Mutual Ben. Life Ins. Co. of Newark v. Miles

PHILIPS, District Judge. On tbe 1st day of July, 1887, tbe defendants borrowed of tbe complainant tbe sum of $3,000, for wbicb tbey executed to complainant tbeir promissory note, payable five years after date, with 6 per cent, interest per annum, payable semiannually on tbe 1st days of January and July in each year. To secure the payment of this note, tbey executed a deed of mortgage on certain real estate, consisting of three lots in tbe city of Sedalia, Mo. This loan was effected by defendants through one James G. Thompson, by sending in tbeir application to tbe complainant company, containing tbe usual provisions that tbey constituted said Thompson tbeir agent therefor. By tbe terms of tbe note, tbe same was made payable at the First National Bank of Sedalia, Mo., with exchange on New York City. On tbe 1st day of July, 1892, on tbe application of defendants, this loan was extended by an agreement in writing for [33] an additional period of five years from July 1, 1892. This agreement provided, inter alia, that in consideration of the extension both principal and interest should be paid, when due, at complainant’s office in Newark, N. J. The lots in question belonged to the defendant Mary T. Miles, the wife of co-defendant, John R. Miles, who acted in these transactions as agent for his wife. On or about the 1st day of March, 1894, the defendants made a contract of sale of one of said lots and 10 inches oi'f of another thereof to one Drucker, and applied to said Thompson to have him obtain a release of the property so sold to said Drucker from said mortgage deed on the payment of $1,000 on said $3,000 loan. Thereupon, on the 7th day of March, 1804. Thompson wrote to the treasurer of the complainant, advising it of defendants’ proposition, and asking their consent thereto; to which said treasurer made answer, on March 30,1894, as follows: “Mr. J. G, Thompson, Sedalia, Mo. — Dear Sir: Your favor of the 7th inst. is received. In reply, would say that it is contrary to our rules to make releases of portions of mortgaged premises. If John It. Miles and wife will prepare and present an application for a new loan of §2,000.00 upon the property They desire us 1o retain as security, we will have tiie same considered, and, if granted, new loan made and present paid. I should receive some assurances that Hie interest will be promptly paid in the fuiure. “Yours, truly, Sarn’l W. Baldwin, Ass’t Treasurer.” On the 16th day of March, 1894, Thompson wrote the following letter: “Samuel W. Baldwin, Esq., Ass’t Treas., Newark, N. J. — Dear Sir: Referring (o your favor of March 10th, concerning loan to John R. Milos and wife for §3,000.00, upon which they desire to make payment of §1,000.00, and a relea.se of part of ihe ground, 1 now hand yon herein new application for a loan of §2,000.00 upon the ground mentioned in my letter of the 7th inst., which please submit, and advise me of your decision in the matter. “Yours, truly, J. C. Thompson.” On March 21,1894, the following telegram was sent: “Mr. J. O. Thompson, Sedalia, Mo.: Miles’ application approved, subject to title. • Edward D. Dobbins, Secretary.” Ho far as complainant is concerned, this is the last heard of the matter by it until after the 4th day of May, 1894, at which time the said First National Dank of Hedalia, Mo., of which Thompson was cashier, failed, and was placed in the hands of a receiver, and Thompson fled the country to Mexico. The defendant John It. Miles, without more, joined his wife in a deed of trust on the unsold portion of said lots to the complainant t for the sum of $2,000, and drew Ms check for the sum of $1,000 in favor of the First National Bank of Sedalia, and thereupon the bank passed the same to the credit: of the complainant. and absorbed the proceeds thereof in its business. At the time of the payment of said $1,000 as aforesaid, the following receipt was given therefor: “Received of Mrs. Dannie Drucker §1,000.00, to be applied on deed of trust of Mutual Benefit Life Insurance Company of Newark, N. J., as a release of lot 3 and 10 indies off of the oast side of lot 2, in block 57, in Smith & Martin’s Second addition to the city of Sedalia, said deed of trust to he released within the present month, and is recorded in Book 53, page 411, Records of Pettis Count v, Mo. ‘ ¡Signed] J. G. Thompson, Gash.” [34] After the failure of the hank and the flight of Thompson, the receiver in charge of the bank found said $2,000 deed of trust among papers in the bank. The question to be decided is whether or not the said mortgage for $3,000 should be canceled and satisfied by complainant, and the second deed of trust for $2,000 accepted by it. In other words, was the $1,000 paid to complainant in fact and in law? Because of the fact that Thompson had obtained the original loan for the defendants, and the application for extension thereof had been made and obtained through him, the defendants seem to have assumed that he was the proper person to apply to to effect the release of part of the mortgaged premises on the payment of the $1,000. It is not contended seriously, by reason of Thompson’s office in effecting the loan for defendants, that authority could be implied in him to thereafter collect either the principal or interest on the bond. Englert v. White (Iowa) 60 N. W. 224; Cummings v. Hurd, 49 Mo. App. 147. The evidence fails to show that Thompson individually ever made collection of even the interest on the bond. As in the Ilgenfritz Case (decided contemporaneously herewith) 