Opinion
No. 3081.
Decided January 2, 1940.
An undisclosed principal, when subsequently discovered, may at the election of the other party, if exercised within a reasonable time, be held upon all simple non-negotiable contracts made in his behalf by his duly authorized agent, although the contract was originally made with the agent in entire ignorance of the principal.
In such case the belief of one who is dealing with the agent of an undisclosed principal that the transaction was solely with the agent in his individual capacity is immaterial.
The findings of a master which relate solely to an issue which has become res adjudicata will be disregarded.
PETITION, brought originally for the purpose of discovering the interest of the defendant Fred in the real property of his wife, the defendant Leah, and to subject that interest, if any should be found, to the satisfaction of a judgment obtained by the plaintiff against Fred. Prior to trial before a master, the plaintiff, without objection by the defendants, was allowed to amend its bill by substituting for the original prayers one in which it sought to hold the defendant Leah on the ground that she was her husband's undisclosed principal. At the close of the hearing the master reported his findings and recommended that the plaintiff's bill, as amended, be dismissed. The court, Young, J., accepted and approved the master's findings and recommendation, ordered the bill dismissed, and allowed the plaintiff's bill of exceptions.
The master, after reciting in summary the testimony of the defendants, both of whom were called to the stand by the plaintiff, made the following findings.
"Fred Dearborn had conducted a plumbing business as an independent contractor for many years, and had done business with the plaintiff company as such independent contractor. The goods in question were purchased on an open account between the plaintiff and Fred Dearborn, and so far as anything appears to the contrary, the plaintiff intended to give exclusive credit to Fred Dearborn. The items sued for were sold by the plaintiff on Dearborn's credit, and the plaintiff expected him to pay for them.
"The only basis for a finding of agency with an undisclosed principal is the plaintiff's assumption that Leah was the undisclosed principal of her husband because of the fact that he was her husband and the goods were purchased for use in her property. Against that assumption, we have the facts as found, and the testimony of Leah Dearborn with particular reference to Dearborn's dealings with the plaintiff over a period of years as an independent plumbing contractor.
"The Master finds no basis to treat this transaction of Fred Dearborn with the plaintiff any differently from others over a period of years wherein Dearborn did business with the plaintiff; and therefore finds that Dearborn was not acting as the Agent of Leah Dearborn, but as an independent contractor."
It appears that the articles purchased from the plaintiff were various items of heating equipment which the defendant Fred installed in a house owned by his wife and in which they both lived.
It further appears that the judgment for the collection of which this bill in equity was originally brought was rendered by the Municipal Court of Laconia in an action at law brought by this plaintiff against both defendants, but dismissed before trial as to the defendant Leah, with a marking of "neither party" as to her.
The plaintiff requested a finding of fact, as reported by the master, to the effect "that inasmuch as Leah Dearborn had instructed her husband, Fred, to purchase the goods for her and install them for her benefit, that he was thereby acting as an agent for her, an undisclosed principal," and its bill of exceptions to the petition recites that it is "upon the ground that the facts found were not a sufficient basis for a ruling that the relationship between Leah Dearborn and Fred Dearborn was that of independent contractors, and that the ruling that Leah Dearborn was the undisclosed principal of Fred Dearborn must be made."
Marguerita M. Broderick (by brief and orally), for the plaintiff.
Tilton Tilton (Mr. Frederick A. Tilton orally), for the defendants.
After contrasting English law with the continental systems, Professor Mechem in his work on agency writes that "it is unquestionably the general rule of our law that an undisclosed principal, when subsequently discovered, may, at the election of the other party, if exercised within a reasonable time, be held upon all simple non-negotiable contracts made in his behalf by his duly authorized agent, although the contract was originally made with the agent in entire ignorance of the principal." 2 Mechem, Agency (2d ed.), s. 1731. To the same effect see 1 Williston, Contracts (Rev. ed.), s. 286; 3 C. J. S., Agency, s. 244; 2 Am. Jur., Agency, s. 393; 1 Am. Law Inst., Restatement of Agency, s. 186. Later in the above section of Professor Mechem's work it is said, "The rule itself is doubtless an anomaly, but even so it is undoubtedly as well settled as any other rule of the law of agency." It has for many years been in effect in this state. Chandler v. Coe, 54 N.H. 561; Bryant v. Wells, 56 N.H. 152, 155.
From the authorities cited above, as well as from the very nature of the situation, this right of action does not depend upon the third person's knowledge, when dealing with the agent, that the latter was acting for another instead of for himself. Obviously everyone, when dealing with an agent for a wholly undisclosed principal, believes that he is dealing with the agent only, relies solely upon the agent individually, and, if credit be extended, extends that credit to no one but the agent. However, and herein lies the anomaly, the creditor has a right of action against the undisclosed principal, when discovered, even though he never learned of the existence of the latter until after the bargain was completed, if he can prove, as in every other case of agency, that the agent's acts were within the scope of authority. 1 Am. Law Inst., Restatement of Agency, ss. 194, 195; 1 Williston Contracts, supra; 2 Am. Jur., Agency, s. 401; 3 C. J. S. Agency, s. 245; Platts v. Auclair, 79 N.H. 250, 252. The fundamental question in the case at bar, then, is not whether the plaintiff, when it sold the items of heating equipment to Fred, believed that it was dealing with Fred alone and individually, but it is whether or not Leah ever authorized Fred to make those purchases for her and in her behalf.
This is the question which the plaintiff brought to the attention of the master by its request for a finding referred to earlier in this opinion, and that question does not appear to have been properly passed upon. While it is true that there are findings to the effect that Fred was not acting as the agent of his wife when he purchased the items of heating equipment, it is evident from those findings themselves as well as from their context, that the master's conclusion of lack of agency was based at least in part upon his findings with respect to the plaintiff's belief at the time of purchase that it was dealing with Fred alone and in his individual capacity. These latter findings concerning the transactions between Fred and the plaintiff shed no light upon the real question in this case which is whether or not Fred, when dealing with the plaintiff, was, unknown to it, acting as the agent of his wife. From this failure to comprehend the nature of the issue presented, it follows that there must be a new trial as to the defendant Leah. Gagne v. Company, 87 N.H. 163.
The findings made in relation to the plaintiff's reliance upon the credit of Fred and in relation to its belief that it was transacting business with him individually bear upon the issue of Fred's liability to the plaintiff (Chandler v. Coe, 54 N.H. 561, 576; Albany v. Abbott, 61 N.H. 157, 159; Batchelder v. Libbey, 66 N.H. 175; Hilliard v. Railroad, 77 N.H. 129), but, the plaintiff having already obtained judgment against Fred in the Municipal Court, that issue has already been determined and cannot be litigated again. This petition was properly dismissed as to him.
New trial as to the defendant Leah: decree for the other defendant.
All concurred.