing that in case of their payment, the mortgage should be void ; otherwise the same should be in full force and virtue in law.
Also, is the following: “It is expressly agreed by and between said grantor and grantee, that the above described property is now by these presents, delivered by the grantor (mortgagor) to the said grantee (mortgagee), the same to remain in the possession and under the control of said grantee as hereinafter provided. It is further agreed by and between said grantor and grantee, that the said grantor is by these presents placed in possession of said property, goods and chattels, as the agent of said grantee, such possession to be the possession of said grantee. The said grantor, as such agent, to sell and dispose of said property, and to account and turn over to said grantee the proceeds of all such sales, at the maturity of said promissory notes from the date hereof. Such sales to be made for cash only. Books to be at -once opened in the name of the said grantee, and accounts of sales to be kept in the name of such grantee. The grantor, as such agent of said grantee, to receive for services to be paid weekly ■out of the proceeds of such sales and not otherwise, the sum of--dollars per week. And the balance of the proceeds of such sales, to be applied in satisfaction of the indebtedness aforesaid. ’ ’
It is stipulated that an inventory and schedule of the property so conveyed should be made in duplicate, each party to hold one copy. It is next agreed that, if at any time, it shall be ascertained that the grantor (Smith) while in the possession of such property as agent of the grantee, shall waste or endanger the same, or fail to honestly account for the proceeds of sales, his right to continue as agent of grantee shall at once cease, and his place filled with such person as the grantee may select.
The grantee, Hurr, is authorized to insure the property in a sum not exceeding the amount of indebtedness so secured, and pay the cost of insurance out of proceeds of sales. All insurance held by the grantor on the mortgaged property to he transferred to the mortgagee.
The only other stipulation of the mortgage- hearing on the controversy here, is in substance, that if the indebtedness described is not paid at maturity of the notes, from the proceeds of the sales in the manner before provided, the grantee may sell and dispose of a sufficient amount of the mortgaged property to satisfy the unpaid portion of the indebtedness, which sale should be public, after notice of the same for three consecutive weeks in some newspaper ,of general circulation in the county. After disposing of goods sufficient in amount to pay the indebtedness, and costs of sale, the remainder of the goods shall be transferred to the grantor, or mortgagor.
On the same day that the purchase was made by Smith (January 11, 1899) and the above mortgage was executed, Smith took a lease on the store building for five years with the privilege of. ten years, and went into possession of the property, goods and chattels purchased, and took in with him to run the store, a Mr. Messinger, and after him David Fisher, whose business was to operate the store for Smith at his request, while he, Smith, was working at his trade as painter for the Toledo & Ohio Central Railroad Co. It seems that the goods for which recovery was had in the lower court, were ordered by Mr. Fisher for Smith.
The first two notes were paid off, and in the month of March, 1900, Hurr, the payee and mortgagee, sold and transferred to the plaintiff in error the last two notes of $334.00 each, to fall due January 1,1901, and January 1,1902, respectively. They were endorsed to plaintiff in error without recourse, and contained the memorandum, “secured by chat tel' mortgage.” These notes were negotiable in form, but the mortgage was not transferred by endorsement, nor was it delivered to plaintiff in error, but remained on file in the recorder’s office. The plaintiff in error had knowledge that the notes transferred to him were secured by the chattel mortgage.
The goods, for which recovery was had in the court of common pleas, were shipped by defendant in error at divers dates from June 21, 1900, to August 16, 1900, inclusive, and were ordered by David Fisher for E. A. Smith, the mortgagor, and no authority was given by plaintiff in error to either Smith or Fisher to order goods from defendant in error or anyone else, to place in said store, but the goods were charged by defendant in error to Smith. The plaintiff in error was never in actual possession of the store, nor did he exercise any control over it.
In September, 1900, Smith assigned in bankruptcy all the goods, chattels and merchandise then on hand, as his own individual property, and later applied to retain a part' of the proceeds of the stock in lieu of a homestead, which was denied him because of the mortgage of the plaintiff in error.
The plaintiff in error appeared in the bankruptcy proceedings, and asserted his claim to the proceeds of the goods as a mortgage creditor and not as an absolute owner of the goods, and his claim was allowed, not only as to goods'on hand when the mortgage was given, but also as to other goods placed in the stock thereafter and before assignment.
' The defendant in error- was represented as to its claim for the goods furnished at the times above noted, ait the first meeting of -the creditors of Smith in said bankruptcy proceedings, which was on the twentieth'day of September, 1900, when it claims,, it,, for the first time had knowledge of the nature of the instrument herein denominated a chattel mortgage, and shortly thereafter withdrew its claim against Smith from the referee in bankruptcy, and sued the plaintiff in error for the price of the goods it had shipped and charged to Smith.
