#### HAYNOR MANUFACTURING COMPANY v. E. L. DAVIS.

(Filed 1 April, 1908).

1. Principal and Agent — Agency to Sell — Warranty.

Authority to an agent to sell goods is as a general rule authority to bind his inúncipal by warranty.

■2. Contracts — Sale of Goods — Implied Warranty — Breach — Latent Defect — Damages.

The selling of an article carries an implied warranty that it is merchantable and can lawfully be sold by the purchaser in his locality if bought for resale; and when the prohibitive quality is latent and could not have reasonably been detected by ordinary observation the seller is liable upon the implied warranty for such damages as were the direct and natural consequence of the breach.

3. Principal and Agent — Representations, Fraudulent — Inducing Sale.

The principal is liable for the fraudulent representations of his agent, general or special, made by the agent in the course of his employment and to induce the sale of his goods, and acted upon.

4. Principal and Agent — Warranty — Verdict Directing — Counterclaim — Nonsuit—Knowledge of Principal.

The salesman of plaintiff sold to defendant certain goods called “Bucliu Tonic,” representing that it was nonalcoholic and that no license or tax would be required for a sale, and if so his principal would pay it. The principal knew at the time of sale that the de*268fendant was a general merchant at Bocky Mount, N. G., and subsequently shipped the “tonic” to him. The “tonic” contained 32 per cent, alcohol, was highly intoxicating and required the payment of a license tax, which was duly demanded of defendant.

In an action to recover of defendant the price of the “tonic”: Held, (1) that it was error in the court below to direct a verdict in plaintiff’s favor and against defendant’s counterclaim for license tax paid by him; (2) that such was in the nature of a nonsuit upon the whole evidence as to the counterclaim; (3) that the knowledge of the agent of the facts and circumstances was the knowledge of the principal; (4) that by its subsequent shipment the plaintiff was fixed with such knowledge.

ActioN tried before Neal, J., and a jury, at November Term, 1907, of Nash.

Defendant appealed. Tbe facts are stated in tbe opinion.

Jacob Battle for plaintiff.

Austin & Grantham for defendant.

Clark, O. J.

This action was begun before a justice of tbe peace to recover tbe value of goods sold. Tbe defendant sets up orally a counterclaim, or payment, as follows, which presents tbe only question before us: “The defendant denied that he owed tbe plaintiff anything and pleaded payment in full of all accounts, and set up as a reason, among other things, that the goods for which the account was made was, in part, 'Buchu Tonic/ and that at the time he purchased it from the plaintiff the plaintiff’s salesman, R. D. Guy, had represented the said 'Buchu Tonic’ to the defendant as nonalcoholic and not subject to any privilege or license tax of any kind, either Federal or State, and guaranteed the defendant when he purchased the said 'Buchu Tonic’ of the said salesman that if defendant should ever be required to pay any taxes of any kind for the privilege of selling the same in his store at South Rocky Mount the plaintiff company would make good to the defendant any such license tax paid by him; that after having sold at retail the said 'Buchu Tonic,’ relying upon the representations and warranties of the said Guy, general salesman *269for the said company, he had been called upon and required to pay a Federal license tax of $31.50 because of the fact that the said ‘Buchu Tonic’ was a beverage and highly intoxicating and contained about 32 per cent, alcohol. The defendant contends that he is entitled to a credit in this transaction against the account of plaintiff for the $31.50 paid as a Federal license tax, and that he, upon being required to pay such tax, returned to the plaintiff all the ‘Buchu Tonic’ which he had on hand, deducted the $37.50 and sent the plaintiff a check for the excess of the account over and above the $37.50 and demanded that he be credited with the $37.50.”

On the trial in the Superior Court the defendant’s testimony was to said purport. Mr. W. B. Allen, the Pure Food Chemist for the State, testified that he had analyzed the “Buchu Tonic” manufactured by plaintiff on several occasions; that it usually ran about 32 per cent, alcohol and was highly intoxicating, and that a license tax was collectible on beverages containing one-half of one per cent, alcohol or upwards.

At the close of the evidence the court directed a verdict in favor of the plaintiff for $37.50. As this is equivalent to a nonsuit against the defendant upon his counterclaim, it is irrelevant to consider the evidence in reply introduced by the plaintiff. There was no controversy that the defendant owed plaintiff a balance of $37.50 unless he were entitled to this counterclaim.

The defendant was entitled to have his counterclaim submitted to the jury, and if the facts were found in accordance with his testimony it was a valid counterclaim.

1. There was the express warrant of the plaintiff company through its agent to sell the goods. “As a general rule an agent authorized to sell property, in the absence of express limitation of his powers, is authorized to bind his principal by warranty.” 30 A. & E., 164. “An agent authorized to sell is authorized to make a warranty.” Alpha Mills v. *270 Engine Co., 116 N. C., 802; Davis v. Burnett, 49 N. C., 72; Hunter v. Jameson, 28 N. C., 252. Even though such agent exceeds his authority, he binds his principal. Lane v. Dudley, 6 N. C., 119.

2. There was an implied warranty arising because the manufacturer of the article knew that it was alcoholic and subject to tax, and because also -this was a latent quality which the defendant could not have detected by ordinary observation. Without reference to any authority in the agent to make an express warranty, the manufacturer in selling through Guy warranted against latent defects that the article is merchantable and can be lawfully sold by the purchaser if bought for resale. McQuaid v. Ross, 22 L. R. A., note at p. 190 et seq.; Bierman v. Mills Co., 87 L. R. A., 800.

The plaintiff would be responsible for such damages as were the natural and direct consequence of the breach of such warranty. And what could be more direct than the license tax required by the Government for the shortest period for which license is issued to sell said alcoholic beverage ?

3. The plaintiff company is liable for the fraudulent representations of its salesman and agent which were made to defendant to induce the trade and acted upon by defendant to his injury. This would be so whether the agency of Guy were general or special. Hunter v. Matthias, 90 N. C., 105; Peebles v. Patapsco Co., 77 N. C., 233; 1 A. & E. Enc. (2d Ed.), 1143. The president of the company testified that when the sale was reported he knew where defendant was and engaged in what business, and he must have known that a general merchant could not sell “highly intoxicating liquor, running usually 32 per cent, alcohol” (for this evidence of the State Chemist must be taken as true on the non-suit), and subsequently thereto he shipped the “Buchu Tonic” to the defendant. The company therefore assumed full responsibility for the act of its agent, for the knowledge of the agent that the defendant bought and was induced to buy by *271bis representations and promise that tbe company would pay tbe license tax if liability tberefor was incurred was tbe knowledge of tbe company, and in its subsequent shipment it was fixed with sucb knowledge, even tbougb it bad not authorized tbe express warranty. Lane v. Dudley, 6 N. C., 119.

Error.