rich, but take water very slowly when irrigated, due to their high content of deflocculated clay. They are better adapted to grain and finerooted crops than deep-rooted plants, and require the introduction of some other substance such as straw, manure, or Bermuda sod to make them available for general crop production.

The question then is, on this state of the record, Was plaintiff entitled to an instructed verdict? It claims that it was for two reasons. In the first place, because the real estate broker, Crenshaw, was not by it authorized to make any representations as to the quality and productive character of the land; and, such being the case, it was not bound by such representations, even if he did make them, if it had no knowledge thereof. Second, that even if fraudulent representations were made in such manner that it was bound thereby, yet defendants took no action thereon for more than 3 years after they were discovered, and their claim for damages is therefore barred by the statute of limitations. Civ. Code 1913, ¶ 711, as amended by Laws 1917, chap. 76, § 1.

Taking up the last point first, we are satisfied that it cannot be sustained. It is true that, had defendants brought an independent action for damages for the alleged fraudulent and deceitful representations, the statute of limitations would have applied to the case. Even then, however, they would have been entitled to have the jury answer an interrogatory under proper instructions as to when such representations were discovered by defendants to be fraudulent. We think, further, it is the well-settled law that a defense of recoupment which rises out of the same transaction, such as a note

coupment, but rather of counterclaim or set-off, and that a counterclaim is subject to the statute of limitations, regardless of the status of the note sued upon. Our statute on counterclaim and set-off was taken from Minnesota, and there it is held that a breach of warranty may be the subject of counterclaim, or it may be set up as a defense by way of recoupment in an action for the purchase price of property sold with warranty, and that the statute of limitations does not run against such defense, and such right must be held to survive and continue as long as the vendor's right of action upon the contract. C. Aultman & Co. v. Torrey, 55 Minn. 492, 57 N. W. 211. We think, therefore, that the instructed verdict, if based upon the ground that the statute of limitations had run against defendants' claim for recoupment for false and fraudulent representations, would have been erroneous.

The second point is the vital one in the case. It is contended by defendants that a real estate broker in the selling of land is impliedly authorized by his principal to make representations in regard to the quality and value of the land, and that the principal is bound by such representations as though he had himself made them. It is insisted, on the other hand, by plaintiff that a real estate broker who is not authorized to convey land, but who merely may find a purchaser upon the terms fixed by his principal, cannot bind the principal by representations in regard to the quality and value of the land, unless he was expressly authorized to make such representations, or unless they are known to his principal before the sale is consummated. There are authorities upon both sides of the question. Defendants cite the cases of Judd v. Walker, 114 Mo. App. 128, 89 S. W. 558; Wolfe v. Pugh, 101 Ind. 293; Millard v. Smith, 119 Mo. App. 701, 95 S. W. 940, and the text of 27 R. C. L. 365, as supporting their position, while plaintiff urges the better rule is laid down in Mayo v. Wahlgreen, 9 Colo. App.

506, 50 Pac. 40; Freyer v. McCord, 165 Pa. 539, 30 Atl. 1024; State, Decker, Prosecutor, v. Fredericks, 47 N. J. L. 469, 1 Atl. 470; Samson v. Beale, 27 Wash. 557, 68 Pac. 180, and National Iron Armor Co. v. Bruner, 19 N. J. Eq. 331.

The matter is one of first impression in this jurisdiction and we are therefore at liberty to adopt the rule which seems to us best in consonance with our general practice, conditions, and public policy. We are of the opinion that plaintiff's position

Brokers-anthority to bind principal by representations.

on this issue is the soundest. The other rule originated in England, where land is transferred with comparative rarity, and where an agent dealing with land is impliedly given far more authority over it than is the case with the ordinary real estate broker in western America. There lands were and generally are handled by exclusive agents in whom the owner reposes a special confidence, and to whom a prospective purchaser might well look as being, if not the alter ego, at least the fides Achates of such owner. With us, on the contrary, it is the general custom, when an owner desires to sell his land, to list the same with as many real estate brokers as possible, with specific instructions given to them as to price and conditions of sale, and with an authority which is ordinarily assumed to extend only to showing prospective purchasers over the premises, stating the terms, and, if the property and terms are satisfactory, taking them to the owner for completion of the transaction. If we are to hold the owner of property bound by any and all representations made by any one of a dozen brokers under such circumstances, and liable in an action for fraud and deceit because of such representations, when they are entirely unknown to him and would have been indignantly repudiated, had they been called to his attention, the door to fraud upon the owner will be thrown wide open. We think the authorities supporting plaintiff's position lay down the better rule,

and we adopt that as the one to be followed in Arizona.

