Thomas Wilson & Co. v. Smith

Whenever, .by express agreement of the parties, a sub-agent is to be employed by an agent to receive money1 for the principal; or where an authority to do so may fairly be-implied from the usual course of trade, or the nature of the transaction; the principal may treat the sub-agent ás his agent, and when he has received the money, may recover it ,in an action for money had and received. If, in such ease, the sub-agent has made.no advances and given no new credit to the agent on account of the remittance of the bill,'the sub-agent cannot •' protect himself against such an action by passing the amount of the bill to the general credit of the' agent, although the agent may be his debtor.

. This case came up on a certificate of division in opinion between the judges of the Circuit Court of the United, States for the district ' of Georgia.- The record being very short, it will be inserted entire.-- “ This was an action of assumpsit brought, in this court by the plaintiffs, to recover from the defendant the sqm of eight hundred dollars and interest, being the amount of a draft or bill of exchange drawn by one Henry B. Holcombe, Of Augusta, in .the state of ■Georgia, upon one Charles F. Mills, of Savannah, in said state, and , accepted by him, and paid to the defendant. The declaration contained two counts. The first'Was for-money collec ted and received by the defendant, to and for the use of the plaintiffs, upon the particular Bill, of exchange set' out and ^escribed in the declaration; the second count was generally for money had and received. The plea of non-assumpsit was pleaded by the defendant in bar of the action, £it being -proved that the draft or bill of exchange' upon which the money was collected and received by the defendant was the property of the plaintiffsthat it had been by them placed in fhé hands of- their agent, David W. St. John,- at Augusta^ Georgia, for collection, and by him, ■ St. John, forwarded to the defendant, St. John’s agent, at Savannah, Georgia, for acceptance and collection; that it was accepted and paid to the defendant, by whom the proceeds were received and credited to the account of St.; John, frojtn whom the defendant received the draft or bill for collection, and who was indebted to the defendant at the time. That at the time the- said bill was so paid to the defendant, and by him credited to the. account of St. .John, he, St. John, had failed in business, and had departed this life; that he failed, and had not recovered his affairs at the. time of his death, and was insolvent; that the credit for the amount of1 the bill, carried by the defendant to St. John’s account, was made in payment of a previously, existing debt due by St. John to the defendant, no new transaction having arisen between the defendant and St. John after the payment of the said bill to the defendant; ‘ that to secure the paymént of his debt to the defendant, St. John had trans- ■ ferred to the defendant three hundred shares of the capital stock of the Augusta Insurance and Banking Company, upon which $100 per share had been paid; that the defendant appeared satisfied with this ■security, and that St. John would then have given additional security had the' defendan required it.’ That the draft or bill of exchange was made payable to the order of Henry B. Holcombe, the drawer, and by him endorsed in blank, and endorsed by St. John to H. Smith, Esq., (the defendant,) or order. That when the'' draft was sent to the defendant for collection he was not apprized to whom it belonged, nor were any. instructions or directions given to him as to the disposition of the money when collected. “ The following point was presented, during the progress of the trial for the opinion of the judges,- on which the judges were opposed in opinion, viz.: Whether there was such privity of contract between the plaintiffs and defendant, either express or implied, as would' enable the plaintiffs to maintain the action for money had and received. ■ “Which said point, upon which the disagreement has happened, is stated above, under the direction of the judges of the said court, at the request of the counsel for the parties in the cause, and ordered to be certified into the Supreme Court of the United States at the next session, pursuant to the act of Congress in such case made and provided.” Berrien. The question is, whether there is such a privity, of contract, between the plaintiff and defendant, either express or implied, as will enable the plaintiff to sustain the action for money had and received. It is not necessary that the relations of contract should exist between the parties. There are many cases in which the defendant, has received the money óf plaintiff, under circumstances which would render'him liable ex delicto, in which plaintiff is permitted to waive the tort, and •sue in thié action. 1 Leigh’s N. P. 45, 46. Wherever defendant has received money, the property of. plaintiffs, which defendant is bound ex aguo et bono to refund, it may be recovered in this action. Moses v. McFarlane, 2 Burr. 1012. The true question is the right of plaihtiff to receive, or of defendant to retain the money. In-the eye of the law, there is always such privity of contract as is necessary to sustain this action,- between a person who holds the money of another, which in equity and good conscience he is bound to refund, and the person whose money is thus withheld. Camp v. Tompkins, 9 Comí. Rep. 553. Again. "Where one has received the money of another, and has not the right to retain it, the law will imply privity of contract. Mason v. Waite, 17 Mass. Rep. 560-;. Hall v. Marston, 17 Mass. Rep. 575. Two propositions may be.laid down. . 