Brown v. Arrott , 6 Watts & Serg. 402 ( 1843 )

The opinion of the Court was delivered by

Kennedy, J.

The defendant having been the factor of the plaintiff, the latter seeks to charge the former in this action, among other things, with certain losses arising from sales made by the defendant or his sub-agent, of goods belonging to the plaintiff, which losses, as the plaintiff alleges, have accrued from the negligence and want of proper care on the part of the defendant. The counsel of the defendant, aware no doubt that it was the duty of their client, as the agent of the plaintiff, to show that he had kept him apprised of his doings, and that he had given him notice within a reasonable time of all such acts and circumstances as were important to his interest, lest by his neglect to do so h^should be held liable to indemnify the plaintiff, offered to read in evidence the deposition of David Arrott, wherein, among other things, he testifies, “ that the defendant gave this deponent particular instructions to see the plaintiff, and to inform him of the state of his consignment particularly, and the sales which had been made at Boston.” And again, “ that he visited the plaintiff at Dundee, and made him particularly acquainted with the state of his consignment and of the sales made at Boston;” but in his cross-examination he says, “ when the deponent was at Dundee, he had no copy of account sales from Young, (meaning the defendant’s sub-agent who made the sales at Boston), and of course showed none to the plaintiff.” The first two recited clauses of this deposition were objected to as not being admissible in evidence, but the court thinking otherwise, overruled the objection, to which the counsel for the plaintiff took a bill of exception, which is the ground of the first error assigned.

It certainly was the duty of the defendant at all times to keep the plaintiff, his principal, apprised of his doings, and to give him notice within a reasonable time of all such acts and circumstances as were important to his interest; and if by his neglect to do this the plaintiff has suffered a loss, he is entitled to be indemnified by the defendant. From the evidence in the case, it appears that the defendant, in the latter end of September 1822, forwarded a portion of the plaintiff’s goods consigned to him for sale, to James Young, of Boston, with instructions to sell the same there. That under the authority of the defendant, Young sold of the goods thus forwarded, in the following months of October and November, to the amount of about $720 nett, on a credit of four months, which became payable in the months of February and March then next following. And again in the months of March, April and May 1823, Young sold the residue of the goods of the plaintiff for the additional sum of $1167.70 nett, making in all, after defraying the charges and expenses attending the sales, the sum total of $1887.70. David Arrott, the witness, as he states in his deposition, visited the plaintiff at Dundee, in Scotland, in the month of August or September 1823, and although sales had been made in the months of October and November 1822, of nearly one-half of the goods forwarded to Young at Boston, a good part of a year before that, and the monies arising therefrom received by Young at least as early as February and March 1823, it does not appear that any attempt was ever made by the defendant to advise or notify the plaintiff of the sales at Boston, or the receipt of the monies thereon, in any form or manner whatever, until the time that David Arrott says he visited the plaintiff in August or September of the latter year. The -question then presents itself, if the defendant had not been in default and guilty of neglecting his duty before that, by not having’communicated to the plaintiff the account of the sales and monies received thereon at Boston, by Young, was the communication testified to have been made in regard thereto by David Arrott, such a statement and notice of what had been done and transacted relative to the sales at Boston, and the monies received thereon, as the defendant was bound to give in order to acquit himself from the imputation of neglect of duty as the plaintiff's agent, which otherwise might be brought against him ? We are of the opinion it was not. We think that it ought to have been in writing, and that it ought to have contained an account of the various sales made at different times, with their respective dates and the several sums of money received thereon by the sub-agent, as far as known to the defendant, or he had it in his power by reasonable diligence to inform himself. But this was not done even verbally, as would appear from the narrative of the witness; nor is it credible that he could have given the plaintiff a verbal account of the whole transaction in detail, as he had no written statement of it himself at Dundee, when he saw the plaintiff. We, therefore, consider that the court below erred in admitting those parts of the deposition of David Arrott to be read in evidence to the jury, which were objected to by the counsel for the plaintiff.

