Leach & Co. v. Peirson
Headline: Limits use of self-serving demand letters to prove broker promises; Court reversed and ordered a new trial, holding a customer’s letter alone cannot establish a salesperson’s authority to repurchase bonds.
Holding: The Court held that a person's self-serving letter cannot, by itself, establish a broker-salesman's authority to promise repurchase; without proof of the salesperson's authority the defendant was entitled to a directed verdict.
- Prevents customers' unsworn letters from proving brokers' authority alone.
- Requires independent proof of a salesperson’s authority before admitting demand letters.
- Defendant may get a directed verdict when agent authority is unproven.
Summary
Background
A customer named Peirson bought $20,000 in bonds from a large bond house through salesman Mather on three dates in 1920–1921. Peirson testified that Mather promised the firm would repurchase the bonds at cost (98) whenever Peirson asked. Peirson sent a letter on May 9, 1921, stating the agreement and asking when to deliver the bonds. The bond house's officers said they never received the letter and denied Mather had such authority; Mather also denied making the promise. The trial court admitted Peirson's letter and instructed the jury that if the firm received the letter and did not disaffirm it, they could infer the firm had acquiesced and that Mather had authority. The jury returned a verdict for Peirson, and the court of appeals affirmed.
Reasoning
The Supreme Court reviewed whether the plaintiff's self-serving letter could, by itself, establish that the firm had agreed to repurchase the bonds. The Court said a person cannot create evidence for himself simply by writing a letter of assertions and sending it to the other party. A failure by the recipient to answer such a letter is not an admission unless other circumstances make a response natural or necessary. Because no independent evidence showed Mather's authority, the demand letter was immaterial. The Court also noted a loan given two days after the letter could be an unrelated transaction or inconsistent with the claimed right. Since no proof of authority was offered, the defendant should have been granted a directed verdict.
Real world impact
This ruling means that customers cannot rely on their own unsworn demand letters as proof of a broker's authority to make binding promises. Brokers and courts must look for independent evidence of an agent's authority before treating such a letter as admissions. The decision is procedural and sends the case back for a new trial rather than resolving the underlying contract claim finally.
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