Atkins v. Cotter

• Decision Date: 11 October 1920
• Docket Number: 159
• Citation: 224 S.W. 624,145 Ark. 326
• Parties: ATKINS v. COTTER
• Court: Arkansas Supreme Court

224 S.W. 624

145 Ark. 326

ATKINS v. COTTER

No. 159

Supreme Court of Arkansas

October 11, 1920

Appeal from Lee Chancery Court; A. L. Hutchins, Chancellor; modified and affirmed.

Caruthers Ewing, for appellant.

1. Agency must be shown by positive proof or circumstances justifying the inference that the principal has assented to the acts of the agent (126 Ark. 405), and what the agent said if anything can not be looked to as even tending to establish his authority as agent. 93 Ark. 600; Ib. 315; 90 Id 104; 1 Mechem on Agency, § 288; 21 R. C. L., p. 280 § 6; 31 Cyc., p. 1652, § C; 129 F. 583; 65 N.W 403-5; 22 Id. 276-7; 4 Heisk. (Tenn.) 542.

2. The mere fact that a principal receives and retains the benefits of the unauthorized act of another will not amount to ratification if what the agent said or did in the transaction if the principal was in ignorance of what the agent had said or done. 74 Ark. 557; 64 Id. 217; 55 Id 240; 2 C. J. 495. In line with the Arkansas cases and the statement in 2 C. J. 495 and many cases, see Ala. 446; 3 Col. App. 49; 32 P. 176; 102 Ill. 84; 12 N.W. 323; 13 P. 388; 49 S.W. 77; 27 N.E. 519; 84 N.W. 63; 62 Id. 194; 51 Vt. 414.

3. One dealing with an alleged agent not a general agent is put on notice of the limitations of the agent's authority, and must ascertain what that authority is, and if he fails to do so he deals with the agent at his peril. 104 Ark. 150; 132 Id. 371; 105 Id. 110; 92 Id. 315; 62 Id. 33; 23 Id. 411.

4. The rule that the principal is chargeable with facts known to the agent only applies when agency is established. It then does not apply if the facts are such that it is reasonably certain that the agent would conceal them from his principal, and it becomes the duty of the one dealing with the agent to make the facts known to the principal himself. 95 Tenn. 53; 143 N.Y. 559; 26 So. 422; 38 La.Ann. 435; 27 N.J.Eq. 33; 59 N.J.L. 225; 87 Wis. 378; 154 Ill. 301; 216 Id. 598; 72 Conn. 666; 122 Ga. 362; 93 Ia. 389; 76 Ind. 47; 105 S.W. 130; 14 L. R. A. (N. S.) 376.

5. Every agency is subject to the legal limitations that it can not be used for the benefit of the agent himself or of any other person than the principal in the absence of an agreement that it may be so used; and as this is a matter of law and not of fact, all persons must take notice of it. 21 R. C. L., p. 910; 2 C. J., p. 837; Hufcutt on Agency, 185; 1 Mechem on Ag., art. 754; 139 N.Y. 146; 143 Id. 559; 70 L. R. A. 315; 26 A. 914; 22 L. R. A. (N. S.), 414.

6. The complainants mistake as to the extent of the liability of Mr. Cotter for the debts of the firm of Atkins & Cotter is ineffective to release him, and, in spite of her error in this behalf, he remains liable for the entire debt. Elliott on Cont., art. 114; Page on Contracts, art. 172; 35 N.E. 598.

7. An insurable interest is necessary to the validity of a life insurance policy, and one without insurable interest can acquire no rights because his interest is against public policy. 132 Ark. 458; 98 Id. 52; 116 Id. 527; 119 Id. 498.

8. Where the relation out of which insurable interest grows is terminated, as the divorce of husband and wife, or as between partners on dissolution of the firm, the insurable interest ceases to exist. 189 S.W. 429; 83 Id. 411; 188 Id. 22; 142 P. 194; 31 S.E. 381; 28 S.W. 274; 2 Joyce on Ins., arts. 944-5; 1 May on Ins., par. 100-A; 14 R. C. L., par. 97.

In the light of the evidence, it was error to allow Mr. Cotter a 25 per cent. credit in the accounting. Mrs. Atkins agreed only to pay "her part" of the Atkins farm account; and if no part of that account was due by her, she certainly agreed to pay no part of it. Cotter is estopped from claiming under the agreement. The recitals in the agreement put him on notice that Mrs. Atkins knew nothing of this alleged arrangement whereby she would pay a debt she did not owe. If this court concludes that Cotter did not sustain his claim that the debt of Mrs. Atkins should be reduced by 25 per cent. of some indefinite amount, there should be no trouble as to Cotter's claim that he entered into a contract with Mr. Atkins as agent for his wife whereby the agent's principal was to pay the agent's debt. Hufcutt on Agency, p. 185; 139 N.Y. 146; 1 Mechem on Agency, art. 754; 143 N.Y. 559. One dealing with an agent with knowledge of the agent's interest must as a matter of law know that the contract is invalid, supra. 21 R. C. L. 910; 2 C. J. 837.

