Vol. I.]

TOME V. PARKERSBURG BRANCH R. R. Co.

[No. 10.

cates.

ous, and the treasurer of the company refused to exchange them for new certifiOn suit brought against the company, by the holder of these certificates, for its refusal to exchange them for new certificates, it was held, that the defendant was liable for the fraudulent acts of its agent; and the jury in assessing the damages to which the plaintiff was entitled might allow him the amount of the money advanced on the stock with interest, or the amount of the market value of the stock at the date of the loan with interest (if they deemed it proper to allow interest), the amount allowed, however, not to exceed the amount of the money loaned with interest, if the value of the stock should be greater than the loan and interest.

Shortly after the discovery of the fraudulent conduct of the treasurer in the overissue of stock, the directors of the company, on the 10th of August, 1870, held a meeting at which a report was made by the Finance Committee, setting out in detail the extent of such over-issue. In this report there was no mention made of one of the certificates held by the plaintiff. The plaintiff offered to read in evidence the record of the proceedings of this meeting, from the record book of proceedings of the company, having previously read, without objection, from the record of the various meetings of the stockholders and directors of the company, held prior to this meeting. The defendant objected to the admission of the proffered testimony. Held, that the proceedings of the meeting of the 10th of August were admissible, -the report of the Finance Committee, that one of the certifi cates of stock held by the plaintiff did not appear upon the list of "over-issues of the stock of the company," furnishing the strongest negative proof that such certificate was genuine and not spurious.

On the question of the genuineness of the signature of a Mr. Van Winkle to certain certificates of stock sued on, a witness professing to be an expert in the matter of handwriting was offered to prove that the signature to such certificates was not genuine. He stated that he had never seen Mr. Van Winkle write, nor received any letter from him, nor had he become acquainted with it in the course of business, but that his only knowledge on the subject was derived from an examination of the signatures of said Van Winkle, in the two certificate books in evidence, which had been placed in his hands by the defendant to enable him to testify, and that he had carefully examined them for five or six months, and had thus acquired a knowledge of the handwriting of Van Winkle. Held, that the witness was not competent to testify as to the genuineness of Mr. Van Winkle's signature, his opinion being derived solely from a comparison of handwriting. On the same question, a photographer by profession and expert in handwriting, offered as a witness by the defendant, stated that he had, at the instance of the defendant, made photographic copies of the signatures of Van Winkle to the certificates sued on, and of others admitted to be genuine; that some of these copies were of the actual size of the original, and others of an enlarged size. The defendant thereupon proposed to offer said copies in evidence, to be examined by the jury, together with explanations by the witness as to the differences between the genuine and those alleged to be forged, and his opinion, derived from a comparison of those copies, as to the genuineness of the signatures to the certificates sued on. The plaintiff objected. Held, that the proffered evidence was inadmissible.

THE facts appear in the opinion.

The cause was argued before Bartol, C. J., Stewart, Bowie, Miller, and Alvev, JJ.

Messrs. Saml. Snowden, Wm. F. Frick & I. Nerett Steele, for appellant.

Messrs. C. J. M. Gwinn, J. H. B. Latrobe & Reverdy Johnson, contra.

Vol. I.]

TOME v. PARKERSBURG R. R. Co.

[No. 10.

BOWIE, J., delivered the opinion of the court. The main question involved in this cause is the extent of the liability of private corporations for the acts of their agent, done within the scope of their employment, expressed or implied.

The inquiry is of peculiar interest, not because of any novelty of principle, but on account of its application to a class of corporations, which have multiplied with amazing rapidity in modern times, and absorbed a vast proportion of the capital and commerce of the country.

As the relation of principal and agent is common to all classes and conditions of life, the principles which govern it are of universal application. All persons, natural and artificial, capable of entering into this relation are subject to its laws. From the humblest position of domestic service, to the highest grade of financial or commercial employment, a common principle controls its obligations.

66

The maxim, qui facit per alium facit per se," on which it is said the whole law of principal and agent rests, is based on the instinct of natural justice, that in all employments and business of men, those who create or appoint agents for their own convenience and advantage should be liable for their acts of omission or commission, in the course of their employment.

From considerations of policy, public corporations, such as states or municipalities, are exempt in a great degree from responsibility for implied authority, founded on the conduct of those they employ; but private corporations, like the individuals who compose them, are held to rigid accountability for the acts of those whom they have held out to others as worthy of trust.

The record contains six bills of exceptions, taken by the appellant; the first five, to the rejection and admission of certain evidence; the sixth, to the rejection of the prayers of the appellant, and the granting of those of the appellee.

