
    Hermann Norden and William Nicholas Schill, Respondents, v. Brodie L. Duke, Appellant.
    First Department,
    June 7, 1907.
    Principal and agent—unauthorized purchase of stock by agent — when authority of agent question for jury — when error to submit question of ratification by principal.
    The plaintiff, a- stockbroker, sued to recover an alleged balance due on account of stock transactions.. The transactions were carried on by correspondence with the defendant’s agent without his knowledge. Evidence examined and held, that a finding by the jury that the transactions by the agent were authorized by the defendant,was warranted by the evidence.
    It is error to charge that the defendant may be held liable if he ratify the unauthorized acts of his agent in the absence of any evidence showing ratification.
    The silence of an alleged principal after discovering the unauthorized acts of his agent is not a ratification if the third party is not prejudiced thereby, for ratification is based upon principles, of estoppel or "an intention of the principal .to adopt the unauthorized act with a full knowledge of the material facts.
    Appeal by the defendant, Brodie L. Duke, from a judgment of the Supreme .Court in favor of the plaintiffs, entered in the office- of the "clerk of .the county of New York on the 26th day of October, 1906, upon the verdict of a jury, and also from an order enterted in said clerk’s office on the 31st day of October, 1906, denying the defendant’s motion for a new trial made upon the minutes.
    
      
      William F. Goldbeóh, for the appellant.
    
      Edmund L. Mooney [Frederi'oh A. Card with him on the brief], ■ for the respondents. • '
   Laughlin, J.:

. The plaintiffs - were copartners, conducting business as stockbrokers in the city of New York under the firm name of “A. Norden & Company,” and the defendant was a resident of "the city of Durham, N. C. The action is brought to recover an alleged balance of account claimed to be owing to the plaintiffs by the defendant, as the result of certain .stock transactions which .they claim to have conducted for him. The defendant' had' an office in Durham, and employed one William G. Bramham, who acted as his private secretary, stenographer, bookkeeper and. clerk. The principal business of the defendant was looking after his own real estate interests, but he was president of the Commonwealth Manufacturing. Comr pany of Durham, and was accustomed to' speculate in cotton arid stock at Durham and on the New York.exchanges. From Tate in November, 1903, until early in January thereafter the .defendant was confined to his house by illness, and Bramham was in’charge of • his-office and business-. About the middle of December, 1903, the Morehead- Banking Company of Durham, to which defendant was ■indebted on - a call loan of $16,000, secured by collateral, called the loan and gave notice that if it was not paid the collateral would be sold. Bramham endeavored to raise funds .to meet the loan, but being unsuccessful and being . unable to communicate with the defendant, determined to speculate’ in cotton in defendant’s name, in the hope of raising the necessary funds to meet the loan. The plaintiffs knew of the defendant through the Commonwealth Manufacturing Company, with which they had business relations, not, however, conducted -by defendant, who was' its president, but they had never had any business relations with him individually. The latter part of September, 1903, the plaintiffs, of their own motion, communicated to the defendant information concerning some features of the stock market and solicited business. On the- 17th day of ■ December, 1903, Bramham wired plaintiffs in defendant’s nanie as follows: “If you deem advisable, sell 1,000 Jany. and 1,000 March for quick turn 20 points profit.” The following morning, before acting on this telegram, plaintiffs received a further telegram likewise sent by Bramham in the name of the defendant to “ sell' two thousand March at thirteen cents for twenty points profit.” Plaintiffs assumed that the telegrams were genuine and authorized by the defendant. They executed the second order the day they received it and pursuant to a further message sent by Bramham in the name of the defendant they closed the transaction without profit or loss, and mailed a statement thereof, addressed tó defendant at Durham, H. 0. On the twenty-first day of the same month Bramham wired plaintiffs in defendant’s name, to “ Sell 2,000 March 1905 cancel previous orders.” They executed the order and closed the transaction on the same day, with a profit of $400, and likewise mailed a statement thereof to the defendant, inclosing their check for $400, payable to his order. The next day Bramham wired plaintiffs, in defendant’s name, to “ Sell two thousand March ninety-six.” Plaintiffs, through a broker on the floor of the exchange, executed this order, and immediately thereafter the price of cotton rose rapidly and when the rise in price indicated a loss' of about $2,000 plaintiffs wired.the defendant to remit $2,000 to protect his margin. The message was received and opened by Bramham, who replied in defendant’s name: “What do you think of position? Don’t care to protect March.” The plaintiffs regarded this telegram as ambiguous, but did not understand that it was an order to close the transaction. They wired defendant as follows: “ Bulls buying wildly confident as ever, no faith in it ourselves.” The market continued to .rise and when a loss of about $4,0Q0 was indicated plaintiffs wired defendant to “ Please make" remittance four thousand instead of two, answer.” Bramham received and opened the message and answered it in'defendant’s name, as follows : “ You were advised did not desire to protect trade.” Plaintiffs then wired defendant: “ Your telegram read‘what do you think of. position, don’t care to protect March.’ You certainly could not expect us to Understand this as an order to close your contracts. We must insist on your responsibility for whole amount.” To this Bramham replied, in defendant’s .name: “ Have no desire to act other than fair, but you had order not to protect- March and consider responsible foi only 20 points. You were notified at one o’clock not to protect.” - Having received no remittance plaintiffs closed out the transaction on the same day at a loss of $4,900. on that speculation and transmitted a statement to the defendant. After receiving it Bramham wrote plaintiffs, inclosing the check for $400, which they .had previously transmitted, and acknowledging..liability to the ' extent of the loss up to 20 points, but repudiated liability beyond that. The plaintiffs credited the $400 on the account, and brought this action on the eighteenth day of April thereafter, to recover the balance of $4,500.

