Miller v. Lea , 35 Md. 396 ( 1872 )

Alvey, J.,

delivered the opinion of the Court.

This action was brought by the appellees, merchants of Philadelphia, against the appellants, to recover the amount of an account for goods sold to the latter by Goodwin, Oliver & Co., factors and commission merchants of Baltimore, to whom the appellees had consigned goods for sale.

The appellees were del credere agents or factors of "William Simpson & Sons, for the sale of what is known as “ Simpson’s Prints.” They consigned to Goodwin, Oliver & Co. quantities of these goods to be sold on their account; and the latter sold to the appellants, on the 3d, 7th and 12th of January, 1871, parcels of such goods, amounting in the aggregate to the sum of $1,032. These sales were on a credit of thirty days, and before the accounts were all collectible, and before any of them had been paid, Goodwin, Oliver & Co. failed, and without accounting in any way to their principals, the appellees, for the amount of the proceeds of sale.

Immediately after the failure of these Baltimore factors, the appellants were notified to pay the amount of sales to the appellees, and not to Goodwin, Oliver & Co.; and, upon their declining to recognize the claim of the appellees, this suit was brought.

At the trial in the Court below, several prayers were offered by each of the parties, those on the part of the appellees being granted, while those by the appellants were rejected; and to which ruling of the Court, in reference to all the prayers, the appellants excepted.

By these prayers, two questions are presented on this appeal — first, as to the right of the appellees to sue and maintain the action; and, secondly, as to the right of the appellants to the benefit of set-off of a claim due them from Goodwin, Oliver & Co., as against the demand of the appellees.

The principles that must control the case are few, and appear to be exceedingly plain and simple.

1. As to the right of the appellees to sue. It is supposed by the appellants, that because the appellees were themselves mere agents, and were not named or known in the contract of sales, and Simpson & Sons might have an action for the money claimed, therefore the appellees cannot sue. But it is clear, we think, that such supposition is without foundation. The question here is, not so much as to the relation of the appellees to Simpson & Sons, as to the relation of Goodwin, Oliver & Co. to the appellees. It is clear, that as between the appellees and Goodwin, Oliver & Co., they stood in the relation of principal and agent. The goods were received by Goodwin, Oliver & Co. directly from the appellees, and were to be sold for their account. These Baltimore factors derived all their authority from the appellees, and their accountability was to them primarily. As agents for the sale of the goods, Goodwin, Oliver & Co. could raise no question inconsistent with the relation of principal and agent, as between themselves and the appellees, unless by the active intervention of Simpson & Sons. In the sale of the goods, therefore, to the appellants, Goodwin, Oliver and Co. were the agents and factors of the appellees, and the latter are entitled to all the rights of principals as against third parties dealing with their factors.

And why should the appellees not be regarded as the principals in the sales to the appellants ? There is no good reason certainly for depriving them, of that position, but, on the contrary, many why they should be so regarded. Consider their obligations and their relation to the goods.

By taking the goods for sale, under a del eredere commission, the appellees became responsible for their value, and, in the absence of active intervention by the general owner, they became the virtual owners as to all third parties. They were entitled to the management, control and possession of such goods, and had full authority to sell them in their own names, and, of course, by their own agents. They were also entitled to a lien on the goods, or their proceeds, for their commissions, disbursements and advances made in respect of them, as well as a lien for their general balance of accounts. They could, moreover, maintain suits in their own names for trespasses and torts committed on such goods while in their possession, founded upon their special ownership and rights therein. Story’s Agency, secs. 400, 401. While therefore the appellees bore the relation of agents to the general owner of the goods, there is no reason that would forbid their maintaining the relation of principals to other parties, in respect to the same goods.

Regarding then the appellees as principals in the contract of sale, it is beyond all question that they are entitled to sue for the price of the goods sold, although the contract of sale be in the name of the agents actually making the sale. This is established as a clear proposition. When goods have been sold by a factor, says Chancellor Kent, (2 Com., 632,) “ the owner is entitled to call upon the buyer for payment before the money is paid over to the factor; and a payment to the factor, after notice from the owner not to pay, would be a payment by the buyer in his own wrong, and it would not prejudice the rights of the principal. If however the factor should sell in his own name as owner, and not disclose his principal, and act ostensibly as the real and sole owner, the principal may, nevertheless, afterwards bring his action upon the contract against the purchaser, but the latter, if he bona fide dealt with the factor as owner, will be entitled to set-off any claim he may have against the factor, in answer to the demand of the principal.” This principle is founded upon a series of cases, at the head of which is the leading case of George vs. Claggett, 7 T. Rep., 359. It follows therefore that the first prayer of the appellees, which asserted their right to maintain the action, was properly granted; and that the third and fourth prayers of the appellants, which denied such right, were properly refused by the Court below.

2. We come next to the appellants’ right of set-off as against the appellees.

This right of course depends upon the circumstances under which it is claimed.

It appears from the testimony of one of the appellants, who was examined as a witness, that the claim for set-off originated in two separate loans to Goodwin, Oliver & Co., made on the 29th of November, and the 16th of December, 1870, before, and without any sort of connection with, the sale of the goods, the price of which is sued for. These loans were made on call; and upon being called for, after the sale of the goods, time was extended for payment, under an agreement by which notes were to be given, with the right to renew.

