Junck v. Reed

42 P. 292, 12 Utah 196, 42 P.R. 292, 1895 Utah LEXIS 18

• Court: Utah Supreme Court
• Decided: November 6, 1895
• Docket: No. 549.
• Status: Published

Opinion

Meeeitt, C. J.:

This is an appeal from a judgment rendered in favor of respondents Holbrook and Duggins in the District Court of the First Judicial District of Utah territory, and from an order denying the appellants’ motion for a new trial. It appears from the evidence that the apjiellants had for many years been partners under the firm name of Jungk & Fabian, doing business as merchandise brokers in Salt Lake City, Utah; that on November 20, 1889, they entered into a contract with S. W. Scott to buy sheep, it being provided therein that all contracts for sheep should be made in the name of Jungk & Fabian, who by their firm name were parties of the first part, and they agreed to furnish the necessary capital. Scott agreed to attend to the buying and receiving of the sheep. Payments for sheep were to be by check of Jungk & Fabian, per S. W. Scott. .The contract further provided that the net profits were to be divided equally between Jungk, Fabian, an.d Scott, —one-third to each, — and that they should “ bear, in like proportion, any interest paid on money borrowed, and all expenses whatsoever incurred in connection with sheep contracts.” Respondents Cropper & Reed, at the solicitation of Scott, agreed with Jungk & Fabian to sell and deliver to them 5,000 head of sheep, at prices ranging from $2.25 to $2.65 per head. This contract was dated December 24, 1889, and on the signing of the contract Jungk & Fabian paid to Cropper & Reed $500, in a check" that was filled out by Fabian, but signed by Scott in the name of Jungk & Fabian, per S. W. Scott. It was provided in the contract that Cropper & Reed should furnish sureties for the performance thereof on their part, and, when such sureties were furnished, should receive an additional sum of $4,500, which should be considered part payment for the sheep. In pursuance of this agreement, Hapgood and Duggins were furnished as sureties, and the remaining $4,500 was then paid. Thereafter, Cropper & Reed, likewise at the solicitation of Scott, entered into a ■second contract with Jungk & Fabian, by which they ■agreed to sell and deliver to Jungk & Fabian an additional 5,000 head of sheep, at the price of $2.65 per head, and, on furnishing respondents Duggins and Holbrook •as sureties for the faithful performance of the contract on their part, received from Jungk & Fabian a check for $5,000, signed in their name, per S. W. Scott. By the terms of both these contracts the sheep were to be deliv■ered in the following July and August.

There is evidence tending to-show that, prior to entering into either of. these contracts, Cropper & Reed had been approached by Scott, who offered to go into partnership with them in furnishing these sheep, and also repre-rented to them that he could procure the sheep at a less price than that which they were to receive from Jungk & Fabian. On the 7th day of March, 1890, the following written contract was made between Cropper & Reed and Scott, to wit: “Salt Lake City, March 7, 1890. This ■agreement, made and entered into by and between Cropper, Reed & Scott, as partners, dealing in cattle, sheep, and real ■estate. They each one agree with each other to buy and sell on commission, and share equal in profits and loss on all real estate and cattle, and expenses of handling the same, to share in two contracts of sheep, made by Cropper & Reed to Jungk & Fabian. The said Scott is to divide .all profits made in selling and the said Cropper & - Reed are to divide all profits in buying, ■should there be any, and to work to one .another’s interest in the entire business as partners. Cropper & Reed. S. W. Scott.” It appears that neither ■Jungk nor Fabian knew of Scott’s partnership with Cropper & Reed, but that Cropper', at least knew that Scott was interested with, or the agent of, Jungk & Fabain in the matter of purchasing sheep, and Reed also knew this-fact before the execution of the notes sued on. Cropper & Reed failed to furnish the sheep as required by the contract, the price of sheep having materially risen between-the date of the contract and the date when the sheep were to be delivered. After such failure they had a partial settlement with Jungk & Fabian, at which it was agreed between them that Jungk & Fabian had been damaged by their failure to fulfill said contract in the sum of $5,000,. which sum, together with the $10,000 theretofore received by Cropper & Reed, made the total amount due to Jungk & Fabian at that time $15,000. In partial payment thereof, Cropper & Reed paid and delivered to Jungk & Fabian money and checks aggregating $3,062.50; sheep, at the-contract price, amounting to $1,075.40; a note executed by S. W. Scott to Cropper & Reed, $600; a further check, drawn by Eliza Moody on Deseret Savings Bank, $1,200,— total, $5,937.90. At the same time it was agreed the balance should be settled in notes, and a short time after-wards the following notes were executed in pursuance of such settlement: First, the three notes sued on, made by D. C. Reed and' G. W. Cropper, and endorsed by L. Hol-brook and S. M. Duggins, aggregating $7,000; second, a. note made by D. G. Reed and G. W. Cropper, and indorsed by H. F. Hapgood, for $500; third, a note made by D. C. Reed, G. W. Cropper, and S. W. Scott for $1,500. The indorsers on the notes were sureties on the contracts, and indorsed the notes as a continuation of their liability on the contracts. The note indorsed by Hapgood has since-been paid, but none of the other notes have been paid. This action was instituted upon the three promissory notes, aggregating $7,000 made by the defendants Reed and Cropper and “indorsed by Holbrook and Duggins. The makers joined in one answer and the indorsers joined in another. In the respective answers, failure of consideration for the notes, and fraud in obtaining- íbero, are alleged. The particular fraud relied on by the indorsers is that Scott was a partner on both sides of the contracts, that that fact was unknown to them, and materially increased their risk, and that the failure of the plaintiffs to disclose such fact to them discharges their obligation.

