
    Seligman Oppenheimer and Others, Respondents, v. Richard Irvin and Thomas S. Irvin, Appellants.
    Third Department,
    January 6, 1915.
    Principal and agent — sale of stock with alleged agreement to repur-chase if value decreases—burden of proof — authority of agents trade custom — evidence — ratification.
    Plaintiffs, who purchased stock through the agent of the defendants, stockbrokers, seeking to hold the defendants upon a warranty made by their agent that the defendants would take back the stock if it declined in value, which it did, are under the burden of proving either, first, that the agent was expressly authorized by the defendants to make such warranty, or, second, that by the custom of the particular trade the agent had implied authority to make the warranty. In the absence of such proof there can be no recovery for the breach of the alleged warranty and the complaint should be dismissed.
    Where the plaintiffs proved no express authority on the part of the agent to make the warranty, the defendants were entitled to offer evidence tending to show that the agent possessed no implied authority, and to that end may show that it was not the custom of the trade to make such warranty.
    Where the defendants had no knowledge whatever of the alleged war ranty when made by then- agent, and afterwards repudiated the same, they cannot be held to have ratified, for a ratification can only exist where the principal has full knowledge of the facts.
    Appeal by the defendants, Richard Irvin and another, from a judgment of the Supreme Court in favor of the plaintiffs, entered in the office of the clerk of the county of Ulster on the 13th day of May, 1914, upon the verdict of a jury, and also from an order entered in said clerk’s office on the 3d day of June, 1914, denying defendants’ motion for a new trial made upon the minutes.
    
      Lord, Day & Lord [Allan B. A. Bradley and Henry B. Potter of counsel], for the appellants.
    
      Brinnier & Canfield [William D. Brinnier of counsel], for the respondents.
   Howard, J.:

The plaintiffs are jewelers and reside in Kingston. The defendants are bankers and brokers, with offices in New York. One William J. Reineke, an agent of the defendants, visited the store of the plaintiffs in Kingston and solicited one of the plaintiffs to purchase from the defendants 100 shares of preferred stock of the United States Motor Company. After some conversation one of the plaintiffs made an order in his own handwriting in the name of the plaintiffs’ firm for 100 shares of this stock at thirty-nine dollars a share and sent it to the defendants. This stock was subsequently delivered by the defendants and paid for by the plaintiffs. Subsequently the stock declined greatly in value and the plaintiffs, claiming that Reineke had warranted on behalf of the defendants to take back the stock and refund the purchase price in case it should shrink in value, made a demand on the defendants for a fulfillment of this contract of warranty. The defendants disclaimed that there was any warranty and refused to take back the stock or return the money. This action is on the alleged breach of the contract of warranty.

There was a dispute of fact as to whether there was any warranty. Two of the plaintiffs and their brother-in-law — three witnesses in all — swear to the conversation out of which the warranty is said to spring. Reineke, the agent, positively denies the alleged warranty, but the jury have decided in favor of the plaintiffs and there is no reason to disturb their determination of this question of fact.

Assuming, then, that the agent did say, in words or substance, that the defendants would take the stock back and refund the money in case the stock should decline in value, and that the defendants would guarantee that the plaintiffs should not lose anything — how does this affect the defendants ? There was absolutely no proof that the agent was authorized by the defendants to make any such warranty, the positive evidence of the agent and of one of the defendants being that the agent had no such authority. Therefore, unless the authority of the agent can be implied, what he said upon the subject of guaranty is wholly inconsequential. Unless it be proven that it is the custom in the sale of goods similar to those in question for the agent to warrant them no authority is implied. In Cafre v. Lockwood (22 App. Div. 11) the rule was declared to be that “Where a contract for sale is made through an agent of the seller, there is no implied authority on the part of the agent to warrant the quality of the goods unless it shall be made to appear that it was the usual custom in sales of goods of that kind for an agent to warrant them.” In Wait v. Borne (123 N. Y. 592) the rule was again stated thus: “It must be usual for the agent to have power to warrant in order to carry out the object and to sell the article confided to him for sale before the law will imply such power.” Smith v. Tracy (36 N. Y. 79) also enunciates the same doctrine. There was no such proof in this case; no proof that it is customary in the. sale of stocks for agents to warrant that they will not decline in value, and that if they do the broker will take them back and refund the money. Therefore the case is absolutely barren of evidence of the agent’s authority to make the alleged contract of warranty sued upon. There was no implied authority to warrant and, therefore, no authority at all. Hence there was no such contract as the one sued upon and, therefore, no cause of action, and the complaint should have been dismissed.

There having been no proof presented by the plaintiffs of express authority on the part of the agent to make the alleged contract of warranty á nonsuit could only have been denied on the theory that there was an implied authority. It was, therefore, the right of the defendants to offer evidence tending to show that there was no implied authority. As has been seen, there could only be an implied authority here if it be the custom for an agent to warrant the value of stocks when he makes a sale of such securities. The defendants attempted to prove that there is no such custom. The trial court rejected this evidence. This was error. The learned trial court in ruling upon this question stated that the burden was not upon the defendants to make such proof. But in view of the only possible theory on which the denial of the nonsuit could have been .based, namely, that the agent had implied authority to warrant, the duty was on the defendants to offer proof that there was no implied authority. The trial court refused to let the defendants do so, and this was error.

There is no question of ratification here. There can be no ratification by the principal of the acts of the agent unless the principal has full knowledge of the facts. In this case the defendants had absolutely no knowledge that the agent had given a warranty, such as is alleged in the complaint or any warranty whatever.

For these reasons the judgment and order should be reversed and a new trial granted.

All concurred.

Judgment and order reversed and new trial granted, with costs to appellants to abide event.  