274 Mass. 407 | Mass. | 1931
This suit in equity was heard by a judge of the Superior Court on the original bill and cross bill. The parties agreed that the securities which the plaintiff sought to have the defendants required to deliver to it had been so delivered since the suit was brought; that securities mentioned in the cross bill had been sold, and that if the defendants are entitled to recover on their cross bill, such recovery should be in the sum of $11,773.69, with interest. Both the original bill and the cross bill were dismissed. The plaintiff and defendants appealed.
The plaintiff is a trust company. The defendants are stockbrokers in Boston. The judge found that on March 1, 1929, the firm of Clement, Parker and Company, stockbrokers, was dissolved. John F. Barry was a member of this firm and on its dissolution he became a member of the defendants’ firm. A so called “ customers’ ” man, by the name of Palfrey, a bookkeeper, Poor, and other employees of Clement, Parker and Company entered the service of the defendants. For a time the Clement, Parker and Company office was continued as a branch of the defendants, but on or about June 14, 1929, it was given up and thereafter Barry, Palfrey and the other employees of Clement, Parker and Company were located at the defendants’ offices. Palfrey continued with the defendants until August 1, 1929, when he became an employee of another brokerage concern. The plaintiff had in its employ since 1903 one Morrill; he became its assistant treasurer in 1920; in June, 1929, he was appointed assistant vice-president in charge of the credit department.
It was the practice of the plaintiff to receive orders from its customers for the purchase or sale of securities, causing the orders to be executed through some brokerage house, the deposit accounts of the customer being charged with the amount of the purchases or credited with the proceeds of the sales. Morrill, with other employees of the plaintiff, had authority to conduct these transactions.
All of the securities listed in the memorandum attached to the findings of material facts were purchased by Morrill from the defendants by orders in the plaintiff’s name, but in reality for his own benefit. As to the question of the defendants’ knowledge that Morrill in buying on the credit of the bank was buying for himself, the evidence was conflicting. It is set out in the findings in detail. It appeared that a transfer of certain items from the plaintiff’s account to that of Morrill was made on the books of Clement, Parker and Company by direction of Palfrey after conferring with Morrill, and Palfrey knew that Morrill had purchased these items for his own benefit and not for the plaintiff’s customers. This transfer was on
It was found that Palfrey before he was employed by the defendants and while working for Clement, Parker and Company knew that Morrill was from time to time purchasing securities in the plaintiff’s name, although in reality for himself. Palfrey knew that these purchases were not authorized. While Palfrey was employed by the defendants he knew that certain items in issue were made by Morrill for himself and it was ruled that Palfrey’s knowledge was to be imputed to the defendants and was sufficient to put the defendants upon inquiry as to all subsequent purchases; that, although some of the purchases in issue were made by Morrill without authority after Palfrey ceased to be employed by the defendants, these purchases were so far related to the transactions of which the defendants’ agent knew that the constructive knowledge which arose during Palfrey’s employment still continued after he had ceased to be employed by the defendants, and that notice to an agent, while acting for his principal, of facts affecting the transaction is constructive notice to the principal. Brooks v. Shaw, 197 Mass. 376. Cotter v. Nathan & Hurst Co. 218 Mass. 315. Merchants National Bank v. Marden, Orth & Hastings Co. 234 Mass. 161, 171.
Morrill was the agent of the plaintiff, but the responsible agents of the plaintiff had no actual knowledge of Morrill’s wrong doing until October 28, 1929, and had no knowledge of the transactions here in question; nor were the circumstances attending these transactions sufficient to put such officials upon inquiry. On the other hand, Palfrey had actual knowledge that certain purchases made by Morrill ostensibly as agent for the plaintiff were made for himself. Palfrey knew this before he became the agent of the defendants and he had this knowledge while he continued in their employ. He was the agent of the defendants to conduct the transactions and as to unauthorized purchases made by Morrill during the employ
The more difficult question is whether the defendants had constructive knowledge of Morrill’s conduct in excess of his authority after Palfrey had left their employment. Decisions are to be found which hold that, once the agency has come to an end, the knowledge of the former agent is no longer imputed to the principal; that, the principal being no longer in receipt of the benefits of the agency, he is no longer to bear the burden of his knowledge. See Blackburn, Low & Co. v. Vigors, 12 App. Cas. 531; Murray v. Preferred Accident Ins. Co. 199 Iowa, 1195, 1203. But this rule is not followed under all circumstances and the principal may be bound by the knowledge of the agent after the relation has ceased. The theory of this distinction is that it is to be presumed that the agent communicated his knowledge to the principal. The defendants while Palfrey was their agent knew constructively what Morrill was doing in a continuing series of transactions of large amounts; they knew that he was exceeding his authority, that this was his regular course of business and this same course of business continued after Palfrey was no longer the agent of the defendants. Birmingham Trust & Savings Co. v. Louisiana National Bank, 99 Ala. 379. See Bland v. Shreveport Belt Railway, 48 La. Ann. 1057; Loring v. Brodie, 134 Mass. 453, 462.
The defendants rely on Blackburn, Low & Co. v. Vigors, 12 App. Cas. 531. We are of opinion, however, that the extended dealings of Morrill and the nature of the business carried on by him with the defendants distinguish the present case from Blackburn, Low & Co. v. Vigors. The constructive knowledge of the defendants related not only to the particular transactions but to the whole course of dealing. In this respect on the facts shown no distinction is to be made between constructive and actual knowledge. For if the defendants had actual knowledge of Morrill’s conduct while Palfrey was in their service, the informa-, tian, even after Palfrey’s services were concluded, would bind them. In view of the nature of the business and the way in which it was carried on, the constructive knowl
Palfrey was not engaged in a fraud of his own when concealing his information of Morrill’s acts; he was working as the defendants’ agent and seeking to hold the business furnished by Morrill for his employers. Innerarity v. Merchants’ National Bank, 139 Mass. 332, and similar cases, therefore, are not applicable.
The plaintiff contends that Barry also had knowledge that Morrill was acting beyond his authority. We do not think it necessary to discuss this point further than to say that the judge who heard the evidence found as a fact that Barry did not know of Morrill’s misconduct with reference to the items now in issue, notwithstanding his earlier knowledge. This finding, in our opinion, should stand.
The defendants cannot recover from the plaintiff because the securities were in fact purchased by Morrill for himself while acting as agent for the plaintiff and the defendants had constructive knowledge that Morrill exceeded his powers in the transactions. The decree dismissing the plaintiff’s bill and the cross bill is affirmed, with costs to the plaintiff.
Ordered accordingly.