Calhoun v. McCrory Piano & Realty Co.

129 Tenn. 651 | Tenn. | 1914

MR. Justice Landsden

delivered the opinion of the Court.

One Brown was an agent of the piano company, without authority to borrow money, but with authority to make sales of pianos and collect the purchase price of the pianos sold. He defaulted in his remittances for the sales of pianos, and to make good his defalcation borrowed $360 from Miss Banks and executed a note, therefor, signed ‘ ‘ The McCrory Piano & Realty Company, M. R. Brown, Mgr.” After the maturity of the note, Miss Banks sold and indorsed it to Calhoun. Calhoun filed this bill against the piano company to recover the amount. The piano company did not know that Brown had borrowed the money, nor did it know that any part thereof had been received by it until after Brown absconded and left its service. Brown deposited the money received from Miss Banks in a bank to his own credit, and remitted $300' of the amount to the piano company by his own check, which the piano company credited to Brown’s account.

The chancellor and the court of civil appeals held that the piano company is not liable, to Calhoun upon the note. We denied a petition for writ of certiorari at a former day, and the case is now before us upon petition to rehear. It is earnestly insisted by the petitioner that the piano company is liable, because it re-ceivecl the benefit of the loan, and it is said that the actnal money received from Miss Banks has been traced into the hands of the piano company. Bannatyne v. McIver, cited in the Conrt of Appeal of England, 1 K. B. 103, 3 Ann. Cases, 1143, is relied upon as anthority to sustain the complainant’s claim.

If liability against the piano company can be sustained at all, it must be upon some equitable principle. There is no liability at law, because Brown was without authority to borrow the money, and the defendant has not ratified his transaction.

Bannatyne’s Case is based upon the judgment of Lord Selborne in Blackburne Bldg. Soc. v. Cunliffe, 22 Ch. D., 6172. In his judgment in that case, Lord Sel-borne thought that the equity allowed there was consistent with the general rule of law that persons “who have no borrowing powers cannot, by borrowing, contract debts to the lenders.” He thought the principle of law stated and the equity enforced there could be harmonized upon the principle that, if the one without power to borrow should use the money to discharge liabilities of his principal, the amount of the principal’s liabilities would not be changed, and therefore there was no substantial borrowing in the result, so far as the position of the principal was concerned. In substance, this is undoubtedly true, and in such a case the principal, who receives the benefit of the money borrowed, is liable to the lender. In Bannatyne’s Case it appeared that the lender did not know of the want of authority in the agent to borrow money. In .the later case of Reversion Fund, etc., v. Maison Cosway, Ann. Cases, 1913, p. 1106, it appeared that the lender knew that the agent was without power to borrow, hut the sums borrowed were used to discharge outstanding liabilities of the principal, and the rule laid'down by Lord Selborne was applied as in Bannatyne’s Case. The underlying equity in those cases is that the principal has received the benefit of the borrowed money in such way as not to enlarge his liability. But such is not this case. The agent here borrowed the sum in controversy to discharge in part his own defalcation with his principal. If the principal should be required to pay the note in suit, its liabilities would be increased in precisely the amount of the judgment.

It is a well-settled doctrine of equity that, where a principal obtains the benefit of a loan procured by his. agent acting without authority, he thereby ratifies the unauthorized contract, and makes himself liable to the lender for the sum received. This is in fact a statement in another form of the doctrine announced by Lord ■ Selborne, supra. The principal, however, cannot be said to have received the benefit of an unauthorized loan, unless the sum borrowed is used to increase his money in hand, or which he is entitled to receive from the agent, or unless it is used to extinguish outstanding liabilities against him.

In this case Brown was due the piano company a larger sum than that which he remitted to it out of the loan procured from Miss Banks. The piano company received this remittance from Birown in such manner that, as between them, it was a remittance npon sales of pianos, and therefore was the company’s money. Its liabilities were not decreased, and • its money in hand was not increased. Therefore the mere act of retaining the sum remitted to it by Brown is not a ratification in equity of the unauthorized transaction.

Cases illustrating the general subject: Alton Mfg. Co. v. Garrett Biblical Institute, 243 Ill., 298, 90 N. E. 704; McAdow v. Black, 4 Mont., 475, 1 Pac. 751; Mundorff v. Wickersham 63 Pa., 87, 3 Am. Rep. 531.