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RATIFICATION IN AGENCY.
RATIFICATION IN AGENCY WITHOUT KNOWL-
EDGE OF MATERIAL FACTS.
The question for discussion (^) is whether in cases of agency by ratification the doctrine that notice to the agent (^) is notice to the principal has any application. Some of the general principles from which the argument is to proceed may be set forth in a few senten- ces. Where one without the semblance of authority assumes to act as the agent (^) of another, that other may ratify the act and there- by acquire the rights and assume the obligations that would have been his had the agent's assumed authority been actual. In like manner, where an (^) agent, whose authority is limited, acts on his principal's behalf beyond the scope of that authority, the principal's subsequent ratification is, in most respects at least, equivalent to actual prior authority. (^) Further, where an agent is acting for his principal, within the scope of his (^) authority, notice to or knowledge possessed by the (^) agent, germane to the subject matter of the agen- cy and affecting the execution of the agency, will with some excep- tions (^) be deemed to be notice to or the knowledge of the principal. This knowledge (^) must have been acquired by the agent while he was acting as such; or, if acquired previously, must have been ac- tually present in the agent's mind during the (^) execution of his agency, and it must have (^) been knowledge which he was at liberty to disclose to his principal. In cases where the knowledge of the agent is relied upon to affect the validity or the consequences of action on the part of the principal himself, the communication of such knowledge must have been within the scope of the agent's duty and there must have been an opportunity, in the exercise of reasonable diligence, to communicate such knowledge to the princi- pal before he acted. Neither in cases where the agent is acting nor in cases where the principal is (^) acting will notice to the agent be deemed notice to the principal where it is known to be to the agent's own interest to conceal his knowledge from his principal, or where (^) he is known to be violating his duty and is acting in fraud of or contrary to the interest of his principal. I The maxim ratihabitio retrotrahitur et inandato priori aequi- paratur has come to express an established doctrine (^) of our law. i. Innerarity v. Bank, Z39 Mass 332; cf. Fouche v. Mferchants' Bank, xio Ga. 827, 842-848.
RATIFICATION IN AGENCY. 33 I
RATIFICATION IN AGENCY WITHOUT KNOWL-
EDGE OF MATERIAL FACTS.
The question for discussion is whether in cases of agency by ratification the doctrine that notice to the agent is notice to the principal has any application. Some of the general principles from
which the argument is to proceed may be set forth in a. few senten-
ces. Where one without the semblance of authority assumes to act as the agent of another, that other may ratify the act and there- by acquire the rights and assume the obligations that would have been his had the agent's assumed authority been actual. In "like manner, where an agent, whose authority is limited, acts on his principal's behalf beyond the scope of that authority, the principal's subsequent ratification is, in most respects at least, equivalent to a<;tual prior authority. Further, where an agent is acting for his principal, within the scope of his authority, notice to or knowledge possessed by the agent, germane to the subject matter of the agen- cy and affecting the execution of the agency, will with some excep- tions be deemed to be notice to or the knowledge of the principal. This knowledge must have been acquired by the agent while he was acting as such; or, if acquired previously, must have been ac- tually present in the agent's mind during the execution of his agency, and it must have been knowledge which he was at liberty tv disclose to his principal. In {:ases where the knowledge of the agent is relied upon to affect the validity or the consequences of action on the part of the principal himself, the communication of such knowledge must have been within the scope of the agent's duty and there must have been an opportunity, in the exercise of reasonable diligence, to communicate such knowledge to the princi- pal before he acted. Neither in cases where the agent is acting nor in cases where the principal is acting will notice to the agent be deemed notice to the principal where it is known to be to the agent's own interest to conceal his knowledge from his principal, or where he is known to be violating his duty and is acting in fraud of or contrary to the interest of his principal. 1
The maxim ratihabitio retrotrahitur et mandata priori aequi·
paratur has come to express an established doctrine of our law.
