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Law School Case Brief

Williams v. Dugan - 217 Mass. 526, 105 N.E. 615 (1914)

Rule:

The power to borrow money or to execute and deliver promissory notes is not lightly to be implied. It either must be granted by express terms or flow as a necessary and inevitable consequence from the nature of the agency actually created. An agent who has authority to pay the debts of his principal, to disburse his moneys, to settle with his creditors or even to bind him by a contract or agreement to pay money, is not authorized to sign negotiable paper, by which his principal will be bound. The power of binding by promissory negotiable notes can be conferred only by the direct authority of the party to be bound, with the single exception where, by necessary implication, the duties cannot be discharged without the exercise of such a power. 

Facts:

The principal appointed the agent as her attorney in fact by a power of attorney.The agent was empowered to pay taxes. Respecting the subject property, the agent had the full power that the principal might have had, with the further stipulation that the enumeration of specific powers did not cut down the general grant. The holder, believing that a transaction was with the principal, lent the agent money and received a negotiable promissory note signed by the agent on behalf of the principal. When the loan was not paid, the holder filed an action against the principal to recover under the promissory note. The trial court entered judgment in favor of the holder, ruing that the agent had the power to borrow money or to execute and deliver promissory notes on behalf of the principal. 

Issue:

Was the agent authorized to borrow money?

Answer:

No

Conclusion:

The court reversed the judgment and entered judgment for the principal. It held that the borrowing of money was not within the apparent scope of the agent's authority and no specific authority to borrow money was given in the power of attorney. The court held that these words were used with reference to the powers expressly granted and did not enlarge those powers beyond their fair scope. They fell short of conferring the right to borrow money on the principal's account. It reiterated that the power to borrow money or to execute and deliver promissory notes must either be granted by express terms or flow as a necessary and inevitable consequence from the nature of the agency actually created. Lastly, the Court quoted Smith v. Cheshire: An agent who has authority to pay the debts of his principal, to disburse his moneys, to settle with his creditors or even to bind him by a contract or agreement to pay money, is not authorized to sign negotiable paper, by which his principal will be bound.

 

 

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