Opinion ID: 2222926
Heading Depth: 1
Heading Rank: 5

Heading: Deterring the Evil Gwynnes

Text: The statements and restatements of the law of agency may obscure the effect of law on commercial dealings. Indeed, even distinguished courts sometimes dispose of cases without pausing to consider the effects that common law choices have on commercial problems like absconding agents. See, e.g., Phelps v. McQuade, 220 N.Y. 232, 115 N.E. 441 (N.Y.1917) (summary resolution of fall-out from jewelry transaction by a scoundrel, Walter Gwynne, impersonating Baldwin Gwynne, a man of financial responsibility.). Our Court of Appeals has suggested a more complete understanding of this rule of law. In resolving the present case, the court relied on Bischoff Realty, Inc. v. Ledford, 562 N.E.2d 1321 (Ind.Ct.App. 1990), which observed that the burden of an agent's fraud ought rightly be placed on the principal who hired him rather than on a third party stranger to the agency relationship. Oil Supply, 670 N.E.2d at 91 (citing Bischoff, 562 N.E.2d at 1324). The object of agency law in cases such as the one before us should be the deterrence of absconding agents. Commerce will be facilitated where the law allocates burdens to those best able to thwart the absconders. To be sure, principals are generally in a better position to prevent potential fraud by their agents than are buyers. Oil Supply could have prevented this situation by making a confirmation, or by closer supervision of its agent Dolin. The Court of Appeals was correct to characterize these failings as neglectful. Oil Supply, 670 N.E.2d at 91. On the other hand, Hires might just as easily prevented the defalcation by taking the time to ponder why some company it had never heard of had just deposited a truckload of antifreeze on its doorstep. Because Hires was chargeable with notice of the existence of Oil Supply as Dolin's principal before it accepted the goods, and because Hires had the last opportunity to prevent the loss before the transaction was complete, Hires should bear the loss. This disposition has the added benefit of making it more difficult for the Dolins of the world to shift debt by fraudulent means. If Hires could keep the antifreeze without paying for it, bad agents could more easily pay off debts to businesses like Hires by shifting them to those like Oil Supply. [2] Dolin would owe Oil Supply roughly $28,000 in addition to the amount he already owed at the time he absconded. Indebtedness to Oil Supply rather than Hires could well be preferable to Dolin, and he should not be empowered to shift debt from one creditor to another by way of fraud. We conclude that Hires was not entitled to set off its Dolin debt in the lawsuit brought by Oil Supply. [3]