Haas v. Ruston

14 Ind. App. 8 | Ind. Ct. App. | 1895

Lotz, J.

It is apparent from the rulings made, and the judgment rendered, that the court below, from the facts alleged in the pleadings, reached these legal conclusions: (1) That the broker had no power to make contracts in his own name and without the knowledge or consent of his principals, which would be binding upon them in favor of the other contracting parties; (2) that as the broker had made contracts which were capable of being enforced by his principals, the principals were liable to him for his commissions; (3) that the circular letter of July 20th relating to the confirmation of sales was not controlling.

The main and controlling question in this controversy is, can a broker make a contract in his own name without the knowledge and consent of his principal, that will bind both his principal and the other contracting party ?

A broker is a peculiar kind of an agent, and brokerage is a peculiar kind of agency. It is the business of a broker, to negotiate contracts between others in matters of trade and commerce. He usually deals with the contracting parties and not with the things which may be the subject of the contract. He has neither interest in nor possession of the property which it is his business to buy or sell for others, and ordinarily he has no implied power to buy or sell in his own name. It is in these respects that a broker differs from a factor and from an ordinary agent.

The office and duty of a broker is stated in Domat’s Civil Law, part 1, book 1, title 17, article 1, as follows:

“1204. The Office of a Broker. — rThe engagement of a broker is like to that of a proxy, a factor or other agent; but with this difference, that the broker being employed by persons who have opposite interests to manage, he is, as it were, agent both for the one and the other, to negotiate the commerce and affair in which he concerns himself. Thus, his engagement is two-fold, and consists in being faithful to all the parties in the execution of what every one of them intrusts him with. And his power is not to treat, but to explain the intentions of both parties; and to negotiate in such a manner, as to put those who employ him in a condition to treat together personally.”

In Story on Agency, the office of broker is thus defined:

“Section 28. Secondly. Brokers. The true definition of a broker seems to be that he is an agent, employed to make bargains and contracts between other persons, in matters of trade, commerce or navigation, for a compensation, commonly called brokerage. Or, to use the brief but expressive language of an eminent judge, ‘a broker is one who makes a bargain for another, and receives a commission for so doing.’ Properly speaking, a broker is a mere negotiator between the other parties, and he never acts in his own name, but in the names of those who employ him. Where he is employed to buy or sell goods, he is not intrusted with the custody or possession of them, and is not authorized to buy or to sell them in his own name. He is strictly, therefore, a middle man, or intermediate negotiator between the parties. ”

Again, section 34 of the same authority, the difference between factor and broker is thus stated :

‘ ‘ Section 31. A factor differs from a broker in some important particulars. A factor may buy and sell in Ms own name, as well as in the name of his principal. A broker (as we have seen) is always bound to buy and sell in the name of his principal. A factor is intrusted with the possession, management, control, and disposal of the goods, to be bought or sold, and has a special property in them, and a lien on them. A broker, on the contrary, usually has no such possession, management, control, or disposal of the goods, and 'consequently has no such special property or lien.”

1 Bell Comm. p. 508, fourth edition, in comparing the duties of factor and broker, says :

“The character of factor and broker is frequently combined, the broker having possession of what he is employed to sell, or being empowered to obtain possession of what he is employed to purchase. Properly speaking, in these cases, he is factor.”

Again the relation of broker and factor is clearly stated by Story, section 109 :

“Section 109. Secondly, as to brokers. These, as we have seen, have 'an .incidental authority to sign the contract for, and as the agent of, both parties. A broker employed to effect a policy, has an incidental authority to adjust losses upon it; and, if employed to settle losses, he has authority to refer a disputed loss to arbitration. A broker employed to buy or sell without limitation of price, has the incidental authority to bind his principal by any price, at which he honestly buys or sells. So, a broker authorized to sell goods without any express restriction as to the mode, may sell the same by sample or with warranty. Ordinarily, he cannot make the contract in his own name, but ought to do it in the name of the principal. There are exceptions, however, by the usages of trade, as in cases of policies of insurance, which are usually made in the name of the policy broker, and he may then sue thereon. So, he cannot buy or sell on credit, except in cases justified by the usages of trade. So, a broker has ordinarily no authority virtute officii, to receive payment for property sold by him; and, if payment is made to him by the purchaser, it is at his own risk, unless from other circumstances the authority can be inferred. ”

The leading case in which the distinction between a broker and that of a factor and other agents is carefully pointed out, is that of Baring v. Corrie, 2 B. and Ald. 137 (143). The court by Abbott, C. J., said : “ The distinction between a broker and a factor is not merely nominal, for they differ in many important particulars. A factor is a person to whom goods are consigned for sale by a merchant residing abroad, or at a distance from the place of sale, and he usually sells in his own name, without disclosing that of his principal. The latter, therefore, with full knowledge of these circumstances, trusts him with the actual possession of the goods, and gives him authority to sell in his own name. But the broker is in a different situation; he is not trusted with the possession of the goods, and he ought not to sell in his own name. ” To the same effect Mr. Justice Holroyd observed, in the same case, that a factor ‘£ is a person to whom goods are sent or consigned, and he has not only the possession, but in consequence of its being usual to advance money upon them, he has also a special property in them and a general lien upon them. When, therefore, he sells in his own name, it is within the scope of his authority : and it may be right therefore, that the principal should be bound by the consequences of such sale ; amongst which, the right of setting off a debt due from the factor is one. But the case of a broker is different; he has not the possession of the goods, and so the vendee cannot be deceived by that circumstance; and besides, the employing of a person to sell goods as a broker does -not authorize him to sell in his own name. If, therefore, he sells in his own name, he acts beyond the scope of his authority, and his principal is not bound.” Ewell’s Evans Agency, page 4.