The second and third errors will be considered together, as they relate to the same point. They are exceptions to the opinion of the court in admitting the testimony of Samuel Comly, Joseph Cabot, Samuel Snelling and Benjamin W. Richards, which was offered and given for the purpose of showing in effect that the defendant was not to be regarded as being guilty of negligence in suffering Young, his sub-agent at Boston, to receive the monies received by him on the sales made by him of certain parts of the goods before the whole were sold, and to use the same for the space of three or four months without even requiring him to pay over or forward the monies so received, and without taking any steps to obtain payment thereof until Young became insolvent and unable to pay, because, as the counsel for the defendant alleged and offered to prove by the witness just named, it was not usual for factors or agents to transmit to their principals or employers monies received by them, as long as any part of the whole consignment remained unsold, or if sold, as long as any portion of the monies to be paid thereon remained unpaid, when the honesty or ability of the agents or sub-agents were not questionable, and that such delay on the part of the Jatter to transmit the money actually received and coming to the employers, furnished no ground to suspect or believe that the money might be lost if suffered to remain until the sale of the whole quantity of the goods forwarded should be effected and the monies received thereon. Where the owner of the goods or the principal is advised from time to time by his agent of the sales as they are made, and again of the receipt of the monies as they are paid thereon, and according to the understanding that exists between them, arising either from a special agreement or a previous course of dealing between them, or the established usage or custom, if there be any, regulating the same, the principal or late owner of the goods is to call on his agent or factor and receive his money, or to draw upon him for it, the latter may retain it until it is demanded; but where the factor or ■agent is bound either by the agreement or previous course of dealing between them, or the usage of trade in regard thereto, to forward the money to his principal or employer, it is clearly his duty to do so, as he shall receive it, though it be only a part of what he expects, by the earliest opportunity, and no practice to the contrary will either justify or excuse his retaining it beyond such time, unless the sum shall be so small as not to justify the expense of forwarding it. Every principle of honesty and fair dealing would seem to require this of .the factor or agent; and to allow him to indulge in doing otherwise, would inevitably, in many instances, prevent the principal or the employer from receiving his money forever: it would be placing the agent in a situation which might tempt him to use the money for his own purposes to the prejudice of his principal, which would be morally wrong and generally attended with injurious consequences to his principal. Besides, it is perfectly clear that if the agent uses the money, his interest is thereby immediately placed in direct opposition to that of his principal or employer, as to making sale of the residue of the goods; for as long as he has either occasion for the money received by him, or can use it to advantage, it becomes his interest to delay or put off the sale of the residue; or if he does sell, to sell on the longest possible credit, without regard to the interest of his employer or the owner of the goods, so that he may have the use of the money received by him during the interim. But it is well settled that no practice shall be sanctioned or in any way encouraged in an agent, that tends to place his own interest in direct opposition to the duty which he owes to his principal, because the temptation, perhaps, in many cases, would be too strong for resistance by men of flexible morals, and might ultimately lead to gross misconduct if not crime. The prohibition in this resp'ect is positive, and has been found not only to be a salutary check against temptation and the practice of fraud, but to' accord with sound policy and the purest principles of Christianity. And, indeed, the present case furnishes a striking illustration of the injurious consequences that seem too naturally to arise from such a practice as the witnesses were called to prove and spoke of in their testimony. Young, though a man of unblemished integrity and good credit in the estimation of'his acquaintances, was tempted, under the indulgence of this practice, which the witnesses say is usually allowed to agents, to use the money received by him as agent for his own purpose; and where is it now 1 Lost forever. But had he forwarded it to the defendant as he received it, the plaintiff most probably would have received it without being compelled to sue for it. And here it may not be improper to consider the relation in which Young stood to the defendant. Young was his agent, as he was employed by him to act in his behalf without the knowledge or direction of the plaintiff. Young, therefore, became accountable to the defendant and not to the plaintiff, and bound to inform the defendant of all that he did under his commission within a reasonable time; and the defendant again, within the like time, was bound not only to acquaint the plaintiff with the same, but bound likewise not to suffer monies received by Young under his agency, to remain longer in his hands than was reasonable for its being forwarded or demanded, and if not forwarded or paid on demand being so made, then to use, without.any unnecessary de-. lay, the necessary means for enforcing payment. See Cartwright v. Hateley, (1 Vez. Jr. 292); Pinto v. Santos, (5 Taunt. 447); Stephens v. Badcock, (3 Barn. & Adol. 354). Seeing then that it was the duty of the defendant to have called on Young for payment of the monies received by him as often as he received the same, within a reasonable time thereafter, in the event of his failing to pay within such time of his own accofd, and the money has been lost through the neglect of the defendant to call upon Young in the manner just mentioned for payment of it, the loss is fairly imputable to a failure on the part of the. defendant to perform a duty which he was bound to the' plaintiff to perform, and the plaintiff therefore entitled to claim indemnity from him. Under this view of this part of the case, we are satisfied that the testimony mentioned in the second and third errors ought not to have been received, and that the court erred in admitting it.

