Wilson v. Smith/Opinion of the Court

THIS case camp up on a certificate of division in opinion between the judges of the Circuit Court of the United States for the district of Georgia.

The record being very short, it will be inserted entire.

'This was an action of assumpsit brought in this court by the plaintiffs, to recover from the defendant the sum of eight hundred dollars and interest, being the amount of a draft or bill of exchange drawn by one Henry B. Holcombe, of Augusta, in the state of Georgia, upon one Charles F. Mills, of Savannah, in said state, and accepted by him, and paid to the defendant. The declaration contained two counts. The first was for money collected and received by the defendant to and for the use of the plaintiffs, upon the particular bill of exchange set out and described in the declaration; the second count was generally for money had and received. The plea of non-assumpsit was pleaded by the defendant in bar of the action, 'it being proved that the draft or bill of exchange upon which the money was collected and received by the defendant was the property of the plaintiffs;' that it had been by them placed in the hands of their agent, David W. St. John, at Augusta, Georgia, for collection, and by him, St. John, forwarded to the defendant, St. John's agent, at Savannah, Georgia, for acceptance and collection; that it was accepted and paid to the defendant, by whom the proceeds were received and credited to the account of St. John, from whom the defendant received the draft or bill for collection, and who was indebted to the defendant at the time. That at the time the said bill was so paid to the defendant, and by him credited to the account of St. John, he, St. John, had failed in business, and had departed this life; that he failed, and had not recovered his affairs at the time of his death, and was insolvent; that the credit for the amount of the bill, carried by the defendant to St. John's account, was made in payment of a previously existing debt due by St. John to the defendant, no new transaction having arisen between the defendant and St. John after the payment of the said bill to the defendant; 'that to secure the payment of his debt to the defendant, St. John had transferred to the defendant three hundred shares of the capital stock of the Augusta Insurance and Banking Company, upon which $100 per share had been paid; that the defendant appeared satisfied with this security, and that St. John would then have given additional security had the defendant required it.' That the draft or bill of exchange was made payable to the order of Henry B. Holcombe, the drawer, and by him endorsed in blank, and endorsed by St. John to H. Smith, Esq., (the defendant,) or order. That when the draft was sent to the defendant for collection he was not apprized to whom it belonged, nor were any instructions or directions given to him as to the disposition of the money when collected.

'The following point was presented, during the progress of the trial, for the opinion of the judges, on which the judges were opposed in opinion, viz.: Whether there was such privity of contract between the plaintiffs and defendant, either express or implied, as would enable the plaintiffs to maintain the action for money had and received.

'Which said point, upon which the disagreement has happened, is stated above, under the direction of the judges of the said court, at the request of the counsel for the parties in the cause, and ordered to be certified into the Supreme Court of the United States at the next session, pursuant to the act of Congress in such case made and provided.'

Berrien, for the plaintiffs.

Nelson, (attorney-general,) for the defendant.

Berrien. The question is, whether there is such a privity of contract between the plaintiff and defendant, either express or implied, as will enable the plaintiff to sustain the action for money had and received.

It is not necessary that the relations of contract should exist between the parties.

There are many cases in which the defendant has received the money of plaintiff, under circumstances which would render him liable ex delicto, in which plaintiff is permitted to waive the tort, and sue in this action. 1 Leigh, N. P., 45, 46. Wherever defendant has received money, the property of plaintiffs, which defendant is bound ex aequo et bono to refund, it may be recovered in this action. Moses v. McFarlane, 2 Burr., 1012. The true question is the right of plaintiff to receive, or of defendant to retain the money.

In the eye of the law, there is always such privity of contract as is necessary to sustain this action, between a person who holds the money of another, which in equity and good conscience he is bound to refund, and the person whose money is thus withheld. Camp v. Tompkins, 9 Conn., 553.

Again. Where one has received the money of another, and has not the right to retain it, the law will imply privity of contract. Mason v. Waite, 17 Mass., 560; Hall v. Marston, Id., 575.

Two propositions may be laid down.

1. On the facts stated, Smith, defendant, was the agent of plaintiffs, bound to account to them on notice of their claim; and, therefore, the amount collected by him was money had and received to their use.

