
    Case 27 — Action to Recover Possession of a Piano
    Dec. 6.
    Baldwin, &c. v. Tucker.
    APPEAL FROM MERCER CIRCUIT COURT.
    Judgment for Defendant and Plaintiff Appeals.
    Reversed.
    Principal and Agent — Authority of Selling Agent tq Accept Note to Himself for Price — Notice of Want of Authority.
    Held: As it is not customary for agents selling pianos to have authority to take notes payable to themselves for the price-, the .purchaser of a piano from such an agent was bound to know that ;the agent had no such authority, in the absence of anything to -show that 'he did have such authority; and therefore the title 'to a piano, for the price of which a purchaser executed his negotiable note payable to the agent, did not pass from the principal to the purchaser, the -agent having appropriated the proceeds of the note.
    GAITHER & VANABSDALL and SIMBALL & DOOLAN, attorneys FOR APPELLANTS.
    This action was brought under sections 180 and 181 of the Civil Code, to recover the possession of a piano from appellee, which he purchased from one- J. W. Sparks, a local agent of'the -appellants, with limited .authority to sell-pianos sub- - ject to the approval of the appellants. The agent’s authority being prescribed in a written contract, to take orders for pianos under .specific instructions embodied therein, subject to the approval of appellant. He was -authorized to take orders for appellant in Harrodsburg, Ky., and to sell according to the terms named in a separate memorandum.
    
      ■POINTS'AND AUTHORITIES.
    1. A person dealing with an agent of limited authority must, at his peril, take notice of such limitations, and he can not_rely .on mere assumption of authority by the agent. Meehem on ■ Agency, sees. 289-290; Graycraft v. Selvage, 10 Bush, 709; Russell v. Cox, 18 Ky. Law Rep., 1087; .Spalding y. Tucker, 21 Ky. Law Rep., 224; Chas. Brown Grocery Co. v. BecEet, 22 Ky. Law Rep., 57 S. W. Rep., 458.
    2. An agent has absolutely no authority to deal with the subject-matter of his agency for his own benefit, and, if he do so, it is a legal fraud on his .principal which is shared in by the .person dealing with him with knowledge of such legal fraud,, and the principal is not bound by such “contract.” Meehem on Agency, secs. 354-375; Benjamin on Sales (4th Am. Bd.), secs. 1095-1099, pp. 953-955; Tiffany on Sales, p. 203; Tiedeman on Sales, secs. 143 and 269; Ostrander on Insurance (2d Ed.), see. 56; Chas. Brown Grocery Co. v. Beckeit, 22 Ky. Law Rep., 57 S. W. Rep., 458; Hoffman v. Mutual Life Ins. Co., 92 U. S., 161; Bertholf v. Quinlan, 68 111., 297-303; Holton v. Smith, 7 N. H., 451; Wheeler & Wilson Mfg. Co. v. Givan, 65 Mo., 89; McCormick y. Keith,'8 Neb., 143; Levi v. Booth, 58 Md., 305-319; McCulloch v. McKee, 16 Pa. St., 289; Trudo v. Anderson, 10 Mich., 357; Stewart v. Woodward, 50 Vt., 78; Aultman Co. y. Lee, 43 Iowa, 404; Greemhood v. Keator, 9 Bradwell, 183; MeKindly v. Dunham, 55 Wis., 578; Godshaw v. Struck, 22. Ky. Law Rep., 820; Martin’s Adm’r v. U. S., Monroe, vol. 2, p. 90; Vanadas Heirs v. Hopkins’ Adm’r, 1 J. J. Marshall, 287; DeHart v. Wilson, 6 Monroe, p. 581; Am. & Eng. Ency. Law (.2d Bd.), yol. 1, 987; Mechanics’ Bank v. New York R. Co.., 13. N. Y., 632; Tidrick v. Bice, 13 Iowa, 214; Snow v. Warner, 10 Met. Mass., 136; Resse v. Medlock, 27 Tex., 120; Dozier v.. Freeman, 47 -Miss., 660; Brown v. Johnson, 12 .Smed. and M. Miss., 398; North River Bank v. Aymar, N. Y., 282; Am. & Eng. Ency. Law (2d Bd.), yol. 1, pp. 1012, 1027, 1028; McCormick v. Keith, 8 Neb., 142; Aultman v. Lee, 43 Iowa, 404; McCormick v. Walter A. Wood Mowing Machine Co., 72 Ind., 518.
    3. Appelleefs “contract” was not made with D. H. Baldwin & Company at all, but with “Baldwin Piano Company,” a different concern.
    BEN LEE HARDIN and W. C.’ BELL fok appellee.
    The testimony of A. A. Vanburen, one of the appellants, shows that J. W. Sparks, who sold the piano to appellee, had some sort of agency for more than a year, in territory embracing Harrodsburg, the home of appellee, to sell pianos for the firm. o£ D. H. Baldwin & Co. This territory, easily canvassed for orders or .sales, was impliedly occupied by Sparks, bringing to the knowledge of the citizens his .agency; that this, with other pianos, was shipped by appellants to Sparks iat Lawrenceburg, a part of his territory. The fact that Sparks had limited authority was not known to appellee, and he had the right to assume that Sparks had .authority to make the sale.
    Oúr conclusion is:
    (1) A .single act of .an .assumed agent and a single recognition ■of his authority hy the principal is sufficient to prove the .agency. WilcoX v. Chicago, &c., R. R. Co., 24 Minn., 269.
    (2) Where faots exist sufficient to imply the relation of principal and agent, the parties are hound by them.
    "(3) An agent acting under a general authority hinds his principal hy any act done within ’.the «cope of his employment, even if done against instructions. ’ Secret instructions can not affect third parties, dealing with the agent. 10 Bush, 632; 1 J. J. Mar., 285; 59 Ind., 93'; 10 N. H., 538; 49 Iowa, 126; 24 Minn., 269.
   ■Opinion op the court by

