Court Opinion

ID: 3984813
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:41:04.042918+00
Date Added: 2024-06-11T07:44:17.673928
License: Public Domain

This is an appeal from a judgment rendered in favor of respondents Holbrook and Duggins in the District Court of the First Judicial District of Utah territory, and from an order denying the appellants' motion for a new trial. It appears from the evidence that the appellants had for many years been partners under the firm name of Jungk Fabian, doing business as merchandise brokers in Salt Lake City, Utah; that on November 20, 1889, they entered into a contract with S. W. Scott to buy sheep, it being provided therein that all contracts for sheep should be made in the name of Jungk  Fabian, who by their firm name were parties of the first part, and they agreed to furnish the necessary capital. Scott agreed to attend to the buying and receiving of the sheep. Payments for sheep were to be by check of Jungk  Fabian, per S.W. Scott. The contract further provided that the net profits were to be divided equally between Jungk, Fabian, and Scott, — one-third to each, — and that they should "bear, in like proportion, any interest paid on money borrowed, and all expenses whatsoever incurred in connection with sheep contracts." Respondents Cropper  Reed, at the solicitation of Scott, agreed with Jungk  Fabian to sell and deliver to them 5,000 head of sheep, at prices ranging from $2.25 to $2.65 per head. This contract was dated December 24, 1889, and on the signing of the contract Jungk Fabian paid to Cropper  Reed $500, in a check that was filled out by Fabian, but signed by Scott in the name of Jungk  Fabian, per S. W. Scott. It was provided in the contract that Cropper  Reed should furnish sureties for the performance thereof on their part, and, when such sureties were furnished, should receive an additional sum of $4,500, which should be considered part payment for the sheep. In pursuance of this agreement, Hapgood and Duggins were furnished as sureties, and the *Page 207 
remaining $4,500 was then paid. Thereafter, Cropper  Reed, likewise at the solicitation of Scott, entered into a second contract with Jungk Fabian, by which they agreed to sell and deliver to Jungk Fabian an additional 5,000 head of sheep, at the price of $2.65 per head, and, on furnishing respondents Duggins and Holbrook as sureties for the faithful performance of the contract on their part, received from Jungk  Fabian a check for $5,000, signed in their name, per S. W. Scott. By the terms of both these contracts the sheep were to be delivered in the following July and August.
There is evidence tending to show that, prior to entering into either of these contracts, Cropper  Reed had been approached by Scott, who offered to go into partnership with them in furnishing these sheep, and also reprerented to them that he could procure the sheep at a less price than that which they were to receive from Jungk  Fabian. On the 7th day of March, 1890, the following written contract was made between Cropper Reed and Scott, to wit: "Salt Lake City, March 7, 1890. This agreement, made and entered into by and between Cropper, Reed  Scott, as partners, dealing in cattle, sheep, and real estate. They each one agree with each other to buy and sell on commission, and share equal in profits and loss on all real estate and cattle, and expenses of handling the same, to share in two contracts of sheep, made by Cropper  Reed to Jungk  Fabian. The said Scott is to divide all profits made in selling and the said Cropper  Reed are to divide all profits in buying, should there be any, and to work to one another's interest in the entire business as partners. Cropper  Reed. S. W. Scott." It appears that neither Jungk nor Fabian knew of Scott's partnership with Cropper 
Reed, but that Cropper at least knew that Scott was interested with, or the agent of, Jungk  Fabain in *Page 208 