But, it will be said, has the purchaser no rights, and must he go remediless, or at most have an action against a possibly irresponsible and insolvent agent, when, relying on the latter's conduct, he has entered into a contract with the owner from which the latter has received a pecuniary profit? If such were the result necessarily flowing from the rule laid down, it would, indeed, work with harshness and injustice. The authorities which follow that rule, however, also indicate the proper remedy for the defrauded purchaser. When he discovers the fraud, he has two courses open to him. He may either ratify the transaction so far as the owner is concerned and make the payments, notwithstanding the false representations, reserving the right to sue the agent in damages for such fraud and deception, or he may go to the owner and, stating the fraud, offer to rescind. If the owner, after due notice of the fraud

agent-ratiЯca

and offer of rescis- principal and sion, insists upon tion of fraudholding the pur

sale of property.

chaser to his bargain, he will then be deemed to have ratified the alleged representations of the agent and the purchaser may pursue as against such owner any remedy which he would have had, had the false representations been made by the owner in person. If, on the other hand, the owner accepts the rescission and returns the purchase price, the parties are in status quo and justice, as between them, is satisfied.

In the case at bar there is no evidence that any false representations, even if they were made by the agent, were ever communicated or known to plaintiff or any of its officers until the filing of the answer herein. There is no evidence of any offer of rescission on the ground of fraud. One of defendants, it is true, said that he asked plaintiff to take the land back, but expressly stated that the only reason he gave was that the land was unproductive, and

that defendants could not make the payments thereon, and that he never at any time suggested that defendants had been deceived or defrauded

by any false representations made at the time of their purchase of the property in question. Further, not even in the answer do defendants' offer to rescind, but on the contrary, insist on retaining the land in question. To allow a recoupment under such circumstances would, in effect, be compelling an innocent owner of land to sell it against his will on terms to which he had never agreed. We are of the opinion that before a purchaser who has been deceived. unauthorized

Set-off-vendor and purchaserrecoupment for broker's fraudwhen allowed.

by

false and fraudulent representations as to quality and value made by a

real estate broker with whom land

has been placed for sale may set up the defense of recoupment for such false and fraudulent representations in an action by the vendor for the purchase price, it must be alleged and proved, in addition to the false representations by the broker, that representations and an offer of the vendor, after knowledge of such rescission on that ground by the purchaser, refused to accept the rescission. No such knowledge and offer having either been pleaded or proved by defendants, the trial court properly directed the jury to return a verdict in favor of plaintiff. The judgment of the superior court of Maricopa county is affirmed.

Ross, Ch. J., and McAlister, J.,

concur.

I. In general, 111.

III. Location, 117.

IV. Boundaries, 119.

V. Quantity, 121.

1. In general,

Attention is called to the fact that cases are not included herein which involve the question as to authority of a real estate broker to bind his employer by representations as to the title to the property. Cases are included where the person acting as a broker is referred to as a broker, and also where he is referred to as an agent. In this regard no distinction is made, unless it is made in the particular case.

The question as to the power of an agent or broker employed to find a purchaser for land, to bind the owner by representations as to the quality, condition, value, or location or boundaries of the land, is presented in dif

ferent aspects. In one class of cases the question of authority is raised where the action is against the vendor for the recovery of damages based upon a claim that the representations by the agent were false and fraudulent. In another class of cases the vendee seeks to recoup damages or prevent a recovery by the vendor of the purchase price, on the ground of total or partial failure of consideration, based upon the false representations of the agent in the particulars mentioned. The third class of cases is where the question is raised in an action by the vendee against the vendor for the rescission of a contract, on the ground of such false and fraudulent representations. The decisions in the latter

class of cases, sustaining the authority of the agent to bind the owner as to representations with regard to the matters mentioned, are not of persuasive value as precedents in cases where the action is by vendee to recover damages for the fraud, or where, without rescinding, he seeks to prevent or reduce recovery by the vendor. In this regard it is notable that the action of rescission raises another principle which either is controlling or very persuasive, and which is in effect that the principal will not be permitted to retain the fruits of the fraud of his agent on the ground that he did not know of, or authorize the commission of, the fraud. It is obvious that the question of implied or ostensible authority to bind the principal by such representations really is not involved in this class of cases, although many of the cases of this kind deal with the question of authority.

The question as to the authority of a broker to bind the owner of land as to representations which affect the value of the land, where it is sought to hold the innocent owner for damages on the ground of imputed fraud, is involved in much difficulty. The result of sustaining the authority often is to impose upon the owner a burden clearly beyond that which the agent had either actual or ostensible authority to impose by any contract with the purchaser of the land.

For example, the vendor may be held liable for damages based upon the difference between the actual value of the land and its value if it had been as the agent represented it, and certainly there can be no ground for saying that the agent had implied or ostensible authority thus to bind his principal. Even where the measure of damages is the difference between the contract price and the actual value of the land, it cannot be said that the agent had either the implied or ostensible authority to bind his principal for this amount.

