Campbell v. Gowans

• Decision Date: 02 January 1909
• Docket Number: 1950
• Citation: 35 Utah 268,100 P. 397
• Court: Utah Supreme Court
• Parties: PETER N. CAMPBELL, Respondent, v. HUGH S. GOWANS and BETSY GOWANS, Appellants, and S. B. MILNER, Trustee, Defendant

100 P. 397

35 Utah 268

PETER N. CAMPBELL, Respondent, v. HUGH S. GOWANS and BETSY GOWANS, Appellants, and S. B. MILNER, Trustee, Defendant

No. 1950

Supreme Court of Utah

January 2, 1909

APPEAL from Third District Court, Salt Lake County.--Hon. Geo. G Armstrong, Judge.

Action to foreclose a deed of trust. From a judgment for plaintiff the defendants appealed.

REVERSED AND REMANDED with directions.

Messrs Richards, Richards & Ferry for appellants.

Messrs. Booth, Lee & Badger for respondent.

RESPONDENT'S AUTHORITIES.

"Where a mortgagor pays the amount of the debt to one whom he knows has not possession of the papers and who undertakes merely to procure a release from the mortgagee, the mortgagor assumes the risk of the release being procured in that manner." Lane v. Duchae, 73 Wis. 646, 41 N.W. 962.

"No authority can be inferred merely from the fact that the money was borrowed from the holder of the note through a firm of brokers, of which the trustee was a member, and that payments of interest on the note had been made to him before." (Stiger v. Bent, 111 Ill. 330; Insurance Co. v. Eldridge, 102 U.S. 545.) Possession indispensable by agent of securities to authorize him to collect. Jones on Mortgage, sec. 964. Burden of proof on debtor to show agent had possession of note when payment was made. (Stiger v. Bent, 111 Ill. 328; Eaton v. Knowles, 61 Mich. ; Williams v. Walker, 2 Sandf. Ch. N.Y. 325; Smith v. Kidd, 68 N.Y. 130; Garrels v. Morton, 26 Ill.App. 433.) While the authority of an agent to receive payments may be inferred from his having made the loan and retained the securities, this inference fails when the notes are withdrawn from his possession. (Garrels v. Morton, 26 Ill.App. ; Lane v. Duchae, 75 Wis. 646; Roberts v. Matthews, 1 Vern. 150; Westenholm v. Davies, Freem. Ch. D., 298; Hooles v. Frick, 75 Ga. 715.) The payment of an indebtedness, in order to operate as a discharge of the indebtedness, must, of course, be made to the creditor or to a person authorized by the creditor to receive it. (22 A. and E. Ency. Law (2nd Ed.), 518, and note 3.) And the fact that the party to whom the payment was made claimed to be the agent of the creditor is of no avail to the debtor where such person was not authorized to receive payment. (22 A. and E. Ency. Law (2nd Ed.), 518, and note 4.) Payment to an agent upon whom the creditor has conferred ostensible authority to receive it is as effective as though the agent had actual authority. "Payment to an agent who has neither possession of the securities nor express authority to receive the payment, is not good." (Smith v. Kidd, 68 N.Y. 130, 23 Am. Rep. 157; Dickson v. Wright, 59 Miss. 585, 24 Am. Rep. 677; Knife Co. v. Bank, 41 Conn. 421, 19 Rep. 517; Doubleday v. Kress, 50 N.Y. 410, 10 Am. 502; Curtain v. Ins. Co., 78 Cal. 619.) "Payment to an agent is binding upon the principal only to the extent of the agent's authority to receive payment." (Martin v. United States, 2 T. B. Monroe 89, 15 Am. Rep. 129, and note.) "A mortgagor who makes a payment to one, other than the mortgagee, does so at his peril. If the payment be denied upon him rests the burden of proving that it was paid to one clothed with authority to receive it. There is, however, one exception to this general rule. If payment be made to one having apparent authority to receive the money, it will be treated as though actual authority had been given for its receipt." Bailey on Agency (3 Ed.), 275; Story on Agency, sec. 98; Williams v. Waller, 2 Sandf. Ch. 325; Smith v. Kidd, 68 N.Y. 130, 23 Am. Rep. 157; Brewster v. Karnes, 103 N.Y. 564. The mere possession by an agent of evidences of indebtedness or securities does not confer upon him ostensible power to receive payment thereof. 22 Am. and Eng. Enc. of Law, p. 520; Lawson v. Nicholson, 52 N. J. Eq. 821; Trust Co. v. Folsom, 26 A.D. 40; Brown v. Taylor, 32 Gratt. (Va.) 135.

STRAUP, J. McCARTY, C. J., and FRICK, J., concur.

OPINION

STRAUP, J.