The last exception presenting questions of laws, which are peculiar to and govern the case, and the preceding exceptions, such only as are incidental, we shall examine them inversely.

As the pleadings contain a summary of the facts and the issues to which the prayers apply, a synopsis of them will be a proper preliminary.

The suit was instituted on the 1st of April, 1871, in the superior court of Baltimore city, by the appellant against the appellee, for the refusal of the latter to issue to the former certain new certificates of stock, in lieu of others previously issued to and held by the appellant, and presented for renewal, in pursuance of notice requiring the holders of stock to present and renew their certificates.

The narr. contained six counts: the first, second, and third for refusing to renew a certificate of 200 shares, issued the 8th of April, 1870; the fourth, fifth, and sixth for refusing to renew a certificate of 350 shares, issued the 2d of October, 1869.

The gist of these several counts is referred to and traversed by the pleas.

The defendants pleaded to the first and fourth counts, that the certificates in said counts mentioned were spurious and not genuine, as the name of the president of the Parkersburg Railroad Company, upon the face of

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TOME V. PARKERSBURG BRANCH R. R. Co.

[No. 10.

said certificates, is not the genuine handwriting of said president. To the second and fifth counts, that in issuing the certificate mentioned in said counts, the same being spurious and not genuine, inasmuch as the name of the president is not the handwriting of the president, the agent of the said company, mentioned in said count, acted without the scope of his employment. To the third and sixth counts the defendants deny that they have prosecuted their business, in the matter of issuing certificates. of stock, in a grossly unskilful and improper manner, and with want of proper care, skill, and diligence.

The defendants afterwards filed additional pleas, alleging that the certificates mentioned were issued without authority and fraudulently, and not for the use and benefit of the defendants, but for the use and benefit of the agent.

To the additional pleas the plaintiff (the appellant) replied that John L. Crawford was the treasurer and transfer agent of the defendants, and placed in sole charge of its office in Baltimore, and in possession of their books, containing certificates of stock, signed in blank by the president, and in issuing the certificates, Crawford acted in the exercise of a power conferred upon him by the defendants as their treasurer and transfer agent; that the plaintiff advanced his money upon the collateral security of the certificates without any knowledge or suspicion that Crawford, as treasurer and transfer agent, was acting fraudulently, and that the defendant is estopped from saying the certificates were fraudulently issued, &c.

For replication to the defendants' second amended plea, the plaintiff said, that whether said certificates were fraudulently issued by Crawford, without lawful authority or not, or whether they were issued for his use and not for the benefit of the defendants, or whether the defendants received any benefit, nevertheless the plaintiff was entitled to maintain his action, because Crawford, in issuing the certificates, acted within the scope of his employment as treasurer and transfer agent.

The issues made by the pleadings, briefly expressed, are as follows: 1st. Whether the certificates of stock alleged to be issued by the appellees to the appellant were genuine or spurious?

2d. Whether they were issued by the treasurer and transfer agent within the scope of his employment?

3d. Whether the appellees conducted their business in the matter of issuing the certificates of stock in a grossly unskilful manner, and without due care and diligence?

4th. Whether the certificates were issued without authority and fraudulently by the treasurer and transfer agent?

5th. Whether the appellees were estopped by the facts and circumstances of the case from denying the authority of their agent and the genuineness of the certificates?

Some of these issues present, perhaps, questions of law as well as of fact, but all errors of pleading were waived, and it was agreed that either party might present, for the judgment of the court, any question that the facts might authorize.

The appellant's prayers, upon the hypothesis, that the facts contained in them respectively are proved, without referring to them specifically, present the following propositions substantially, viz. : —

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TOME . PARKERSBURG BRANCH R. R. Co.

[No. 10.

1st. The appellee is responsible to the appellant for the amount which he has lost through the act of its agent, whether the certificates of stock upon which the loans were made have the genuine signature of the president, or whether they are forged, or whether the money went into the treasury of the appellee, or into the pockets of Crawford, if the certificates were issued in the course of, and within the scope of his employment as agent.

2d. That the appellee is estopped from denying the facts set out in the certificate issued by its agent, and authenticated by its seal, in the due course of his employment and within the scope of his authority.

That the corporation cannot set up the fraud of its own agent as a defence, because the act of the agent is its own act, and such defence would be relying on its own fraud.

3d. That the negligence of the appellee, in the management and conduct of its corporate affairs, contributed to the perpetration of the frauds upon the appellant, and concludes them from denying their responsibility for the acts of their agent.

The appellee's prayers negative these propositions, and are generally the converse of them.

The questions involved in them are thus epitomized in the appellee's brief:

1st. That no recovery can be had under any circumstances, on the certificates offered in evidence, without proof of the genuineness of the signatures of the president and treasurer, and of the seal of the company.