Thus in National Iron Armor Co. v. Buner (1868) 19 N. J. Eq. 331, it is held that an agent authorized to sell real estate has no authority to represent the quantity of the land. The

rule is stated that "making a contract as agent at a fixed price, and the approval of such contract by the defendant, does not hold him out to the world as an agent to sell at any other price, or to vary the terms of sale. It is every day's practice for an owner of real estate to authorize an agent to sell it at a certain price, a given part in cash and the rest on credit. The agent cannot bind the principal to a sale on any other terms. The purchaser must ascertain, at his own peril, the power of the agent. And if the agent's contract on these terms is approved, and adopted by the principal, the purchaser has no right to infer from that fact that the agent has power to alter the terms of the contract. An agent with restricted power to sell a tract of land at a given price has no power to bind his principal by any representation as to the quantity or quality of the land. That is beyond his power; or else, by representing that a tract of 5 acres, which he was authorized to sell for $1,000, contained 10, he could bind his principal to convey it for $500 on the principle of compensation. False representations made by an agent at the bargain, although unauthorized by his principal, may release the purchaser from his contract, on the ground of fraud or deception, which is upon another principle of equity, but they cannot bind the principal, if beyond the scope of the authority given."

The rule is stated in Lansing v. Coleman (1871) 58 Barb. (N. Y.) 619, that, "to hold that a person not authorized to make a sale, but simply to advertise the property for sale, and procure someone to negotiate with the owner, can make representations or warranties binding upon the owner, without his authority or knowledge, would be too dangerous. The wellknown office of such an agent is merely to initiate a negotiation, not to complete one. The parties proposing in such a case to purchase are necessarily referred to the principal for the actual negotiation, and there is no hardship in requiring, but on the contrary common prudence and justice to the vendor would seem to demand, that the

purchaser should go to him for the facts which are to influence the purchase."

In Freyer v. McCord (1895) 165 Pa. 539, 30 Atl. 1024, the vendee was denied the right to recover damages for false and fraudulent representations by an agent of the vendor, unknown to the latter, as to the quantity of land being included in the contract of sale. The court said that, if the vendee was deceived, it was by the agent, and his action for deceit should have been against him. The evidence is entirely insufficient to support such action against the defendant, the utmost that it amounts to against her being that plaintiff did not get the whole of the land he thought he was buying, and that by reason of the circumstances he might be entitled to a rescission on tender of reconveyance. The rule is further stated that a man may be liable to make good the value of another's property which he has used, though he may have used it innocently and unwittingly, but he can not be convicted of larceny unless he took it animo furandi, nor can he be punished by damages for deceit or fraud without evidence that he participated in or knew or ought to have known of it. See infra, V. Quantity.

And see Ringer v. Wilkin (1919) 32 Idaho, 330, 183 Pac. 986, wherein the action of the trial court is reversed on the ground that the jury were erroneously instructed that the vendors were liable in an action for damages for false and fraudulent representations made by a real estate broker with whom they had listed the property for sale, notwithstanding the vendors did not know that the broker made such fraudulent representation.

In Dellwo v. Petersen (1919) 32 Idaho, 172, 180 Pac. 167, it is held that the vendee cannot maintain an action for fraud and deceit against the vendors where the action is based upon false and fraudulent representations with regard to the real property, made by real estate brokers with whom the property was listed for sale, and such representations were unknown to the vendors. In this regard the court also distinguishes between an action for 57 A.L.R.-8.

deceit and an action in the nature of rescission to recover from the principal the fruits which he has received of a fraud committed by his agent. The misrepresentations complained of related largely to the quantity of water available for irrigation purposes (see also other cases in subsequent subdivisions).

The vendor is held liable to the vendee for damages, in an action for deceit based upon the false representations of the agent as to the quantity of land in the tract he was selling where there is evidence of participation in the fraud by the owner, in Griswold v. Gebbie (1889) 126 Pa. 353, 12 Am. St. Rep. 878, 17 Atl. 673. The court said that "the general rule that a principal is responsible for the misrepresentations of his agent, within his authority, is beyond question, and the better opinion is that, as to third parties affected by his acts or words, it is the apparent scope of his authority, and not his actual instructions, that must govern. That is the basis on which the business of the world in the present day is transacted, and the rule should be enforced in a liberal spirit, with regard to the actual habits of the community. That an agent who is empowered to engage a real estate broker to make sale of a country seat is thereby authorized to give the broker a description of the place, including its acreage, is so clear that the learned judge would have been justified in submitting the point to the jury in terms much stronger against the defendant below than he did." This case is distinguished in Freyer v. McCord (1895) 165 Pa. 540, 30 Atl. 1024, supra. The court said that, "while the general rule that the principal is liable for his agent's misrepresentations is unquestionable, as was held in Griswold v. Gebbie (Pa.) supra, yet the action of deceit being founded on fraud or moral wrong, to sustain it against the principal on such representations, the fraud should be clear, and there should, in addition, be some evidence of participation or knowledge on the part of the principal, or circumstances which should have put him upon inquiry. In other