The fourth error is an exception to the charge given by the court to the jury. The first matter is the instruction given to the jury in relation to the loss of the money received by Young for the goods of the plaintiff sold by him, which arose from his appropriating the same to his own use, and becoming unable to make it good. It may be proper to premise that when the cause comes to be tried again, testimony mentioned in the second and third errors will be excluded, and, of course, what was said by the court to the jury in regard to it will and cannot be repeated, which will remove, in part, what is here excepted to. Before, however, we proceed to consider the instruction given to the jury in regard to the defendant’s liability to make good this loss to the plaintiff, it will be proper to notice some of the other evidence given, which has a bearing on this part of the case, besides what has been already noticed in the discussion of the second and third errors. By a letter of the 22d October 1822, from Young, the defendant was advised of Young’s having sold two bales of the plaintiff’s goods, but without stating whether for cash or credit.. By another letter, however, of the 13th November 1822, Young informed him that he had sold them on a credit of four months, and that he had made another attempt to sell the linens at auction, but the prices being unfavourable, he stopped the sale. He, to bé sui’e, does not say expressly that any of the linens were then sold, but such fact might, perhaps, be inferred without going too far, or, if not inferred, it was sufficiently ambiguous to have put the defendant on inquiry in regard to it. And by his account of sales furnished afterwards in July 1823, it appears that he had sold on the 10th November, three days before his letter of the 13th of that month, $498.22 worth, some portion of which, most probably, was Lumgair’s goods, as in his account he seems to blend the goods of the latter with those of the plaintiff It therefore appears that the defendant was apprised in October and November 1822 of Young’s having made sales of the plaintiff’s goods, the prices of which were to become payable in the months of February and March following ; yet he neglects to call on Young for the money, as it appears, or to mention a remittance thereof until the 22d May 1823, some two and a half or three months nearly after it had become payable, when he writes to Young that he had been expecting an account of the sales of the linens as far as they had been made, accompanied with a remittance for the same. But the defendant, in his letter dated the 28th of the same month, only six days afterwards, writes to Young that he need not make a partial remittance, but to push the sales to a close, and then remit the whole at once. And what renders the conduct of the defendant the more extraordinary and the less excusable in having delayed a demand of the remittance of the money received so long, is the circumstance disclosed by the letter of Young to the defendant of the 6th March 1823, wherein he acknowledges his inability to pay a note given by himself and one Thompson to the defendant, for money lent, which was about to become payable in a few days, and begs the defendant to take it out of bank, where it had been deposited. It is difficult to imagine why this letter of the 6th of March did not wake the defendant up to a state of vigilance, and induce him to insist upon the immediate payment of all the monies received by Young as his agent, and if not paid instanter, to have gone further, and taken the goods still remaining unsold out of his hands, unless it was that he wished to have his own debt for the money lent paid first. But the plain consequence of this not having been done by the defendant, is, that the money then received, as also all the goods remaining unsold, have bfeen lost to the plaintiff, so far as Young is concerned. And why should not the defendant indemnify the plaintiff for the whole amount óf his goods sold by Young, seeing it was his duty to have proceeded as has just been suggested? And what rendered it still more imperatively the duty of the defendant to have done so, was, that the plaintiff at that time was pressing him to remit him alt the monies he could obtain. The evidence, as it appears to me, shows not only an entire want of vigilance on the part of the defendant to secure the payment of the money received by Young, and the goods in his hands from being lost to the plaintiff, but a degree of negligence also that is unaccountable, as well as culpable, in not even advising the plaintiff by writing that he had forwarded any portion of his goods to Boston and placed them in the hands of Young, there to be sold for his benefit, until some nineteen or .twenty months afterwards, when Young had sold the goods and appropriated the proceeds to his own use something like eleven months' previously, and become insolvent at least nine months. Thus- all information was withheld by the defendant from the plaintiff in regard to these goods, so that the latter had it at no time in his power to give any advice to the defendant as to what he had better do in order to secure the goods or the monies arising therefrom in the hands of Young from being lost. That it was the duty of the defendant to have advised the plaintiff of his having sent the goods in question to Boston, within a reasonable 'time at least thereafter, cannot be denied, as also to have notified him from time to time of the sales made thereof and the monies received thereon by Young, so that the plaintiff might have been enabled to judge for himself, and to have directed the defendant what to do under the existing circumstances as they occurred, in order to guard against any loss or detriment that might otherwise occur. The defendant, however, having neglected everything of the sort, is it not reasonable and just that he should be held responsible for any loss that has happened, which possibly might have been avoided had he only performed his duty to the plaintiff as his agent? It appears to be contrary to every principle of natural justice, as well as sound policy, to say that he ought or would not be answerable for such loss. Indeed, it seems to me, that- it would not be going too far to hold, under the circumstances of this case, that the defendant by his conduct had impliedly agreed to be answerable to the plaintiff for any loss that should arise from the default of Young. But the evidence, besides showing most incontestably the neglect of the defendant to perform his duty, tends also strongly to prove that if he had used ordinary diligence in the performance of it, the loss which has arisen immediately from the .infidelity and insolvency of Young, in all probability, would not have accrued. And if any doubt existed whether the actual loss sustained by the plaintiff was equal to the value or price of the goods or not, it being proven that a breach of duty had been committed on the part of the defendant, tending to produce the loss, it lay on him to remove the doubt by giving testimony showing what the amount of the actual loss was. The court below, however, seem, as it appears to me, to have,instructed the jury differently, by holding out the idea to them that it rested with the plaintiff to show the amount of the actual loss. If the court intended to impress the jury with this notion, we are of opinion that it erred. For it is evident, if such a rule were to be applied to the plaintiff in cases like the present, he would go without redress, in many instances, where his agent by his negligence has caused a loss equal to the value of the property committed to his care. While the property is in the possession and care of the agent, he must be supposed to be cognizant of all that happened to it, and of the actual loss which his want of due care and diligence may have occasioned to his principal, whereas the principal may well be presumed to know but little, if anything about it, and hence it is nothing more than reasonable that the burthen of proof, as to the amount of the actual loss sustained by the plaintiff, should lie upon the defendant in such cases. This accords with what is advanced by Mr Justice Rogers in Beckman v. Shouse, (5 Rawle 189, 190); and by Chief Justice Savage in Beardslee v. Richardson, (11 Wend. 25). But in this case the evidence established the delinquency of Young beyond all question, in his converting the monies arising from the sale of the plaintiff’s goods to his own use; and likewise a total neglect of duty, on the part of the defendant, in not demanding the monies as received by Young, and in not taking the goods then unsold out of his possession, when he discovered that he was unable to meet his pecuniary engagements, and especially if Young had failed, on demand, to pay the money immediately which he had previously received. The court, therefore, ought to have told the jury, in plain terms, that the defendant had rendered himself liable to the plaintiff for the full value of the goods placed in the hands of Young, or at least for the amount of money produced by the sales made of them. This direction would have been in conformity, also to the opinion of this court as expressed by the chief justice on a former writ of error in this case. 6 Whart. 24. It does not, however, appear to have been given, but it seems to have been submitted by the court to the jury to decide the question of damages, without laying down any rule as a measure for them to go by, other than in general terms that they ought to be equal to the actual loss.

