Hall & Brown Woodworking Machine Co. v. Haley Furniture & Mfg. Co.

56 So. 726, 174 Ala. 190, 1911 Ala. LEXIS 347

• Court: Supreme Court of Alabama
• Decided: November 23, 1911
• Status: Published

Opinion

SOMERVILLE, J.

This is an action of detinue by the appellant against the Haley Furniture & Manufacturing Company, and W. T. Archer, assignee. The appellee duly intervened as claimant of the property sued for, filing his affidavit of claim, and the appropriate issue was made up, and the trial proceeded thereon. The affidavit did not state the nature of the right of the claimant as required by Code, § 6043.

The bill of exceptions sets out all the evidence, but we Jhere state only such portions thereof as are necessary to illustrate the material question which we are called- upon to consider.

The subject-matter of the suit is a lot of machinery sold by the plaintiff to said Haley Company in February, 1906, and delivered in April following, except one item which reached the consignee as late as about June 12th. Only about one-third of the purchase money was to be paid on delivery, and to secure the payment of the balance the vendor retained the title and possessory right in itself until the price of the machinery was fully paid, as shown by the written contract and notes in evidence. This written contract was filed for record on August 3, 1906, and in the meantime, on June 18, 1906, the claimant Sheffield Company (now appellee) loaned to the defendant Haley Company $6,000, the latter executing to the former as security therefor a mortgage deed conveying certain property in the city of Sheffield described as “all of block numbered four hundred and forty-eight (448) together with all buildings and improvements thereon, and all machinery and appliances thereat, together with the appurtenances.” It does not appear that this mortgage has ever been foreclosed.

The tendency of the testimony of the two witnesses, C. L. Haley and J. J. Challen, introduced by the plaintiff, was to show that in the loan transaction of June 18th, in which the Haley Company secured the loan of $6,000 from the Sheffield Trust Company, the Trust Company was represented by one J. W. Worthington, who was a director and stockholder, but not an officer, in said Trust Company; that said Worthington was at the same time president of the Sheffield National Bank; that said witnesses, who were respectively president and secretary and treasurer of the Haley Company, negotiated with said Worthington in the months of January, February, March, and April, 1906, for the purpose of getting a loan for the Haley Company; that Worthington promised to get such a loan for them, and stated that he would secure it from a trust company about to be organized; that during these negotiations in January and February it was explained to Worthington that the loan was to be used in the purchase of the machinery in controversy; that the contract of sale between the plaintiff and said Haley Company, one of the terms of which provided for the reservation of the title and right of possession until the purchase money was paid, was exhibited to Worthington and its terms gone over with him, and then left with him for several days for his inspection; that the Sheffield Trust- Company was not organized and had no existence until May 26, 1906; and that no conversation with Worthington, nor information to him as to the status of the title to the machinery occurred on or after May 26, nor any later than March, 1906. For the claimant, all of the testimony as to information given him concerning plaintiff’s claim to the machinery is vigorously denied by Worthington, as well as any knowledge whatever on his part of such a claim, either before or during his agency.

With respect to statutory claim suits, it has long been settled law in Alabama that the affidavit and bond required of the claimant are jurisdictional, and cannot be dispensed with even by consent of parties, express or implied.' — Mobile Life Insurance Co. v. Teague, 78 Ala. 147; House v. West, 108 Ala. 355, 19 South. 913.

When the claim interposed is based on a mortgage or lien, the statute (section 6043, Code 1907) expressly requires that “the claimant must state in his affidavit the nature of the right which he claims,” and the same section further requires that, in case the claim is sustained, the amount of it, whether due or not, must be ascertained, and the plaintiff may pay to the claimant the amount so ascertained, and of course eliminate him from any “further participation or interest in the proceedings.”

From its very nature this requirement is not jurisdictional, but there can he no possible doubt that it is restrictive in its character and purpose, and that a claimant who fails to thus propound the nature of his claim cannot be allowed to support it by evidence of either mortgage or lien. This conclusion was announced by this court in the case of Ivey v. Coston, 134 Ala. 259, 32 South. 664, cited with approval in Bennett v. McKee, 144 Ala. 601, 38 South. 129.

The introduction in evidence of the mortgage in support of the claimant’s claim was objected to on the ground of its irrelevancy to the issue, and, no foreclosure being shown, the objection should have been sustained. And it necessarily follows from this that the court should have given the general affirmative charge for the plaintiffs as requested.

It is a mistake to assume, as do counsel for appellee in their brief, that by “a claim based on a mortgage” the statute means only a mortgage not overdue. It cannot be thus restricted. On the contrary, the statute plainly applies to any mortgage under which there remains to the mortgagor the right of demption; the intent being to give the plaintiff the benefit of such right if it has not been foreclosed. And, even in a court of law, a tender of the debt by the mortgagor after the law day, if made before seizure of or demand for the chattels, revests the legal title in the mortgagor. — Maxwell v. Moore, 95 Ala. 166, 10 South. 444, 36 Am. St. Rep. 190.

