Story Case

Mr. J. H. Jones was a ranch owner and a cattle grower. On his ranch he had some ten thousand head of cattle. John Anderson, who worked for him on the ranch, was making a trip to Chicago. Jones told Anderson to ascertain the market conditions and telegraph the same to him as soon as possible, and if they were good he would telegraph him authority to sell on certain terms. On reaching Chicago, Anderson found that the prices were very good, but would likely decline before he could receive authority from Jones to sell. So he contracted to sell six thousand head to be delivered in thirty days. He immediately communicated with Jones as to what he had done. On the day following the transaction in Chicago, Jackson, a judgment debtor of Jones, caused the cattle to be attached in satisfaction of his judgment. The day following the attachment, Jones received Anderson's message, and immediately wired him that he approved the transaction. The Chicago Packing Company, to whom the cattle were sold, brought this action to recover the cattle from the sheriff, who had them in possession under the attachment.

Under the foregoing circumstances what should be the decision of the Court?

Ruling Court Case. Cook Vs. Tullis, Volume 18 Wallace Reports Of The United States Supreme Court, Page 333

One Homans was a banker engaged in business in Cincinnati, Ohio. On several occasions he had purchased United States Bonds for one Tullis, which he kept in his possession. On one occasion Tullis permitted Homans to use $20,000 worth of the bonds upon condition that Homans put in place of the bonds, bills receivable to the same amount, as security, and to replace the bonds upon demand. This allotment of bonds was returned in accordance with their agreement. In March, 1869, Homans, without permission or knowledge of Tullis, took out $6,000 in bonds, substituting an equivalent amount in bills receivable. In April of the same year he removed these bills receivable and substituted in their place a note and mortgage for $7,000, by him held on one Hardesty. The note was dated April 17, and was payable 90 days thereafter. When the note fell due, Hardesty dishonored it. Homans turned the note and mortgage over to an attorney with instructions to start suit for the collection of the note. Homans failed on August 26. Then, for the first time, Tullis learned of the unauthorized act of Homans. However, he approved the transaction and directed the attorney to proceed with the suit. Cook and others, trustees in bankruptcy of the estate of Homans filed a bill to set aside the transfer of this note and mortgage by Homans to Tullis on the ground that it was in violation of the bankruptcy act.

Cook contended that no right vested in Tullis to the note and mortgage until he ratified; but that, in the meantime, the rights of the creditors had intervened, and he was then unable to ratify.

Decision: "When one purports to act for another in the name of the latter and without the latter's consent, no rights accrue to the alleged principal until he ratifies. Then, it is said, that his rights relate back to the time when the unauthorized act was done. This is true only in case the rights of third persons have not intervened. In this case, however, the court was of the opinion that no rights of creditors had intervened, and that, therefore, Tullis might ratify what had been done.

Mr. Justice Field, who delivered the opinion of the Court, said in part: "The substitution of the note and mortgage in place of the bonds was approved by the defendant, Tullis, immediately upon being made acquainted with the facts. This approval constituted a ratification of the transaction. The general rule as to the effects of a ratification by one, of the unauthorized act of another, respecting the property of the former, is well settled. The ratification operates upon the act ratified precisely as though authority to do the act had been previously given, except when the rights of third parties have intervened between the act and the ratification. The retroactive efficacy of the ratification is subject to this qualification. The intervening rights of third persons cannot be defeated by ratification. In other words, it is essential that the party ratifying should be able, not merely to do the act ratified at the time the act was done, but also at the time the ratification was made. As said in one of the cases cited by counsel: 'The ratification is the first proceeding by which he (the ratifying principal) becomes a party to the transaction, and he cannot acquire or confer the rights resulting from that transaction unless in a position to enter directly upon a similar transaction himself. Thus, if an individual pretending to be the agent of another should enter into a contract for the sale of land of his assumed principal, it would be impossible for the latter to ratify the contract if between its date and the attempted ratification, he had himself disposed of the property.'"

Judgment was given for Tullis because no rights of creditors were shown to have intervened.

Ruling Law. Story Case Answer

Ratification operates by relation. That is to say, an unauthorized act purporting to be done for a given person imposes no liability, and confers no benefit on that person until he chooses to ratify the act. When he ratifies it, the effect is just the same as if he had previously authorized the act. This general rule is subject to this qualification: An act can not be ratified, if, between the time when the act was done and the time when the assumed principal attempted to ratify, rights of third persons have intervened. The principal must not only be able to have done the act when done, but his ability to do that act must also exist when he attempts to ratify.

Now, in the Story Case, Anderson, without authority, sold the cattle. Between the time when he made the sale and the time when the assumed principal attempted to ratify, a creditor came in and attached the cattle. By that attachment he was invested with certain rights. These rights could not be cut off by the principal ratifying a previously unauthorized act of an agent.