Coffin v. Planters Cotton Company

• Decision Date: 12 June 1916
• Docket Number: 59
• Citation: 187 S.W. 309,124 Ark. 360
• Parties: COFFIN v. PLANTERS COTTON COMPANY
• Court: Arkansas Supreme Court

187 S.W. 309

124 Ark. 360

COFFIN v. PLANTERS COTTON COMPANY

No. 59

Supreme Court of Arkansas

June 12, 1916

Appeal from Mississippi Chancery Court; Charles T. Coleman, Special Chancellor; affirmed.

Decree affirmed.

Hughes & Hughes, for appellant.

1. Mrs Coffin has priority. 105 Ark. 152; 115 Id. 366; 27 Cyc. 1294; 1 Jones on Mortg. (6 ed.), § 956a, 814; 57 Kans. 743; 97 Ill. 156; 156 S.W. 483; 59 F. 917; 109 Cal. 42; 54 Neb. 262; 145 Mo. 142; 85 Md. 315; 50 Ind. 441; 57 So 671; 205 N.Y. 105; 162 Mass. 72; 100 Ga. 236 and many others. The great weight of authority is that the holder of a negotiable note under circumstances like these, has priority as against one who assumes to pay off the mortgage debt to the original mortgagee, whether such payment be made by the mortgagor personally or by some one for him, intending to take and actually taking a new mortgage. Cases supra. 203 U.S. 296; 39 L. R. A. 75; 97 U.S. 369, etc.

2. The loan company paid the mortgage. 97 Ill. 156; 102 Id 148; 191 Id. 174; 183 Id. 523.

3. French was not appellant's agent and she never ratified his acts. There can be no ratification without full knowledge of all the material facts, or where it is known the agent exceeds his authority and the principal has put it beyond his power to return or restore the benefits received, or without his fault conditions are such that he cannot be placed in statu quo, or repudiate the entire transaction without loss. 2 C. J. 496; 64 Ark. 217; 76 Id. 472; Ib. 563; 90 Id. 104; 105 Id. 512; 26 S.W. 381; 2 Corpus Juris., 480, 496; 1 Mechem Agency (2 ed.) § 403.

Caruthers Ewing, of Memphis, for appellee.

1. French was the agent of Mrs. Coffin with authority to act for her. If he violated his instructions this violation did not affect the loan company. Mrs. Coffin with full knowledge ratified the substitution of securities. The cases cited by appellant do not sustain her position. Many of them support our contention. 58 Mich. 138; 68 Id. 36; 77 N.W 355; 68 Pa. 985; 71 N.W. 538; 77 P. 512; 102 U.S. 545; 107 Id. 478; 46 Minn. 156; 13 Oh. St. 419; 15 L. R. A. (N. S.) 1025 and note. The bona fide purchase of a legal right, whether of security or otherwise, cuts short prior equities. Cases supra.

2. Mrs. Coffin ratified the acts of her agent with notice of facts and circumstances equivalent to knowledge of all facts reasonable diligence would enable one to discover. 58 Ark. 84; 23 Id. 735; 32 Id. 251; 16 Id. 94, 340; 114 Tenn. 467; 38 S.W. 733, 740; 94 U.S. 432; 101 Id. 140; 142 Id. 438; 150 Id. 96; 151 Id. 607; 5 L. R. A. (N. S.) 896; 73 P. 360, etc.

3. She had knowledge of all the facts. 28 Ark. 59; 54 Id. 216; 55 Id. 112, 240; 11 L. R. A. 81; 118 N.Y. 563; 64 Ark. 217 and many others.

OPINION

SMITH, J.

A condensation of the allegations of the complaint is contained in appellant's brief, from which we copy the following statement:

"The complaint alleges, in substance, that G. L. Waddell is the owner of a plantation in Mississippi County, Arkansas, known as the Shawnee Village. At the times mentioned he owed a balance of purchase money of about $ 20,000 on the land. Defendant, Planters Cotton Company, in March, 1911, loaned him approximately $ 30,000 on the land, taking three $ 10,000 notes due several months later. The plaintiff, two days thereafter, bought one of said notes from the Planters Company, before maturity, in good faith, without notice of any defense, and paid therefor $ 10,000 in cash. This indebtedness was renewed in 1912, and three new notes taken by the Planters company, one of which was thereupon indorsed to plaintiff, who also took a separate note for the interest then due her.

"On February 22d, 1913, the defendant Commonwealth Farm Loan Company (herein called the loan company) took a mortgage on the same land to secure a loan of $ 35,000. Of this sum, $ 20,000 was applied to liquidate the purchase money lien, which was in front of all the mortgages. The remainder, about $ 15,000, was paid to Planters Cotton Company, and that company placed of record on the same day a power of attorney to the clerk to satisfy the record of both the mortgages to it, which was done.