CHIEF JUSTICE PAYNTER —

Reversing.

On October 7, 1898, D. TET. Baldwin & Co., dealers in pianos and musical instruments, by a writing, authorized- J. W. Sparks to take orders for their musical instruments in Harrodsburg, Ky., and such other territory as might be agreed upon. The instruments and proceeds of sale were to be the property of appellants. The order® taken and sales made by him were not to be binding -on appellants until approved1 by them. Blank notes were furnished to him-, payable to appellants’ order, and they were to be subject to appellants’ approval when executed. On November 22, 1898, appellants shipped to J. W. Sparks, Lawremceburg, Ky., four pianos, for the purpose of taking orders therefor, according to the terms of the contract of agency. One of the four pianos shipped to him was sold to Charles Sparks, and one of them is the one in contest. On December 22, 1898, he sold'the appellee, Tucker, a piano for $120, for which he took a note payable to himself individually,' twelve months after date, at the First National Bank, Harrodsburg. Upon receipt of the note and delivery of the piano, he discounted the note at the bank, and1 never accounted to appellants for any part of the proceeds. Four or five days after this transaction, appellee wrote to appellants, at Louisville, Ky., that he had bought the piano, Sparks not having made any report of sale to them. The company at .once declined to ratify the sale, anid' claimed the piano. The appellee refused to give it up, and this action was instituted to recover the possession of it, upon the claim that it belonged to them, as they had never parted with title thereto. The appellee resisted recovery, upon the idea that Sparks was acting for appellants, and that they were bound by his acts. Upon the proof as to the contract of agency and the value of the piano, etc., the court, at the conclusion of appellants’ testimony, instructed the jury to find for appellee.

