First Nat. Bank of Mandan v. Larsson

• Decision Date: 16 January 1937
• Docket Number: 6445
• Court: North Dakota Supreme Court

271 N.W. 289

67 N.D. 243

FIRST NATIONAL BANK OF MANDAN, NORTH DAKOTA, a Corporation, Appellant, v. AGATON LARSSON, Respondent

No. 6445

Supreme Court of North Dakota

January 16, 1937

Rehearing Denied February 19, 1937.

Syllabus by the Court.

1. A debtor making a voluntary payment to one who holds obligations of the debtor either as creditor or collector has a right to determine and direct upon which debt his payments shall be applied.

2. If an agent has interests adverse to the principal as to matters within the scope of the agency, it is the agent's duty to reveal such interests to the principal.

3. A breach of duty alone is not sufficient to warrant the recovery of substantial damages by a principal against his agent. The principal must show that he was, in fact, damaged by the breach of duty, the measure of damages being the actual loss sustained.

4. If a principal for whom an agent holds a claim for collection establishes that he has suffered actual loss and that there is a reasonable probability that the loss would not have occurred had it not been for the negligence or breach of duty of the agent, the amount of such loss is prima facie the amount of the claim.

Appeal from District Court, Morton County; H. L. Berry, Judge.

Action by the First National Bank of Mandan, North Dakota, against Agaton Larsson. Judgment for defendant, and plaintiff appeals.

Reversed and remanded.

Sullivan Fleck & Sullivan, for appellant.

A bank holding paper for collection merely, if it merely presents the paper for collection and is guilty of no misrepresentation or fraudulent concealment, is not forbidden to obtain a preference from the same debtor for a debt owing to itself. 7 C.J. 609; United States Nat. Bank v Westervelt, 55 Neb. 424, 75 N.W. 857.

Where debtor did not direct bank to apply payments to debt due bank, rather than to debts due depositor of bank for whom bank acted as general agent for investments and collections, bank should have applied payments to debt due depositor. McRae v. Farmers State Bank, 35 P.2d 58; Dern v. Kellogg, 54 Neb. 560, 74 N.W. 844.

A cashier of a bank when making the application of moneys paid into the bank of which he is cashier, paid either by himself as trustee or by any other parties, is bound to apply them upon such indebtedness of the debtors as he is directed by them to do. National Bank v. Mechanics Nat. Bank, 94 U.S. 437, 24 L. ed. 176; Hall v. Marston, 17 Mass. 575; Stone v. Seymour, 15 Wend. (N.Y.) 10; Stebbins v. Lardner, 2 S.D. 127, 48 N.W. 847; Haglin v. Friedman, 118 Ark. 465, 177 S.W. 429; Stewart v. Simons, 163 S.W. 155; Ross Lumber Co. v. State Exch. Bank, 67 So. 188; 8 C.J. 445; Walmer v. First Acceptance Co. 192 Wis. 300, 212 N.W. 638; Carpenter v. National Shawmet Bank, 187 F. 1.

In the absence of definite facts proven showing affirmative negligence on the part of the collateral holders, and showing a definite damage to the pledgor by virtue of those specific alleged and proven acts of negligence, the pledgor cannot recover. Amick v. Empire Trust Co. 53 A.L.R. 1064; Herold v. Hill, 41 N.D. 30, 169 N.W. 592; Consolidated Naval Stores Co. v. Wilson, 21 A.L.R. 681.

Charles D. Cooley and Hyland & Foster, for respondent.

Every man to whom a business is intrusted by another has a trust to perform; and every man is a trustee who is to advise concerning or to operate the business of another. Quinn v. Phipps, 113 So. 419, 54 A.L.R. 1173; Waldron v. Evans, 1 Dak. 11, 46 N.W. 607; Holman v. Commercial & Sav. Bank, 50 S.D. 524, 210 N.W. 730; Beach v. Wilton, 244 Ill. 413, 91 N.E. 492; 26 R.C.L. 1232; Wood v. Rabe, 96 N.Y. 414; Rogers v. Genung, 76 N.J.Eq. 306, 74 A. 473; 7 C.J. 609.

A pledgee is not bound to collect the collateral security upon its maturity, before the maturity of the principal debt, except upon the request of the pledgor, or in pursuance of an express contract to do so. Jones, Collateral Securities, 3d ed. § 667; Ingstad v. Farmers State Bank, 61 N.D. 194, 237 N.W. 704.

If the collecting agent has any business of his own in conflict with that of the principal it is the agent's duty to decline the trust; or if undertaking it, to give the preference to the principal. To act otherwise is fraud. 7 C.J. 609; Commercial Bank v. Red River Valley Nat. Bank, 8 N.D. 382, 79 N.W. 859.

