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Tollett v. Montgomery Real Estate Ins. Co.

Supreme Court of Alabama
Jan 11, 1940
238 Ala. 617 (Ala. 1940)


6 Div. 601.

January 11, 1940.

Appeal from Circuit Court, Jefferson County; E. M. Creel, Judge.

Barber Barber, of Birmingham, for appellant.

When the subject matter and all the parties interested in it are brought before a chancery court, the court will retain the cause for all purposes and adjust the whole controversy even though damages merely, which could be assessed at law, are demanded of one or more of the parties respondent, or that, from the material averments of the complaint, it appears that only legal action will lie against some of respondents; and this is particularly true where fraud is averred. Miller v. L. N. R. Co., 83 Ala. 274, 4 So. 842, 3 Am.St.Rep. 722; Bromberg v. Eugenotto Const. Co., 158 Ala. 323, 48 So. 60, 19 L.R.A., N.S., 1175; King v. Livingston Mfg. Co., 180 Ala. 118, 60 So. 143; Jarrett v. Hagedorn, 237 Ala. 66, 185 So. 401; 5 Ala.Dig. 471-473; 19 Am.Jur. pp. 129, 130; 16 Cyc. 247, 248. Corporations, in their dealings with third persons, act only through agents; and in such transactions such agents actually possess such powers as a third person has a right to assume are possessed by such agent under the circumstances surrounding the transaction between such agent and third person. United Burial Ins. Co. v. Collier, 224 Ala. 57, 139 So. 106; Birmingham News Co. v. Birmingham Printing Co., 209 Ala. 403, 96 So. 336; Langham v. Jackson, 211 Ala. 416, 100 So. 757; St. Louis S. F. R. Co. v. Hall, 186 Ala. 353, 65 So. 33; Caldwell v. Standard Oil Co., 220 Ala. 227, 124 So. 512; Wooten v. Federal Discount Co., 7 Ala. App. 351, 62 So. 263; University Chev. Co. v. Bank of Moundville, 227 Ala. 516, 150 So. 560; So. R. Co. v. Beaty, 212 Ala. 608, 103 So. 658; Code 1923, §§ 9535 (1), 9541; Van Derveer v. Strickland Bros. Mach. Co., 16 Ala. App. 677, 81 So. 197; Birmingham T. S. Co. v. Louisiana Nat. Bank, 99 Ala. 379, 13 So. 112, 20 L.R.A. 600; Tennessee C., I. R. Co. v. Pope, 21 Ala. App. 183, 107 So. 735; Standard Oil Co. v. Gunn, 234 Ala. 598, 176 So. 332; Gassenheimer v. Western R. Co., 175 Ala. 319, 57 So. 718, 40 L.R.A., N.S., 1998. The principal is deemed to have notice of whatever the agent has notice of, which the agent in good faith and exercise of ordinary care and deligence ought to communicate to the principal. Code 1923, § 9538; Life Casualty Ins. Co. of Tenn. v. Crow, 231 Ala. 144, 164 So. 83; Commercial Cas. Ins. Co. v. Isbell Nat. Bank, 223 Ala. 48, 134 So. 810; Bynon v. Citizens' Bank, 221 Ala. 626, 130 So. 391; Tatum v. Commercial Bank Trust Co., 193 Ala. 120, 69 So. 508, L.R.A. 1916C, 767; Mechem on Agency, §§ 719, 721; McClesky