HUTCHESON, Chief Judge.
Appealing from a summary judgment dismissing, for the reasons stated in the
The facts
The district judge, stating: "The defendant agency admits that the bond was executed without authority. It argues that, in the state of the relationship between the parties, at the very least the insurer owed it a duty to disavow its action immediately if the insurer intended to do so, in order that the agency could seek another bond to substitute for the one in suit."; held that the defendant was right because, where an agent exceeds its authority, the principal must, to hold him accountable, immediately upon notice repudiate the agent's action. Otherwise, the principal is deemed to have ratified his agent's act, and "where, as here, repudiation by the principal may be unavailing as to third parties and the agent is sought to be held personally accountable, there still arises the duty immediately to notify the agent of disavowal so that he may protect himself if he can."
Proceeding, then, on the motion for summary judgment, to treat the case as though it presented no issue of fact, the
We cannot agree with these views. The law is well settled: that an agent owes to his principal the obligation of high fidelity; that he may not proceed without, or beyond, his authority, particularly where he has been forbidden to act; and that, if so proceeding, his actions cause loss to the principal, the agent is fully accountable to the principal therefor.
This court has had occasion many times to deal with suits against agents for failure to obey instructions. In Blackshear Mfg. Co. v. Umatilla Fruit Co., 5 Cir., 48 F.2d 174, 175, a suit for negligence and bad faith of a salesman in extending credit, this court, holding that the evidence was sufficient to take the question to the jury, declared:
In Eagle Indemnity Co. v. Cherry, 5 Cir., 182 F.2d 298, 299, the court declared:
In Palmer v. Chamberlin, 5 Cir., 191 F.2d 532, 538, 27 A.L.R.2d 416, this court again declared:
Finally, in Canada Steamship Lines v. Inland Waterways Corp., 5 Cir., 166 F.2d 57, 59, a suit brought in Louisiana by a principal against his agent for damages for failure to follow his instructions, this court, holding the agent liable, discussed fully the principles controlling in suits between principal and agent of the kind presented here. There, stating:
we gave full application to these principles.
Under the undisputed facts in this case and the settled law applicable thereto, unless and until the principal, with full knowledge of all the applicable facts, waived the breach of his instructions and adopted the agent's act, in writing the bond, as its own, the agent became and remained liable to the principal for the damages resulting from its assuming to act to the disadvantage of its principal without authority and in absence of clear proof of facts showing breach of instructions. In short, in the
The case was not tried and determined on its facts. Instead, it was determined as matter of law and without a trial on the incorrect assumption that, notwithstanding the agent's admitted and grievous breach of its duty, it could escape the loss and throw it on its principal, upon the mere claim that the principal did not immediately repudiate the bond. The law is not so written.
The judgment is reversed and the cause is remanded for trial and for further proceedings not inconsistent herewith.
RIVES, Circuit Judge (dissenting).
The sole and simple issue in the district court was whether the principal, Manufacturers Casualty Insurance Company, as between itself and its local agent in New Orleans, ratified the act of the agent in writing a contract performance bond. There was no claim that the agent had original authority to write such a bond.
On January 12, 1951 the agent sent a night letter telegram to the principal advising that one Geiger was the successful bidder on "a small painting job for $2780," giving a brief summary of Geiger's experience, assets and liabilities and requesting authority to execute the bond. On the same day the agent wrote the principal an air mail special delivery letter giving additional information about Geiger, and concluding:
Still on the same date, January 12th, the principal wired the agent: "Prefer not to authorize painting bond James H. Geiger without full investigation. Writing."
The principal's letter of the same date to the agent read:
So far as the present record shows, the next communication was on January 23rd, when the principal wired the agent: "Authorize contract bond two thousand seven hundred eighty dollars James H. Geiger —"
Also on January 23rd, the principal wrote a letter to the agent as follows:
On the next day, January 24th, the agent wrote to the principal:
On the next day, January 25th, both bonds were executed by the agent in the name of the principal, and on January 29th, the contracts and the contract performance bonds were placed on record in the Mortgage Office for the Parish of Orleans. Thereafter, on January 30th, the principal wired the agent: "Do not execute bond J. H. Geiger thirteen thousand eight hundred unless authorized see letter January twenty third —"
On February 3rd, the agent wrote the principal:
So far as the record shows, there were no further communications between the principal and agent for more than a month. On March 8th, the agent forwarded to the principal its regular reports covering insurance and bonds written by it during the month of January, enclosing with said reports the principal's portion of the premiums in the
On March 16th, the agent wrote to the claim department of the principal:
The agent's previous communications had been directed to the Superintendent of the Contract Department of the principal at the same address, 1617 Pennsylvania Boulevard, Philadelphia, Pennsylvania.