In its amended petition, the defendant in error avers that, the goods were shipped to the plaintiff in error, Kelly, at his request, and for which he was indebted to it. The shipments are set out in detail, followed by prayer for judgment for the sum of $265.47.
The plaintiff in error answered and denied each and every allegation of the petition. He also set up a second defense, which is not important here.
The case proceeded to trial by jury, and at the close of the testimony, the court at the request of the plaintiff below, charged the jury as follows: “If the jury find from the evidence that the defendant, Jamison Kelly, acquired from C. P. Hurr, the two notes of E. A. Smith, executed and delivered to C. P. Hurr, and secured by the chattel mortgage, plaintiff’s exhibit ‘B,’ then the court charges you as a matter of law, that the said Kelly thereupon established such relations between himself and E. A.' Smith as theretofore existed between said C. P. Hurr and said E. A. Smith, and said Smith in the future conduct of the grocery business and in making the subsequent purchases of goods from plaintiff for which suit is brought, acted as agent for said Kelly, and said Kelly under such state of facts is liable to pay for said goods.”
The court in the general charge said: “The evidence relating to the agency of E. A. Smith, and his power as such, is contained in a chattel mortgage offered in evidence in this case,” and the terms of the mortgage are narrated to the jury. Then the court adds: “Now it is claimed that this agent, E. A. Smith, was not the agent of Hurr to purchase goods, but was only the agent to sell goods; that he had no authority whatever to purchase any goods, but according to the terms of this chattel mortgage this agent had no authority to purchase, no right to purchase for his trade, — could go out and purchase goods and chattels and the very moment'these goods and chattels landed in his store building, purchased and brought here by this agent, that they became the absolute property of this man Hurr.
‘ ‘ The law will not permit any such transaction. If he had authority enough by his purchase of these goods to transfer the ownership of these goods from the seller of the goods to Mr. Hurr, he had authority enough as agent to bind Mr. Hurr in the purchase of these goods, and for all purposes he would be the agent of Mr. Hurr in the purchase of the goods as well as in the sale of the goods. ’ ’
There is more of the charge of like tenor and effect.
Again the court said at the close of the charge: “Therefore, if you find from the evidence that after the notes secured by the mortgage from Smith to Hurr were sold and assigned to the defendant, and that there were goods purchased by E. A. Smith, or by some person acting for and by the authority of said E. A. Smith, or defendant, and that said goods were placed in the store and with the goods mortgaged by said E. A. Smith as aforesaid, and that said goods were disposed of and accounted for and sold as the goods described in said mortgage, then you will find for the plaintiff in such amount as you find such goods were sold for, together with interest from August 21, 1900.”
Exceptions were saved by plaintiff in error as to the special and general charge. The defendant asked the conrt to submit to the jury certain interrogatories, which the court did in the following language: “The defendant has requested the court to submit certain interrogatories, which are as follows (reading them). You will answer each one separately. If the plaintiff shipped to the agent of Jamison GL Kelly these goods, then in law he shipped the goods to Jamison Gr. Kelly. Your answer to those interrogatories, if you find that he shipped these goods to the agent of Jamison Gr. Kelly, your answer whether or not he shipped these goods to Jamison G. Kelly, should be yes, for what a man does by the agent he does by himself.” Defendant excepted to this language. The jury found generally for the plaintiff in the amount demanded, and answered the interrogatories to the effect that each bill of goods wns shipped to Kelly at his request.
A motion for new trial was overruled and judgment rendered on the verdict. The case was taken to the circuit court on error and that court affirmed the judgment.
Error is prosecuted in this court to reverse both judgments.
Messrs. Eli P. Evans and Fred H. Schoedinger, for plaintiff in error.
By the terms of the mortgage E. A. Smith, the mortgagor, was placed in possession of the goods and chattels mortgaged, as the agent of C. F. Hurr, the mortgagee, and as such agent he was, in the language of the mortgage, “to sell and dispose of said property and to account and turn over to said grantee the proceeds of all such sales, at the maturity of the said promissory notes.” Kleine v. Katzenberger & Co., 20 Ohio St., 110. The counsel for The Tracy & Avery Co. contend that the mortgage by its terms authorized Smith to make purchases for and on the credit of Hurr. This we deny.
