We do not contend, as asserted by appellant's counsel, that if the attorney received the money for his principal and then secretly converted it to his own use, the principal would not be bound; but in this case the attorney never received the money for the respondent, but obtained it for his own use, with the knowledge of the parties to whom he gave the note that he had no right to make it, and the authorities cited by the appellant have no application to this case.
The case in 3 Hill, 262, much relied on by appellant, is based on a different state of facts, and in that case Judge Nelson delivered a very able dissenting opinion, repudiating the idea that a principal is liable for an unauthorized act of his agent.
In Stainer v. Tyson, 3 Hill, Judge Cowen qualifies his opinion in the foregoing case. (Atwood v. Munnings, 7 Barn. & Cress. 278: Dunlap'sPaley on Agency, 3d edit. 192, 193; 8 Greenl. R. 338; N. Y. Ins. & Trust Co. v. Beebe, 4 Comstock, 364, 369.)
The attorney had no power to make the note in question. In the power to appoint substitutes, the power to sell or mortgage real estate is excepted from the powers conferred upon the substitute, by the express terms of the power in question; showing an intention, on the part of the principal, to give the substitute less power than the attorney. The unlimited power to make notes, if independent, is the largest power that could be conferred. (Rassiter v. Rassiter, 8 Wend. 494.)
By reference to the power, the party receiving the note could readily know that the attorney had no power to execute the note unless accompanied by a mortgage, and there being no mortgage, the taker of the note assumed the responsibility of its payment.
JUDGES: The opinion of the Court was delivered by Mr. Justice Heydenfeldt. Mr. Chief Justice Murray and Mr. Justice Terry concurred.
OPINION
HEYDENFELDT, Judge
A party who gives his power of attorney to another, authorizing the latter in general terms " to manage and transact all business matters of every nature and description in which I may be interested," and " to make, execute and deliver promissory notes, bills or bonds," will be held liable for all such securities executed in his name, by his attorney, where they have reached the hands of an innocent holder, although they may have been made for the private individual purposes of his attorney. Where one of two innocent parties must suffer, it must fall on him who has trusted most.
The argument against this position, rests upon the ground that the letter of attorney, which confines the authority to the business of the principal, ought to put on inquiry the person to whom the note is offered. The law, however, requires no one to do a vain thing. In making the note the agent is guilty of falsehood; is it to be expected that he will disclose his falsehood upon being questioned? Would he not rather add to it by stating some simulated object in behalf of his principal? Shall it be required that the inquiry must extend to an examination of the books of the principal? In many cases the principal has no books; in some cases the examination of his books would result in the defeat of his commercial operations; in none could it disable the agent in committing frauds, for if a certain amount of money was seen from examination to be necessary, the same amount might be drawn from half a dozen different sources.
It is furthermore contended, that, if no inquiry is demanded, as a rule of law, it will destroy the usefulness of letters of attorney, as nobody will trust to an extent which may result in ruin; but, on the other hand, the argument is equally cogent that to require so much of commercial men in the way of examination into the bona fides of a transaction, will equally weaken, if not to a greater degree destroy, the efficiency of such instruments. Not only so, but it takes away one man's natural power of implicitly trusting another, and upon every occasion institutes an inquisition into his private business, destructive, may be, alike to his prosperity and independence of action.
The doctrine we here adopt is exactly analogous to that which is universal in cases of partnership; as where one partner, having the power to sign the partnership name to a note, uses his power for his own purposes, and in fraud of his partners; the partners have everywhere been held liable to an innocent holder.
Judgment reversed and cause remanded.