On March 21st, the vice-president of the principal wrote the agent:
Upon the default of the contractor, Geiger, the principal took over the work, enlisted the aid of its agent in securing bids from other contractors, and the agent, under a disclaimer of personal liability, co-operated with the principal in completing the contract.
Under the foregoing undisputed facts, the learned district judge, in a clear and full opinion reported as Manufacturers Casualty Insurance Co. v. Martin-Lebreton Insurance Co., 144 F.Supp. 515, held that as between the principal and the agent, the principal had ratified the act of the agent.
I think that the district judge was correct. As said in I Restatement, Agency § 94, p. 234:
See also 2 Am.Jur., Agency, §§ 232, 233.
That this principle applies as between principal and agent is made plain by the opinion of the district court, see 144 F.Supp. at page 517. If further Louisiana authority to that effect is needed, I would cite: Dupré v. Splane, 16 La. 51; Starr v. Zacharie, 18 La. 517; Reed v. Ritchey, 2 La.Ann. 796; Stanfield v. Tucker, 4 La.Ann. 413; Beau v. Drew, 15 La.Ann. 461; Featherston v. Graham, 17 La.Ann. 42; Raymond v. Palmer, 41 La.Ann. 425, 6 So. 692, 17 Am.St.Rep. 398. In the last cited case, the Supreme Court of Louisiana said:
In the case principally relied on by the principal, American Fire & Marine Insurance Co. v. Seymour, La.App., 144 So. 775, it was held that casualty insurance policies issued by the local agent without actual authority were not ratified because the insurer failed to cancel them within three days after notice of issuance reached the general agent's office.
In the present case, the principal waited from shortly after February 3 until March 21st, or for more than forty days, with no answer to the agent's letter of February 3rd, which, especially in view of the previous correspondence, plainly called for a reply if the principal did not intend to ratify the agent's act. In the meantime, the principal had received, deposited and still retains the premium for the bond. That seems to me inconsistent with its contention that the risk of loss was primarily that of its agent. Not until the agent had notified the principal of the certainty of a loss under the bond, did the principal break its silence, refer to the agent's original and admitted lack of authority, and seek to hold the agent personally responsible. That will not do.
Principals are under just as much obligation to deal honestly with their agents as agents are with their principals. It seems to me that simple honesty of dealings between the parties requires an affirmance of this judgment. I, therefore, respectfully dissent.
Rehearing denied; RIVES, Circuit Judge, dissenting.
FootNotes
The agent had no authority to write contract performance bonds or bonds of any sort.
On Jan. 12, 1951, agent, desiring to write bonds for one Geiger, who it advised "has been recommended to us — Dun and Bradstreet have no information on him", requested, by night letter, wire authorization to execute a bond on a small painting job for $2,780 and temporary authorization to write other bonds for him, pending "your complete investigation".
On the same day the plaintiff sent a telegram to the defendant reading as follows: "Prefer not to authorize painting bond James H. Geiger without full investigation. Writing".
On the same date plaintiff wrote to the defendant expressing lack of confidence in Geiger as a credit risk on the basis of inability to find anything about him, and stating, "We do not feel that we should authorize this bond until such time as the completed financial statement is forwarded to us by Mr. Geiger". It also requested other and full information about him.
Under date of Jan. 23, 1951, plaintiff sent a wire authorizing the $2,780 bond and on the same day this authority was confirmed in a letter to the agent in which insurer wrote, "In regard to the bond of approximately $13,800 for Mr. Geiger [which plaintiff had requested authority to write], we wish to advise that as soon as you know the other bids, we wish that you would let us know immediately and we will see what we can do toward authorizing this bond."
In the face of this correspondence and plaintiff's specific refusal to authorize the execution of the bond, the defendant, on Jan. 25, 1951, without any authority to do so, signed the bond, and on Jan. 29, placed the contract and the bond on record in the mortgage office.
Defendant, however, was not advised of the execution until Feb. 3, 1951. The remittance by the agent for premiums written in the month of January was not made until well into March, the execution report is not dated, the check is dated March 8, and it was deposited on March 13, 1951.
On March 16, the defendant wrote to the claim department of plaintiff, advising that there was evidence of a possible loss under the bond.
On March 21, Mr. Cordell, Vice-President of plaintiff, wrote it expressing surprise that it had executed the bond in violation of its express authority and advising that it would hold the agent liable for any loss sustained.
The insurance company thereafter completed the contract, the agent under a disclaimer of personal liability on the bond cooperating fully with the insurer in completing it.
Comment
User Comments