Ellis v. Hale

MR. JUSTICE HOLLOWAY delivered the opinion of the court. Early in 1915, Newton Sanders applied to C. F. Ellis & Co. for a loan of $1,000, to be secured by. a mortgage upon real estate situated in Rosebud county. The application was approved and a note payable to Richard H. Dana, Jr., and a mortgage in which Dana was named mortgagee, were forwarded by Ellis & Co. to Edgar H. Hale at Forsyth, to be executed by Sanders and wife. About April 12 the papers were returned apparently properly executed, the acknowledgment to the mortgage purporting to have been made by Sanders and wife before Hale as notary public. On April 12 a check payable to Hale, for the amount of the loan less certain expenses, was sent to Hale. The check was signed by Ellis & Co., was cashed by Hale, the money embezzled, and Hale absconded. Later it developed that the purported signatures of Sanders and wife were forgeries and the acknowledgment false and fraudulent. Before the fraud was discovered, and on May 7, Richard H. Dana, Jr., by Charles F. Ellis, his attorney in fact, transferred the note and mortgage for value to Frank J. Fenn. As soon as the fraud was discovered, Bradford H. Ellis, of his own motion, repaid to Fenn the amount Fenn had paid for the note and mortgage, and a few days later took from Fenn an assignment of any right of ae [186] tion which Fenn had against' Hale and the sureties on his ■notarial bond, and soon thereafter commenced this action. The sureties appeared by answer and upon the trial a verdict in their favor was directed by the court. From the judgment dismissing his complaint and from an order denying his motion for a new trial, plaintiff appealed. Every material allegation of the complaint was put in issue [1-3] by the answer. The burden was imposed upon the plaintiff to prove the case made by his pleading and in this he failed signally. Section 326, Revised Codes,- defines the liability of the sureties on the official bond of a notary public as follows: “For the official misconduct or neglect of a notary public, he, and the sureties on his official bond, are liable to the parties injured thereby for all damages sustained.” The language is reasonably clear and, when tested by the rules of construction applicable, leaves no room for doubt. The sureties are liable for injury which results proximately from the official misconduct or neglect of the notary. This is the meaning of the statute above. (Mahoney v. Dixon, 31 Mont. 107, 77 Pac. 519.) Neglect is not charged against Hale, but it is alleged that he made a false and fraudulent acknowledgment to the mortgage. This fact alone, however, would not render the sureties liable. In order to constitute Hale’s fraudulent act a proximate cause of injury, someone must have parted with value in reliance upon the verity of the certificate. Who, then, could have' sustained such injury as would have given rise to a cause of action against these sureties? First: Dana, provided he parted with his money in reliance upon the truth of the statements contained in the certificate, and he might have acted in person or by agent; but if the money transmitted to Hale was not his money, he suffered no injury and had no cause of action. It is not alleged specifically that the money belonged to Dana and there is not even a scintilla of evidence that it was his money. The only reference to the subject is found in the cross-examination of plaintiff when, after testifying to the valuation placed upon the [187] Sanders land, lie answered a question as follows: “ Q. That was your valuation and on the strength of that valuation you recommended a loan, did you, of $1,000 of Mr. Dana’s money? A. Yes.” Whether the money thereafter sent to Hale was Dana’s money, the money of plaintiff, the property of C. F. Ellis & Co., or the money of someone else, is left to conjecture. Neither is there any evidence that Dana relied upon the notary’s certificate or that he ever knew of the transaction. This plaintiff testified that he (plaintiff) relied upon the verity of the certificate. He alleges in his complaint that he represented Dana in loaning money in this state, but that allegation was denied and there is no evidence even tending to support it; neither is there any evidence tending to prove that plaintiff was the agent of Dana in this particular transaction. The record discloses, on the contrary, that Charles F. Ellis had a power of attorney from Dana and the correspondence concerning this loan was all with C. F.,-Ellis & Co. Just what was the legal status of C. F. Ellis & Co. is not made apparent. There is not a syllable of evidence to show whether C. F. Ellis & Co. was a corporation, a copartnership, or merely a fictitious name under which someone did business. In other words, there is not any evidence that Dana suffered injury by reason of his reliance upon the notary’s certificate, and therefore he had no cause of action which he could assert and none which he could transfer to Fenn. Second: Fenn would have had a cause of action if, when he purchased the note and mortgage, he parted.with his money in reliance upon the notary’s certificate; but Fenn was not called as a witness and there is not even a suggestion in the record that he ever examined the certificate or placed any reliance whatever upon it; so that, so far as he is concerned, this record fails altogether to disclose that he had any cause of action against these sureties, and since the only cause of action attempted to be stated in the complaint herein is one which Bradford H. Ellis procured from Fenn by virtue of the [188] assignment, it follows that the evidence fails to make out the case stated. The authorities are in accord in supporting the rules announced above. (State ex rel. Mathews v. Boughton, 58 Mo. App. 155; People v. Nederlander, 177 Mich. 434, Ann. Cas. 1915C, 1026, 143 N. W. 753; 1 Corpus Juris, 902; 20 R. C. L. 336; note to Joost v. Craig, 82 Am. St. Rep. 380; John’s American Notaries, sec. 17.) The judgment and order are affirmed. Affirmed. Mr. Chief Justice Brantly and Associate Justices Hurly, Matthews and Cooper concur. Rehearing denied September 27, 1920.