AGENCY-FRAUD-NEGLIGENCE-PUBLIC POLICY. LIABILITY OF THE PRINCIPAL FOR THE TORTS OF A SUB-AGENT APPOINTED WITHOUT AUTHORITY. A principal is not bound by a contract made in his name by a sub-agent appointed without authority, even where it is precisely the contract which his agent is employed to make; but public policy requires that the principal be held responsible for the torts of a sub-agent appointed without authority. LIABILITY OF THE PRINCIPAL FOR THE FRAUDULENT ACTS OF THIRD PARTIES, OCCASIONED BY THE NEGLIGENCE OR IMPROPER ACTS OF AN AGENT,-If a fraud is committed through the neglect of an agent to employ reasonable precautionary measures to prevent it, or through any improper or wrongful act whilst in the master's business, the principal will be responsible. IDEM.-Where a trust is put in one person, and another whose interest is intrusted to him is damnified by reason of the neglect of such as that person employs in the discharge of that trust, he shall answer for it to the party damnified. ART. 5, TITLE 9, CIVIL CODE.-Construed. APPEAL from the District Court of the Fourth Judicial District. On and before January 21, 1875, one P. L. Washburn was the sole agent of the Western Union Telegraph Company, at Colusa, Colusa County, Cal., for the receipt and transmission of dispatches over its telegraph wires. He was also, at the same time, agent for Wells, Fargo and Co's Express, and had various insurance agencies, and employed in his general business, as his clerk, a young man who went by the name of Charles Crowell. Washburn was a practical "Morse" telegraph operator, and Crowell also understood the same system. Crowell was never employed by the Western Union Telegraph Company, in any capacity, but said Washburn frequently employed him at said Colusa, to receive and transmit dispatches over the telegraphic wires of said company, to San Francisco and elsewhere, during the said month of January, 1875, and prior thereto, and allowed him, during said times, to have free access to the office of said company, in said Washburn's charge, and to the apparatus therein for sending dispatches. The dispatches sent by said Crowell, over the said wires, were received by the various operators of the company, at the various points to which the same were directed, and were by them delivered in the usual course of business. Said Crowell was known to such various operators of the company to be the operator sending such dispatches. The office of the company at Colusa, and of said Wells, Fargo & Co., and said insurance agencies referred to, were all kept in one building and room. On the nineteenth of January, 1875, said Washburn was absent from the town of Colusa, having left said Crowell in charge of his said office, and having authorized said Crowell, in his absence, to receive and transmit, over said wires, telegraphic dispatches, when said Charles Crowell, without the knowledge or consent, and in the absence of his employer, P. L. Washburn, sent from Washburn's office a telegram to San Francisco, in the following words : CoLUSA, January 19, 1875. To the Bank of California, San Francisco:-Pay Charles H. Crowley twelve hundred dollars, gold. [Signed] W. P. HARRINGTON, Cashier. This telegram was written and dispatched by himself, as operator. W. P. Harrington was then cashier of the Colusa County Bank, at Colusa, where the office of the said bank was. This dispatch was received by the San Francisco office of the Western Union Telegraph Company, on January 21, 1875 (the wires having been down between Marysville and Sacramento, intermediate the day of sending and the day of receipt), and on that day was delivered, by the company, to the Bank of California. Crowell left Colusa for San Francisco, on January 19, 1875, having previ ously sent a telegram, he himself operating the wires at Colusa, to Charles H. Crowley, at the Occidental Hotel, signed by a fictitious name, directing him to call at the Bank of California for money. Crowell, on his arrival in San Francisco, obtained the dispatch previously sent to Charles H. Crowley, and procured a young man named George W. Spencer, a resident of San Francisco, who had made his acquaintance in Colusa, to go with him to the Bank of California, to identify him. On arriv ing at the bank Crowell presented the dispatch last referred to, and stating that he was the person named therein, asked for payment to him, and referred to Mr. Spencer for identification. Mr. Spencer, in answer to the inquiry of the cashier, as to the fact of identity, replied, "Yes, I know him." The cashier then wrote a receipt, of which the following is a copy : No. 4954. Received, San Francisco, January 21, 1875, from the Bank of California, twelve hundred dollars, as per telegram instructions from Colusa Co. Bank. Charge Nat. G. Bk. D. O. M. & Co. Dated January 21, 1875. For account of Charles H. Crowley. $1200. And the said Charles Crowell then receipted the same in name of Charles H. Crowley. The said George W. Spencer then indorsed the receipt as follows: Signature correct. GEO. W. SPENCER. The said Crowell then received, from the Bank of California, the sum of twelve hundred dollars, gold coin, and departed from the bank with the money in his possession, and has never been seen since. Mr. Spencer was deceived by the similarity of the names of Crowell and Crowley, and did not observe the difference between Crowell's name and the name signed by him to the receipt above recited. He was not a party to the deceit in any way. The telegram to the Bank of California was a forgery, perpetrated by said Crowell, for the purpose of fraudulently obtaining said sum of twelve hundred dollars. The Bank of California, under the facts stated, claims that the Western Union Telegraph Company is responsible to it for the loss thus incurred by it in paying the sum of one thousand two