In disposing of the former appeal of this cause (78 Conn. 211), there was no occasion to discuss the essential marks of distinction between an agency by estoppel and one which rests upon an apparent or ostensible authority. We were chiefly concerned with a pleading — the fourth defense — comprehensive enough to cover both, but which the trial court had removed from consideration as no defense at all, because in effect it failed to disclose an express agency. Indeed, had we not distinguished between its matters of fact and certain averments which more properly appear as mere statements of legal inference, we must have sustained the defense as really declaring an express agency, since it rested in part upon an allegation that the defendant was induced to his course by his "knowledge" that the bank had "authorized" the company to collect the accounts. The defense was reinstated, and upon the second trial invited proof by the defendant of either form of agency which it was obviously framed to cover: If it should appear that the bank had actual knowledge *Page 213 of the company's transactions with him as alleged, an apparent or ostensible authority from it for the company's acts would also appear; if, on the other hand, there developed upon proof of the essential facts, circumstances and conditions surrounding the dealings of the parties — all consistent with the broad allegations of the defense — which made it apparent that the bank's position was such that it ought to have known what the company was doing, then the bank's protest that it did not in fact know, became immaterial, and could not excuse it. In that event, knowledge must be imputed to it of the company's acts and representations, and the defendant would have established an agency by estoppel.
Upon the retrial there was a formal stipulation to the truth of certain facts. This included a condensed tabulated history of all the accounts prior to those in suit, and it is largely from a careful study of this table that the actual course of business pursued by the parties appears. The salient features of their dealings may be summarized as follows: After securing a substantial loan from the bank, the company assigned to it in writing a Thorp account payable in sixty days as partial collateral security. These accounts were always for amounts much less than the corresponding loans, and the attendant agreement in each case was that when the account was paid by Thorp to the bank, the amount should be credited on the still outstanding loan for which it was a partial security. Immediate notice of the assignment, and a request that payment be made direct to the bank, was in every instance given in writing by the bank to Thorp. Before the maturity of the accounts, Thorp usually gave a two or three months note to the company, which the latter at once realized on by a discount at some other bank. Long after the expiration of the original sixty days, and even after the maturity and payment of Thorp's note, the company would pay to the bank the amount of the overdue account in reduction of its indebtedness on the loan, — the disproportionate balance of which indebtedness continued to remain unpaid for *Page 214 a period ranging in different instances from a week to two months thereafter. It was also admitted that Thorp acted throughout in good faith, in the belief that the company was authorized to make collection of the accounts, and upon the company's representations to that effect.
It is obvious, of course, that the bank had actual knowledge that the loans remained unpaid at the maturity of the assigned accounts; that these accounts were never paid either at or after maturity by Thorp to the bank; that in every case a sum corresponding to the amount of the assigned account was in fact paid by the company to the bank after the account's maturity; that this sum was credited on the still unpaid loan which the account was assigned to secure; that the balance of the underlying loan remained unpaid when this credit was given. But while admitting that during this whole period the company was actually cancelling these overdue accounts, in each case before the underlying loan was paid, the bank rests upon the narrow proposition that it did not in fact know that the company was assuming to collect them on its behalf. In short, it is the bank's claim that it supposed the company either to be "taking up" in each instance, for its own protection, the account of a "slow debtor" and making itself good with the bank for a long overdue account; or that it was acting as Thorp's agent in receiving and turning over the money. Since these are not isolated instances, but form a continuous and unvarying practice, this claim necessarily implies that the bank either continued making these loans upon what its confessed knowledge and experience showed to be at least questionable security, or, while fully aware that payments of the accounts at maturity were regularly defaulted, acquiesced in the practical management and control of them by the company after repeated reason to believe that it, rather than Thorp, was the real delinquent.
With actual knowledge, therefore, of these irregular and suggestive methods, the bank not only invited their continuance by its silence, but permitted them to ripen into the settled custom of years, when for its own protection it *Page 215 was bound by every principle of common prudence to inquire into their cause. "Whatever fairly puts a party upon inquiry in such a case is sufficient notice in equity, where the means of knowledge are at hand." Angle v.Northwestern M. L. I. Co., 92 U.S. 330, 342.
I think the case falls clearly within the doctrine of Bronson v. Chappell, 12 Wall. (U.S.) 681, 683, and that upon the admitted facts the plaintiff was estopped to deny the authority of the company to collect the accounts on its behalf.