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(309 I. 226, 140 N. E. 834.) the agent's authority. Nicholson act in securing it. That rule applies -agreement to

was what is known to executory contracts; but where, reparchase in law as a special as in this case, the only authority of stock-effect.

agent of defendant. the agent is to unconditionally sell His only authority was to sell de stock, collect and account to his fendant's stock at a given price. principal for the proceeds of the When he had sold the stock to Mrs. sale, and, without his principal's Murray for the authorized price and knowledge, the agent agrees that his collected the money, he had done all principal will repurchase the stock, he had any authority to do. De

De- the principal is not bound by the unfendant never had any knowledge of authorized agreement of the agent. its agent's unauthorized act until So far as the principal is concerned three years had elapsed after the the sale is not conditional, and resale of the stock. Immediately on

Immediately on taining the money for the stock unbeing notified its agent had signed

gned der such circumstances is not a ratiits name to an agreement to repur- fication of the agent's unauthorized chase the stock, defendant repudiat- agreement. Wheeler v. Northwested the agreement.

ern Sleigh Co. (C. C.) 39 Fed. 347; Plaintiff's contention is that after Finance Co. v. Pittsburgh Coal Co. the defendant learned of the un- 65 Minn. 442, 68 N. W. 70; Davenauthorized act of its agent, if it port Sav. Fund & L. Asso. v. North claimed the benefit of the sale, it American F. Ins. Co. 16 Iowa, 74; was its duty to comply with the un- 2 C. J. 515; Tulane University v. aụthorized agreement of its agent to O'Connor, 192 Mass. 428, 78 N. E. repurchase the stock. We do not 494; Bryant v. Moore, 26 Me. 84, 45

think the rule con-effect of taking

Am. Dec. 96. See also note to John advantage of tended for applies to Gund Brewing Co. v. Tourtellotte, agent's act. cases of this charac

29 L.R.A.(N.S.) 210. ter. There is a rule that where a

We are of opinion the Circuit and principal, with knowledge that his

Appellate Courts misapplied the law agent has exceeded his authority in

to the uncontroverted facts. The securing a contract, attempts to en

judgments of the Appellate and Cir. force the contract the agent had

cuit Courts are reversed. authority to make, he will not be permitted to do so and repudiate Petition for rehearing denied Octhe agent's fraud or unauthorized tober 3, 1923.

ANNOTATION.

Effect of agent's agreement to repurchase property sold by him.

Almost all the cases found on this it is not bound by his agreement to subject relate to sales of corporation repurchase the stock, and that the stock.

purchaser must acquaint himself with While it is difficult to generalize on the extent of such agent's authority; this subject, it may be said that in and the fact that a corporation retains the great majority of cases the pur- the proceeds of an executed unconchaser obtained relief, although this ditional sale of its stock after receivwas not in the reported case ing notice that the agent agreed to (MURRAY v. STANDARD PECAN Co. repurchase the stock under certain ante, 604).

conditions does not bind it to perform It will be seen that in the reported the agreement. case (MURRAY v. STANDARD PECAN Co.) In Schuster North American it is held that a corporation author- Hotel Co. (1921) 106 Neb. 672, 184 N. izing an agent to sell its stock and W. 136, 186 N. W. 87, it was held that collect and turn over the money for where a contract for the subscription

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V.

for stock contains the provision that Pac. 664, the defendant subscribed "no conditions, agreements, or repre- in writing for - certain shares of sentations,” other than those printed stock of the plaintiff company, exein the instrument, shall bind the cuting her note for the purchase company, the agents of the company, price; the action was upon the note who sell the corporate stock and pro- and resulted in favor of the decure the execution of the subscription fendant; the subscriptions were made contract, clearly act outside the limits out in triplicate; one marked "Origof their ostensible authority when inal” was retained by the company, they make an oral promise, as an ad- one marked “Duplicate” was given to ditional stipulation and obligation of the subscriber, and another marked the company, that the company will, “Triplicate” was retained by the upon request, accept a return of the agent; the "duplicate" subscription, stock and repay the consideration, retained by defendant, had written on with interest; and the fact that the the back the following: “July 25—11. agents acted fraudulently in such case Ten months from date, if holder of would not fix responsibility upon the contract wishes, we

agree to take company. (This case was cited in said stock off purchaser's hands at Shimonek v. Nebraska Bldg. & In- the purchase price of $1 per share. vest. Co. (1922) Neb. — 191 N. W. Tidewater & Southern R. R. Co., by 668, an action where there had been R. U. Morey, Sec. Dept;" this was a similar contract, but where, how- not written upon the original subever, the agent's agreement had been scription retained by the company; ratified and partially carried out by the defendant claimed that the sale the company.)

