Harvey v. Turner & Co.

4 Rawle 223, 1833 Pa. LEXIS 24

• Court: Supreme Court of Pennsylvania
• Decided: March 14, 1833
• Status: Published

Opinion

The opinion of the court was delivered by

Rogers, J.

This was an action of indebitatus assumpsit, brought to recover certain advances made by the plaintiffs to the defendant under the following circumstances. The plaintiffs, who reside in the city of Philadelphia, were the factors or consignees of the defendant, who resides in North Carolina, and by orders of the defendant, on the 13th of November, 1822, sold twenty-six bags of cotton, to a certain John Hastings at a credit of four months. The 17th of November the plaintiffs advised the defendant of the sale, and on ihe 31st of Decemb'er transmitted their account to the defendant, debiting him with their advances, and crediting him with the amount of sales. The whole amount was paid to the defendant. The debt due from Hastings was ascertained to be bad, on the 15th of March following, at which time Hastings’s note was protested for non-payment. Although several letters passed between the parties, no claim is made on account of non-payment, nor is there advice given or notice of the fact of protest, for upwards of six months. The defendant alleges that the factors were guilty of negligence in making sale of the cotton; that they were negligent in giving notice of the insolvency of Hastings, and also, in their endeavours to obtain payment after the sale.

It is admitted that the first point was properly left by the court as .a fact for the decision of the jury. But the defendant complains of the charge of the court which in effect was, that the defendant shall repay the money advanced unless the defendant can show that he has suffered damage by the negligence of the plaintiffs. By the charge -of the court, the onus is thrown upon the principal, whereas the defendant contends, that the factors in giving credit, and neglecting to give notice of the non-payment of the note, assumed the debt to themselves. It is a rule of law which does not admit of dispute, that an agent is bound to keep his principal informed of all material occurrences in the agency. If he fails to do so, it is negligence and a palpable violation of duty for which the factor is clearly liable to suit. It was then, the duty of the plaintiffs, to inform the defendant in a reasonable time, and particularly after having credited him in account, of the non-payment of the note. For this the defendant had a right of action, but, according to the charge, he could not recover even nominal damages, unless he could make it appear, that he had sustained some damage by the want of notice. We cannot accede to this view of the case, for a strict adherence to the rule, is in our opinion necessary to insure a faithful performance of the trust. If a factor sells, and credits the principal with the amount of sales, of which he advises his principal, and fails within a reasonable time to give notice that the debt is bad, he becomes an insurer for the whole amount. And this rule is required by a due regard for the security of the principal, for otherwise, such is the power necessarily intrusted •to an agent, that he may be guilty of any degree of negligence or of fraud with impunity, unless the principal is able (which is frequently impracticable) to prove special damage, and the extent of it. Á merchant in Philadelphia, makes a shipment to his factor in London. The factor advises him of the sale of the goods at a credit of three or ■six months, and at the same time credits him with the amount of sales, in his account-current. The factor neglects to inform him of the non-payment of the note at maturity. Surely he has a right to conclude that the bills were paid when due. He acts on this natural supposition; carries on his business as usual; draws bills on the faith of (he funds which he fancies he has in the hands of his factor in London, and is afterwards informed at the end of six or twelve months (for there is no limit) that he has been under an entire mistake, that although he, the factor, neglected to inform him of it, yet the vendees of the goods were insolvent, and not one cent of the amount has been received. If this be allowed it is obviously a power which may be used either negligently or by design, to the utter destruction of the principal. His whole operations may be destroyed by the failure of ■the agent to perform an admitted duty, in a manner which it may be difficult if not impossible to show to a court and jury. It is a beneficial principle, which visits such neglect with a strict penalty. Time is of consequence to (he commercial world, and it is important ■to them to be regularly and early advised, of all material circumstances in relation to business entrusted to foreign factors and agents. Nor does the rule impose any unnecessary hardship. It calls merely for the strict performance of a well known and acknowledged duty. A party who negligently or wilfully omits to do that which the law requires, and with which it is so easy to comply, has 00 right to complain. There was no other rational mode of accounting for the silence of the plaintiffs, but on the supposition that the money had been paid, or that the agent had assumed the responsibility on himself. Harvey had a right to believe, and to act under the belief,, that Hastings’s note had been paid, or that such arrangements had been made, as to assure the payment of the debt. In most cases of agencies, it is true, that the measure of damages is the injury which the principal can show he has sustained, and this has been abundantly shown by the cases cited in the argument. But there are cases, of which we conceive this to be one, where it has been found wise, and indeed necessary, in the due transaction of commercial business, to establish rules somewhat arbitrary in their nature, and partaking in some degree of strictness and severity in their operation. Some of these provide for the benefit of the agent, others for the security of the principal. If an agent forward his accounts to his principal, who does not in a reasonable time object to them, he thereby consents, and is bound by them. If he transcends his authority, and the principal fails, within a reasonable time after knowledge, to disaffirm the transaction, he ratifies the act of the agent. If a principal directs his agent to make insurance, and he omits to do so, the agent becomes the insurer. When there is an abandonment the insurer pays for a total loss. To make a drawer liable on a bill of exchange, or promissory note, it is requisite to give him due and seasonable notice of their non-acceptance or non-payment.

