Innocent, and that the fraud was not for his benefit, was

immaterial.^ But the court on appeal thought otherwise,

although its decision rests in part upon the terms of the

subscriber's contract.^ Cases under this head are irrecon-

cilable. It remains to discuss them more in detail.

В§ 154. Fraud for benefit of agent.

Where the fraud is committed within the apparent scope

of the authority, and under cover of the principal's name and

business, but for the benefit of the agent, there is a sharp

confiict of authority as to the liability of the principal.

In England it seems to be established that the j)rincipal

is never liable under such circumstances. In the leading

English case the statement was that, " The master is an-

swerable for every such wrong of the servant or agent as

is committed in the course of the service, and for the mas-

1 Browning v. Hinkle, 48 Minn. 541; Lamm v. Port Deposit Home-

stead As.so., 49 Md. 233 ; Bradford v. Hanover Ins. Co., 102 Fed. Rep. 48.

2 Post, §§ 1.55, 15G. See also ai>le, § 52 a.

' City Nat. Banlt v. Dun, 51 Fed. Rep. IGO; reversed in Dun r. City

Nat. Bank, 58 Fed. Rep. 174.

* 51 Fed. Rep. 100.

6 58 Fed. Rep. 174. Following Pollard v. Vinton, 105 U. S. 7 ; Fried-

lander V. R. Co., 130 U. S. 410; see post, §§ 155, 15G.

TORTS AND FRAUDS OF AGENT. 203

ter's benefit." ^ In a later case it was expressly held that

the limiting clause, "and for the master's benefit," is an.

essential element of the liability.^

In the United States two opposite views are taken. One

class of cases follows the English holding ; ^ another class

of cases holds that, " where the principal has clothed his

agent with power to do an act upon the existence of some

extrinsic fact* necessarily and peculiarly within the knowl-

edge of the agent, and of the existence of which the act of

executing the power is itself a representation, a third per-

son dealing with such agent in entire good faith, pursuant

to the apparent power, may rely upon the representation,

and the principal is estopped from denying its truth to

his prejudice."^ "If his [the agent's] position and the

confidence reposed in him were such as to enable him to

escape detection for the while, then the consequences of

his fraudulent acts should fall upon the bank, whose direc-

tors, by their misplaced confidence and gift of powers, made

them possible, and not upon others who, themselves acting

innocently and in good faith, were warranted in believing

the transaction to have been one coming within the cashier's

powers." ^

This conflict of judicial opinion is well illustrated in two

classes of cases : (1) where the agent fraudulently issues stock

certificates and sells them for his own benefit ; (2) where

^ Barwick v. English Joint Stock Bank, supra. And see Houldsworth

V. City of Glasgow Bank, L. R. 5 App. Cas. 317.

2 British Mutual Banking Co. v. Charnwood Forest R. Co., L. R. 18

Q. B. Div. 714.

3 Friedlander v. Texas, &c. Ry., 130 U. S. 416, and cases in succeed-

ing sections.

* Ordinarily an agent can commit a fraud for his own benefit only by

misrepresenting an extrinsic fact, as that a document is genuine or valid,

that a depositor has funds, and the like. In committing a fraud for his

principal's benefit, he usually misrepresents an intrinsic fact, as the quality

of an article sold.

6 Bank of Batavia v. New York, &c. R., 106 N. Y. 195, 199.

6 Phillips V. Mercantile Nat. Bk., 140 N. Y. 556, 563. And see cases

jn succeeding sections.

204 PRINCIPAL AND THIRD PARTY.

the agent fraudulently issues bills of lading and sells them

for his own benefit.

§ 155. Fraud for benefit of agent. — Issue of stock certificates.

If a stock transfer agent fraudulently issues stock cer-

tilicates in excess of the amount which the company may

lawfullv issue and, by collusion with the transferee of the

stock, sells them to innocent purchasers for value for his

own benefit, is the company liable in an action for damages

to the innocent purchasers of the stock ?

The English courts have answered this question in the

negative. The purchasers called upon the transfer agent to