The claimant’s affidavit did not state the nature of his claim, and by the omission he renounced the right to prove any claim based upon a mortgage. The plaintiff met the omission in the only ways open to him, viz., by objection to the introduction of the mortgage, and by request for the affirmative charge. The record presents not merely a defect jn the affidavit, but a variance between pleading and proof.

2. On motion of the claimant, the trial court excluded all the testimony of the two witnesses Haley and Challen as to conversations and transactions between them and J. W. Worthington relative to the property sued for, and relative to their negotiations with him for a loan from the claimant company; the ground of objection being, substantially, that any notice to Worthington of plaintiff’s claim, before the organization of the claimant company, and hence before his agency for it began, was not notice to the claimant, nor binding on it. The question presented by this ruling is the vital question in the case.

By a long line of decisions, this court is thoroughly committed to the rule that knowledge acquired -by an agent prior to his agency, or in regard to matters outside the line of his duty, or while pursuing his own or some other person’s business, is not notice to his principal of such fact or facts, and is not binding upon him. —Mundine v. Pitts, 14 Ala. 84; Pepper v. George, 51 Ala. 195; Reid v. Bank of Mobile, 70 Ala. 211; McCormick v. Joseph, 88 Ala. 403, 3 South. 796; Wheeler v. McGuire, 86 Ala. 398, 5 South. 190, 2 L. R. A. 808; Goodlar v. Daniel, 88 Ala. 590, 7 South. 254, 16 Am. St. Rep. 76; Bessemer L. & I. Co. v. Jenkins, 111 Ala. 135, 149, 18 South. 565, 56 Am. St. Rep. 26; Central of Ga. Ry. Co. v. Joseph, 125 Ala. 313, 28 South. 35; Pearce v. Smith, 126 Ala. 116, 28 South. 37; Scotch Lumber Co. v. Sage, 132 Ala. 598, 32 South. 607, 90 Am. St. Rep. 932; Patterson v. Irvin, 142 Ala. 401, 38 South. 121; Traders’ Ins. Co. v. Letcher, 143 Ala. 410, 39 South. 271.

The fundamental requirement is that such knowledge on the part of an agent to bind his principal “must- be limited to such knowledge or information as comes to the agent in transacting the business of his principal.” • — Central of Ga. Ry. Co. v. Joseph, 125 Ala. 319, 28 South. 37. This is a simple rule, easy of application, and just in its results.

Where the agent’s knowledge is of this character, it is constructive notice to the principal entirely regardless of the principal’s actual knowledge. — Wiley v. Knight, 27 Ala. 346. This is usually explained by saying that the law conclusively presumes that the agent has in fact communicated his knowledge to his principal. We think, however, that the better and more logical explanation is that with respect to the given transaction the agent is in laAV identified with his principal; that knoAvledge that comes to the agent, Avhile acting in such matter for his principal, would have come to the principal had he been acting for himself; and that, as a rule of policy and justice, he must he equally charged thereAvith. — Sooy v. State, 41 N. J. Law, 395; Houseman v. Girard Ass’n, 81 Pa. 256-262.

But on either theory, the rule is not a rule of evidence merely, as is sometimes declared, but a rule of substantive law.

The Alabama rule, as above defined, is not in accord with the Aveight of authority in other jurisdictions, as pointed out by Mr. Freeman, in his valuable note to Trenton v. Pothen, 46 Minn. 298, 49 N. W. 129, 24 Am. St. Rep. 228-233, where the cases on both sides are collected and discussed; and as shoAvn by Mr. Pomeroy in his third edition of Equity Jurisprudence (volume 2, § 672, and notes). It appears from these authorities that the more generally accepted rule is that the agent’s knowledge, though acquired previously to his agency, if retained by him and carried with him into the subsequent business which he transacts for his new principal, is notice to the latter whether communicated to him or not. ■

This rule we regard as both illogical and unjust — a criticism which is fully vindicated by a consideration of the numerous and unpractical qualifications and exceptions which courts expounding the rule have been compelled to adopt. In this connection we note Mr. Pomeroy’s observation that “several of the ablest English judges have, in recent cases, expressed a decided opinion against the rule itself, and while considering themselves bound by it, as far as it is settled, have wished that it should be abrogated by the Legislature.” —2 Pom. Ep. Jur. (3d Ed. § 672, note 1.

We adhere to the rule as settled by our own cases cited above.