Whitman v. Howell Cotton Co., 147 Ala. 573, 42 So. 67; Hall Brown W. W. M. Co. v. Haley Furniture Mfg. Co., 174 Ala. 190, 56 So. 726, L.R.A. 1918B, 924; First Nat. Bank v. Allen, 100 Ala. 476, 14 So. 335, 27 L.R.A. 426, 46 Am.St.Rep. 80; 9 Cyc. 273. When the relation of principal and agent is once established, the law presumes its continuance until contrary is shown or a different presumption is raised from the nature of the subject in question. Mid-Continent Life Ins. Co. v. Beasley, 202 Ala. 35, 79 So. 373; McKenzie v. Stevens, 19 Ala. 691; Whildin v. Merchants' Planters' Nat. Bank, 64 Ala. 1, 38 Am.Rep. 1. For frauds and misrepresentations of his agent within the scope of his employment, the principal is liable for this although he had no knowledge thereof and has received no benefit therefrom. 21 R.C.L. 850 (30); First Nat. Bank v. Allen, 100 Ala. 476, 14 So. 335, 27 L.R.A. 426, 46 Am.St.Rep. 80; King v. Livingston Mfg. Co., supra; Birmingham Ledger Co. v. Buchanan, 10 Ala. App. 527, 65 So. 667; Lerner Shops v. Riddle, 231 Ala. 270, 164 So. 385; Stapler v. Parler, 212 Ala. 644, 103 So. 573; Gowan v. Wisconsin-Alabama Lumber Co., 215 Ala. 231, 110 So. 31; Williams v. Hendricks, 115 Ala. 277, 22 So. 439, 67 Am.St.Rep. 32, 41 L.R.A. 650; Gulf Electric Co. v. Fried, 218 Ala. 684, 119 So. 685; Kendrick v. Colyar, 143 Ala. 597, 42 So. 110; Rochester-Hall Drug Co. v. Bowden, 218 Ala. 242, 118 So. 674; Jones v. Strickland, 201 Ala. 138, 77 So. 562. Appellant had the right to rely on the statements as of fact made to her by the agent, without instituting any independent investigation. Tillis v. Smith Sons Lumber Co., 188 Ala. 122, 65 So. 1015; Wilks v. Wilks, 176 Ala. 151, 57 So. 776; Parker v. Ward, 224 Ala. 80, 139 So. 215; Cartwright v. Braly, 218 Ala. 49, 117 So. 477; J. B. Colt Co. v. Price, 210 Ala. 189, 97 So. 696; Shepherd v. Kendrick, 236 Ala. 289, 181 So. 782. Knowledge of the contents of a written instrument procured to be signed by agent by misrepresentation of its contents could not be imputed to person executing same who was lulled into state of security, and neglected to read the instrument by such misrepresentations of the agent. Southern B. L. Ass'n v. Dinsmore, 225 Ala. 550, 144 So. 21; Beck Pauli Lithographing Co. v. Houppert, 104 Ala. 503, 16 So. 522, 53 Am.St.Rep. 77; Cartwright v. Braly, supra. Where relation of trust and confidence exists between parties, it is the duty of the party in whom confidence is reposed to make full disclosure of all material facts within his knowledge relating to the transaction, and concealment of same is a fraud. Brasher v. First Nat. Bank, 232 Ala. 340, 168 So. 42; Gen.Acts 1927, p. 335; Gen.Acts 1931, p. 327; King v. White, 119 Ala. 429, 24 So. 710; 7 Ala.Dig. p. 495, 15.

