Lodge v. Towne
| Decision Date | 16 February 1917 |
| Docket Number | 20,054 - (194) |
| Citation | 161 N.W. 403,136 Minn. 72 |
| Parties | GRAND LODGE, ANCIENT ORDER OF UNITED WORKMEN, v. EDWARD P. TOWNE |
| Court | Minnesota Supreme Court |
Action in the district court for St. Louis county to recover $2,500 paid to defendant. The answer, among other matters, alleged that in accepting that sum defendant fully believed that the same was paid him at the request of Emma M. Anschutz acting through her agent, C.J. O'Donnell, and defendant received the sum so paid in good faith and fully believed that the note and mortgage so satisfied were valid and genuine instruments, and defendant used all reasonable care and prudence in the transaction. The facts are stated at the beginning of the opinion. The case was tried by Fesler, J who made findings and dismissed the action. Plaintiff's motion to amend the conclusions of law was denied. From the judgment entered pursuant to the order for judgment and from the order denying its motion for amended conclusions of law plaintiff appealed. Reversed.
Recovery of money paid under mutual mistake of fact -- forged mortgages.
D. procured from defendant the sum of $2,500 as a loan to A., ostensibly secured by her note and a mortgage on real property owned by her. The note and mortgage were forgeries. Before the maturity of this mortgage, D. induced plaintiff to make a loan of $5,000 on the same property, arranging with defendant to accept payment of the $2,500 mortgage. Plaintiff, on receiving a note and mortgage purporting to be executed and acknowledged by A., but in fact forgeries perpetrated by D., delivered to defendant its check for $2,500, in payment of his mortgage, and to D. its check for $2,500, payable to A. Both plaintiff and defendant were ignorant of the forgeries, and neither was negligent. In this action to recover of defendant the money paid to him by plaintiff, it is held:
(1) The money paid to and received by defendant in payment of the forged note and mortgage held by him was the money of plaintiff, and paid by it. It was paid under a mutual mistake of fact and without consideration, and may be recovered back unless defendant, in reliance upon the payment, has altered his position so that to compel repayment would be against conscience.
(2) In an action to recover for money had and received under a mutual mistake, defendant is not liable where he has irrevocably altered his position to his loss in reliance upon the payment. The evidence in this case does not show that defendant, by reason of or in reliance on the payment, lost an opportunity to recover from the party guilty of the fraud, or that his position has been altered to his damage.
William B. Anderson, Warner E. Whipple and Frank E. Randall, for appellant.
W. S. Telford and William P. Harrison, for respondent.
The question in this case is which of two innocent parties, plaintiff or defendant, shall suffer for a wrong committed by a third person. The trial court decided in favor of defendant and plaintiff appeals from the judgment.
The facts are as follows: Plaintiff, a fraternal insurance corporation authorized and accustomed to loan its surplus funds on real estate security, in June, 1911, received a written application from the Hartman-O'Donnell Agency of Duluth, ostensibly on behalf of Emma M. Anschutz, for a loan of $5,000 for five years, secured on certain improved real estate in Duluth owned by Mrs. Anschutz. After the property had been inspected and the title examined the application was accepted. The examination of the title by plaintiff's counsel in Duluth disclosed a prior mortgage on the property for $2,500, running to and held by the defendant. This mortgage was not due, but O'Donnell, acting for the agency, assured plaintiff orally and in writing that defendant would accept payment of his mortgage, and that he had so arranged with defendant. The Duluth counsel for plaintiff interviewed defendant, and confirmed his willingness to accept payment. Plaintiff, after receiving from the agency a mortgage, note and coupon notes purporting to have been executed by Mrs. Anschutz, and the mortgage to have been acknowledged by her before O'Donnell as notary, drew two checks for $2,500 each, one payable to defendant, the other to Emma M. Anschutz. These checks were mailed to plaintiff's counsel in Duluth for delivery upon procuring a satisfaction of defendant's mortgage. This satisfaction was delivered to the counsel a few days later and duly recorded. The check payable to defendant was delivered to him and the proceeds are retained by him. The check payable to Mrs. Anschutz was delivered to the Hartman-O'Donnell Agency. O'Donnell forged the payee's name, secured payment of the check and converted the proceeds.