The mortgágee, Hurr, was the general, but not the absolute owner of the mortgaged chattels. His rights and duties- as to the chattels were very different from what they would have been had he been the unqualified or absolute owner of them, and had put Smith in charge of the store as his agent to conduct the business. In equity, Hurr’s rights before the assignment, were those only of a creditor holding, the chattel mortgage as collateral security for the payment of the notes it was made to secure. He could not deal with the property as if it were his own. He could have sold it in the manner authorized by the terms of the mortgage for" the purposes therein stated. The proceeds were to be credited to Smith as so much paid upon the notes. The proceeds, until they became a credit on the mortgage debt, did not belong to Hurr to any greater extent than the chattels which produced the proceeds. If these funds before they became a payment on the debt belonged to Hurr, Smith would not be entitled to have them credited on the debt he owed to Hurr. This statement is illustrative of the distinction between the rights of Hurr as the general owner of these mortgaged chattels and his rights as the absolute owner of personalty. The record of the mortgage was constructive notice to the world of Hurr’s rights and duties as mortgagee in the mortgaged chattels.
Smith’s interest in the chattels mortgaged was not extinguished by the mortgage. He had the right of redemption. Upon payment of the debt the residue of the chattels and their proceeds were to be his, and the mortgage was to .become void. He was in equity the owner of the chattels mortgaged and had an equitable interest in them that was the subject of attachment or assignment.
The provision in the mortgage that, “It is hereby understood that this mortgage is to include and cover all other goods, wares and merchandise which may be purchased and placed in said store building, in place and stead of any portion of the said above mentioned goods, wares and merchandise now located in said store building,” must be construed and understood to mean only such goods as were supplied or added to the stock by Smith. Manifestly if a stranger left goods there to be sold on commission, or for safe-keeping, they would not be covered by the mortgage. If Hurr had not assigned the notes, and Smith had bought goods on Hurr’s credit and added them to the stock, they would have belonged to Hurr absolutely and would not have been covered by the mortgage, and upon payment of the mortgage debt they would not have belonged to Smith. In such a case Hurr would have been entitled to be paid from the proceeds of the chattels covered by the mortgage, and the proceeds from goods that were absolutely his, would belong to him.
• Hurr was Smith’s creditor, and to secure the payment of $1,000.00 to him he took the said notes and chattel mortgage. This court is asked to assume from the terms of the mortgage which placed Smith in possession of .the goods to sell them, as Hurr’s agent and pay over, to him the proceeds until the mortgage debt was paid, that, by this arrangement, Hurr authorized Smith, to purchase goods for the store on Hurr V credit, and to mingle and,confuse them with the mortgaged chattels. Such, an ar rangeinent between sane parties is bardly conceivable. If Hurr had authorized Smith to buy goods for the store on Hurr’s credit, the confusion into which the business would have been plunged is, apparent and Ilurr’s liability for goods purchased by Smith would not have been protected by the mortgage.
There is nothing in the mortgage, and certainly nothing in the record outside of the mortgage, to warrant the inference as matter of fact,, and certainly not as matter of law, that if said notes had not been assigned, the said Smith would have been the agent of Hurr to purchase goods for. the store on Hurr’s credit.
The Tracy & Avery Co. did not know that any of the notes had been assigned to Kelly until after it had proved its claim in the bankruptcy proceedings. So that the goods were not sold upon any reliance, or expectation, that Kelly would pay for them. Outside of the mortgage there is nothing in the record to show any liability on the part of Kelly. The question is simply whether, at the times of the purchases, Kelly became liable to The Tracy & Avery Co. for the goods thus sold.
After the transfer of the two notes to Kelly, Mr. Hurr was the general owner of the mortgaged chattels and the owner of the legal title of the mortgage in trust for the holder of these notes, Colebróoke on Collateral Securities, sec. 145; Kernohan v. Manss et al., 53 Ohio St., 133. Hurr could have can-celled the mortgage — Kelly could not. And Smith continued as before to be Hurr’s agent to sell the mortgaged goods. The endorsement and transfer of the notes vested in Kelly the legal title of the notes and carried to Kelly an equitable interest in the mortgage as an incident to the assignment of the-notes. Kernohan v. Manss et al., 53 Ohio St., 133 2 Am. & Eng. Ency. Law (2 ed.), 1086. Kelly’s-rights were simply those of a creditor — his equitable-rights to the mortgage security were subject to the-. t rights of Hurr and Smith, as these rights existed at' the time of the transfer of the two notes to Kelly. The transfer of the notes to him did not make Smith his agent. There was no agreement between Kelly and Smith, and the latter was not in Kelly’s employment. If by the terms of the mortgage, Smith had the right to buy goods on the credit of Hurr and add them to the stock, such right was a valuable property right in Smith of which he could not be deprived without his consent, and a transfer of the notes to Kelly by Hurr could not deprive Smith of such right. Kelly would not stand in Sfnith’s shoes.
The goods sued for if bought of The Tracy & Avery C<?. by Smith as agent of Kelly, would belong to the latter absolutely, and Smith would have had no interest in them. If placed in the store they would not have been covered by the mortgage — . within its proper construction and meaning; they would not pass to Smith’s trustee in bankruptcy.
