
    BRANHAM v. FRANK FULLMER AND FULLMER STOCKYARDS, INC.
    1. Principal and Agent — Undisclosed Principal — Setoff.
    One dealing with the agent of an undisclosed principal may not, in the transaction with the principal, take a setoff which would be good against the agent where he knew of the agency or was put on inquiry with respeet to it and with reasonable diligence might have learned of it.
    2. Principal and Agent — Undisclosed Principal — Notice—Insolvency.
    Knowledge that a person with whom one is dealing is insolvent, or in failing circumstances, or financially incapable of carrying out a proposed contract can constitute sufficient reason to put one dealing with him on notice that he is acting as an agent.
    References for Points in Headnotes
    [1] 3 Am Jur 2d, Agency § 327.
    [2] 3 Am Jur 2d, Agency §§ 293-299, 302, 326, 327.
    Appeal from Tuscola, James P. Churchill, J.
    Submitted Division 2 June 9,1970, at Lansing.
    (Docket No. 5,512.)
    Decided June 29, 1970.
    Leave to appeal denied September 22, 1970. 384 Mich 755.
    Complaint by David Branham and Frank Little against Frank Fullmer and Fullmer Stockyards, Inc., for monies deducted from the proceeds of a sale of cattle as a setoff on an unrelated promissory note of plaintiffs’ agent. Judgment for plaintiffs. Defendants appeal.
    Affirmed.
    
      
      Taylor é Carter, for plaintiffs.
    
      Maurice C. Hansford, for defendant.
    Before: McGregor, P. J., and Bronson and Mahinske, JJ.
    
      
      Cireuit judge, sitting on the Court of Appeals hy assignment.
    
   Per Curiam.

An agent of the plaintiffs herein delivered some cattle to the defendants, who then sold the cattle and received the proceeds from the sale. There was, at the time of the sale, a promissory note dne and owing by the agent to the defendants, independent of this transaction. The defendants deducted the amount owed on the promissory note from the proceeds of the unrelated cattle sale; plaintiffs bring this action to recover the monies deducted. The trial court, sitting as the finder of fact, held that the defendants were not entitled to the setoff claimed and from this, defendants appeal.

On appeal, defendants argue that, inasmuch as there was an undisclosed principal, they were entitled to the setoff. The law in this matter is succinctly stated in 3 Am Jur 2d, Agency, § 327, pp 684, 685.

“The failure of an agent to disclose his principal to the party with whom he makes a contract does not entitle such party, when sued on the contract by the principal, to avail himself of a defense or set-off which would have been good as against the agent individually, where he knew of the existence of the agency, or was put on inquiry in respect thereof, and with reasonable diligence might have learned of it. Even though the agent acts in his own name, if the third person had any reason to believe that he was dealing with one who was representing someone else, lie cannot successfully set up such defense or setoff, even though he might not know the identity of the principal”;

and

“It is generally held that notice need not extend to the identity of the principal, but it is sufficient if it merely discloses the fact that the agent is acting in a transaction for some third party.” 53 ALE 414, 448. ;

The financial condition of a party (herein the agent) can constitute sufficient reason to put a party on notice as to the existence of an agency relationship, as in the instant case.

“Knowledge that the person with whom one is dealing is insolvent, or in failing circumstances, or financially incapable of entering into and carrying out a proposed contract, has been held to require inquiry as to the existence and rights of an undisclosed principal.” 53 ALE 414, 455.

The trial judge had ample basis for his findings, and such findings will not be set aside unless clearly erroneous. GCE1963,517.

Affirmed. Costs to plaintiffs.  