It is a difficult question sometimes to determine whether an agency is general or special. It is sometimes held that where an agency is special as between principal and agent it is general between the principal and third persons. Where the agency is created by writing, it seems to be proper for the court to determine whether it is general oi special. If it be by parol it is for the jury to determine its character and extent. Mr. Mechem, in his work on Agency, section C, says:' “A universal agent is one authorized to transact all of the business of his principal of every kind. A general agent iis an agent who is empowered to transact all of the business of his principal of a particular kind or in a particular place. A special agent is one authorized to act only in a specific transaction. A principal can have but one universal agent. He may have a general agent in each line of his business, and in each of several places. He may employ as many special agents as occasion may require. A universal agency is of very rare occurrence, the great majority of the cases being those which involve some form of general or special agency.” Sparks seems to have been made the agent, with limited powers', to transact all the business in the matter of selling musical instruments in the city of Harrodsburg and such other territory as might be agreed upon between the parties. Without deciding, we will assume, that he was a general agent for appellants to sell pianos in Harrodsburg. According to the terms of the contract, he bald no authority except to solicit orders for pianos. Where an agent is intrusted with goods to sell for his principal, he has no right to sell or deliver them in payment of his own debt. The creditor who receives goods under such an arrangement, notwithstanding he may be acting in good faith and in ignorance that the goods did not belong ho the agent, acquires no title thereto against the principal. Where the principal authorizes the agent to collect a demand, or receive payment of one, he can not be bound by the action of the agent except he actually collect the money.. The agent is not authorized to take the note of the debtor, payable t*o himself or to his principal. Mechem, Ag., sec. 354, says: “An agent intrusted with goods to sell for his principal has no right to sell or deliver them in payment of his own debt, or to pledge them as security for his own debt, and persons dealing with such an agent are bound to take notice of this limitation of his authority. A creditor therefore, who receives the goods under such an agreement, as well as his vendee, though acting in good faith, and in ignorance that the goods did not belong to the agent, acquires no title thereto, as against the principal.” The same author, in section 375, says: “'An agent authorized merely to collect a demand, or to receive payment of a debt, can not bind his principal by any arrangement short of an actual collection and.' receipt of the money. He can not, therefore, take in payment the mote of the debtor, payable either to himself or to his principal; or the note or bond of himself, or of a third person; or a draft or order on a stranger, or horses, wheat, merchandise, or other property of any kind; nor can he set off a claim due from himself; or take property for his own use in payment.” In Grocery Co. v. Becket (22 R., 393), (57 S. W., 458), the court said: “"The general ruleds that the acts of an agent bind his principal wilhin the'scope of his apparent authority, but that the principal is never bound where the person dealing with the agent knows, or has reason to know, that the agent is exceeding his authority, or is perpetrating a fraud on his principal.” In Hoffman v. Insurance Co., 92 U. S., 161, 23 L. Ed., 539, it appeared that an agent of the company agreed to take in payment for the premium a horse for .himself and a note to himself. The insurance company refused to recognize the transaction, and in passing upon the question the court said: “The exercise of such a power by the agent was liable to two objections, — it was ultra vires, and it was a fraud as respects the company. Hoffman must have known that neither Goodwin nor Thayer had any authority to enter into<such an arrangement, and he was a party to the fraud. No valid contract as to the company could arise from such a transaction.” In Bertholf v. Quinlan, 68 Ill., 297, an agent had in his possession whisky for sale. He traded it for a piano. The court held that be had no authority to make such a contract, and that the principal was not bound thereby, and was entitled to recover possession of the whisky, or its value. In Holton v. Smith, 7 N. H., 451, an agent, with general authority to sell his principal's goods did so, and received in pay-, inent a debt due from himself to the purchaser; The' court held that the principal* was entitled to recover the goods. It said; “Miller had an undoubted authority to sell the goods; but it was to sell them, not as his own, but as the goods of the plaintiff; and, acting as agent of the plaintiff, he had,no right to exchange them for other goods, or for his own note. By the disposition he made of them he 1 reated them as his own, and this dispositipn was not properly a sale; within the meaning of his authority to sell, but a delivery over, at a certain price, in payment of a demand against himself. Although in the nature of a sale, it is, in fact, a payment of his- debt with goods instead of money. If it might also be considered as a purchase by himself at the same time, that will not avail, as an agent has no right to purchase of himself What he is intrusted to sell. Had Miller sold, and received the money, he might, to be secure, have squandered it, but that can make no difference. ... If a principal may be subjected to- loss in such modes, it is because he has thus far trusted to the fidelity of the agent, and this furnishes no reason why the law should permit the agent to defraud him in the other cases.” In Manufacturing Co. v. Givan, 65 Mo., 89, a sewing machine agent had authority somewhat similar to the powers of Sparks in this case. He sold a machine under a contract that he would take part pay for it in board for himself. The court held that the contract was not binding on the company, saying; “He has no right to charge the security of his principal for his debt, or to make himself the debtor to the principal for the like amount in lieu of the person who owes the debt, without the consent of the principal to that effect. If an agent has authority to receive for his principal a.' debt due from a third party to him, and the agent owes- a like amount, or a greater, he has no right to substitute himself as the debtor of the principal, giving him credit for the amount, or to set off the debt due by him to such third person.” In Culloch v. McKee, 16 Pa., 289, an agent was authorized to collect a debt. He took a note from the debtor payable to himself in settlement. The court held that it could not be done. In Trudo v. Anderson, 10 Mich., 357, 81 Am. Dec., 795, an agent was authorized to sell a horse, but he exchanged it for another. The court held that he had no power to do so. In Stewart v. Woodward, 50 Vt., 78, 28 Am. Rep., 488, a general agent for a merchant tailor agreed with a'doctor, to sell the principal’s goods in payment of a medical bill which the agent owed him. The agent’s authority was general. The court held that he could not be presumed to have the power to make such a contract for his own benefit at the expense of his principal. In Aultman v. Lee, 43 Iowa, 404, an agent for the sale of threshing machines agreed with the purchaser that he would take wheat from him in part payment of the notes given for the machine. The court held that he could not bind the principal by such contract. When the principal places goods in the hands of his agent to sell, the' parties' dealing with -him are bound to take notice that there is a limitation upon his authority which prevents him from taking property in exchange for that which he has to sell, or from receiving in payment thereof the purchaser’s note payable to the agent. If an agent has a debt to collect for his principal the debtor must take notice that there is a limitation upon the authority of the agent to receive anything in payment of it except money. If the agent can not take a note payable to himself for a 'debt which he has in his hands to collect, or can not take the note of another in payment of the demand, upon what principle can he sell the property which may be intrusted to him for that purpose and take a note payable to himself for the purchase money? In this case the appellee knew the piano belonged to appellants. He assumed that Sparks was acting as their agent in the sale of the piano. He was bound to know that there was such a limitation upon the power of the agent that he could not take the purchaser’s note payable to himself for the purchase money of the piano. In Hoffman v. Insurance Co., 92 U. S., 161, 23 L. Ed., 539, the supreme court expressly held that the agent had no right to take a note payable to himself for the premium due his principal. Any man with ordinary understanding ought to know that a firm handling a vast number of pianos, like appellants, would not send its agents over the country-to sell pianos and take notes payable to themselves for the purchase money. It is not a question, however, of what he ought to know, but in a transaction like the one under consideration the purchaser is bound to know that there was a limitation upon the agent’s authority which would prevent him from taking a note payable to himself for the purchase money. The proof shows that the selling price of the piano was $300, and yet Sparks sold it to the appellee for $120, besides taking the note payable to himself. The court erred in giving a peremptory instruction to the jury. On the facts shown in this record it should have told the jury, in the absence of any evidence to show that Sparks was authorized to sell the piano and take the note payable to himself for the purchase price, to find for appellants. There was nothing in this case to" show that, in the business of selling pianos by agents, it was usual for them to-take notes payable to themselves for the purchase money. Had such been shown, then it would appear to be an act' within the scope of the agent’s apparent authority. It is said in Hoffman v. Insurance Co., 92 U. S., 104, 23 L. Ed., 539: “Within the sphere of the authority conferred, the act of the agent is as binding upon the principal as if it were done by the 'principal himself. But it is an elementary principle, applicable alike to all kinds of agencies, that whatever an agent does can be done only in the way usual in the line of business in which he is acting. There is an implication to this affect arising'from the nature of his employment, and it is as effectual as if it had been expressed in the most formal terms. It is present whenever his authority is -called into activity, and prescribes the manner, as well as the limit, of its exercise.”