I. Innerarity v. Bank, 139 Mass 332; cf. Fouche v. Merchants' Bank. no Ga. 827. 842-848.
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And if ratification is equivalent to prior authority, and, relating back to the beginning, makes actual ab initio the pretended authori- ty of the agent, does it not follow that such agent must be regarded as having been acting within the scope of his authority all along and make his knowledge the presumed knowledge of his principal whether actually communicated or .not? To some extent it seems to have been assumed that it does. It has been stated that in two cases a ratification may be absolutely binding upon the principal, even though made in ignorance of some material fact: first, where the principal wilfully chooses to remain ignorant of the fact and to ratify notwithstanding-a statement with which one can scarcely take issue; and, secondly, where knowledge of the fact will be im- puted to the principal. Will it ever be so imputed? "Where the agent was authorized to act, but departed from his instructions, there is a^ presumption^ that^ the^ principal^ knows^ all^ the^ facts."^2 It has also been said: "If a principal ratifies a contract or other transaction entered into or done for him by another without au- thority, he is chargeable with the other's knowledge of (^) fraud, ille- gality, or other facts in the transaction." 8 In so far as these state- ments lay down the proposition that a party may be held to have ratified unauthorized acts without actual knowledge of material facts connected therewith, on the ground that such knowledge will be imputed to him, they appear to be based upon a petitio princi- pii. Notice will not be imputed to a principal unless an agency covering the specific transaction is somehow brought into exis- tence. To bring-it into existence by ratification requires (^) a knowl- edge, either real or imputed, of all the material facts. But such knowledge cannot be imputed on the ground of agency, because the very object of imputing the knowledge is to establish the fact of agency. The question may arise in a number of different cases, and the principles to be applied in them are not identical. It may be at- tempted to charge a principal upon a transaction entered into by one who had no authority to act for him in any matter whatever, or by one who had a limited authority but acted in excess thereof. The ques- tion may arise in cases between the principal and the agent, or be- tween the principal and the party with whom the agent came di-
2. Huffcut on Agency, Ed. 2, § 37, citing Meehan v. Forrester, 52 N. Y. 277; and Hyatt v. Clark, i 8 N. Y. 563. But it is further stated that this doctrine has not been recognized in all cases. 3. Clark and Skyles on Agency, § 476. The statement quoted above is made, however, as a part of the discussion of the doctrine of imputed notice, and not with especial reference to ratification as such.
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And if ratification is equivalent to prior authority, and, relating back to the beginning, makes actual ab initio the pretended authori- ty of the agent, does it not follow that such agent must be regarded as having been acting within the scope of his authority all along and make his knowledge the presumed knowledge of his principal whether actually communicated or .not? To some extent it seems to have been assumed that it does. It has been stated that in two cases a ratification may be absolutely binding upon the principal, even though made in ignorance of some material fact: first, where the principal wilfully chooses to remain ignorant of the fact and to ratify notwithstanding-a statement with which one can scarcely take issue; and, secondly, where knowledge of the fact will be im- puted to the principal. Will it ever be so imputed? ('Where the agent was authorized to act, but departed from his instructions, there is a presumption that the principal knows all the facts." 2 It has also been said: "If a principal ratifies a contract or other transaction entered into or done for him by another witliout au- thority, he is chargeable with the other's knowledge of fraud, ille- gality, or other facts in the transaction." 8 In so far as these state- ments lay down the proposition that a party may be held to have ratified unauthorized acts without actual knowledge of material facts connected therewith, on the ground that such knowledge will be imputed to him, they appear to be based upon a petitio princi- pii. Notice will not be imputed to a principal unless an agency covering the specific transaction is somehow brought into exis- tence. To bring- it into existence by ratification requires a knowl- edge, either real or imputed, of all the material facts. But such knowledge cannot be imputed on the ground of agency, because the very object of imputing the knowledge is to establish the fact of agency. The question lllay arise in a number of different cases, and the principles to be applied· in them are not identical. It may be at- tempted to charge a principal upon a transaction entered into by one who had no authority to act for him in any matter whatever, or by one who had a limited authority but acted in excess thereof. The ques- tion may arise in cases between the principal and the agent, or be- tween the principal and the party with whom the agent came di-
- Huffcut on Agency. Ed. 2, § 37. citing Meenan 'lI. Forrester, 52 N. Y. 277; and Hyatt 'U. Clark, lIS N. Y. 563. But it is further stated that this doctrine has not been recognized in all cases.
