
    James W. Elwell v. Moses Chamberlain, Jr.
    The plaintiff was the owner of a promissory note, made by third persons, and employed a broker to sell it for Mm. The latter employed another person, as Ms agent, to effect the sale. The defendant agreed with such agent to buy the note, if another note, of the same makers, falling due on the 13th of October, owned by the defendant, and payable at a bank in Brooklyn, was paid. This negotiation was had in the City of New York. On the 14th of October, such agent positively represented that the note had been paid, which was untrue. On this representation, a check was given for the note, payment of which was stopped, and which is now sued upon. It was drawn to and endorsed by such agent, . and by him delivered to the broker, and by the latter, to the plaintiff.
    
      Held, that the false representation, of the agent of the broker, was of the same effect as if made by the broker himself, and that the plaintiff could not acquire a title to a security for money, so obtained.
    
      Held, that whether the agent did or did not know that the other note was not paid, was immaterial.
    (Before Bosworth and Hoffman, J. J.)
    Heard, Nov. 16th;
    decided, Dec. 6th, 1857.
    This cause was tried before Mr. Justice Slosson and a jury, and comes before the Court, upon an application for a new trial, on a case made. The learned Judge refused to permit the counsel of the defendant to go to the jury, upon certain questions of fact, holding, that there were none which it was their province to determine; and directed a verdict to be given for the plaintiff, which was accordingly rendered.
    The principal question in the cause arose upon the following proposition, which the counsel of the defendant submitted, as a bar to the plaintiff’s recovery, and which the Judge overruled: “ That, although Mills was not directly employed by Elwell, still, as he acted for Elwell, and obtained the check by fraud, Elwell cannot avail himself of the benefit of the fraud, without also being responsible for the consequences of it.”
    The facts, bearing upon this proposition, are the following:— The firm of Lane, West & Company made a promissory note, to their own order, dated the 20th of June, 1856, at four months, for $2240.20, and endorsed it. The note was made to be sold in the market, to raise money for the firm. One Van Olinda got possession of the note, and brought it to Hotchkiss, a broker, shortly after it was made, who sold it. This sale was made to the plaintiff, Elwell, who, upon being applied to, refused to advance cash for it, but offered his own note, taking a discount of two and a half per cent, upon the note of Lane, West & Company. This was accepted, and the money raised by means of the plaintiff’s note, went, it seems, to the use of that firm, through Yan Olinda.
    The date, of this transaction, is not distinctly fixed; but it was certainly before the 7th of October; very probably, was about the time of the date of the note.
    Elwell, the plaintiff, thus became the owner of the note of the firm, having paid for it, by his own note, accepted as cash, and, for all purposes of the cause, to be treated as cash.
    About the 7th of October, Elwell employed Hotchkiss, the broker, with whom he had made the previous arrangement, to dispose of the note for him. Hotchkiss employed Charles N. Mills for this purpose. Mills negotiated with the defendant; and finally, on the 14th of October, 1856, it was taken by the defendant, who gave his check for $2215.20, on the Nassau Bank, dated that day, and drawn in favor of Mills, who endorsed it to the plaintiff.
    On the 15th of October, the defendant stopped the payment of. the check by the bank, and this action is now brought to recover the amount of it.
    In the course of the trial, the defendant was sworn on his own behalf, and testified, that a few days before the 13th of October, Mills showed him the note, and requested him to buy it. He replied, that he had enough of Lane, West & Co.’s paper already; that he held a note of theirs which- would fall due on the 13th, and was in a bank at Brooklyn; that if such note was paid at maturity, he would buy the one in question; that on the 14th of October, Mills called and said: “Your note is paid. Lane, West & Co. paid it yesterday, and you must now, according to promise, buy the present note.” That he (defendant) replied, that he did not know it had been paid, but would take Mills’s word for it, and buy the note. Mills repeated that it was paid. The check was then given, and on the ensuing morning, the 15th, the defendant received notice of the dishonor of the note in the Brooklyn bank, and then stopped the payment of the check.
    
