Court Opinion

ID: 6412923
Source: CourtListenerOpinion
Date Created: 2022-06-25 11:54:02.226861+00
Date Added: 2024-06-11T15:51:25.904155
License: Public Domain

Bigelow, C. J.
The exceptions taken to the rulings ot th *6court at the trial of these cases are quite numerous, but they can be properly classed under three heads.
1. First in order is the objection to the proof of the acts and representations of Dolliver, as the agent of the corporation at the time the defendants procured their policies. To the competency of this evidence we can see no valid objection. He was duly appointed to act in behalf of the corporation by the president and secretary under the sixth by-law, and had authority to make contracts of insurance, which should be binding on the company if duly ratified. It was clearly within the scope of his authority to answer inquiries concerning the condition and property of the corporation, and its ability to fulfil its contracts with those who were about to accept policies, especially as it appears he was expressly authorized by the officers of the corporation to make such statements. If it be true, as urg"d by the counsel for the plaintiffs, that he could not bind the corporation by any false and fraudulent representations, because it had no authority to appoint an agent for an unlawful purpose or to use unlawful means, it would follow that no corporation could be held liable for any acts of its authorized agents, however fraudulent or wicked their conduct might be, or however great might be the injury thereby occasioned to third persons. Such a doctrine finds no support in the law. A corporation can act only through agents. If they, while exercising the authority conferred on them, are guilty of falsehood and fraud, their principal is liable for the consequences which may flow therefrom. The true test of the liability of the principal in such cases is to ascertain whether, in committing a fraud, the agent was acting in the business of his principal. If he was engaged in the course of his employment, then parties injured by his misconduct or fraud can resort for redress to the persons who clothed him with the power to act in their behalf, and who have received the benefits resulting from his agency. Foster v. Essex Bank, 17 Mass. 479, 509. Fuller v. Wilson, 3 Ad. & El. N. S. 58. Story on Agency, § 308.
2. The evidence relating to the mode of paying in the capital stock; concerning the entries in the books of the corporation, *7and the omission therein of any account of the sums of money purporting to have been paid in as the capital of the company ; of the manner in which stock in various banks and other corporations was transferred to the president of this corporation and reconveyed by him subsequently, and of other similar facts, was all competent as bearing on the issue raised by the answers. It tended to prove that the notes in suit had been obtained from the defendants by false and fraudulent representations concerning the solvency of the corporation, its ability to meet its liabilities, the amount of its capital stock, and the mode of its investment. The issue was a very broad and comprehensive one, and opened an inquiry into the entire transactions of the corporation, from its organization to the time when the alleged false representations were made to the defendants. By no other means could the jury determine whether the defence set up to the notes in controversy was well founded. Taken by itself, each fact offered in evidence might seem remote or immaterial to the inquiry. But it often happens, especially when questions of fraud are the subject of investigation, that circumstances which, viewed separately and apart from each other, seem to be slight and irrelevant, when connected together and combined in a chain of evidence, afford irresistible proof of the issue which they are adduced to establish.
3. All the instructions given to the jury seem to have been accurate and well adapted to the facts in proof, and sufficiently full to enable the jury to pass intelligently on the rights of the parties, except that which related to the alleged rescission of the contracts of insurance. This ground of defence was not open to the defendants under their answer, and, the objection having been seasonably taken, the evidence in its support should have been excluded, or the jury told that they could not consider it in making up their verdict. It is a mistake to suppose that a defence to a contract on the ground that it was obtained through fraud is identical with one which alleges that the contract was rescinded. The former admits the existence of the contract, but seeks to avoid it, in whole or in part, by prdof ol facts to which the law gives efficacy according to their legal *8effect on the rights of the parties. But it does not necessarily defeat the action, or prevent the party who relies on the contract from maintaining his action and recovering such damages for the breach thereof as he may prove to have been sustained. But it is otherwise, where the defence rests on a rescission of the contract. In such case the issue is that the contract has ceased to have any legal existence, not by reason of fraud or falsity in its inception only, but by reason of such fraud and falsity, in connection with other and distinct acts in pais, by which it has been terminated. If this defence is established, the action on the contract cannot be maintained. It follows that it is a distinct and substantive ground of defence, which is not embraced by a mere allegation of fraud in procuring a contract, and that it must be alleged in the answer according to the provisions of the practice act, if a defendant seeks to avail himself of it in order to defeat a recovery on a contract.

Exceptions sustained.