- Clark and Skyles on Agency, § 476. The statement quoted above is made, however, as a part of th"e discussion of the doctrine of imputed notice, and not with especial reference to ratification as such.
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cause the agent has such knowledge. The agent himself (^) knows that the facts have not (^) been communicated. One of the results of a real ratification (^) is that the agent is relieved from all liabilities except those which would (^) have fallen upon him had he been acting with authority; (^) but he will be relieved from no liability (^) to the principal by reason of a ratification made by the latter in ignorance of -facts not communicated by the agent. 6 As between the principal and the third party, a distinction must be drawn between cases where the (^) third party is suing the principal and cases where the (^) principal is suing the third party. In the latter case (^) it is obvious that the principal cannot hold the third party upon any different (^) contract or transaction than the one into which such third party actually entered, even though the principal's suit is brought in ignorance of material (^) facts that were part of that trans- action. But this is not at all the (^) same thing as saying that the principal has ratified the contract or act of his agent, notwithstand- ing his ignorance of the facts. If he does ratify, he must ratify as to the burdens and obligations as well as to the benefits. The (^) only contract the third party can be held to is the one he made. If the principal continues (^) to press his suit after he has become acquainted therein with the facts of which he was previously ignorant this may constitute (^) a ratification; but it will not be upon the ground of imputed notice, but because he then has actual notice. In any event he (^) must fail in his attempt to extort the benefits from the third party, when he himself has not assumed the burdens.7 So if the (^) principal attempts to hold the third party to a contract made through (^) an agent, who made an unauthorized warranty as a part thereof, the principal (^) must make good the warranty also. 8 In such case it is wholly unimportant (^) to determine whether or not the agent had apparent authority to make (^) the warranty. 9 If an agent sells his principal's goods on terms other than (^) those within his real or apparent authority, if the principal is unwilling to ratify those terms he is not (^) entitled to sue at all on the contract for the price,^10 and persevering in his action with knowledge of those terms may be a ratification. So also, if the agent has entered into an illegal transaction (^) on behalf of his principal, as where he has made an
6. See Bank of Owensboro v. Western Bank, 13 Bush (^) (Ky.) 526. 7. E4berts v. (^) Selover, 44 Mich. 5x9; Brigham v. Palmer, 3 Allen, 450; Wheeler & W. Mfg. Co. v. Aughey, 144 Pa. 398. 8. Loomis v. Vawter, 8 Kan. App. 437. 9. See (^) Eberts v. Selover, supra. zo.' Shoninger (^) v. Peabody, 57 Conn. 42; but see Stewart v. Woodward, 50 Vt. 78.
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cause the agent has such knowledge. The agent himself knows that the facts have not been communicated. One of the results of a real ratification is that the agent is relieved from all liabilities except those which would have fallen upon him had he been acting with authority; but he will be relieved from no liability to the principal by reason of a ratification made by the latter in ignorance of .facts not communicated by the agent. 6 As between the principal and the third party, a distinction must be drawn between cases where the third party is suing the principal and cases where the principal is suing the third party. In the latter case it is obvious that the principal cannot hold the third party upon any different contract or transaction than the one into which such third party actually entered, even though the principal's suit is brought in ignorance of material facts that were part of that trans- action. But this is not at all the same thing as saying that the principal has ratified the contract or act of his agent, notwithstand- ing his ignorance of the facts. If he does ratify, he must ratify as to the burdens and obligations as well as to the benefits. The only contract the third party can be held to is the one he made. If the principal continues to press his suit after he has become acquainted therein with the facts of which he was previously ignorant this may constitute a ratification; but it will not be upon the ground of imputed notice, but because he then has actual notice. In any event he must fail in his attempt to extort the benefits from the third party, when he himself has not assumed the burdens. 7 So
if the principal attempts to hold the third party to a contract made
through an agent, who made an unauthorized warranty as a part thereof, the principal must make good the warranty also. 8 In such case it i~ wholly unimportant to determine whether or not the agent had apparent authority to make the warranty. 9 If an agent sells his principal's goods on terms other than those within his real or apparent authority, if the principal is unwilling to ratify those terms he is not entitled to sue at all on the contract for the price, 10 and persevering in his action with knowledge of those terms may be a ratification. So also, if the agent has enter.ed into an illegal transaction on behalf of his principal, as where he has made an
- See Bank of Owensboro v. Western Bank, 13 Bush (Ky.) 526. 7. Eperts v. Selover, 44 Mich. 519; Brzj;ham v. Palmer, 3 Allen, 450; Wheeler &.0 W. Mfg. Co. v. Augltey, 144 Pa. 398. 8. LoomIS '!'. Vawter, 8 Kan. App. 437.
