Case Name: Stainback v. Read & Co.
Court: Supreme Court of Appeals of Virginia
Jurisdiction: Virginia
Decision Date: 1854-04
Citations: 11 Gratt. 281
Docket Number: 
Parties: *Stainback v. Read & Co.
Judges: *ALLEN and DANIEL, Js., concurred.
Reporter: Virginia Reports
Volume: 52
Pages: 127–130

Head Matter:
*Stainback v. Read & Co.
April Term, 1854,
Richmond.
1. Powers of Attorney—Construction and Scope.—A power of attorney given to an agent to act in the name ana on beha.ll ol his principal, in the absence ot anything' to show a different intention, must be construed as giving authority to act only in the separate individual business of the principal.
2. Same—Authority to Draw, Endorse or Accept Bilis -Scope of Authority.—A.power of attorney to draw, endorse and accept bills, and to make and endorse notes, negotiable at a particular bank, in the name of the principal, does not authorize the attorney to draw a bill in the ioint names of himself and his principal.
3. Same -Same—Effect Where Bill Drawn on Person Having No Funds of Principal.—Such a power does not authorize the attorney to draw a bill in the name of his principal upon a person haying no tunds of the principal in his hands. And if such a bill is accepted and paid by the drawee for the accommodation of the drawer, there is no implied obligation of the principal to repay him.
4. Same -Same—Abuse of Power—Notice to Third Persons—Effect. —Such a power does not authorize the attorney to draw a bill in the name of his principal for the benefit of the attorney; anda party dealing with the attorney, and having the means of knowing that the agent was exceeding his powers in thus drawing the bill for Ms own benefit, cannot recover of the principa 1.
This was an action of assumpsit in the Circuit court of Petersburg, brought by C. C. Read & Co. against Eittleberry R. Stainback. Upon the trial the plaintiffs introduced in evidence a bill of exchange, which bore date the 14th of December 1842, and was directed to them, whereby they were requested to pay to P. C. & J. 1). Osborne & Co. one thousand nine hundred and sixty-nine dollars and foriy-two cents. The bill was signed by E. E. Stainback, by E. C. Stainback, attorney, and by F. C. Stainback, and was endorsed by the payees and E. C. Stainback; and was paid by the plaintiffs, who charged the amount on their books to E. C. Stainback and the defendant; neither of whom had at the date of the bill, any funds in the hands of the plaintiffs.
*The plaintiffs also introduced in evidence the power of attorney from E. E. Stainback to E. C. Stainback, set out in the next preceding case. They also offered evidence to prove that up to some time about the beginning of 1842 the defendant E. C. Stainback and another, who died in 1841, were in business in Petersburg as merchants under the name of E. E. Stainback, Son & Co. That the defendant is far advanced in life, attends to no business, and that E. C. Stainback had the management and settlement of the business of E. E. Stainback, Son & Co. up to the time of his failure in 1843. That R. E. Stainback, Son & Co. and also E. C. Stain-back, had an account at the Bank of Virginia in Petersburg- in December 1842, and previously, and that R. E. Stainback, Son & Co. were indebted to that bank until 1843. That on the 15th of December 1842 the bill aforesaid was discounted by said bank, and the proceeds passed to the individual credit of E. C. Stainback, the draft not then having been accepted by the plaintiffs. That in managing the bank business of R. E. Stainback, Son & Co., E. C. Stainback frequently endorsed notes and bills last, that he might control the proceeds.
The plaintiffs also introduced two letters, both of them in the handwriting of F. C. Stainback, and addressed to them. One bears date September 21st, 1842, and is signed E- E. Stainback, Son & Co. The only part of it having any bearing on this case is as follows:
“I enclose some paper, for which please send me your notes, payable at Earmville,' viz:
My note dated 2d September, at
90 days, favor E. E. S. - - 1619 48
Do. do. 7th do. do. . 1941 67
*3561 15
For which be pleased to send me your notes in favor *of E. E. Stain-back, Son & Co., dated 1st September, at 90 days, for *1618 38, and dated 8th September, at 90 days, for *1942 77, which will balance. You can use the notes if you wish.