1. On the facts stated, Smith, defendant, was the agent of plaintiffs, bound to account to them, on notice of their claim; and, therefore, the amount collected by him was money -had and received to their use. 2. That his ignorance of the real owner of the bill cannot affect the right of plaintiffs to Recover in this action, on notice and proof of their title, so long as defendant stands .in his original situation, and until there has been a change of circumstances, by his having paid over the money to his immediate employer, or done something equivalent to it. •1^ Smith, the defendant, was .the agent of plaintiffs. The case states,— 1st. That the bill, was the property of plaintiffs. . 2d. That it was collected by defendant, who received it from St. John, the agent of plaintiffs. - .On this state of facts, did the necessary privity exist ? or, in other words, had defendant the right- to retain after- notice of plaintiffs’ claim.? It is .objected that delegated power cannot be delegated without authority for that, -purpose,' because it implies trust and confidence, which cannot be assigned to a stranger.' That the sub-agent has no claim upon the principal, fiar commissions, advances, &c., therefore is under no responsibility to him, his sole remedy being against his immediate employer, and' therefore that his sole responsibility is to him. For qualifications, of the rule, see Story on Agency,’ sect. 14, p. 16. Authority implied.. Licensed auctioneer. — 4; When indispensable by the laws to accomplish the end. Ship-broker. — 2.. Ordinary usage of trade. - Factor. — 3. Where.uhderstóod.by parties as the mode in which .the'-business woiild or might be done. • The authority exclusively personal, unless from express provision, 'legal necessity, usage of trade, or fair presumptions growing out of .. particular transaction, a broader power .was intended to-be conferred. Story on Agency, seet. 14, p, 17. Test the present case, by this rule, thus qualified.’ A foreign- house, holding a bill drawn on a citizen of Savannah, in Georgia, Has a. correspondent át Augusta, in the same state, to whom he remits it for collection, and by whom it is sent to his correspondent in Savannah, where'the drawee resides. Is othis not conformable to the usual course of such transactions ? . Could plaintiffs have expected that St. John, abandoning his own place of business, should have repaired to the distant residence of the drawee, to present this bill personally ? Would not the remit- ■ tance of it there, to his correspondent, be “understood ‘by the parties, to "be the mode in which this particular business would or might be. doné ?” Was St. John bound- to do more than select a competent and trust-worthy agent to receive the contents of the bill ? If with the-bill he. had stated plaintiffs’ interest, would any have doubted that defendant would’ have been the agent of plaintiffs in r this matter ? and does this not settle the right to delegate his autho-' rity? What effect, withholding that information .would have, will - be considered hereafter. It- suffices at present, in order to sustain the first position, to show, that this bill, was dealt-with according to the usual mode of transacting such business. That in appointing a sub-agérit, St. John did no more than plaintiffs designed and intended. If so, defendant was agent of plaintiffs, by an authorized substitution '; -an authority, implied from the circumstances, and as strong'as.if expressly given; and, as their agent, is, therefore, directly accountable to them for the money received tinder that agency, as money had and received.to their use. • ’ 2. Defendant’s ignorance of the real , owner of the bill, and St. John’s-prior indebtedness to him, cannot affect plaintiffs’ right to recover, unless, before notice of their claim, defendant had made advances to St. John, or delayed his prior claim against him,"rely, ing for reimbursement or payment on this fund. St. John, in remitting the bill, did not . state that plaintiffs were owners of it. He was indebted to defendant, who, on receiving its contents," credited him in account, and now claims to-retain the . money of plaintiffs, in payment of the debt due to him by St. John. The defendant’s having passed the money, in account, cannot affect this question;/Buffer v. Harrison, Gowp. Rep. 665; Coxe.r. Prentice, 3 Maulé & Selw. 348. Lord Elleoborough. says,;“ I take it that an agent who receives money for. his principal, is liable as a principal so long as he stands in' his original situation, and until there has been a change of circumstances,” &c., &c. This money is, therefore, to be considered as iñ the hands of defendant, without any disposition having been made of it. Defendant’s want of knowledge that the money belonged to thé plaintiffs, cannot affect their right after notice and proof of their title. De Válengin’e Adrá’r v. Duffy, 14 Peters, 282,290. This was a case where money was réceived -by an. administrator, as property'belonging to his intestate, though it belonged in fact to', anóthe'r. The court said,- that “the want of knowledge, or the possession of knowledge, on the part of the administrator, as to the rights or claims of other persons, on the money thus received, cannot alter the'rights of the party to whom it is ultimately due.” Something more is necessary to enable a sub-agent to retain for his general balance against, his immediate- employer, than his mére want of knowledge of the real principal. Story on Agency, sects. •389, 390, pp. 481,483, and the authorities there cited. The- lien exists for advances made, and (as it seems)'for his.general balance. But why ? The reason is given. It is the presumption that the advances were