Smith v. Keating

• Decision Date: 22 May 1958
• Docket Number: No. 34309,34309
• Citation: 52 Wn.2d 391,326 P.2d 60
• Court: Washington Supreme Court
• Parties: J. Colin SMITH and Virginia E. Smith, his wife, Respondents, v. James L. KEATING and Tommia L. Keating, his wife, Appellants.

Page 391

52 Wn.2d 391

326 P.2d 60

J. Colin SMITH and Virginia E. Smith, his wife, Respondents, v. James L. KEATING and Tommia L. Keating, his wife, Appellants.

No. 34309.

Supreme Court of Washington, Department 2.

May 22, 1958.

Brethorst, Fowler, Bateman, Reed & McClure, Roy J. Moceri, Seattle, for appellants.

Holman Mickelwait, Marion, Black & Perkins, J. Paul Coie, William M. Holman, Seattle, for respondents.

FOSTER, Justice.

This judgment on a promissory note must be reversed because of the error of the trial court in withdrawing the defense of payment from the jury and directing a verdict for the respondents (plaintiffs).

The note (for $6,750) represented the balance of the purchase price ($26,750) of the plaintiffs' home under an executory real-estate contract. To that complaint, appellants pleaded payment, and in support of that affirmative defense, produced evidence summarized as follows:

Respondents listed their home for sale with Charles P. Wolf, then a licensed real-estate broker in Seattle. On August 27, 1955, appellants deposited $1,000 earnest money and signed an earnest money agreement for the purchase of the property for $26,750, which was thereafter executed by both respondents. Respondents, instead of employing a lawyer to draw the necessary contract and conveyance, entrusted their agent, the real-estate broker Wolf, to do so.

Wolf prepared a conventional executory contract for the sale of respondents' home to appellants for $26,750, which, on September 13, 1955, they acknowledged before the same Wolf, a notary public. In it, respondents receipted for $3,000 of the purchase price and provided that an additional $17,000 of the purchase price was to be obtained by a mortgage loan, which, under the contract, was to be disbursed as follows:

'(1) Payment of the balance of the principal and interest of the present existing first mortgage to the National Bank of Commerce, Main Branch. (2) Deduct selling costs. (3) Disburse [sic] and payment of any other lien that may exist. (4) Balance to be paid to the Seller.'

The contract required the balance of the purchase price, $6,750, to be represented by a sixty-day promissory note secured by a second mortgage on appellants' real property. The contract further provided:

'The seller agrees, upon receiving full payment of the purchase price and interest in the manner above specified, to execute and deliver to purchaser a Warranty deed to the property, excepting such part thereof which may hereafter be condemned, if any, free of incumbrances except those above mentioned, and any that may accrue hereafter through any person other than the seller.'

Pursuant to the executory contract of purchase, appellants took possession on September 13, 1955. The contract contained the usual provisions forfeiting to the seller as liquidated damages all sums paid in the event of the purchasers' default. Payment of all sums due under the contract was a condition precedent to the passing of the title.

Prior to September 13, 1955, respondent husband conversed by telephone with Mr. Jennings of the Securities Mortgage Company, which loaned the $17,000 on the security of the property. Appellant husband overheard the whole of that conversation by means of a loud-speaker. Mr. Smith said that all moneys were to be paid to his agent, the real-estate broker Wolf; whereupon, Mr. Jennings requested written confirmation, which Mr. Smith gave by letter dated September 13, 1955, as follows:

'This is to advise you Charles P. Wolf, Agent, has the authority to direct the disbursements of the funds received from the first mortgage placed on my property at 4502 East 33rd Street, Seattle, Washington, and settlement of the funds to be received from satisfaction of Real Estate Contract dated 13 September 1955, for sale of my property.' (Italics supplied.)

Appellant wife testified that respondent husband told her to deal with Wolf after respondents left Seattle.

Soon after the execution of the executory contract for the sale of their home, respondents left Seattle and moved to New York, taking with them the note for $6,750, which was only approximately 25.23 per cent of the total purchase price.

On or about October 20, 1955, appellants, having completed their financing, went to the office of real-estate broker Wolf to whom they paid the full amount of the note after first examining the letter of September 13th, in which respondents authorized Wolf to receive 'settlement of the funds to be received from satisfaction of Real Estate Contract.' The money in question was a specifically designated part of the funds 'received from satisfaction of Real Estate Contract.' Whereupon, agent Wolf delivered to appellants the warranty deed to the property, which was promptly recorded. Title, both legal and equitable, passed.

Respondents admit that the appellants paid the full amount of the note to Wolf, who converted it and never accounted to the respondents. It is refreshing to note that neither party accuses the other of bad faith.

The question, then, is: Was Wolf, respondents' agent, to receive the money in payment of the note in question? He was. The trial court was in error in withdrawing this defense from the jury and directing the verdict in favor of respondents for two reasons: (1) There was adequate evidence of actual authority as respondents' agent to accept the balance of the purchase price; and (2) there was, likewise, ostensible authority to do so.

It should be remembered that, in passing upon this motion, respondents' evidence will be disregarded, and the appellants' evidence, and all reasonable inferences therefrom, will be accepted as true.

Respondents argue that the fact that Wolf did not have possession of the note at the time of the payment is conclusive evidence of his lack of authority to receive payment as their agent. Such, however, is not the law. Because the remaining one-fourth of the purchase price was represented by a promissory note still in the hands of the original payee, the matter is no different than any other contract liability. Ogden, Negotiable Instruments (5th ed.) 309, chapter 18, § 168. Repeated decisions of this court hold that the agent's possession or nonpossession of a note is merely evidence, but is not conclusive of authority or lack of authority to receive payment. Ross v. Johnson, 171 Wash. 658, 19 P.2d 101; Pfeiffer v. Heyes, 166 Wash. 125, 6 P.2d 612; Delaney v. Nelson, 132 Wash. 472, 232 P. 292.

We have here direct testimony that the respondents directe...