Ring Furniture Co. v. Bussell , 171 N.C. 474 ( 1916 )

"Waleer, J.,

after stating the case: It may be conceded that an outgoing member of a firm should take his name out with him, for if he leaves it behind he will be considered as still holding himself out as a partner, whatever may be his real relation to the firm, unless he gives notice of his withdrawal to those who dealt with the firm or were its customers while he was-a partner. Straus v. Sparrow, 148 N. C., 309; George on Partnership, 261 and 407.

The question for our consideration is whether the notice to A. H. Holland, the travelingj-salesman, .wm.sufficient in law to fix the plaintiff" with notice of the retirement of the defendant T. T. Frazier from The firm of which he hadjbeen a member^ and which was succeeded by the new firm,. composed, of .different members^ but which continued to conduct a like kind of business under the same name. This depends again upon whether it was within the scope of Holland’s agency to receive the notice and his duty to communicate it to the plaintiff, either directly or indirectly through the Forsyth Furniture Company.

Mechem on Agency, see. 721, lays down the following rule:

“The law imputes to the principal and charges him with all notice or knowledge relating to the subject-matter of the agency which the agent requires or obtains while acting as such agent and within the scope of his authority or which he may previously have acquired, and which he then had in mind, or which he had acquired so recently as to reasonably warrant the assumption that he still retained it. Provided, however, that such notice or knowledge will not be imputed (1) where it is such as it is the agent’s duty not to disclose, and (2) where the agent’s relation to the subject-matter or his previous conduct render it certain that he will not disclose it, and (3) where the person claiming the benefit of the notice, or those whom he represents, colluded with the agent to cheat or defraud the principal.”

This statement of the law was affirmed in Jenkins v. Renfrow, 151 N. C., 323.

It will be convenient to determine, in the beginning, whether Holland was such an agent, being what is known as a “commercial traveler” and taking orders for the sale of goods, without regard to his special relation to the Forsyth Chair Company and the plaintiff.

In Cox v. Pearce, 112 N. Y., 637 (s. c., 3 L. R. A., 563), cited and approved by this Court in Straus v. Sparrow, supra, four propositions were decided:

1. The failure of an agent to communicate to his principal information acquired by him in the course and within the scope of his agency is a breach of duty to his principal; but as notice to the principal it has the same effect as to third persons as though his duty had been faithfully performed.

2. If a person gives notice of bis withdrawal from a firm to an agent with authority to receive orders for an article, when the latter seeks from him, as a supposed partner, an order from the firm for such article, it is of no consequence, so far as the effect of the notice is concerned, that on a subsequent sale to a new firm of the same name the agent had forgotten the notice.

3. Notice to a party, actual or constructive, in a particular transaction, of a fact which exempts another from liability in that transaction is notice in all subsequent transactions of the same character between the same parties.

4. Notice to a special representative for procuring orders for coal from a firm who acts exclusively in the interest of certain dealers, and who has previously procured orders from the firm, on soliciting another order, that one of the former members of the firm had withdrawn, constitutes notice to the dealers whom he represents.

The case of Ach v. Barnes, 53 S. W. (Ky.), 293, held that notice to plaintiff’s traveling salesman (at the time he sold the goods) that defendant had withdrawn from a firm to which the salesman had sold the goods for the plaintiff was notice to the plaintiff, so as to relieve the defendant from liability for the price of the goods sold. The Court there said, at page 294: “When an ostensible partner retires from the firm, he must give notice of his retirement to those who have had dealings with the firm in order to avoid future responsibility, or must show aetua] knowledge on their part, or adequate means of knowledge that the firm no longer exists; but it is not important in what manner the notice is given. See Mitchum v. Bank, 9 Dana, 166; Gaar v. Huggins, 12 Bush., 261; Pars. on Partn., p. 412, and Collyer Partn., p. 1059. And notice to the agent in reference to or in connection with any business in which the agent is engaged by authority of the principal, and where the information is so important a fact in the transaction as to make it the duty of the agent to communicate it to the principal, is, in contemplation of law, notice to the principal, upon the theory that it is the agent’s duty to communicate to his principal knowledge which he has respecting any business in which he is engaged for the principal; and the presumption is that he will perform his duty.” And again: “We are of the opinion that if information of the dissolution of the partnership was actually communicated to the salesman of appellants at the time of or before the sale of the goods, it is, in contemplation of law, a sufficient notice thereof to appellants.” See, also, Straus v. Sparrow, supra; Jenkins v. Renfrow, supra, and Cowan v. Roberts, 133 N. C., 629, where it was said:’ “Of course, if any salesman had been notified of the dissolution of the firm, and he had afterwards sold goods to Roberts, Redmond (tbe partner wbo bad retired) would not bave been liable.”

