Johnson v. Blumer

The following opinions were filed February 12, 1924: Doerfler, 'J. In the very able brief and argument of counsel for the defendant Keller they insist that plaintiff should be denied relief as prayed for in the complaint, upon the ground of estoppel. There is no pretense that Johnson, the mortgagee, or the plaintiff ever had any actual knowledge of the fraud committed by Dahms in the sale of the eighty acres to the defendant Keller, or with respect to any of the subsequent transactions, but it is strenuously contended that the facts and circumstances as disclosed by the record establish clearly knowledge on the part of Durst, the cashier of the bank, not only of the existence of the plaintiff’s mortgage, but that he also knew of the sale from Dahms to Keller and the subsequent transactions in the premises, or, to say the least, that under the stafe of the record he must be charged with such knowledge as a matter of law, and being the agent of the mortgagee and the plaintiff, and the executor of the mortgagee’s estate, the duty devolved upon him to notify the defendants of the existence of this mortgage so as to enable them to seasonably protect themselves, and, having failed to act or speak when it was his duty so to do, plaintiff sh’ould be estopped from obtaining the relief prayed for. The situation presented is somewhat novel, and no parallel — 374 — case has been cited, and we must frankly confess that we have found none. It must be conceded that had the defendants, prior to the assignment of the Blumer mortgage by Dahms to Cornelius, received notice of the existence of the plaintiff’s mortgage, an effective remedy would have been opened to them for their protection. From the time of the execution of plaintiff’s mortgage up to the beginning of 1913, Durst, as cashier, unquestionably acted as. the agent for the mortgagee in the collection of the interest, but while acting as such agent he also represented the bank as its cashier and discharged the duty of protecting the interests of the bank with respect to the indebtedness of Dahms to the bank. Durst was not the mortgagee’s general agent, as his authority was limited to the collection of the interest on the notes and mortgage. On the other hand, he was one of the principal officers and a general agent of the bank, charged with 'the duty 'to further and promote the bank’s interests. He was thus acting in a dual capacity, the effect of which, in law, would be the same as if these two agencies had been represented by two separate and distinct individuals. “It is a fundamental principle in the law of agency that for information given an agent to be attributable to his principal the information must be imparted to the agent in the course of his agency.” Butter v. Michigan Mut. L. Ins. Co. 184 N. Y. 337, 340, 77 N. E. 398; Corrigan v. Bobbs-Merrill Co. 228 N. Y. 58, 126 N. E. 260, 10 A. L. R. 662, 670. In 2 Corp. Jur. p. 863, § 544, it is said: “The rule that notice to an agent is notice to- his principal is not applicable unless the notice has reference to business in which the agent is engaged under authority from the principal, and is pertinent to matters coming within that authority; and hence a principal is not affected with knowledge which the agent acquires while not afcting in the course of his employment, or which relates to matters not within the scope of his. authority, unless the agent actually com-' municates his information to the principal.” — 375 — See, also, numerous cases cited under note 93 on page 864, among which will be found Wells v. American Exp. Co. 44 Wis. 342. The rule last quoted from Corpus Juris is so well intrenched in the jurisprudence of this country as to require no further comment; and applying such rule to the case at bar, we conclude that Durst acted as the agent of the bank and obtained what knowledge he had during the years 1911 and 1912 and up to the time of the death of the mortgagee in the early part of 1913, when he received the mortgages of Keller and Blumer as collateral security to the indebtedness of Dahms to the bank, and when he collected the interest thereon, together with instalments of principal, and when he applied the same in the reduction of Dahms’ indebtedness to the bank, in the course of such agency and not in the course of the agency for the mortgagee. During the greater part of the year 1913 Durst acted as executor of the estate of the mortgagee, and counsel for Keller contend that in that capacity he held the legal title to the notes and mortgage in suit, and having knowledge of the breach of the covenant of warranty on the part of Dahms, and having failed to give notice to the defendants of his knowledge, plaintiff should be estopped from obtaining the relief prayed for in her complaint. The title to-personal property held by an executor differs in many.respects from that of an absolute owner. He holds this title not in his own right, but pursuant to his nomination as executor in the will and his appointment by the. court. He holds the title primarily for administration purposes for the benefit first of creditors, and secondly for the benefit of those interested in the estate. As executor he is charged with the duties of a trustee, and upon the termination of his trust the property undisposed of and unliquidated passes to the persons entitled thereto, pursuant to the final decree of the county court. Thus we have another instance of Durst acting in a dual capacity. As executor of the estate — 376 — it was incumbent upon him to collect the interest on the notes and mortgage and the principal after it became due. While the notes fell due in 1912, prior to the death of the mortgagee, they were not liquidated, but on the close of the administration the executor assigned the same and the mortgage to the plaintiff, and it nowhere appears in the record •that plaintiff objected thereto; on the contrary, we must assume that this was done with her consent. No knowledge of a breach of covenant in the warranty deeds referred tó-came to the executor while acting as the personal representative of the deceased. On the contrary, such knowledge as he received, if any, was revealed to him while acting as the agent of the bank, and therefore such knowledge is not chargeable to the estate or to the plaintiff herein. Had Durst during the period of his executorship made admissions of the breaches of covenant, such admissions could not be received against him or against the estate, where he derived such knowledge in the course of his agency for the bank. 22 Corp. Jur. p. 407, § 486. The same rule heretofore declared with respect