Court Opinion

ID: 9812746
Source: CourtListenerOpinion
Date Created: 2023-08-31 22:47:01.761805+00
Date Added: 2024-06-11T15:26:20.983795
License: Public Domain

OlabKSON, J.,
dissenting: This is not an action between a principal and agent where the scope of the agent’s authority is the authority actu*67ally conferred upon him by the principal, but this is an action by a third party and a different principle is applicable. Confusion has arisen in the decisions on the subject when the distinction is not kept in mind.
The principles applicable to the facts in this action are set forth in R. R. v. Smitherman, 178 N. C., at p. 598-9, as follows: “While as between the principal and agemt the scope of the latter’s authority is that authority which is actually conferred upon him hy his principal, which may be limited by secret instructions and restrictions, such instructions and restrictions do not affect third persons ignorant thereof, and as between the principal and third persons the mutual rights and liabilities are governed by the apparent scope of the agent’s authority, which is that authority which the principal has held the agent out as possessing, or which he has permitted the agent to represent that he possesses, and which the principal is estopped to deny. The apparent authority, so far as third persons are concerned, is the real authority, and when a third person has ascertained the apparent authority with which the principal has clothed the agent, he is under no further obligation to inquire into the agent’s actual authority. The authority must, however, have been actually apparent to the third peison, who, in order to avail himself of rights thereunder, must have dealt with the agent in reliance thereon, in good faith, and in the exercise of reasonable prudence, in which case the principal will be bound by the acts of the agent performed in the usual and customary mode of doing such business, although he may have acted in violation of private instruction, for such acts are ivithin the apparent scope of his authority.” (Italics mine.) Bank v. Hay, 143 N. C., 326; Trollinger v. Fleer, 157 N. C., 81; Powell v. Lumber Co., 168 N. C., 632; Furniture Co. v. Bussell, 171 N. C., 474; Cardwell v. Garrison, 179 N. C., 476; Bobbitt Co. v. Land Co., 191 N. C., 323; Sears, Roebuck & Co. v. Banking Co., 191 N. C., 500; Bank v. Sklut, 198 N. C., 589.
Page, in his valuable work on Contracts, Yol. 3, 2d ed., part sec. 1760, at p. 3018, states the matter thus: “Outside of the class of public agents the actual authority conferred by a principal upon his agent is practically inaccessible to the public at Iwge. Accordingly, persons who do not know what the agent’s authority really is, are justified in dealing with him upon the assumption that he has the authority which the principal indicates by his conduct that the agent possesses. Thus dealing-with the agent, such persons may hold the principal on contracts outside the real authority of the cogent but inside his apparent authority.” (Italics mine.)
C. S., 6304, is as follows: “An insurance agent or broker who acts for a person other than himself in negotiating a contract of insurance is, for the purpose of receiving the premium therefor, the company’s agent, *68whatever conditions or stipulations may be contained in the policy or contract. Such agent or broker knowingly procuring by fraudulent representations payment, or the obligation for the payment, of a premium of insurance, shall be punished by a fine of not less than one hundred nor more than five hundred dollars, or be imprisoned for not more than one year.” This salutary statute says premium, it does not limit it to the first premium as defendant contends the secret contract with its agent does.
The findings of fact by the court below, agreed upon by the parties, are to the effect: That one O. A. Moran was the duly authorized agent of defendant on 8 March, 1928, and for some years prior and some time thereafter, and his territory as such agent included the town of Golds-boro, Mount Olive and other towns. Among the duties conferred by the defendant upon its said agent was to represent to the proposed applicants the kind of policies issued by the defendant company, the expense of such policies to the proposed applicants and the benefits to be derived by the assured with respect to each class of policies issued by the defendant society. That on 8 March, 1928, the said O. A. Moran, as agent of the defendant society solicited the plaintiff, who lived in the agent’s territory, to accept a policy of the defendant known as retirement annuity policy, explaining to her the price and benefits to be derived from said policy, and procured an application from said plaintiff in writing for such policy and collected from the plaintiff simultaneously with the signing of said application, as premium on the policy to be issued, the sum of $121 in cash and four Liberty Bonds of $100 each, all of the value of $521. That said application was never turned in to the defendant and the said defendant knew nothing of the transaction until informed by letter from the plaintiff dated 7 March, 1929.