81 Fed. 27, the coupons were sent by the company, indorsed, to the First National Bank of Sedalia for collection in the usual course of banking business. The fact that defendants went to the bank, and paid the interest, and it was forwarded by Thompson, could give no claim of a colorable holding out by the company of Thompson as their general agent for the collection of any money that any debtor might wish to pay on bonds to the complainant. More than that, the defendants had express notice that the principal of this bond was not payable at the First National Bank at the time the $1,000 was paid therein. The original contract expressed in the bond provided for payment at said bank, but in consideration of the extension of the loan it was changed, and both principal and interest thereafter were made payable at the office of complainant in the city of Newark, N. J. The principal not being due when defendants proposed to make payment thereon, it could only be done by a conventional rearrangement between the obligors and the obligee. And especially must the presumption be indulged that no such alteration of the mortgage bond could be effected whereby any part of the security could be released, without the express consent of the mortgagee. The exercise of such plenary power by the local agent would have been so extraordinary as to excite special wonder and inquiry of the mortgagors as to the authority of such an agent. Thompson did not even assume to so act when the defendants applied to him to effect such release on the payment of the $1,000. This is rendered absolutely certain by the deposition of defendant John B. Miles. He states in his deposition that after the sale was made to Mrs. Drucker he went to see Mr. Thompson, “to know if, by paying off $1,000, if that would release that place, and take it off that piace, and leave the remaining $2,000 on the home place where we live. He said he would write immediately to the company, and find out.” And he further admitted that Thompson showed him the letter received from the company, which was evidently the letter of March 10, 1894. This letter advised him that Thompson had no authority to [35] act. in respect of this particular transaction, unless specially authorized (hereto by the company. Accordingly, the defendants made out and sent through Thompson their application for a. new loan of $2,000, which Thompson forwarded in the letter of March 16, 1894. In this letter Thompson asked the treasurer to submit the matter to 1he company, and advise him of the decision. To this the secretary of this company made answer by telegram, saying, “Miles1’ applicat ion approved, subj< et to title.” This was the last ever heard of the matter by the company until after the collapse of the bank, and Thompson had lied. No title was submitted to the company, and no deed of trust nor money was forwarded to them, and no release of the first mortgage was given by the company. If the $1,000 is to be regarded, as defendants claim, as payment on the $3,000 bond, it was not paid to the company at its office, as the contract of extension expressly stipulated it should be; and, if Thompson could be regarded as clothed with authority to receive if, (lie money was not paid to him, but to the hank, by check made payable to the bank, and a receipt wan taken therefor from Thompson as cashier of the bank. This was done in the face of the fact that the authority of the bank to receive either the principal or interest of the debt liad been revoked in consideration of the extension agreement. Thompson never got: the money, but Hie bank received and appropriated it. As the facts in the case show that this whole transaction, with the knowledge of defendants, was made to depeud upon the special arrangement, it is useless to discuss the suppositions of defendants respecting the scope of Thompson's agency in effecting the loans of the company. The money was not paid to him, and there is not the shadow of authority that the bank liad any agency to receive this money for complainant. The defendants, with a confused identity in law and fact of Thompson and the bank, elected to leave their money with the hank, and trust if to account therefor to the complainant. They thus constituted the bank tlieir agent for this $1,000 payment, and must look to it. for its recovery. Ward v. Smith, 7 Wall. 451. There is no evidence in this (‘ase to warrant the court in finding that Thompson directed the defendants to1 draw,, or have drawn the check on the bank as a method of payment to Thompson individually. And, if there had been such testimony, as matter of law Thompson had no authority as a, claimed agent of complainant: to receive or accept anything from defendants except money. He had no implied nor incidental authority to direct a payment to or deposit, in the bank, so as to bind the principal. When the check was made payable to the bank, and passed to complainant’s credit therein, the bank was insolvent in fact, and known to be so by Thompson. The money could not then be drawn out: of the hank on the order of anyone save that of complainant, if ratified by them. Thompson had no special or implied authority from complainant to check out its account. It: does seem to me that, if such a method of payment should be held to constitute payment to the absent creditor on a bond then in its possession, and payable by express agreement at its office in New Jersey, the court, Instead of enforcing, would unmake, a contract. It results that the issues are found for complainant, and decree accordingly.