Story Case

Steven Miller appointed Victor Taylor as agent to sell brick in the town of Springfield. Taylor had other business and so delegated his power to one Lyon to sell the brick. Lyon was a capable man, and apparently Taylor was careful in choosing him as sub-agent. Lyon, however, made a mistake in delivering brick to an insolvent corporation and Miller was never paid for his brick. Miller brought suit against Taylor on the ground that Taylor had no authority to appoint a sub-agent and therefore is absolutely liable for the loss. Taylor submitted as defense that his other business compelled him to appoint a sub-agent and that he was careful in making the appointment. What should be the ruling of the Court?

Ruling Court Case. Hoag Vs. Graves, Volume 81 Michigan Reports, Page 628

The evidence in this case showed that Hoag had a claim arising out of a policy of insurance which had been issued by a company in New York. Hoag engaged Graves to collect. They agreed that in case it was collected, Graves should have one-half of the amount, but he was to pay all expense necessary in the collection of it. Hoag was to receive the other one-half.

Graves then engaged a lawyer in New York to see about the matter. This lawyer asked for a power of attorney of Hoag, which was given. He collected $500 and sent it to Graves. The lawyer collected the remaining amount of the claim, but refused to remit any portion of it. Hoag then sued Graves claiming that the lawyer was agent of Graves, and that payment to the lawyer was payment to Graves.

Justice Champlin delivered the opinion.

The circumstances of the case show that the lawyer in New York was not agent of Graves, but agent of Hoag. Accordingly he cannot recover.

The Court in support of its judgment, quoted from Mechem: "If an agent employs a sub-agent for his principal and by his authority, express or implied, then the sub-agent is the agent of the principal and is directly responsible to the principal for his conduct; and if damages result from the conduct of such sub-agent, the agent is only responsible in case he has not exercised due care in the selection of the sub-agent. But if the agent, having undertaken to transact the business of his principal, employs a sub-agent on his own account to assist him in what he has undertaken to do, he does so at his own risk and there is no privity between such sub-agent and the principal. The sub-agent is therefore the agent of the agent only, and is responsible to him for his conduct, while the agent is responsible to the principal for the manner in which the business has been done, whether by himself or his agent. (Mechem On Agency. Sec. 197.)"

Ruling Law. Story Case Answer

If the agent without due care in a proper case selects a sub-agent to assist him in carrying on the business of the principal, this sub-agent is agent of the principal and not of the first agent. By a proper case is meant one in which the agent is expressly authorized to delegate, or when the act involves no discretion, or where such delegation is customary or necessary from the nature of the case. On the other hand, if the agent negligently employs a sub-agent even in a proper case, he is answerable to his principal for the default or misconduct of the sub-agent. Further, if he employs a sub-agent when he as agent is not permitted to delegate his authority, he does so at his peril. No amount of care in selection will relieve him from liability to this principal for the default or misconduct of the sub-agent.

In the Story Case, the ruling of the Court should be that Taylor's defense would be of no effect. He would be liable absolutely for the act of Lyon, for the reason that he had no authority, either express or implied, to appoint a sub-agent.