The defendant company, the principal and Moran his agent, had a secret agreement, as above set forth, unknown to plaintiff, that the agent “is not under any circumstances authorized to receipt for deferred or renewal premiums.” At the time he had this secret agreement with defendant he had been for years an agent for defendant selling insurance in Goldsboro, Mt. Olive and other towns. He had authority to represent to the applicant for insurance the kind of policies issued, the expense of such policies, the benefit to be derived by the assured with respect to each class of policies issued by,defendant company. He had an official receipt, the one in the present case, No. A 238429 furnished him by the defendant company. On this receipt, furnished him by the company, he receipted her for $521.
Under all this indicia of apparent authority he, as agent of defendant company for long years in that locality, solicited the plaintiff to accept a policy known as a retirement-annuity policy and collected at the time *69as premium ou tbe policy to be issued the sum of $121 in cash and four Liberty Bonds of $100 each, all of the value of $521. The other representations made to plaintiff to obtain this money I need not repeat — they are set forth above. At the time he collected this $521, defendant had this secret agreement with its agent, unknown to plaintiff, that its agent had authority only to collect the amount of the first premium, $105. These representations were made at the time to procure the contract, and it is unthinkable that defendant, having given his agent all the apparent authority can now claim it is not liable for its agent’s representations by setting up a secret agreement. This Court may rely on an opinion of the New Hampshire Court, but, speaking for myself, such law is foreign to all sense of justice. "With all the indicia of authority to obtain plaintiff’s money, which she paid in good faith, and now defendant refuses to return it on a secret agreement unknown to plaintiff is putting a premium on secret dealings, which is abhorred in business methods and frowned on by law.
It is well settled in this jurisdiction: “Where one of two persons must suffer loss by the fraud or misconduct of a third person, he who first reposes the confidence, or by his negligent conduct made it possible for the loss to occur, must bear the loss.” R. R. v. Kitchen, 91 N. C., at p. 44; Bank v. Liles, 197 N. C., at p. 418.
The defendant held this agent out for years with all the authority to solicit certain kinds of insurance for it, with the official receipt on forms-furnished by the defendant, with official numbers on them. The receipt given shows no secret agreement between defendant and its agent. The agent made enticing and alluring representations of what his company was giving her; she relied on this agent’s apparent authority, in good faith, and defendant’s agent obtained from her five premiums on the policy that he had a right to solicit, amounting to $521. Now the defendant company contends that it had with its agent a secret agreement, unknown to plaintiff, and refuses to either give her the insurance purchased or return the $521. Such conduct on the part of defendant should not be upheld by this Court. It puts the general public at the mercy of agents sent out to solicit insurance with all the paraphernalia of authority, but limited by a secret agreement, unknown to the unsuspecting public. The facts in this case disclose that plaintiff has been cheated and defrauded by an agent of the defendant company, for years in its service, who had the power to solicit insurance with all the indicia of authority. The agent representing he had authority to take plaintiff’s hard earned money, part in Liberty Bonds, saved no doubt by her for a “rainy day,” converting from the agent’s representations the Liberty Bonds into a better insurance investment. The agent has gotten plaintiff’s money from her by his apparent authority, and a secret agree*70ment between the principal and agent should not be allowed to defeat this recovery. Such secret conduct in a case of this kind should not be tolerated by this Court, whatever the New Hampshire Court may hold. That decision is only persuasive, if that, in this Court. Such secret agreement between the principal and agent cannot prevail against the apparent authority of the agent which was relied on by plaintiff in good faith. The main opinion, to my mind, is contrary to the weight of authority in the nation and settled law in this jurisdiction. I can see no reason why defendant, an insurance company, is not bound by the settled law in cases of this kind that apply to others. It is a matter of common knowledge that companies like defendant require bonds from their agents, to protect them, when the agents are sent out to solicit insurance from the general public.