Again in Ewell’s Evans on Agency, side page 122, the authority of a broker is most clearly stated, both as to acts authorized and prohibited. After giving fully what is the implied authority of broker, it is stated:

‘ ‘A broker has no implied authority : (a) To buy or sell in his own name. The case of an insurance broker is an exception fco this rule; he need not even state that he contracts as a broker. (b) To receive payment for goods sold for his principal. But an insurance broker has authority to receive payment of any loss that may occur on a policy effected by him, if the instrument remains in his hands.” See also Irwin v. Williar, 110 U. S. 499; White v. Chouteau, 10 Barb. 202; Buckbee v. Brown, 21 Wend. 109; Dugan v. United States, 3 Wheat. 172; Pott v. Turner, 6 Bing. 702; State v. Duncan, 16 Lea (Tenn.) 75.

It would seem, from the authorities, that the only exception to the rule that a broker cannot contract in his own. name, is in the matter of insurance policies.

The appellant cites and relies upon as holding a contrary doctrine the cases of Knapp v. Simon, 96 N. Y. 284; Saveland v. Green, 36 Wis. 612. In these cases, however, it appears that the. broker made the contract in his own name at the request or with the knowledge of the principal.

The distinction between the powers of a broker and that of a factor is supported by reason as well as by authority. A factor has the possession of the goods, frequently lias a lien upon them for moneys advanced. He has one of the indices of title. The contract is made upon his credit, and, although in his name, it may he enforced both as against himself and against his principal, and be enforced both by him and his principal against the other contracting parties. -An ordinary agent, acting in the scope of his authority, may bind his principal when the contract is made for the principal’s benefit, although made in the name of the agent; and the principal may enforce the contract, or it may be enforced against him. Although the contract may have been made upon the credit of the agent, the other contracting party may, when he discovers the principal, elect to pursue the principal instead of the agent, and in some instances he may pursue both. Mech. Agency, sections 558, 977 ; Lawson Cont., section 197.

It is true that the principal is bound to indemnify his agent for all acts lawfully done in the execution of his authority. This includes all expenses properly incurred, and extends to all acts done by the agent in the course of his agency in which he has incurred or undertaken a liability or sustained damages. Lawson Cont., section 179.

But the principal is not liable to the agent for acts ultra vires, or in excess of his authority, unless the acts have been ratified.

A broker occupies a peculiar .relation to the contracting parties; he frequently represents both, and is often entitled to a commission for buying and a commission for selling in the same transaction. He has no possession that can mislead one of the contracting parties. If he were permitted to make contracts in his own name for his principal, and without the principal’s knowledge, he would be in a position to take advantage of a rise or fall in prices.

The contract being in his own name he might claim the profits, and in the event of loss cast it upon his principal. His powers might be much abused and the interests of the principal sacrificed. It is for these reasons that the policy of the law forbids a broker from contracting in his own name without the knowledge or consent of the principal.

Appellant’s learned counsel contend that the- circular letter of July 20, under the circumstances averred, is not controlling.

This letter and the letter and telegram of August 10 th must be construed with reference to the situation of the contracting parties, and we must take into consideration the motives that actuated the parties and the means used and the purposes sought to be accomplished. The parties were several hundred miles apart — one in the city of Savannah and the other in the city of Evansville. The last letter and the telegram and the quick communication made use of indicate that the appellees were desirous of making quick sales at prices named. Kirwan v. Van Camp Canning Co., 12 Ind. App. 1.

Again the last letter and the telegram were in writing while the circular letter was printed.

It is a familiar rule that when a contract, or contracts, and other instruments, are partly written and partly printed, and a conflict arises between such portion, the written portions are entitled to a higher consideration tha¡n the printed portions in ascertaining the intention of the parties.

Conceding, without deciding, that the circular letter is not controlling, still the contracts were not binding upon the appellees, for they never authorized them to he made in the name of the appellant.

If the appellees repudiated the contracts upon the ground that they had never been confirmed or accepted by them, this did not deprive them of the right to repudiate them upon another ground, especially if they learned of such cause subsequently to the first repudiation.

It may be said that the act of the broker in taking the contracts in his own name was an act.in the interest of his principals, and they ought not be permitted to take advantage of it. It is true that the appellant pledged his own credit for the benefit of the appellees, and it seems like a hardship to permit them to profit by an act done for their benefit. Whilst a seeming hardship results in this particular instance, yet the integrity of the rule that a broker cannot make a contract in his own name binding upon the principal, without his knowledge, must be upheld. If this rule should be broken down or varied, far greater injuries might result.

The claim for commissions is affected by the same infirmity that affects the claim for damages on account of the failure to fulfill the contracts. They both spring from the same source, from contracts which, under the circumstances averred, have no binding force upon the appellees.

It is true that the contracts resulted in furnishing the appellees with customers for their flour, but to say they are liable for commissions and are not liable for the damages, is to draw two inconsistent deductions from the same premises.

Here again á hardship results, but it arises from the necessity of maintaining the integrity of the rule above stated.

Filed November 26, 1895.

Judgment reversed on the cross errors, with instructions to sustain appellees’ motion for judgment on the pleadings.