- On the trial the court directed a verdict against Cropper & Reed, but as to the sureties, by its- fourth instruction, in effect, instructed that if Holbrook and Duggins knew at the time of signing the notes that Scott was a partner with Jungk & Fabian, and also with Cropper & Reed in the contracts upon which they were guarantors, they were bound upon the notes. If they did not know it, they were not bound upon them. This, in effect, instructed the jury that it was the duty of Jungk & Fabian to communicate Scott’s double interest to the sureties, and that their failure to communicate that fact avoided the contract of suretyship, unless said sureties had knowledge thereof from other sources.

It may be admitted that Scott’s double interest was a material fact for the indorsers to know, but it appears in the evidence that this fact was unknown to Jungk & Fabian, although known to Cropper & Reed. The three notes sued on are admitted by the pleadings to be executed to Jungk & Fabian, not to Jungk, Fabian & Scott. It also appears by the evidence that Scott has no interest therein. Any fraud which would be a defense to those notes, must be a fraud on the part of Jungk & Fabian, and, unless Scott’s action and Scott’s knowledge of his dealings with Cropper & Reed can be imputed to Jungk & Fabian, they would be under no obligation to disclose what they did not know.

It is not contended that Scott’s interest -with Jungk & Fabian alone increased the liabilities of the sureties, nor in any manner interested them. The evidence conclusively shows that Scott was attempting to perpetrate a fraud on Jungk & Fabian. In the contract of March 7, 1890, he agrees to share with Cropper & Reed the profits that would come to him when Jungk & Fabian sold the sheep. His whole arrangement with Cropper & Reed gave him an interest in opposition to his duty as the agent or partner -of Jungk & Fabian, and violated the plainest principles of law, that no agent should be permitted to acquire an interest adverse to his duty to his principal. Acting for Jungk & Fabian, it was Scott’s duty to procure a contract from Cropper & Reed at the lowest price, and acting for himself, as a partner of Cropper & Reed, it was his interest to obtain from Jungk & Fabian the highest price. If the contract between Jungk & Fabian and Scott constituted Scott a partner with Jungk & Fabian as to the net profits, yet, as to the corpus of the property, and as to the obligations payable to Jungk & Fabian alone, no interest was vested in Scott, nor any authority given him to discharge such obligations; certainly no act of Scott’s in furtherance of a scheme to defraud Jungk & Fabian would have that effect. For the same reason, Scott’s knowledge of his own scheme to defraud Jungk & Fabian could not be imputed to them, there being a presumption that he would not disclose it to them.

