Brown v. Brown

• Decision Date: 14 November 1910
• Citation: 132 S.W. 220,96 Ark. 456
• Parties: BROWN v. BROWN
• Court: Arkansas Supreme Court

132 S.W. 220

96 Ark. 456

BROWN v. BROWN

Supreme Court of Arkansas

November 14, 1910

Appeal from Pulaski Chancery Court; John E. Martineau, Chancellor affirmed.

Decree affirmed.

Downie Rouse & Streepey and Carmichael, Brooks & Powers, for appellant.

The decree foreclosing the mortgage against the homestead was erroneous. Mandelbaum in dealing with Stevenson was bound to inquire into the nature and extent of his authority. 62 Ark 33; 19 Am. Dec. 94. Moreover, he was put on notice by Stevenson's own statement that he, Mandelbaum, was not surrendering the shares of stock for the benefit of appellant. Steele on Agency, § 82; 53 Ark. 135; 79 Ark 401. Appellee is not in the position of an innocent purchaser without notice, because Mandelbaum, her agent, it is clearly shown, acted with notice that there was no consideration passing to appellant. He could not be a bona fide holder of the note and mortgage because they were not taken in the due course of trade or of business. He acquired no better title than Dickinson or Stevenson, who had none. 47 Ark 363; 3 Am. St. Rep. 205; 16 Id. 661; 48 Id. 400. An equitable lien could not be created upon the homestead merely by the deposit of the mortgage. 3 Pomeroy (3 ed.), § 1265.

Riddick & Dobyns, for appellee.

1. Neither appellee nor his agent had ever been notified of the termination of Stevenson's agency, and they were justified in the belief that he was still appellant's agent with power to act in the substitution of the collateral. 31 Cyc. 1639, 1640; 24 Pa. S.Ct. 396. And the evidence shows that she ratified his act.

2. Appellant is estopped to deny the validity of the note and mortgage in the hands of appellee. 42 Ark. 24; 7 Cyc. 799; 11 Ark. 285; 33 N.J.Eq. 338; 63 N.J.Eq. 549, 53 A. 139; 63 N.E. 751; 86 Pa. 80; 1 Parson, Eq. Rep. 248; 60 N.E. 983. There is no allegation nor proof of bad faith on the part of Mandelbaum in the purchase of the note, and the burden of proving that it was not taken in good faith was on the appellant. 1 Daniel, Neg. Inst., § 776; 2 Wall. 110; Tiedeman on Commercial Paper, § 289; 61 Ark. 81. Mere knowledge of facts that would raise a suspicion as to the validity of the paper or gross negligence on the part of the taker at the time of the transfer is not sufficient to impair the buyer's title. 30 S.W. 1077; 96 U.S. 58. Purchaser of negotiable paper is not bound to make inquiry, though dealing with an agent. 1 Daniel, Neg. Inst., §§ 771-775. The fact that no consideration moved to the principal does not defeat estoppel. 102 Ill. 84-86. See also 105 Mo.App. 384; 79 S.W. 1013; 16 Cyc. 728.

OPINION

HART, J.

Lillian G. Brown purchased a stock of goods from Belle Brown in the city of Little Rock, Arkansas, and for part of the purchase money executed the following instrument of writing:

"Little Rock, Ark., June 22, 1908.

"One month after date, for value received, I promise to pay to Mrs. Belle Brown the sum of $ 50 or more, and on each and every succeeding month thereafter the sum of $ 50 or more until the full consideration for which this note is given, $ 4,600, with interest from date at the rate of 8 per cent. per annum, is paid in full; payable without defalcation or discount. The maker and indorser of this note severally waive notice of nonpayment and protest. This note being for the balance of the purchase of a stock of goods, it is hereby agreed and understood that a lien shall be retained on the south 47 feet of lot 2, block 37, in the town of Argenta, Arkansas, and subject to a mortgage now held on same by the Ladies' Building & Loan Association of Little Rock, Arkansas, said property being of the value of $ 2,500; that this note shall be indorsed and guaranteed by R. E. Stevenson; that, for additional security for the payment of said balance, stock certificate No. 10, for eighty (80) shares of stock of the Rose City Bank, of the city of Little Rock, Arkansas, is hereby attached hereto as collateral, said stock being worth $ 2,000. It is further agreed that at any time the parties hereto shall see fit to change the amount or kind of security, collateral or otherwise, provided for herein, it may be done with the consent of the parties hereto.

"Lillian G. Brown.

"Indorsed by R. E. Stevenson."

In the transaction, R. E. Stevenson acted as agent for Lillian G. Brown and J. J. Mandelbaum as agent for Belle Brown. Both principals and agents were present when the contract was executed. Some time afterwards Stevenson stated to Mandelbaum that he wanted the 80 shares of stock in the Rose City Bank for the purpose of giving the same to his wife. After some discussion it was agreed that the stock should be delivered to Stevenson, and in lieu of it he delivered to Mandelbaum an unrecorded mortgage on the homestead of Lillian G. Brown. This mortgage purports to have been executed on June 28, 1908 by Lillian G. Brown to W. L. Dickinson, agent, to secure the sum of $ 1,000 and interest, which the mortgage recites was due by Lillian G. Brown to said W. L. Dickinson, agent, on or before two years after date of mortgage. There was an assignment of said mortgage and the note for $ 1,000, which it was given to secure, by said Dickinson to said Belle Brown. This assignment or transfer of the mortgage is dated August 15, 1908.

Mandelbaum testified that he understood that the mortgage of Lillian G. Brown to W. L. Dickinson, agent, was a good and binding obligation at the time he accepted the transfer of the same in lieu of the Rose City Bank stock.

Lillian G. Brown testified that the mortgage from her to said Dickinson was executed for the purpose of borrowing money to pay on her homestead; that the contract with Dickinson was never consummated, and that she received no money from him; that she left the mortgage with Stevenson for the purpose of obtaining the money, and that the "deal fell through," and that the mortgage was never delivered to him; that she neglected...