- See Eberts v. Selover, supra. 10: Sltoninger v. Peabody, 57 Conn. 42; but see Stewart v. Woodward, 50 Vt. 78.
RATIFICATION IN AGENCY.
illegal (^) sale of liquors, the principal is not entitled to reap the bene- its of the transaction, and to maintain (^) an action for the price, with- out assuming the burdens. He cannot separate the transaction in- to two parts-a sale of liquors and an illegal intent-and ratify the former while repudiating the latter. 1 The real remedy (^) of the principal in such cases-and he will not be deprived of it because he has seemed to ratify, in case his ratification (^) was in ignorance of material facts-is to repudiate the whole transaction (^) and to sue in replevin or in trover in case goods of his have come into the pos- session of the third party through the unauthorized act of the agent. 12 It might be held that he cannot regain his goods if they have come into the possession of bona fide purchasers; but this is not the proper doctrine, and anyway it would not be on the ground of ratification, as will appear hereafter. The question most (^) commonly arises, however, in cases where the third party attempts to hold the principal upon a contract or transaction (^) entered into by the agent and later ratified by the prin- cipal. It is the universal doctrine that in such case a ratification is not binding upon the principal unless made with knowledge of all material facts, 1 3^ or unless made intentionally in conscious ignor- ance; 4 though to constitute a ratification, if the principal knew all the facts it is not necessary that he should have understood their legal effect. 15 The receiving and retaining of benefits under a con- trict is no ratification when the principal was ignorant of represen- tations or collateral contracts made by the agent as part of the transaction. 18 It is among these cases that the doctrine of imputed notice should appear, if it is to appear anywhere in the case of agency by ratification. But, as indicated heretofore, there is no ground for its appearance, and as a matter of fact it does not so appear in the decisions. In all the long line of cases holding that a principal whose agent has exceeded his authority is not bound by a ratification made in ignorance of material facts, the agent actu-
3i. Backman v. Wright, 27 Vt. 187; see also Singleton v. Bank of Monticello, 113 Ga. 527. i2. See Brigham v. Palmer, 3 Allen, 450; Shoninger v. Peabody, 57 Conn. 42.
13. Combs V. Scott, 12 Allen, 493; Roberts v. Rumley, 58 Iowa, 301; Wheeler v. NorthwesternSleigh Co., (^) 39 Fed. 347. x4. Phosphate of Lime Co. v. Green, L. R. 7 C. P. 43, 58; Meehan v. Forrester, 52 N. Y. 277; Lewis v. Reed, 13 M. &W. 834. 3S. Hyatt v. Clark, ir8 N. Y. 563; Kelley v. Horse Ry., x4r Mass. 496. x6. (^) Wheeler v. Northwestern Sleigh Co., 39 Fed. 347; Smith V. Tracy, 36 N. Y. 79; Baldwin (^) v. Burrows, 47 N. Y. 199.