Cabaniss Johnston, Newton DeBardeleben, and K. E. Cooper, all of Birmingham, for appellee.

There is no equity in the bill, which shows on its face that complainant has a complete and adequate remedy at law. Gulf Compress Co. v. Harris, Cortner Co., 158 Ala. 343, 48 So. 477, 24 L.R.A., N.S., 399. A complainant may not join with his equitable claim a purely legal cause of action against a person who is a stranger to the equitable controversy, and thereby deprive that person of a right to trial by jury. 21 C.J. 138, 140, 148; 19 Jur. 130; H. H. Hitt Lumber Co. v. Cullman Property Co., 189 Ala. 13, 66 So. 720; Johnson v. Little, 141 Ala. 382, 37 Ala. 592; Baines v. Barnes, 64 Ala. 375; Hudson v. Wood, C.C., 119 F. 764. The principal is not responsible for the acts of his agent where the agent, in performing such acts, has an individual interest aside from his agency. Appellee cannot be held for the fraud of Ellis. Miller v. Citizens' Nat. T. S. Bank, 1 Cal.App.2d 470, 36 P.2d 1088; Birmingham News Co. v. Browne, 228 Ala. 395, 153 So. 773; Johnson v. Ala. Fuel Iron Co., 166 Ala. 534, 52 So. 312; 11 R.C.L. 811; 39 C.J. 1293; Seaboard Air Line R. Co. v. Gleason, 5 Cir., 21 F.2d 883; Wallace v. Casey Co., 132 App. Div. 35, 116 N.Y.S. 394; Byrne v. Dennis, 303 Pa. 72, 154 A. 123; Credit Alliance Corp. v. Sheridan Theatre Co., 241 N.Y. 216, 149 N.E. 837; Wen Kroy Realty Co. v. Public Nat. B. T. Co., 260 N.Y. 84, 183 N.E. 73; Fifth St. B. L. Ass'n v. Kornfeld, 315 Pa. 406, 172 A. 703; King Const. Co. v. Mary Helen Coal Corp., 194 Ky. 435, 239 S.W. 799; Robertson v. C. O. D. Garage Co., 45 Nev. 160, 199 P. 356; Silverado S. S. Co. v. Prendergast, 9 Cir., 31 F.2d 225; Arnold v. Somers, 92 Vt. 512, 105 A. 260. Complainant must be deemed to have known Ellis owned the property involved in her trade with him since, in absence of misrepresentations as to contents of document, one who executes the document will not be heard to deny knowledge of its contents. Grant Lumber Co. v. North River Ins. Co., D.C., 253 F. 83; Metzger v. Aetna Ins. Co., 227 N.Y. 411, 125 N.E. 814; In re McCready's Estate, 316 Pa. 246, 175 A. 554; Muller v. Mutual Ben. H. A. Ass'n, 228 Mo. App. 492, 68 S.W.2d 873; Midland Mortgage Co. v. Rice, 197 Iowa 711, 198 N.W. 24; 17 C.J.S., Contracts, § 137, p. 489; 12 Am.Jur. 630; Bates v. Harte, 124 Ala. 427, 26 So. 898, 82 Am.St.Rep. 186; Terry v. Mutual Life Ins. Co., 116 Ala. 242, 22 So. 532. The acts of an agent, even in matters touching his agency, do not bind his principal where he is known to be acting for himself or to have an adverse interest. Complainant must be deemed to have known she was trading with Ellis personally, and can get no relief on the theory of apparent authority, Keyser v. Hinkle, 127 Mo. App. 62, 106 S.W. 98; Mechem on Agency, §§ 721, 723; Stanton v. Hawley, 193 App. Div. 559, 184 N.Y.S. 415; Fifth St. B. L. Ass'n v. Kornfeld, supra; Manhattan Life Ins. Co. v. Forty-Second G. St. F. R. Co., 139 N.Y. 146, 34 N.E. 776. When an agent, acting nominally as such, is in reality acting in his own business and adversely to his principal, knowledge of his actions will not be imputed to his principal. 2 Am.Jur. 298; 3 C.J.S.Agency, § 264, p. 197; Frenkel v. Hudson, 82 Ala. 158, 2 So. 758, 60 Am.Rep. 736; Girard Fire Marine Ins. Co. v. Gunn, 221 Ala. 654, 130 So. 180; American Ry. Exp. Co. v. Judd, 213 Ala. 242, 104 So. 418.

The question in this case is whether the bill in equity filed by appellant contains an equitable right against Montgomery Real Estate and Insurance Company, whose demurrer was sustained, and the bill dismissed as to it. We will refer to it as appellee.

The bill alleges that complainant lived in Birmingham, and owned forty acres of land in Chilton County, Alabama; that appellee was a real estate broker in Birmingham, and had in its employ Thomas T. Ellis as a salesman; that she listed for sale with appellee, acting by Ellis in the line and scope of his authority, said forty acres of land; that Ellis personally owned a piece of city property; that she did not know that he was the owner of it, but that through fraudulent representations he induced her to deed him the land in exchange for the city property; that in doing so he was acting in the line and scope of his employment by appellee.

