Burlington Sav. Bank v. Prudential Ins. Co. of America

• Decision Date: 03 April 1928
• Docket Number: 38302
• Citation: 218 N.W. 949,206 Iowa 475
• Parties: BURLINGTON SAVINGS BANK, Appellee, v. PRUDENTIAL INSURANCE COMPANY OF AMERICA, Appellant, et al., Appellees
• Court: Iowa Supreme Court

218 N.W. 949

206 Iowa 475

BURLINGTON SAVINGS BANK, Appellee, v. PRUDENTIAL INSURANCE COMPANY OF AMERICA, Appellant, et al., Appellees

No. 38302

Supreme Court of Iowa, Des Moines

April 3, 1928

REHEARING DENIED SEPTEMBER 28, 1928.

Appeal from Crawford District Court.--M. E. HUTCHISON, Judge.

Petition and cross-petition for foreclosure of mortgage, and cross-petition for partial cancellation of mortgage held by defendant Prudential Insurance Company. Defendants Rose F Argotsinger and George Argotsinger executed to defendant C L. Voss a mortgage of $ 18,000, dated December 1, 1916, on the land in question. Voss assigned this mortgage to plaintiff. Voss was a member of the partnership of Kuehnle & Voss, who were doing business under that name, and also under the name of Bank of Denison. Kuehnle & Voss were engaged in the business of banking, abstracting, and making real estate loans. Their predecessors, Shaw & Kuehnle, and they themselves (Kuehnle & Voss) had contracts with the defendant Prudential Insurance Company in reference to making loans the contents of which will be referred to in the opinion. The Argotsingers applied to the Prudential Company, through Kuehnle & Voss, for a loan of $ 24,000. It was intended that the proceeds of this loan should be used in part for the payment of the $ 18,000 mortgage held by plaintiff. The Argotsingers executed to the Prudential Company a note for $ 24,000, dated February 14, 1920, and as security, a mortgage on the premises in controversy. The Prudential Company made the loan of $ 24,000. Voss forged and recorded a release of plaintiff's $ 18,000 mortgage, and furnished the Prudential Company an abstract of title showing plaintiff's mortgage to have been released. Plaintiff's mortgage has not been paid. Decree of foreclosure in its favor was entered, and is not in question here. The court canceled the $ 24,000 mortgage to the Prudential Company, except as to $ 5,557.76, for which amount personal judgment was rendered against the Argotsingers, and foreclosure was allowed. The Prudential Company appeals.

Affirmed.

Stout, Rose, Wells & Martin and P. W. Harding, for appellant.

Sims & Page and Tinley, Mitchell, Ross & Mitchell, for plaintiff.

P. J. Klinker and L. W. Powers, for George Argotsinger and Rose Argotsinger, appellees.

Andrew Bell, for Jacob Johnson, Trustee in Bankruptcy, appellee.

J. E. Shaw Van, for Charles L. Voss, appellee.

L. W. Powers, for W. M. Knutson, receiver, appellee.

MORLING, J. DE GRAFF, ALBERT, KINDIG, and WAGNER, JJ., concur.

OPINION

MORLING, J.

Our conclusion on the question of whether Kuehnle & Voss were the agents of the Prudential Company in the negotiation of the loan by the Prudential Company to the Argotsingers, and our opinion of the consequences of such conclusion, are controlling, and we proceed immediately to the discussion of that question. The facts should be considered in the light of some elementary principles.

What one may do himself, he may do by another, and what he does by another, he does himself. Agency is a representative relationship.

"The distinguishing features of the agent are his representative character and his derivative authority." Mechem on Agency, Section 1.

See, also, Story on Agency (9th Ed.), Section 3; Sternaman v. Metropolitan Life Ins. Co., 170 N.Y. 13, 21 (62 N.E. 763, 765, 88 Am. St. 625, 57 L.R.A. 318); 2 Corpus Juris 421.

"The word 'agent' is a very extensive term, and may be fairly applied to almost anyone who performs the office of another." Clement v. Canfield, 28 Vt. 302.

"The relation of agency is the consensual relation existing between two persons, by virtue of which one of them is to act for and in behalf of the other and subject to his control." American Law Institute, Agency, Restatement No. 1 (Tentative), Section 2.

"When the person acting is to represent the other in the contractual negotiations, bargainings, or transactions involved in business dealings with third persons, or is to appear for or represent the other in hearings or proceedings in which he may be interested, he is termed an 'agent,' and the person for whom he is to act is termed the 'principal.'" Idem, Section 3.