The only remaining matter intended to be noticed is the Fol-well debt, amounting to $283.50, created by a sale made by the defendant of a portion of the plaintiff’s goods to John Folwell in the latter end of June 1822, on a credit of six months. To secure the payment of this' debt the defendant took a note of Folwell, payable to himself, including in it a debt of $138.84 owing to himself on his own account. It is not deemed material to consider whether the credit of Folwell was such as to make it prudent to sell to him on a credit of six months. One witness says it was pretty good; that it was such as induced the witness to sell to him, by which he'lost; and another witness testifies, that his standing was equal to any of the jobbing or piece-men — was about the first in the market; bqt whether it was.usual to sell to such men on a credit of six months, does not appear. What the credit of Fol-well was among business men at the time the defendant sold to him, is considered unimportant’, because we are of opinion that he made the debt his own by blending if with his own debt, and afterwards releasing Folwell from the payment of- it as his own, without any authority from the plaintiff to do so. Having thus made the debt his own, he became and remains liable to the plaintiff for payment of the amount of it with interest thereon. This case may be considered not unlike the case of an agent (only stronger, as the defendant here released the debt) who improperly, and contrary to his known duty or the habits of business, deposits the money of his principal in his own name, with a banker who fails; the agent, in such case, becomes responsible to his principal for the money lost by the failure. Massey v. Banner, (1 Jac. & Walk. 245-8); 4 Madd. 413; Story on Agency 188, pl. 200. Because, as was said in Wren v. Kirton, (11 Vez. 382), he cannot so deal with his principal’s money as that if the banker’s solvency continue he may be in a condition to. treat it as his own, and if insolvency happen, he may escape by considering it as belonging to his principal. Paley on Agency 45, (2d Amer. edit. 1822). This reasoning is directly applicable to the defendant in this case, who, having taken the note in his own name of Folwell, including money coming to himself on his own account, had it in his power, as long as Folwell continued solvent, to treat the whole of it as his own ; but Folwell having become insolvent without paying the note, the defendant wishes to escape from the loss by showing that the note was taken to secure money coming to the plaintiff, as well as himself. The authority cited, however, would seem to be opposed to his doing so. But without deciding the point on this ground alone, we think that the additional circumstance of the defendant’s having released Folwell from the debt upon a composition made with him, without any authority from the plaintiff, renders him liable to the plaintiff for the amount of it.

Judgment reversed, and a venire facias de novo awarded.