If Smith had been expressly authorised by Kelly to purchase goods on his credit, this would not authorise Smith to employ Fisher to buy them on Kelly’s credit. The rule is well settled that the-power conferred upon an agent upon the special confidence or trust which the principal has in the agent’s personal ability or integrity, in the absence of authority express or implied, cannot be redelegated by the agent so as to bind the principal. Am. & Eng.. Ency. Law (2 ed.), 972. The authority of an agent, to buy goods for a store on the credit of the principal is most clearly a personal trust and confidence which cannot he- delegated without certain and plain authority.
The court’s charge to the jury is incongruous, illogical, discordant, misleading and erroneous.
The. first proposition given in the charge to the jury, if properly given, virtually disposed of the ivhole case — Kelly having admitted he had bought the notes- — and nothing remained for the jury to do but to assess the amount for which they should return a verdict against the defendant Kelly. This was virtually and in effect a direction to the jury to return a verdict for the plaintiff. All the rest of the charge was unnecessary and superfluous. The fact that the court in other parts of the charge formally submitted various questions to the jury does not cure this misleading and erroneous proposition. The court in thus charging invaded the province of the jury, and determined the whole contention b'etween the parties. Instead of the charge given, the court should have directed the jury to return a verdict for Kelly, Pollock v. Cohen, 32 Ohio St., 514, or have left it to the jury, under proper instructions, to determine whether Smith, or Fisher, was authorized as the agent of Kelly to purchase the goods sued for, and as to Kelly’s liability. The proposition given is contrary to law and was fatally misleading and erroneous.
The court erred in directing the jury that Kelly ■“is liable to pay for the goods.”
The provisions of the mortgage do not warrant the inference as matter of fact and certainly not as matter of law, that Smith was the agent, of Hurr to make purchases — the mortgage is silent on . that subject and confers no such authority — but.if they -do warrant such inference it does not follow that the mere transfer to Kelly of the two notes secured by the mortgage, created the relation of principal and agent between Kelly and Smith and authorized him, •or his agent Fisher, to purchase the goods for Kelly.
■ This case should not be confused with the one where a person is the owner of a stock of goods in a running store, and is conducting the business by an agent, in which case the principal may be liable for goods sold to the agent and charged to him in ignorance that he had a principal. In such a case the .goods would be added to the stock and the principal would get the full benefit of the goods. But in this •case if Smith bought the goods for the store, in whom would the title to them vest when it passed from The ‘Tracy & Avery Co.? If it vested in Kelly he would ■be the absolute owner of the goods and they would not be covered by the mortgage, and woidd not pass ■to Smith’s assignee in bankruptcy. If it vested in Smith and the goods were added to the stock they would be covered by the mortgage, which was valid as between the parties to it. Francisco v. Ryan, 54 Ohio St., 308. From the record it is manifest that it was the mutual understanding of the mortgagor and mortgagee that the goods which might be purchased by Smith and added to the stock would belong to him.
If at the times the goods sued for were purchased Smith was the agent of Kelly to make purchases, and The Tracy & Avery Co. had notice thereof but •elected to sell them on Smith’s credit and did so with his consent, the company is bound and concluded by that election. 1 Am. & Eng. Ency. Law (2 ed.), 1120, and notes. But if such agency did nót exist and the company sold and delivered the goods to' Smith on his credit, Kelly is not liable.
Judges and writers in considering the rights and duties of creditors as to chattel mortgage securities, so far as we have observed, do not mention any liability on the part of the part of the creditor to perform the obligations imposed by the assigned collateral contract, or other instrument, upon the assignor, and we have found no case where such an. assignee has been held liable to perform the contract. The reason of this seems to be that no such liability exists unless imposed by positive agreement. Contracts and instruments of various kinds are frequently assigned as collateral security, and as to' such collateral securities the courts have uniformly held that the assignee is not liable. Taylor on Private Corporations (4 ed.), sec. 471; Henkle v. Salem Mfg. Co., 39 Ohio St., 547; Schwill et al. v. Beckel et al., 13 O. D., 699.
Where a person causes stock to be transferred-to - him'on the stock books of the company issuing the' stock he becomes liable to subsequent creditors on the ground of estoppel, and not on his obligation ordnty as assignee of the stock as collateral security-having represented on the stock book that he was a stockholder, the courts estop him from denying that representation as against a creditor who has- extended credit to the company presumably on' the faith of that representation. Taylor on Private Corporations (4 ed.), see. 742; 22 Am. & Eng. Ency. Law (2 ed.), 908.
A doctrine of estoppel that can have no application here. 22 Am. & Eng. Ency. Law (2 ed.), 907;. 4 Cyc., 88; 4 Cye. 88,'notes 22 and 23 •, Brewer v. Maurer, 38 Ohio St., 548.
