Court Opinion

ID: 6617920
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:25:33.499842+00
Date Added: 2024-06-11T15:58:36.120869
License: Public Domain

Ellison, J.
(dissenting). — I adhere to the opinion expressed when the case was here before. All pretense that the agent was authorized to borrow for defendant the sum sued for, or to execute a note in defendant’s name is abandoned. The suit was originally on the note which the agent executed in defendant’s name, but an amended petition was filed in which that, was abandoned. The sole question is ratification. And as to this it seems now to be conceded that, since defendant had no knowledge at time it received the draft that the agent had gotten it of plaintiff in defendant’s name, *262the ratification must be based upon defendant’s having refused to pay back to plaintiff that amount of money when it did learn how it had been obtained. In other words that,’ by retaining the fruits, after knowledge, it must be held to have adopted the means of obtaining them. The facts of this case — the facts which are conceded by both parties — make this principle of the law of ratification altogether inapplicable. Hershe was defendant’s agent in the sale of lumber for cash and on credit. He had authority to receive payment for cash sales and to collect from customers who purchased on time. It was his duty to make daily report to defendant of the state of the business; or at least he was to report at not longer periods than three days. In addition to this it was his duty to send in to defendant the balance of moneys he might have on hands due defendant whenever it would amount to a considerable sum — anywhere from $200 to $500. As stated by Judge Smith on the former appeal, he “fell behind with the defendant in respect to the faithfully accounting for all moneys received by him in his capacity as agent for the defendant. To cover up his defalcations he made in the name of the defendant” the note etc. For this note he received of plaintiff the draft on the National Bank of Commerce which he inclosed to defendant in the following letter:
“Office of Badger Lumber Company, Trenton, Mo., July 21, 1891.

“Badger Lumber Company, A. A. White Treas. Kansas City, Mo.