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illegal sale of liquors, the principal is not entitled to reap the bene- .fits of the transaction, and to maintain an action for the price, with- {Jut assuming the burdens. He cannot separate the transaction in- to two parts-a sale of liquors and an illegal intent-and ratify the former while repudiating the latter. 11 The real remedy of the principal in such cases-and he will '!lot be deprived of it because he has seemed to ratify, in case his ratification was in ignorance of material facts-is to repudiate the whole transaction and to sue in replevin or in trover in case goods of his have come into the pos- session of the third party through the unauthorized act of the agent. 12 It might be held that he cannot regain his goods if they have come into the possession of bona fide purchasers; but this is noe the proper doctrine, and anyway it would not be on the ground of ratification, as will appear hereafter. The question most commonly arises, however, in cases where the third party attempts to hold the principal upon a contract or transaction entered into by the agent and later ratified by the prin- cipal. It is the universal doctrine that in such case a ratification is not binding upon the principal unless made with knowledge of all material facts, 13 or unless made intentionally in conscious ignor- ance ; U though to constitute a ratification, if the principal knew all the facts it is not necessary that he should have understood their legal effect. III The receiving and retaining of benefits under a con- tract is no ratification when the principal was ignorant of represen- tations or collateral contracts made by the agent as part of the transaction. 16 It is among these cases that the doctrine of imputed notice should appear, if it is to appear anywhere in the case of agency by ratification. But, as indicated heretofore, there is no ground for its appearance, and as a matter of fact it does not so appear in the decisions. In all the long line of cases holding that a principal whose agent has exceeded his authority is not bound by a ratification made in ignorance of material facts, the agent actu-
II. Backmanv. Wright,27 Vt. 187; see also Singleton v. Bank of Monticello, II3 Ga. 527.
- See Brigham v. Palmer, 3 Allen, 450; Slzoninger v. Peabody, 57 Conn. 42. 13. Combs v. Scott, 12 Allen, 493; Roberts v. Rumley, 58 Iowa, 301; Wheeler v. Nortllwestern Sleigh Co., 39 Fed. 347.
14- Phosphate of Lime Co. v. Green, L. R. 7 C. P. 43, 58; Meehan v.
Forrester, 52 N. Y. 277; LeWIS v. Reed, 13 M. & W. 834- IS. Hyatt v. Clark, u8 N. Y. 563; Kelley v. Horse Ry., 141 Mass. 496.
16. Wheeler '!I. Northwestern Sldglz CD., 39 Fed. 347; Smith v. Tracy, 36 N. Y. 79; Baldwinv. Burrows, 47 N. Y. 199·
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cipal. 24 It would seem that in such (^) cases the principal would be under a quasi contractual (^) obligation to pay for benefit received, but it seems correct to say that the principal's conduct does not amount to ratification. Where the third (^) party is attempting to hold the principal (^) liable for the misrepresentation, (^) fraud, or other tort of the agent on the ground of ratification, the rule (^) laid down by the courts is found to be (^) the same as where the principal is to be (^) held liable on unau- thorized contracts. As (^) a general thing, where an attempt is made to charge the principal for the (^) tort of an agent, the liability of the principal is based (^) upon some real or apparent authority conferred by him upon the agent, (^) although in many cases the principal's liability has been determined (^) by the doctrine that one who sets an instrument in motion should be (^) responsible for in- juries done by it so long as it acts within (^) the course of the employ- ment, (^) a doctrine more properly applicable (^) to servants than to agents. 25 But in some cases the basis (^) of the principal's liability has been an alleged ratification, (^) and to show such ratification (^) it is uniformly required (^) that the principal be shown to have (^) ratified with actual (^) knowledge of the tort for which he is (^) to be held liable. Such knowledge will not be imputed to him, (^) and there is no pre- sumption that the agent has told him of the tort. Thus a (^) princi- pal is not chargeable (^) with the fraud of his agent, in an action (^) of deceit or otherwise, (^) on the ground of ratification, unless he knew of the (^) fraud when he ratified. 28 In such case the (^) ratification is no ratification of the fraudulent representations. In Lewis v. Read,^27 defendant authorized (^) bailiffs to distrain for rent and to (^) seize any- thing (^) found on the place but nothing elsewhere. (^) The bailiffs seized sheep belonging (^) to plaintiff (who was not the tenant), which were not on the tenant's (^) place when seized. The sheep were sold and defendant received (^) the money, without knowledge, how- ever, that the sheep had (^) been outside the boundary when seized. The court says: "Mr. Read could (^) not be liable in trover unless he ratified the act of the bailiffs, with (^) knowledge that they took the sheep elsewhere (^) than on Penybryn (the farm in question); (^) or unless he meant to take upon himself, without (^) inquiry, the risk of any irregularity which they might (^) have committed and to adopt
24. Bryant v. Moore, (^26) Me. 84. 25. See Huffcut (^) on Agency. Ed. 2. 26. Colvin v. Peck, 62 Conn. xs5; Nichols (^) v. Bruns, 5 Dak. 28; Keefe v. Shall, iSr Pa. 9 o. 27. 13 M. & W. 834.
