Frey v. Curtis

Irvine, C. This was an action by Frey to foreclose a mortgage. Tbe defense was payment. From a finding and decree in [407] favor of the defendants plaintiff appeals. The case belongs to that class, unfortunately become recently very familiar, where the mortgagor has paid the debt to a third person, who failed to remit to the one entitled, and the question at issue is the authority, or apparent authority, of that person to receive payment. In this case the note and mortgage were made to one W. J. Neill, the note being negotiable. • The maker was George R. Curtis, who afterwards conveyed the mortgaged premises to Alexander Stock, by whom all payments were made and whose heirs defend this case. From a printed indorsement on the blanks used, and from some very indirect evidence, it seems that the loan which formed the consideration had been negotiated through the Western Farm Mortgage Company, of Lawrence, Kansas. Plaintiff Frey, soon after the execution of the note and mortgage, purchased them, Neill indorsing the note and interest coupons and assigning the mortgage. The assignment was not recorded until after the events relied on as constituting payment. The note and all interest coupons were made payable at the Third National Bank of New York. Before the maturity of each interest coupon plaintiff indorsed the same and gave it to bankers in Albany, where he resided, by whom it was sent to the Third National Bank, the place of payment. The Albany bank is named by the plaintiff in his deposition as the National Commercial Bank, but the indorsements on the coupons indicate that it was M. Y. B. Bull & Co. Stock, on his part, paid each installment of interest to- the Western Farm Mortgage Company or to- the Western Farm Mortgage Trust Company of Denver, Colorado, which, in the words of the witnesses, had “bought the good-will” of the Kansas company. The Trust Company remitted to the Third National Bank of New York, and procuring the coupon delivered it to Stock. Shortly before the maturity of the note and last coupon Stock paid the amount thereof to the Trust Company, which credited Frey therewith on its books, but passed into the hands [408] of a receiver without remitting the money. Frey had no dealings whatever with the Western Farm Mortgage Company or Western Farm Mortgage Trust Company. He did not know that either of those companies had been collecting the interest on his mortgage. On the other hand, he had pursued the policy of sending the coupons through a bank to the place where they were in terms payable, and thus seeking collection in the proper and regular manner. While the case in many particulars resembles Thomson v. Shelton, 49 Neb., 644, where a finding-favorable to- the defendant was sustained, it does not fall within the rule of law therein announced, and upon which that case was decided, to-wit, that “ostensible authority is that which a principal intentionally, or by the want of ordinary care, causes or allows a third person to believe the agent to possess.” Here the principal had by no affirmative act conferred any apparent authority on the alleged agent, nor had he been guilty of any negligence. While the course of dealing between the Trust Company and the mortgagor had been such as perhaps to justify the latter in believing- the Trust Company to be in some way authorized to act for Frey, this was due wholly to the conduct of the Trust Company, and was not authorized or consented to by Frey, nor were those acts known to him. It has several times been held by this court that authority to collect interest installments is not alone-sufficient from which to infer authority to collect the principal, where the evidences of indebtedness are negotiable and are not in the possession of the person assuming to act as agent. (Stark v. Olsen, 44 Neb., 646; Richards v. Waller, 49 Neb., 639; Porter v. Ourada, 51 Neb., 510.) So that, even had Frey been aware that the Trust Company had been collecting- the interest, this would not estop him from denying its authority to collect the principal while he retained possession of the note, and ¿specially before its maturity. It is claimed that there is evidence tending- to- show that the note had in fact been placed in possession of the Trust [409] Company’s agent for collection. There is. evidence that M. V. B. Bull was the eastern agent of the Trust Company. Whether he had any connection with the banking firm, of M. Y. B. Bull & Co., through whom Prey had transmitted the coupons to the Third National Bank, does not appear, nor do we think that fact material to the present inquiry. A witness testified that a memorandum on the books of the Trust Company showed that on November 24, 1891, — three days after the payment, — the papers were.held by M. Y. B. Bull for collection. The books themselves were not offered in evidence, and the testimony referred to was objected to as incompetent and not the best evidence. It was not the best evidence and should have been excluded, and must now be disregarded. It therefore becomes unnecessary to consider what effect, if any, it might be given if properly in the case. It is also urged that the evidence shows a custom, prevailing among these loan companies to collect interest and principal on loans by them made and remit to their customers, regardless of the provisions of the notes making them elsewhere payable. It is argued that the plaintiff had availed himself of the benefits of the Trust Company’s acts in pursuance of this custom, and that he must adopt the agent’s acts as a whole or reject them altogether. Passing by the question of the validity of a custom directly in the teeth of the terms of a written contract, it is to be observed that only one witness testified to such a custom, and he did not say how long it had prevailed or to wha.t extent. He only undertook to testify as to transactions which had come within his own experience. No attempt was made to show that plaintiff, a ‘resident of New York, knew of such custom, and cer.tainly, under the other evidence, such knowledge was necessary to charge him with its consequences. (Milwaukee & Wyoming Investment Co. v. Johnston, 35 Neb., 554; Union Stock Yards Co. v. Westcott, 47 Neb., 300.) It is further urged in support of the judgment that there was proof of actual authority. Such proof consists [410] merely of tiie testimony of officers of tbe Trust Company that it was acting for Frey. This was on their part merely a conclusión, and one contradicted by all the facts of the case. At most the company was assuming to act for Frey, but without any authority so to do. We cannot find any evidence tending to sustain the finding of the district, court. The judgment is reversed and the cause remanded, with directions to enter a decree foreclosing plaintiff’s mortgage. Reversed and remanded.