2. That his ignorance of the real owner of the bill cannot affect the right of plaintiffs to recover in this action, on notice and proof of their title, so long as defendant stands in his original situation, and until there has been a change of circumstances, by his having paid over the money to his immediate employer, or done something equivalent to it.

1. Smith, the defendant, was the agent of plaintiffs. The case states,--

1st. That the bill was the property of plaintiffs.

2d. That it was collected by defendant, who received it from St. John, the agent of plaintiffs.

On this state of facts, did the necessary privity exist? or, in other words, had defendant the right to retain after notice of plaintiffs' claim?

It is objected that delegated power cannot be delegated without authority for that purpose, because it implies trust and confidence, which cannot be assigned to a stranger. That the sub-agent has no claim upon the principal, for commissions, advances, &c., therefore is under no responsibility to him, his sole remedy being against his immediate employer, and therefore that his sole responsibility is to him. For qualifications of the rule, see Story on Agency, § 14, p. 16.

Authority implied.

Licensed auctioneer.-1. When indispensable by the laws to accomplish the end.

Ship-broker.-2. Ordinary usage of trade.

Factor.-3. Where understood by parties as the mode in which the business would or might be done.

The authority exclusively personal, unless from express provision, legal necessity, usage of trade, or fair presumptions growing out of particular transactions, a broader power was intended to be conferred. Story on Agency, § 14, p. 17.

Test the present case, by this rule, thus qualified.

A foreign house, holding a bill drawn on a citizen of Savannah, in Georgia, has a correspondent at Augusta, in the same state, to whom he remits it for collection, and by whom it is sent to his correspondent in Savannah, where the drawee resides.

Is this not conformable to the usual course of such transactions? Could plaintiffs have expected that St. John, abandoning his own place of business, should have repaired to the distant residence of the drawee, to present this bill personally? Would not the remittance of it there, to his correspondent, by 'understood by the parties to be the mode in which this particular business would or might be done?' Was St. John bound to do more than select a competent and trust-worthy agent to receive the contents of the bill? If with the bill he had stated plaintiffs' interest, would any have doubted that defendant would have been the agent of plaintiffs in this matter? and does this not settle the right to delegate his authority? What effect withholding that information would have, will be considered hereafter.

It suffices at present, in order to sustain the first position, to show that this bill was dealt with according to the usual mode of transacting such business. That in appointing a sub-agent, St. John did no more than plaintiffs designed and intended. If so, defendant was agent of plaintiffs, by an authorized substitution; an authority implied from the circumstances, and as strong as if expressly given; and, as their agent, is, therefore, directly accountable to them for the money received under that agency, as money had and received to their use.

2. Defendant's ignorance of the real owner of the bill, and St. John's prior indebtedness to him, cannot affect plaintiffs' right to recover, unless, before notice of their claim, defendant had made advances to St. John, or delayed his prior claim against him, relying for reimbursement or payment on this fund.

St. John, in remitting the bill, did not state that plaintiffs were owners of it. He was indebted to defendant, who, on receiving its contents, credited him in account, and now claims to retain the money of plaintiffs, in payment of the debt due to him by St. John.

The defendant's having passed the money, in account, cannot affect this question; Buller v. Harrison, Cowp., 565; Coxe v. Prentice, 3 Mau. & Sel., 348. Lord Ellenborough says, 'I take it that an agent who receives money for his principal, is liable as a principal so long as he stands in his original situation, and until there has been a change of circumstances,' &c. &c.

This money is, therefore, to be considered as in the hands of defendant, without any disposition having been made of it. Defendant's want of knowledge that the money belonged to the plaintiffs, cannot affect their right after notice and proof of their title. De Valengin's Adm'r. v. Duffy, 14 Pet., 282, 290. This was a case where money was received by an administrator, as property belonging to his intestate, though it belonged in fact to another. The court said, that 'the want of knowledge, or the possession of knowledge, on the part of the administrator, as to the rights or claims of other persons, on the money thus received, cannot alter the rights of the party to whom it is ultimately due.'

