Bank Of Morganton v. Hay

• Decision Date: 11 December 1906
• Citation: 55 S.E. 811,143 N.C. 326
• Parties: BANK OF MORGANTON et al. v. HAY.
• Court: North Carolina Supreme Court

55 S.E. 811

143 N.C. 326

BANK OF MORGANTON et al.

v.HAY.

Supreme Court of North Carolina.

Dec. 11, 1906.

Principal and Agent—Rights as to Third Persons—Authority of Agent¹—Drafts on Principal.

Plaintiff, a bank, cashed a draft drawn on defendant by his agent, on the faith of the payment of similar drafts, and a letter written by defendant to the agent, in which he said, "I had entirely overlooked your check, and now beg to inclose same to you. I think it would be well for you to draw on us at stated times, or write a few days in advance, and remind us of it, in order that you may not be embarrassed." Two later letters of defendant, also examined by the bank before cashing the draft, showed that defendant complained of the agent's failure to secure business, while his expense account had grown until it had about reached the limit, justified by reasonable expectation of commissions. One of these letters, which stated that the agent's draft for $20 was received, and would be paid, and which called upon the agent to account for his agency, furnished the only evidence of the usual amount of the agent's drafts. Just one week from the date of this letter, the agent drew the draft in suit for $60 for expenses not already incurred, but likely to arise thereafter in another place. It did not appear that he had made any accounting of his agency, that he was instructed to go to the place where he said he was going, or that he had notified defendant of his intention to do so, or of his purpose to draw on him for $00. Defendant was not informed by the face of the drafts, which he paid, that they were cashed by the plaintiff bank their appearance being the same as if simply drawn and forwarded for collection. Held, that the correspondence contained enough to put the plaintiff on its guard, and did not confer authority on the agent to have the draft in suit cashed.

Appeal from Superior Court Burke County; O. H. Allen, Judge.

Action by the Bank of Morganton and another against T. T. Hay. From a judgment of nonsuit plaintiffs excepted, and appealed. Affirmed.

The plaintiff brought this action to recover $60, the amount of a draft which was drawn on March 16, 1905, by H. L. Hinson on the defendant payable to its order five days after sight. The defendant refused to accept and pay the draft upon the ground that Hinson had no authority to draw It. The plaintiff alleged that he did have authority to draw the draft as agent of T. T. Hay & Bro. of Raleigh, N. 0., of which firm the defendant Is a member. To show that such authority existed, the plaintiff introduced in evidence three letters written by T. T. Hay & Bro. to Hinson, as follows:

"Raleigh, N. C, Jan. 24, 1905.

"H. L. Hinson, Morganton, N. C.—Dear Sir: I am just In receipt of your letter, and will say that we are not at all discouraged, for we know you are coming to the point with some good applications soon. I had entirely overlooked your check, and now beg to enclose same to you. I think It will be well for you to draw on us at stated times or write a few days In advance and remind us of it In order that you may not be embarrassed. I will send you supplies asked for in your letter by tomorrow's mail. Yours very truly, [Signed] T. T. Hay & Bro."

"Raleigh, N. C, Feb. 1, 1905.

"Mr. H. L. Hinson, Morganton, N. C.— Dear Sir: It appears to us that you have been In Morganton long enough to find out whether or not you can do any work there or not, and we therefore write to know what are, really, your prospects. It is no use, in my opinion, for an agent to stay in a town Indefinitely unless there is something in sight, for you have been there about three weeks and we have not had the pleasure of seeing a single application. Write me fully by return mail on this point, and let me know what we may expect from Morganton, and if the chances appear to be against you we want you to try some other place, for we must count on results and not what prospects may be in sight. Yours very truly, T. T. Hay & Bro., General Agents."

"Raleigh, N. C, March 7, 1905.

"Mr. H. L. Hinson, Morganton, N. C.— Dear Sir: Your draft for $20 was received this morning and will be paid, but I would like very much for you to write what the prospects are in Morganton, for unless you do something pretty soon the advance account will be so large that you will be unable to make It up In the way of commissions. We do not mind spending money for the business If we get anything In return, but it does not appear to me a good proposition for you to spend several months In one place with no prospect of sufficient business to cover the outlay; therefore I am writing youagain this morning to let me hear from you in regard to this matter, and to move to another point unless you have some good business absolutely in sight Yours very truly, [Signed] T. T. Hay & Bro., General Agents."