made, or the demand delayed, relying, on the credit of the fund allowed to remain in his hands. No advances were made in this case. Defendant did not rely on this fund for the pay-, ment of his demand. He did not delay it. That demand was prior, and had been secured to the satisfaction of defendant by a pledge of bank stock. When St. Johri failed,, and the security became (as is to be presumed) inadequate, then, for the first time, defendant looked to this fund, but he had undertaken the agency without any such reliance. The presumption is, therefore, negatived by the facts of the case; The Bank Metrop. v. New. England,Bank, 1 How. Rep. 234. This will' probably be'relied on. The court held: 1. That the paper in question continued the property of the New England Bank, notwithstanding the endorsement, these having been made to enable the agent to collect. 2. That a long course of dealing and repeated settlements in conformity to it, in which the parties were mutually credited with the proceeds of bills remitted by them, balances being suffered to remain, until -they were reduced by the proceeds of bills and notes deposited, made this case the same in principle as if money had been advanced on the- paper deposited. The court said there was no difference in principles,' between an advance of money, and a balance suffered to remain upon the faith •of these mutual dealings. -The case under consideration is unaecompanied-by any of these .circumstances. Here there was no advance made,'or.demand delayed in reliance upon this fund ;. or any course of dealing and usage founded upon it, by which balances were suffered to remain undrawn for, looking to reimbursement from.'the proceeds' of bills or notes to be collected, which would be deemed equivalent, as in that case, to advances actually made. The bill was drawn by Holcombe on Mills, accepted by Mills, and endorsed by Holcombe, and sent to Augusta- for collection. All that was necessary was for St. John to endorse it in blank, but he endorsed it specially to Smith. In this state of the. case, whose agent was Smith? to whom would he have written to give information of the'payment or non-payment of the bill? Certainly to St. John, who would have compelled him to pay over thé money. A defence by Smith, that he was not the proper person tó be .paid, would not have been listened to. A sub-agent cari be created, and •in this case. Smith must have been the agent of St. John. The question of agency must settle that of privity of contract. Story on Agency, 395 to 400, where the subject is discussed. An agent is responsible only to his employer. Paley’s Agency, 48; 1 Livermore on Agency, 64, 65, 66.; 6 Taunt. 148; 1 Vesey, jun., 291, 292; where a son was employed as sub-agent by his father, who was agent, and.it was held that the son could not be an. accounting party to the owner of the mine,, because there was no. pri-vity. 14East,582; 1 Crompton & Jervis,-83; 3 Bam. & Ad. 354; 4 Ibid. 375; 2 Campbell, 123. It is said, by the other side, that usage must govern. This is admitted. But what usage or-facts does the record shpw? Not that Smith was a factor or broker, but only that he was a creditor of St. John. .The court cannot presume usage, and there..is nothing in the record to show it.. . What are the respective equities of the parties? The action for money had arid received is analogous to. a bill in equity. Suppose that the bill had belonged to St. John, ■ pould he have claimed to. receive the. amount of it whilst, he was a debtor ? The creditor had -a right to apply the fund to pay himself.. It is admitted .that if Smith had forborne to press St. John.for the amount of this debt, he would have a right, to retain the amount of this bill. But the plaintiff, by his acts, has been ..the. cause of lulling Smith into'a false security. Story, 483, 484. Where a party-may be supposed' to rely on a-particular security, it is enough.' -Case .of New England Bank, 1 How. 234.1 The death of St. John does not defeat the lieu. Story' on Agency, -378 to- 388, authorities collected. It is a general rule, that where a factor holds property as his own, foe real owner cannot come in and ‘claim, where third persons are concerned, having claims upon the agent. 5 Taunt. 56; 2 Bell’s Comm. sect. 807 to 812; Chitty’s Commercial Law, 544,545,646; 2 Bell’s Comm. 789 to 806.. Bei'rien, in reply; The controversy here is not about general principles, but their • application. The cases in Taunton and 6 -Vesey establish, that between a sub-agent and principal'there is no .privity. I do not deny - the existence of the general rule' which these cases support, but say. that there are exceptions-to the ride, of which this is one. (Mr. Ber-rien here examined the cases.) ’ One of the exceptions is, where it is manifest that some other person would be employed. As-to the equitiesiof the parties.- Shall the defendant retain money which confessedly belongs to the plaintiff,’ when ,the position of the defendant has undergone no change in consequence of getting-this money?. Tf his circumstances had been changed upon.this account, I have conceded that he could retain it. Smith could not have'befen lulled into a false security, because the statement affirms that no new transaction happened. St. John, therefore, could not have received a fresh advance.' The case of the New England Bank was decided upon the ground that there had been “mutual and extensive dealingsthat they “ did not drawahd that these things were like an “ actual advance.” Strike these facts out of the case, and it would not have been decided as it was, but would then have resembled ours. Here is an insulated transaction, .without any evidence of advance or forbearance;