The bill undertakes to set out a complete story in chronological order, entering with great detail into a statement of evidential facts on which the charge of fraud is based. It is not necessary to rehearse them here.

Upon the basis of that fraud the bill seeks a rescission of the transaction, offering to do equity, and seeks a personal judgment against both appellee and Ellis as for deceit in procuring the transaction, and also for damages to her farm by Ellis and his privies, resulting from waste while they have had it.

Appellee has no interest shown by the bill in the controversy insofar as a rescission is concerned. But its contention is that it is not shown by any allegation in the bill that it is liable for damages in either aspect in which it is claimed in the bill.

The controversy with Ellis and his privies both for a rescission and for damages is not involved on this appeal. But the question is whether appellee is liable in damages on account of such alleged fraud by its agent in the line and scope of his authority.

The claim for damages for deceit is not consistent with the prayer for a cancellation of the deeds, which is but a rescission. The defrauded seller may either affirm the sale and sue for the deceit, or may disaffirm and recover the property sold. Day v. Broyles, 222 Ala. 508, 133 So. 269; Southern Bldg. Loan Ass'n v. Argo, 224 Ala. 611, 141 So. 545; Southern Land Development Co. v. Meyer, 230 Ala. 40, 159 So. 245.

When he sues for deceit he is thereby standing on the contract. Moore v. Oneonta Motor Co., 223 Ala. 510, 137 So. 301; Southern Bldg. Loan Ass'n v. Bryant, 225 Ala. 527, 144 So. 367; Brasher v. First National Bank, 232 Ala. 340, 168 So. 42.

In a suit in equity for the cancellation of instruments, the parties will be given complete relief consistent with the theory of cancellation. Smith Sons v. Securities Co., 198 Ala. 493, 73 So. 892; 12 Corpus Juris Secundum, Cancellation of Instruments, § 79, p. 1083, text and note 74.

When a vendor exercises the right to rescind the sale and cancel the deed for fraud, he may recover in the same suit just claims for waste due to the negligence or willful conduct of the purchaser or his privies. 66 Corpus Juris 798, § 422, and page 843, § 513. Such claims are consistent with the theory of cancellation and rescission. It is but a method of making the vendor whole. But to rescind and get the property back, and also recover damages for deceit would do more than make her whole, and, therefore, the court gives an election of remedies under such circumstances. So that the only possible claim of appellant for damages consistent with her claim for rescission is that of waste, which is included in the allegations and prayer.

But do the facts show a liability by appellee for the waste committed by Ellis after he had fraudulently acquired the land from complainant? Having elected in this suit, so far as it is concerned, to cancel and rescind for the fraud and recover the land and damages for the waste, the inquiry is whether the waste is so related to the fraud committed by the alleged agent of appellee as to be its proximate result. When the transaction was closed, and the deeds passed and possession given, the fraud, if any, which induced it created a condition which came to a rest. The waste which followed is not a proximate result of the fraud, unless the act of Ellis in committing it was such as is the natural probable consequence of the fraudulent transaction or should have been contemplated. Sloss-Sheffield Steel Iron Co. v. Wilkes, 236 Ala. 173, 181 So. 276.

Either contingency is sufficient: that the result was (1) the natural and probable consequence of the wrongful act, or was (2) reasonably to have been contemplated. Birmingham Water Works Co. v. Martini, 2 Ala. App. 652, 56 So. 830; 15 Ala.Dig. 313, Negligence, 56(1); Alabama Power Co. v. Curry, 228 Ala. 444, 153 So. 634; Morgan Hill Paving Co. v. Fonville, 218 Ala. 566 (16 and 17), 119 So. 610; Smith v. Alabama Water Service Co., 225 Ala. 510, 143 So. 893, 895; Louisville Nashville R. Co. v. Maddox, 236 Ala. 594, 183 So. 849, 118 A.L.R. 1318.