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cipal. 24. It would seem that in such cases the principal would be under a quasi contractual obligation to pay for benefit received, but it seems correct to say that the principal's conduct does not amount to ratification. Where the third party is attempting to hold the principal liable for the misrepresentation, fraud, or other tort of the agent on the ground of ratification, the rule laid down by the courts is found to be the same as where the principal is to be held liable on unau- thorized contracts. As a general thing, where an attempt is made to charge the principal for the tort of an agent, the liability of the principal is based upon some real or apparent authority conferred by him upon the agent, although in many cases the principal's liability has been determined by the doctrine that one who sets an instrument in motion should be responsible for in- juries done by it so long as it acts within the course of the employ- ment, a doctrine more properly applicable to servants than to agents. 25 But in some cases the basis of the principal's liability has been an alleged ratification, and to show such ratification it is uniformly required that the principal be shown to have ratified with actual knowledge of the tort for which he is to be held liable. Such knowledge will not be imputed to him, and there is no pre- sumption that the agent has told him of the tort. Thus a princi- pal is not chargeable with the fraud of his agent, in an action of deceit or otherwise, on the ground of ratification, unless he knew of the fraud when he ratified. 28 In such case the ratification is no
ratification of the fraudulent representations. In Lewis v. Read, 21
defendant authorized bailiffs to distrain for rent and to seize any- thing found on the place but nothing elsewhere. The bailiffs seized sheep belonging to plaintiff (who was not the tenant), which were not on the tenant's place when seized. The sheep were sold and defendant received the money, without knowledge, how- ever, that the sheep had been outside the boundary when seized. The court says: "Mr. Read could not be liable in trover unless he ratified the act of the bailiffs, with knowledge that they took the sheep elsewhere than on Penybryn (the farm in question); or unless he meant to take upon himself, without inquiry, the risk of any irregularity which they might have committed and to adopt
24- Bryant v. Moore. 26 Me. 84-
- See Huffcut on Agency. Ed. 2. 26. Colvin v. Peck, 62 Conn. ISS; Nichols v. Bruns. S Dak. 28; Keife v. SMUt 181 Pat 90.
- 13 M. & W. 834.
