Court Opinion

ID: 8861687
Source: CourtListenerOpinion
Date Created: 2022-11-26 17:50:23.18234+00
Date Added: 2024-06-11T17:05:50.704406
License: Public Domain

HAWLEY, District Judge
(dissenting). I concur in the general proposition announced in the opinion of the court as to the ordinary powers and authority of an agen t, — that, when he undertakes to pledge the security of his principal for his own use, he must affirmatively show express authority therefor. .But the question here, as I understand it, does not involve the proposition whether Schulze, simply by virtue of his position, had authority from his principal to do the act in question. I am of opinion that the evidence justifies the findings of the circuit court, to the effect that the Fidelity Trust Company believed, and had the right to believe, that the draft in question, as well as the three other drafts which were paid by the treasurer of the railroad company, was drawn, in the regular course of business, for the use and benefit of the railroad company, and would, as the other drafts had been, be paid by the treasurer thereof, and that it relied upon this understanding and knowledge in cashing the draft, and issuing a certificate of deposit therefor in the name of Schulze; that it did not know, and had no reason to believe, that Schulze intended to convert the same to his own use; that the Northern Pacific Eailroad Company, and the receivers thereof, by the appointment of Schulze as general land agent, and the auihority conferred upon him thereby, and their dealings through him with the Fidelity Trust Company, and the payments of the drafts drawn by Schulze by the treasurer of the railroad company, induced it to believe that Schulze, as the general land agent, had the power, and was authorized, to draw the draft in question, and to take and receive the money therefor; and that, by holding him out by this general course of dealing, they gave him such apparent authority for that purpose as to justify it in entertaining and acting upon *546the belief that he was authorized to perform such acts as their agent. In cases of this character, the question is not what authority was intended to be given to the agent by his principals, but what authority were third persons having dealings with him, justified, from the conduct and acts of the principals, in believing was given to him. The fact and scope of his agency is not, in such cases, to be confined to the actual authority given by the principals to the agent, but courts can look at the knowledge that the principals have or had, or by the exercise of ordinary care and prudence ought to have had, as to what the agent was doing. The general rule upon this subject is clearly stated in Mechem, Ag. § 84, as follows:
“Whenever a person has held out another as his agent authorized to act for him in a given'capacity, or has knowingly and without dissent permitted such other to act as his agent in such capacity, or where his habits and course of dealing have been such as to reasonably warrant the presumption that such other was his agent, authorized to act in that capacity, whether it be in a single transaction, or in a series of transactions, his authority to such other to act for him in that capacity will be conclusively presumed, so far as it may be necessary to protect the rights of third persons who have relied thereon in good faith, and in the exercise of reasonable prudence; and he will not be permitted to deny that such other was his agent, authorized to do the act that he assumed to do, provided that such act is, within the real or apparent scope of the presumed authority.”
It is a well-settled rule of law that, where one of two innocent parties must suffer through the wrongful act of a third party, the one who has enabled such third party to accomplish the wrong must bear the penalty and suffer the loss. The Fidelity Trust Company in the present case appears’to have acted in good faith, and was not guilty of any negligence or wrongdoing. It is true that the president of the bank testified that he knew that Schulze, as the general land ágent of the railroad company, had been irregular and unreliable in some of his business methods; but the transaction concerning which this testimony was given occurred long prior to the procuring of the drafts drawn by Schulze, which were paid by Baxter as treasurer of the railroad company. The fact that the railroad company and its receivers continued to have faith in Schulze as a business man, and to repose trust and confidence in him, and that the treasurer of the corporation continued to pay drafts drawn by him without any real authority so to do, were of sufficient weight to overbalance the president’s personal knowledge of Schulze’s irregular and crooked methods prior to that time. When we take into consideration the character of the acts which the railroad company permitted Schulze, their general agent, to do, and that Schulze’s unlawful and unauthorized acts were connived at and aided by Baxter, the treasurer of the company, it furnishes sufficient grounds, in my opinion, to have induced the bank to believe that Schulze had authority, not only to draw the draft, but to have it cashed, and the money paid to himself, or deposited to his order, for the benefit of his principals. The rule announced in the opinion of the court requires greater vigilance upon the part of the bank than it exacts from the principal himself, as to the agent’s authority, and, in my view of the case, compels the party least at fault to bear the loss. As long as corporations or individuals hold out to the *547general public, and to all parties with whom they have dealings, that tlieir agent has authority to do acts beyond the general scope of an ordinary agent’s power, and sanction and approve such acts, without interposing objections thereto when brought home to their knowledge, they cannot thereafter raise the objection that the acts performed by him were beyond the ordinary scope of his agency. The usage and custom of the principals in sanctioning and approving the illegal acts of Schulze, or the acts performed by him without any direct authority from them, was calculated to mislead and deceive the public with whom they dealt, and the knowledge of such parties that the agent was unreliable in his business mefhods cannot be urged as a reason whv they should not be bound by such acts. By their own course of conduct they are estopped from raising such a defense. As before stated, it does not appear that the bank had any knowledge that Schulze intended to appropriate the; money obtained upon the draft to his own use. The mere fact that he requested the bank to issue to him a certificate of deposit, and that he procured the same, was not of ifself calculated to put the bank upon inquiry as to what use he intended to make of the money. If he had authority to draw the draft, he had the power to obtain the money Cor the benefit of Ms principals; and, unless the bank had knowledge to the contrary, it had the right, from the previous course of business, to presume and believe that he was acting for his principals in having the draft cashed, and that he intended using that money for his principals, and not for himself. “For the acts of his agent within his express authority, the principal is liable, because the act of the agent is the act of the principal. For the acts of the agent within the scope of the authority which he holds the agent out as having, or knowingly permits him to assume, the principal is made responsible, because to permit him to dispute the authority of the agent in such case would be to enable him to commit a fraud upon innocent persons.” 1 Am. & Eng. Enc. Law (2d Ed.) 990, and authorities there cited; 4 Thomp. Corp. §§ 4881, 4993,5250.