Jensen v. Lewis Inv. Co.

• Decision Date: 20 February 1894
• Citation: 39 Neb. 371,58 N.W. 100
• Parties: JENSEN ET AL. v. LEWIS INV. CO.
• Court: Nebraska Supreme Court

39 Neb. 371

58 N.W. 100

JENSEN ET AL.

v.LEWIS INV. CO.

Supreme Court of Nebraska.

Feb. 20, 1894.

Syllabus by the Court.

The evidence in the case examined and considered, and held to sustain the finding of the trial court that S. was the lender's agent in negotiating the loan, and not the borrower's, and that the loss resulting from the failure of S. to pay over the money to the borrower, delivered to him for that purpose by the lender, falls on the latter.

Appeal from district court, Douglas county; Wakeley, Judge.

Action by Rasmus P. Jensen and another against the Lewis Investment Company to cancel certain mortgages. There was judgment for plaintiffs, and defendant appeals. Affirmed.Howard B. Smith, for appellant.

Morris & Beekman, for appellees.

NORVAL, C. J.

The appellant, the Lewis Investment Company, is a corporation organized under the laws of the state of Iowa, and engaged in the business of making loans upon real-estate security, its principal place of business being at Des Moines. Rasmus P. Jensen made an application to the investment company for a loan of $1,200 on certain real estate owned by him, and situate in the city of Omaha. After receiving notice that the application was accepted, he, with his wife, Mary Jensen, executed and delivered to said company two mortgages covering said real estate, one for the sum of $1,200, due in five years from date thereof, with 7 per cent. interest, payable semiannually, and the other for the sum of $60, payable in 10 equal payments. Both mortgages were duly recorded in the office of the register of deeds of Douglas county. Subsequently, Jensen sold and conveyed the premises to Ole Oleson, warranting the title against incumbrances. About two years afterwards, Rasmus P. Jensen and Ole Oleson brought this action in the court below to cancel the mortgages, alleging in their petition, as a ground therefor, that the investment company had not paid to Jensen, nor to any one for him, the money agreed to be loaned, but had wholly failed and refused to pay the same, or any part thereof, and that it refused to surrender said mortgages, or to discharge the same of record. The investment company filed an answer and cross petition, making Mary Jensen a party defendant, praying a foreclosure of the mortgages. Upon the hearing, the district court found the issues in favor of the plaintiffs, and rendered a decree in accordance with the prayer of the petition. For convenience, we shall hereafter designate Rasmus P. Jensen as “plaintiff,” and the Lewis Investment Company as “defendant.” The record discloses that one L. A. Stewart, on and prior to March 17, 1887, was engaged in the loan business in the city of Omaha, and had submitted numerous applications for loans to, and procured loans to be made by, defendant and other loan companies. On the date aforesaid, plaintiff applied to Mr. Stewart for a loan of money, and signed and left with him a written application for a loan of $1,200, which application was forwarded by mail by Stewart to the company at Des Moines. In due time the application was approved; papers were prepared by defendant, and sent to Stewart, which were subsequently executed by plaintiff. The money to pay out on the loan was given by the defendant to Stewart, and it is undisputed that the latter never paid any part of the $1,200 to the plaintiff, but absconded, without accounting for the same to the defendant.