"The plaintiff was ignorant of all the proceedings. No part of the note held by her has peen paid, nor has she in any way authorized the release of record of the mortgage securing her note. The Planters Cotton Company is now in the hands of a receiver, and Waddell, the maker of the note, is insolvent.

"There were various other allegations on subordinate features of the controversy, but these were the main facts.

"The prayer is, in effect, for judgment on the note, for sale of the property, and that plaintiff be decreed to have priority in the proceeds except as to the $ 20,000 paid toward the purchase money."

Certain junior lienors are also parties defendant, but as the decree in the cause finds, and as they themselves concede, that their liens are inferior to the ones here involved, we make no statement of the issues as to them.

The loan company and the cotton company do not deny the execution of the different deeds of trust and other instruments referred to in the complaint, but they do deny that the deed of trust originally given had been satisfied of record without appellant's consent, but aver that she had authorized this action, and that she had fully ratified the action of the Planters Cotton Company in satisfying the deeds of trust, and that the loan company is an innocent purchaser.

The two principal questions in the case are, first, that of the priority of the mortgages and, second, whether the plaintiff, Mrs. Coffin, ratified the action of the Planters Cotton Company in satisfying the deed of trust securing the note on which this action is based. The principal question of fact which is important to consider in determining these questions is that of the nature and extent of the authority of one C. T. French as appellant's agent. Appellant's husband had been a member of the firm of Dillard & Coffin Company, and during the last years of his life French was employed by that firm and was held in the highest regard by its members. After the death of Mr. Coffin, French severed his connection with that firm and became connected with the Planters Cotton Company in the capacity of general manager. He continued, however, to be the agent and confidential adviser of Mrs. Coffin, and her confidence in him appears to have been unreserved.

We agree with appellant in her claim of priority. This view conforms to the opinions in the recent cases of Driver v. Lacer, 124 Ark. 150, 186 S.W. 824; Calhoun v. Ainsworth, 118 Ark. 316, 176 S.W. 316; Calhoun v. Sharkey, 120 Ark. 616, 180 S.W. 216; Koen v. Miller, 105 Ark. 152, 150 S.W. 411.

The note in question was negotiable and had been properly endorsed and was owned by appellant at the time the deed of trust securing it was cancelled. It was, therefore, the duty of the loan company to know who the owner of the note was, and it could not claim protection through the mere cancellation of the deed of trust by the cotton company, if that company was not the holder of the note at the time that action was taken.

It is earnestly insisted that French was the agent of Mrs. Coffin in causing the deed of trust to be cancelled. But a majority of the court do not accept that view of the evidence. All of us, however, do agree with the learned special chancellor in his finding that Mrs. Coffin ratified the action of French in cancelling the lien of this deed of trust.

We have been favored with very excellent briefs in this case which evince much learning and research on the part of opposing counsel; but the legal principles involved are not difficult and have been settled by the decisions of this court. It is well settled that, before one can be held to have ratified any unauthorized act of one who assumes to be his agent, the principal must have knowledge of all the material facts upon which said agency is predicated, and ignorance of such facts renders the alleged ratification ineffectual and invalid. Schenck v. Griffith, 74 Ark. 557, 86 S.W. 850; Lyon v. Tams & Co., 11 Ark. 189; Martin v. Hickman, 64 Ark. 217, 41 S.W. 852; Niemeyer Lbr. Co. v. Moore, 55 Ark. 240, 17 S.W. 1028.

But it is equally as well settled that when one has this knowledge and remains silent when he should speak, or accepts some benefit which he obtains by virtue of his reputed agent's acts, he cannot thereafter be heard to deny the agency. In other words, he will be held to have ratified the unauthorized acts. Ladenberg v. Beal-Doyle Dry Goods Co., 83 Ark. 440, 104 S.W. 145; Atlanta National Bldg. & Loan Assn. v. Bollinger, 63 Ark. 212, 37 S.W. 1049; Dierks Lbr., etc., Co. v. Coffman, 96 Ark. 505, 132 S.W. 654; Lyon v. Tams & Co., 11 Ark. 189; Billingsley v. Benefield, 87 Ark. 128, 112 S.W. 188; Pike v. Douglass, 28 Ark. 59; Creson v. Ward, 66 Ark. 209, 49 S.W. 827; Kelly v. Carter, 55 Ark. 112, 17 S.W. 706.

Appellant quotes and relies upon the rule as stated in 2 C. J. 496, where it is said:

"There is no ratification if, at the time it becomes known that the agent exceeded his authority, the principal has put it beyond his power to return or restore the benefits received, or if without his fault conditions are such that he cannot be placed in statu quo, or repudiate the entire transaction without loss."

This statement of the law is, of course, correct, and is in accord with the prior decisions of this court. It becomes necessary therefore, to determine whether Mrs. Coffin remained silent when she should have spoken, or whether she accepted benefits flowing out of the unauthorized acts of French, or whether the action taken by her was such only as was necessary to obtain the best security possible for...