Lewis v. Brehme

Alvey, J., delivered the opinion of the Court. It is conceded in this case that the defendant was the agent of the plaintiffs for the sale of goods, and that, in addition to the commission allowed the defendant as ordinary agent, an additional commission was agreed to be allowed, and was actually allowed, for and in consideration of the defendant’s ^guaranty of payment of all bills of goods purchased of the plaintiffs by a certain customer, who was, through the agency of the defendant, induced to deal with the plaintiffs, merchants in* Philadelphia, and such additional commission was to be paid whether the purchases were made by the particular customer directly of the plaintiffs, or through the defendant as their agent. The customer having purchased goods of the plaintiffs, and ])aid for them to the defendant, the agent, and the money having been lost in the manner disclosed in the evidence and stated in the prayers of the respective parties, the question is, upon whom is that loss to fall. It is insisted on the part of the plaintiffs that the defendant, being an agent, acting under a del eredere commission, is bound to pay, not conditionally, but absolutely, as if he were himself the vendee of the goods; and that, consequently, he did not discharge his liability by the purchase and transmission of the gold draft of the 27th of April, 1866.

And even if the liability of the defendant, by reason of the del credere commission, be not maintainable to the extent contended for, still, the plaintiffs insist that as ordinary agent, whose duty it was to remit funds to his principal, the defendant having procured "the draft payable to his own order, and endorsed it to the plaintiffs without excluding recourse, is, under all the circumstances attending the- transaction, liable ⁴²⁴ as endorser, the drawer having failed, and the draft meeting with dishonor. On the other hand, the defendant contends that his relation to the plaintiffs was not that of a del credere agent or factor, strictly speaking; but that if he be so regardedjthe guaranty, in consideration of the commission, only extends to the payment of the money for the goods by the vendee, and not to its safe transmission to the vendor; and that, consequently, the guaranty was gratified and discharged when the money was paid by the purchaser to the defendant as the plaintiffs’ agent. He also contends that he is not liable as endorser of the draft transmitted, because of the relation of principal and agent existing at the time between the plaintiffs and himself, in reference to which, the draft was purchased, and that, acting for the convenience of the plaintiffs, he can only be held responsible fop good faith and ordinary diligence. These positions of the parties were sought to be maintained by them at the trial in the Court below, and with that view they propounded prayers for instruction to the jury; but the Court rejecting those of the plaintiffs, and granting those offered by the defendant, the plaintiffs have brought those rulings to this Court for review, and whether they be correct or otherwise, according to our judgment, will appear in the sequel of this opinion.

We cannot resist the conclusion that the defendant was, at the time of the transactions involved in this controversy, strictly a del credere agent of the plaintiffs; although the nature and extent of the obligation imposed upon such an agent has' been variously stated, and, in regard to it, down even to the present time, no little conflict will be found to exist among Judges and authors of the highest repute. On the one hand there are those who maintain that an agent del credere for the sale of goods, makes himself absolutely and in the first instance liable to his principal for the pi’ice of the goods sold; while on the other hand it has been strongly maintained that such an agent only incurs a secondary res ⁴²⁵ ponsibility, that of mere surety, whereby he can bo required to pay only in the event of failure on the part of the principal debtor. And some of the authorities have gone to the extreme of maintaining that the undertaking of the agent under a del credere commission is a mere guaranty of the debt of another, and therefore within the Statute of Frauds, 'Which of these positions is correct depends, to a great extent, upon the state of the authorities, the question never having been finally adjudicated in this State. Whenever an agent, in consideration of additional commission, such as was agreed to be allowed in this case, guarantees to his principal the payment of debts that become due through his agency, he is said to act under a del credere commission.

What then is the nature and extent of this guaranty? In Grove vs. Dubois, 1 T. Rep., 112, a case of a policy broker, Lord Mansfield answered this question in very plain and unqualified terms when he said, “ It is an absolute engagement to the principal from the broker, and makes him liable in the first instance. There is no occasion for the principal to communicate with the underwriter, though the law allows the principal, for his benefit, to resort to him as collateral security. But the broker is liable at all events.” In this Mr. Justice Btjller concurred, and said that he had known many actions to have been brought against brokers with commission del credere, and that he had never heard any inquiry made in such cases, whether there had been a previous demand upon the underwriter and refusal; and he declared that such was not the practice.

Thus showing, according to the opinions of these great Judges, that the obligation of such undertaking was primary and absolute in its character, and that the agent was regarded as standing in the relation to his principal of an original debtor. Ten years after the case of Grove vs. Dubois, the case of Mackenzie vs. Scott, 6 Bro. P. C., 280, occurred in the House of Lords, on an appeal from the Court of Sessions in Scotland. That case was very analogous in its circumstances to ⁴²⁶ the one before us.

There, a factor under a commission del credere, sold goods and took accepted bills from the purchasers, which' he endorsed to a banker at the place of sale, and received the banker’s bill for the amount, payable to his, the factor’s, own order, on a house in London. This banker’s bill the factor endorsed and transmitted to his principal, who got the same accepted. The acceptors and drawer having failed before payment, it was held, according to the head note of the case, that the factor was answerable for the amount of the bill, being personally liable under his commission del credere, to satisfy his principal the price of the goods sold. It was insisted in that case, as it has been in this, that the del credere obligation extended only to guaranteeing the payment of the price of the goods by the vendee, and that the remittance of the money by the factor was a transaction entirely different and distinct.

