Constant v. Univ. of Rochester

• Citation: 111 N.Y. 604,19 N.E. 631
• Parties: CONSTANT et al. v. UNIVERSITY OF ROCHESTER et al.
• Decision Date: 15 January 1889
• Court: New York Court of Appeals

111 N.Y. 604

19 N.E. 631

CONSTANT et al.

v.UNIVERSITY OF ROCHESTER et al.¹

Court of Appeals of New York.

January 15, 1889.

Appeal from superior court of New York city, general term.

Action by Mary T. Constant and others, executors, to foreclose a motgage executed February 17, 1883, by the defendants Hugh and Elizabeth Meehan to Samuel S. Constant, plaintiff's testator. The University of Rochester is joined as defendant, being the holder of a mortgage on the same property, dated January 11, 1884. The court found that plaintiffs' mortgage was a lien superior to that of the university, on the ground that, although plaintiffs' mortgage was never recorded, yet the agent who obtained the university's mortgage had knowledge of the existence of plaintiffs' mortgage, having himself procured it, and it being at the time in his office; and that this knowledge must be imputed as notice to his principal. The university appeals.

Martin W. Cooke, for appellant.

John E. Parsons, for respondents.

PECKHAM, J.

In taking the mortgage of January, 1884, we think the university occupied the position of mortgagee for a valuable consideration. It surrendered a prior mortgage, with the accrued interest thereon, and took the mortgage in question. If the university be not chargeable with notice of the prior mortgage to Constant, which was unrecorded, then its own mortgage is the prior lien, as between the two.

The first important question arising is, did Dean, who acted in the transaction as the attorney and agent for the university at the time of the execution of the mortgage to the university, have knowledge of the existence of the prior mortgage to Constant, executed in February, 1883, and which he then took as agent for Constant? In other words, is there any proof that he in January, 1884, had that fact present in his mind and recollection,so that it can be said from the evidence that he then had knowledge of its existence as an unpaid outstanding obligation?

The transaction out of which the mortgage to the university arose occurred 11 months subsequent to the transaction out of which the mortgage in suit arose; and the former mortgage was neither a part of the same transaction as the latter, nor had it the least connection therewith. Under the law, as decided by the older cases in England, such fact would have been an absolute defense to the claim that there was any constructive notice to the defendant arising out of notice to its agent, because such notice was in another and entirely separate transaction.

In Warrick v. Warrick, 3 Atk. 291, 294, decided by Lord Chancellor HARDWICKE in 1745, that able judge assumed it as unquestioned law that notice to the agent, in order to bind his principal by constructive notice, should be in the same transaction. He said: ‘This rule ought to be adhered to; otherwise it would make purchasers' and mortgagees' titles depend altogether on the memory of their counselors and agents, and oblige them to apply to persons of less eminence as counsel, as not being so likely to have notice of former transactions.’ Cases were continually arising subsequent to that case wherein the principle was assumed as the law of England, although the cases did not in their facts absolutely call for a decision on that point.

But in Mountford v. Scott, 1 Turn. & R. 274, upon an appeal from a decision of the vice-chancellor, Lord Chancellor ELDON said that the vice-chancellor proceeded upon the notion that notice to a man in one transaction is not to be taken as notice to him in another transaction. The lord chancellor continued: ‘In that view of the case, it might fail to be considered whether one transaction might not follow so close upon the other as to render it impossible to give a man credit for having forgotten it.’ He further said: ‘I should be unwilling to go so far as to say that, if an attorney has notice of a transaction in the morning, he shall be held in a court of equity to have forgotten it in the evening; it must in all cases depend upon the circumstances.’

In Hargreaves v. Rothwell, 1 Keen, 154, Lord LANGDALE, master of the rolls, held that where one transaction is closely followed by and connected with another, or where it is clear that a previous transaction was present to the mind of the solicitor when engaged in another transaction, there is no ground for a distinction by which the rule that notice to the solicitor is notice to the client should be restricted to the same transaction.