But the waste committed by Ellis, if any, before the transaction was closed and done in and about his agency, and in the scope of his employment was chargeable to appellee.

In this case, it is alleged that by the fraudulent act of appellee, acting by its authorized agent, the land of appellant came into the possession of Ellis.

The fraud may be the proximate cause of the result, though it is not proximate in time, if it is proximate in efficiency. Its efficiency in that respect may be preserved although other causes may have sprung up which have not impaired its efficiency. Lanasa Fruit Steamship I. Co. v. Universal Ins. Co., 302 U.S. 556, 58 S.Ct. 371, 82 L.Ed. 422.

If, through the fraud of appellee acting by its agent with due authority, the duty to use due care not to commit waste was imposed on Ellis, though the want of such care producing the waste was the most immediate cause of it, appellee should not be held without the pale of proximate causation, since its act in creating the duty on the part of Ellis served to continue the efficiency of the fraud into a failure of performance of the duty. If as a creature of the fraud, Ellis was in possession of the land imposed thereby with a duty to use due care not to cause waste, the failure to exercise such care is a proximate result of the duty thus imposed. One who produces the duty is ordinarily proximately responsible for such breach as may naturally follow. This result would be different if the duty to use due care did not naturally follow from the alleged fraud.

It is claimed that the allegations in the bill as to the authority of Ellis as agent merely express the conclusion of the pleader. That is probably true in respect to the commission of the waste. While the agency in that connection is alleged, the facts show that as to it, appellee had no business interest; that Ellis individually, and not as agent for appellee, claimed and had possession of the land. But in negotiating the transaction, and in making the false representations, the bill alleges that Ellis was the agent for and employed by appellee, and acting as such within the line and scope of his agency. That is not merely the conclusion of the pleader within the rule declared in National Park Bank v. Louisville Nashville R. Co., 199 Ala. 192 (9), at page 206, 74 So. 69. That authority holds that the pleading should allege facts showing the agent's authority or that he was employed to do the particular acts. 49 Corpus Juris 70, § 55.

But taking the entire allegations of the bill, and all the facts detailed, we think it sufficiently alleges that the fraud was within the authority of Ellis as agent of appellee. Williams v. Bedenbaugh, 215 Ala. 200, 110 So. 286; Gulf Electric Co. v. Fried, 218 Ala. 684, 119 So. 685.

In the Fried case, supra, it was held that the principal is liable for the fraud of his agent, though without his consent or participation, if it is done in the course of the agent's employment, and is not a willful departure from it, and it is sufficient if he acts within the apparent scope of his authority. Alabama Machinery Supply Co. v. Caffey, 213 Ala. 260, 104 So. 509; Standard Oil Co. v. Gunn, 234 Ala. 598, 176 So. 332; Birmingham News Co. v. Browne, 228 Ala. 395, 153 So. 773; for discussion of that principle see 2 Amer.Jur. 281, § 362.

But the principal is not liable for the willful torts of an agent done for the personal benefit of the servant. Birmingham News Co. v. Browne, supra; Johnson v. Alabama Fuel Iron Co., 166 Ala. 534, 52 So. 312.

In this case, Ellis, in making the sale, was acting for himself and for his own personal benefit. And if appellant had notice that he was doing so, she could not fasten any claim of liability on appellee occasioned by the fraud of Ellis in negotiating the transaction. But if she intrusted the sale of her land to Ellis as agent of appellee, and he was such agent, and Ellis deceived appellant into supposing that he was negotiating a sale as her agent to a third person, and she did not know the true status of that matter, and did not know that she was dealing with Ellis on his own account, his status as the authorized agent of appellee continued insofar as appellant was concerned, and in that event appellee would be liable for the fraud of Ellis, if any, in negotiating the transaction. Restatement, Agency, § 262; 2 Am.Jur. 283, § 363, text and note 19; Gleason v. Seaboard Air Line R. Co., 278 U.S. 349, 49 S.Ct. 161, 73 L.Ed. 415. Concerning her actual knowledge that Ellis was himself the purchaser, the bill alleges:

