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Brief Reports. — The following report, a model of brevity, is in Strange's Reports, i. 173: "Tremain's case. In Cane. Being an infant, he went to Oxford contrary to the orders of his guardian, who would have him go to Cambridge. And the court sent a messenger to carry him from Oxford to Cambridge. And upon his returning to Oxford there went another tarn to carry him to Cambridge, quam to keep him there."
AMERICAN LAW REVIEW.
Vol. Vm.] BOSTON, JULY, 1874. [No. 4.
FRAUDULENT MISREPRESENTATIONS OF AGENTS.1
Few points in the law have been the subject of more perplexing doubts and conflicts than the question of the liability in tort of a principal for such misrepresentations of his agent as are known by the agent to be false, but not by the principal. In America it has generally been held that an action of deceit may be maintained against the principal; but the cases are at variance as to the ground of liability. In England the whole subject has until recently been in a very unsettled state; and it is not yet free from difficulties.
The American courts in most cases have implicitly followed the doctrine of Hern v. Nichols,2 but generally with little or no investigation of the proper limitations of that case. This is somewhat remarkable, as Hern v. Nichols is but a briefly reported nisi prius decision. The case was this: The plaintiff, in an action of deceit, set forth that he had bought several pieces of silk for silk, whereas it was another kind of silk, and that the defendant, well knowing this deceit, sold it to him for silk.
On trial, upon not guilty, it appeared that there was no actual deceit in the defendant, who was the merchant, but that it was his factor beyond sea; and the doubt was, if this deceit could charge the merchant. And Holt, C. J., was of opinion that the
1 This article was originally written as a note to the author's forthcoming work entitled Leading Cases on Torts, and in substance will be printed as such. At our request, however, it has been enlarged and revised for our pages. — Eds.
2 1 Salk. 289.
Vol. vm. 41
merchant was answerable for the deceit of his factor, though not criminaliter, yet civiliter; for seeing somebody must be a loser by this deceit, it is more reason that he that employs and puts a trust and confidence in the deceiver should be a loser than a •stranger. And upon this opinion the plaintiff had a verdict.
Among the American cases, Jeffrey v. Bigelow1 is often referred to. The facts in this case, in brief, were that one Stevens, an agent of the defendants, had sold to the plaintiff sheep infected with the scab, which fact was at the time known to the agent, but not to the defendants. The fact of the disease was known to one Hunt, who at the sale was a partner of the defendants, to whom he had before the action assigned all his interest. In an action on the case for fraud the defendants were held liable, both for the loss of the sheep sold by their agent, and of others that had become infected by them. Much Was said in the opinion of the court to the effect that, Hunt being a partner, his knowledge was notice to his copartners, the defendants; also that Stevens was a general agent in relation to the sale; and the doctrine of Lord Holt, supra, of trust and confidence reposed in the agent, was adopted. Hunt's connection with the case does not appear to be important; for as partner he was only a general agent of the firm, and there was no evidence that he had in fact communicated his information to the defendants.
The leading case in Massachusetts is Locke v. Stearns.2 This was trespass upon the case in the nature of deceit. One of the defendants, who were partners, had sold divers quantities of meal as linseed meal, when in fact it was a mixture of linseed and teilseed meal; the latter being inferior in quality to the former. The judge charged the jury that if one of the defendants sold the meal to the plaintiff, knowing that teilseed meal was inferior in quality and value to linseed meal, this knowledge would bind all the defendants; and the charge was sustained. After mentioning that the deceit was resorted to for the defendants' benefit, the ground taken in Hern v. Nichols was again referred to with approval. And it was also said to be a general rule that one partner is liable for damages sustained by the deceit or other fraudulent act of his copartner, done within the scope of his authority; citing Rapp v. Latham8 and Willet v. Chambers.*
i 13 Wend. 518. « 1 Met. 560.
» 2 Barn. & Aid. 795. 1 2 Cowp. 814.