3. There are statements in the opinion in the case of Lea v. I. B. Mercantile Co., 147 Ala. 421, 42 South. 415, 8 L. R. A. (N. S.) 279, 119 Am. St. Rep. 93, which we cannot reconcile with our view of the law as settled by our previous cases, and which require qualification. In that case it was held that, where the alleged agent was in fact the sole manager and controller of a corporation at his will, and its sole stockholder but one — the latter being a non-resident — where,. in fact, he was not only the alter ego, but in effect the corporation itself, and where he acted in a single transaction for himself and the corporation, his knowledge acquired previous to his agency was notice to the corporation and binding upon it. As was well said, per Tyson, J.: “It could be nothing but the sheerest nonsense to say that as agent he should communicate the knowledge to himself as the managing representative of his corporation. Since the corporation could acquire notice in no other way than by and through its managing head or officer, it will scarcely be doubted that notice to such officer is of necessity notice to it.” Herein is found the chief reason for the conclusion of the court, in which we fully concur.

But the opinion goes further and lays down the rule that the agent’s previously acquired knowledge will be constructive notice to the principal, if recently acquired in a connected transaction, or if of such precise and definite character as that it must be presumed to remain present in his mind and memory during the last transaction. This rule, as there stated, is a quotation from 2 Pom. Eq. Jur. (3d Ed.) § 672, to which we have already referred. It is sought to be justified as a mere exception to the general rule conceded to exist in Alabama, and is declared to be in harmony therewith; and cases are cited as illustrative of and supporting this exceptional rule, viz., Wiley v. Knight, 27 Ala. 336, 346; City Nat. Bank v. Jeffries, 73 Ala. 183; White v. King, 53 Ala. 162; and Dunklin v. Harvey, 56 Ala. 177. It is sufficient to say of the first two of these cases that they merely lay down the general rule that notice to an agent, with respect to a matter as to which he is then serving as agent, is notice to the principal; such being unmistakably the fact in each case. It was said, it is true, in Wiley v. Knight, that “the principal knows whatever the agent knows”; but, taken literally and absolutely, this is a patent fallacy, and the court could only have meant to include knowledge acquired while and as agent.

In White v. King and Dunklin v. Harvey, though not expressly stated, it is to he inferred from the record that the knowledge of the agent which was held as constructive notice to his principal was acquired by the agent prior to his service as such. Both were chancery cases, and, on the pleadings and proof, the knowledge of the agent was properly if not necessarily imputed to his principal by implication, as we shall presently explain. But the theory of constructive notice was applied, inadvertently, we think, since the distinction as to the time of the agent’s acquisition of the knowledge was not mooted, and was evidently not in the mind of the court, and no reference was made in White v. King to the earlier case of Mundine v. Pitts, 14 Ala. 84, 90, where the limitation is plainly declared; while in Harvey v. Dunklin the case of Mundine v. Pitts is actually cited as authority. Moreover, Judge Stone, who wrote the opinion in Harvey v. Dunklin, afterwards declared, in McCormick v. Joseph, 83 Ala. 403, 3 South. 797, that: “Notice or knowledge by an attorney, to carry home constructive notice to the client, must be shown to have been given or acquired after the relation of attorney and client was formed. It is not enough that the notice is first and the retainer afterwards.

4. It is clear, also, that the notion of a general and special rule consisting harmoniously in our decisions, as stated in Lea v. I. B. Mercantile Co., cannot be sustained, for the cases themselves expressly repudiate it. In Wheeler v. McGuire, 86 Ala. 406, 5 South. 193; 2 L. R. A. 808, it was said, per Clopton, J.: “Many cases hold that notice to an agent is notice to his principal, though acquired before the relation is created, if present in his mind at the time of the particular transaction, and he cannot communicate it or act upon it, without violating a legal (or) moral clnty. It was, hxnvever, early settled in tliis state that knowledge of an agent, to operate as constructive notice to the principal, must have beeu acquired after the relation of principal and agent was formed. This rule having been followed ever since, whatever might be our opinion were it an open question, it would not be prudent to disturb it now. — Mundine v. Pitts, 14 Ala. 84; McCormick v. Joseph, 83 Ala. 401 (3 South. 796) ; Frenkel v. Hudson, 82 Ala. 158 (2 South. 758; 60 Am. Rep. 736.)”

And, again in Goodbar v. Daniel, 88 Ala. 590, 7 South. 257; 16 Am. St. Rep. 76, it was said, per H. M. Somerville, J.: “There are cases which hold to the doctrine that knowledge of a material fact acquired by an agent in a former transaction, comparatively recent in point of time, such as he is bound to communicate, if present in his mind and memory while engaged in a second transaction, shall operate as constructive notice to his principal in the second transaction. — 2 Pom. Eq. Jur. (1st Ed.) § 672. But there is a long line of decisions in this state which adopt the rule that notice to an agent, to bind his principal, must have been acquired by the agent during his employment, i. e., while he is actually engaged in the prosecution of his duties as agent, and not at a time antecedent to the period of his agency” — citing a number of the cases.

