Story Case

Mr. J. L. Jenkins was in need of money. He went to the Second National Bank of Bloomington, where he lived, and requested a loan. The bank authorities asked him what security he could give for the same. Mr. Jenkins said that he was willing to deposit with them $1,000 in stock certificates owned by him, and to give to them the power to sell the stock in case the loan was not paid at maturity. The bank authorities agreed to the proposition, and proper papers were drawn up, evidencing the transaction. Jenkins turned over to them the stock certificates, with power to sell under the circumstances above mentioned. A few days before the loan was due to be repaid, Jenkins notified the bank authorities that he wished to revoke the power he had given. May he do so?

Ruling Court Case. Carmichael's Case, Law Reports, 1896, Volume 2 Chancery Division (English), Page 643

In 1896, C. B. Phillips promoted a company with the purpose that the company, when incorporated, should purchase from him certain mining property. Car-michael signed an agreement, by which he agreed, in consideration of a commission, to subscribe for 1,000 shares in the company, such number, however, to be reduced according to the number of shares taken by the public. Carmichael further agreed that the agreement and application should be irrevocable and, notwithstanding any repudiation by him, should be sufficient to authorize Phillips to apply for the shares on behalf of Carmichael, and the company to allot them.

The company was incorporated on March 24, and the subscription list was advertised to open on March 27 and close on the 30th. On March 27, Carmichael stopped payment on the check which he had given as a deposit on the shares, and wrote to Phillips that he repudiated the agreement. But Phillips, nevertheless, applied for shares of stock for Carmichael, which were allotted him by the company, and his name was placed upon the register of the corporation as a shareholder. Carmichael now brings this action asking that his name be stricken from the register, because Phillips' authority to apply for the shares had been revoked before it was exercised.

Phillips contended that this authority was coupled with an interest and was, therefore, irrevocable by any act of Carmichael.

Decision: The authority, in this case, was one coupled with an interest. Here Phillips was not merely interested to the extent that he might get a commission from the sale of the shares, but he was interested in that it would enable the corporation to buy his mining land. This constituted an agency which was irrevocable by Carmichael.

Mr. Lopes, L. J., said in the course of his opinion: "The question in this case is whether the company had authority to allot these shares to Mr. Carmichael. That question depends upon whether the authority given to Mr. Phillips, who was vendor, was revocable or not. If it was an authority coupled with an interest, it would be irrevocable. The question that really exists is whether, in this case, it is an authority coupled with an interest. I think the answer is a very short and complete one. What was the object? The object was to enable Mr. Phillips, the vendor, to obtain his purchase money, and it, therefore, conferred a benefit on the donee of the authority. I think that Mr. Car-michael is a member of the company and not entitled to have his name struck out." Judgment was given against Carmichael.

Ruling Law. Story Case Answer

We have seen that the principal has the power to revoke the authority of an agent in the ordinary case. But it is said that the power does not exist where the agency is one coupled with an interest. In such a case, the principal has neither the right nor the power to revoke the authority of the agent. It is difficult to define just what constitutes an agency coupled with an interest. In one sense every agency is coupled with an interest; that is, every agent has an interest in the continuance of the agency, because in its continuance his compensation rests. But to make an agency irrevocable, the agent must have an interest different from his compensation. He must have an interest in the subject matter, or the agency must be given by way of security. In the Story Case, the bank had an agency coupled with an interest, in that the power to sell the certificates was given by way of security. This being the case, the power to sell could not be revoked by Jenkins so long as the loan remained unpaid.