to- agency also applies to the period of time while Durst was. acting as executor, and such knowledge, not having been communicated to the plaintiff, cannot be imputed to1 her nor bind her. In its findings of fact the court in substance found all of the essential' facts set forth in the complaint, but omitted to make or file any findings -whatsoever on the subject of estoppel, laches, waiver, or acquiescence. This failure is all the more deplorable because the principal issue presented by the pleadings involved these questions. In view, however, of our holding that as a matter of law' the information obtained by Durst as agent or executor was not chargeable to the mortgagee, his estate, or the plaintiff herein, the failure on' the part of the court to make and file full findings does not constitute prejudicial error. Counsel for defendant Keller contend that the plaintiff should be estopped in obtaining the relief prayed for by her, — 377 — for the reason that the mortgagee and plaintiff were guilty of laches. Having held that the mortgagee and the plaintiff had no actual or. constructive notice of the breach of warranty of Dahms until after the latter’s death, it follows that the defense of laches herein cannot prevail. After the death of Dahms the defendant Keller, upon advice of counsel, filed a contingent claim for the amount of the plaintiff’s notes and mortgage against the estate of Dahms, and from time to time during the administration of the estate Keller received dividends which were applied upon the principal and interest of plaintiff’s two1 notes. The judgment entered in plaintiff’s favor provides that it shall bear interest at the rate of six per cent, per annum, which is contrary to the provisions of sec. 3164 of' the Statutes, pursuant to which such judgment shall bear interest at the rate provided for in the notes secured by the mortgage. That the judgment is erroneous in the respect referred to is conceded by plaintiff’s counsel. The defendant Blumer’s cross-complaint against the defendant Keller is based upon the breach of the covenants of warranty contained in the deed from Keller to Blumer, and he prays for judgment against Keller for the amount of the judgment of foreclosure. The defendant Keller in his answer to the cross-complaint, as will appear from the foregoing statement of facts, alleges mistake, claiming that the warranty deed was executed without his knowledge of the covenants of warranty, and that it was understood that his deed was to be a quitclaim deed and that Blumer was to receive a warranty deed from Dahms, and he therefore prays in his answer for a reformation of the deed from Keller to Blumer in accordance -with his understanding at the time of the execution of the deed. Keller’s counsel claim that the cross-complaint, alleging a breach of the covenants of warranty and praying for damages on account of such breach, constituted a legal action and not an equitable action, and that pursuant to his — 378 — request, timely made, Keller was entitled to the trial of such issue by a jury. The issue presented by Keller, however, praying for a reformation, constituted an equitable issue which the court proceeded to try without a jury, and it found that Keller executed the warranty deed pursuant to his contract with Blumer, and thus found against Keller’s contention of mistake. This, clearly established Keller’s warranty deed to Blumer, and entitled Blumer to the recovery of damages from Keller as a matter of law. No issue of fact as to damages, therefore, was presented, and the court did not commit error in refusing to submit the issue of damages to a jury. It is further claimed by counsel for Keller that under a breach of warranty against incumbrances Blumer should have been confined to the recovery of merely nominal damages, and that he would be entitled to actual damages only in the event of an eviction or if he purchased and paid the plaintiff’s mortgage. This contention is based' upon the ruling of this court in Estate of Hanlin, 133 Wis. 140, 113 N. W. 411. While the rule contended for is undoubtedly well fortified by the decisions, under the facts and circumstances of this case the reason for application of the rule does not exist. The doctrine that a cause of action for substantial damages does not accrue to one who has obtained title to property on a warranty deed where a breach of such warranty is made to appear, until he has been evicted or has paid the mortgage, is founded upon the possibility of the mortgagee recovering upon the personal covenant of the mortgagor. In the instant case, however, the reason for this rule does not obtain, for it is .conclusively shown that Dahms, the original mortgagor, died insolvent, and that his estate has been' distributed in the course of administration proceedings in the county court; therefore the possibility of enforcing payment on the personal covenant of the mortgagor no longer exists. — 379 — The doctrine applicable is found in 7 Ruling Case Law, p. 1184, § 107: “In a number of jurisdictions it has been held that although a covenant against incumbrances.,, like a covenant of seizin, is broken if at all as soon as made, yet the cov-enantee can found no right to actual damages on the mere existence of incumbrances, but will be limited to a nominal recovery, unless he has paid off the incumbrance of actually lost the estate in consequence of it. The above rule is founded on the reason that such -covenant is considered as strictly a covenant of indemnity, and that the grantee ought not to recover the value of the incumbrance on a contingency, when he may never be disturbed by it. This is a reasonable rule; for if he were to recover the value, for example, of an outstanding mortgage, the mortgagee might still resort to the defendant, on his personal obligation, and compel him to pay it, and if the purchaser feels the inconvenience of the existing incumbrance and the hazard of waiting till he is evicted, he may go and satisfy the mortgage, and then resort to his covenants.” In the instant case the possibility of the. plaintiff recovering from the mortgagor no longer exists. The judgment of foreclosure becomes an absolute lien upon the property of the defendant Blumer. The judgment of the trial court is in the nature of an interlocutory decree, and of such decree the defendant Keller has no reason, under the facts and circumstances of this case, to complain, for we are of the •opinion that had the court granted an absolute judgment such judgment would have been proper. By the Court. — Judgment modified in accordance with the opinion, and,, as so modified, affirmed.