These are acknowledged principles of commercial law, for which it is needless to cite authority. So in Malyne, 82, it is said, “ If a factor do sell unto a man certain goods of another man’s account, either by itself, or among other parcels, and this factor giving not advice unto the owner or proprietary of the sale of the said goods, but afterwards (having had more dealing with that man in selling of goods and receiving of moneys) this man becometh insolvent; the factor is to make good that debt for the said goods so sold, because he gave no advice to the owner of the sale of the said goods, at convenient time, even as if he had sold those goods unto a man contrary to the commission given unto the man; for the sale of factorage binds him hereunto.” Further, it has been decided, that after a loss has happened, an agent is bound to give his principal the earliest notice of the insolvency of the underwriters, with whom he has effected policies of insurance on behalf of his principal, in order that the latter may enforce his claim, and take such steps as he may think proper for his own security. A failure to do so makes the agent liable for the whole amount of the insurance. Jameson v. Swainston, 2 Camp. 546, n. In many of their circumstances, the cases are precisely alike, and many of the remarks of Mansitekd, C. J. are strictly applicable here. As in Jameson v. Swainston, we are of the opinion, that after so great a lapse of time, between the time of ascertaining the insolvency of Hastings, and rendering the last account, the factors, as between themselves and the principal, must be presumed either to have received actual payment of the note, or to have settled with him in account. For the purpose of recovering from the defendant, the plaintiffs should, in a reasonable time after the protest of the note, have apprised him of the inability of Hastings to pay, whom he was naturally led to believe by the plaintiffs, had settled with the factors. Their silence deprived him of all opportunity through the instrumentality of others, or by himself, of endeavouring to obtain payment of the note. The silence of the factors is an answer to their demand against the principal, and they must look for indemnity to Hastings, whom they have trusted. The steps afterwards taken to recover the money, it is unnecessary to examine, for they cannot avail the plaintiffs, inasmuch as they have neglected to give notice of a fact so material for the security of the principal. It may be proper further to state, that I have examined the testimony with care, and cannot discover that the defendant at any time affirmed the conduct of the plaintiffs.

Huston, J.

This case presents a single point. Harvey, who lived in North Carolina, sent cotton, rosin, &c. to Turner Sp Co., and drew on them for the price, or received merchandize. About once a year Harvey came to this city, and a settlement of the previous year took place.

In the autumn of 1822, he sent some cotton to Turner <$p Co., who sold it to J. Hastings at four months, and took his note to J. Harvey, and informed Harvey of this.

Before the note fell due, J. Hastings was unable to pay. Turner tip Co. pressed him much ; obtained a mortgage on his property and his wife’s estate, and then a bond and warrant to confess judgment, and entered judgment in Delaware county, where Hastings lived.

Harvey came to this place in August or September, 1823, and received an account-current from Turner Sp Co., by which he was indebted to them about one thousand dollars. To this, for some time, he made no objection. In it he had no credit for the amount of Hastings’s bond and judgment, which, as well as the previous note, were in the name of J. Harvey. After some time, Turner <§• Co. brought suit. The defence was,' that from their conduct they were liable to J. Harvey for the price of the cotton sold to Hastings.

The judge left it to the jury to ascertain whether, as Hastings was unknown to Turner Sp Co. they made the proper inquiries, and received such answers as to his character and standing, as justified them in selling to him on credit, and the jury found for the plaintiffs on this point. There was an allegation of negligence against the plaintiffs, in not informing Harvey that Hastings’s note was not paid at maturity, and that he was likely to fail; or, in fact, was hopelessly insolvent. And the court told the jury, that if from this neglect of information Harvey supposed the note was paid at maturity, and on that supposition drew for the amount, or thereabouts, distinctly on this supposition, and the plaintiffs accepted the draught, knowing it was so drawn, they made the debt their own, and could not recover. The jury on this point also found for the plaintiffs.

