Livermore v. Maxwell

• Decision Date: 10 May 1893
• Citation: 87 Iowa 705,55 N.W. 37
• Parties: LIVERMORE v. MAXWELL ET AL. QUINCY v. GINSBACH ET AL. QUINCY v. ALLINE ET AL. DAVIS v. WERLE ET AL. PERKINS v. BOEVER ET AL.
• Court: Iowa Supreme Court

87 Iowa 705

55 N.W. 37

LIVERMORE

v.MAXWELL ET AL.

QUINCY

v.GINSBACH ET AL.

QUINCY

v.ALLINE ET AL.

DAVIS

v.WERLE ET AL.

PERKINS

v.BOEVER ET AL.

Supreme Court of Iowa.

May 10, 1893.

Appeal from district court, Plymouth county; Scott M. Ladd, Judge.

Action in equity to cancel and set aside a release and satisfaction, entered on the record, of a certain trust deed, executed by defendant Maxwell to secure his certain promissory note, and for judgment and decree foreclosing said trust deed, and declaring plaintiff's lien superior to the interest or liens of the defendants. Decree was entered dismissing plaintiff's petition, from which he appeals. The issues and facts appear in the opinion.Ira T. Martin and Haines & Lyman, for appellant.

Pat. Farrell, Geo. C. Scott, and J. H. & C. M. Swan, for appellees.

GIVEN, J.

1. Four other cases, resting largely upon the same state of facts involved herein, were submitted herewith, namely: Josiah P. Quincy, Appellant, v. Nicholas Ginsbach et al.; Josiah P. Quincy, Appellant, v. Ernest A. Alline et al.; Ann Davis, Appellant, v. Mathias Werle et al.; A. T. Perkins v. Paul Boever et al., Appellants. The following facts applicable to all these cases appear without controversy, or are fully established by the evidence: For some years prior to and during the time of the transactions hereinafter mentioned, J. M. Dunn was engaged, at Le Mars, Iowa, in the business of loaning money on real estate security, and John Jeffries & Sons were engaged in business as real estate and mortgage brokers at Boston, Mass. J. M. Dunn employed Jeffries & Sons, as brokers, to sell for him on commission such securities as he might send them for that purpose. The course of business was as follows: In some instances, J. M. Dunn paid the money to the borrower on receiving the security; in others, he took an application for a loan, forwarded it to Jeffries & Sons, and, when notified that they had a purchaser for the securities, Dunn took and forwarded the note and trust deed of the borrower to Jeffries & Sons, who indorsed the same to the purchaser on payment of the purchase price, and forwarded the money, less commissions, to J. M. Dunn, and he delivered it to the borrower. In each instance, whether the loan was made in the one way or the other, J. M. Dunn took the promissory note of the borrower for the amount of the loan, with interest coupons attached, payable to the order of P. M. Dunn at Boston, Mass. He also took from the borrower a deed to himself, as trustee, conditioned for the payment of the debt, and providing for a reconveyance “on full payment of the indebtedness.” The notes thus taken were forwarded to Jeffries & Sons, with indorsement thereon to them, without recourse, of the note and annexed coupons. In some instances the coupons were also indorsed, but in blank as to the indorsee. These indorsements purported to be signed by P. M. Dunn. J. M. Dunn also sent to Jeffries & Sons the trust deed, duly recorded, without indorsement. On receipt of such securities, in case where application for a loan had been accepted, Jeffries & Sons indorsed them, without recourse, to the person accepting the loan, on payment of the amount, and forwarded the money, less the commissions, to J. M. Dunn, who paid it to the borrower. In cases where J. M. Dunn had made the loan from his own money, Jeffries & Sons sold and indorsed the notes, without recourse, to the purchaser, and remitted the amount, less commissions, to J. M. Dunn. Payment of matured coupons was made through J. M. Dunn, the person paying furnishing him the money, which he sent to Jeffries & Sons, who paid it to the holder of the note on surrender of the coupon, which was sent, through Dunn, to the person paying the same. P. M. Dunn, the payee in these notes and cestui que trust, was the wife of J. M. Dunn. We are satisfied from the evidence that she had no personal interest in these transactions, and that her name was used by her husband, in taking securities and indorsing notes, by her authority and with her knowledge and consent. The facts in the case against Maxwell et al. are that on December 1, 1885, the defendant John Maxwell, having borrowed $1,100 from J. M. Dunn, executed his promissory note therefor, and his trust deed to secure the same, in the manner stated above. The deed being duly recorded, J. M. Dunn, on December 12, 1885, sent said note, coupons, and deed to Jeffries & Sons, indorsed as above stated, to be sold. On December 15, 1885, the plaintiff purchased said note and coupons, and Jeffries & Sons indorsed the note to him, without recourse, and delivered to him the coupons, which were indorsed in blank, the blank being filled with the name of the plaintiff as indorsee. The amount received by Jeffries & Sons from the plaintiff was sent to J. M. Dunn, less their commission. The coupons were paid at or before maturity, in the manner stated above. On March 27, 1887, John Maxwell sold and conveyed by warranty deed a part of the land to the defendant Daniel J. McNamara, who assumed to pay $700 of the debt secured by the trust deed from defendant Maxwell. On September 26, 1887, Maxwell sold and conveyed to McNamara the balance of the land; McNamara assuming the remaining $400 of the indebtedness secured by the trust deed. Prior to November 14, 1888, McNamara applied to the defendant the Farm Land Mortgage & Debenture Company, through its agent at Sioux City, for a loan of $1,600 upon said land, and exhibited an abstract showing title in him, clear of all incumbrances except said trust deed. The loan was accepted on condition that said trust deed should be satisfied and canceled. A draft was drawn on the Farm Land Mortgage & Debenture Company, of Chicago, for the amount required to satisfy the trust deed in favor of J. M. Dunn, trustee, which draft was sent to J. M. Dunn, to be presented and used when the trust deed was properly discharged of record, and an abstract showing that fact furnished to the agent at Sioux City. To secure this loan McNamara executed his mortgage to the company, November 14, which was duly recorded November 19, 1888. Upon receipt of the draft by J. M. Dunn, the following entry was made and signed in person by J. M. Dunn and P. M. Dunn, upon the margin of the record of said trust deed: “This trust deed paid in full, and the same is hereby released, satisfied, and discharged of record this twenty-sixth day of December, 1888. J. M. Dunn, Trustee. P. M. Dunn, cestui que trust.” About the 1st of March, 1889, McNamara sold said N. E. 1/4 of N. E. 1/4 of section 29 to the defendant Albert Hockenberry, and at the same time paid the Farm Land Mortgage & Debenture Company $500 upon the $1,600 loan, whereupon said company released the $1,600 mortgage, and took a new mortgage, securing the remaining $1,100, upon the same land, except that sold to Hockenberry. During all these years the plaintiff was a resident of Massachusetts, and had no actual knowledge of the transactions between the defendants, nor of the satisfaction entered upon the record of the trust deed, until shortly before the commencement of this action. The plaintiff failed to take an assignment of the trust deed, and failed to have the assignment of the Maxwell note to him entered of record.

