
    Henry W. Sage and Others, Respondents, v. Shepard & Morse Lumber Company, Appellant.
    
      Agency — agent falsely stating'that he is authorized to sell upon his own account— ignorance of the principal — estoppel—conversion—which of two innocent parties must lose—Factors’ Act, when it does not apply—act of the vendor in retaining a dishonest agent—awaiverof'atort, not a ratification—when price and, not valué should govern the damages — Laws 1880, chap. 179.
    The complaint in an action alleged, in effect, that the defendant wrongfully obtained possession of lumber which belonged to the plaintiffs and converted, it by a sale; and further stated that the plaintiffs elected to waive the tort involved in taking the lumber and asked to recover its value upon an implied contract. The answer was a general denial.
    Upon the trial of the action it appeared that the plaintiffs were lumber dealers in Albany, and had for a long time had in their employment as a traveling salesman Joseph B. Abbott, through whom the defendant, which was engaged in a similar business in Boston, Mass., had dealt extensively with the plaintiffs.
    In .December, 1887, Abbott falsely represented to the defendant that the plaintiffs had giv.en him the privilege of dealing on his own account in such lumber as the plaintiffs did not have on hand, and the defendant, believing this, gave him orders for lumber with that understanding. Abbott filled these orders by directing the plaintiffs’ employees to load upon cars in Albany for shipment some lumber from the plaintiffs’ yard, and other lumber from the yards of other dealers, from whom Abbott bought it in the plaintiffs’ name and upon their credit, and which the plaintiffs paid for in good faith in the due course of business. •
    In shipping the lumber to the defendant Abbott took bills of lading in the name of the plaintiffs as consignors, and of the defendant as consignee, which neither party knew of until after Abbott’s death, but Abbott made out and sent to the defendant invoices for the lumber in his own name. The defendant received and sold the lumber and paid the purchase price to Abbott, who kept the money, neither party knowing the truth of the matter until Abbott committed suicide in December, 1890.
    
      Held, that the plaintiffs were entitled to recover, as the defendant knew that Abbott was the agent of the plaintiffs in the sale of their lumber for then-account, and such an agency implied a denial of Abbott’s power to sell lumber in his own name or for his own account;
    That when, as the evidence showed, Abbott told the defendant that he was selling it lumber which the plaintiffs did not keep and which he had “ picked up ” from other dealers, he, in effect, told it that the plaintiffs had not clothed him with the possession of, or with the indicia of title to, the lumber in suit;
    That the plaintiffs-could not lose their right to their property by the fraud of Abbott, unless some act or omission of their own misled the defendant into believing Abbott’s false representations, and that no such act or omission upon the part of the plaintiffs was shown;
    That as Abbott had no title, the defendant acquired none, and that its subsequent sale of the property constituted a conversion;
    That the manner in which Abbott procured and made out the bills of lading could not estop the plaintiffs, as Abbott concealed the truth from both parties;
    That the doctrine, that where one of two innocent parties must lose by the fraud of a third, he should lose who made the fraud possible, had no application to this case; that the rule of cameat em/ptor was more nearly in point;
    That the Factors’ Act, which is substantially the same in this State as in Massachusetts, did not protect the defendant, as within the meaning of that act Abbott was not a factor nor agent intrusted with the possession of a bill of lading, nor was he intrusted with the possession of any merchandise for the purpose of sale;
    That the defendant, in order to bring the plaintiffs within the Factors’ Act, must show that the plaintiffs actually intrusted Abbott with the possession of the lumber for the purpose of sale, which it did not do, as the bills of lading in the plaintiffs’ names were fraudulently procured by Abbott, and he had no possession of any lumber except as the servant, salesman and manager of the plaintiffs upon their own premises and at their place of business;
    That it did not assist the defendant to show that the plaintiffs’ negligence or their confidence in Abbott made it easier for him to abstract the lumber;
    That the fact that the plaintiffs still employed Abbott after they had once obtained from him a written statement that he was a thief and a liar was not such negligence upon their part as would defeat a recovery against the defendant;
    That the plaintiffs did not, by waiving the alleged tort of the defendant in taking and selling the lumber and suing upon an implied contract, ratify Abbott’s wrongful act; that the plaintiffs waived the tort of the defendant in taking and selling the lumber, but did not waive the liability of the defendant to pay the true owners for the lumber;
    That, under the circumstances, the price for which the lumber was sold, and not its value, should govern the recovery.
    
