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A fundamental principle of law of the State of Louisiana is that the authority of an agent to execute notes or other commercial paper on behalf of his principal must be express and special. Civil Code, Article 2997 (Louisiana). The granting of such authority is implied when the main object of the agency requires the exercising of that power.
Plaintiff E.T Sunmer was a holder of two promissory notes which he sought to collect. The holder's other claim, which according to the court on review was properly granted, was the balance for hay sold. The plaintiff’s petition alleged that in the execution of both notes, the proprietor's store Dubber Mercantile Company, the trade name used for defendant Knighton’s store was represented by its duly authorized manager and agent of the defendant. Defendants denied the allegations of the petition, and averred that the notes were made by the agent without any authority from the proprietor. The case was a companion case against the same defendants Knighton et al., a proprietor of a store and the members of a partnership who purchased her business. The trial court rejected plaintiff’s demands on the promissory notes but granted a claim against the defendant proprietor. Defendants also complained. Plaintiff sought review.
Did the trial court err in rejecting the plaintiff’s demands on the promissory notes?
The court affirmed the judgment and held that, according to Civil Code, Article 2997 of Louisiana, the authority of an agent to execute notes or other commercial paper on behalf of his principal had to be express and special. The granting of such authority, however, was implied when the main object of the agency required the exercising of that power. In this case, the agent testified that the notes were given in connection with his borrowing of funds for use in the operation of the store. Plaintiff relied on the provisions of the written management agreement to show authority for such acts. In affirming the decision, the court found that the authority did not include the obtaining of loans. Furthermore, the nature of the agency did not furnish by implication the authority claimed.