“E- E- Stainback, Son & Co. have *15000 to pay on 4th of next month, and I wish to provide myself with paper in time. Your notes you will make payable in Earmville. ’ ’
The second letter bears date December 15th, 1842, and is signed E. C. Stainback. In it he says, “I have yours of 10th, handing your check for *1000. Your draft fell due to day, not on 16th, and I had to alter the date to 15th. I would not have used it if I could have avoided it.”
“P. S. The draft of *1740 92 is right. We had another discounted to day for about *1900. Will duly take care of them.”
The plaintiffs also introduced in evidence certain bills or drafts, one of which was endorsed by E. E- Stainback, by E. C. Stainback attorney, E. C. Stainback, and E. E- Stainback, Son & Co. ; and another was signed as the bill on which this action is founded is signed.
The defendant offered evidence to prove that at the'date of the power of attorney aforesaid, the defendant was engaged in mercantthe business in his own name in Petersburg, E. C. Stainback being a clerk in the defendant’s house; and that F. C. Stainback was at that 'time under age, and engaged in no business on his own account; and that the firm of E. E. Stainback, Son & Co. was formed about 1836 or 1837. -
The evidence being through, the defendant moved the court to instruct the jury as follows:
1st. That under the power of attorney given in evidence in this cause, E. C. Stainback had no authority to draw the bill on the plaintiffs, the payment of which *constitutes the foundation of this action; and that the drawing of such bill on the plaintiffs, and the payment thereof by them, did not authorize the said plaintiffs to maintain this action against him.
2d. That if they believe from the evidence, that the bill, the payment of which by the plaintiffs constitutes the foundation of this action, was drawn by E. C. Stain-back for his own benefit, and the proceeds thereof went to his own use, that it was not authorized by the power of attorney in evidence in this cause, and that it was the duty of all persons dealing with the said E. C. Stainback as attorney, to notice the limitations of his authority, as the same was conferred by the said power, and that he could only bind his principal in such cases and upon such bills as were included in said authority.
3d. That the power of attorney given in evidence in this cause, gave no authority to F. C. Stainback to bind the defendant, by drawing or endorsing bills, &c., for the benefit of E. C. Stainback, nor unless the same were drawn or endorsed for the benefit and in the business of-the defendant.
4th. That if the jury believe from all the evidence in the cause, that the object of the defendant in executing the power of attorney in evidence in this cause, was to enable and authorize his son E. C. Stain-back the attorney to attend to and transact the bank business of the defendant at the Virginia Bank in Petersburg, the defendant being then a merchant in Petersburg, and the said E. C. Stainback being under age; and that the bill the payment of which by the plaintiffs is the foundation of this suit, was not drawn by the said attorney in the course of attending to and transacting the bank business of the defendant at said bank, but for his own use and accommodation, then the said attorney had no power to bind the defendant *by the drawing of the said bill, so as to enable the plaintiffs, on payment thereof, to recover the amount from the defendant.
The court refused to give the first and fourth instruction, and gave the second and third; but qualified the same by further instructing the jury, that the agent F. C. Stainback had the power, under the letter of attorney made evidence in the cause, to draw the bill on which this suit is founded, and subscribe the name of his principal E. E. Stainback thereto, in the manner in which it is clone; and that if the jury shall believe that the plaintiffs accepted the same, and paid it at maturity, without notice of, or just cause to suspect, any intended fraud or misapplication of the proceeds thereof from the use or benefit of the principal, that then they ought to find for the plaintiffs, though they may believe it was an accommodation acceptance.
And further, that if the jury shall believe that no fraud or collusion with the agent is chargeable on the plaintiffs, then the fact that the said agent executed the bill in the name of his principal E. E- Stainback, designating himself as attorney, is equivalent to a declaration on his part, that he was acting in the business and for the benefit of his principal; and that any misapplication of the proceeds by the agent after they came to his hands (if there was any), would not defeat the plaintiffs’ recovery.
To the opinion of the court refusing the first and fourth instructions, and instructing the jury as aforesaid, the defendant excepted. There was a verdict and judgment for the plaintiffs; and thereupon the defendant applied to this court for a supersedeas, which was awarded.
Joynes and Patton, for the appellant.