Kelly ivas not the assignee of the mortgage. By the transfer of the notes to him he acquired merely the equity in the mortgage. Allen v. First National Bank, 23 Ohio St., 97. The legal title of the mortgage remained in Hurr. Colebrooke on Collateral Securities, sec. 145; Kernohan v. Manss et al., 53 Ohio St., 133.
Mr. L. G. Feighner, for plaintiff in error, in separate brief, cited and commented on the following authorities:
Kernohan v. Manss, 53 Ohio St., 133; Jones on Chattel Mortgages, sec. 503; Holbrook on Collateral Securities, sec. 145; 1 Bouv. Law Dict., Rawley’s Rev., 116; Mechem on Agency, sec. 308; Craighton v. Toledo, 18 Ohio St., 447; Pomeroy Equity Jurisprudence, sec. 290; Francisco v. Ryan, 54 Ohio St., 307; Chapman v. Weimer, 4 Ohio St., 481; Berry v. Barnes, 23 Ark., 411; Story’s Agency, sec. 72; Robb v. Vos, 8 O. F. D., 290, 310; Baker v. Morse, 55 Kan., 276; Elliott’s General Practice, 276; Pollock v. Cohen, 32 Ohio St., 514; 2 Am. & Eng. Ency. Law (2 ed.), 286; 2 Abbott’s Trial Brief Pleadings, 1275, sec. 79; Mechem on Agency, sec. 186; Pendall v. Rench, 2 O. F. D., 531; Abbott’s Trial Brief, p. 146, sub. 6; idem. 126 and note; Martin v. Butler, Wright, 553; Electric Ry. Co. v. Hawkins, 64 Ohio St., 391; secs. 5201, 5242, 5307, Rev. Stat.
Messrs. Bell, Brinkerhoff & Coss and Messrs. Harris <& Sears, for defendant in error.
It may be stated as a general rule that where- a simple contract is made by a duly authorized agent without disclosing his principal, and the other party in contract afterward discovers that the person with whom he dealt was not the principal, he may abandon his right to look to the agent personally and resort to the principal. 1 Am; & Eng. Ency. Law (2 ed.), 1139.
The contract between Mr. Hurr and Mr. Smith duly authorized Mr. Smith as the agent of Hurr to conduct the business, and Mr. Hurr's assignee, Mr. Kelly, in a court of competent jurisdiction made his claim to the proceeds of the after acquired property purchased by his agent, Mr. Smith. As soon as the disclosure came as to who was the principal, The Tracy & Avery Co. abandoned its right to look to Mr. Smith personally and resorted to the principal, Mr. Kelly. Lee v. Insurance Co., 13 Dec. Re., 109; 1 Handy, 217; Ford v. Williams, 62 U. S., 287.
We also cite the above case on the doctrine that where the principal is entitled to the advantages or benefits to be derived from contracts made on his behalf by his agent, he also takes all the burdens and disadvantages connected with the contract. Meeker v. Claghorn et al., 44 N. Y., 349.
When Honorable Judge Wing of the district court of the United States, held that Mr. Kelly was entitled to the proceeds of the after acquired property, he could have done so only on one theory, and' that was that he was in possession, because of the rule laid down in the 4th Ohio State which has never been abrogated in this state, and which rule is familiar to all the judges arid lawyers in the state. If he was in possession it was under the terms of the contract through Mr. Smith his agent, and if Mr.. Smith was his agent it necessarily follows that Mr. Jamison Kelly was the principal. Chapman v. Weimer, 4 Ohio St., 481.
The néxt question is as to the right of the Tracy & Avery Co. to withdraw its claim in the district court and-thereby prevent estoppel running against it as to any other course they might pursue. On this proposition we first cite the Encyclopedia of Pleading and Practice, vol. 20, p. 1322.
The proper person to say whether the circumstances were proper would be the court itself, and the fact that the court allowed it to be withdrawn would be conclusive proof that it was proper.
In a bankruptcy proceeding before a referee, the properly verified affidavit as to a claim on the part of a creditor would stand in the relative position that a petition would or an ordinary pleading in the state courts. Adolph Friedman in 1 Am. Ban. Rep., 510.
The next question on which we wish to cite authorities is as to the estoppel as running against Mr. Kelly. 11 Am. & Eng. Ency. Law (2 ed.), 446.
We will venture assertion here that the proposition of law as given in this text will not be gainsaid or contradicted by any one. And we further say without fear of successful contradiction, that the facts in this case fit the proposition as given as completely as if the text writer in writing the text had this particular case in view. The same doctrine is practically held in Babcock v. Camp, 12 Ohio St., 11.
