Security Co. v. Richardson

• Decision Date: 12 December 1887
• Citation: 33 F. 16
• Parties: SECURITY CO. v. RICHARDSON et al.
• Court: U.S. District Court — Southern District of Iowa

33 F. 16

SECURITY CO. v. RICHARDSON et al.

United States Circuit Court, S.D. Iowa, Central Division.

December 12, 1887

Cummins & Wright, for complainant.

Lehmann & Park, for defendant.

SHIRAS J.

In January, 1878, Thomas H. Richardson borrowed of William Bolles the sum of $2,500, and as security therefor executed a note or bond, and a mortgage on certain realty situated in Wayne county, Iowa, the principal and interest being payable at B. R. Abbe's office in Hartford, Connecticut, and the present suit is instituted for the purpose of foreclosing this mortgage; the defense being that the debt is fully paid and the mortgage discharged and released on the record. It is admitted that the complainant holds the note and mortgage merely as trustee for William Bolles, and not in its own right, and the questions in dispute are to be determined the same as though William Bolles was the complainant. By its terms, the note came due November 1, 1882. On the first day of May, 1882, Richardson paid to one Hugh R. Creighton, of Des Moines, $1,700, and on the twenty-fourth of April, 1883 a sum sufficient, if added to the $1,700 to pay the note in full; and the question to be determined is whether these payments made to Creighton are to be deemed to be payments to Bolles, and binding upon him, Creighton having failed to account for the same. To determine this question it is necessary to ascertain the relation held by Creighton to the respective parties, and the authority he had from Bolles touching the matter of collecting and receiving moneys due him.

It appears that Creighton had organized at Des Moines, Iowa, a company, known as the 'Union Loan Association,' for the purpose of procuring and making loans of money on real estate in Iowa. To the borrower it was represented that the company had facilities for procuring loans from eastern capitalists; to the latter it was represented that through the agency of the company desirable loans could be made on first-class security. When a person in Iowa desired to procure a loan, he would apply to the company, and was required to sign a written application by the terms of which he appointed the Union Loan Company his agent to procure the loan; and the application also contained a statement of the amount desired to be borrowed, the time of loan, the security offered, and other like facts. These applications would be generally forwarded to some broker in the east, and he would place the loan with some one willing to take the same. The borrower paid a fixed commission to the Union Loan Association, and a portion thereof was paid to the broker in the east who finally placed the loan. The broker through whose agency the loans taken by William Bolles were negotiated was B. R. Abbe of Hartford, Connecticut. It also appears that in process of time Creighton virtually controlled all the business done in the name of the Union Loan Association, and practically the company became merged into Creighton. In all, nearly 200 separate loans were taken by Bolles, amounting in the aggregate to over $200,000. Upon these loans, for several years, Creighton collected interest and also the principal of some. Finally, he absconded, and it appeared that he had received upon the loans made by William Bolles some $29,000 or more for which he had not accounted, including the payments made, as already stated, by the defendant in this case; and the question is, upon which of the parties must this loss fall? On behalf of the complainant, as the representative of William Bolles, it is contended that the note or bond was made payable at Hartford, Connecticut; that Bolles retained possession of the note and mortgage; and that no payment became complete until it reached Bolles' hands at Hartford; and that, as the defendant paid the same to Creighton when he did not have in his possession the note or mortgage, he paid at his peril, and simply constituted Creighton his agent to convey or forward the money to Bolles. On part of the defendant, the contention is that Bolles had made Creighton his general agent, with authority to collect all sums due on loans made through Creighton, and that Creighton had authority to receive the payments made, and that his reception thereof binds Bolles. The decision of the case must turn upon the conclusion reached as to the extent of the authority of Creighton as agent for Bolles.

On the argument, it was suggested that the Union Loan Association or Creighton must be deemed to be, throughout the transaction the agent of the defendant, because such agency existed at the beginning. The agency conferred by defendant upon the company was to procure the loan, and when this was accomplished the agency terminated. In fact, the loan company or Creighton occupied different positions in these transactions; being at one time the agent of the borrower, and at another the agent of the lender. To determine under what circumstances he acted for the lender, and the extent of his authority, regard must be had to the dealings between Bolles and Creighton, which extended from 1877 until in 1885, during which time very many letters were exchanged between Bolles and Creighton, and between the latter and B. R. Abbe. Exception is taken to the letters passing between Creighton and Abbe, as not being evidence against Bolles; but it is not necessary to consider this exception, as the facts decisive of the case sufficiently appear from the correspondence to which Bolles was a party, or of which he had actual knowledge, taken in connection with the other facts duly proven. From the evidence it appears that, in the beginning of the transaction between Creighton and Bolles, copies of the abstracts of title were forwarded for the latter's inspection, but finally he instructed Creighton that it was unnecessary to forward the same, as he (Bolles) would rely on Creighton's judgment in this regard. It also appears that Bolles relied upon Creighton to keep track of the taxes upon the various tracts of land mortgaged to the former, and also to keep him fully posted in regard to the conduct of the parties indebted, and their modes of doing business. When it became necessary to foreclose any of the mortgages, Creighton was intrusted therewith; and he brought the requisite suits, attended the sales, bought in the property when necessary, and had full charge of the property thus purchased. In many instances, he had sent to him the satisfaction pieces to be recorded, for the purpose of discharging the mortgage of record. Of the large amounts of interest paid on the loans made by Bolles, the larger part, if not the whole thereof, was collected by Creighton; and the same is true of so much of the...