was conditional and that by the fraud Where a letter of the purchaser of plaintiff's agent the true consideraaddressed jointly to the principal and tion did not appear upon the "origithe agent ordered a cement elevator, nal" subscription. The court said, and stated that the purchase was inter alia: "We are satisfied that based "on your claim to sell the hoist appellant should not be permitted to for us within a reasonable time after deny the authority of the agent to we have notified you that we have enter into such conditional contract. finished using it, for about 66 per The agents were authorized to sell cent of the cost price,” it was held stock; they had the blank subscripthat the power to make such an ex- tion book. In the sale of the stock traordinary contract was not presum- they represented, therefore, the corably or impliedly within the general poration. The purchaser was not scope of a selling agent's authority, warned nor put upon inquiry as to any and that therefore it was incumbent limitation to the authority of the on the purchaser to prove otherwise agent in receiving subscriptions. The than by the acts and declarations of purchaser had the right to assume the agent that the agent had preced- that the salesman was authorized by ent authority to make it or that the the corporation to do those legal acts principal ratified its act. The court which the nature of his employment stated: "The principle applicable to seemed to warrant. The agent, in the case is this: “The burden of prov- other words, was ostensibly clothed ing both the fact of agency, and its with unlimited authority, and upon scope, lies on him who asserts them.'familiar principles appellant should T. L. Smith Co. v. Burd P. Evans & not be heard to disavow and repuCo. (1914) 56 Pa. Super. Ct. 626. diate the contract made by him....

On the other hand, as heretofore The authority of the agent and the stated, in the great majority of cases ratification of his acts by the prin. the purchaser obtained relief. And in cipal may be shown, of course, by cirmost of these cases he was the plain- cumstances; and it is fair to assert tiff in the action,

that a review of the whole situation In Tidewater Southern R. Co. v. leads rationally to the conclusion that, Harvey (1917) 32 Cal. App. 253, 162 in legal contemplation, the act of

case

Morey in the premises was the act tiff upon the condition that it could of appellant. Moreover, if we regard be returned and the purchase price the fraudulent feature of the trans- be refunded if the plaintiff was disaction, we reach the same conclusion. satisfied with the purchase, but the It was the duty of the agent to make defendant contended that the agent the proper indorsement on the 'origi- making the sale had not authority to nal' subscription. If he had done so, attach such a condition to any sale, the corporation would have had the court said and held: “There was through that channel actual knowl- evidence tending to prove that the edge of the entire contract. But by secretary and manager indorsed the the fraud of the agent the said in- contract as made by the sales agent, dorsement was not made, and as far including the condition for rescindas respondent is concerned, the case ing; and it must be presumed that must be viewed then as though said such secretary and manager had auindorsement had been made and thority to enter into such a contract acquiesced in by appellant; for the as the one in question, providing the act of the agent under the circum- defendant could have entered into stances is the act of the principal, same. If, as a matter of fact, such and the latter must suffer the conse- an officer as one who is known as quences of the agent's failure to do secretary and manager had not auas he agreed.”

thority to enter into a conditional stock (See also, for a on similar sale, other than as such authority facts, where, however, the authority might be affected by statute, certain of the agent seems to have been ly the burden was upon defendant to conceded, Tidewater Southern R. Co. establish such fact." v. Vance (1916) 31 Cal. App. 503, 160 In Wisconsin Lumber Co. v. Greene Pac. 1097.)