D. May and Stanard, for the appellees.
Powers of Attorney—Abuse of Power—Notice to Third Persons. - In Dyer v. Duffy, 39 W. Va. 152. 19 S. E. Rep. 541, it is said: “One dealing with an agent under written power must take notice of his powers. as an act not authorized is not binding on the principal. Curry v. Hale, 15 W. Va. 867; Hewes v. Doddridge, 1 Rob. (Va.) 143; Stainback v. Read, 11 Gratt. 281."
In Glover v. Ames, 8 Fed. Rep. 357, it is said: “In Stainback v. Read. 11 Gratt. 291, this principle was applied to a case in some respects similar to the present. There a power of attorney was given to an agent to draw bills, indorse notes, etc., but it was held that the agent was not authorized thereby to draw bills for his own benefit, but only for the benefit of his principal.’'
The principal case is also cited in DeVoss v. City of Richmond, 18 Gratt. 363.
See generally, monographic note on “Agencies" appended to Silliman v. Fredericksburg, etc.. R. R. Co., 27 Gratt. 119.

Opinion:
*SAMUELS, J.
A proper analysis of this case will show that it turns •upon two questions:
First. Whether F. C. Stainback had the authority of E. E. Stainback his principal, to draw the bill which is part of the foundation of this suit, or to subject his principal to an action on a collateral contract in regard thereto.
Second. If he had no .such authority, is E. E. Stainback still liable for the act of the agent, because of anything in the dealing between the agent and the plaintiffs ?
It may be laid down as a rule of law, sanctioned alike by reason and authority, that a power of attorney given to an agent, to act in the name and on behalf of his principal, in the absence of anything to show a different intention, must be construed as giving authority to act only in the separate, individual business of the principal. See Story on Agency, from § 57 to § 143; Atwood v. Munnings, 7 Barn. & Cress. 278; North River Bank v. Aymar, 3 Hill's N. Y. R. 262; Stainer v. Tysen, 3 Hill's N. Y. R. 262; Hewes v. Doddridge, 1 Rob. R. 143.
It is equally well settled that a party dealing with an agent acting under a written authority, must take notice of the extent and limits of that authority. He is to be regarded as dealing with the power before him; and he must at his peril, observe that the act done by the agent is legally identical with the act authorized by the power. See cases above cited; also 1 American Leading Cases 392, in notes.
These rules of law applied to the facts of the case, are decisive of the first question. The bill was not drawn in the business of E. E. Stainback, but in that of F. C. Stainback exclusively. It was not identical with a bill drawn in the separate name of B. E. Stainback. A joint bill imposes a joint liability on the *drawers in case it be not honored. In case of loss in the business in which the bill is drawn, both parties are bound; and in case one of the drawers be insolvent and the other solvent, as in this case, the whole loss must fall on the solvent party. If, however, a profit be made, it must be divided between those jointly concerned. A contract such as this is widely different from one in which the party liable for a loss, if one occur, is solely entitled to the profit, if one result.
Again: The power in any event must be held to authorize the agent to draw such bills only as B. E. Stainback might himself have rightfully drawn. In the case before us neither B. E. Stainback alone, or B. E. & F. C. Stainback jointly, had any right to draw the bill in question, having no funds in the hands of the drawees; and having, at the time, no other reason to suppose it would be accepted. The drawer of a bill, when he negotiates it, is to be understood as affirming that he has the right to draw. In the case before us E. E. Stainback is made to falsely affirm such right; to commit a fraud by means of the falsehood; and all this under color of the authority conferred by him. Under certain circumstances a principal may be bound by the act of his attorney going beyond his power, yet he can be so bound only toan innocent holder for value. Read and company are not holders at all; they knew perfectly well that B. E- Stainback, either solely or jointly with another, had no right to draw on them; that a power to draw bills rightfully, would not extend to their house, in the then state of business relations between them and the drawers, or either of them.
The letter of attorney authorized the agent to do certain specified acts, including the drawing of bills; this, ' as already stated, is to be construed as applying to the rightful drawing of bills in the business of the *principal. "Within these limits the agent had authority to pledge the credit of his principal, and subject him to the consequent liability. Yet in the case before us the defendant is sued not upon a direct undertaking as drawer, nor upon a liability incident to his position on the bill; he is sued upon an alleged contract to transpose the positions of the drawers and acceptors, to make the drawers liable to the acceptors: And all this is said to be implied in the drawing the bill under the circumstances existing at the time. It cannot be held that an agent may, by implied contract, bind his principal beyond those limits within which he might bind him by express contract; nor can it be held that a power to draw a bill, in itself gives the further power to make another original and express contract to indemnify the acceptor against his acceptance. If the attorney could not make an express contract of indemnity, it is impossible to suppose that it can be implied from his drawing the bill.
