A. BLUM JR.'S SONS v. WHIPPLE

Agency. Laches. A person who takes from a special agent a check payable to his principal and indorsed by the agent is bound to inquire and ascertain whether the agent had authority to make such indorsement.

If a travelling salesman employed by a corporation as a special agent to make sales of wines and liquors, without authority to indorse checks payable to the corporation, indorses and negotiates such a check and embezzles the proceeds, the corporation can recover for the conversion of the check from the person who cashed it and caused it to be collected.

If a special agent without authority to indorse checks payable to his principal indorses and negotiates such a check and embezzles the proceeds, and thereupon absconds and the principal as soon as he learns of the transaction institutes criminal proceedings against the agent, who never is found, and if more than two years later the principal for the first time informs the person who cashed the check of its wrongful indorsement, demands from him the amount of the check, and upon refusal brings an action for its conversion, the delay of the plaintiff, which has not injured the defendant, does not as matter of law constitute a ratification of the act of the agent in indorsing the check, nor does it show such negligence or laches as to preclude the plaintiff's recovery.

SHELDON, J.

As Newman was employed by the plaintiff corporation merely as a travelling salesman, with no authority to indorse the plaintiff's name upon any checks or other instruments, and as he never was held out by the plaintiff as having any such authority, there is no doubt of the plaintiff's right of recovery in this action unless it has lost this right by its long silence after its discovery of Newman's wrongful acts. Robinson v. Chemical National Bank, 86 N.Y. 404. Buckley v. Second National Bank, 6 Vroom, 400. Graham v. United States Savings Institution, 46 Mo. 186. He was only a special agent of the plaintiff, with limited authority; and the defendants before taking the checks upon his indorsement were bound to inquire and ascertain the nature and extent of his authority. Lovett, Hart Phipps Co. v. Sullivan, 189 Mass. 535, 536, and cases there cited.

But the defendants contend that the plaintiff, having allowed more than two years to elapse after learning of Newman's wrongful acts and before it gave any notice to the defendants or made any claim upon them, was guilty of laches and now must be taken to have ratified the acts of its agent Newman. They quote the language of Colt, J. in Harrod v. McDaniels, 126 Mass. 413, 415: "It is a rule in the law of agency, that when the unauthorized act of the agent is done in the execution of a power conferred, in a mode not sanctioned by its terms, and in excess or misuse of the authority given, ratification by the principal is more readily implied from slight acts of confirmation. The duty to disaffirm at once, on knowledge of the act, is said to be more imperative in such cases, because the confidence of the principal in the fitness and fidelity of the person he has selected as an agent is shown by the relations already established between them." But in that case there was evidence of ratification by the affirmative acts of the defendant. Nor were Newman's acts, as in some other cases cited by the defendants, done in the execution of a power conferred by the plaintiff, though in a mode not sanctioned by its terms, or merely in excess of the strict limitations put upon his authority. Foster v. Rockwell, 104 Mass. 167. Brown v. Henry, 172 Mass. 559, 567. Nor did the plaintiff receive any benefit from Newman's acts, as in Brigham v. Peters, 1 Gray, 139, nor was there any legal duty incumbent upon the plaintiff to give prompt notice of the facts and of its claims to the defendants; its delay could be nothing more than one of the circumstances to be weighed against it. Greenfield Bank v. Crafts, 2 Allen, 269. Canal Bank v. Bank of Albany, 1 Hill, 287. It could not have been ruled as matter of law that the plaintiff had ratified Newman's acts in indorsing the checks to the defendants.

Nor was the plaintiff guilty of such negligence or laches as to take away its right of recovery. This question was considered under somewhat similar circumstances in the recent case of Murphy v. Metropolitan National Bank, 191 Mass. 159, 164, 165. Here, as in that case, it did not appear that any loss was caused to the defendants or that their position was in any way changed by the failure of the plaintiff to notify them earlier than it did. Hamlin v. Sears, 82 N.Y. 327. Indeed, it affirmatively appears that the plaintiff, as soon as it learned of these transactions, instituted criminal proceedings against Newman, but that he has never since been located, except that it was rumored that he was in the Philippine Islands; and these facts are competent to show that the defendants have not been injured by the plaintiff's failure to give them any earlier notice. And see the cases cited in Murphy v. Metropolitan National Bank, 191 Mass. 159.

The rule adopted in that case as between a bank and one of its depositors applies a fortiori in the case at bar.

It follows that the instructions requested by the defendants were rightly refused.

Exceptions overruled.