Court Opinion

ID: 5020681
Source: CourtListenerOpinion
Date Created: 2021-10-01 04:09:07.023185+00
Date Added: 2024-06-11T08:17:45.188336
License: Public Domain

*359On Rehearing
Appellee Meyer S. Levenson, by his motion for rehearing, . correctly ■ states that the liability of an agent .for a-non-existent principal is somewhat different from the liability of an agent for a principal who is' incompetent and may disaffirm a contract, such as an infant, or one who is under disability of coverture. Restatement, Agency, § 332; 2 Am.Jur., Agency, § 318; 3 C.J.S., Agency, § 215d. We find no Texas precedents, hut Goldfinger v. Doherty, 153 Misc. 826, 276 N.Y.S. 289, 293, discusses the circumstances under which the agent is liable in the -event the principal claims incompetency to disaffirm a Contract, saying:
“In the absence of misrepresentation, under what circumstances, if any, is an agent acting for an infant, who subsequently disaffirms, not the. agency, but the transaction of the agent, liable to 'the other contracting party? It must appear that the agent knew or had reason to know of his principal’s lack of full capacity,. and it must further ap-. pear tjiat the other contracting party was in ignorance theréof. The theory of breach of warranty of authority is that one dealing with an agent has been misled by 'him. This could hardly be deemecl to have occurred, if all the facts are known. ‘It is .material, in these cases, that the party claiming a want of authority in the agent should be ignorant of the truth touching the agency.’ Thilmany v. Iowa Paper Bag Co., 108 Iowa 357, 361, 79 N.W. 261, 262, 75 Am.St.Rep. 259. If "the agent ‘acts within his instructions, and . in good faith, especially when the facts are equally known to both parties, he is not personally responsible, although it may. happen that the authority itself is void.’ Hall v. Lauderdale, 46 N.Y. 70, 75. See, also, Mechem on Agency, § 545Restatement of the Law of Agency, § 329. * * *
, “The basis of: the liability of an agent, in a situation such as we are here considering, is that he has-produced ‘a •false impression upon the mind) of the other party; and, if this- result is'accomplished;'it- is unimportant whether the. means of accomplishing it are words or acts of the defendant, or his concealment or suppression of material facts not equally within the knowledge or reach of the plaintiff.’ Stewart v. Wyoming Cattle Ranche Co., 128 U.S. 383, 388, 9 S.Ct. 101, 101, 32 L.Ed. 439. We believe that the correct rule is that set forth in the Restatement of the Law of Agency as follows: ‘§ 332. Agent of partially incompetent principal. An agent making a contract for a disclosed principal whose contracts are voidable because of lack of full capacity to contract, or for a principal who, • although having capacity to contract generally, is -incompetent to enter into the particular transaction, is not thereby- liable to the other ;party. He does not become liable by reason of the failure of the principal to perform, unless he contracts or represents .that, the principal has capacity or unless he has reason to know of the principal’s lack of capacity and of the other party’s ignorance thereof.’• * ■
“If, therefore, the liability of the agent is to-be based on.his failure to disclose facts in connection with his. principal’s lack of full .capacity .to 'the other contracting party, it.must appear .(1) that the agent knew or had reason to know the facts indicating his prin..cipal’s lack of full capacity;, (2) that the other contracting party was in ig~ norance thereof and the'agent'had reason so to .believe; and ' (3) 'that the .transaction is one in which lack of full capacity was a material fact.”
Since the proof demonstrated that. Levenson was acting for his1 wife, to whom he had been married for twenty-one years, that they both engaged in .real estate and ■ commercial businesses . together, and: -.that together they operated the business- out of *360which this transaction grew, it is not difficult to infer that he well knew his wife’s disabilities were not removed. No less facile is the inference that the payee of the note took it expecting it to be good, and ignorant of the principal’s incompetency.
Judgment for Frances R. Levenson is affirmed, but judgment is reversed and rendered against Meyer S. Levenson. The motion for rehearing is otherwise overruled.