The second question has, to some extent, been anticipated in considering the first. There are, however, certain considerations peculiar to this branch of the case, which require some notice. It is well settled that although an agent may in fact exceed his power, yet if he apparently keep within its limits, and deal with innocent parties for value, the principal will be bound. Mann v. King, 6 Munf. 428; North River Bank v. Aymar, 3 Hill's N. Y. R. 262. It is but just that the principal should suffer the consequences of his own misplaced confidence, rather than they should fall on innocent parties. This rule of law, however well established, can afford no aid to Read & Co. upon the facts of this case. They dealt -with an agent acting under a power of attorney, and, as already said, must be regarded as dealing with that power before them. They were bound, at their peril, to notice the limits prescribed therein, either by its own terms, or *by construction of law. With this knowl edge, they nevertheless make a contract, which is not one of those specified in the power; but an original contract to subject the drawers to a liability not incident to their position on the paper. They accepted the bill, having no funds of the drawers; they knew that their acceptance would make them liable to any subsequent holder for value; they relied upon the undertaking of F. C. Stainback for indemnity; this undertaking is contained in the letter dated December 15th, 1842, the day the bill was discounted, advising the drawees of the bill and its discount, and promising "to take care of itobviously meaning thereby to provide funds for its payment at maturity. This undertaking is contained in a letter from F.'C. Stainback to Read & Co. given in evidence upon the trial. The letter is signed by E. C. Stainback with his own name only; is wholly upon his own business with them; and must be held to be an express guarantee by P. C. Stainback alone. This excludes all possibility of an implied guarantee by B. E. Stainback, either joint or several.
The law, as here declared, required that the first and fourth instructions should have been given ; and seeing that by necessary legal intendment Read & Co. did know the limits of the attorney's power, and that in making the contract sued on he was exceeding his authority, there was no foundation in the facts of the case for the qualification with which the second and third instructions were given. The court, therefore, erred in annexing such qualification.
I am of opinion to reverse the judgment of the Circuit court, and remand the cause for a new trial, with directions to give the four instructions as moved for, if the evidence on the new trial shall be substantially the same as on the former trial, and if the instructions shall be again asked for.
*ALLEN and DANIEL, Js., concurred.
MONCURE and LEE, Js., dissented.
The judgment was as follows :
It seems to the court here, that the power of attorney from Bittleberry E- Stainback to E. C. Stainback, given in evidence on the trial in the court below, did not give authority to E. C. Stainback to draw the bill given in evidence, binding said E. E. Stainback as a joint drawer with P. C. Stainback; and that the Circuit court erred in refusing to give the first instruction moved for by the plaintiff in error.
It further seems to the court here, that the power of attorney, as between the principal and agent, gave no authority to the agent to draw the bill aforesaid for the accommodation of the agent; and that parties dealing with the agent and having the means of knowing that the agent was exceeding his power in thus drawing the bill for his own benefit, cannot recover of the principal.
It further seems to the court that the facts, that P. C. Stainback held the bill and had it discounted for his own benefit; that he wrote the letter of December ISth, 1842, addressed to the defendants ; that they accepted, after receiving that letter, and charged their acceptance to P. C. Stain-back; if believed by the jury, taken in connection with the written evidence, were sufficient to show that the defendants had the means of knowing that P. C. Stainback the agent, in procuring the acceptance of defendants, was procuring it for his om accommodation and not that of his principal; and that the principal was not bound: that the court below should have so instructed the jury, and that it erred on plaintiff's second motion.to instruct.
It further seems to the court here, that the court *below erred in its action on the plaintiff's third and fourth motions to instruct; that it should have given the instruction above stated as proper to be given on the second motion to instruct.
Therefore, it is considered by the court that the said judgment be reversed and annulled; that the plaintiff recover of the defendants his costs in this court expended; that the verdict of the jury be set aside, and the cause remanded for a new trial to be had therein; upon which trial, if the evidence shall be the same in substance as that at the former trial, the Circuit court shall conform its action to the principles hereby declared.