In Bank v. Winder, 198 N. C., p. 18, the matter has recently been thoroughly discussed in reference to ownership of personal property, and by analogy is controlling. It is there said, p. 21, citing a wealth of authorities : “But an estoppel will arise against the real owner when he clothes the person assuming to dispose of the property with the apparent title to it, and the person setting up the estoppel, relying upon the fact, parts with something of value or extends credit on the faith of such apparent ownership. 10 R. C. L., 777, sec. 91. The controlling principle is this: Where the owner of personal property clothes another with the indicia of title, or allows him to appear as the owner, or as having the power of disposition, an innocent third party dealing with the apparent owner will be protected.”
In Couch Cyc. of Ins. Law, Yol. 2 (1929), p. 1479-80, and part of section 517, is in full accord with the decisions of this and other courts on the subject. We find: “It is within the power of an insurance company, as between itself and its agent, to define and limit the powers of the latter, but it is equally well settled that the rights of innocent third parties dealing with an agent, within the apparent scope of his authority, cannot be affected by private instructions to such agent, of which they have no notice or knowledge, or by secret limitations upon his authority. In fact, it is clear that insurance companies are responsible for the acts of their agents within the general scope of their business intrusted to their care, and that no limitations of their authority will be binding on parties with whom they deal, which are not brought to the knowledge of those parties, especially where such persons rely in good faith upon his apparent authority. Undoubtedly, if an officer of an insurance company assumes to possess certain powers, and the nature of his employment justifies the assumption of authority, and the party dealing with him has no notice of want of the claimed authority, and there is nothing to warrant an inference to the contrary, the company is bound, even though *71be bad no sucb power as claimed. And it would seem to be especially true, as it bas been beld, tbat limitations upon tbe powers of, or secret instructions to, a general agent, do not bind third persons dealing with bim without notice thereof; also, tbat it is no defense tbat tbe general agent departed from private instructions when acting within tbe general scope of bis authority, unless sucb instructions be made public, or tbe insured bas notice, or unless tbe party dealing with tbe agent is, by reason of tbe attendant circumstances, or something in tbe nature of the business, or by custom, or by a course of dealing, or otherwise, put upon inquiry as to tbe exact limits of tbe agent’s authority. . . . (p. 1482). With respect to private restrictions as affecting tbe powers or authority, express or implied, of subagents, it is beld, in application of tbe principle, tbat neither corporations nor individuals can escape their honest liabilities by secret understandings between principals and agents; tbat if a person is employed as agent of a life insurance company, but, by a secret contract between bim and tbe company’s general agent, be is to'be simply a subagent, and be is beld out as agent of tbe company, with the power to collect and pay over premiums to its general agent, tbe company must answer for collections made by bim, but not turned over to it,” etc.
There is nothing to indicate in tbe findings of fact tbat plaintiff knew or in tbe exercise of due care might have known tbat defendant’s agent did not have authority to receipt for her $521.
In fact, tbe twelfth finding shows to tbe contrary: “Tbat tbe plaintiff bad no knowledge of tbe contents of said written contract, nor of any specific limitation upon tbe agency of said 0. A. Moran until after this answer filed by tbe defendant therein.”
This finding is inadvertently overlookéd in tbe main opinion. Tbe agent of defendant took $121 in cash and four Liberty Bonds, tbe equivalent about which no question is Raised, and gave the receipt for $521 cash, and in tbe receipt called it “the first annual premium on proposed retirement annuity,” etc. Defendant’s agent deceived plaintiff, and by tbe receipt called it tbe first annual premium, and should be tbe loser. How did plaintiff know tbat defendant’s agent only bad tbe right to take money — he took tbe equivalent as money and receipted her for $521. Then again, tbe receipt says “This receipt must not be detached unless first premium is collected”' — tbat is exactly what was done, tbe first premium and more was collected.
I am authorized to say tbat the Chief Justice concurs in this .dissent.