Court Opinion

ID: 5303899
Source: CourtListenerOpinion
Date Created: 2022-01-08 03:20:39.983145+00
Date Added: 2024-06-11T08:29:06.943360
License: Public Domain

Finch, J.
(dissenting). Even assuming the finding of the trial court that plaintiff told Medinger that he canceled the power of attorney to be sustained by the weight of the evidence, yet in my opinion the case at bar falls within the exception to the general rule that notice to the agent is to be imputed to the principal. Such rule has no application where the facts and circumstances are such as to rebut a presumption that the agent would communicate his knowledge to his principal, as where such communication would necessarily frustrate the ulterior plan or scheme in which the agent was engaged. As was said by Judge Vann, in Henry v. Allen (151 N. Y. 1, 9): “ The learned General Term proceeded to judgment upon the ground that a principal is chargeable with the knowledge acquired by an agent while transacting his business, and that hence the plaintiff had constructive notice of the circumstances under which Monson procured the instruments in question from the defendants. The general rule that notice to the agent, while acting within the scope of his authority and in regard to a matter over which his authority extends, is notice to the principal, rests upon the duty of disclosure by the former to the latter of all the material facts coming to his knowledge with reference to the subject of his agency and upon the presumption that he has discharged that duty. (Casco National Bank v. Clark, *551139 N. Y. 307, 313; Hyatt v. Clark, 118 N. Y. 563; Case of the Distilled Spirits, 11 Wall. 356, 367.) This presumption, however, does not always arise, for there are several exceptions well recognized by the authorities. Thus, when the agent has no legal right to disclose a fact to his principal, or he is engaged in a scheme to defraud his principal, the presumption does not prevail, because he cannot in reason be presumed to have disclosed that which it was his duty to keep secret, or that which would expose and defeat his fraudulent purpose. (Innerarity v. Merchants’ National Bank, 139 Mass. 332; S. C., 52 Am. Rep. 710; Weisser v. Denison, 10 N. Y. 68, 76; Frenkel v. Hudson, 82 Ala. 158; Western M. & I. Co. v. Ganzer, 63 Fed. Rep. 647; Hudson v. Randolph, 66 Fed. Rep. 216; Kettlewell v. Watson, L. R. 21 Ch. Div. 707; Cave v. Cave, L. R. 15 Ch. Div. 639; Mechem on Agency, § 721.) As Mr. Pomeroy says in his work on Equity Jurisprudence: ‘ When an agent or attorney has in the course of his employment been guilty of an actual fraud, contrived and carried out for his own benefit, by which he intended to defraud, and did defraud his own principal or client, as well as perhaps the other party, and the very perpetration of such fraud involved the necessity of his concealing the facts from his own client, then, under such circumstances, the principal is not charged with constructive notice of facts known by the attorney, and thus fraudulently concealed. In other words, if, in the course -of the same transaction in which he is employed, the agent commits an independent fraud for his own benefit, and designedly against his principal, and it is essential to the very existence or possibility of such fraud that he should conceal the real facts from his principal, then the ordinary presumption of a communication from the agent to his principal fails; on the contrary, a presumption arises that no communication was made, and consequently the principal is not affected with constructive notice.’ (§ 675.) Referring to the same subject in Weisser v. Denison (supra), Judge Allen said: 1 The principle that notice to an agent is notice to the principal is quite familiar, but is only applicable to cases in which the agent is acting within the scope of his employment. Were it otherwise, and did it extend to acts unauthorized and outside of the employment, whether trespasses or even felonies, the master might be made responsible for all acts, whether tortious or otherwise, done by his servant, while in his employ, of acting professedly in his behalf, if he did not act at once by disclaiming the authority. The servant would necessarily have knowledge of his own wrongful act, and within the rule sought to be applied, the knowledge of the servant would be that of his master. * . * * He would thus, by a legal fiction, *552be charged'with the tortious, fraudulent or even felonious act of his servant. This is not the law.’ (p. 77.)”
In the case at bar Medinger" had an incentive to trade in the plaintiff’s account. It appears that he had an agreement with the plaintiff that he should receive twenty-five per cent of any profits arising out of such trades. This agreement was not disclosed to the defendants. It is apparent that Medinger had resolved to trade in the account whether with or without authority, and this ulterior purpose could not be accomplished if he informed the defendants of the revocation of his power to act as plaintiff’s agent.
Looking at the case at bar from the point of view of the scope of the employment, the trial court has found as matter of fact that Medinger’s authority was limited to taking orders from customers for the purchase and sale of securities and to place such orders with the defendants for execution. It was not within the scope of Medinger’s employment on the part of the defendants to trade in a customer’s account. This he was especially authorized to do on the part of the plaintiff under the power of attorney filed by the plaintiff with the defendants. Nor was it within the scope of Medinger’s employment by the defendants to accept cancellation of the power of attorney. This fact distinguishes the case at bar from those of McConnell v. Hellwig (190 App. Div. 244) and Eng v. Cammann (85 Mise. 27). There the notice of cancellation was given to the defendants’ manager, and it was held that the latter, even though regarded as receiving the notice not as manager for the defendants, but as agent for the plaintiff, when he came to transmit the orders was acting within the scope of his duties as manager of the defendants, and his knowledge was theirs. Since, therefore, the knowledge of Medinger that his power of attorney had been revoked cannot be imputed to the defendants (and the trial court has found that there was no actual notice to the defendants of such revocation), the authority of Medinger to bind the plaintiff under such power of attorney continued, and the defendants are not liable for his acts thereunder. As was said by Judge Rapallo, in Claflin v. Lenheim (66 N. Y. 301, 305): “ It is a familiar principle of law that when one has constituted" and accredited another his agent to carry on a business, the authority of the agent to bind his principal continues, even after an actual revocation, until notice of the revocation is given; and, as to persons who have been accustomed to deal with such agent, until notice of the revocation is brought home to them.”
I am further of the opinion that in any event the plaintiff is barred from a recovery as against the defendants because he was *553guilty of gross negligence under all the circumstances of the case, in not himself advising the defendants of the cancellation of the power of attorney to Medinger. Plaintiff knew that Medinger had refused to be guided by his alleged instructions not to trade in the account unless by express authorization from plaintiff and knew of Medinger’s incentive to trade arising out of the agreement to share in any profits. Plaintiff also concedes that he entertained doubts of Medinger’s honesty. Under these circumstances plaintiff should not have relied upon Medinger to act upon his oral statement to Medinger that he had canceled his power of attorney, or have assumed that Medinger would inform the defendants of such cancellation. The trial court has found that the defendants acted in good faith throughout, in full reliance upon the continued existence of the power of attorney. Plaintiff’s loss arose through no negligence or breach of duty on the part of the defendants, but solely out of plaintiff’s own negligence.
For the reasons first stated, however, the judgment as matter of law should be reversed and the complaint dismissed.
McAvoy, J., concurs.
Judgment affirmed, with costs.