      Mills was examined as a witness in the cause, upon the call of the defendant. The plaintiff did not question him as to the statement of the defendant, and the defendant did not seek to corroborate that statement by him.
    
      M G. Benedict, for the plaintiff.
    
      Wm. M. Allen, for the defendant.
   Hoffman, J.—

The evidence of the defendant must be treated as entitled to credit, and it proves the case of a condition affixed to the agreement to purchase the note; of a positive false representation by Mills, that the fact had occurred upon which the condition rested, and the purchase was to be made; and of the consummation of the bargain upon the faith of that unequivocal representation.

Whether Mills knew that the note referred to was unpaid or not, is immaterial. He undertook to state, as a fact, that it had been paid, being fully apprised that the defendant would not otherwise take the note in question.

If Mills, the payee of the check, were the plaintiff, it would be impossible to hesitate a moment in denying a recovery; or had Hotchkiss made the representations, the plaintiff would clearly have been affected by them. His authority was to sell the note. What he said or did, in relation to such sale, was within the scope of his power. (Sandford v. Handy, 23 Wendell, 265.)

What is the effect of the representations being made by Mills, employed by Hotchkiss ?

It is true, that a factor or agent, entrusted with a particular duty, cannot delegate his power, and commit the discharge of that duty to another. The brief note of the case of Moffat v. Wood, (Selden’s Notes of Cases, Court Appeals, December, 1853,) recognizes this rule.

But can the plaintiff, upon the facts as proved, receive this check from Mills, drawn payable to his order, obtained by his fraud, and be exempt from any liability for that fraud, and profit by it ? Chamberlain had no knowledge, as far as appears, but that Mills was the actual owner, or that he was not dealing for an immediate principal.

The plaintiff knew that Mills must have had some part in the negotiation of the sale, as the cheek was in his favor.

No doctrine would tend more effectually to promote the success of deception, and secure its fruits, than to hold, that a fraud practised by a servant or clerk of an agent employed to sell property, is not a ground of relief, when, if perpetrated by the actual agent, it would be sufficient.

The well-considered case of Fitzsimmons v. Joslyn, (21 Vermont, 129,) bears strongly upon this question.. Creditors of a merchant had declined to sell him more goods; had referred him to another merchant, and had represented to the latter the good credit of the former. The merchant then sold him goods. The purchaser became insolvent. ,

It was held, that he was responsible for the statements of his creditors, and as the vendor was cheated by means for which he was responsible, such vendor could sustain trover for the goods, which were in the hands of the sheriff.

The proposition of Chief-Justice Redfield is thus expressed:—- “ With regard to representations made by others without authority at the time, the person who takes advantage of the influence of such false representations to obtain an unjust contract, or who adopts a contract made for his benefit, through the instrumentality of fraudulent representations, becomes himself a principal in the fraud, and it is the same as if he had made the representations himself.”

That there may be cases of representations made by persons so utterly disconnected from the party, as to exempt him from any responsibility for them, need not be contested. But when, as in the present case, there is a direct connection; when the fraud was practised by the servant of the actual agent, and when the party is, or ought to be aware of such employment, it cannot be allowed that the principal may shelter himself beneath the plea of his ignorance of the fraud.

A new trial should be granted, with costs to abide the event.

Bosworth, J.

—When an agent, during and in the very course of a transaction, makes a false representation, though without actual fraud, of a matter- which he declares to be within his personal knowledge, the principal cannot claim or hold any advantage therefrom, hut the party dealing with such agent may rescind the transaction as soon as he discovers the untruth, and may then recover back any money paid, or property delivered. (Parson’s Merc. Law, 152.)

Within this rule, Mills is to be deemed the agent of the plaintiff, although not employed by him. He has no title to the check, except by force of the transaction between Mills and the defendant. That the latter has a right to annul. (New trial granted with costs to abide the event.)  