The judgment is reversed for proceedings consistent with this opinion.

Judge Hobson,

(dissenting). It has often been held by this court that the acts of an agent within the apparent scope of his authority bind his principal; and that, where there is any evidence of fact, it must be left to the jury, and is not to be determined by the court, as a matter of law, on a motion for nonsuit. Appellants sent out their agent to sell pianos for them; they gave him possession of their instruments, assigned him certain territory in which he was to represent them, and authorized' him to sell on Gredit. As to the public he ■ was their representative in that territory. The selling of a piano was within the apparent scope of his authority, and they are bound by his sale, unless the circumstances were such as to apprise the purchaser that the agent was exceeding his authority or such as to put a reasonable man on inquiry. It is said that the purchaser was put on inquiry by the fact that the piano was sold at $120, and a note taken payable to the agent. No weight is given in the opinion to the amount of the price. Pianos vary much in value, and there is not enough in this case to show that the purchaser was put on notice, by the amount .asked for the piano, that something was wrong. At least, what weight -should be attached to this circumstance is clearly a question for the jury. As to the taking of the note bo himis'elf, the agent having the power to sell on credit and take a note for the price, it was within the apparent scope of this authority to determine the form of the note. The purchaser had a right to assume that the agent took the note according to the course of business between him and his principal. A large part of the business of the country in the selling of sewing machines, pianos, and the like i>s done by agents who go from house to house and sell their wares on credit. It is not uncommon for the principal to require them to take the notes in their own name's and then indorse them, so as to make them personally responsible for the notes. No authority can be found for the proposition, so far as I am aware, that the taking of a note by an agent in Ms own name, is, as a matter of law, conclusive to the purchaser that the agent is exceeding his- authority. None of the authorities cited by the court sustain this conclusion, and it is, at least, remarkable that, if such" is the law, no ca'se so holding can be found, when such a large part of the business of the country has for years been done in this way. As between two innocent persons, one of whom must suffer, the loss should fall on the principal who has armed the agent with apparent authority, and thus enabled him to obtain the advantage of the person with whom he trades, rather than -on the purchaser, where the agent acts within the apparent scope of his authority, and there is nothing in the transáction to put the purchaser on notice that he is exceeding his authority. Where authority is conferred by parol the rule is that the apparent iscope of it is a question for the jury. It seems to me the same rule should be applied where the agent is sent to take charge of- his principal’s interest in a territory distant from his principal, and the Secret arrangements between the principal and the agent are unknown to the public dealing' with him.

I am therefore of opinion that the case should be left to the jury, under proper instructions, and that a -peremptory instruction should not be given,, and in this dissent Judges Burnam and Guffy concur  