Tbe rule wbicb imputes to tbe principal tbe knowledge possessed by tbe agent, and tbe extent o£ it, applies, as bas been well said, only to cases where tbe knowledge is possessed by an agent witbin tbe scope of whose authority tbe subject-matter lies; in other words, the knowledge or notice must come to an agent wbo bas authority to deal in reference to those matters which the knowledge or notice affects. Tbe facts of wbicb the agent had notice must be within tbe scope of tbe agency, so that it becomes his duty to act upon them or communicate them to bis principal. As it is tbe rule that whether the principal is bound by contracts entered into by tbe agent depends upon tbe nature and extent of tbe agency, so does tbe effect upon tbe principal of notice to tbe agent depend upon tbe same conditions. Hence, in order to determine whether tbe knowledge of tbe agent should be imputed to tbe principal, it becomes of primary importance to ascertain tbe exact scope and extent of tbe agency. Trentor v. Pothin, 46 Minn., 298 (24 Am. St. Rep., 225), op. by Mitchell, J.

It bas been held by this Court that whether one is entitled to represent another as bis agent, and thus to bind tbe principal by bis conduct, is to be determined not by tbe descriptive name employed, but by the nature of the business and the extent of tbe authority given and exercised, and that such agent is not any subordinate employee without discretion or power to act in tbe particular matter, but must be one regularly employed, having some charge or measure of control over tbe business intrusted to him, or of some part of it, and of sufficient character and rank to afford reasonable assurance that be will communicate tbe fact in question to bis employer. Whitehurst v. Kerr, 153 N. C., 76, 80.

If an agent acquires knowledge of a fact wbicb it is important that bis principal should know in reference to a particular matter, and while engaged in tbe transaction to wbicb tbe fact related, it would seem to be bis duty to make it known, so that tbe principal can act intelligently and advisedly in regard to it; for otherwise be might be seriously prejudiced by tbe agent’s silence.

It would follow that if Holland was acting as salesman for tbe plaintiff when be sold tbe last bill of goods to tbe new firm, trading as Southern Furniture Company, be was under the duty to apprise it of what had been said to him by Bussell as to the withdrawal of defendant from the firm. We do not see why tbe fact that plaintiff bad a rating book and passed Upon all orders should alter tbe case. In tbe first place, this was not known to tbe Southern Furniture Company, and, for all that appeared to this firm at the time, Holland rated the plaintiff’s customers with whom he dealt, and he was, therefore, the one, as Bussell evidently thought, to be informed of the change in the firm, so that he might communicate the fact to his principal. If the plaintiff had a rating list and passed upon the orders, it does not appear to have done so in this particular instance, and was actually misled by the failure of Holland to perform his duty, showing by practical illustration the fairness and reasonableness of the rule.

The next question is whether Holland’s special connection with the Forsyth Chair Company and his consequent relation to the plaintiff prevents the application of the usual rule to this case. We have already stated that, so far as appeared to the Southern Furniture Company, Holland represented the plaintiff, or, at least, there is evidence tending to show this as a fact. He had photographs of plaintiff’s goods and its price lists, which was the same as a catalogue; and M. Y. Fulp, plaintiff’s secretary and treasurer, testified: “Mr. Holland, or whoever had this catalogue and price list of my company, was authorized to take orders for the company. He was a traveling salesman. . . . I had a contract with the Forsyth Chair Company that their employee was to represent us on the road.” It is true, there is evidence which tends to show that Holland was employed by the chair company, but he also represented the plaintiff, according to some of the testimony. But suppose he was a subagent as to the plaintiff, or represented it, not directly, but through the chair company. Tiffany on Agency, p. 265, says: “If an agent has authority to employ a subagent, it seems that the same principles must apply as to the notice to be imputed to the principal in cases of agents appointed by him directly, and that notice to the subagent of any fact material to the business which he is authorized to transact is notice to the principal. This rule is frequently applied in cases of subagents appointed by insurance agents. Nor would it seem to be material, so long as the agent had authority to appoint the subagent, whether privity of contract existed between him and the principal. If the principal is bound by his act, he should also be charged by his knowledge.” The author refers in the text and note to Hoover v. Wise, 91 U. S., 208, as being supposed to establish a contrary doctrine; but that case is not like this one, and the opinion of the Court, even in that case, met with a strong dissent by three very able judges, Justices Miller, Clifford, and Bradley, the first of the three writing the dissenting opinion. The case, as a precedent, has also been doubted in other jurisdictions. The evidence in this case, though, presents a question very different from the one considered there.

The Court, in Bates v. Am. Mortgage Co., 37 S. C., 88, referring to the general rule we have stated, says: “It is insisted that the doctrine does not apply wben another or subagent is introduced; that notice to the agent, but not to the'subagent, will be imputed to tbeir principal. There seems to be no case in our Reports upon that precise point, but I confess that I am not able to perceive the principle on which the alleged distinction rests, if both the agent and subagent are, as here, engaged in the same business for the principal, although it may be on different parts of that business. Such seems to be the general rule. "Where an agent has power to employ a subagent, the acts of the sub-agent, or notice given to him, in the transaction of the business, have the same effect as if done or received by the principal. Sooy v. State, 41 N. J. L., 394; Story Ag., secs. 452, 454. An attorney employed by an agent for his principal is the principal’s attorney. Porter v. Peckham, 44 Cal., 204.” The case of Hoover v. Wise, supra, is there mentioned with apparent disapproval, but held to be distinguishable, even as it was decided.