the matter of purchasing sheep, and Reed also knew this fact before the execution of the notes sued on. Cropper  Reed failed to furnish the sheep as required by the contract, the price of sheep having materially risen between the date of the contract and the date when the sheep were to be delivered. After such failure they had a partial settlement with Jungk  Fabian, at which it was agreed between them that Jungk  Fabian had been damaged by their failure to fulfill said contract in the sum of $5,000, which sum, together with the $10,000 theretofore received by Cropper  Reed, made the total amount due to Jungk  Fabian at that time $15,000. In partial payment thereof, Cropper  Reed paid and delivered to Jungk  Fabian money and checks aggregating $3,062.50; sheep, at the contract price, amounting to $1,075.40; a note executed by S. W. Scott to Cropper  Reed, $600; a further check, drawn by Eliza, Moody on Deseret Savings Bank, $1,200, — total, $5,937.90. At the same time it was agreed the balance should be settled in notes, and a short time afterwards the following notes were executed in pursuance of such settlement: First, the three notes sued on, made by D. C. Reed and G. W. Cropper, and endorsed by L. Holbrook and S. M. Duggins, aggregating $7,000; second, a note made by D. C. Reed and G. W. Cropper, and indorsed by H. F. Hapgood, for $500; third, a note made by D. C. Reed, G. W. Cropper, and S. W. Scott for $1,500. The indorsers on the notes were sureties on the contracts, and indorsed the notes as a continuation of their liability on the contracts. The note indorsed by Hapgood has since been paid, but none of the other notes have been paid. This action was instituted upon the three promissory notes, aggregating $7,000 made by the defendants Reed and Cropper and indorsed by Holbrook and Duggins. The makers joined in one answer and the indorsers joined in another. In the respective answers, failure of consideration for the notes, and fraud in obtaining *Page 209 
them, are alleged. The particular fraud relied on by the indorsers is that Scott was a partner on both sides of the contracts, that that fact was unknown to them, and materially increased their risk, and that the failure of the plaintiffs to disclose such fact to them discharges their obligation.
On the trial the court directed a verdict against Cropper  Reed, but as to the sureties, by its fourth instruction, in effect, instructed that if Holbrook and Duggins knew at the time of signing the notes that Scott was a partner with Jungk  Fabian, and also with-Cropper  Reed in the contracts upon which they were guarantors, they were bound upon the notes. If they did not know it, they were not bound upon them. This, in effect, instructed the jury that it was the duty of Jungk  Fabian to communicate Scott's double interest to the sureties, and that their failure to communicate that fact avoided the contract of suretyship, unless said sureties had knowledge thereof from other sources.
It may be admitted that Scott's double interest was a material fact for the indorsers to know, but it appears in the evidence that this fact was unknown to Jungk  Fabian, although known to Cropper  Reed. The three notes sued on are admitted by the pleadings to be executed to Jungk  Fabian, not to Jungk, Fabian  Scott. It also appears by the evidence that Scott has no interest therein. Any fraud which would be a defense to those notes, must be a fraud on the part of Jungk  Fabian, and, unless Scott's action and Scott's knowledge of his dealings with Cropper  Reed can be imputed to Jungk  Fabian, they would be under no obligation to disclose what they did not know.
It is not contended that Scott's interest with Jungk  Fabian alone increased the liabilities of the sureties, nor 14 *Page 210 in any manner interested them. The evidence conclusively shows that Scott was attempting to perpetrate a fraud on Jungk  Fabian. In the contract of March 7, 1890, he agrees to share with Cropper  Reed the profits that would come to him when Jungk  Fabian sold the sheep. His whole arrangement with Cropper  Reed gave him an interest in opposition to his duty as the agent or partner of Jungk  Fabian, and violated the plainest principles of law, that no agent should be permitted to acquire an interest adverse to his duty to his principal. Acting for Jungk 
Fabian, it was Scott's duty to procure a contract from Cropper  Reed at the lowest price, and acting for himself, as a partner of Cropper 
Reed, it was his interest to obtain from Jungk  Fabian the highest price. If the contract between Jungk  Fabian and Scott constituted Scott a partner with Jungk  Fabian as to the net profits, yet, as to the corpus of the property, and as to the obligations payable to Jungk Fabian alone, no interest was vested in Scott, nor any authority given him to discharge such obligations; certainly no act of Scott's in furtherance of a scheme to defraud Jungk  Fabian would have that effect. For the same reason, Scott's knowledge of his own scheme to defraud Jungk  Fabian could not be imputed to them, there being a presumption that he would not disclose it to them.
