Moore v. Croft
| Decision Date | 02 May 1929 |
| Docket Number | 5019 |
| Parties | CRAWFORD MOORE, as Trustee, Respondent, v. WILLIAM P. CROFT and IDA J. CROFT, His Wife, Appellants, and DAVID O. HARRIS et al., Defendants |
| Court | Idaho Supreme Court |
BILLS AND NOTES-EXECUTION OF IN BLANK-VALIDITY-ESTOPPEL.
1. Where one who executes an instrument in blank entrusts it to another with authority to fill the blanks and make delivery and such other fills the blanks in a manner violative of his authority and obtains value thereon from payee or grantee or other obligee acting in good faith and without knowledge that the instrument was not completed when the maker parted with its possession, the maker is estopped to deny the validity of the instrument so filled out and delivered.
2. One executing promissory note secured by mortgage to procure a loan from state, wherein note was blank as to NAME of payee and rate of interest and mortgage blank as to description of property and NAME of mortgagee, and description of obligation to be secured, but such person to whom note and mortgage were entrusted, negotiated to plaintiff contrary to maker's instructions, held estopped to deny validity of note and mortgage as against plaintiff giving value therefor, where with full knowledge of his defenses maker delivered to plaintiff a release of a mortgage that had been recorded prior to plaintiff's mortgage.
3. One taking note and mortgage, executed in blank and negotiated by bank officers to whom delivered contrary to instructions with knowledge that the bank was not being lawfully operated and that the maker was an accommodation maker, is not charged with notice of fraud or that the notes were wrongfully filled out by the person to whom they had been entrusted.
APPEAL from the District Court of the Eleventh Judicial District for Minidoka County. Hon. T. Bailey Lee, Judge.
Action to foreclose mortgage on real estate. Judgment for plaintiff. Affirmed.
Judgment affirmed, with costs to respondent.
S. T. Lowe, for Appellants.
The appellant is not estopped to question the validity of both the note and the mortgage, for in order to constitute an estoppel, the following elements must exist: (1) false representations or concealment of material facts, (2) such representations or concealment must be made with knowledge, actual or constructive, of the facts, (3) the party to whom the representations or concealment were made must have been without knowledge, and (4) he must have relied thereon and acted thereon to his prejudice. (Sullivan v. Mabey, 45 Idaho 595, 264 P. 233; Froman v. Madden, 13 Idaho 138, 88 P. 894; Ergenbright v. Henderson, 72 Kan. 29, 82 P. 524; Schott v. Linscott, 80 Kan. 536, 103 P. 997; Kennedy v. The Grand Fraternity, 36 Mont. 325, 92 P. 971, 25 L. R. A., N. S., 78; Dye v. Crary, 13 N.M. 439, 85 P. 1038; State v. Portland General Elec. Co., 52 Ore. 502, 75 P. 722, 98 P. 160.)
Edwin Snow and Karl Paine, for Respondent.
Independently of the negotiable instruments law, the plaintiff is protected as a bona fide purchaser on the ground of estoppel. ( Ladd v. Read, 114 Kan. 175, 217 P. 273; Empire Trust Co. v. President and Directors of Manhattan Co., 97 Misc. 694, 162 N.Y.S. 629; Security Bank & Trust Co. v. Foster (Tex. Civ.), 249 S.W. 227; Lloyd's Bank, Ltd., v. Cooke, 1 K. B. 794, 8 Ann. Cas. 182; 3 R. C. L., p. 199, sec. 209.)
The same principle of estoppel applies to the execution and delivery of the mortgage as in the case of the note. ( State v. Matthews, 44 Kan. 596, 25 P. 36, 10 L. R. A. 308, and cases there cited; Pence v. Arbuckle, 22 Minn. 417.)
Plaintiff brought this action to foreclose a mortgage upon real estate. The facts as they appear from the findings of the trial court are as follows: About February 15, 1921, pursuant to negotiations commenced on February 2, 1921, E. R. Dampier, as trustee for the stockholders and bondsmen of the Heyburn State Bank and for its benefit, borrowed $ 20,000 from plaintiff as trustee for four Boise banks, and as such trustee executed his notes therefor to the plaintiff. On or about February 3, 1921, the defendant William P. Croft, being the owner of certain lands, and for the purpose of enabling the Heyburn State Bank to obtain funds to carry on its business, delivered to one John W. Voorhees, who was one of the persons in charge of the business of the Heyburn State Bank, his promissory note for $ 3,000 and a mortgage upon said lands securing the same. At the time said instruments were delivered to Voorhees the note was blank as to the name of the payee and the rate of interest, and the mortgage was blank as to the description of the property and the name of the mortgagee and the description of the obligation to be secured; and it was at that time understood and agreed between Croft and Voorhees that the said blanks would be filled by Voorhees or some other person so that the note would be payable to the state of Idaho and bear interest at six per cent per annum, and so that the mortgage should describe the said lands, should designate the state of Idaho as mortgagee, and should secure the payment of a note payable to the state of Idaho, bearing six per cent interest. The execution and delivery of said instruments to Voorhees were induced by false representations made by said Voorhees and one J. J. Connor, who with Voorhees was in charge of the business of the Heyburn State Bank, such representations being to the effect that the loan would be procured from the state of Idaho, that the bank would deliver to Croft certain securities and would repay the loan to the state; false representations were also made as to the financial condition of the bank. Croft relied upon said representations in executing and delivering the instruments, and the bank did not deliver to him the promised securities nor repay the loan which was obtained by the use of the Croft and other collateral. Croft received no consideration for his note and mortgage. Efforts made to procure the contemplated loan from the state of Idaho were unsuccessful, and the loan from plaintiff was arranged, whereupon Voorhees inserted in the mortgage the description of the land and filled up the blanks in the note and mortgage designating plaintiff as payee and mortgagee, and ten per cent as the rate of interest, all without the knowledge or consent of Croft. The loan made by plaintiff was made only upon the condition that his notes be secured by collateral notes and mortgages in his favor, and defendant's note and mortgage were used as a part of the collateral for said purpose, having been filled up and completed prior to their delivery to plaintiff, who had no knowledge or notice either of the false representations or of the fact that the instruments were not complete when delivered by Croft to Voorhees. At the time the note and mortgage were signed by Croft he was not a stockholder in or a surety for the Heyburn State Bank; but thereafter, the stockholders of the bank having surrendered their stock to Dampier as trustee for the benefit of the bank, the stock was on or about January 10, 1922, apportioned among the persons, including defendant, who had...
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