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all their acts." There (^) is no suggestion here that the knowledge of the bailiffs might be imputed to the defendant. The case of Hyatt v. Clark 28 has been cited to sustain the doc- trine that the (^) knowledge of the agent may be imputed to the prin- cipal (^) so as to make that a ratification of an unauthorized act which otherwise (^) would not be, 20 but in fact the court decided no (^) such thing. In that case an agent, acting under a power (^) of attorney, made a lease, conditioning (^) it upon the principal's approval. The principal was never informed of this condition. (^) She actually dis- approved of the lease, but on being informed by her agent that the lease was binding, she accepted rent from the tenant. There was doubt as to whether the power of attorney (^) authorized the agent to make such a lease. The court held that it was (^) not necessary to resolve this doubt. Either the agent was (^) authorized or he was not. If he was not, the principal was bound to know (^) that, for she execu- ted the power, and hence she must be regarded (^) as knowing that she was not bound by the lease. If she (^) knew one good ground for repudiating (^) the lease, she did not need to know two (^) such grounds. The (^) court did not hold that in this event the knowledge that (^) the lease was conditioned on her approval would (^) be imputed to the principal, (^) but merely that under such circumstances (^) the fact was not (^) material (a conclusion possibly open to criticism in itself). If, on the other hand, (^) the agent was authorized by the power of attorney to execute (^) the lease, then the acceptance of rent would bind the principal; (^) for in such case the knowledge of her agent would be imputed to her, and she would (^) be presumed to know that the lease was conditioned on her (^) approval. But under this supposition, the agent was acting (^) within the scope of his au- thority; (^) the agency was established by the power of (^) attorney and not by the ratification; (^) the agent was held out as worthy to be trusted to do (^) the very thing he failed to do, and the tenant was justified (^) in believing that the agent would do his duty within the scope of (^) his authority and report all the terms of the contract to (^) his principal. It seems safe to conclude that (^) where the third party seeks to hold the principal by virtue of a ratification, he must affirmative- ly show that the principal had actual knowledge (^) of every material act or representation of the agent (^) and every other material fact forming a part of the transaction, and that (^) the principal will not be presumed to have had knowledge of them (^) merely because the agent had.
28. xr8 N. Y. 563. 29. See Huffcut on Agency, Ed. 2, §37; Clark and (^) Skyles on Agency, §107.
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all their acts." There is no suggestion here that the knowledge of the bailiffs might be imputed to the defendant.
The case of Hyatt v. Clark 28 has been cited to sustain the doc-
trine that the knowledge of the agent may be imputed to the prin- cipal so as to make that a ratification of an unauthorized act which otherwise would not be, 29 but in fact the court decided no such thing. In that case an agent, acting under a power of attorney, made a lease, conditioning it upon the principal's approval. The principal was never informed of this condition. She actually dis- approved of the lease, but on being informed by her agent that the lease was binding, she accepted rent from the tenant. There was
dotJ.bt as to whether the power of attorney authorized the agent to
make such a lease. The court held that it was not necessary to resolve this doubt. Either the agent was authorized or he was not. H he was not, the principal was bound to know that, for she execu- ted the power, and hence she must be regarded as knowing that she· was not bound by the lease. If she knew one good ground for repudiating the lease, she did not need to know two such grounds. The court did not hold that in this event the knowledge that the lease was conditioned on her approval would be imputed to the principal, but merely that under such circumstances the fact was not material (a conclusion possibly open to criticism in itself). If, on the other hand, the agent was authorized by the power of attorney to execute the lease, then the acceptance of r.ent would bind the principal; for in such case the knowledge of her agent would be imputed to her, and she would be presugled to know that the lease was conditioned on her approval. But under this supposition, the agent was acting within the scope of his au- thority; the agency was established by the power 'of attorney and not by the ratification; the agent was held out as worthy to be trusted to do the very thing he failed to do, and the tenant was justified in believing that the agent would do his duty within the scope -of his authority and report all the terms of the contract to his principal. It seems safe to conclude that where the third party seeks to hold the pi"incipal by virtue of a ratification, he must affirmative- ly show that the principal had actual knowledge of every material act -or representation of the agent and every other material fact forming a part of the transaction, and that the principal will not be presumed to have had knowledge of them merely because the agent had.
- '1I8 N. Y. 563.
- See Huffcut on Agency, Ed. 2, §37; Clark and Skyles on Agency, §I07.
