Instrument 1)c under seal or negotiable, parol evidence cannot,

at common law, be received even to effectuate the intention of

the parties,^ nor can it be received where by the terms of a

simple contract it clearly appears that exclusive rights and

credit were given to the agent.*

It follows that there are three cases in which the agent also

can sue : (1) where the agent contracts by deed in his own

name ; (2) where the agent contracts in a negotiable instru-

ment in his own name ; (3) where by the terms of a contract

rights under it are expressly restricted to the ngent.^ Where

one contracts really for himself, but ostensibly for another

whom he does not name, he may sue as principal.*^ In other

cases of simple contracts made for an undisclosed or unnamed

principal, the principal may sue, although the agent may also

sue in some cases.''

2. Quasi- Contract Obligations.

В§ 166. Money paid by mistake.

It is a general |)rinciple of the law that money paid under a

mistake of material fact, in the belief that it is due, may be

recovered back in an action for money had and received,

1 Ante, §§ 129-135. " Post, § 197.

« Post, §§ 188, 189. * Ante, § 132; post, § 186.

6 Post, В§ 207. * Dicey on Parties, Rule 18.

^ Post, В§ 208.

LIABILITY OF THIRD PARTY. 215

where it would be against conscience for the payee to retain

it.^ The action is based on equitable principles and proceeds

upon the fiction that the defendant promised to pay the money

back. In this action it is immaterial whether the principal

paid the money in person or through an agent ; in either case

he is entitled to proceed in quasi contract for his remedy.

Accordingly a principal may maintain an action for money

had and received against a third person to whom an agent

has paid it under a mistalce of fact,^ or which is paid by him

under a mistake originating with his agent,^ or with a public

or quasi-public officer, on the strength of whose certificate he

relies.* The government may recover in this way money paid

by one of its agents under a mistake or misinterpretation of

law.^

В§ 167. Money paid under duress or fraud.

Where a third person obtains from an agent by duress or

fraud moneys belonging to the principal, the latter may re-

cover the moneys so paid by his agent in an action for money

had and received.^ Such actions may always be maintained

by the real party in interest since they do not rest upon priv-

ity of contract, but upon the contract created by the law.''' If

an agent is compelled to pay illegal charges for the protection

of his principal's interests, the latter cannot proceed against

the agent but must proceed against the one making the unjust

exaction.^ The agent as well as the principal may, however,

proceed against the third party for the amount so paid under

duress.*

^ Keener on Quasi-Cont., Ch. IT.

2 United States v. Bavtlett, Daveis (U. S. Dist. C), 9, s. c. 2 "Ware, 17.

3 Lane v. Pere Marquette Boom Co., 02 jNIich 63.

* Talbot V. National Bank, 129 Mass. 07; Holmes v. Lucas Co., 53

Iowa, 211.

5 McElrath r. United States, 102 U. S. 426 ; Wisconsin Central R. v.

United States, 164 U. S. 190 ; United States i'. Dempsey, 104 Fed. Rep.

197.

^ Stevenson v. Mortimer, Cowp. 805 ; Demarest r. Barbadoes, 40 N.

J. L. 604.

7 Stevens v. Fitch, 11 Mete. (Mass.) 248

^ Holman v. Frost, 26 S. C. 290. ^ Stevenson v. Mortimer, supra.

216 PKIXCirAL AND THIRD PARTY.

Whore money belonging to tlic principal has been diverted

by the agent into the hands of a third person who takes with

notice of tiie breach of trust, the latter is lial)lc to the princi-

jial in ^(jiiiiy, and in some States in quasi-contract, as for

money iiad and received.^

3. Tort Obligations.

§ 168. Property diverted by agent. — General rule.

Where an agent disjwses of his principal's property beyond

the scope of the authority, the principal may recover it from

any one into whose hands it has passed.^ This doctrine rests

upon the maxims that a buyer gets no better title than the

seller had to give him, and that an owner cannot be divested

of his title without his consent. The third party is therefore

bound to show that the agent had the authority to transfer

the title, or that the principal's conduct has been such as to

work an estoppel. Authority may be shown in the usual ways;

namely, by previous grant, by subsequent ratification, by

necessity, and by estoppel.

To the general and sweeping rule as above stated, there are

two well recognized exceptions at the common law and a third

which has been created by statute in some jurisdictions. The

rule and the common law exceptions are well explained in the

case of Saltiis v. Everett,^ and may be here briefly summarized.