Something more is necessary to enable a sub-agent to retain for his general balance against his immediate employer, than his mere want of knowledge of the real principal. Story on Agency, §§ 389, 390, pp. 481, 483, and the authorities there cited. The lien exists for advances made, and (as it seems) for his general balance. But why? The reason is given. It is the presumption that the advances were made, or the demand delayed, relying on the credit of the fund allowed to remain in his hands. No advances were made in this case. Defendant did not rely on this fund for the payment of his demand. He did not delay it. That demand was prior, and had been secured to the satisfaction of defendant by a pledge of bank stock.

When St. John failed, and the security became (as is to be presumed) inadequate, then, for the first time, defendant looked to this fund, but he had undertaken the agency without any such reliance. The presumption is, therefore, negatived by the facts of the case; The Bank Metrop. v. New England Bank, 1 How., 234. This will probably be relied on. The court held:

1. That the paper in question continued the property of the New England Bank, notwithstanding the endorsement, these having been made to enable the agent to collect.

2. That a long course of dealing and repeated settlements in conformity to it, in which the parties were mutually credited with the proceeds of bills remitted by them, balances being suffered to remain, until they were reduced by the proceeds of bills and notes deposited, made this case the same in principle as if money had been advanced on the paper deposited.

The court said there was no difference in principles between an advance of money, and a balance suffered to remain upon the faith of these mutual dealings.

The case under consideration is unaccompanied by any of these circumstances. Here there was no advance made, or demand delayed in reliance upon this fund; or any course of dealing and usage founded upon it, by which balances were suffered to remain undrawn for, looking to reimbursement from the proceeds of bills or notes to be collected, which would be deemed equivalent, as in that case, to advances actually made.

Nelson, (attorney-general,) for the defendant.

The bill was drawn by Holcombe on Mills, accepted by Mills, and endorsed by Holcombe, and sent to Augusta for collection. All that was necessary was for St. John to endorse it in blank, but he endorsed it specially to Smith. In this state of the case, whose agent was Smith? to whom would he have written to give information of the payment or non-payment of the bill? Certainly to St. John, who would have compelled him to pay over the money. A defence by Smith, that he was not the proper person to be paid, would not have been listened to. A sub-agent can be created, and in this case Smith must have been the agent of St. John. The question of agency must settle that of privity of contract. Story Agency, 395 to 400, where the subject is discussed.

An agent is responsible only to his employer. Paley Agency, 48; 1 Liverm. Agency, 64, 65, 66; 6 Taunt., 148; 1 Ves., 291, 292; where a son was employed as sub-agent by his father, who was agent, and it was held that the son could not be an accounting party to the owner of the mine, because there was no privity. 14 East, 582; 1 Crompt. & J., 83; 3 Barn. & Ad., 354; 4 Id., 375; 2 Campb., 123.

It is said, by the other side, that usage must govern. This is admitted. But what usage or facts does the record show? Not that Smith was a factor or broker, but only that he was a creditor of St. John. The court cannot presume usage, and there is nothing in the record to show it.

What are the respective equities of the parties? The action for money had and received is analogous to a bill in equity Suppose that he bill had belonged to St. John, could he have claimed to receive the amount of it whilst he was a debtor? The creditor had a right to apply the fund to pay himself. It is admitted that if Smith had forborne to press St. John for the amount of this debt, he would have a right to retain the amount of this bill. But the plaintiff, by his acts, has been the cause of lulling Smith into a false security. Story, 483, 484.

Where a party may be supposed to rely on a particular security, it is enough. Case of New England Bank, 1 How., 234.

The death of St. John does not defeat the lien. Story on Agency, 378 to 388, authorities collected.

It is a general rule, that where a factor holds property as his own, the real owner cannot come in and claim, where third persons are concerned, having claims upon the agent. 5 Taunt., 56; 2 Bell Com., §§ 807 to 812; Chit. Com. L., 544, 545, 546; 2 Bell. Com., 789 to 806.

Berrien, in reply.

The controversy here is not about general principles, but their application. The cases in Taunton and 6 Vesey establish, that between a sub-agent and principal there is no privity. I do not deny the existence of the general rule which these cases support, but say that there are exceptions to the rule, of which this is one. (Mr. Berrien here examined the cases.) On of the exceptions is, where it is manifest that some other person would be employed.

