SECTION IV.

LIABILITY OF AGENT WHO DRAWS ON ACCOUNT OF HIS PRINCIPAL, OR INDORSES TO HIM.

§ 309. In respect to bills of exchange drawn or indorsed by a party as agent, there are three cases in which an interesting question as to the drawer's or indorser's liability arises. First. When the drawer, who is known to be agent of the drawee, draws in favor of the drawee's creditor-whether or not he is liable to such creditor. Second. When an agent, selling goods for the owner, draws on the buyer for the amount-whether or not he is liable to the owner. And Third. Whether or not an agent, to whom a bill or note is made payable, is liable on an indorsement thereof to his principal.

$310. Drawer on principal.-As to the first question, it is said by Story, in his treatise on Agency, "If an agent should, in his own name, draw a bill of exchange on his principal for the debt of the latter, he would be personally responsible as drawer in case of the dishonor of the bill, although upon the face of it the bill was drawn on account of his principal." 1

And it is stated in the American Leading Cases to be the general rule, that "whenever an agent puts his name to a negotiable instrument as a party to it, he is legally liable to the promisee and to indorsees upon it."2

§ 311. The English cases clearly bear out these views. But the weight of authority in the United States is other

2 Vol. I. [*635].

8

Leadbetter v. Farrow, 5 M. & S., 345 (1816). Agent of a country bank to whom plaintiff sent a sum of money in order to procure a bill on London, drew in his own name upon the London firm. Held, defendant was liable as drawer, though plaintiff knew he was agent. Perhaps this case is distinguishable from the American cases in this, that the plaintiff wanted a bill drawn on London. That was the very object of his negotiation. But no such distinction seems to have been taken.

VOL. I.-19

wise, though the cases are not uniform.

If the drawer

signs himself “A. B, agent,” and the payee takes the bill so drawn on his principal debtor, to whom he has given credit, and to whom he looks for payment, it has been said there is really no valuable consideration for his liability. But the debt of another is a valuable consideration, and if the agent intended to be bound upon the draft, no other consideration would be necessary. Bills are constantly drawn for accommodation, and the transaction might be construed as intended to be of this character. We think, however, that a bill drawn by "A. B., agent," might well be distinguished from a note so signed; for the language is not inconsistent with the idea that the drawer signs as agent of

'Krumbaar v. Ludeling, 3 Martin (old series) [*640], p. 700. The agent drew on his principal for a debt due the payee, without describing himself as agent. The court said, per Mathews, J.: The attempt of Ludeling to show that he acted merely as agent for the Amelungs, in drawing the bill on which this suit is commenced, can be considered properly in no other light than an offer of evidence to show a want of consideration in the written agreement, and that, for this reason, he is not bound to fulfil any obligation which might otherwise have resulted from it. There is no doubt of the personal liability of the drawer of a bill of exchange, who signs it without expressing his agency, when it passes into the hands of third persons having no knowledge of the circumstances under which it was drawn, and between whom and the drawer the law will not allow the consideration to be inquired into. The appellee having signed, without expressing for whom he signed, is clearly liable on the face of it; but he is at liberty to show a want of consideration, and any circumstances of fraud or violation of good faith on the part of the appellant, which may be sufficient to exonerate him from this apparent liability, the suit against him being brought by a person with whom he was immediately concerned in the negotiation of the instrument.' Wolfe v. Jewett, 10 La. Ó. S., 614 (1835); Lincoln v. Smith, 11 La. O. S., 11 (1837). In these cases there was no intimation of agency on the face of the bill. Hicks v. Hind, 9 Barb., 528 (1850). In this case the drawer signed the bill "John Hinde, agent." Held not bound, Paige, J., saying: "This case may be distinguished from the case of Pentz v. Stanton. In that case the name of the principal was not disclosed to the vendor by the agent at the time of the purchase of the goods and giving of the draft for the price of the goods. The non-disclosure of the principal made the agent liable for the goods. And being so liable, it was proper he should be held personally liable on the draft."

Mayhew v. Prince, 11 Mass., 55 (1814), Parker, J: "The agency under which he acted is a matter between him and his employer, but can not protect him from the claim of the payees of the bill, who have a right to consider him as an independent drawer, notwithstanding they may have known, either from the terms of the bills themselves, or from extraneous evidence, that the defendant was acting as servant to one of the house on which the bill was drawn." To same effect see Newhall v. Dunlop, 14 Me., 180 (1837).

. See I Parsons N. & B., 94.

the drawee whose name is disclosed upon the face of the instrument; while in a note none but the maker's name is disclosed, therefore parol evidence might well be admitted to show the real circumstances of the case, from which might be inferred the understanding of the parties. When there is no intimation of agency accompanying the drawer's name, the case presented is more difficult. This view, however, may be presented when the buyer has parted with his goods upon faith of the principal's credit; but dealing with his agent, he then has funds in the principal's hands; and it is his draft that the principal would honor, provided he knew the fact that he was indebted to the drawer.