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agent, but it is not correct to say that there has been a ratification. It is fair to impute the knowledge^ to the^ principal^ in^ favor^ of^ the prior claimant, for it will not have the effect of holding the^ prin- cipal to the unauthorized and disadvantageous contract or trans- action, though it may have^ the^ effect^ of^ causing him^ a^ loss^ if^ his vendor and his agent are irresponsible. The agent has^ been party to a fraud on another while acting in the course of his em- ployment and for the principal's benefit, and in such case the general doctrines of agency should hold the principal irrespective of knowledge and irrespective of ratification. If the principal in such case insists on retaining the property after he learns of the lien or claim of the third party, he puts himself practically in the position of claiming the benefits and repudiating the burdens. This he is never allowed to do. It^ remains^ true,^ however,^ that^ the reason he^ is^ not^ a^ bona^ fide^ purchaser^ is^ that^ notice^ is^ imputed to him. This doctrine should not^ be^ applied^ in^ favor^ of^ bona^ fide^ pur- chasers of goods that have been sold by an agent who had neither apparent ownership nor apparent authority^ to^ sell^ on^ the^ terms^ he made, where the principal has not himself acted so as to create an estoppel. The principal, even though in ignorance of^ the^ facts he received the proceeds, may repudiate^ the^ sale^ and^ reclaim^ the goods from^ the^ possessor, whoever he^ may^ be.^ In^ this^ case^ the^ fact of which the principal was ignorant is not the existence of a lien or trust or other equity in favor of another, but is the existence of an act or representation of the agent. Knowledge of such a fact is not to be imputed to the principal in any case. The innocent purchaser's title, in the absence of actual authority in^ the agent^ and in the absence of an estoppel against the principal because of his own conduct, depends upon ratification. There has been no ratifi- cation. The principal is as innocent as the purchaser and^ his^ claim is prior in point of time. The principal is not^ attempting^ to^ retain the benefits while repudiating the burdens, but is repudiating the whole transaction. It thus^ appears^ that^ whether^ between^ principal^ and^ agent,^ prin- cipal and third party, or principal and outsiders, whether the prin- cipal is^ suing^ or^ being^ sued,^ a^ ratification^ is^ never^ to^ be^ based^ upon the doctrine of imputed notice, although in one case knowledge of extrinsic facts may be imputed to the principal even^ in^ the^ absence of any ratification. The doctrine of ratification and^ the^ doctrine^ of imputed notice have^ no^ connection.^ Ratification^ requires^ actual knowledge of all material facts, and there is no exception. Arthur L. Corbin. NEw HAVEN, CONN.
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agent, but it is not correct to say that there has been a ratification. It is fair to impute the knowledge to the principal in favor of the prior claimant, for it will not have the effect of holding the prin- cipal to the unauthorized and disadvantageous contract or trans- action, though it may have the effect of causing him a loss if his vendor and his agent are irresponsible. The agent has been party to a fraud on another while acting in the course of his em- ployment and for the principal's benefit, and in such case the general doctrines of agency should hold the principal irrespective of knowledge and irrespective of ratification. If the principal in such case insists on retaining the property after he learns of the lien or claim of the third party, he puts himself practically in the position of claiming the benefits and repudiating the burdens. This he is never allowed to do. It remains true, however, that the reason he is not a bona fide purchaser is that notice is imputed to him. This doctrine should not be applied in favor of bona fide pur- chasers of goods that have been sold by an agent who had neither apparent ownership nor apparent authority to sell on the terms he made, where the principal has not himself acted so as to create an estoppel. The principal, even though in ignorance of the facts he received the proceeds, may repudiate the sale and reclaim the goods from the possessor, whoever he may be. In this case the fact of which the principal was ignorant is not the existence of a lien or trust or other equity in favor of another, but is the existence of an act or representation of the agent. Knowledge of such a fact is not to be imputed to the principal in any case. The innocent purchaser's title, in the absence of actual authority in the agent and in the absence of an estoppel against the principal because of his own conduct, depends upon ratification. There has been no ratifi- cation. The principal is as innocent as the purchaser and his claim is prior in point of time. The principal is not attempting to retain the benefits while repudiating the burdens, but is repudiating the whole transaction. It thus appears that whether between principal and agent, prin- cipal and third party, or principal and outsiders, whether the prin- cipal is suing or being sued, a ratification is never to be based upon the doctrine of imputed notice, although in one case knowledge of extrinsic facts may be imputed 1'0 the principal even in the absence of any ratification. The doctrine of ratification and the doctrine of imputed notice have no connection. Ratification requires actual knowledge of all material facts, and there is no exception.
Arthur L. Corbin.
Nxw HAVEN, CONN.