As to the equities of the parties. Shall the defendant retain money which confessedly belongs to the plaintiff, when the position of the defendant has undergone no change in consequence of getting this money? If his circumstances had been changed upon this account, I have conceded that he could retain it. Smith could not have been lulled into a false security, because the statement affirms that no new transaction happened. St. John, therefore, could not have received a fresh advance. The case of the New England Bank was decided upon the ground that there had been 'mutual and extensive dealings;' that they 'did not draw;' and that these things were like an 'actual advance.' Strike these facts out of the case, and it would not have been decided as it was, but would then have resembled ours. Here is an insulated transaction, without any evidence of advance or forbearance.

Mr. Chief Justice TANEY delivered the opinion of the court.

We think the question certified has been settled by the decision of this court, and that it is unnecessary to go into an examination of the English laws which were cited in the argument. It is admitted that the bill was the property of the plaintiff, and was transmitted to St. John, at Augusta, for collection, and by him transmitted to the defendant, at Savannah, where the drawer resided; and that no consideration was paid for the bill, either by the defendant or St. John. According to the usual course of dealing among merchants, the transmission of the paper to St. John gave him an implied authority to send it for collection to a sub-agent at Savannah, for it could not have been expected by the plaintiff that St. John was to go there in person, either to procure the acceptance of the bill, or to receive the money, nor could St. John have so understood it. So far, therefore, as the question of privity is concerned, the case before us is precisely the same with that of the Bank of the Metropolis v. The New England Bank, 1 How., 234. In that case, the bills upon which the money had been received by the plaintiff in error, were the property of the New England Bank, and had been placed by it in the hands of the Commonwealth Bank for collection, and were transmitted by the last mentioned bank to the Bank of the Metropolis, in Washington, where the bills were payable. And upon referring to the case, it will be seen that the court entertained no doubt of the right of the New England Bank to maintain the action for money had and received, against the Bank of the Metropolis; and the difficulty in the way of its recovery in the action was not a want of privity, but arose from the right of the Bank of the Metropolis to retain, under the circumstances stated in the case, for its general balance against the Commonwealth Bank. In that case, as in the present, the agent transmitting the paper appeared, by the indorsements upon it, to be the real owner, and the party to whom it was transmitted had no notice to the contrary, and the money received was credited to the Commonwealth Bank. We think the rule very clearly established, that whenever, by express agreement between the parties, a sub-agent is to be employed by the agent to receive money for the principal, or where an authority to do so may fairly be implied from the usual course of trade, or the nature of the transaction, the principal may treat the sub-agent as his agent, and when he has received the money, may recover it in an action for money had and received.

Another question has been raised in the argument, that is, whether the defendant has a right to retain on account of the money due to him from St. John? As this point has not been certified, it is not regularly before the court, yet as it has been fully argued on both sides, and evidently arises in the case, it seems proper to express our opinion upon it, as it may save the parties from further litigation and expense.

Upon this part of the case, as well as upon the question certified, we think the case of the Bank of the Metropolis v. The New England Bank, decisive against the defendant. It appears from the statement that he made no advances, and gave no new credit to St. John on account of this bill. He merely passed it to his credit in account. Now if St. John had owed him nothing, upon the principles we have already stated, the plaintiff would be entitled to recover the money; and we see no reason why he should be barred of his action because St. John was debtor to the defendant, since the case shows that he incurred no new responsibility upon the faith of this bill, and his transactions with St. John remained in all respects the same as they would have been if this bill had never been transmitted to him. In the case of the Bank of the Metropolis and the New England Bank, it appeared in evidence that there had for a long time been mutual dealings between these two banks, in the collection of money for each other, and that balances were suffered to remain and credit given upon the faith of the paper transmitted or expected to be received, according to the usual course of their business with one another. And the court held, that if credit had been so given, the party giving it had the same right to retain as if he had made an advance of money; the hazard he ran by the extension of the credit giving him as just and equitable a right to retain, as if he had incurred responsibility by an advance of money. The right to retain, in that case, depended upon the fact that credit was given. But in the case at bar this fact is expressly negatived, and there is no ground, therefore, upon which he can retain, according to the principles decided in the case referred to.

As this point, however, is not in strictness regularly before this court, we shall confine our answer to the question sent here for decision, and shall direct it to be certified to the Circuit Court, that there was such a privity of contract between the plaintiffs and defendant, as would enable the former to maintain the action for money had and received.