The emphasis is unmistakable, for in Mundine v. Pitts the agent’s knowledge was acquired only a few days be-' forehand; in McCormick v. Joseph only a week beforehand; and in C. of Ga. Ry. v. Joseph it was acquired only a feto moments beforehand.

It will sufficiently appear from the foregoing review of our decisions that the new doctrine (to this state) found in Lea v. I. B. Mercantile Co., 147 Ala. 421, 42 , 8 L. R. A. (N. S.) 279, 119 Am. St. Rep. 93, founded on the text of Mr. Pomeroy and other authorities, is a departure from the established rule of our decisions, and must therefore he disapproved and rejected. It follows, also, that the cases of White v. King, 53 Ala. 162, and Dunklin v. Harvey, 56 Ala. 177, are erroneous in their application of the theory of constructive notice to the facts there involved, and must be qualified to that extent.

5. Constructive notice to the principal through the actual knowledge of the agent is not a rule of evidence, but one of substantive law. Given notice to or knowledge of the agent, received while so acting, and the principal is conclusively bound by it; not because he ever knows it in fact, because his actual knowledge is utterly immaterial, but because as to the thing the agent is doing the agent is in law the principal, and the principal is in law the agent. Their legal identify is complete. Nor can it matter, in this aspect of the rule, whether the agent has or has not, private reasons or interests which make it unlikely or even certain that he will not inform his principal, as correctly ruled in First Nat. Bank v. Allen, 100 Ala. 476, 14 South. 335; 27 L. R. A. 426, 46 Am. St. Rep. 80.

On the other hand, the actual knowledge of the principal, when material, may be proved like any other fact. It 'is the duty of an agent to inform his principal of every material fact within his knowledge, no matter when acquired, bearing upon the subject-matter of his agency, which may affect the interests of his principal with respect thereto; and it will be presumed that he has discharged this duty. — The Distilled Spirits, 11 Wall, 367, 20 L. Ed. 167. Here we have a true rule of evidence, a presumption of law that a duty has been discharged, from which follows the further presumption that the principal has acquired the knowledge of his agent. But this presumption like others of a similar nature, is disputable, and not conclusive. Unless rebutted, it is sufficient to fasten upon the principal, not an unreal constructive notice which is incontestable, but simply an implied actual notice which is contestable. A failure to distinguish between these entirely distinct principles has, in our judgment, produced most of the confusion and contrariety of judicial opinion which seems to have always attended the consideration of this subject by the courts. See the cases cited in 31 Cyc. 1594, note 50.

This doctrine of implied actual notice will serve to justify, if not to explain, the rulings found in White v. King and Dunklin v. Harvey, supra.

6. The rule of implied notice, as above stated, unless there is direct evidence showing that the imputed knowledge was present in the agent’s mind during his agency, must obviously depend upon the interior presumption of fact that the knowledge in question has thus persisted in his memory, so as to be available for communication seasonably to his principal.

The law does not presume that a fact once known is never forgotten, for this is contrary to all human experience. Nor is the remoteness or lateness of its acquisition as knowledge by the agent in all cases the most important consideration, for all experience teaches that much that we learned in the remote past ineradicab-ly persists in our memories, while unimportant events of yesterday have been already forgotten. This particular issue then rests in inference, and is for the jury to determine.

If the jury find that the knowledge was present in the agent’s mind during the execution of the agency, then they must find as matter of law that the principal was duly informed, unless they are reasonably satisfied to the contrary from other evidence before them. We do not mean to say that the agent’s prior knowledge may not be so remote in point of time, or so lacking in clearness or apparent importance, as to justify the trial court in presuming, prima facie that it has been forgotten. This seems to have been the view taken in Bessemer L. & I. Co. v. Jenkins, 111 Ala. 135, 18 South. 565, 56 Am. St. Rep. 26.

7. There is no testimony shown by the bill of exceptions which can support a finding that Worthington was the alter ego of the claimant corporation in such sense and degree as to bring this case within the influence of the decision in Lea v. I. B. Mercantile Co., supra.

8. The information acquired by Worthington from the witnesses Haley and Challen, being acquired prior to the period of his agency for claimant, did not operate as constructive notice to it.

9. But their testimony in this regard was admissible in evidence for the purpose of showing actual knowledge of plaintiff’s' claim on the part of the- claimant corporation, under the principles above declared; and its exclusion was error prejudicial to appellant.

Other assignments of error need not be noticed, as the questions presented will hardly recur upon another trial.

Reversed and remanded. All of the Justices concur, except Dowdell, C. J., not sitting.