Adler v. Interstate Trust & Banking Co.

• Decision Date: 20 February 1933
• Docket Number: 30093
• Citation: 166 Miss. 215,146 So. 107
• Parties: ADLER et ux. v. INTERSTATE TRUST & BANKING CO
• Court: Mississippi Supreme Court

146 So. 107

166 Miss. 215

ADLER et ux. v. INTERSTATE TRUST & BANKING CO

No. 30093

Supreme Court of Mississippi

February 20, 1933

Suggestion Of Error Overruled April 17, 1933.

(In Banc.)

1. BILLS AND NOTES.

Whether payee was agent of holder to accept payment of note made payable in Louisiana should be determined by law of Mississippi, where notes were executed here and secured by mortgage on Mississippi property, and mortgage provided law of Mississippi should control.

2. BILLS AND NOTES.

Payment to bank of notes made payable there but not left with bank for collection or presented there is not satisfaction, and maker must see that payment is made to legal holder (Code 1930, section 2744).

3. PRINCIPAL AND AGENT. Notice given by maker of negotiable notes to payee, of intent to make prepayment, pursuant to provision of mortgage giving privilege to debtor of maturing notes by notice to payee, held not to constitute payee agent of holder of notes to receive payment, where holder was ignorant of giving of notice (Code 1930, section 2744).

The evidence disclosed that the notes were on their face negotiable instruments in every respect, and mortgage, while providing for giving of maturity notice by debtor to payee further provided that nothing in the mortgage should operate to affect the negotiability of the notes. When debtors gave notice to mature the notes, payee replied that it did not know who was the present holder, but it received payment under agreement to find the holder of the notes, and the trustee canceled the mortgage. Later the payee mortgage company failed. During all this time the holder of the notes knew nothing of the attempt to make prepayment.

4. BILLS AND NOTES.

Holder who fails to present note for payment merely forfeits unearned interest and attorneys' fees provided for in note and costs of collection by suit.

5 MORTGAGES.

Equity should not decree cancellation of mortgage, entered following payment of notes to payee, where payee in accepting payment did not act as agent for holder.

6 MORTGAGES.

Equity will set aside cancellation of mortgage obtained by accident fraud, or mistake.

7 MORTGAGES.

Trustee which, after wrongfully canceling mortgage, purchased notes from holder thereof, succeeded to rights of holder as against makers, where trustee canceled mortgage in good faith at instance of makers on representation that notes had been paid.

8. CORPORATIONS.

Banking corporation and security company could not by reason of having one officer, several directors, and some stockholders in common be treated as single corporation.

9. BANKS AND BANKING.

That securities company, as payee of notes, deposited in bank proceeds of payment held not to render bank chargeable with notice of makers' rights, where there was no evidence that particular deposit was earmarked.

ETHRIDGE, GRIFFITH and COOK, JJ., dissenting.

HON. T. PRICE DALE, Chancellor.

APPEAL from chancery court of Forrest county HON. T. PRICE DALE, Chancellor.

Suit by the Interstate Trust & Banking Company against Sam Adler and wife. Decree for complainant, and defendants appeal. Affirmed.

Affirmed.

T. J. Wills, of Hattiesburg, for appellants.

The appellee was trustee, vested, with the legal title to the property conveyed in trust to secure the payment of the indebtedness evidenced by the twenty promissory notes. As trustee, holding the title, it was the representative of both the maker and the holder of the notes so secured. In any particular act or transaction, the trustee might be the representative and agent of either the maker or the holder, depending upon the character of the act or the capacity in which the particular act is performed.

The trustee may acknowledge satisfaction of the deed of trust in the same manner that the cestui que trust might, but the trustee would be liable for the amount due Under the deed of trust if any of the indebtedness remains due and unpaid.

Section 2153, Mississippi Code of 1930.

The trustee could protect itself against being called upon to pay the holder of the note. It could require the delivery of the paid notes to it, but this was not within the contemplation of the contract or of the parties that the notes were to be paid at that time. In lieu thereof, the trustee could have required the depositing of the money with it to be held in lieu of the title to the property. The trustee however, had faith in the Mortgage & Securities Company's honesty and integrity. They extended to the Mortgage & Securities Company that credit and confidence that it frankly admitted that it would not have extended to Adler. As a result of that faith and confidence, the money was lost and the trustee was called on and did pay it. It is a well settled principle of law that when a loss has happened, which must fall on one of two innocent persons, it shall be borne by him who is the occasion of the loss.