• The undisputed evidence shows that the defendant did not expressly authorize these transactions and had no actual knowledge thereof until at leást six days after the loss had been sustained. The order to buy was given by Bramham without consulting defendant or communicating with him directly or indirectly, and the subsequent transactions and negotiations were continued in the same manner. Upon a former appeal from a judgment nonsuiting the plaintiffs, it was held by this court'that they established a prima facie case of authority on the part of Bramham to act for the defendant in these matters, and a new trial was granted. (113 App. Div. 99.) Upon the last trial the plaintiffs presented practically the same evidence tending to ¡show that the defendant authorized'the transactions by general authority conferred Upon Bramham. The defendant testified in his own behalf and Bramham was examined in his behalf by commission. Their evidence does not as matter of law, at least, overcome th q prima facie case presented by plaintiffs, and the question as to whether the defendant was liable upon: the ground that Bramham was his authorized agent was a question of fact which has been determined by the jury in favor of 'the plaintiffs. We do not regard their verdict on that question as against the weight of evidence, but we are of opinion that there must be a new trial for-errors in the charge.

• The learned trial justice, instead of submitting the Case to the jury upon the question of the authority of Bramham to represent the defendant, instructed the jury, in effect,, that even though Bramham was not authorized to represent the defendant, still, if the defendant' ratified his acts, the plaintiffs were entitled to recover, and he left it to the jury, as a question of fact, to determine whether or not the defendant did ratify the acts of Bramham with respect to this speculation. Counsel for the defendant duly excepted to the charge as made with respect to ratification, and requested the court to instruct the jury that there was no evidence of ratification, and excepted to the„ refusal of the court to so charge. In these circumstances it may he that the jury found that Bramham was not authorized to represent the defendant, but 'that the defendant was liable upon the theory of ratification of his employee’s unauthorized acts. We are of opinion that the evidence did not warrant the court" in submitting the question of ratification to the jury. The transactions were entered in the books of the defendant, and although it appears that he did not come to the office for a considerable period thereafter and did not examine the books or files when he came, yet he is doubtless chargeable in law with lcnowledgb of the contents of his books and files, after his attention was drawn to these transactions on or after the 28th day of December, 1903,. by Bramham. He, however, received no benefit from the transactions, and the plaintiffs have in no manner been prejudiced by his failure to repudiate the same. As already observed, the loss occurred long before the defendant had any personal knowledge of the transactions. The defendant, upon learning from Bramham that the •latter had opened this speculative account, disavowed Bramham’s authority and Bramham assumed the responsibility and manifested a willingness and intent to bear the loss personally. The defendant had no communication or correspondence with the plaintiffs concerning the transactions. The plaintiffs communicated with him, but the letter and telegram were intercepted by Bramham, who conducted the correspondence in the name of the defendant and continued the correspondence with plaintiffs concerning the adjustment of the account for some little time after he informed the defendant concerning it. This correspondence was conducted partly in his' own name and partly in the name of the defendant, but without the knowledge of the defendant or his authority. The plaintiffs were informed by letters from Bramham on the 19th and 23d of January, 1904, that he had conducted this stock speculation without the knowledge of the defendant. Down to that time plaintiffs supposed that they were dealing directly with the defendant. The defendant at most remained silent after discovering that his agent had assumed to speculate on his account without authority; but, assuming that the agent acted without authority, for the jury may have so found, the defendant was informed of the fact that the loss had already been incurred, and it does not appear that the plaintiffs ' have- been prejudiced by his silence. The unauthorized contract had been made and fully executed. Nothing remained-but-a liability for a balance of account. If the plaintiffs had been prejudiced by the failure of the defendant to- notify them that the- trans^ actions were unauthorized, then, doubtless, lie' would be liable upon the theory that it was liis duty to speak; but liability upon* the ‘ theory of ratification is ’ based upon principles of estoppel or the intention of the principal to adopt the unauthorized act or contract, and there must be, with full knowledge of the material.facts, failure to act, by which the party dealing with the agent has been prejudiced before there can be any estoppel which precludes the principal from denying the authority of the agent, or facts or circum-' stances warranting- the inference that he intended’to adopt the act or contract. (Merritt v. Bissell, 155 N. Y. 396, 401; Minshall v. Arthur, 2 Hun, 662; Hopkins v. Clark, 7 App. Div. 207, 213; affd., 158 N. Y. 299; Hogue v. Simonson, 94 App. Div. 139.)

It follows that the judgment and order should be reversed and a . new trial granted, with costs to appellant to abide the. event.

Ingraham, Clarke, Scott and Lambert, JJ., concurred.'

. Judgment and order reversed,- new trial ordered, costs to appellant to abide event. ■ ’  