& W. Teleph. Co. (1904) 127 Iowa, Where stock was bought on a guar- 350, 69 L.R.A. 968, 109 Am. St. Rep. anty of resale signed individually on 387, 101 N. W. 742, the plaintiff rethe reverse side of a receipt for the covered in an action for the par money, which receipt was written on value of certain shares of stock in the the stationery of the defendant cor- defendant company pursuant to a conporation, and signed by the same in- tract made in the name of the defenddividual, “Agent at N. Y. City,”- ant corporation under its corporate the guaranty being of resale at the seal, executed by the president and same price if the purchaser's brother secretary, whereby the defendant

, deemed the investment unwise, and a agreed that in a certain contingency check for most of the purchase money it would repurchase the plaintiff's was deposited by the corporation, stock and pay the par value there. it was held that the transfer of the for. As to the defense that the ofstock by the corporation with appar- ficers had not authority in fact to ent knowledge of the guaranty, and make the contract, the court said, inthe retention by it of the check, were ter alia: “It clearly appears from sufficient, if true, as the jury was the implied color which the answers warranted in believing, to constitute must give in order that the defense a ratification on the part of the de- may be considered at all, that these fendant corporation of the guaranty. officers did in fact make the contracts Malcomson v. Monaton Realty Invest- as alleged in the petition, under the ing Corp. (1913) 154 App. Div. 694, seal of the corporation, and that 139 N. Y. Supp. 405, affirmed in (1915) the defendant corporation has had 214 N. Y. 677, 108 N. E. 1100.

and enjoyed the benefits of such conIn Sweeny v. United Underwriters tracts. This being true, the corporaCo. (1912) 29 S. D. 576, 137 N. W. tion cannot accept and ratify the con379, where there was evidence which tracts in so far as they were benewould have warranted the jury in ficial to it, and repudiate them in so finding that stock of the defendant far as they imposed any liability on corporation was bought by the plain- its part. It accepted plaintiff's money

31 A.L.R.–39.

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on the strength of these contracts, and the letterhead of the defendant corcannot, while retaining the same, be poration, headed with its name and heard to say that its officers had no the names of its president, secretary, authority to make the contracts un- treasurer, and fiscal agent, and signed der which it was received. This is in the individual name of the fiscal hornbook law. . The contract agent, who had acted in good faith being under the seal of the corpora- in the matter; but the president, tion, and the signature of the corpora- secretary, and treasurer of the detion and its officers being undenied, it fendant claimed that they knew of no will, of course, be presumed not authority ever having been given to the only that the contract was in fact fiscal agent sufficient for him to make executed, but that its officers had the agreement of resale. It was held power to make it."

that the plaintiff was entitled to a In Lemmon v. East Palestine Rub- decree directing the defendant to pay ber Co. (1918) 260 Pa. 28, 103 Atl. 510, her, on surrendering her stock, the the plaintiff, by a contract in writing price stated in the agreement, with signed by himself and the defendant interest, etc. The case seems to have company by its treasurer and to which been decided upon the authority of its seal was attached, purchased of Rackemann v. Riverbank Improv. Co. the defendant certain shares of its (1896) 167 Mass. 1, 57 Am. St. Rep. treasury stock, and there was a stipu- 427, 44 N. E. 990, a case beyond the lation in the contract that the de- scope of this annotation, where it fendant would furnish plaintiff a was held that the defendant corporabuyer for the stock within six months, tion could not retain what was beneif desired, at a price to net the ficial in a transaction made through plaintiff a certain profit per share; an agent, while disclaiming what was the plaintiff gave his note for the onerous, provided that it could be stock, which was paid at maturity, restored to its former position, and the money went into the treas- In Whaley V. O'Grady (1912) 22 ury of the company; the stock re- Manitoba L. R. 379, the plaintiff purmained in its custody. It was held chased from the defendant company that the contract was entire and in- certain shares of another corporation, divisible, that there had been a com- through a stock salesman in the emplete and perfect performance of the ploy of the defendant company; at the contract by the plaintiff, of which the time of the sale, the salesman signed defendant company had received and the name of the company to an agreestill retained the benefit. “It is,” ment to repurchase the stock, if desaid the court, “therefore, not in a sired, on a certain date at an advance position and will not be permitted to in price; he had authority in writing deny either the authority of its agent from the vice president. It was held in negotiating the contract or its in the trial court that the corporation liability to comply with its terms." was not bound by the agreement, and

