This is a suit on a promissory note, dated October 26, 1961, signed in the name of defendant, "Carol Horowytz d/b/a E.D.S. by J. Pearl," and endorsed on the reverse side by "Jack Pearl."
Defendant has admitted in the pretrial order that J. Pearl is her father and that he engaged in business in defendant's name from time to time.
It appears from the exhibits introduced into evidence that on April 8, 1957 a checking account was opened with plaintiff bank in the name of defendant, doing business under the tradename E.D.S., as a men's clothing business at 957 Market Street, San Francisco, California. The signature card, containing defendant's authorized signature, also contains the statement, "J. Pearl power of attorney attached." The original of this "signature card: power of attorney" was received into evidence and defendant admits signing it.
No oral testimony was offered by either party. The evidence consisted of the admissions contained in the pretrial order and the instruments introduced into evidence. The question presented is whether J. Pearl had the authority to obligate defendant on the note in question. Plaintiff relies solely upon the power of attorney as establishing such authority.
Thus the court is called upon to determine whether the power of attorney can be construed as clothing the attorney-in-fact with the authority to borrow on behalf of defendant principal.
A power of attorney is an instrument in writing by which one person, as principal, appoints another as his agent and confers upon him the authority to perform certain specified acts or kinds of acts on behalf of the principal. The primary purpose of a power of attorney is not to define the authority of the agent as between himself and his principal, but to evidence the authority of the agent to third parties with whom the agent deals. 3 Am. Jur. 2 d, Agency, § 23, p. 433.
The authority to borrow money on the credit of the principal is among the most important and also dangerous powers which a principal can confer upon an agent, since manifestly there is a great possibility of the abuse of the power. For this reason, in the absence of express authority, the authority of an agent to borrow on the principal's credit will not be inferred unless it is necessarily implied by the scope and character of the authority which is expressly
granted. 3 Am. Jur. 2 d, Agency, § 88, p. 490. Unless otherwise agreed, an agent is not authorized to borrow unless such borrowing is usually incident to the performance of acts which he is authorized to perform for the principal. Restatement, Agency 2 d, § 74, p. 192.
These principles have been well expressed by the court in Williams v. Dugan, 217 Mass. 526, 105 N.E. 615, L.R.A. 1916 C 110 (1914):
"The power to borrow money or to execute and deliver promissory notes is one of the most important which a principal can confer upon an agent. It is fraught with great possibilities of financial calamity. It is not lightly to be implied. It either must be granted by express terms or flow as a ...