2. We first inquire as to the liability of the defendants Maxwell and McNamara. They answer separately, each setting up the payment made to J. M. Dunn as a full satisfaction of the indebtedness, and claim the right to maintain that defense upon the ground that J. M. Dunn was agent for the holder of the notes, and authorized to receive the payment, and upon the further ground that Mrs. P. M. Dunn did not sign the indorsements, and therefore the plaintiff is not the holder of negotiable paper, for value, before due. There is no evidence that J. M. Dunn was agent for the holder of the notes, and authorized to receive payment thereof, unless such agency and authority are found in the trust deed. The only authority conferred by the deed is to reconvey upon the debt being fully paid. The authorities are uniform in holding that a trustee has no powers except those conferred by the instrument creating the trust; that persons dealing with the subject of the trust take notice of the extent and limitations of the powers conferred; and that those given must be strictly pursued. Perry, Trusts, § 831; Jones, Mortg. § 957; Pom. Eq. Jur. § 1062; Newman v. Samuels, 17 Iowa, 537; Hill, Trustees, 478. Even if Mr. Dunn did have authority to receive payment at the maturity of the note, that did not authorize him to receive it when he did. The note was payable “on the 1st day of December, A. D. 1890,” not on or before; yet Mr. Dunn assumed to receive payment nearly two years before it was due. It was argued that, as Mrs. P. M. Dunn joined in the release of the deed, the payment should be held good as to these defendants. These defendants knew that the note was negotiable by indorsement. They had each paid interest coupons that were returned to them, bearing the indorsement to the plaintiff, and they knew that neither J. M. nor P. M. Dunn had the note and coupons to surrender at the time the payment was made. Kellogg v. Smith, 26 N. Y. 18;Bergen v. Urbahn, 83 N. Y. 49. We are in no doubt but that these defendants knew that the note and coupons had been transferred, and made the payment upon the mistaken belief that J. M. Dunn had authority, as trustee, to receive it. It is certainly a hardship to require these defendants to pay this debt again, and equally so if the plaintiff must lose it. It is a familiar and just rule, “that, when one of the innocent parties must suffer by the wrongful act of a third person, he must suffer who left it in the power of such third person to do the wrong.” McClure v. Burris, 16 Iowa, 591. It was these defendants who put it in the power of J. M. Dunn to embezzle this money. It is further argued that, as the notes were not negotiable without...