"Whilst at the same time and with relation to the identical subject matter the said Ellis was actually trading with complainant to his own best interest and the best interest of his said employer the said Montgomery Real Estate Insurance Company, and to complainant's damage, which fact he artfully concealed from this complainant. * * *

"That on to-wit, January 27, 1939, the said Thomas T. Ellis came to the residence of the complainant in company with a man whose name the said Ellis stated is Holiman and whose other further or different name is to the complainant unknown, who was represented to her by said Ellis as also being and who was in fact employed by the respondent Montgomery Real Estate Insurance Company as its attorney and agent and said Ellis handed complainant a paper which paper the respondent Ellis said was a deed to complainant's said farm; that he, Thomas T. Ellis, whilst acting as said agent of Montgomery Real Estate Insurance Company as aforesaid, represented to complainant then and there that the deed was for the purpose of making the trade for the Avondale property and advised complainant that she should sign same for her own best interest and profit as aforesaid and complainant says she relied upon the representations of said Thomas T. Ellis then and there and executed said deed, but says that when she executed the same she was not in the presence of or sight of any one except herself. * * *

"And complainant avers that she did not receive a deed to said Avondale property until to-wit: February 2nd, 1939, when said respondent Thomas T. Ellis delivered a deed purporting to be a deed to said Avondale property to her said daughter Rubye Lee Tollett at her place of employment at Kress Store in Birmingham, Alabama, and complainant avers that at the time said deed was so delivered to her said daughter the said Thomas T. Ellis stated in substance to her said daughter that he, Ellis, had just received a long distance call from Thorsby that the house on the farm there had burned down; that he, Ellis, had a hard time getting the tenant on said farm out of possession and that on the 1st of February, 1939, he had put in possession of said property a man named Self and that the house on complainant's said farm burned that night of February 1st, 1939; and complainant says that said farm house was on the night of to-wit: February 1st, 1939, totally destroyed by fire. * * *

"And complainant further avers that on or about the 2nd of February, 1939, she discovered for the first time that at the time she executed said deed to said property set forth in Exhibit A that the grantee therein was not a third person but the respondent Thomas T. Ellis."

The bill was filed March 3, 1939. This shows that the house was burned and waste committed pending the negotiation of the transaction, and she did not know until after it was closed either that Ellis was himself the purchaser or that the house had burned.

On these averments the bill is consistent in alleging that at the time of the waste committed before the transaction was closed, Ellis was acting in the line and scope of his employment, and that when she signed the deed she did not know that Ellis was the purchaser, although her deed is made to him. One may be bound by a deed without actual knowledge of its contents. The question here is knowledge of its contents, not its binding effect as a deed. The fact that her deed was made to Ellis is not conclusive that she had not real knowledge that it was so.

We cannot agree that the bill is multifarious, or that an adequate remedy exists at law against appellee so as to defeat the assertion of a claim in this suit for waste committed.

In Johnston v. Little, 141 Ala. 382, 37 So. 592, it was held that it was permissible to join in the bill as defendant a party to the fraud.

If appellee is liable for the waste, it is so because Ellis is also liable, arising from the fraud for which appellee is alleged to be responsible. This is therefore a joint and several liability for the waste if appellee is liable at all. There is no reason why such claim may not be litigated in this suit.

We have reached the conclusion that the demurrer should not have been sustained for any ground here discussed, and that the bill should not have been dismissed as to appellee.

Reversed and rendered.

ANDERSON, C. J., and GARDNER and BOULDIN, JJ., concur.

Summaries of

Tollett v. Montgomery Real Estate Ins. Co.

Supreme Court of Alabama
Jan 11, 1940
238 Ala. 617 (Ala. 1940)
Case details for

Tollett v. Montgomery Real Estate Ins. Co.

Case Details


Court:Supreme Court of Alabama

Date published: Jan 11, 1940


238 Ala. 617 (Ala. 1940)
193 So. 127

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