Both the mortgage to defendant and that to plaintiff were forgeries, as were the notes. This was the work of O'Donnell. Mrs. Anschutz had made no mortgages on her property, and did not know of their existence until some two years after that to plaintiff was placed on record, at about which time O'Donnell absconded for parts unknown. O'Donnell paid the interest coupons on both mortgages as they became due, and neither plaintiff nor defendant had any knowledge or suspicion that the mortgages and notes held by them were not genuine until Mrs. Anschutz' discovery of the forgeries and repudiation of the mortgages was reported to them. When this information reached plaintiff, its general counsel went to Duluth, acquainted defendant with the facts showing the invalidity of the mortgages, and demanded the return of the $2,500 paid by plaintiff to defendant supposedly in payment of this mortgage. This demand, as well as a later written demand, was refused by defendant. This action brought to recover the $2,500, was commenced December 11, 1914.
The theory of plaintiff, and the basis of its claim of a right to recover in this action, is that the money was paid by it to defendant as the result of a mutual mistake of fact, both parties believing and acting on the belief that defendant had a valid mortgage on the property, whereas in fact he had none. This theory assumes that the money paid to defendant was plaintiff's money, as the action is really one for money had and received, the claim being that defendant has received the money of plaintiff, has no right to it, and ought in equity and good conscience to turn it over.
Defendant insists that the action cannot be maintained because it was not plaintiff's money that defendant received, but the money of O'Donnell, paid by plaintiff as his agent in the exercise of a right claimed by him through an agreement with defendant. It contends further that a recovery should be denied because plaintiff is unable to restore the status quo of defendant, that is, put him in the position he was before the payment was made.
The questions are very interesting. The trial court was with defendant on both his contentions as stated above. As we stated in the beginning, both plaintiff and defendant are absolutely innocent. Neither was in any way negligent. One of them must suffer a loss from O'Donnell's dishonesty.
1. As stated by the trial court, the first question is: Whose money did Towne get? If it was not plaintiff's money, this action will not lie. The learned trial judge held that the money was not plaintiff's. He reached the conclusion on this reasoning: Towne's mortgage was not due; he was induced to accept payment by O'Donnell; the payment by plaintiff was on the direction of O'Donnell, and supposedly on behalf of the mortgagor; plaintiff's note and mortgage had been delivered to it, and all that was left to be done was to pay the $5,000, and get the Towne satisfaction. The court concluded from these facts that O'Donnell, and not plaintiff, was the payor of the money to Towne. It did not say that it was O'Donnell's money, or Mrs. Anschutz's money, and it could not be so said, as neither had any right whatever to it. It seems to us that the money represented by the check or warrant delivered by plaintiff's Duluth attorney to defendant was plaintiff's money, and that plaintiff paid it to defendant. It was induced to part with it by the fraud of O'Donnell, but we fail to see how the right or title to the money ever passed from plaintiff. Nor do we see the logic of saying that O'Donnell, not plaintiff was the payor. Were we dealing with the payment of a genuine mortgage, it would be right enough to say that the payment, in legal contemplation, was by the mortgagor. But here we have the payment of a mortgage that never existed, which strikes us as nothing more or less than a payment made by plaintiff to a third person on the strength of false representations of O'Donnell that such person was entitled to it. The situation is not as if plaintiff had intrusted O'Donnell with the money, and authorized him to pay Towne. This it expressly declined to do. We do not intimate that this would have given O'Donnell any right to the money, or that it would have ceased to belong to plaintiff, or that plaintiff would not still have been the payor, acting through an agent. We have tried unsuccessfully to appreciate the force of the argument that, because defendant agreed with O'Donnell to accept payment of the mortgage before it was due, and because plaintiff paid the money to defendant under this agreement, it follows that the money was not plaintiff's or was not paid by it. The facts that the money was plaintiff's and that plaintiff paid it to defendant are none the less the facts because O'Donnell had arranged with defendant to accept payment, or because without such an arrangement defendant could not have been compelled to accept payment. If we are right in this conclusion, it can hardly be questioned that the case is within the...
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