The case of Bennett v. Judson? though holding a similar doctrine, marks a departure from the above cases in the ground of liability. That was an action for fraud in the sale of land by the defendant's agent. "There is no evidence," said Comstock, C. J., delivering the judgment of the court, "that the defendant authorized or knew of the alleged fraud committed by his agent Davis in negotiating the exchange of lands. Nevertheless, he cannot enjoy the fruits of the bargain without adopting all the instrumentalities employed by the agent in bringing it to a consummation. If an agent defrauds the person with whom he is dealing, the principal, not having authorized or participated in the wrong, may no doubt rescind when he discovers the fraud, on the terms of making complete restitution. But so long as he retains the benefits of the dealing he cannot claim immunity on the ground that the fraud was committed by his agent, and not by himself."
This ground, as we have stated, was suggested in Locke v. Stearns, supra; and had it not been for the ruling that the defendant in Jeffrey v. Bigelow, supra, was liable for the loss of other sheep than those sold by him, that case would also have been covered by the rule in Bennett v. Judson. A rule similar to that in Jeffrey v. Bigelow, in not confining the liability of the principal to the profit derived by him, was declared in White v. Sawyer.2 "No question is made by the defendant's counsel," said the court, " of the correctness of the doctrine that a principal is liable for the false representations of his agent, although personally innocent of the fraud. It is settled by the clear weight of authority." The point was therefore not considered in the case. And the same is true, so far as appears from the opinion, of the other point, extending the damages beyond the profit derived.
All of the other American cases are like Judson v. Bennett; the defendant being held liable where he has received a benefit from the act of his agent. In none of them is it suggested that his liability is to be pushed beyond this point.8 In Cook v. Castner 4
• 21 N. Y. 238. 3 16 Gray, 586.
'See AUerton v. Allerton, 50 N. Y. 670; Craig v. Ward, 3 Keyes, 898; Elwdl v. Chambrrlin, 31 N. Y. 619; Chester v. Dickerson, 52 Barb. 349; Graves v. Spier, 58 Barb. 387; Hunter V. Hudson River Iron Co., 20 Barb. 493; Sharp y. New York, 40 Barb. 257; Davis v. Bemis, 40 N. Y. 453, note; Durst V. Burton, 2 Lans. 137; 8. c. 47 N. Y. 167; Sandford v. Handy, 23 Wend. 260.
* 9 Cuah. 266.
the action was in assumpsit to recover the consideration paid in a transaction brought about by the fraudulent representations of one of the defendants, who were partners. Here, of course, the measure of damages is plain; and this is doubtless the proper form of action for such cases.
But while most of these cases were decided upon the ground taken in Judson v. Bennett, some of them also refer to the doctrine of Hern v. Nichols.1 Mr. Justice Nelson, in Sandford v. Handy, after quoting the language of Lord Holt, says that the agent is "held out as fit to be trusted, and his fidelity and good conduct in the matter thereby recommended.2 And where one of two innocent persons must suffer by the fraudulent act of a third, the one who enables such third person to commit the fraud must bear the loss." The first part of this language seems to be only another way of putting the doctrine of Hern v. Nichols. The trust and confidence reposed in the agent is manifested by holding him out as such.
Let us now turn to the English cases. The question has there more frequently arisen as to the liability of corporations for misrepresentations of their directors or other managers. In Dodgson's Case 3 the plaintiff had been induced to purchase shares in a failing concern by the fraud of the directors, and brought suit in equity to have his name taken off the list of contributories in winding-up proceedings. But the Vice-Chancellor held that the fraud of the directors could not affect the general body of shareholders, i.e., the company. This case was followed by VieeChancellor Parker, in Bernard's Case,* who there said: " Bodgson's Case shows that the directors cannot be the agents of the company to commit a fraud; and, therefore, even if Mr. Bernard had been induced to take shares by the misrepresentation of the directors, that was no reason why he should not be a contributory." In BrockwelVs Case,5 Vice-Chancellor Kindersley held the contrary on similar facts; but this case was soon after overruled by the Lord Chancellor and Lords Justices in appeal.6 "Clearly," said the Lord Chancellor, "there was fraud, and gross fraud, on the part
1 See Davis v. Bemis and Sandford v. Handy, supra.
* Attorney-General v. Siddon, 1 Tyrwh. 46, Bayley, B.; Smith's Mer. Law, 70; Story's Comm. Agency, § 465.
» 3 De Gex & S. 85. « 5 De Gex & S. 289. 6 4 Drewry, 205.
6 Mixer's Case, 4 De Gex & J. 575.