"Stipulations in the contract of the parties as to whether a given person is an agent, and if so, whose agent he shall be deemed to be, are not conclusive. Neither is the testimony of the agent or the parties conclusive. * * * (a) Where a person is unquestionably the agent of one party or the other in a transaction, but there is a dispute as to which party is his principal, the question is to be decided by a reference to all the facts and circumstances of the case. A proper interpretation of the facts may indicate that he was the agent of one party, although the contract recites or he testifies that he was the agent of the other." Idem, Section 71.

"(3) There may be express and formal employment, or employment may be inferred from facts and circumstances, or implied from other employment, under the rules set forth in Sections 43 and 44." Idem, Section 72.

The principal and agent may attempt to disguise their real relationship under the form of a contract between them by which the relationship of principal and agent between them is in terms denied, and is asserted to exist between the agent and a third person. They may attempt by their contract to make the agent the agent of another, instead of the actual principal. The court will not permit itself to be deceived, or the actual relationship between the principal and agent to be perverted or the rights of third persons affected by such jugglery of words or make-believe, but will ascertain the facts as they actually are, and on such facts determine the truth and the true relationship as it is in reality. Trotter v. Grand Lodge, 132 Iowa 513, 520, 109 N.W. 1099; McLean v. Ficke, 94 Iowa 283, 289, 62 N.W. 753; Donaldson v. Kenegy, 197 Iowa 893, 898, 196 N.W. 587. See Youtsey v. Union Cent. L. Ins. Co., 191 Iowa 1120, 183 N.W. 476; Harrison v. Legore, 109 Iowa 618, 80 N.W. 670.

The Prudential Company has its principal office at Newark, New Jersey. It has been engaged in making loans in Iowa. The extent of such business in Iowa does not appear; but it is a fair inference from the record that an extensive loan business has been transacted by the Prudential Company in Iowa through Shaw & Kuehnle and Kuehnle & Voss. In 1911, Shaw & Kuehnle were asked by the Prudential Company to "furnish us with an up-to-date list of your local correspondents." A list was accordingly furnished, and included names in perhaps 100 or more towns. The Prudential Company thereupon advised Shaw & Kuehnle that "it has been thought best to give The Leavitt & Johnson Trust Company, of Waterloo, Iowa, the exclusive right to submit applications to us for farm loans upon property in the following counties in Iowa," naming some seventy. The company's letter stated:

"As most of this section of the state is somewhat distant from your office you have made a very limited number of loans for us there. We prefer that loans you have already made in this section should remain under your supervision but new applications upon property in the above counties which you wish to submit to us should be referred to The Leavitt and Johnson Trust Company."

Note the language. A loan business of this extent would naturally be expected to have the oversight of some representative or agent of the Prudential Company in the state. On February 14, 1913, Kuehnle & Voss and the Prudential Company made a contract, reciting:

"Whereas the party of the first part desires to submit to the insurance company applications for loans upon the security of mortgages on lands located in the state of Iowa, and the insurance company is willing to receive such applications, and make loans where said applications are approved."

The contract proceeds to declare, in substance, that, where application is made to the company by Kuehnle & Voss, and accepted by the company, the company will deposit to Kuehnle & Voss's credit with Kountze Brothers of New York City, "or in such other depositary as shall be mutually agreed upon, the amounts which may have been advanced by the party of the first part [Kuehnle & Voss] in order to close said loans as soon as the insurance company shall receive, in proper form, notes of the borrowers evidencing such loans, together with the abstracts of record of title and attorney's reports on title forwarded by the party of the first part to the insurance company, together with their certificate of payment of the borrower or borrowers." Kuehnle & Voss agreed to purchase from the insurance company all such loans as to which defects or errors might be discovered, and to pay such amount of any loans that might be found to be in excess of one half of the value of the security.

The Prudential Company insists upon this provision of that contract:

"It is further mutually understood and agreed that in all transactions arising out of the performance of this agreement, the party of the first part is acting and will act as agent of the borrower in negotiating said loans, and in no instance is acting or shall be authorized to act as agent for the said insurance company."

A previous similar contract between Shaw & Kuehnle and the Prudential Company was thereby canceled.

On June 19, 1922, an agreement was made, reciting that of February 14, 1913, as one by which the partnership of Kuehnle & Voss "was appointed the loan correspondent of the Prudential Insurance Company of America with authority to submit applications for and close real estate mortgage loans on lands located in the state of Iowa upon compliance with the conditions" thereof. This agreement further recited that "in said agreement it was...