The facts in the above case being practically admitted and certainly not disputed by any evidence,, and if we have made the proper claims under the facts, then it is perfectly.proper that the judgment, of the court below be affirmed.

Opinion:
Price, J.
At the expense of much space, we have-presented in our statement of this case, the ground work of the dispute between the parties, — not a dispute about the facts, but concerning the law of the case. Counsel for the parties are as one upon the facts as we have stated them, and when they are examined it is not difficult to determine the legal conclusion to which they inevitably lead.
Two or three questions arise in the record and they have received the attention of counsel and have been discussed in their briefs.
One is the extent of the agency of E. A. Smith, the purchaser of the chattels from C. F. Hurr. It is conceded that the scope and terms of this agency depend entirely upon the language of the chattel mortgage executed by Smith to Hurr when the purchase was made. It is not claimed that either by parol, or any other instrument of writing, the scope of his authority was extended or modified. At the time of the purchase of the stock of groceries, and the fixtures, Smith paid Hurr in cash $405.00, and executed and delivered to Hurr, the vendor, four promissory notes, and secured their payment by a chattel mortgage on the property purchased, and provided in the instrument, that the lien created thereby, should extend to any goods which might be subsequently acquired and placed in the stock. As the very important part of the mortgage, it was agreed therein, "that the above described property is now by these presents delivered by said grantor (Smith, the mortgagor) to the said grantee (Hurr, the mortgagee), the same to remain in the possession and under the control of said.grantee, as hereinafter provided."
It is next agreed that Smith, the purchaser and mortgagor, was placed in the possession of the goods and chattels, as the agent of Hurr, the vendor and mortgagee, but providing that "such possession to be the possession of said grantee," Hurr. The powers and authority of this agent are clearly defined and limited as follows: "to sell and dispose of said property, and to account and turn over to said grantee (Hurr) the proceeds of all such sales, at the maturity of said promissory notes from the date hereof. ' '
It is then provided that, for acting as agent in that behalf, he should have a weekly compensation to be paid out of the proceeds of the sales, the balance to be applied on the mortgage indebtedness. Sales were to be for cash only, and careful account thereof to be kept by Smith. If this agent should waste the property, or if he should fail to honestly account for proceeds of sales, his agency should cease, and Hurr could put another in his place as such agent. By another clause, Hurr, the mortgagee, is empowered, in case the notes were not paid at maturity from proceeds of sales by Smith, to sell and dispose of a sufficient amount of goods to satisfy the unpaid balance, but such sale should be public, after notice by three weeks ' publication in a newspaper of general circulation in that county.
Keeping in mind that the goods and chattels so purchased and mortgaged by Smith constituted a retail grocery, the reason is apparent for delivering to the mortgagee the possession of the property under the mortgage. A chattel mortgage on a stock of goods being sold at retail, with the mortgagor in' possession retaining the power to sell, is always a precarious lien, and it may fail as against other creditors and bona fide subsequent purchasers. Freeman v. Rawson, 5 Ohio St., 1; Harman v. Abbey, 7 Ohio St., 218.
To guard against danger, no doubt, the mortgage before us, was framed as it is, and it was competent for the parties to so provide.
In Kleme, Hegger & Co. v. Katzenberger & Co., 20 Ohio St., 110, this court held: "A stipulation in a mortgage of goods, that the mortgagor shall retain possession and sell the goods in the usual retail way, paying over the money received therefor to the mortgagee, as the goods are sold, does not render the mortgage, per se, fraudulent and void as against other creditors of the mortgagor. The question of good faith arising upon such stipulation is one of fact for the determination of the jury."
At the close of the opinion in that case, Scott, J., says: "That the mortgagor should thus act as agent of the mortgagees in selling the goods for their benefit, is not necessarily in fraud of the rights of other creditors, and if the transaction is bona fide it is difficult to see why it should not be upheld. Such an arrangement raises only a question of good faith, to be determined by the jury in the light of all the evidence, and is not per se fraudulent."
In the case at bar, the powers and authority of the' mortgagor were more carefully hedged about, because, while he was constituted the agent of the mortgagee to make sales, it was after a stipulation transferring possession to him, and that the possession for the purposes of the agency, in Smith to sell, should be the possession of the mortgagee.
It is clear therefore that .the instrument under consideration is one that . Smith had a right to execute and Hurr a right to receive.
