Burchard v. Hull
| Decision Date | 03 February 1898 |
| Docket Number | 10,877 - (268) |
| Citation | 74 N.W. 163,71 Minn. 430 |
| Parties | KATE M. BURCHARD v. WILLIAM E. HULL and Others |
| Court | Minnesota Supreme Court |
Appeal by plaintiff from an order of the district court for Scott county, Cadwell, J., denying her motion to amend the findings and for a new trial. Reversed.
Principal and Agent -- Agent for Collection of Mortgage Interest Coupon -- Extent of Power -- Implied Authority -- Foreclosure.
The plaintiff, being the owner of a note secured by a real-estate mortgage containing a power of sale, detached from the note an interest coupon, and transmitted it to an agent for collection (that being the extent of his express authority) the plaintiff herself retaining the principal note, not yet due, and the mortgage. Held, that the agent had no implied authority to foreclose the mortgage under the power; that in such case his implied authority was limited to a resort to such remedies as might be pursued for the collection of the coupon, irrespective of the collateral mortgage.
John H Nickell, Brooks & Hendrix and Hahn, Belden & Hawley, for appellant.
An agent in whose hands an interest coupon note has been placed for collection, the owner retaining the principal note and securities given therefor, is not authorized to collect, or receive payment upon, the principal note. Mechem, Ag. § 817; 1 Jones, Mort. § 964; Smith v. Kidd, 68 N.Y. 130; Crane v. Gruenewald, 120 N.Y. 274; Cooley v. Willard, 34 Ill. 68; Doubleday v. Kress, 50 N.Y. 410; Richards v. Waller, 49 Neb. 639; Klindt v. Higgins, 95 Iowa 529; Joy v. Vance, 104 Mich. 97; City v. Reams, 51 Neb. 225; Van Deusen v. Ingraham, 110 Mich. 38; Williams v. Walker, 2 Sand. Ch. 325; Bronson v. Ashlock, 2 Kan.App. 255; Padley v. Neill, 134 Mo. 364; Western v. Douglass, 14 Wash. 215. Where the agent is intrusted neither with the principal note nor with the mortgage he has no authority to dispose of the mortgage, or to realize upon the same, whether by sale, foreclosure or otherwise.
The fact that the record discloses a foreclosure regular in form is no protection to a purchaser to the property from the grantee at the foreclosure sale if the foreclosure was unauthorized. Bausman v. Kelley, 38 Minn. 197, 206; Welch v. Cooley, 44 Minn. 446; Hayes v. Lienlokken, 48 Wis. 509.
Charles D. Hinds, for respondent.
The delivery of the coupons to the agent for collection carried authority to the agent to use all proper and necessary means to accomplish the purpose of the agency. Story, Ag. §§ 58, 77, 97; Mechem, Ag. §§ 194, 386, 388; Benjamin v. Benjamin, 15 Conn. 347; Watts v. Howard, 70 Minn. 122; Ryan v. Tudor, 31 Kan. 366. Such agency gives authority to sue and direct what property to levy on. Joyce v. Duplessis, 15 La. An. 242; Bush v. Miller, 13 Barb. 481, 488; Scott v. Elmendorf, 12 Johns. 317; M'Minn v. Richtmyer, 3 Hill, 236. In Merchant v. Woods, 27 Minn. 396, after the mortgage had been paid it was foreclosed and the property sold to a bona fide purchaser. The court held that the title of such purchaser was protected under the recording law. See, also, Bausman v. Faue, 45 Minn. 412; Bausman v. Eads, 46 Minn. 148. In the following cases the facts are nearly the same as those in the case at bar. Hatfield v. Reynolds, 34 Barb. 612; Thomson v. Shelton, 49 Neb. 644; Shane v. Palmer, 43 Kan. 481; Quinn v. Dresbach, 75 Cal. 159.
The facts in this case are practically undisputed. The plaintiff was a resident of Brattleboro, Vt., and a depositor and customer of the Vermont National Bank of that place. Having $1,200 which she desired to lend on western real-estate security, she authorized and requested the bank to make such an investment for her. The bank made the investment for her through A. F. & L. E. Kelley, of Minneapolis, who loaned the money to the defendant Hull, who executed therefor his note, dated January 30, 1890, payable to the order of the plaintiff, at Brattleboro, five years after date, with interest at 7 per cent. per annum semiannually, according to the terms of 10 coupon notes of even date, attached to the principal note, also payable to the order of the plaintiff, at Brattleboro, on the 1st days of January and July of each year. As security for the payment of these notes, Hull, on the same day, executed to plaintiff a mortgage, containing a power of sale, on 80 acres of land in Scott county, in this state. After recording the mortgage, the Kelleys transmitted it, together with principal note and coupons attached, to the bank at Brattleboro, which delivered them to the plaintiff, who has ever since retained them in her exclusive possession, except as she, from time to time, detached the maturing interest coupons, and delivered them to the bank for collection, as hereinafter stated.
Upon the evidence, there can be no question that up to this point the agency of the bank was special and limited, the extent of it being to make the loan for plaintiff, and that when this was done, and the securities delivered to her, the bank's authority terminated, unless afterwards continued or renewed by the subsequent acts of the plaintiff. Plaintiff did not know the Kelleys, and had no communication with them, her dealings being exclusively with the bank. It must be assumed from the nature of the business that she knew that the bank would have to employ some one in the West to make the loan; and, from the fact that the names of the Kelleys were printed on the margin of the notes delivered to her, she may have known that the bank had employed persons of that name to make the loan. But, as a stream cannot rise higher than its source, the bank could not delegate to a sub-agent any greater authority than it itself possessed.
As each interest coupon was about to mature, the plaintiff detached it, and delivered it to the bank for collection and credit to her account. Although the coupons were payable in Brattleboro, the custom of the bank was to send them to the Kelleys for collection. The evidence is to the effect that plaintiff was not aware of this, but, as we view the case, it is immaterial whether she was or was not. The Kelleys, on receipt of a coupon, would collect it from Hull, and remit the proceeds to the bank, which then placed them to the credit of plaintiff's account.
Hull, however, defaulted in the payment of the coupons which fell due July 1, 1892, and January 1, 1893; but in both instances the Kelleys advanced or paid the amount out of their own funds, and remitted the same to the bank as if paid by Hull, the bank placing the amount, as usual, to the credit of plaintiff's account, she supposing that the coupons had been paid by Hull. The Kelleys then placed, or caused to be placed, these two coupons in the hands of an attorney, and procured him to foreclose the mortgage, under the power, in the name of the plaintiff, and bid in the property on March 25, 1893, in the name of A. F. Kelley, for over $1,400, the full amount of principal and accrued interest due on the mortgage. The sheriff's certificate and other proofs of the foreclosure were placed on record. There being no redemption from this sale, A. F. Kelley, in November, 1894, sold and conveyed the land to the defendant Wells, for $1,750 cash, and appropriated the money to his own use. There is no evidence that Wells did not purchase and pay his money in the honest belief that the foreclosure was authorized and valid, and that Kelley's title was good.
Neither plaintiff nor the Vermont bank knew of this pretended foreclosure, or the subsequent sale of the land to Wells until the facts came to light, after the Kelleys failed, in the fall of 1896. The plaintiff never authorized the foreclosure, unless such authority was implied from her delivering the coupons to the bank for collection. Notwithstanding such foreclosure and sale, the Kelleys continued regularly to remit the interest, as it became due, to the Vermont bank, as if the mortgage was still a subsisting live security, and continued to do so until shortly before their failure, the last remittance being for the interest that fell due January 1, 1896. Plaintiff supposed this was being paid in the ordinary course of business by the...
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