This action is brought by the plaintiff to foreclose a deed of trust on real property, executed and delivered by the defendants Hugh S. and Betsy Gowans to secure their promissory note of even date, payable to the plaintiff. The defendant S. B. Milner, a resident of Salt Lake City, was named the trustee in the deed. The answer of the Gowanses contained a plea of payment, and a demand for the surrender and cancellation of the note and deed.

The note was for $ 500, dated July 1896, and was payable July 1898 at the National Bank of the Republic, at Salt Lake City. The facts are substantially as follows: The Gowanses, who resided in Tooele county, applied to Porter J. Conway, who was in the real estate and loan business at Salt Lake City for a loan of $ 500. Conway, who was acquainted with the plaintiff, wrote him in New York, where the plaintiff resided, that the Gowanses desired a loan, and that, in his opinion, the loan would be good. The plaintiff wrote him that he would make the loan if Milner approved it. The plaintiff testified Milner represented him at Salt Lake City, and that he had, at various times, loaned a great deal of money for him in that vicinity. Milner approved the loan. The plaintiff sent a New York draft for the sum of $ 500, payable to himself and indorsed by him to Milner. Milner paid Conway the sum of $ 500, either in cash or by Milner's individual check. The money was paid by Conway to the Gowanses, either in cash or by Conway's own check. The note and trust deed were executed by the Gowanses and delivered to Conway. After the deed was recorded, Conway delivered the deed and note to Milner, who sent them to the plaintiff. All the transactions had with the Gowanses with respect to the negotiation of the loan, and the execution and delivery of the note and deed, were had with Conway. None of them were had directly with plaintiff or with Milner. When the interest coupons became due, the plaintiff sent them to Milner. Milner delivered them to Conway, who collected the interest from the Gowanses. All the interest paid by them was paid to Conway. When received by him he paid it to Milner. Milner forwarded it to the plaintiff. In December 1896, the plaintiff wrote Milner: "I have written Conway that I have sent the Gowans' coupons to you." In remitting interest to the plaintiff, Milner stated: "Paid by P. J. Conway Gowans' interest coupon, $ 25.00." At one time he wrote plaintiff: "Conway paid me the Gowans interest yesterday. It seems his clerk had got in on January 13th and had used it. When I wrote him (Gowans) that suit would be brought at once he sent me a check and the receipt." In January 1897, Milner wrote the plaintiff inclosing interest money which Conway had collected on the Gowans' note, and on a Mrs. Cherishino's note, also due the plaintiff: "I do not want to injure anyone wrongfully and my suspicions may be without foundation, but I would advise you to be careful of Conway and not trust him too far." Conway collected interest from other persons to whom plaintiff had made loans, and paid it over to Milner. In referring to one of them Milner wrote plaintiff: "Conway claims he sent you the interest money he had collected from Adonis. I made him give me a guarantee to pay it if he had not paid you." At another time he wrote: "I also enclose Conway's letter and agreement to pay your Adonis interest [35 Utah 273] --if you have not already got it." At still another time he wrote plaintiff: "I saw Conway today. He says he has some interest paid by Gowans, Adonis, or some one he forgets which, that belongs to you. He said he would bring it in today but he has not done so." Plaintiff himself testified that on one occasion when he was in Salt Lake City he met Conway on the street, who told him that he had $ 30 interest money received by him from Gowans, and that Conway then paid it over to him. Plaintiff also testified that he had received letters from Conway and that he had written letters to him. When asked to produce the letters received by him and copies of those written by him to Conway, he testified that he did not keep either. He admitted receiving the letters from Milner, and that he replied to them, but stated that he also kept no copies of those letters. Milner testified that he received letters from the plaintiff in reply to the letters written by him, but that he was able to find only one of them. The plaintiff, however, testified that after the Gowanses were behind on their interest due January 13, 1899, he wrote Conway several letters, saying, "Please have Gowans pay interest." He, however, testified that he wrote these letters "considering and believing that Conway was the agent or representative of the defendants, Gowans, in the matter of my loan to them." The interest was thereafter paid by the Gowanses to Conway as theretofore, which was by him paid over to Milner and by him forwarded to plaintiff. On July 12th, 1899, the Gowanses paid Conway $ 325, principal and interest, and on September 15th, 1899, they paid him the further sum of $ 203, principal and interest, being payment in full of the principal and interest on the note. Conway failed to pay these moneys over to either Milner or plaintiff. He absconded after he received them, and has not been heard of since. One of the defendants testified that when he made the last payment he asked Conway for the note and mortgage and for a release; that Conway told him that the note and mortgage were in the possession of Mr. Campbell in New York, and that Mr. Campbell was indisposed and sick and had gone south. He further testified that he knew Campbell did not live in Utah, that he resided in New York, and that Conway had to send east to get the note and mortgage and a release; and that, believing and expecting everything would be all right, h...