2d. That no recovery can be had, even if the certificates were genuine, as regards the seal and signatures, and in other respects, if they were issued by Crawford for his own benefit, without authority; and that there is nothing in the evidence to estop the defendants below from setting up a want of authority.

3d. That if the said certificates gave to Crawford no right which he could enforce against the company, the hypothecation of them to the plaintiff below, his bailee, could confer no rights which he did not possess himself.

The appellant's prayers are predicated on the theory of a general agency; the appellee's on a special or limited authority.

In the very excellent compendium of Mercantile Law, by Smith, the rights of third persons against principals are very clearly and forcibly defined, as follows:

"As far as the agent's authority extends, he has a right to bind the principal to third persons. Now his authority may, as we have seen, be either expressly given or inferred from the acts of his supposed principal. When it is expressly given, there can be no doubt as to its extent, except from the uncertainty of words employed in delegating it. When, however, it is to be inferred from the conduct of the principal, that conduct furnishes the only evidence of its extent as well as of its existence; and in solving all questions on this subject, the general rule is, that the extent of the agent's authority is (as between his principal and third parties) to be measured by the extent of his usual employment, for he who accredits another by employing him must abide by the effects of that credit, and will be bound by contracts made with innocent third persons, in the

Vol. I.]

TOME V. PArkersburg BRANCH R. R. Co.

[No. 10.

seeming course of that employment, and on the faith of that credit, whether the employer intended to authorize them or not; since where one of two innocent persons must suffer by the fraud of a third, he who enabled the third person to commit the fraud should be the sufferer." Smith's Mer. Law, 56, 57 (London edition, 1834).

This principle is applied to cases respecting notes or bills, which, if drawn, indorsed, or accepted by a clerk who has been previously allowed to do so, bind the master, though the money never came to his use; and to sales and guarantees; in a word to every species of mercantile transaction; and whether the agent have or have not been dismissed from his employer's service, provided that the third party had no reason to be aware of the determination of his employment. Vide Prescott v. Flinn, 9 Bing. 21; Boulter v. Arlesdon, 1 Sel. 234; Barber v. Gingell, 3 Esp. 60; Haughton v. Ewbank, 4 Camp. 88; 12 Mod. 346, cited by Smith.

The American doctrine on this subject is announced by Story, in terms equally emphatic and comprehensive, viz. :

"It is a general doctrine of law, that although the principal is not ordinarily liable (for he sometimes is), in a criminal suit, for the acts or misdeeds of his agent, unless, indeed, he has authorized or coöperated in those acts or misdeeds; yet he is liable to third persons in a civil suit, for the frauds, deceits, concealments, misrepresentations, torts, negligences, and other malfeasances, or misfeasances, and omissions of duty, of his agent in the course of his employment, although the principal did not authorize, or justify, or participate in, or indeed know of such misconduct, or even if he forbade the acts or disapproved of them. In all such cases the rule applies respondeat superior, and it is founded upon public policy and convenience; for in no other way could there be any safety to third persons in their dealings, either directly with the principal, or indirectly with him, through the instrumentality of agents. În every such case the principal holds out his agent as competent and fit to be trusted, and thereby in effect, he warrants his fidelity and good conduct in all matters within the scope of the agency." Story on Agency, 7th edition, ch. 17, sec. 452; Penn., Del. & Md. Steam Nav. Co. v. Hungerford, 6 G. & J. 291; Lord Holt's opinion in Lane v. Cotten, 12 Mod. 490; Paley on Agency, by Lloyd, 294, 301, 307; Bac. Abrid. Master & Ser. R. These principles apply as well to private corporations as to natural per

sons.

"As natural persons are liable for the wrongful acts and neglects of their servants and agents, done in the course and within the scope of their employment; so are corporations upon the same grounds, in the same manner, and to the same extent.' Angell & Ames on Corps. ch. 9, sec. 310; Albert v. The Savings Bank of Balto. 1 Md. Ch. Dec. 407; Thacher v. Bank of N. Y. 5 Sand. 121; Thompson v. Bell, 10 Exch. 10 (26 Eng. L. & Eq. 536); Bargate v. Shortridge, 5 Ho. of Ld. Cases, 297 (31 Eng. L. & E. 44); Nat. Exch. Co. v. Drew, H. L. 1855 (32 Eng. L. & E. 1); Stevens v. Boston and Maine Railroad, 1 Gray, 277; Blackstock v. N. Y. & Erie R. R. Co. 1 Bosworth, 77.

These obligations spring, as we have said, from the dictates of natural justice, the policy of the law, and the necessities of society; they are