In Dennette v. Boston Securities Co. that the action, which was to recover (1910) 206 Mass. 401, 92 N. E. 498, damages for its breach, must be disthe plaintiff brought a bill for a re- missed. On appeal the judgment was scission of a contract with the defend- reversed and it was held that the deant, whereby she had bought shares fendant must restore the plaintiff to of its stock under an agreement that his original position, and, on an asthe corporation would, on her order, signment of the stock to it, must repay resell the shares taken by her for a the plaintiff the sum that he paid for similar price. The ground of her ac- the stock, with interest. tion was that it later appeared that Re National Piano Co. (1918) 252 the contract was made on terms on Fed. 950, a stockholder transferred which the defendant's agent had no to the company all his stock in exauthority to contract. The plaintiff change for new preferred stock and a had made the purchase relying on a contract to repurchase it executed in letter delivered to her written on the name of the corporation by its president. All the important stock- the shares of stock, and the consideraholders knew of the contract and tion paid, with the only condition a made no objection to it, and all the condition subsequent,—that if after a directors apparently approved of it, year the purchaser was dissatisfied but there was never any vote of the E. Burr would repurchase the shares directors authorizing or ratifying the from him,-doubtless the only remecontract. It was held that the cor- dy of the plaintiff would be on such poration was bound without any new and independent contract to reformal vote, and the claim of the purchase. But if the agreement for stockholder was allowed in bankrupt- the sale of the stock to plaintiff can cy against the corporation.

be considered executory, and its conIn Swartz v. Burr (1919) 43 Cal. summation dependent on the condiApp. 442, 185 Pac. 411, the plaintiff tion precedent that at the expiration made an agreement with one Burr, re- of one year plaintiff elects to retain citing the payment of cash and the it, then the corporation, which has regiving of a promissory note by the ceived the money and the note, with plaintiff, and reciting also the deliv- knowledge of the contract, holds them ery by Burr to the plaintiff of cer- subject to the exercise of plaintiff's tain shares of stock of the Burr option, and must repay the money, and Creamery Company, “to be held for a cannot collect the note, but must surperiod of one year by" plaintiff, and render it for cancelation in the event stating that if, at the expiration of plaintiff decides not to retain the that time, the plaintiff desired to sell stock. It cannot accept the benefits such stock, he agreed to sell only to and repudiate the obligations." Burr, who agreed to pay him a cer- In Dickinson V. Zubiate Min. Co. tain sum, with interest, and provid- (1909) 11 Cal. App. 656, 106 Pac. ing, further, that after one year, if he 123, the plaintiff purchased stock of remained a stockholder, he would par- a corporation under an agreement ticipate in all dividends, etc.

It was that it would, on demand, repay and alleged and found that, though the refund to him the purchase price agreement was executed in the name after he had examined its property; of Burr, it was made for and as the

he did so demand; thereafter the parcontract of the defendant Burr

ties made another agreement, whereby Creamery Company, of which corpora

the company agreed to refund to the tion Burr was the president and gen

plaintiff the purchase price, together eral manager. The court took the

with a certain assessment, six months view in affirming a judgment for the

from date, which agreement was

signed by the president and secretary, plaintiff against the corporation,

“subject to the ratification of the that it might reasonably be inferred

board of directors;" within two from the evidence that both Burr and

months thereafter it was formally the plaintiff entered into this con

submitted to the board for action, but tract on the understanding that Burr

no action was taken thereon until spoke for the corporation; that the

after the expiration of the six months, corporation was presumed to know of

and nearly six weeks after the plainthe execution of the contract and tiff had made formal demand for reits terms; that the corporation had payment, the demand being then renotice that this was a contract for fused by the corporation, which by the transfer of a block of its unissued its formal resolution disaffirmed the capital stock; that it had received agreement. The court considered the cash payment, and that the note that if there was not a technical was made payable to it. The court ratification of the contract, the facts further pointed out that the contract were sufficient to estop the corporaindicated that the sale was executory tion from pleading want of ratificaor conditional, and said: “If this ap- tion as a defense. peared on the face of the agreement Miscellaneous. to be a completely executed sale of It may be noted that in Eichelber

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