Seaverns v. Presbyterian Hosp.

• Decision Date: 18 June 1898
• Citation: 173 Ill. 414,50 N.E. 1079
• Parties: SEAVERNS et al. v. PRESBYTERIAN HOSPITAL.
• Court: Illinois Supreme Court

173 Ill. 414

50 N.E. 1079

SEAVERNS et al.

v.PRESBYTERIAN HOSPITAL.

Supreme Court of Illinois.

June 18, 1898.

Error to appellate court, First district.

Bill by the Presbyterian Hospital against Joshua S. Seaverns and Althea Seaverns. From a judgment of the appellate court (64 Ill. App. 463) affirming a decree for complainant, defendants bring error. Affirmed.Pence & Carpenter, for plaintiff in error.

Green, Robbins & Honore, for defendant in error.

This was a proceeding brought by the Presbyterian Hospital of the city of Chicago, the defendant in error, to foreclose two mortgages,-one given by Mark S. Thompson to secure a note for $10,000, dated March 11, 1882, payable five years after date to the order of himself, and bearing interest at 7 per cent. per annum, on the west [173 Ill. 415]14.24 feet of lot 7 and all of lots 8 and 9, in W. H. Adams' subdivision of part of the S. E. 1/4 of section 28, township 39, range 14, in the city of Chicago; and the other a mortgage given by Joshua S. Seaverns, the plaintiff in error, who became to owner of the said premises October 2, 1885, and made his promissory note of that date for the sum of $2,000, to the order of himself, and bearing interest at 7 per cent. per annum, and which matured the same day as the $10,000 note, and was indorsed to Peabody, Houghteling & Co., who were also the owners of the $10,000 note. The $2,000 mortgage was subject to the Thompson mortgage, and both were duly recorded. The Presbyterian Hospital purchased these two notes, amounting to $12,000, July 21, 1894, of Peabody, Houghteling & Co., and filed this bill of foreclosure January 25, 1895. After the purchase of the property by Seaverns, he gave the control and management of the same to Bogue & Hoyt, real-estate agents in Chicago. They became his agents in 1885, and continued such agents until March, 1894, when they failed in business. The firm of Bogue & Hoyt was composed of George M. Bogue, Hamilton B. Bogue, and one Hoyt, and after the death of Hoyt was known as Bogue & Co. Hamilton B. Bogue. of the firm, did the whole business for Seaverns, collected the rents, paid his interest, and took general charge of this property for him. In 1890 Seaverns arranged with his agents, Bogue & Hoyt, to remodel the warehouse on the property, and they took entire charge of the improvements. The repairs were estimated to cost, when they were commenced, between $6,000 and $7,000, but when completed the cost was about $19,000. During the progress of the work Bogue & Hoyt advanced large sums of money for Seaverns, until it became necessary for him to raise more money to carry on the repairs. Hamilton B. Bogue proposed to Seaverns that he should be permitted to negotiate a loan for him on the property for $25,000, and that with the proceeds the two mortgages now being foreclosed could be paid off, and the balance applied to pay for the improvements. This Seaverns approved and consented to with Hamilton B. Bogue, and March 31, 1891, Seaverns executed a promissory note for $25,000, payable to his own order, and indorsed by himself, payable five years after date, the interest being represented by coupon notes, and secured by mortgage on the aforesaid property. At this time George M. Bogue was president and chairman of the executive committee of the hospital, and George W. Hale was treasurer, and also a member of the finance committee. After Hamilton B. Bogue had arranged with Seaverns for making this new mortgage, Bogue & Hoyt wrote the following letter to Hale, the treasurer of defendant in error: ‘Chicago, March 31, 1891. George W. Hale, Esq., Treasurer, etc.-Dear Sir: We have negotiated a loan to A. B. and J. S. Seaverns for $25,000 on their property at the corner of Twenty-Sixth and Butterfield streets, the details of which will be given when we hand the papers covering the loan. Please send us your check for the amount of the loan, $25,000. Very truly yours, Bogue & Hoyt.’ This request to the treasurer to send his check for $25,000 and the note for $25,000 both bear date March 31, 1891. The treasurer's check was dated April 1st,-the following day,-but the mortgage was not acknowledged until April 6th, when it was sent to defendant in error, and the transaction was completed. Plaintiff in error, Seaverns, filed his answer to the bill for foreclosure, denying there was due defendant in error $12,000 and interest on said notes secured by said mortgages being foreclosed, and claiming that said Presbyterian Hospital had notice of said mortgages, and of the understanding between said Bogue & Co. and said Seaverns that said Bogue & Co. should pay off, out of the proceeds of said $25,000, the two mortgages, amounting to $12,000, and that it was the duty of the hospital to see to the application of the money towards the payment of the two mortgages sought to be foreclosed, and that the purchase by the hospital of the two mortgages should be treated as a payment and cancellation thereof, and should be declared satisfied. A replication was filed, and on the hearing the court decreed a foreclosure of the two mortgages as being first liens on the property. The case was taken to the appellate court for the First district, where the judgment of the circuit court was affirmed, and Seaverns brings the case to this court by writ of error, and asks that the decree of the circuit court and the order of affirmance of the appellate court may be reversed.