“Dear Sir: Please find enclosed draft No. 11,106 on Nat. Bank, of Com., K. C., Mo., Amount. . . . $500 00 u u u _ a ^ ^ u ^ a _
“Total, $500 00
*263“Please place same to our credit and acknowledge receipt. Yours very truly,
“Benj. E. Hebshe, Agent.”
The amount was credited by defendant on the account as directed. I am not able to see how the extract from the testimony of one of defendant’s officers, •as set out in the opinion, should in any way change the material facts, or the result that should follow therefrom. It can certainly make no difference how defendant kept its accounts and books with the Trenton yard — whether the charges were against the Trenton yard or against the agent who controlled, managed and handled the funds arising from that yard. The defendant was not;dealing with an inanimate affair, but was, of course,' dealing with its agent who sold lumber for it and collected the purchase money, out of which he bought native lumber, paid expenses, deposited the money and was to remit balances to defendant. And when he remitted to defendant he was, of course, discharging what he owed it. Whenever there was a balance against him or the Trenton office (no difference which) representing an amount which he had misapplied, he owed that amount — that amount was due from him to defendant. And when he sent the draft to defendant he did so in payment of a part of what was due from him, as the result of misapplication of moneys in his hands. Suppose that, instead of giving Hershe the draft, plaintiff had given him that amount of money and he had paid it over to defendant, would it be in accordance with any principle of law to say that defendant, upon learning that he had obtained it by the fraudulent use of their name, should be held to pay that sum to plaintiff? If this was the law, then every one who is defrauded by an agent forging his principal’s name for the purpose of obtaining money to meet his speculations from his principal, can recover *264the money from the principal. If a collecting agent sent out over the country by a wholesale merchant should loose the sum collected in gambling and then make it up by the fraudulent use of the merchant’s name and send it in to the merchant, would the merchant, who had no knowledge, when he received' it, how it was obtained be liable to an action by the party-defrauded? If this had been understood to be the law the present action would not be the novelty it is in legal annals.
It seems to me that the doctrine of ratification by retaining the fruits of an unauthorized contract finds no facts in this case upon which to rest. The opinion of my colleagues treats the case as though an agent had without authority bought a horse of a third party and executed a note for the purchase money in his principal’s name. In such case, when the principal learns how the horse was obtained, he could not refuse to pay the note and yet retain the horse. If he refused to surrender the horse he would be compelled to pay the note. Otherwise he would have the horse without having rendered value. This is in no way similar to the facts of the case before us for the defendant here in receiving the money was only receiving what was due to it. It was not receiving something without rendering value, for it had already parted with what the money received represented and gave the agent’s account credit. And the sum which defendant received was not the fruits (in a legal sense) of the fraudulent act of Hershe, but the fruits of its business at Trenton, represented by its agent.
The error which it seems to me is made in the decision of 'this case is also made apparent by the authorities cited in support of ■ the opinions rendered now and when the case was first here. Ruggles v. Washington County, 3 Mo. 496, was where agents of *265Washington county built a courthouse for the county. The court said of the case: “As soon as the courthouse was finished the county court took possession of it and have used it ever since as a courthouse. They, for the benefit of the county, have had the use of the house for at least fifteen years. They then discover some supposed flaw in the original contract, by which they attempt to avoid payment to the builder; this looks like an afterthought and is not entitled to the favor of law.” So the case of Norton v. Bull, 43 Mo. 113. That ease was also where a principal was seeking to retain benefits to which he was not entitled, and which the acts of the agent for him brought into existence. In Watson v. Bigelow, 47 Mo. 413, an agent without authority borrowed money of Mrs. Watson, giving her a note therefor. With the money he purchased a horse and buggy, which he used in the business of his principal. The principal denied the agent’s authority, refused to pay the note and refused to give up the property, but on the contrary sold it and kept the proceeds. The court held that by keeping the property after knowledge of the unauthorized act of the agent, the principal ratified the act and the note became the debt of the principal. So each case cited is wholly inapplicable to the case under consideration. All those cases may be illustrated by the principle that, where A makes a fraudulent sale of an article of property to B, for the purchase price of which B executes his note, B can not keep the property and also refuse to pay the note. If he wishes to disavow the contract he .must surrender up the property.' Otherwise B would have the property and not be out anything. So, as was before stated, if one assuming to act for a principal buys a horse for him and promises in the principal’s name to pay the purchase price; if the principal, upon learning of the unauthorized act, refuses *266to give up. the horse, he ratifies the act of the unauthorized agent and must pay the price. For here there is no circumstance to justify the keeping of the horse except to pay the price.
But, whenever the unauthorized agent owes the principal the money which he pays to him and the principal, without knowledge of how it was obtained, applies it to the agent’s account, the principal does not ratify the means whereby it may have been obtained by refusing to pay over the money to the party from whom it was obtained. In such case there is no privity between the principal and the party with whom the agent dealt. There is no ratification, for the reason that the principal refuses to recognise the unauthorised act and his retaining the money is not as being received on a contract with the third party, but upon an independent legal cause, vis: the pecuniary obligation which the agent owed to him.
The distinction which I have been endeavoring to make has been made in several adjudications: Thatcher v. Pray, 113 Mass. 291; Baldwin v. Burrows, 47 N. Y. 212; Bohart v. Oberne, 36 Kan. 284; The Penn. Co. v. Dundridge, 8 Gill & J. 323; Gulick v. Grover, 33 N. J. L. 463; Lime Rock Bk. v. Plimpton, 17 Pick. 159.
The first of these cases is much in point here. There an agent of the plaintiff sold to the defendant Pray, a horse without having any authority to do so. The agent received a draft from defendant in payment and sent it to plaintiff, who received the same without knowing of the agent’s unauthorized act in selling the horse, and applied it as a credit on what the agent was owing him on other matters. Afterwards, on learning of the sale he disavowed it and demanded the horse of defendant. The defendant demanded the money he had paid to the agent, and which the plaintiff had *267received, before he would deliver the horse. The plaintiff refused to pay back the money, and it was held that he could recover the value of the horse. In Bohart v. Obern, supra, the supreme court of Kansas say of a state of facts precisely applicable to the case in hand: “Where an agent makes a contract, outside of his actual and apparent power, and the fruits of his contract are received by his principals in ignorance of the material facts and without any knowledge that the contract had been made in their behalf or names, but were received and were retained by them upon the1* information and understanding that the money was paid to satisfy in part a liability existing against the agent, and in their favor, such receipt and retention will not amount to a ratification of the unauthorized contract.” The case of Lime Rock Bk. v. Plimpton, 17 Pick. 159, is not like the present case, but it serves to illustrate the principle of law I have invoked. In that case an agent had in his possession some of his principal’s money, which he, without authority, loaned to the defendants, they not knowing it was his principal’s. The agent also owed the defendants and they applied the amount they thus borrowed of him on what he was owing them. He afterwards informed them the money was not his, but that he had collected it for his principal and demanded it of defendants. It was held in an action for money had and received that the principal could not recover from the defendants.