      Appeal by the defendant, the Shepard & Morse Lumber Company, from a judgment of the Supremé Court in favor of the plaintiffs, entered in the office of the cleric of the county of Albany on the 8th day of October, 1895, upon the report of a referee, except so much thereof as dismisses the complaint as to the first cause of action therein set forth.
    • The complaint alleged in substance, among other things, that the defendant wrongfully obtained possession of a large quantity of lumber belonging to the plaintiffs and- converted the same to its own use; that the plaintiffs waived the defendant’s tort in taking the lumber and asked to recover its value upon the contract implied by the facts. The answer was a general denial.
    The facts shown upon the trial and as found- by the referee are, that for many years prior to December 1, 1890, the plaintiffs were lumber dealers in Albany, and that the defendant was engaged in the same business in Boston, Mass; that the plaintiffs had for many years had in their employ one Joseph B. Abbott as their traveling. salesman, with power to solicit and accept orders for lumber, and to agree upon the prices- therefor, and to direct plaintiffs’ employees to ship and consign lumber from the stock in their yard to fill such orders, and to buy lumber from other dealers in Albany upon the credit of the plaintiffs, to fill such orders and to cause the same to he shipped and consigned to fill the same.
    The defendant had many times before the transactions here. in question, bought large quantities of lumber of the plaintiffs through Abbott, and the greater part of its extensive purchases from the plaintiffs were -made through him as plaintiffs’ salesman or representative. About December 1, 1887, Abbott falsely represented to the defendant that the plaintiffs had given him the privilege of dealing on his own account in such lumber as they did not have on hand, and he solicited for himself its orders for such lumber; that the defendant believed Ms false representations and gave him from time to time" orders for the lumber here in question; these orders Abbott filled by directing the plaintiffs’ employees to load upon cars some of the lumber from the plaintiffs’ yard, and other portions of the order from the yards of other dealers in Albany, from whom Abbott bought the same in the plaintiffs’ names and upon their credit, for which the plaintiffs paid in the due course of business without suspicion. Abbott caused the cars thus loaded to be consigned to the defendant, who received the same in Boston and paid Abbott for the lumber thus sent, relying upon his representations that this lumber was his own, and that lie could sell it to the company upon his own account. Abbott kept the money thus received, and neither party knew or suspected the truth until after Abbott died by suicide in December, 1890, before which time the defendant had sold and disposed of the lumber thus bought of Abbott.
    The referee found in favor of the plaintiffs in the sum of $26,602.76, with interest from December 2, 1890.
    
      Matthew Hale, for the appellant.
    
      Hamilton Harris, for the respondents.
   Landon, J:

The defendant had frequently bought lumber of the plaintiffs, the plaintiffs acting in making the sales by Abbott, their clerk and salesman. Abbott, we assume from the evidence, had full power from the plaintiffs to make as their agent, and in their name, sales of their lumber to the defendant. If he had sold the lumber here in question to the defendant in the name of the plaintiffs, such sales would have been within the scope of his authority. But he had no authority to sell the lumber for himself, and every act which he did and representation that he made in effecting these sales was in his own name, and .not in the plaintiffs’. The defendant knew that Abbott was the agent of the plaintiffs in the sale of their lumber in their name and upon their account. Such agency implied the denial of his power to sell it in his own name or upon his own account. Nevertheless, in respect to this lumber, the defendant believed Abbott’s false statement that the lumber was his own; that the plaintiffs permitted him to buy and sell certain kinds of lumber which they did not deal in, upon his own account, and, believing his statement, it dealt with him as the owner of it, and paid him for it, It did not rely upon the plaintiffs at all, but solely upon Abbott.

The plaintiffs cannot lose their right to their property by means of this fraud of Abbott, unless some act or omission of their own inisled the defendant into believing Abbott’s false representations that he was himself the owner of it, or had the right to sell it upon his own account instead of upon theirs. (McGoldrick v. Willitts, 52 N. Y. 612; Barnard v. Campbell, 55 id. 456; Smith v. Clews, 114 id. 190.)