Somes v. Brewer, 2 Pick. 184; Abbott v. Rose, 16 American Reports 427.

The payment of the money of December 8th to the Mortgage & Securities Company was the payment to the agent of the holder, and satisfied the debt. It is a well settled principle of law that when the money for the payment of a note, secured by a mortgage, has reached the hands of an agent, authorized to collect it, the debt is paid and the mortgagor is entitled to have the, mortgage given to secure the debt cancelled.

Boyd v. Pate, 90 N.W. 646.

The authority of an agent may be inferred from the mutual conduct and relationship of the parties, the general nature of the transaction and the circumstances surrounding the transaction itself, and the parties.

Bull v. Duncan et al., 59 P. 42.

It is not necessary to establish an alleged agency by direct evidence. It may be established by circumstances such as the relationship of the parties to each other and their conduct with reference to the subject matter of the contract.

Lindquist v. Dickson, 6 L.R.A. (N.S.) 729.

It is a well settled principle of law that where the maker of a note deposits at the place of payment designated in a note, at maturity, such funds to pay it, that it is a payment, even though the depository may fail and consequently the funds be lost.

Bank v. Zorn, 37 American Reports, page 733; Lazier v. Horan, 39 American Reports, page 167; McLeod v. Despain, 19 L.R.A. (N.S.) 276.

Stevens & Heidelberg, of Hattiesburg, for appellee.

It is undisputed in the evidence that the notes here sued on were not paid to the legal holder thereof, Mr. McIlveen.

The trustee, complainant here, was liable to Mr. McIlveen for his money.

Section 2153, Mississippi Code 1930.

There was no conduct on the part of the trustee which led the Adlers to make the deposit with the Mortgage & Securities Company, and the release was executed after the deposit was so made. Having been executed in good faith, there could not possibly be any element of estoppel on the part of the complainant trustee, and its only liability, if any, would be that fixed by said section 2153.

To work an estoppel of the trustee, the latter must have been guilty of some misrepresentation or conduct which led the Adlers to make the arrangement with the Mortgage & Securities Company which they in fact made, and to make the payment to the Mortgage & Securities Company which was made.

Hart v. Foundry & Machine Company, 72 Miss. 802, 17 So. 769.

The burden of proving payment is on the party setting it up, whether he pleads it in defense to a suit to foreclose the mortgage, or alleges it as a ground of relief in an action to redeem or to cancel the mortgage, or otherwise stop its enforcement.

41 Corpus Juris, 792.

Payment of a mortgage debt should be made to the mortgagee in person, or to some one who is duly authorized by law to receive the payment in his stead, or to whom he has given the power and authority to receive it.

The trustee in a deed of trust in the nature of a mortgage has generally no, authority to receive payment.

41 C. J. 788; 27 Cyc. 1387.

Payment to discharge the mortgage must be real. In any case, the mortgage is not discharged unless the intended means of satisfaction actually reaches the creditor and becomes and remains effective in his hands.

41 Corpus Juris, 789.

Where money is put in bank and the mortgagee notified, and he receipts for the debts and cancels, and the bank fails and the money is lost thereby, the mortgage is not discharged.

27 Cyc. 1391, citing Bax v. Hoagland, 13 Nebr. 571, 14 N.W. 514; 19 Ruling Case Law, page 455, para. 240.

As between the parties, or persons having notice a release of a trust deed in the nature of a mortgage, executed by a trustee without authority of the cestui que trust, and without having received payment of the debt secured, does not discharge the mortgage lien.

Day v. Brenton, 63 Am. St. Rep. 460; Swift v. Smith, 26 L.Ed. 193; McPherson v. Rollings, 1 Am. St. Rep. 826; Demuth v. Old Town Bank, 60 Am. St. Rep. 322; Borgess Investment Co. v. Vette, 64 Am. St. Rep. 567.

Equity will set aside a cancellation of a mortgage or deed of trust procured by accident, fraud or mistake.

41 Corpus Juris, 822; Holmes v. Bacon, 28 Miss. 607; Eagle Lumber & Supply Company v. Deweese et al., 135 So. 490.

The instrument is in trust for the security of the indebtedness therein described, and the status of the title is governed by the provisions of our Mississippi law, and particularly section 2779, Mississippi Code 1906, brought forward as section 2128, Mississippi Code 1930.

The notes were negotiable and the very character of the Mortgage & Securities Company as a financial and investment institution and the very fact that the notes bore a guaranty form for execution by the Mortgage & Securities Company put the...