The only question presented for consideration is this: Was the payment of the money to Stewart, in law, a payment to the plaintiff? In other words, was Stewart the agent of the plaintiff in negotiating the loan and receiving the money? A consideration of the evidence in the record satisfies us that the answer should be in the negative, and that the defendant should bear the loss occasioned by Mr. Stewart's dishonesty. That Stewart, for a long time prior to the transaction in question had been the agent of the defendant in negotiating loans for it in the city of Omaha, there is no room for doubt. George P. Russell, who was Mr. Stewart's clerk, and had charge of his loan office, testified as to the manner in which the business was conducted as follows: “Q. Were you familiar with the method of transacting business between L. A. Stewart and the Lewis Investment Co.? A. Yes, sir. Q. State to the court the manner of conducting the business between them. A. You refer to his negotiating loans? Q. In regard to this loan business, you say they were in correspondence? A. Yes, sir. Q. State the manner of conducting this business. A. Well, sir, we received the application for a loan on one of the Lewis Investment Co. blanks, which we furnished the party making the application. We then made an examination of the property, procured an abstract, and forwarded it to the Lewis Investment Co. for their approval. If approved, we received draft, mortgages, notes, and instructions from the company. Q. Did you have an appraisal made? A. Yes, sir; that is provided for in the blank. Q. When was that made? A. Made before the papers were submitted to the Investment Co. Q. Who chose the appraisers? A. As a general thing, Stewart. If he didn't, the Investment Co. did. Q. Where were the mortgages made out and prepared? A. At the office of the company in Des Moines. Q. What rates were they getting at that time? A. Their rate was eight per cent. Q. That is, eight per cent. per annum? A. Yes, sir. Q. During the course of the loan? A. Yes, sir. Q. Usually for five years? A. Yes, sir. Q. Two mortgages were made out, were they not? A. Yes, sir. Q. The principal mortgage was to secure the principal amount of the loan, was it not? A. Yes, sir. Q. What rate of interest would that mortgage draw? A. If the loan was eight per cent., as a general thing, the first mortgage was made at six per cent. Q. How was the other two per cent. evidenced? A. By a second mortgage, which ran sometimes one, two, or five years, as agreed. Q. Who filed these mortgages with the register of deeds? A. L. A. Stewart. Q. Was there any custom as to the order in which these two mortgages were filed? A. The instructions were to file the first mortgage first. Q. So it would show on the record that it was the prior of the two mortgages? A. Yes, sir. Q. What commissions did L. A. Stewart get for doing this business? A. There was a general understanding on eight per cent. mortgages that two per cent. of the face of the mortgage was to be the commission to be paid by the Lewis Investment Co. to L. A. Stewart,--two per cent. of the face of the loan. Q. When were these commissions paid? A. They were paid at different times; as a general rule, once a month. Q. Were they paid with each loan, or at stated periods? A. Sometimes the draft was made out to include commissions; sometimes not. It might be left for several loans to accumulate, and paid then, or wheneverit was asked. Q. The Court: State whether the borrower ever paid Mr. Stewart the commission outside of these papers. A. No, sir. Q. Mr. Davis: What was the usual custom, in making these second mortgages, as to whom the second mortgage ran? A. I am inclined to think, as a general rule, to the Investment Co. Q. You spoke of the second mortgage being equal to two per cent. for the entire term of the loan? A. Yes, sir. Q. In a five-year loan it would be ten per cent. of the principal sum? A. Yes, sir. Q. You spoke of the Lewis Investment Co. paying two per cent. of the face of the mortgage to Mr. Stewart? A. Yes, sir. Q. Was that the rule in loans for shorter period than five years? A. I think that rule applied to loans in general. That was the general understanding. Loans, as they were made, were made on certain terms.” The testimony of the witness Russell is not contradicted by any officer of the defendant, although George H. Lewis, the president, and Robert P. Maynard, the secretary, of the investment company, were both examined as witnesses on the trial. Mr. Lewis, in his testimony, states that he was acquainted with Mr. Stewart, and knew him while he was a resident of Des Moines, which was before his removal to Omaha; that witness declined to appoint Stewart agent, but admits that he requested him to send in applications for loans, and that the defendant had made about 100 loans on applications taken by Stewart; that the latter in every case gave his opinion as to the desirability of the loan, and in some instances they were made on his recommendation and approval, without an examination of the real estate offered by the borrower as security. The witness further testified that “we make it an imperative rule that no one shall represent himself as agent of the Lewis Investment Co. in any way, or publicly advertise himself as such. Mr. Stewart asked us to permit him to advertise himself as our agent in 1886, but we refused him. We have refused it to Messrs. Muir & Gaylord of this city. This is our universal custom and practice in all our business.” The record further discloses that, about a year after Stewart began to procure applications for the defendant, he was required to and did give a bond to the investment company in the sum of $10,000, signed by two sureties, conditioned as follows: “Whereas, the said L. A. Stewart is engaged in the business of negotiating and making loans secured by mortgage upon real estate in the city of Omaha, and in the county of Douglas, outside the city of Omaha, and in other portions of the state of Nebraska; and whereas, in the course of said business, acting as the agents of various parties desiring such loans, it is his practice to send applications to said Lewis Investment Co., and, if such loans are accepted by them, to forward the note or notes and mortgages securing the same, duly executed, to said company, and receiving from them in return the funds to fill the loans for which said Stewart makes drafts upon said Lewis Investment Co., or receives from said company such drafts, the same to be applied in payment of...