Opinion
No. 26895.
March 26, 1928. Suggestion of Error Overruled June 11, 1928.
PRINCIPAL AND AGENT. Representations by agent beyond scope of authority did not authorize cancellation of contract for purchase of lots and deed pursuant thereto.
Representations by agent, to effect that vendor intended to raise lots which were entirely beyond scope of authority vested in him, and without subsequent ratification, held insufficient to authorize cancellation of contract for purchase of lots and deed executed pursuant thereto, particularly in view of fact that purchaser, with knowledge that vendor had repudiated agent's statements, executed new contract and paid additional money.
APPEAL from chancery court of Harrison county; HON. V.A. GRIFFITH, Chancellor.
Gardner, Brown Morse, for appellant.
The principle questions presented by this appeal are whether or not an owner of land is liable for the unauthorized statements of a real estate broker, beyond the scope of the agent's authority, without the knowledge or consent of the owner and alleged to have been made by the agent to induce a sale, and whether or not fraud, sufficient to avoid and set aside a conveyance of real estate, can be predicated upon promises or representations of a real estate broker as to matters of future performance. The points of law upon which appellant relies are as follows: "1. In order for a party to be relieved from the payment of a note on the ground of fraud, he must plead and prove that the representations made the basis of the charge of fraud were made with authority, that they related to material facts, and that they were false and known to be false. 2. Fraud cannot be predicated upon statements promissory in their nature and relating to future actions, nor upon the mere failure to perform a promise, or an agreement to do something at a future time, or to make good subsequent conditions which have been assured. 3. A real estate broker, authorized only to bring owner and purchaser together, or to submit to owner, for approval and execution contracts with prospective purchasers, cannot bind his principal by any statement, representation or warranty contradictory of or in conflict with the written contract which he is authorized to procure. Any person dealing with such broker is charged by law with knowledge of his limited powers. 4. A representation by an agent, made without authority and beyond the scope of his employment, is not binding upon the principal. Ordinarily a statement by a vendor as to an improvement to be made in the neighborhood by another person is an expression of opinion only and does not constitute fraud." Huls v. Black, 14 Ky. L. Rep. 805; Western Townsite Co. v. Norotuy (S.D.), 143 N.W. 895; Buckingham v. Thompson (Tex.), 135 S.W. 652. The alleged representations, even if they were made, related to matters of future performance, and not as to existing facts. As to such matters, the majority rule is that they do not constitute fraud. 12 R.C.L., par. 19, p. 252. In Bell v. Henderson, 6 How. 311, this court denied to the heirs of a purchaser an injunction against the enforcement of a judgment for the purchase price of a lot, though it appeared that the agents of the vendor made misrepresentations to the effect that the town in which the lot was located was a place of great commercial importance at the head of steamboat navigation on a river, and that a railroad with a terminal at this town would be commenced within the year following the year of the sale. Beuna Vista Co. v. Billmyer (W. Va.), 37 S.E. 583; Perkins v. Longee, 6 Neb. 220; Day v. S.T. Scott Invest. Improv. Co. (Ill.), 38 N.E. 567; Decatur Mineral Land Co. v. Friedman (Ky.), 56 S.W. 11; Birmingham Warehouse Elevator Co. v. Elyton Land Co. (1890), 93 Ala. 549, 9 So. 235; Buckingham v. Thompson (1911), ___ Tex. Civ. App. ___, 135 S.W. 652; Watkins v. West Wytheville Land Improv. Co. (1895), 92 Va. 1, 22 S.E. 554; Anderson v. Creston Land Co. (1898), 96 Va. 257, 31 S.E. 82; Farwell v. Colonial Trust Co., 78 C.C.A. 22, 147 Fed. 480; M.T. Jones Lumber Co. v. Villegas (Tex.), 28 S.W. 558; McCoy v. Bankers Trust Co. (Tex.), 200 S.W. 1138; Boston Piano Music Co. v. Pontiac Clothing Co., 165 N.W. 865; Barker v. Finley, 166 N.W. 886.
As was said by this court in Milling Co. v. Phillips Son, 117 Miss. 204, "It appears to be the settled law in all jurisdictions that the authority of the agent to bind his principal rests upon the powers conferred upon him by his principal." In Gulfport Mississippi Coast Traction Co. v. Faulk, 118 Miss. 894, this court reiterated the rule recognized in Milling Co. v. Phillips; Smith v. Shackleford et al. (Fla.), 110 So. 358; Rhode v. Gallat (Fla.), 70 So. 471; Holmberg v. Queck, 105 So. 817. In Becker Co. v. Clardy, 96 Miss. 301, we find a widely cited authority, and one that is recognized as a leading case upon the points there involved.
Appellant was not bound by any independent, extraneous representation made by Steen a mere broker. It was bound by only the written contract which it executed. In support of this statement we cite Ismert-Hinckle Milling Co. v. Natchez Baking Co., 124 Miss. 205; Philip Gruner Bros. Lbr. Co. v. First National Bank, 143 Miss. 454, 109 So. 274. These citations of authority could be multiplied, but we feel that those decisions which we have cited are sufficient to enforce the propositions advanced by us. For it would be preposterous to hold a principal liable for the unauthorized statements or representations made by a broker without the knowledge or consent of the principal.
Leathers Sykes, for appellee.
