Appeals, No. 213, Jan. T., 1950 and No. 139, Jan. T., 1951, from judgments of Courts of Common Pleas Nos. 2 and 6 of Philadelphia County, March T., 1949, No. 3985, and June T., 1948, No. 883, in cases of Aaron Toll et ux., v. Pioneer Sample Book Company, and Sidney Smiler v. Aaron Toll et ux., and Lionel Friedman et al. Judgments affirmed.
Joseph E. Gold, with him Paul M. Chalfin, Leonard L. Ettinger and Arthur Silverman, for appellants.
Walter Schachtel, with him Samuel L. Einhorn and Einhorn & Schachtel, for appellee.
Before Stern, C.j., Stearne, Jones, Bell, Chidsey and Musmanno, JJ. (Reargued, as to Appeal No. 213, on November 19, 1952).
OPINION BY MR. JUSTICE BELL
Smiler sued Aaron and Bessie Toll for breach of an agreement of sale made between them; the Tolls in a separate suit sued the Pioneer Sample Book Company (hereinafter called Company) as the alleged principal of Smiler, for breach of the aforesaid agreement of sale. The agreement was under seal. Unfortunately these cases were not consolidated and tried together in the Court below, as they should have been; they have been consolidated here and since the case in which the Tolls were plaintiffs reached this Court first, it will be considered first in this Opinion.
Mr. and Mrs. Toll on April 26, 1949, (10 months after they had been sued by Smiler for breach of the contract in controversy), brought an action of assumpsit against Pioneer Sample Book Company to recover the balance of purchase money allegedly due them under a sales agreement made by Lionel Friedmann & Co., agent for Aaron Toll as the seller and Sidney Smiler as the buyer. Toll agreed therein to convey the property 6224-34 Paschall Avenue, Philadelphia, to Sidney Smiler or his nominee. The most important question here involved arises from the fact that the agreement was under seal. Sidney Smiler, as the purchaser, executed this agreement; the Pioneer Sample Book Company did not execute it and was not a party to it, nor was it named or referred to in the agreement.
The Tolls' original complaint named the Company as the undisclosed principal. When the Court below sustained preliminary objections, the Tolls amended their complaint and named the Company as a disclosed principal, alleging that they knew from the beginning of the negotiations that Smiler, who executed the agreement, was the Vice President and General Manager of the Company and was acting for the Company in making the purchase. Furthermore, the check of $9500. which Smiler gave to the Tolls as his down payment was the check of the Company.
The sales agreement between the Tolls and Smiler was not only under seal but also contained a provision: "This agreement contains the entire contract between the parties and there are no oral agreements or representations between the parties hereunto appertaining." The Tolls give no consideration or effect to this provision except to say that it cannot bar a suit against either a disclosed or undisclosed principal.
The lower Court then sustained preliminary objections to the amended complaint; judgment was entered thereon; and the Tolls took this appeal.
The Tolls' argument may be summarized as follows: A seal today is surplusage, unnecessary, meaningless and without any effect; therefore, this is only a simple contract for the sale of real estate; and a disclosed or undisclosed principal may sue or be sued on a simple contract. Unfortunately, the case is not as simple as the Tolls contend; and it will be necessary to analyze and review the cases and principles governing sealed instruments in order to eliminate the confusion which has arisen.
The general rule is well settled that a principal, disclosed or undisclosed, is liable for the acts and contracts, if not negotiable or sealed, of his agent within the scope of the agent's authority: Lancaster v. Knickerbocker Ice Co., 153 Pa. 427, 26 A. 251; Youghiogheny Iron Co. v. Smith, 66 Pa. 340, 343; Beymer v. Bonsall, 79 Pa. 298; Brown v. German-American Title & Trust Co., 174 Pa. 443, 448, 34 A. 335; Moser Mfg. Co. v. Donegal Conoy Ins. Co., 362 Pa. 110, 115, 66 A.2d 581; Dodson Coal Co. v. Delano, 266 Pa. 560, 565, 109 A. 676; 3 C.J.S. Agency, §§ 231, 239, 240, 244; 2 Am. Jur. Agency, § 346; Restatement, Agency, §§ 147, 149. in Lancaster v. Knickerbocker Ice Co., 153 Pa., supra, the Court said (p. 432): "It is text-book law applied and enforced in a long and unbroken line of cases, that where a simple contract, other than a bill or note, is made by an agent in his own name,*fn1 his undisclosed principal may maintain an action, or be sued, upon it."
Where, however, a contract made by an agent in his own name is under seal, the general rule is that a principal is not bound, unless he is a party to the contract
or named therein as one for whose benefit it was made: A.L.I., Restatement, Agency, § 151; 2 C.J.S., Agency, § 133b(1); 3 C.J.S., Agency, §§ 240, 246; 2 Am. Jur., Agency, § 245; 32 A.L.R. 162; Bellas v. Hays, 5 S. & R. 427; Ardesco Oil Co. v. North American Oil & Mining Co., 66 Pa. 375, 380; Shermet v. Embick, 90 Pa. Superior Ct. 269; Ottman v. Nixon-Nirdlinger, 301 Pa. 234, 241, 242, 151 A. 879.
This general rule applicable to contracts under seal has been modified or no longer prevails in many jurisdictions where the distinction between a sealed and an unsealed instrument has been abolished or a seal is considered unnecessary and surplusage; and the Tolls contend that Pennsylvania has followed this modern trend.
In some transactions and for some purposes a seal is considered as surplusage: Ottman v. Nixon-Nirdlinger, 301 Pa. 234, 241, 151 A. 879; Dick v. McWilliams, 291 Pa. 165, 170, 139 A. 745; Lancaster v. Knickerbocker Ice Co., 153 Pa. 427, 432, 26 A. 251; Dubois's Appeal, 38 Pa. 231; Jones v. Horner, 60 Pa. 214; Schmertz v. Shreeve, 62 Pa. 457. This is especially true as to the validity of a deed or "instrument in writing for conveying land": Section 9, Act of April 1, 1909, P.L. 91, as amended, 21 PS § 8; and certainly a seal is not necessary to validate an agreement of sale.
But it does not necessarily follow, as the Tolls contend, that a seal is entirely meaningless or without any effect. To so hold would in many instances negate the acts and intentions of the parties; and would require us to change or overrule many established principles and decisions with respect to sealed instruments which parties have relied on for a century. What, for example, will happen to the familiar and so frequently used straw-man real estate transactions; what becomes of our rule which holds that a seal imports a consideration;
and what statute of limitations will apply to instruments under seal if a seal is, for all purposes, not only surplusage but also meaningless? The dangers inherent in establishing, by judicial decision, such a fundamental change in our law were clearly pointed out by Justice BENJAMIN CARDOZO in "Paradoxes of Legal Science", 70, and by Judge TAULANE in Rader v. ...