The agent's draft serves as a voucher of that fact. And although if there be no evidence to contradict the presumption that the agent intended to go security for his principal in the form pursued, he might well be held liable as drawer, there may be circumstances which would render it unjust so to hold him. Thus, suppose he was requested by the creditor to draw on his principal for the amount which, according to agreement, only the principal owed; in that case, it seems to us, he would be a drawer for the accommodation of the creditor; and if this be what is meant by the authority which calls him a drawer "without consideration,' it would seem clearly correct, though not so in any other light. We conclude, therefore, that presumptively the agent drawing on his principal is bound to the creditor; but if there were an express understanding that he was not to be bound, or circumstances from which it might be inferred that such was the understanding, he would be regarded as having drawn for the creditor's accommodationnot, indeed, to enable him to raise money, necessarily, but to enable him, in the most succinct form, to vouch to his debtor the amount and authenticity of the debt, and call for payment at the same time.

'Hicks v. Hinde, 9 Barb., 529.

§ 312. Drawer on purchaser in favor of principal.—As to the second question, whether or not the drawer of a bill on a purchaser of goods from him as agent, in favor of his principal, is liable to him (the principal) upon the bill, the authorities are divided. In England his liability is affirmed,1 but not without meeting with dissent and criticism from high authority. In the United States the contrary doctrine has found favor with the courts, though in turn receiving criticism from discriminating authors.

§ 313. The whole question seems to us to turn on the inquiry whether or not the agent, by customary course of dealing, or express authority, was authorized by the principal to draw bills on the purchaser in his favor. If so, he should be considered as really using his own name as the principal's, and the latter could not hold him liable, as there would be no consideration, but, instead, a trust reposed. If, on the other hand, there was no such express or implied authority, the agent should be regarded as assuming in the form of drawer to assure the debt.

'Le Fevre v. Lloyd, 5 Taunt., 749 (1813). A broker being employed to sell goods, sold them for a bill at two months, in accordance with instructions, and himself drew a bill on the buyer for the amount, and was held liable. The Court said: “The broker, by giving this bill, put an end to all doubt.”

2

1 Parsons N. & B., 104; Chitty on Bills, 9th ed., p. 34, citing ex parte Robinson, 1 Buck, 113; Kedson v. Dilworth, 5 Price, 564. Chitty says: "These decisions, subjecting an agent to personal liability as regards third persons ignorant of the circumstances under which the agent became a party, are consistent with the other principles of law applicable to these instruments. But it seems questionable whether even at law it is correct to allow an employer to recover from his agent under such circumstances, because in general, between original parties it may be shown, as a good defence at law, that the bill was drawn, accepted, or indorsed for the plaintiff's accommodation, or for a purpose or consideration which has failed or been satisfied; and to allow such a principal to recover at law against his agent, is only to compel the latter to resort to a court of equity for relief, which might just as well be afforded at law, and a court of equity will certainly afford relief."

3

Jones v. Lathrop, 44 Ga., 398 (1871), the court saying the bills were not drawn "in favor of the plaintiff for any valuable consideration received by the drawers from him therefor." Roberts v. Austin, 5 Whart., 313 (1839), Mechanics' Bank v. Earp, 4 Rawle, 390 (1834).

'I American Leading Cases [*635], where it is said: "The case of Roberts v. Austin, 5 Whart., 313, is believed to have been an oversight on the part of the learned court in which it was decided."

§ 314. Indorsement of agent to principal. Commission del credere. As to the third question, whether or not an agent taking a bill payable to his own order, and indorsing it to his principal, is liable thereon, is the subject of opposing opinions. In England it has been held that an agent, purchasing bills for his principal and indorsing them to his principal, is liable on his indorsement, unless it be qualified by appropriate words, however small the commission he gets upon the purchase, the Court of Common Pleas saying he might have specially indorsed the bills sans recours, but did not do it. Clearly, if the agent indorse for the principal's accommodation, or merely indorse according to the principal's instructions, in order to remit him money which he has collected, he is not bound. In the case of a factor who sells goods on account of his principal under a del credere commission-by which is meant an agreement to guarantee in consideration of a premium-it has been held in Pennsylvania that the agent, under such a commission. guarantees only the solvency of the debtor, and is not bound as a party to the bill which he indorses to his principal by way of remitting the money. But this view of the liability of a factor under a del credere commission is against the view which has obtained in England and in the United States, which is to the effect that such a factor is liable to his principal for the amount of the debt immediately on its falling due, and is, therefore, bound on his

2

Goupy v. Harden, 7 Taunt., 159 (1816).

See Chitty [*34], 46; ex parte Robinson, Buck's Cases, 113 (1817). 'Warwick v. Noakes, Peake's N. P., 68 (1781); Lewis v. Brehme, 33 Md., 431 (1870); Kimball v. Bittner, 62 Penn. St., 205.

4

Sharp v. Emmett, 5 Whart., 290 (1839) ; followed in Byers v. Harris, 9 Heiskell, 652.

B

McKenzie v. Scott, 9 Bro. P. C., 280 (1796); Morris v. Cleasley, 4 Maule & S., 566 (1816), takes a different view as to the factor's liability, and so also do the cases of Thompson v. Perkins, 3 Mason C. C. R., 232 (1823), before Story, J., Peele v. Northcote, 7 Taunt., 48. But the weight of authority is in accordance with McKenzie v. Scott; and sustaining the text are the cases of Wolf v. Koppel, 5 Hill, 558; 2 Denio, 368; Sherwood v. Stone, 14 N. Y., 267 (1856); Swan v. Nesmith, 7 Pick., 220; Lewis v. Brehme, 33 Md., 412 (1870); Wickham v. Wickham, 2 Kay & Johns, 475; Centourier v. Hastie, 8 Exch., 39.