We are impressed that the instant case has no similarity to those of promised improvements to be made in the future — but is rather typical of those with reference to representations of actual existing facts. The leading case on this subject is Donelson v. Weakley (Tenn.), 3 Yerg. 178, decided in 1832 by Chief Justice CATRON, who later became one of the justices of the supreme court of the United States. See Rogers v. Salmon, 8 Paige's Chancery 559, 35 Am. Dec. 725; Anderson v. Hill, 12 S. M. 679, decided in 1849; Wilson v. Carpenter, 91 Va. 183, 50 A.S.R. 824; Trust Co. v. Henry (Idaho), 27 A.L.R. 337. It is suggested by opposing counsel that the representatives must not only be false, but known to be false. Our court holds that knowledge of the falsity is immaterial. Alexander v. Meek, 132 Miss. 298, 96 So. 101; Allen v. Luckett, 94 Miss. 868, 48 So. 186; Oswald v. McGehee, 28 Miss. 340; Lundy v. Hazlett, 147 Miss. 808, 112 So. 591; Oldham v. Memphis Sand Gravel Co., 145 Miss. 851, 111 So. 357, and many others. See Taylor v. Conner, 41 Miss. 722; Rockmann v. Improvement Company, 167 Mass. 1, 57 Am. St. Rep. 427; Haskell v. Starbird, 152 Mass. 117; 23 Am. St. Rep. 809; Benj. on Sales (3 Am. Ed.), sec. 465; Locke v. Stearns, 1 Met. 560, 35 Am. Dec. 382; White v. Sawyer, 16 Gray 586.
In Griswold v. Gebbie, 126 Pa. St. 353, 12 Am. St. Rep. 881, another real estate case, the court says: "The point that the plaintiff in error was not liable for the statements of her agent, John Griswold, is not tenable. The general rule that a principal is responsible for the misrepresentations of his agent, within his authority, is beyond question; and the better opinion is that as to third parties affected by his acts or words, it is the apparent scope of his authority, and not his actual instructions that must govern. That is the basis on which the business of the world in the present day is transacted, and the rule should be enforced in a liberal spirit, with regard to the actual habits of the community. To the same effect are: DuSouchet v. Dutcher, 113 Ind. 249; Rogers v. Empkie, 24 Neb. 653; Aultman v. York, 71 Tex. 261. Surely, therefore, the appellant cannot expect to reap the reward of Steen's activities, and laugh off that portion which entails correlative obligations upon its part.
Mrs. McDaris, the appellee, filed a bill in equity to cancel a contract for the purchase of certain lots, a deed executed in pursuance of the contract, and a trust deed executed by her securing the deferred payment on the contract for said lots. The cancellation of the entire contract was sought on the ground that an agent of the appellant, one Steen, had made certain representations which were false, the main representation being that the appellant, the realty company, intended to raise the lots eighteen inches. She visited the lots in question accompanied by Steen.
The record in this case shows, beyond cavil, that Steen had no authority to make any statement for the realty company. The deal was closed between the appellee, Mrs. McDaris, and the vice president of the appellant company, Steen introducing the parties. The contract was in writing, and, at the time of making it, she did not call attention to the representations upon which she now relies. Subsequently, she had the contract changed so as to make monthly payments; the changes were made in accordance with her wishes, but she made no statement at that time in reference to the representations, nor about having same incorporated in the written contract. Later, she received the deed and executed the trust deed, still not requesting that the agent's representations be incorporated in the contract. Shortly before the delivery of the deed and the execution of the trust deed by her, she was advised by Steen that the grade of the lot would not be raised, and subsequently she called the vice president's attention to the representation of the agent, whereupon he laughed. She closed her deal, and again changed her plan for making payments, this time from monthly payments to deferred notes, paying several hundred dollars cash, and never made any complaint of Steen's representations until real estate had declined in that vicinity and her notes became due. Then she declined to pay the notes, and obtained a temporary injunction against the foreclosure of the trust deed.
The appellant, in its answer, denied that the representations had been made, or that the representations in law constituted fraud; and denied the rights of the agent to make any statement to bind the company. The record clearly shows that the only authority the agent had, was to introduce prospective buyers to the seller; that all the terms of the contract were to be made between the principals to it — and, in the instant case, this was done. The defendant, the appellant, filed a cross-bill seeking to foreclose on the trust deed in a court of equity, and the court below made perpetual the injunction, canceling the entire contract and all instruments mentioned above, and dismissed the cross-bill.
Pretermitting the question of whether or not these statements of the agent were false representations or mere false promises, it is patent that the representation, if made by the agent, was beyond the scope of his employment, and is not binding upon the principal, the appellant company. Steen was a mere broker, and had no direct contract with the realty company; and this record discloses that no one had a contract to close any deal for the appellant, the realty company. It employed an agency by written contract which disclosed that an agent's authority was limited to bringing prospective purchasers and owners together, so that the principals and purchasers might make their own contract. There was no ratification of this alleged representation made by Steen; on the other hand, the appellee, Mrs. McDaris, executed a new contract and paid additional money after she knew that the appellant company had repudiated the statements of Steen, the alleged agent.
This case is ruled by the Gulf Mississippi Coast Traction Co. v. Faulk, 118 Miss. 894, 30 So. 340; Milling Co. v. Phillips Son, 117 Miss. 204, 78 So. 6; Becker Co. v. Clardy, 96 Miss. 301, 51 So. 211, Ann Cas. 1912B, 355; and many other cases from our court. The court below erred in canceling the contracts. The representations, if made by the agent Steen, were entirely beyond the scope of authority vested in him — in fact, he had no such authority — and the appellee knew that she was dealing direct with the principal when entering into the contract, as frequent changes were made in the manner of payment, and she permitted the contract, as written, to rest until her notes became due and the property was declining. The court below should have dissolved the injunction on the cross-bill, and directed a foreclosure under the trust deeds for the balance due on the lots if not paid within a reasonable time. We therefore reverse the case and remand it to be proceeded with in accordance with this opinion.
Reversed and remanded.