В§ 169. Exceptions. (1) Negotiable instruments.

Where the proj)erty entrusted to the agent is currency, or

negotiable paper transferable by delivery, then under the rules

of the law merchant, a hona fide purchaser for value will take

a title good against the jiriucipal, even though the agent ex-

ceeds his powers or diverts the property to his own uses.* The

1 Post, §§ 177-179.

* Thompson v. Barnum, 49 Iowa, 392 ; Barker v. Dinsmore, 72 Pa. St.

427 ; Jackson v. Bank, 92 Tenn. 154; Morris v. Preston, 93 111. 215.

8 20 Wend. (N. Y.) 267.

в– * Goodwin v. Robarts, L. R. 1 App. Cas. 476 ; London Stook Bank

V. Simmons, 1892, App. Cas. 201 ; Ayer v. Tilden, 15 Gray (Mass.), 178;

Bank r. Vanderhorst, 32 N. Y. 553.

LIABILITY OF THIRD PARTY. 217

doctrine is broader than the application to agency, since even

a thief can give good title to money, or paper that passes like

money. In agency, a principal can follow money or negoti-

able paper passing by transfer only where it is in the hands

of one who took with notice of his rights or who did not give

a valuable consideration for it. Purchase without notice and

for value cuts off the owner's rights. Where paper is restric-

tively indorsed, as " for collection," it is notice to all subse-

quent holders of the principal's title.^

But if the money or notes come into the third party's

hands mala fide, the principal may recover; in the case of

money, or notes turned into money, the action may be in

quasi-contract as for money had and received.''^ If an agent

places his principal's money on a wager and loses it, the

principal may sue the winner and recover the money .^

В§ 170. Exceptions. (2) Indicia of ownership; ostensible owner-

ship.

Where the principal not only entrusts his property to the

agent, but also clothes the agent with the documentary evi-

dence of ownership of the property, and third persons have

reason to believe from such documentary evidence that the

agent is the owner, then a bona fide purchaser for value will

be protected as against the principal.* Thus where the prin-

cipal allows his property to stand on the books of a wharfinger

in the name of his agent, he cannot set up his title as against

a purchaser from the agent ;^ nor where he allows a vessel

to be enrolled in the name of his agent ;^ nor where he allows

his agent in purchasing goods to take a bill of sale in his own

1 Commercial Bank v. Armstrong, 148 U. S. 50 ; Butchers', &c. Bank

V. Hubbell, 117 N. Y. 384; Freeman's Bank v. National Tube Works,

151 Mass. 413.

2 Clarke v. Shee, Cowp. 197.

8 Vischer v. Yates, 11 Johns. (N. Y.) 23; Mason v. Waite, 17 Mass.

560 ; Donahoe v. McDonald, 92 Ky. 123.

4 Nixon V. Brown, 57 N. H. 34; McNeil v. Tenth N. B , 46 N. Y.

325.

6 Pickering v. Busk, 15 East, 38.

6 Calais Steamboat Co. v. Van Pelt, 2 Black (U. S.), 372.

218 PKI.N'CirAL AND TIIIUD rAKTY.

naine;^ nor where, uudi'r an ordinance which provides that

licenses shall be taken ont in the name of the owner, he

allows liis agent to take out a license for a public vehicle in

his own name.2 In all these and similar cases the true owner

is estopped by his representation, or acquiescence in the rep-

resentation, as to the agent's title, from setting uj) his own

against one who purchases from the agent on the strength

of the representation. But the document must be a represen-

tation as to title in order to work an estoj)pel, and the buyer

must rely upon it as such.^

Some cases of ostensible ownershij) are often confused

with the cases where the princij)al is estopped to deny the

agent's authority to sell as agent, that is, with cases of osten-

sible agency. But the distinction is clear. In these cases

the buyer treats the seller as owner, and the inquii-y is

whether the conduct of the true owner has been such as to

work an estoppel against him to deny such ostensible owner-

ship. In cases of ostensible agency, the buyer treats the seller

as agent for the true owner, and the inquiry is whether the

conduct of the principal has been such as to create an estoppel

to deny the ostensible agency.* Some cases decided on the

theory of ostensible agency might well have been decided

upon the theory of ostensible ownership.^ Thus if one sends

his goods to an auction room, but confers no documentary