Where, then, is found the authority for Smith, or Fisher for him, to bind Hurr or the plaintiff in error, Kelly, for the purchase of goods made of defendant in error? In March, 1900, — over a year after the execution and delivery of the chattel mortgage by Smith to Hurr, the latter sold and transferred the last two notes secured by the mortgage to Kelly. This mortgage was on file in the proper office and was refiled within the proper time. It seems undisputed that Kelly never had possession of the mortgage, for it remained on file. Furthermore, the only authority vested in Smith to act as the agent of Hurr, must he found in the chattel mortgage. The trial court correctly told the jury in the charge, that "the evidence relating to the agency of E. A. Smith and his power as such is contained in a chattel mortgage offered in evidence in this cause." It is not claimed now, that his agency and its scope are derived from any other source, and we look in vain for any sentence or word in the whole instrument, that authorized Smith or any one for him to purchase goods on the credit of the mortgagee. His power and duty was to sell goods, and have enough of the proceeds on hand at the maturity of the notes, to satisfy them. The agency of Smith was not general hut special, and limited to a particular purpose clearly defined.
But it is urged in argument, that the power to purchase goods for the store on the credit of Hurr, mortgagee, may be implied from Smith's authority to sell the goods at retail, and the charge of the trial court is tainted with this error. The intention of the parties to the mortgage is very plain and nothing is left to inference or implication. They put their whole contract in writing, and the creation of the agency in Smith to sell at retail to pay off the mortgage debt, was for that purpose only.
The authority to purchase on the credit of the mortgagee, was never asserted or exercised by Smith. He did not represent to plaintiff below that he was so authorized. In fact he purchased the goods in question in his own name as the owner of the store, and they were charged to him as such, and plaintiff below never had an account for them with Hurr or plaintiff in error, and knew nothing of Kelly's relation to the stock or chattel mortgage, until he filed and proved his claim before the referee in bankruptcy, sometime after the last bill had been sold and delivered to Smith. Then assuming to experience some revelation, the defendant in error withdrew from the referee its claim against Smith for the goods furnished him, and brought the suit in the court below, which is now under review.
Another view urged for defendant in error is, that inasmuch as one of the stipulations of the mortgage extends its lien to goods subsequently acquired by Smith, such lienholder should be answerable for the new goods so supplied.
This view was in the mind of the trial court, and it pronounced condemnation upon an opposite opinion, and said, "The law will not permit any such transaction. If he had authority enough by his (Smith's) purchase of these goods, to transfer the ownership of these goods from the seller of the goods to Mr. Hurr, he had authority enough as agent to bind Mr. Hurr in the purchase of these goods and for all purposes he would be the agent of Mr. Hurr in the purchase of the goods as well as in the sale of the goods. ' '
As there was no doubt about the condition of the mortgage as to the subsequently acquired goods, and that they went into the store with the other stock, the court practically decided the case in the face of the jury. This is true also of the special instruction given, which appears in the statement of the case, for there the jury was told in substance that because Kelly became the owner of the last two notes given by Smith to Hurr and secured by the chattel mortgage, he "established such relations between himself and Smith as theretofore existed between said C. F. Hurr and E. A. Smith, and that said Smith in the future conduct of the grocery business and in making the subsequent purchases of goods from plaintiff, for which suit is brought, acted as agent for said Kelly and said Kelly under such state of facts is liable to pay for said goods."
What was left for the jury? Nothing. The two instructions surrounded Kelly, and he had no escape. The court committed error there, and continued the error into the balance of the charge. The clause providing for a lien on subsequently acquired goods, seqms to have been the stumbling block for the court, as if it were a new development in the execution of chattel mortgages. There is nothing new or fraudulent in such provision. It was held long ago in Chapman v. Weimer et al., 4 Ohio St., 481, that, "when such mortgage authorizes the mortgagee to take possession of the property secured and attempted to be secured, it is a continuing executory contract; and when the mortgagor acquires such property after the execution of the mortgage and actually delivers the same to the mortgagee, the latter thereby acquires a valid lien on such subsequently acquired property."
In this case, as we have seen, possession of the store was delivered to the mortgagee at the date of and by express terms of the mortgage, and so continued until Smith assigned.. The goods subsequently purchased by him passed to the mortgagee and he had title to them. There was nothing in this clause of the mortgage to establish the relation of principal and agent between Hurr and Smith in the purchase of new goods, and certainly such relation did not pass to Kelly simply because he purchased two notes secured by the mortgage.
It is utterly incomprehensible to us, that the trial court should deduce such relation as a matter of law when there is not a single fact to justify it.
Another observation made in argument is, that authority to purchase goods on the credit of the mortgagee should be implied, because out of the proceeds of sales of goods, including subsequent purchases, the notes were to be paid. Beyond doubt, when Smith purchased the stock from Hurr and gave the mortgage in question, it was contemplated by the parties, that the profits of the business would enable Smith to meet the deferred payments, and also pay the bills for new goods. He assumed and perhaps tried to do both, but it appears he was a painter, rather than a merchant, and procured another to run the store, and eventually failed. The effects of his miscalculation or misfortune should not be visited upon one wholly innocent of their cause.