hundred dollars to Charles Crowell, by the name of Charles H. Crowley, on the authority of the said forged telegram. The Western Union Telegraph Company denies its responsibility. If the fraudulent acts committed by Crowell had been done by Washburn, the defendant would have been liable to an action on the case. When a trust is put in one person, and another, whose interest is intrusted to him, is damnified by reason of the neglect of such as that person employs in the discharge of that trust, he shall answer for it to the party damnified. (Lord Chief-Justice Holt, in Lane v. Sir Robert Cotton, 12 Mod. 490.) The liability of the principal, however, is not limited to instances of neglect, strictly speaking, on the part of the agent. There are many cases in which a master must be held liable for the willful and wrongful acts of his servants. The true ground on which the master avoids liability for most of the willful acts of his servants, when unauthorized by him, is that they are not done in the course of the servants' employment. When they are so the master is liable for them. (Shearman & Redfield on Negligence, § 65.) The general doctrine of the law is, that the principal is liable to third persons for the frauds, deceits, concealments, misrepresentations, torts, negligences, and other malfeasances or misfeasances and omissions of duty of his agent in the course of his employment. (Story on Agency, § 452.) The rule is founded on public policy and convenience, for in no other way could there be any safety to third persons in their dealings, either directly with the principal, or indirectly with him through the instrumentality of agents. In every such case the principal holds out his agent as competent and fit to be trusted; and thereby, in effect, he warrants his good conduct and fidelity. (Id. § 453.) Thus a carrier will be liable for the tortuous conversion of the property being transmitted by his agent. Similar principles will apply to cases like the present. One receiving a dispatch from a telegraph company has the right to rely upon the exercise of ordinary care and prudence by the agent of the company who transmitted the message, in discharging his duty of deciding whether the sender was the person he represented himself to be. Where a "valuable" message is sent the identity of the sender must be determined by the appropriate agent of the company, and if the agent is guilty of negligence in failing to ascertain such identity, the telegraph company is liable. (Elwood v. The Western Union Tel. Co., 45 N. Y. 549.) And if an agent of a telegraph company, whose duty it is to send genuine messages, shall willfully and fraudulently send a dispatch in the name of another, this wrong act is as much done “in the course of his employment" as if he had negligently sent a forged message. To this extent the person receiving the dispatch may depend on the guaranty of the company that their agent is faithful and honest; and he is equally damnified, whether the fraud is committed by the agent directly, or is successfully consummated by another by reason of the negligence of the agent. The agent is authorized to transmit messages, and the transmission of a false message-whether contrived by himself or contrived by another, and negligently sent by him—is within the course of his employment. If the wrong had been done by Washburn, the case would come clearly within the law as declared by section 2938 of the Civil Code : “Unless required by or under the authority of law to employ that particular agent, a principal is responsible to third persons for the negligence of his agent in the transaction of the business of the agency, including wrongful acts committed by such agent in, and as a part of, the transaction of such business, and for his willful omission to fulfill the obligations of the principal." If, therefore, plaintiff is correct in its claim that Washburn had power to delegate his authority to Crowell, the judgment of the Court below in favor of the defendant, the telegraph company, was incorrect. ant. But I shall assume that Washburn had no authority to appoint a sub-agent to perform functions like his own, or any functions for or on behalf of defend. His office as agent of the company was highly confidential, and the company had a right to rely on his performance of his duties personally. He had exclusive charge of the office and operating machinery at that place, and it was part of his duty, not only to see that messages were faithfully transmitted and delivered, but to preserve the secrecy of telegraph correspondence inviolate, and to use every proper precaution to prevent access to the employment of the wires, and to preclude the reading of dispatches. Article V. of Title IX. of the Civil Code is not determinative of the case before us. The sections of that article are but declamatory of the common law, and are applicable to the same cases as would be the common law rules there announced had the Civil Code never been adopted. But beyond these rules there is another, dependent on public policy, which takes effect without reference to the relations between a principal and subagent with regard to matters of contract. A principal is not bound by a contract made in his name by a sub-agent, appointed without authority, even where it is precisely the contract which his agent is empowered to make. But the question here is, whether defendant is liable for the negligences or frauds of Crowell. From the proposition that the principal is not bound by the contracts made in his name by such pretended agent, "It might not unreasonably be inferred that he could not be made liable for the torts of one whose contracts would not bind him. On the other hand, there is a manifest inconvenience certain to ensue to the public at large from thus shifting the responsibility from masters |