The referee does not find,, and the evidence does not show, that the plaintiffs ever did any act, or omitted any, which would tend to lead the defendant to suppose that the - plaintiffs had permitted Abbott to sell lumber upon his own account while he was salesman of lumber for them, or that- would seem to lend any corroboration to Abbott’s false statement to the defendant to that effect. If, in any aspect of the case, it can be said that the plaintiffs clothed Abbott with the possession of the lumber or with the indicia of title to it, yet, when Abbott told the defendant that he was selling it lumber which the. plaintiffs did not keep, which he had picked up” of other dealers, and was dealing in on his own account, he told it that the plaintiffs had not clothed him with the possession of or with the indicia of title to this lumber, and, hence, excluded recourse to them upon any such basis.

The case is that of a person who has -by fraud obtained the possession of the chattels of his principal, and having no other apparent evidence of title than his naked possession, sells them as his own to buyers who know him to be the agent of his principal in dealing in such property, and have no reason except his own 'word to believe that, this propei’ty is not that of his principal. Of course, the buyers in such case obtain no better title than their vendor possessed; that 'is, none at all (Soltau v. Gerdau, 119 N. Y. 380, 397; Hills v. Snell, 104 Mass. 173-177.) Beeausé they obtained no title, their subsequent sale and disposition of the property was without right and a conversion of it. . (Pease v. Smith, 61 N. Y. 477.) It cannot be said that the plaintiffs had any intention thus to part with their -property, and as the defendant cannot trace its possession to any act of the plaintiffs indicating such intention, it was guilty of a conversion in disposing of it. (Ibid.; Bassett v. Spofford, 45 N. Y. 387.)

The defendant’s argument to the contrary, as indeed in.respect to every aspect of its defense, rests upon the assumption that the plaintiffs actually or apparently authorized Abbott to take possession of the lumber in question and dispose of it as owner. The com-* píete answer to this is that the plaintiffs did nothing of the kind. Abbott managed to conceal the transactions from them. They had no knowledge of them until after his death. To suppose that they meant to intrust the possession of this lumber to Abbott in such a way that he could dispose of it as the apparent owner finds no warrant in the evidence, unless we can suppose that the plaintiffs’ servant, caretaker and traveling salesman and, in the absence of the plaintiffs, their manager in the usual course of their business, was authorized to intrust himself with the possession'of his principals’ property in hostility to their possession and to represent himself as the owner, and that too to the customers of his principals who had long dealt with him as their agent.

Whatever Abbott did, having the semblance of authority from his principals, was in obtaining and loading the lumber upon the cars at Albany and in procuring bills of lading therefor from the railroad company in the name of the plaintiffs as consignors, and of the defendant as consignee; but these acts he concealed from the defendant, and the plaintiffs did not discover the facts until about the time of Abbott’s death. Abbott, of course, did not show the bills of lading to the defendant; he made out and sent the defendant invoices for the lumber in his own name. So that in the whole transaction the devices by which he deceived both parties were solely his own and owed their success to his criminal acts.

The defendant invokes the maxim that where one of two innocent persons must lose bj the fraud of a third, the loss should rather fall upon him whose act has enabled the fraud to be committed. But, as we have seen, the facts do not permit the defendant to claim that it was any act or omission of the plaintiffs that led the defendant to ■ trust to Abbott’s denial of his agency; it was rather its own lack of caution under circumstances suggesting caution, that is, the rule caveat em/ptor.

The defendant invokes the Factors’ Act (Chap. 179, Laws of 1830). The act of Massachusetts is shown to be substantially the same as our own. ’ The act provides that every factor or other agent intrusted with the possession of any bill of lading, etc., or not having the documentary evidence of title, who shall be intrusted with the possession of any merchandise for the purpose of sale, shall be deemed the owner as to the purchaser who buys it in good faith.

Abbott was not a factor or such an agent as the statute contemplates. He had bills of lading made out in the plaintiffs’ name, but he did not show them to the defendant; besides, the plaintiffs did not intrust them to him; he fraudulently procured them. He presented to defendant the invoices he made out himself in his own name, and thus he warned the defendant that he was no. agent, and that it dealt with him at its own risk.