There is still one more argument urged, and it had ample recognition by the trial court. After Smith, mortgagor, assigned in bankruptcy, Kelly appeared with other creditors before the referee, and he presented his claim under , the mortgage. This was done on the nineteenth' day of September, 1900, more than a month after the last shipment made by defendant in error. In his affidavit proving his claim, Kelly says among other things: "And the said Jamison G-. Kelly is now the bona fide owner and holder of the said promissory notes and of the said chattel mortgage. And by virtue of the premises this deponent alleges that he is the owner of the said property mentioned in the said chattel mortgage, and being in the said store building mentioned in said chattel mortgage at the time the said Elliot A. Smith caused his petition in bankruptcy to be filed in the said district court, as security for the payment of said notes to him belonging. ' ' On the trial of this case in the common pleas, the defendant in error introduced this affidavit against the plaintiff in error, and counsel claim for it that it works an estoppel against Kelly, affiant, making any defense against the demand of defendant in error.
The trial court charged the jury upon this subject also, and said "when the hearing was then had before the referee in bankruptcy, Mr. Kelly then came in and declared that he as the owner of these notes and chattel mortgage was the owner in possession of these goods described in the chattel mortgage which secured payment of these notes. He naturally claimed that he was in possession of these goods, but by his claim he secured the proceeds of the sale of the goods, and having claimed at that time he was the owner, and having claimed at that time he was in possession by reason of the position of this man Smith as agent, he is now estopped to deny that he was the owner. He is estopped to deny that he was in possession of these goods."
Is this statement the law? Let us see. ' Wé have already found that while Smith was the agent of Hurr to sell goods enough to pay off the notes, he was not the agent of Hurr to purchase stock, on his credit. That'being so, if Smith still continued to be agent for Hurr until lie parted with the notes to Kelly, and the-latter permitted Smith to remain as agent to sell to-pay off his notes, there was no new authority given Smith by Kelly, whereby-he could be held for purchases made by Smith. Kelly stood in Hurr's shoes, is the very most that could be claimed. Hence, in the affidavit of Kelly before the referee, after reciting-the history of his notes and character of the mortgage, he ventures his opinion that "by virtue of the-premises, this deponent alleges that he is the owner of the said property mentioned in said chattel mortgage If Kelly took the place of Hurr in the chattel mortgage, and we should concede that Hurr's possession of the stock passed to Kelly by reason of his purchase of the notes, then there was. no falsehood told by Kelly in his affidavit, although it be simply his opinion based on his rights under the mortgage. If his affidavit was not true in this, respect, — if his opinion was not sound, before the-referee was a suitable place for defendant in error to make a contest. It did not do so. There could not have been much surprise at the claim of Kelly, for-the chattel mortgage had been on file from January 11, 1899, up to the appearance before the referee,, and which was constructive notice to defendant in error of all its contents. In the meantime it sold and delivered goods to Smith and charged them to his. account. How then could the doctrine of estoppel apply? Did the affidavit of Kelly lead the plaintiff below to change its position to its injury? The goods, had already been furnished to Smith and on his credit. The only change of position which can be-attributed to the affidavit, is that defendant in error withdrew its claim for the goods from the referee- and decided to sue Kelly, and in place of receiving a. dividend from the assets of Smith as at first intended, it would risk an action against Kelly to recover the full price of the goods sold to Smith. This, would he a new field for the operation of estoppels, —an act of Kelly long after the sales, to control or influence the conduct of defendant in error several months before. It would he an estoppel with retroactive operation. At all events being estopped to' deny that he was the owner and in possession of the-goods would not tend to make him liable for their purchase. The claim of estoppel has not the slightest foundation, and the court grossly erred in the charge upon the subject.
On the whole case it seems that the trial court: started into the trial with a marked misconception of the meaning of the chattel mortgage and the-rights of parties under it, and so starting, we find, error pervading the entire charge, except in the recitals of the terms of the mortgage and the locating-of the burden of proof. The tide had set in against. Kelly and it had no ebb thereafter, and when the court submitted to the jury the interrogatories requested by Kelly, it was told that, "if the plaintiff' shipped to the agent of Jamison G-. Kelly these goods, then in law he.shipped the goods to Jamison Gr. Kelly, f0r in law what a man does by the agent he does by himself."
Having in the charge practically decided that Smith was the agent of Kelly, the court here dictated what answers should he made to the interrogatories,, and Kelly had no chance for escape.
The trial court erred in all the particulars referred to and its judgment is erroneous. It follows that the circuit court erred in affirming that judgment.
Both judgments are reversed, and we think á retrial of the case would he useless, and conclude to render judgment for plaintiff in error on the undisputed material facts.
Judgments reversed.
Spear, O. J., Davis, Shauck, Crew and Summers, JJ., concur.