It is a general rule that the knowledge of the agent is to be imputed to his principal, but the exception is as well settled as the rule. The rule has no application to a case where the agent acts in his own interest, adverse^ to that of his principal. His adversary character and antagonistic interest take him out of the operation of the rule for two reasons. First, that he will very likely, in such a case, act for himself rather than for his principal; and, secondly, he will not be likely to communicate to his principal a fact wbicb be is interested in concealing. It would be both unjust and unreasonable to impute notice by mere construction under such circumstances* and sucb is the established rule of law on this subject. Frenkel v. Hudson, 82 Ala. 158, 2 South. 758; Allen v. Railroad Co., 150 Mass. 206, 22 N. E. 917. As Jungk & Fabian did not know of Scott’s interest or contract with Cropper & Reed, and as the law does not impute such knowledge to them, they could not disclose it to the sureties, and are not to be mulcted because they did not perform an impossibility.

But it is contended that on a former appeal of this action ' the court held otherwise as to the sureties, and that such holding has become the law of the case, and as ■such is controlling. The particular question of law here ■discussed was not at all discussed'in the opinion on the former appeal. On the former appeal of this case the court decided the question that the interest of Scott with both parties to the sheep contracts was a matter material for the sureties to know;. but they nowhere intimate any opinion, on the principle of law here invoked, that Scott’s knowledge, obtained in an effort to defraud Jungk & Fabian, was not to be imputed to them, and, from a careful examination of that decision, we cannot see that the court intended to intimate any opinion on that question.

There is another reason why the former decision of this ■court did not become the law of the case, and that is that this court in this case is not the court of last resort. As to this case, involving as it does a sum in excess of •85,000, the Supreme Court of the United States is the court of last resort, and this stands as an intermediate court. The doctrine of the law of the case is not only restricted to appellate tribunals, but also to the courts of last resort. See U. S. v. Elliot (Utah), 41 Pac. 720; 1 Herm. Estop. 117, 118; Lawrence v. Ballou, 37 Cal. 518. This is well illustrated by the case of Galigher v. Jones, 129 U. S. 193, 9 Sup. Ct. 335. That was a case involving the consideration of the duty a broker owes to his principal when he refuses to obey telegraphic instructions-from his principal. On the first appeal of that case to the supreme court of Utah territory, it was decided that the broker was not required to signify his refusal by a telegram, but could do so in the ordinary course of mail. The trial court having held otherwise, the case was reversed, with instructions to grant a new trial. The second trial was had before a referee, who found as a fact that the supreme court of the territory had held, under the same facts, and as a matter of law, that the broker was excused if he signified his refusal by mail, and, basing his decision on this as the law in the case, found in favor of the broker. That finding was adopted by the trial court, and affirmed by the supreme court of this territory. On appeal to the Supreme Court of the United States, however, after reciting the finding and the found fact that the finding was in accordance with the law of the case as established on the first appeal, and after quoting from the decision of this court on the first appeal, the Supreme Court of the United States say that the court was in error, that the broker was but an agent, and was bound to follow the directions of his principal, or give notice that he declined to continue the agency, and where the direction came by telegraph, his notice must be by a like prompt means of communication, and reversed the case. Of course, that court could only reverse the-case if the supreme court of Utah territory on the second appeal committed an error in affirming it. Appeals lie to the Supreme Court of the United States from final judgments of the supreme court of this territory to correct the errors of this court. If no-error has been committed, the case will not be reversed. If this court, on the second appeal, in Galigher v. Jones, was, as matter of law, required ■ tq apply the doctrine of the law of the case, it could have committed no error in .so applying it, and there could have been no occasion to reverse the action. On principle it would seem that, admitting that the law was erroneously declared on a former ■appeal of an action, and that such cause could be carried to the Supreme Court of the United States on appeal from the action of this court, there could be no reason in requiring a party to go to that'court 'in order to correct that error; and in this we can see the’ reason why the law •of the case has not been applied to intermediate, but only to -courts of last resort.

On the evidence in this record, the last court erred in its fourth instruction to the jury, and the judgment of the court below must be reversed, and a new trial granted; -.and it is so ordered.

Bartoh, J., concurs.