Hor did the plaintiffs intrust Abbott with the possession of the lumber. He never was intrusted with the possession of any of it apart from the . possession of the plaintiffs. His possession was that of the servant, salesman and manager of the plaintiffs upon their own premises and at their places of business. As between the plaintiffs and the defendant Abbott’s powers were such as their customary dealings with one another through him implied; these dealings implied Abbott’s agency. When Abbott appeared to .be in possession of this lumber and oj>enly claimed to own it, and told defendant that he had obtained it from others and not from the plaintiffs, no pretense or color of ownership derived from the plaintiffs existed. The defendant, in order to bring the plaintiffs within the Factors’ Act, would have to show that they actually did intrust. Abbott with the possession of the lumber for the piirpose of sale. (Howland v. Woodruff, 60 N. Y. 75; Kinsey v. Leggett, 71 id. 387; Soltau v. Gerdau, 119 id. 380; First Nat. Bank of Toledo v. Shaw, 61 id. 283; Thacher v. Moors, 134 Mass. 156.) It is not enough to show that the plaintiffs’ confidence in Abbott or their negligence made it easier for him to abstract the lumber. (Pease v. Smith, 61 N. Y. 477; Knox v. Eden Musée Am. Co., 148 id. 441.)

There is evidence that the plaintiffs once obtained a written statement from Abbott that he was a thief and a liar. The. plaintiffs destroyed the statement. We have no further evidence upon the subject, except that the plaintiffs did not discharge him from their employment. The inference to be drawn is that in some respect he had wronged somebody, perhaps the plaintiffs, and that they punished him by extorting from him this humiliating confession, or that- he made it to appease them. Were they wrong, or even negligent in continuing him in their employment ? We cannot so hold. The evidence fails to bring the plaintiffs within the imputation of the rule announced in the case last cited.

The defendant urges that the plaintiffs by waiving the alleged tort and suing upon the implied contract ratified the wrongful acts of Abbott.

The complaint charges the defendant with tortiously acquiring possession of the plaintiffs’ lumber, and converting the same to its own use, and selling the same, and alleges that the plaintiffs elect to waive the defendant’s tort in taking the lumber (not Abbott’s) and rely upon the contract to pay, which the facts imply.

Upon the facts, the defendant was liable upon two grounds, one in tort, the other upon implied contract; the plaintiffs waive the tort and assert the implied contract. The mere waiver of the defendant’s tort is neither a ratification of it nor an admission of its non-existence. All the acts constituting the tort remain and are provable as showing the defendant’s liability upon the implied contract, but the right to recover as in trover or for conversion is waived. The contract implied is, that the defendant will pay the plaintiffs for the lumber the same as if the plaintiffs had sold it to it. (Terry v. Munger, 121 N. Y. 161.) That could not be so, if Abbott’s claim to sell it as his own, or the defendant’s act in paying for it, was ratified. The plaintiffs simply waived the defendant’s tort in taking the lumber, not its liability to pay the true owners for it. The defendant’s title to the lumber was thereby confirmed, but was confirmed as if sold to it by the plaintiffs through Abbott as their agent and not paid for.

These views dispose of the main exceptions to the findings of the referee.

Exceptions were taken to the reception of evidence as to certain declarations of the president of the defendant. The findings of the referee negative the fact which these declarations were given to establish. Our examination of the case satisfies us that this testimony, whether believed or not, could not legally or rightfully make any difference in the result. We need not, therefore, pass upon the immaterial question whether, if material, its reception was proper.

The defendant excepts to the referee’s finding that the value of the lumber was $26,602.76. There was testimony tending to show that that was its value at Albany when Abbott abstracted it. The defendant actually paid Abbott $26,362.41 for the lumber, and the testimony in its behalf is that it paid him its full market value. One-of the plaintiffs, who could not state that he had seen the lumber, testified to its value, and based his estimate upon the tally books containing the items, and a description and the quantity of each carload. These tally books were verified by the testimony of other witnesses. The difference in values, $240.37, is comparatively small, but we are inclined to think, since the plaintiffs’ right to recover is the same as if Abbott had sold the lumber to defendant for the plaintiffs, that the price for which he sold it, in view of the uncontradicted evidence on the part of the defendant that it paid him its full value, should govern. We, therefore, reduce the judgment as of the date of December 2, 1890, in the sum of $240.37, and, as thus modified, direct that the judgment, as modified, be affirmed, with costs.

All concurred.

Judgment reduced as of the date of December second, in the sum of $240.37, and, as thus modified, affirmed, with costs.  