The court also told the jury, that it was the duty of tbe plaintiffs to inform Harvey promptly, that the note was not paid at maturity, and was in danger of being lost, and for not giving such information the plaintiffs might be liable. And further, that it was the duty of the plaintiffs to commence suit against Hastings if the note was not paid, and no orders were received from Harvey, and for not doing this, the plaintiffs might be liable; but that if the jury found from the evidence, that Harvey sustained no loss from want of notice, or from no suit being commenced (as a mortgage and judgment were obtained, in less time than they would have been had by adverse suit), that the plaintiffs were not liable. The court put it strongly to the jury, that if Harvey by coming on could have used any means not resorted to by Turner Sy Co., could, from Hastings or his friends, by suit or compromise, have recovered the debt or part of it, in short, if Harvey was in any way damnified, by w'ant of notice, the plaintiffs were liable; but if, from the evidence, every thing was done by Turner fy Co. which could have been done, if Harvey is as well off as he could have been if he had received notice, then he has not been injured by want of notice, and must bear the loss. Here the jury found for the plaintiffs, and the only error assigned is, that the court erred on this last point, and ought to have instructed the jury, that for neglecting to give notice of non-payment of the note, Turner Sy Co. were absolutely bound to make it good to Harvey. Although this was the only point which arose in this cause, in which error is assigned, yet much was said on the other points; and perhaps if on those points the jury had found differently, it would have been as satisfactory to the judge who tried the cause; but as he did not grant a new Ntrial, we cannot legally even take that matter into-consideration. The counsel for the plaintiffs have not cited any authority to show that the judge charged contrary to law. For although an old writer, Malyne, was cited to prove that a factor or agent ought to keep his principal informed of the state of his business, yet neither that author, nor any other cited, or which I have seen, states the broad position, that neglect to write or give information of every occurrence, of itself and without other proof, will make a factor liable in every case, and to any amount. The case cited from 17 Mass. Rep. 183, only proves, that omitting to write, together with other circumstances, may make a factor liable. There, the whole of the circumstances were left to the jury. Paley in his Treatise on Agency, has said, in more than one place, that an agent ought to apprise his principal of the stale of his business, and of any important occurrence; but he also states, that to render an agent responsible for loss or damage, “ it must be a real, and not a supposed or probable injury merely; and therefore an agent is not liable for the neglect of an act, expressly directed, if the act when performed would not have entitled his employer to any legal benefit, but only have conferred a probability of advantage. Paley, 8. And again, page 37 : “ It is of consequence to an agent, in consulting his own indemnity, to apprise his principals with convenient expedition, of all material acts done, or contracts concluded by him. It must in general be a question to be decided according to the particular circumstances of each case, whether the culpable delay of the agent in this respect has occasioned injury to the principal.”

It was contended here, however, that by analogy to other cases, the agent ought to be liable; and one of these cases was, that a factor who was ordered to insure, and did not, was liable as insurer. In the first place, the position is too broadly stated. It is only in particular circumstances and situations, that an agent is so liable. French v. Reed et al. 6 Binn. 308. Paley, 18, 20, and following pages. And an agent is not liable at all events, but may use any defence which an insurer could ; for if nothing could have been recovered on the policy, no damage has been sustained by default of the agent. The plaintiff must prove the amount of his interest and the loss, and the defendant may avail himself of a deviation in the voyage, or the illegality of the intended insurance. But what is nearer to the present case, if the agent having difficulty in procuring insurance, employ a broker, who refuses to give up the policy, receives the money from the underwriters, and becomes insolvent, the agent is not liable, if the broker had been of good standing; and the agent was not bound to bring an action for the detention of the policy. Paley, 22.

The counsel also compared this to the case of notice on bills or notes, which must be given in almost all cases, or the person omitting to give it must bear the loss. The answer is, that is a peculiar case, depending on general principles, and more on positive, decisions in some cases, and does not apply even to a surety or guarantor, except one whose name is on mercantile paper. See Gibbs v. Cannon, 9 Serg. & Rawle, 198, and cases there cited.

The very principle of this case, was decided by this court in Hammon et al. v. Cottle, 6 Serg. & Rawle, 290. There the defendant lodged the plaintiffs’ money with P. and informed them of it; and it does not appear he ever after took any other step in the matter. The plaintiffs drew for the money on P. who lived in Paris, where the agent was. The bills were not honoured. Nothing was done by the agent to get the money from P., and yet he was not held liable, because the total insolvency of P. was found to be such, that any attempt to obtain compensation from him would have been fruitless.

The same principle runs through all our cases. The guarantor is not liable unless the money could not be obtained from the principal; but if the principal was totally insolvent, you can recover from the guarantor without having sued the principal, or given notice of his insolvency, Gibbs v. Cannon, 9 Serg. & Rawle, 198; for the omitting to sue or give notice, was no injury to the guarantor.

If the surety in a bond request the obligee to sue the principal, .or he (the surety) will be no longer liable, and the principal is not sued, the surety will generally be discharged^ but if the obligee can show, that a suit against the principal at the time of notice would have been wholly unavailing, the surety remains liable. Gardner's Admrs. v. Ferree, 15 Serg. & Rawle, 30. I know of no case, except that of giving notice to a person whose name is on mercantile paper, in which one man is liable to another for a mere omission to do an act, when that act would have produced no benefit to the party complaining; and whether it would have produced any benefit, must always depend on the circumstances of the case, and so be a matter for the jury. I am therefore of opinion there is no error in the decision of the District Court.

Judgment reversed and a venire facias de novo awarded-