The same witness also proved that he knew that the appellees were the Philadelphia agents for the sale of the “ Simpson Prints,” and believed that Goodwin, Oliver & Co. were the Baltimore agents; but he never knew that the goods pur-' chased by his firm came from the appellees; that their name did not appear in the transaction; that he had supposed Goodwin, Oliver & Co. to be the Baltimore agents of the manufacturers of the goods, Simpson & Sons; and that he knew Goodwin, Oliver & Co. to be commission merchants, selling goods on commission. These facts are proven by the appellants themselves, and may be taken as admissions by them.

The general proposition is well settled that “ where a principal permits an agent to sell as apparent principal, and after-wards intervenes, the buyer is entitled to be placed in the same situation at the time of the disclosure of the real principal as if the agent had been the real contracting party, and is entitled to the same defence, whether it be by common law or by statute, payment or set-off, as he was entitled to at that time against the agent, the apparent principal.” Isberg vs. Bowden, 8 Exch., 852; George vs. Claggatt, 7 T. Rep., 359; Carr vs. Hincliff, 4 B. & Or., 551; Sims vs. Bond, 5 B. & Ad., 393; Fisher vs. Kempton, 7 M. G. & S., 687.

But while this is the general principle that applies to such cases, the buyer must be cautious, and not act regardless of the rights of the principal, though undisclosed, if he has any reasonable grounds to believe that the party with whom he deals is but an agent. Hence, if the character of the seller is equivocal — if he is known to be in the habit of selling sometimes as principal and sometimes as agent, a purchaser who buys with a view of covering his own debt and availing himself of a set-off, is bound to inquire in what character he acts in the particular transaction; and if the buyer chooses to make no inquiry, and it should turn out that he has bought of an undisclosed principal, he will be denied the benefit of his set-off. Add. cm Gont., 1191. If by due diligence the buyer could have known in what character the seller acted, there would be no justice in allowing the former to set-off a bad debt at the expense of the principal. Fish vs. Kempton, 7 M. Gr. & S., 687.

Here the facts are uneontroverted, that the appellants did believe, and of course acted with reference to that belief, that Goodwin, Oliver & Co. were but agents in the sale of the goods purchased by them; and that they, the appellants, knew the character of the business of Goodwin, Oliver & Co. to be that of factors and commission merchants. With such knowledge it would be rather difficult to sustain the right of set-off claimed in this case, according to the authorities upon which the right is founded.

In the recent case of Semenza vs. Brinsley, 18 C. B., N. S., 467, it was held, that a party who bought goods of a person whom he knew to be selling them as agent, could not set-off, in an action by the principal for the price, a debt due to him from the agent, oven though he did not, at the time of the purchase, know and had not the means of knowing, who was the real owner. It was further held, that the plea of set-off was vicious, because it did not allege affirmatively that which ivas said to be the gist of the defence, viz: that the defendant did not know, and had not the means of knowing, that the. pai’ty selling the goods was a mere agent in the transaction.

Upon the principle of the authorities just cited, it would appear to be free of all doubt, that the Court below was right in granting the appellees’ second and third prayers; and its ruling was equally correct in rejecting the first and second prayers on the part of the appellants. The second prayer of the appellants was also objectionable upon other grounds than its conflict with the principle of law to which we have referred ; there was not evidence in the cause, legally sufficient, from which the jury could have found some of the facts embraced in its hypothesis.

The appellants’ fifth prayer was intended to present the law, according to what was supposed to be the proper construction of the 7th section of the 3d Article of the Code, in relation to agents and factors. But we think the prayer was properly rejected by the Court below.

The section of the Code referred to was intended to apply to cases, not like the present, but where sales or contracts of sales have been made by agents, known to be acting as such, who become insolvent before the payment of the purchase ■money, and where the principal, whether known or not at the time of sale, may sue for and receive the money due on the sales, without being subject to any set-off that may have accrued between the person acting as agent and the buyer, “ unless such claim of set-off shall have arisen in a course of dealing with the said agent or factor, acting as such for the same principal or owner, or from previous advances of money or materials found, or work or labor done for the use or advantage of the said principal or owner.” In construing this provision of the statute, we do not concur with the suggestion made at the bar, that it was the intention of the, Legislature to restrict the right of set-off as it previously existed, in cases of sales made by agents, who were honestly supposed by the buyers at the time to be acting as principals or owners. To adopt such a construction would most likely, in many cases at least, lead to deception and fraud.

But in this case, the appellants knew, or had reasonable grounds for knowing, according to their own statement, that Goodwin, Oliver & Co., were not acting as principals in fact in the sale of the goods, but as mere agents; and as the loans were made to them by the appellants, which constitute the claim of set-off, sometime before the goods were sold, and not in a course of dealing for and on account of the appellees as principals of Goodwin, Oliver & Co., it follows that the section of the Code, under which the fifth prayer of the appellants was framed, can have no application to the case. The Court below was therefore right in rejecting the prayer.

(Decided 18th March, 1872.)

Concurring with the Court below in its rulings on the several propositions embraced in the exception of the appellants, we shall affirm the judgment.

Judgment affirmed.