Gleason v. Seaboard Air Line Ry Co, 51

• Decision Date: 02 January 1929
• Docket Number: No. 51,51
• Parties: GLEASON v. SEABOARD AIR LINE RY. CO
• Court: U.S. Supreme Court

278 U.S. 349

49 S.Ct. 161

73 L.Ed. 415

GLEASON

v SEABOARD AIR LINE RY. CO.

No. 51.

Argued Nov. 22, 1928.

Decided Jan. 2, 1929.

Mr. Edward Brennan, of Savannah, Ga., for petitioner.

[Argument of Counsel from page 350 intentionally omitted] Mr. E. Ormonde Hunter, of Savannah, Ga., for respondent.

[Argument of Counsel from page 351 intentionally omitted] Mr. Justice STONE delivered the opinion of the Court.

This case is here on certiorari, granted March 5, 1928, to review a judgment of the Circuit Court of Appeals for the Fifth Circuit, 21 F.(2d) 883, reversing a judgment for petitioner of the District Court for Southern Georgia.

At the trial by jury, it appeared that respondent railway company has terminals for the receipt and delivery of freight both at Charleston, S. C., and Savannah, Ga.; that McDonnell was an employee of respondent at its Savannah office, whose duty it was, and whose continuous practice it had been, to give notice to those engaged in the cotton trade, including petitioner, a cotton factor in Savannah, of the arrival of cotton at the Savannah terminal under 'order notify' bills of lading. There was evidence from which the jury could have found that on March 19, 1925, McDonnell, so acting, gave petitioner notice of arrival of a shipment of cotton under a designated order notify bill of lading; that later on the same day a local bank presented to petitioner the described bill of lading, regular in form and properly indorsed, with an attached draft on petitioner for $10,000, which petitioner paid in reliance upon the notice of arrival given by the agent and the apparent regularity of the documents; that, after presentation of the draft and before payment, McDonnell had again informed petitioner, in response to an inquiry, that the cotton described in the bill of lading had arrived. There was evidence also plainly indicating that petitioner would not have paid the draft without that assurance. The draft and the bill of lading, purporting to be issued by respondent at its Charleston office, eventually proved to have been forged and negotiated by McDonnell in Charleston while temporarily absent from his duties in Savannah and his entire course of conduct with respect to them, including his false notice to petitioner, was in the successful pursuance of a scheme to defraud petitioner of the amount paid by it on the draft.

The second count of petitioner's declaration, and the only one presently involved, set out a cause of action in deceit by McDonnell acting as the agent of respondent in giving the petitioner the false notice and set up that the petitioner was induced to pay the draft by the representation that the cotton had arrived. The court, disregarding any question of want of due care on the part of respondent, instructed the jury that, if it found that the false notice by McDonnell to petitioner was given within the scope of his authority and that petitioner had in fact been induced by the false statement to take up the draft, it should return a verdict for the petitioner. Judgment on the verdict for petitioner was reversed by the Court of Appeals on the ground that an employer is not liable for the false statements of an agent made solely to effect a fraudulent design for his own benefit and not in behalf of the employer or his business, the court saying (21 F.(2d) 884): 'Under the general rule prevailing in the federal courts, an employer is not liable for such conduct of his employee. Friedlander v. Texas & Pacific Ry. Co., 130 U. S. 416, 9 S. Ct. 570, 32 L. Ed. 991. * * *'

In the Friedlander Case the action was brought to recover for the nondelivery of merchandise, purported to have been received by the defendant carrier and covered by a bill of lading issued by its agent, admittedly author- ized to issue bills of lading in the usual course of business. The bill had been fraudulently issued by the agent for his own enrichment, and the described merchandise had not, in fact, been received by the defendant or its agent. The court held that there was no implied authority in the agent to issue bills of lading for merchandise not actually received, and that there was consequently no contractual obligation on the part of the carrier. As the only act of the agent complained of, the issuance of the bill of lading, was thus held not to be within the scope of his authority, that holding was sufficient to dispose of the entire case. To this extent the case has been often cited and followed. Louisville & Nashville R. R. Co. v. Nat. Park Bk., 188 Ala. 109, 119, 65 So. 1003; Roy & Roy v. Northern Pacific Ry. Co., 42 Wash. 572, 576, 85 P. 53, 6 L. R. A. (N. S.) 302, 7 Ann. Cas. 728; contra Bank of Batavia v. New York, etc., R. R. Co., 106 N. Y. 195, 12 N. E. 433, 60 Am. Rep. 440. But the court in the Friedlander Case went on to say (130 U. S. 425, 9 S. Ct. 573):

'* * * Nor is the action maintainable on the ground of tort. 'The general rule,' said Willes, J., in Barwick v. English Joint Stock Bank, L. R. 2 Ex. 259, 265, 'is that the master is answerable for every such wrong of the servant or agent as is committed in the course of the service and for the master's benefit, though no express command or privity of the master be proved.' See also Limpus v. London General Omnibus Co., 1 H. & C. 526. The fraud was in respect to a matter within the scope of Easton's employment or outside of it. It was not within it, for bills of lading could only be issued for merchandise delivered; and being without it, the company, which derived and could derive no benefit from the unauthorized and fraudulent act, cannot be made responsible. British Mutual Banking Co. v. Charnwood Forest Railway Co., 18 Q. B. D. 714.'

The rule, applied in that case, that the authority of an agent to issue bills of lading is impliedly conditioned upon the receipt of the merchandise described in the bill, has now been modified by statute. Section 22¹ of the Federal Bills of Lading Act, 39 Stat. 542 (49 USCA § 102), applicable to bills of lading of common carriers in interstate and foreign commerce, provides that the carrier, in certain enumerated cases, shall be liable on a bill so issued even though the merchandise is not received by the agent.

But the above-quoted passage from that case, taken in conjunction with other references in the opinion to the fraudulent conduct of the agent for his own benefit, has been regarded as authority for the broader rule applied by the court below, and the present case must turn upon the sufficiency of the rule thus announced. For there was here no want of authority in the agent. His power to act for his principal was not contingent upon any act or omission of another. From the verdict, we must take it that it was his duty unconditionally to answer the inquiry of petitioner as to the arrival of the goods, and concededly, if acting within the scope of his employment, the respondent would have been liable, however flagrant the agent's act,...