An employee who has business to transact on his own account similar to that entrusted to him by his employer must always give the latter the preference. Commercial Bank v. Red River Valley Nat. Bank, 8 N.D. 382, 79 N.W. 859.

The measure of damages in an action against an agent for negligence in collection is the actual loss sustained. Mechem, Agency, 2d ed. § 1320.

Morris, J. Christianson, Ch. J., and Burke, Nuessle and Burr, JJ., concur.

OPINION

MORRIS

This is an action on a promissory note which was tried before the court, a jury having been waived. The plaintiff appeals from a judgment of dismissal and demands a trial de novo under chapter 208, Session Laws of 1933. The note, dated March 10, 1934, and upon which about $ 1900.00 was due at the time of trial, is a renewal of an indebtedness which had been renewed from time to time for a number of years.

At the time of trial the plaintiff held for collection another note dated June 29, 1931, given by Anton P. Ness to the defendant in the sum of $ 1617.71 upon which three $ 25.00 payments were endorsed, the last endorsement being October 6, 1933. This note came into the plaintiff's possession through the following transactions. In March 1930 the defendant, who had performed labor and furnished material in connection with the improvement of the residence property of Anton P. Ness, turned over to a collector a claim against Ness for $ 1,700.00. The claim was not then in the form of a note. The witness, Hess, was president of the bank and a few days after the claim had been turned over to the collector, he wrote the defendant as follows:

"I am sorry that you turned your claim against Ness over to Abner Larsson for collection as it made Dr. Ness feel badly and will not help get your money any sooner.

". . . His last payment to you was I think in December and he paid you considerable money already. Therefore, I wish you would come in and see me about it and withdraw the claim from Larsson, as he is not going to be able to get it for you any quicker than I can. . . ."

On receipt of this letter the defendant withdrew his claim from the collector and turned it over to the plaintiff. Hess obtained from Ness a note representing defendant's claim concerning which he wrote to the defendant on April 29, 1930, as follows:

"I procured a note from Anton P. Ness $ 1,765.00 for one year but payable at the rate of $ 100.00 to $ 200.00 per month, beginning May 15th, 1930. I wanted him to pay at least $ 100.00 now but he said he had some interest payments to meet the 1st of the month on his cattle loan, but thought by May 15th he could start making the payments.

"I asked him to have his wife sign the note also but he did not want to ask her to." Hess succeeded in collecting $ 300.00 on this note. It was later turned over to the defendant and was in his hands when on April 18, 1931 Hess wrote him, ". . . I will have a check for $ 100.00 to apply on the Ness note and so you can fix up your interest here. Wish you would bring in the Ness note and leave it with us and from now I will arrange to collect at least $ 100.00 per month from him as business will pick up with him now and am sure he will be able to do it. By leaving the note here as collateral we can use that as a leverage on him that the note is here as collateral, and the payments must be made." After the receipt of this letter the Ness note was delivered to Hess for collection and as collateral to the indebtedness which the defendant owed the plaintiff bank. On June 29, 1931 the Ness note to the defendant was renewed in the sum of $ 1617.71 which renewal was still in the hands of the plaintiff up to the time this suit was brought. On January 18, 1932 Hess wrote to the defendant, "I hope to be able to get some money from Ness by the end of the month to apply on your note, but you should arrange to pay something besides and if you can pay your note down to the amount of the Ness note, we will endeavor to work that out of him."

Again he wrote the defendant, "I wish you would come in next week and arrange to fix up your note, pay what you can on it so we can renew it. I had expected to get a payment out of Ness but on account of the bad winter and impossible roads in the spring his income was not so good, but from now on it should be better."

"At any rate, wish you would pay your note down to the amount he is owing you and I think I will eventually be able to collect the amount he owes you, probably in monthly installments. . . ."

On December 11, 1932, Hess wrote the defendant again, "I wrote you sometime ago about your note and paying something on it and if possible cut it down to the amount of the Ness note, as I figure we will be able to work that out of him in time -- probably by fall. So if you can manage to cut your note down to the amount of his note we will expend our efforts to collect his note by fall. . . ."

During the time that these letters were written Ness was indebted to the plaintiff bank in excess of $ 12,000.00. This indebtedness was partially secured. In addition to sums realized from its security the plaintiff collected from Ness $ 1,700.00 in $ 100.00 payments, which were applied upon Ness's debt to the plaintiff. The defendant did not know of Ness's indebtedness to the bank nor of his payments upon this indebtedness. The defendant claims that the plaintiff while acting as his agent for the purpose of collecting the Ness note, received from Ness...