Cotter can not be heard to say that he was unfamiliar with the lack of authority in Atkins to bind Mrs. Atkins to pay his debt. 70 L. R. A. 315; 55 N.J.L. 329; 26 A. 914; 22 L. R. A. (N. S.) 414.

Cotter owed $ 16,200, and not $ 8,100, and there was absolutely no consideration for the release of the $ 8,100, and the release is ineffective. There was no consideration for the agreement for Mrs. Atkins to look to Cotter for only one-half her debt. Elliott on Contracts, art. 114; Page on Cont., art. 172. Where one of the parties knows or has reason to believe that the other is acting under a mistake as to his legal rights, the failure to disclose the extent of legal liability is fraudulent, and there is always relief against it. 35 N.E. 958.

The facts are not controverted as to the insurance policy. While the firm of Atkins & Cotter existed, each had an insurable interest in the life of the other, and it was properly paid to the widow of the one who first died. The policy was assigned to Mrs. Atkins as collateral security for any indebtedness of W. S. Atkins and Arthur Cotter. By accepting the assignment, the widow assumed no liability for premiums. See legal proposition No. 7, supra.

R. D. Smith and Mann & Mann, for appellee.

1. The chancellor did not err in holding that appellee Cotter owed appellant half of what Atkins & Cotter owed her. The finding is in accordance with the pleadings and evidence.

2. There was no error in the finding that Mrs. Atkins was chargeable with the Atkins farm account. The finding could not be otherwise. She was chargeable with it by reason of the agreement and by the fact that she took possession of all the personal property belonging to the Atkins' farm account and used it for her own personal use.

3. There was no error in charging Mrs. Atkins with a sum equal to 25 per cent. of her debt. The evidence shows this was correct.

4. Mrs. Atkins was chargeable with the proceeds of the life insurance policy. The courts of Texas are not in accord with the rule in other States. 116 Ark. 527; 77 Id. 60; 98 Id. 340; 113 Id. 372; Elliott on Contracts, § 4072; Bacon on Ben. Soc., § 298; Bacon on Life and Ace. Ins., § 301. If the insurance is valid when the contract is made it is not affected by the loss of interest. 14 R. C. L., § 97; 116 Ark. 527; 77 Id. 60; 98 Id. 340; 113 Id. 372.

A person has such an interest in his partner as will support an insurable interest. The policy was payable to the survivor. Bacon, Life and Acc. Ins., § 301.

5. The chancellor did not err in any of his findings of fact, and they are supported by a clear preponderance of the testimony.

SMITH, J. MCCULLOCH, C. J., not participating.

OPINION

SMITH, J.

This suit was instituted for an accounting, it being alleged by Mrs. Atkins, the plaintiff, that in 1912 Atkins & Cotter, a firm composed of plaintiff's husband and defendant, borrowed from her the sum of $ 15,000. This sum was not repaid, and amounted, a year later, with interest at 8 per cent., to $ 16,200. This indebtedness was not denied, but the controversy is over credits claimed by Cotter.

Mrs. Atkins, the appellant, owned a farm, which she rented to her husband, whose tenants were furnished by the firm of Atkins & Cotter. On a much smaller scale Cotter was also interested in farming, and his tenants, too, were furnished by the firm of Atkins & Cotter. The farming operations of both Atkins and Cotter were individual enterprises, in which the copartnership of Atkins & Cotter had no interest, except to collect the accounts due it.

On March 24, 1913, the firm of Atkins & Cotter was largely indebted to Mrs. Atkins and to other creditors, whom they were unable to pay, and it had been agreed between Atkins and Cotter that they would file a voluntary petition in bankruptcy; but on that day the following bill of sale was executed to Mrs. Atkins:

"This bill of sale made and executed this 24th day of March, 1913, is to witness: That in consideration of the verbal contract and agreement heretofore entered into by the parties hereto, in consideration of the sum of $ 16,200 indebtedness owed to Mrs. Atkins, and further debts which we owed, and which she has assumed and paid, we do hereby sell, transfer and convey unto Mrs. Ella M. Atkins our stock of merchandise and fixtures located in the Atkins building in the city of Marianna, together with all book accounts, claims and demands, mortgages and other evidences of indebtedness now held or owned by the firm of Atkins & Cotter.

"And also all live stock and other personal property of whatever character or kind belonging to the said firm, the said bill of sale being intended as part payment to the said Mrs. Ella M. Atkins of our indebtedness to her.

"Witness our hands this the day and year first above written.

"Arthur Cotter,

"W. S. Atkins."

It will be observed that this writing recites, "That in consideration of the verbal contract and agreement heretofore entered into by the parties hereto," etc., the sale was made; and the principal question in the case is, what was this verbal contract and agreement which the parties had entered into before the execution of the writing?

Atkins was called as a witness by his wife, and testified that he represented her in these negotiations, and that the agreement was that when all the assets of...