In Nixon v. Hamilton, 2 Dru. & Walsh, 364, (decided in 1838,) Lord Chancellor PLUNKET adverted to the rule as as to the necessity of notice in the same transaction, and stated, if it were notice acquired in the same transaction, necessarily the principal was to be charged with the knowledge of the agent; but if it were notice received by him in another transaction, then such notice was not to affect the principal, unless he actually had the knowledge at the time of the second transaction. See, also, the case of Dresser v. Norwood, decided in the court of exchequer chamber, and reported in 17 C. B. (N. S.) 466.

This modification of the old English rule is recognized in the comparatively late cast of The Distilled Spirits, 11 Wall. 356. Mr. Justice BRADLEY, in delivering the opinion of the supreme court of the United States, stated that the doctrine in England seems to be established that, if the agent at the time of effecting a purchase has knowledge of any prior lien, trust, or fraud effecting the property, no matter when he acquired such knowledge, his principal is affected thereby. If he acquire the knowledge when he effects the purchase, no question can arise as to his having it at that time. If he acquired it previous to the purchase, the presumption that he still retains it, and has it present to his mind, will depend upon facts and other circumstances. Clear and satisfactory proof that it was so present seems to be the only restriction required by the English rule, as now understood; and the learned justice states that the rule, as finally settled by the English courts, is, in his judgment, the true one, and is deduced from the best consideration of the reasons on which it is founded. In this opinion the whole court concurred.

Story, in his work on Agency, § 140, says: ‘But unless notice of the facts come to the agent, while he is concerned for the principal, and in the course of the very transaction, or so near before it that the agent must be presumed to recollect it, it is not notice thereof to the principal; for otherwise the agent might have forgotten it, and then the principal would be affected by his want of memory at the time of undertaking the agency. Notice, therefore, to the agent before the agency is begun, or after it has terminated, will not ordinarily affect the principal.’

In Bank v. Davis, 2 Hill, 451, it was held that the principal is deemed to have notice of whatever is communicated to his agent while acting as such in a transaction to which the communication relates, and it was held in that case that notice to a bank director, or knowledge obtained by him, while not engaged officially in the business of the bank, would be inoperative as notice to the bank.

In Holden v. Bank, 72 N. Y. 286, the rule was explained, and it was therein held that where an agency was in its nature continuous, and made up of a long series of transactions of the same general character, the knowledge acquired by the agent in one or more of the transactions is to be charged as the knowledge of the principal, and will affect the principal in any other transaction in which the agent as such is engaged, and in which the knowledge is material. In that case it will be seen, upon reading the very able opinion of FOLGER, C. J., that there was no question as to the knowledge of the agent of the various facts, and the only question raised was whether it should be imputed to his various principals in the transactions.

In Cragie v. Hadley, 99 N. Y. 131, 1, N. E. Rep. 537, the doctrine that the knowledge of the agent should come to him in the identical transaction was alluded to, and it was held that it was not necessary in all cases that the notice should be thus given, and that notice to an agent of a bank intrusted with the managementof its business was notice to the corporation, in transactions conducted by such agent acting for the corporation in the scope of his authority, whether the knowledge of the agent was acquired in the course of a particular dealing or on some prior occasion. See, also, Welsh v. Bank, 73 N. Y. 421;Bank v. Savery, 82 N. Y. 291.

From all these various cases it will be seen that the furthest that has been gone in the way of holding a principal chargeable with knowledge of facts communicated to his agent, where the notice was not received, or the knowledge obtained, in the very transaction in question, has been to hold the principal chargeable upon clear proof that the knowledge which the agent once had, and which he had obtained in another transaction, at another time, and for another principal, was present to his mind at the very time of the transaction in question. Upon a careful review of the testimony in this case, we have been unable to find any such proof. It is true the learned trial judge finds that, contemporaneously with the execution of the mortgage to the university, Dean caused to be made a statement upon the basis that the amount was to be loaned to the mortgagors, and that out of the money coming to them, as a consideration for the mortgage to the university, the amount of the bond and mortgage to the plaintiff's decedent, with interest, was to be paid, and that mortgage was to be satisfied; and he further found that the university, through Dean, had notice of the mortgage of the plaintiff's decedent in connection with, and as part of, any proposed transaction by which there was to be loaned to the mortgagor the amount of the bond and mortgage to the university. What is...