
    Melvin L. English, Respondent, v. George Rauchfuss, Appellant.
    (Supreme Court, Appellate Term,
    October, 1897.)
    1. Principal and agent — Dealings of. the creditor with the agent which discharge the principal — Payment, conditional as between creditor and agent.
    Where a creditor of the principal accepts the notes of the agent and gives to the agent an absolute receipt for the claim, indorsed upon a statement of account rendered by the agent to his principal, and the latter, upon this basis, settles with the agent, the principal is discharged as to the creditor, although the payment was conditional as between the agent and the creditor.
    2. Same — Implied powers of agent. '
    An agent has no implied authority to promise, of his own motion, that his notes, given to the creditor for the principalis debt, will he paid at maturity by the principal who has never indorsed them..
    3. Same — Fraudulent scheme of agent to. defraud principal and creditor— Knowledge of principal. |
    
      Semble, that a principal is not chargeable with knowledge of a secret fraudulent scheme, upon the part of his agent, in procuring á creditor of the principal to sign a receipt by means of which the agent may defraud both the creditor and the principal.
    Appeal from judgment rendered by the justice of the Thirteenth Judicial District Court in favor of the plaintiff.
    George A. McDermott, for appellant.
    Charles B. Mason, for respondent.
   Bischoff, J.

The action was for work, labor and services performed by the plaintiff in and about the defendant’s apartment-houses at the request of one Wendehaek, the defendant’s agent, and the defense was payment based upon the evidence that the plaintiff had received the agent’s notes to the amount of the claim and had given a receipt as follows: “Eeceived payment (signed), M. L. English,” indorsed upon a statement of account rendered by the plaintiff to the defendant.

It appeared upon the trial that upon the production of this receipt by the agent the defendant settled with him, and the question in the case was whether or not the plaintiff had actually accepted the individual responsibility of the agent, or, if not, whether he had so acted in the matter that the principal was justified in believing himself discharged at the time when he made settlement with the agent for the assumed payment of the claim.

As to the contention that the plaintiff had actually accepted Wendehack’s personal responsibility, wé think that the finding to the contrary was sufficiently supported by the evidence, but it seems clear that the second ground of defense was well taken.

The rule which applied to this case is stated in Story on Agency (§ 433), to be as follows: “If a creditor of the principal settles with the agent, and takes a note or other security from the latter for the amount due by the principal, although, as between the parties, it is intended only as a conditional payment, yet, if the creditor gives a receipt, as if the money were actually received or the security were an absolute payment, so that the agent is thereby enabled to settle and does settle with the principal, as if the debt had been actually discharged, and the principal would i>e otherwise discharged, the debt will be deemed, as to the latter, absolutely discharged.” The proposition, as thus framed, is fully supported by authority. Rowan v. Buttman, 1 Daly, 412; Muldon v. Whitlock, 1 Cow. 290; Rathbone v. Tucker, 15 Wend. 498; Cheever v. Smith, 15 Johns. 276; Laing v. Butler, 37 Hun, 144; Wyatt v. Marquis of Hertford, 3 East, 147.

Here the defendant’s settlement with the agent was based upon a written acknowledgment of receipt of the amount due, absolute in form, and the fact that the plaintiff had agreed with the agent that the payment, thus acknowledged, should be conditional only cannot, under the rule stated, operate to affect the defendant’s right that the debt stand discharged.

It was shown that when Wendehack tendered the notes,. his personal obligations, he had stated that they were offered in behalf of the defendant who would see that they were paid at maturity, and' it is contended that this agreement, as made by the agent acting ostensibly in behalf of the defendant, was binding upon the latter, to whom the agent’s knowledge, as obtained in the course of the agency, was imputable.

"The infirmity of this position lies in the fact that the method of payment adopted by the agént and acquiesced in by the plaintiff, in this instance, was not, by any proper implication, within his delegated powers and the principal, accordingly, was not chargeable with knowledge of the agent’s statements made at the time, in the absence of any express authorization in the matter.

To justify a party’s reliance upon some implied authority of an agent to do any particular act, assumedly in behalf of his principal, the act must be practically indispensable to the execution of the-duties delegated (Bickford v. Menier, 107 N. Y. 490), and- certainly the tender by the agent of his own notes,, unindorsed by the principal, was in no aspect a necessary or a reasonable form of payment, if intended as a payment for the account of any person other than the agent himself. That such an act is not within the agent’s implied powers, when empowered to make payment, without more, ' must follow from the rule above stated, as a corollary,, since otherwise the agreement between the creditor and the agent, that the payment should be but conditional, would be, necessarily, the principal’s agreement, and the absolute receipt, as explained by parol evidence, would be of no effect.

If it be said that this.agent induced the giving of the receipt, by the plaintiff, through the practice of a fraud against both his principal and the plaintiff,' still the defendant is not chargeable with knowledge of any agreement made by the agent wholly in furtherance of the fraudulent scheme, for the success of which he must needs fail to impart his knowledge to the principal as a matter of fact. Henry v. Allen, 151 N. Y. 1.

The case is brought clearly within the rule discussed and the • judgment for the plaintiff is, therefore, without support in law.

Judgment reversed and new trial ordered, with costs to appellant to abide the event.

Daly, P. J., and McAdam, J., concur.

Judgment reversed and new trial ordered, with costs to appellant to abide event.  