CRAIG, J. (after stating the facts).

1. Did the defendant in error have actual or constructive notice of the arrangement between Seaverns, the plaintiff in error, and Bogue & Co., that Bogue & Co. should pay off the first mortgages sought to be foreclosed out of the $25,000, by reason of George M. Bogue being president of the hospital? The testimony shows that all the arrangements for the making of the $25,000 loan were between Hamilton B. Bogue and Seaverns. The talk when it is claimed the arrangement was made for paying off these first mortgages out of the $25,000 loan was between Seaverns and Hamilton B. Bogue. George M. Bogue was not present, and there is no evidence showing he had any knowledge that the money was to be applied to take up the first mortgages, until after the payment of the money, and the delivery of the mortgage to defendant in error. Because George M. Bogue was a partner of Hamilton B. Bogue, and was president of the Presbyterian Hospital, therefore plaintiff in error claims the defendant in error had constructive notice. Plaintiff in error also claims that any knowledge or information possessed by an agent at the time of acting as agent for a corporation is notice to the corporation, and notice to an executive officer or agent is notice to the corporation itself. The general proposition is true, but where an officer of a corporation is dealing with the corporation in his own interest, opposed to theirs, he is held not to represent them in the transaction so as to charge them with the knowledge he may possess, but which he has not communicated to them, and which they do not otherwise possess, of facts derogatory to the title he conveys. Bank v. Cunningham, 24 Pick. 270; Ang. & A. Corp. 308. In Higgins v. Lansingh, 154 Ill. 301, 40 N. E. 362, a corporation making a purchase from its president was held not chargeable with his knowledge of infirmities in his title to the property. In denying notice to the corporation, this court said (page 387, 154 Ill., and page 388, 40 N. E.): ‘This is upon the view that Higgins, who was at the time the president of the insurance company, was not, in the transfer of the securities to it, its agent; that while, ordinarily, notice to the president of a corporation is also notice to the corporation, such is not the law when the president is dealing with it in his own interest and against the interest of the corporation; that notice to the corporation through its officer rests upon the presumption that the officer will communicate such notice, but that it cannot be presumed that Higgins, although president of the insurance company, would, in selling these securities to it, make any communication derogatory to them, his title thereto, or their value. We think the rule contended for is supported by sound reason and the authorities as well. In Barnes v. Light Co., 27 N. J. Eq. 33, it was said: ‘The general proposition is undoubtedly true that notice of facts to an agent is constructive notice thereof to the principal himself, where it arises from, or is at the time connected with, the subject-matter of his agency. The rule is based on the presumption that the agent has communicated such facts to the principal. Story, Ag. § 140. On principles of public policy the knowledge of the agent is imputed to the principal. But the rule does not apply to a transaction such as that under consideration [the president selling to the company], for in such a transaction the officer, in making the sale and conveyance, stands as a stranger to the company. Stratton v. Allen, 16 N. J. Eq. 229. His interest is opposed to theirs, and the presumption is, not that he will communicate his knowledge of any secret infirmity of the title to the corporation, but that he will conceal it.’' In the case at bar, Bogue & Co. were dealing with the hospital in their own interest. They were negotiating a loan, which subsequent events showed they intended to apply to Seaverns' indebtedness to themselves for advances made by them. The fact that the $25,000 mortgage was not a first lien, as required by the by-laws of the...