It appears that Holland, the traveling salesman, collected for the plaintiff, or at least there is some evidence from which a jury could draw that inference, and there also is evidence that he had other financial relations with plaintiff, as he seems to have been able to procure extensions and like favors for its customers; and this would bring the case directly within the principle of the decision in Straus v. Sparrow, supra, and Jenkins v. Renfrow, supra, and would further indicate that he was not acting strictly as a subagent through his alleged principal, the chair company, but dealing directly with the plaintiff. .

There is evidence from which a jury may infer that the plaintiff knew all along that Holland was selling its goods, although he was the salesman of the chair company. Even in Hoover v. Wise, supra, the Court said: “The general doctrine, that the knowledge of an agent is the knowledge of the principal, cannot be doubted. Bank v. Davis, 2 Hill, 451; Ingalls v. Morgan, 10 N. Y., 178; Fulton Bank v. N. Y. and S. Can Co., 4 Paige, 127. It must, however, be knowledge acquired in a prior transaction then present to his mind, and which could properly be communicated to his principal. The Distilled Spirits, 11 Wall., 356, 20 L. Ed., 167; Ingalls v. Morgan, supra. Neither can it be doubted that where an agent has power to employ a subagent, the acts of the subagent, or notice given to him in the transaction of the business, have the same effect as if done or received by the principal. Story Ag., secs. 452, 454; Storrs v. Utica, 17 N. Y., 104; Boyd v. Vanderkamp, 1 Barb. Ch., 273; Rourke v. Story, 4 E. D. Smith, 54; Lincoln v. Battelle, 6 Wend., 475. The rule of law is undoubted that for the acts of a subagent the principal is liable, but that for the acts of the agent of an intermediate independent employer he is not liable. It is diffi.-' cult to lay down a precise rule which will define the distinctions arising in snob cases. Tbe application of tbe.rule is full of embarrassment. For a collection of tbe cases and illustrations of tbe doctrine, reference may be bad to Story on Agency, sec. 454, and following.” And, referring to Story on Agency, sec. 454, we find it stated tbat tbe principal is represented not only by tbe person wbo is immediately employed in tbe business, but also by others employed by tbat agent under bim or witb whom be contracts for tbe performance of tbe business, and will be responsible for bis acts done within the scope of bis agency.

This ease differs from Hoover v. Wise essentially in this respect, tbat plaintiff contracted witb tbe chair company tbat tbe latter should sell its goods through its own salesmen, they being to some extent engaged in tbe same line of business, and while there is evidence tbat plaintiff retained tbe right to pass upon tbe sales and to investigate tbe financial credit of customers, however tbe authority of Holland may have appeared to the Southern Furniture Company, whether restricted or not, tbe latter was not bound by secret instructions to Holland, not known to them, but bad tbe right, in tbe exercise of good faith and due prudence, to act upon bis apparent authority, as held in Bank v. Hay, 143 N. C., 326; Stephens v. Lumber Co., 160 N. C., 107; Latham v. Field, 163 N. C., 356; Wynn v. Grant, 166 N. C., 39; Powell v. Lumber Co., 168 N. C., 632. There is evidence in this case tbat tbe chair company was not an “intermediate independent employer” of Holland, as the attorney was held to be in Hoover v. Wise, supra, but was something more, as there is some evidence to show, being engaged by tbe plaintiff as agent to sell its goods; and, further, tbe understanding was tbat tbe chair company would make tbe sales through its own salesman. This view is sustained by what was held in Cox v. Pearce, 112 N. Y., 637, 3 L. R. Anno. at p. 364, where tbe Court said: “We are of tbe opinion tbat tbe relation of Marriott to Cox and Boyce was such as to charge tbat firm witb tbe notice given to Marriott in 1878, by Hosea O. Pearce, of bis withdrawal from tbe firm of Pearce & Hall. Tbe notice was material to tbe very negotiations in which Marriott was then engaged, and it was bis duty to inform Cox and Boyce of tbe information be received, because it was a material fact bearing upon tbe question whether they should fill tbe order then made. Marriott, in his dealings witb Pesrce & Hall, was not acting simply as a broker in the general sense. In receiving orders from Pearce & Hall, be was acting exclusively in tbe interest of Cox and Boyce, and it was so understood by tbe vendor and purchaser. Cox and Boyce permitted bim to exercise powers, limited, it is true, but such as are usually exercised bv agents. The occasion called for tbe notification given by Pearce to Marriott. Tbe application for another order was made to tbe former, according to tbe course of business prior to that time, and good faitb required Pearce to make tbe disclosure; and we tbink be bad a right to assume tbat it was witbin tbe scope of Marriott’s agency to receive it in bebalf of bis principals.”

We do not decide tbat notice to Holland as to tbe withdrawal of defendant from tbe firm is to be imputed to the plaintiff as matter of law, but tbat there is evidence for tbe jury to consider upon tbat question, and as tbe court peremptorily instructed against tbe defendant on tbat point, and as we tbink tbe instruction was calculated to prejudice tbe defendant upon tbe essential matters, a new trial is granted as to all tbe issues.

New trial.