It is a general rule that the knowledge of the agent is to be imputed to his principal, but the exception is as well settled as the rule. The rule has no application to a case where the agent acts in his own interest, adversely to that of his principal. His adversary character and antagonistic interest take him out of the operation of the rule for two reasons. First, that he will very likely, in such a case, act for himself rather than for his principal; and, secondly, he will not be likely to communicate to his *Page 211 
principal a fact which he is interested in concealing. It would be both unjust and unreasonable to impute notice by mere construction under such circumstances, and such is the established rule of law on this subject.Frenkel v. Hudson, 82 Ala. 158, 2 So. 758; Allen v. RailroadCo., 150 Mass. 206, 22 N.E. 917. As Jungk  Fabian did not know of Scott's interest or contract with Cropper  Reed, and as the law does not impute such knowledge to them, they could not disclose it to the sureties, and are not to be mulcted because they did not perform an impossibility.
But it is contended that on a former appeal of this action the court held otherwise as to the sureties, and that such holding has become the law of the case, and as such is controlling. The particular question of law here discussed was not at all discussed in the opinion on the former appeal. On the former appeal of this case the court decided the question that the interest of Scott with both parties to the sheep contracts was a matter material for the sureties to know; but they nowhere intimate any opinion, on the principle of law here invoked, that Scott's knowledge, obtained in an effort to defraud Jungk  Fabian, was not to be imputed to them, and, from a careful examination of that decision, we cannot see that the court intended to intimate any opinion on that question.
There is another reason why the former decision of this court did not become the law of the case, and that is that this court in this case is not the court of last resort. As to this case, involving as it does a sum in excess of $5,000, the Supreme Court of the United States is the court of last resort, and this stands as an intermediate court. The doctrine of the law of the case is not only restricted to appellate tribunals, but also to the courts of last resort. See U. S. v.Elliot (Utah), 41 P. 720; 1 Herm. Estop. 117, 118; Lawrence v.Ballou, 37 Cal. 518. *Page 212 
This is well illustrated by the case of Galigher v. Jones,129 U.S. 193, 9 Sup. Ct. 335. That was a case involving the consideration of the duty a broker owes to his principal when he refuses to obey telegraphic instructions from his principal. On the first appeal of that case to the supreme court of Utah territory, it was decided that the broker was not required to signify his refusal by a telegram, but could do so in the ordinary course of mail. The trial court having held otherwise, the case was reversed, with instructions to grant a new trial. The second trial was had before a referee, who found as a fact that the supreme court of the territory had held, under the same facts, and as a matter of law, that the broker was excused if he signified his refusal by mail, and, basing his decision on this as the law in the case, found in favor of the broker. That finding was adopted by the trial court, and affirmed by the supreme court of this territory. On appeal to the Supreme Court of the United States, however, after reciting the finding and the found fact that the finding was in accordance with the law of the case as established on the first appeal, and after quoting from the decision of this court on the first appeal, the Supreme Court of the United States say that the court was in error, that the broker was but an agent, and was bound to follow the directions of his principal, or give notice that he declined to continue the agency, and where the direction came by telegraph, his notice must be by a like prompt means of communication, and reversed the case. Of course, that court could only reverse the case if the supreme court of Utah territory on the second appeal committed an error in affirming it. Appeals lie to the Supreme Court of the United States from final judgments of the supreme court of this territory to correct the errors of this court. If no error has been committed, the case will not be reversed. If this court, on the second appeal, inGaligher v. Jones, *Page 213 
was, as matter of law, required to apply the doctrine of the law of the case, it could have committed no error in so applying it, and there could have been no occasion to reverse the action. On principle it would seem that, admitting that the law was erroneously declared on a former appeal of an action, and that such cause could be carried to the Supreme Court of the United States on appeal from the action of this court, there could be no reason in requiring a party to go to that court in order to correct that error; and in this we can see the reason why the law of the case has not been applied to intermediate, but only to courts of last resort.
On the evidence in this record, the last court erred in its fourth instruction to the jury, and the judgment of the court below must be reversed, and a new trial granted; and it is so ordered.
BARTCH, J., concurs.
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