Pa. 29, 44 A.2d 265 (1945); see also, Pennsylvania Annotations to the Restatement of Agency, § 349; P.L.E. Agency § 129; Sum.Pa.Jur. Agency, § 182.
To the same effect is the rule set forth in the Restatement of the Law of Torts (1948 Supp.), § 233(1):
'Except as stated in Subsection (2), one who as agent or servant of a third person disposes of a chattel to one not entitled to its immediate possession in consummation of a transaction negotiated by the agent or servant is liable for a conversion to another who, as against his principal or master, is entitled to the immediate possession of the chattel.'
Pennsylvania law seems to be in accord with this section. See: Lindsley v. First Nat. Bank of Philadelphia, 325 Pa. 393, 190 A. 876 (1937); SumPa.Jur. Torts, § 390.
Both the agency rule and the tort rule have received approval in the dictum contained in First Nat. Bank of Blairstown v. Goldberg, 340 Pa. 337, 17 A.2d 377 (1941).
In my opinion there is little doubt that an auctioneer is an agent of the seller when he receives the chattel for sale, conducts he sale, sells the chattel upon the fall of the hammer, receives the proceeds from the buyer, and distributes the proceeds less his commission to the seller. See: Restatement, Second, Agency § 1, Comment (e). The auctioneer negotiates such a sale and the seller's unexercised right to reject the bid would not alter the relationship of principal and agent.
In Gardiner v. D. P. S. Nichols Co., 48 Pa.Super. 510 (1912), the defendant company was engaged in the auction business. The Court said at pp. 512-513:
'It must be apparent that the relation between the plaintiff and defendant, created when the horse was delivered to the former to be by it sold, was that of principal and agent.' See also, Hayes v. D.P.S. Nichols Co., 64 Pa.Super. 273 (1916); Vol. 4 Words and Phrases, 'Auctioneer' p. 808.
It also seems certain that a wrongful sale of property by an agent-auctioneer, whereby a lienholder is deprived of his right, is a conversion. United States v. Union Livestock Sales Company, supra; United States v. Mattews, supra; John Clay & Co. Livestock Commission v. Clements, supra; 89 C.J.S. Trover and Conversion § 48b; 14 C.J.S. Chattel Mortgages § 261; 2 Am.Jur., Agency, § 331; 2 Jones, Chattel Mortgages, § 460 (1933).
For the reasons exhaustively set forth in United States v. Matthews, supra, 244 F.2d at pages 630-631, the provisions of the Packers and Stockyards Act of 1921, 7 U.S.C.A. § 181 et seq., and particularly § 205, do not absolve the defendant from liability. For substantially the same reasons, it is my opinion that the Pennsylvania statutes regulating auctioneers cannot be construed as exculpating an auctioneer from the rules of liability set forth above. Cf. United States v. Union Livestock Sales Company, supra, 298 F.2d at p. 760; John Clay & Co. Livestock Commission v. Clements, supra, 214 F.2d at p. 807; contra United States v. Kramel, supra.
The defendant contends that the Government waived any rights it may have had for the disposition of the collateral, citing East Central Fruit Growers Production Credit Ass'n v. Zuritsky, 346 Pa. 335, 30 A.2d 133 (1943). I am unable to find from the evidence any intended waiver on the part of the Government. Certainly, the Government did not expressly or impliedly consent to the sales of the mortgaged cows. Indeed, to the contrary, on three prior occasions the defendant paid claims made by the Government against him for selling mortgaged cows. Because of this, defendant was very much aware that the Government not only did not relinquish its right but expected to and did enforce its right to recover for the conversions from him. Although the Government cannot be estopped, it is clear that its agents did nothing by word or act upon which defendant relied which could be reasonably construed as an inducement to defendant to sell the mortgaged cows without incurring liability.
The defendant argues that it is not possible for him to protect himself, and that because the Farmers Home Administration did not furnish a list of borrowers, it did not act in good faith, and, therefore, cannot recover. I disagree with this argument. The Security Agreement with the mortgagor was recorded in the Recorder's Office of Mercer County in accordance with the Code, § 9-401; and although the Code, § 9-201, does not expressly visit constructive notice upon auctioneers, if defendant wished to protect himself, there was nothing to prevent him from searching the records in the various County Recorders' Offices, compiling a list of mortgagors to the Farmers Home Administration, and keeping the list reasonably current, thereby effectively minimizing the risk of loss resulting from the occasional dishonesty of a person such as the mortgagor in this case. I do not find any legal or good faith obligation on the part of the Government to furnish lists of borrowers to auctioneers.
The fact that defendant was not given notice or that no demand was made upon him prior to suit does not exculpate him from liability for the conversion of the cows. Cf. Rice v. Yocum, 155 Pa. 538, 26 A. 698 (1893); 89 C.J.S. Trover and Conversion §§ 56c, 57.
CONCLUSIONS OF LAW
1. This court has jurisdiction of the subject matter and of the parties to this action.
2. The sale by the defendant of the cows subject to the Security Agreement between Myron D. Flickinger and the Farmers Home Administration of the United States constituted a conversion of said cows.
3. The Farmers Home Administration did not waive any of its rights against the defendant nor is it estopped from asserting same.
4. The defendant is liable to the United States for converting the cows subject to the Security Agreement in the following amounts:
(a) $ 177.49 for the conversion of the Holstein cow;
(b) $ 143.50 for the conversion of the Guernsey cow;
(c) $ 56.50 for the conversion of the Jersey cow; or a total amount of $ 377.49.
5. Judgment in the sum of $ 377.49 should be entered in favor of the United States and against Sandy Sommerville, trading and doing business under the name and style, New Wilmington Livestock Auction.