The three letters were the only ones selected by the plaintiff from all the letters in the correspondence between Hay & Bro. and Hinson which were produced by the defendant upon notice from the plaintiff, and were the only letters seen by the plaintiff or its cashier prior to the drawing of the draft. W. E. Walton, a witness for the plaintiff, testified: "I am cashier of the Bank of Morganton, and was on March 16, 1905. I knew H. L. Hinson, who was an insurance agent representing the Phoenix Life Insurance Company. He was here about three months. On the 16th of March, 1905, I cashed a draft for him, which was drawn on T. T. Hay & Bro. of Raleigh, of which firm the defendant was a member. The draft was for $60. (The witness produced the draft In suit). I cashed this draft on the faith of a letter written by T. T. Hay & Bro. to H. L. Hinson, which Mr. Hinson showed me. This letter was dated January 24, 1905. On the faith of the statements contained in this letter I cashed this draft and T. T. Hay & Bro. refused to pay same Hinson, while in Morganton, showed me two other letters from T. T. Hay & Bro. (letters of February 1, 1905, and March 7, 1905). I saw these three letters from Messrs. T. T. Hay & Bro. to Mr. Hinson before I cashed his draft." Here plaintiff proposed to show that at the time said draft was drawn by Hinson and cashed by the bank, Hinson stated to witness that he needed the $60 for his expenses as agent for the defendant.

Plaintiff also proposed to prove by the witness that, prior to this time, he had cashed several drafts drawn by said Hinson on T. T. Hay & Bro., and that said drafts had always been paid. Plaintiff also proposed to prove that the said Hinson stated to witness at the time the $60 draft was cashed that he needed the money to pay his expenses to Asheville and while at that point as agent Plaintiff also proposed to prove that, in general appearance and demeanor, Hinson appeared to be a gentleman. All this evidence was objected to and excluded by the court, and the plaintiff excepted. Continuing, the witness testified: "I had a conversation with T. T. Hay, one of the members of T. T. Hay & Bro., some time in the month of October, 1905, about this matter. Mr. Hay told me in the conversation that Hinson had been his agent, and had gotten the best of him. I cashed this draft on the faith of the defendant's letter to Hinson, dated January 24, 1905, and because similar prior drafts had been paid." At the close of the evidence, defendant moved for judgment as of nonsuit under the statute. The motion was sustained, and judgment of nonsuit was entered The plaintiff excepted, and appealed.

S. J. Ervln, for appellants.

Avery & Avery, for appellee.

WALKER, J. (after stating the case). There is a general rule that when one deals with an agent it behooves him to ascertain correctly the scope and extent of his authority to contract for and in behalf of his alleged principal, for, under any other rule, It Is said every principal would be at the mercy of his agent, however carefully he might limit his authority. The power of an agent is not unlimited unless in some way It either expressly or impliedly appears to be so, and the person who proposes to contract with him as agent for his principal should first Inform himself where his authority stops, or how far his commission goes, before he closes the bargain with him. Brlggs v. Insurance Co., 88 N. C. 141; Ferguson v. Manufacturing Co., 118 N. C. 946, 24 S. E. 710. The principal is held to be liable upon a contract duly made by his agent with a third person: (1) When the agent acts within the scope of his actual authority. (2) When the contract, although unauthorized, has been ratified. (3) When the agent acts within the scope of his apparent authority, unless the third person has notice that the agent is exceeding his authority, the term "apparent authority" including the power to do whatever is usually done and necessary to be done in order to carry Into effect the principal power conferred upon the agent and to transact the business, or to execute the commission which has been entrusted to him, and the principal cannot restrict his own liability for acts of his agent which are within the scope of his apparent authority by limitations thereon of which the person dealing with his agent has not notice. The principal may also, In certain cases, be estopped to deny that a person is his agent and clothed with competent authority, or that his agent has acted within the scope of this authority which the nature of the particular transaction makes It necessary for him to have. Tiffany on Agency, 180 et seq.; Briggs v. Insurance Co., supra. The authority to draw, accept, or Indorse bills, notes, and checks will not readily be implied as an Incident to the express authority of an agent It must ordinarily be conferred expressly, but it may be Implied If the execution of the paper is a necessary incident to the business. It will not be deemed a necessary Incident, though, unless the purpose of the agency cannot otherwise be accomplished. When the power is expressly conferred, It must be strictly...