[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 572 The evidence renders it entirely certain that the Esparto grass sold by the defendants, and for the proceeds of which they are sued, was the sole property of the plaintiffs, consigned by them to E. C. Stokes as agents for its sale, who were bound to remit to their principals the whole proceeds, after deducting commissions and expenses. The defendants, therefore, have applied the property of plaintiffs to pay the debts of E. C. Stokes, and are here to defend that application. They invoke for that purpose the general rule that third persons may deal with one as principal who holds himself out as such, concealing his agency and not disclosing its origin; and that the real principal cannot so assert his rights as to cut off the equities which have grown up between such agent and third persons. (Wharton on Agency, § 465; Story on Agency, § 390.) This rule has its source and its justification in the broader doctrine that where one of two innocent parties must suffer, he shall bear the loss whose act made its occurrence possible. But neither the rule nor its reason can apply where the third person knows or has sufficient information to fairly infer the existence of an actual agency, although the name of the principal be not disclosed. (Hogan v.Shorb, 24 Wend. 462; Maanss v. Henderson, 1 East, 335;Bliss v. Bliss, 7 Bosw. 345.) And the same result follows where, without actual knowledge of the agency, the circumstances are such as fairly to put the third person on inquiry. (Baring v. Corrie, 2 Barn. Ald. 137.) Most of the cases referred to were those in which the third person was a purchaser, and distinctions are drawn, not necessary to be here considered, between cases in which the supposed principal was a factor, having possession of the goods, *Page 575 and those in which he was a mere broker, negotiating without such possession. Omitting any notice of these, and of other distinctions, it is sufficient, for the purposes of the present inquiry, to say that no form of the rule invoked by the defendants can justify their defense, if it is apparent that they knew or had good reason to know that E. C. Stokes were not in fact the principals, or the sole owners of the property sold. We are thus brought to consider the facts proved on the trial.
It was in August, 1877, that Stokes first spoke to the defendants about the shipment of goods which afterward occurred. The defendants were then engaged to sell the property as brokers, but nothing was said indicating its ownership. On the 8th of the same month, Stokes wrote the defendants announcing that a sample shipment had been ordered, and adding, "we have first-class correspondents who work with us on joint account." Again they wrote on the 5th of September speaking of advices from "our friends abroad," and adding, "they request us to introduce it in as quiet a manner as possible." On the 13th of October, Stokes wrote as to an advertisement of the grass and said, "we propose to send a copy to our correspondents in Europe, and consult them about putting an annual advertisement in." On the 21st of January, the defendants sold the goods, and eight or ten days later collected the price. On the 5th of February, Stokes again wrote to the defendants, complaining of their neglect to account, and saying "the goods were not ours, being on consignment, and we have so informed you frequently." No reply of the defendants, denying this statement, nor any contradiction of it on the witness stand was given. We must take it, therefore, as true. After all this information, and on the 11th of February, the defendants render an account in which they apply $550 upon an old debt due them from E. C. Stokes, contracted we know not when, but under an agreement made nearly six years before, and charging expenses and commissions, acknowledge a balance of a little over $600. This sum they call in their answer the "net proceeds" of the sale. They plead no offset or counter-claim against E. C. Stokes, nor any payment by a credit given, *Page 576 but say only that such balance was the "net proceeds." On this state of facts we think no defense was established as to the $550 withheld. The defendants knew or had good reason to know that E. C. Stokes were not the sole owners of the goods, that others were interested, and even that the foreign correspondents were the probable owners and E. C. Stokes merely consignees and agents. Beyond any doubt the facts and circumstances were strong enough to put the defendants on inquiry, and deprive them of any equity founded on a belief that E. C. Stokes were the real and the sole principals with whom they were dealing. They must stand in a different attitude before they can use plaintiffs' property to pay Stokes' debt to them.
As to the balance, admitted by the defendants to have been in their hands, the defense relied on is that it was taken from them by compulsory process of law. The firm of Ralli Bros., who were creditors of E. and C. Stokes, sued out an attachment against them which was served on the defendants very soon after the proceeds of sales came to their hands. Those proceeds were never taken under the attachment. In April, 1878, the defendants were notified by an agent of the plaintiffs of the claim of the latter to the goods consigned to Stokes. At some time in the summer of the same year, the agent exhibited his power of attorney and claimed the property as belonging to the plaintiffs. And yet, in August of that year, the defendants examined in supplementary proceedings after judgment, obtained by Ralli Bros., testified that they owed E. C. Stokes the balance in question, concealed the claim of ownership of plaintiffs, in that way suffered an order to be made that they pay it over to the sheriff, and thereupon paid it accordingly. The defendants had it in their power, by stating the facts of the case, to prevent the order from being made. (Rodman v. Henry, 17 N.Y. 482; Edmonston v. McLoud, 16 id. 544; Locke v. Mabbett, 2 Keyes, 457;Teller v. Randall, 26 How. Pr. 155.) It was their duty to have done so, and omitting it, without reason or excuse, their after payment to the sheriff was, in effect, voluntary and not compulsory. *Page 577 Such payment was no defense. (Greentree v. Rosenstock,61 N.Y. 593.) As in that case, so in this, the defendants took it upon themselves to decide who was really entitled to the money, and must bear the consequences of their mistake.
Two exceptions to the admission of evidence remain to be considered.
One of the plaintiffs, examined on commission, was asked what their business relations with E. C. Stokes were, and Stokes was asked under what arrangement he received the goods. Both questions were objected to as irrelevant. The answers showed that the goods were shipped to the firm of E. C. Stokes, to be sold for account of plaintiffs. The evidence was, therefore, relevant. It was proper and necessary to establish the exact relation of each of the parties to the goods in controversy. If one of the inquiries was somewhat broad in its terms the answer was confined to the precise issues involved.
In the cross-examination of one of the plaintiffs whose evidence was taken on commission, he was requested by the defendants to annex copies of any correspondence with E. C. Stokes. The witness annexed extracts from the letters and not the whole of the same. On the trial the plaintiffs read these extracts under an objection and exception. Undoubtedly the defendants were entitled to have had the whole of the letters and not extracts, but if they so desired, their remedy was by motion in advance of the trial to have the error in the execution of the commission corrected, either by annexing the full letters, or striking out the extracts, or suppressing the deposition. Not having taken that remedy they must be held to have assented to the mode in which the commission was executed. (Com. Bank ofPenn. v. Union Bk., 11 N.Y. 205; Sturm v. Atlantic Mut.Ins. Co., 63 id. 87; Zellweger v. Caffe, 5 Duer, 100; UnionBank of Sandusky v. Torrey, 2 Abb. Pr. Cas. 269; Sheldon v.Wood, 2 Bosw. 267.)
In the case last cited the Superior Court, in which the present action was tried, established the rule, formally, that where opportunity had existed to correct an imperfect execution of a commission, either by ordering a re-execution or quashing the *Page 578 return, no objections to the deposition would be heard on the trial, save those addressed to the competency of the witness, or the admissibility of evidence. The rule is reasonable and just. Here, the defect was in the execution of the commission. Letters were asked to be annexed, and the commissioner annexed extracts, instead of requiring complete copies. They could have been obtained before the trial. On a motion, the commission could have been sent back for that purpose. Such motion not having been made, the plaintiffs had a right to assume that the cross-examiner was contented with what he had obtained. And, besides, it is difficult to see how the admission of the extracts worked any possible harm. They proved nothing except what had already been proved and was nowhere contradicted, that the plaintiffs were the sole owners of the goods.
The judgment should be affirmed, with costs.
All concur.
Judgment affirmed.