But, if the uniform interpretation of that case be correct, (there being no reasons assigned for the judgment given,) the argument in that respect did not avail; and, in view of the law as it had been announced in Grove vs. Dubois, it is not difficult to perceive upon what ground that decision was based. And afterwards, in 1803, the same general proposition was again pointedly asserted as the law of England in the case of Houghton vs. Matthews, 3 Bos. & Pull., 489. By these decisions the law was regarded as settled in England, until about the year 1816; and all the text writers, and authors of elementary treatises upon the subject of commercial contracts before that time laid it down, as the unquestionable law, that an agent, acting under a commission del credere, was bound to his principal in the first instance and as an original debtor. The law will be found so stated by Liver-more, in his ivorle on Agency, 409, 410 ; by Paley on Agency, 40; by Comyn on Contracts, 1 vol., 253; and by Chitty in his worh on Com.

Law, 3 vol., 222. But it is said that the cases to which we have referred do not now announce the law as accepted in England, and we ⁴²⁷ are referred to the ease of Morris vs. Cleasby, 4 Maul. & Selw., 566, decided in 1816, and the cases following on its authority, to show how the rule has been qualified if not entirely changed. It is true, in the case of Morris vs. Cleasby, Lord Ellenborough did express a decided dissent from the principle announced in the previous decisions, both as to the nature and scope of the del credere obligation. lie said that the guarantor, in consideration of the commission, is only to answer for the solvency of the vendee, and to pay the money if the vendee does not; and that, on the failure of the vendee, the agent is to stand in his place and make his default good. Thus clearly placing the agent in the position of mere surety to the purchaser of the goods.

And if such, be the true nature and character of the contract, seeing that it is entirely collateral and secondary, it is difficult to perceive how it can escape the operation of the Statute of Frauds. Be that, however, as it may, the decision of Lord Ellenbokottgh was sanctioned by the case of Peele vs. Northcote, 7 Taunt., 478, and also impliedly sanctioned by the case of Gall vs. Comber, 7 Taunt, 558, in the Common Pleas. And from the time of these last decisions, until very recently, all the treatises on commercial contracts have stated the law in accordance with the opinion of Lord Ellenbobough, taking the doctrine of Lord Mansfield to have been overruled. It is so stated in Chitty on Contracts; Russell on the Law relating to Factors and Brokers; Smith’s Commercial Law, and in other works treating of the subject.

Nor has there been uniformity of decision on the subject in the Courts of this country; though wo think the tdecided weight of authority is in support of the doctrine as announced in Grove vs. Dubois. In the case of Thompson vs. Perkins, 3 Mason C. C. Rep., 232, before Judge Stoet, in 1823, the principle of Grove vs. Dubois was repudiated as being incorrect, and that of Morris vs. Cleasby sanctioned; though the facts of the case do not appear to have required a distinct ruling upon the particular question now presented. It was ⁴²⁸ an action of assumpsit by the principal against the assignee of the factor del credere who had sold the goods of his principal, and taken negotiable notes payable on time, in his own name, for the amount of sales; and afterwards, and before the notes became due, the factor failed, and assigned the notes to his assignee, for the benefit of his creditors, and the assignee after-wards receiving the money due on the notes, it was held that the prin'cipal was entitled to recover the money so received from the assignee, subject to a deduction of the amount of the lien of the factor for his commissions and charges. Upon such state of facts, it is clear, the right to recover was equally the result of the doctrine of Lord Mansfield as that of Lord Ellenborough.

All the cases concede it to be the right of the principal to forbid payment to the agent, and to maintain an action himself against the buyer to recover the price of the goods; or to pursue his goods, or the notes taken for them, into the hands of third parties precisely as if no del credere contract existed. And though such right in the principal would seem to consist only with a collateral undertaking by the agent, yet, in the contract del credere, being sui generis, it is held in no wise to change the original and independent character of the agent’s undertaking to his principal. In the case of Swan vs. Nesmith, 7 Pick., 220 , occurring a few years after the case in 3 Mason, the Supreme Court of Massachusetts decided that the legal effect of a commission del credere was to make the agent liable at all events for the proceeds of the sale, so that he might be charged in indebitatus assumpsit, as for goods sold to him. There the contract was admitted to be original and not collateral, and therefore not -within the Statute of Erauds; and the necessary conclusion is, that the Court intended fully to sanction the principle of Grove vs. Dubois, to which, and the case of Mackenzie vs. Scott, they refer for the definition of the nature of the commission del credere.

And so in New York, the same principle is established, as will be seen by reference to Wolf vs. Koppel, 5 Hill, 458 , and same case on appeal, 2 Denio, 368 , ⁴²⁹ and Sherwood vs. Stone, 14 N. Y., 267 . The two last cases, being in the Court of last resort, fully approve and adopt, as far as wo can discover from the opinions delivered, the principle of the cases of Grove vs. Dubois and Mackenzie vs. Scott. Judge Stoky, however, in his work on Agency,"section 215, adopting his own view of the law as found in Thompson vs. Perkins, supported by Morris vs. Cleasby, and the cases in the Common Pleas, says that the true engagement of the agent del credere is merely to pay the debt, if it is not punctually discharged by the buyer. That, in legal effect, he warrants or guaranties the debt; and thus he stands more in the character of a surety for the debt, than as debtor.

And the principle