The Farmers' Loan and Trust Company v. Essex

• Court: Kansas Supreme Court
• Writing for the Court: BURCH, J.:
• Citation: The Farmers' Loan and Trust Company v. Essex, 71 P. 268, 66 Kan. 100 (Kan. 1903)
• Decision Date: 10 January 1903
• Docket Number: 12,860
• Parties: THE FARMERS' LOAN AND TRUST COMPANY, Trustee, v. J. A. ESSEX et al

71 P. 268

66 Kan. 100

THE FARMERS' LOAN AND TRUST COMPANY, Trustee, v. J. A. ESSEX et al

No. 12,860

Supreme Court of Kansas

January 10, 1903

Decided January, 1903.

Error from Wyandotte court of common pleas; WILLIAM G. HOLT, judge.

SYLLABUS

SYLLABUS BY THE COURT.

PRACTICE DISTRICT COURT -- Defective Service by Publication. A default judgment rendered upon publication service against the "Farmers' Loan and Trust Company," purporting to bar the lien of a mortgage assigned of record to the "Farmers' Loan and Trust Company Trustee," is not binding on the "Farmers' Loan and Trust Company, Trustee."

Flower, Peters & Bowersock, and Miller, Buchan & Morris, for plaintiff in error.

L. W. Keplinger, and C. W. Trickett, for defendant in error J. A. Essex, and Hutchings & Keplinger, for defendant in error Wyandotte State Bank.

BURCH J. All the Justices concurring.

OPINION

BURCH, J.:

A first mortgage of real estate was assigned by the owner under the following instrument, duly acknowledged and recorded:

"DES MOINES, IOWA, March 6, 1891.

For value received, the New England Loan and Trust Company hereby assigns this bond to the Farmers' Loan and Trust Company, Trustee, or order, and guarantees the prompt payment of the interest coupons thereto attached, and the payment of the principal within two years from date of maturity, with interest thereon at six per cent. per annum, payable semiannually, from said date.

NEW ENGLAND LOAN AND TRUST COMPANY.

By W. F. BARTLETT, Treasurer.

Subsequently, in an action to foreclose a second mortgage, the Farmers' Loan and Trust Company was made a party, served by publication, and judgment taken against it, under an allegation that it claimed some interest in the mortgaged premises but that such interest was subject and inferior to the mortgage sought to be foreclosed. After a sheriff's deed had been issued, the purchaser at the foreclosure sale brought suit to quiet his title against the Farmers' Loan and Trust Company, Trustee, alleging that it claimed some interest in the property, and judgment was rendered against it upon publication service. Within proper time this judgment was opened and the Farmers' Loan and Trust Company, Trustee, allowed to defend. On the trial the evidence on behalf of the Farmers' Loan and Trust Company, Trustee, consisted of its unpaid note, the mortgage securing it, and the assignment set forth above. The plaintiff relied on the judgment in the former suit as conclusive of the rights of the parties. The trial court held that under this evidence the previous judgment against the Farmers' Loan and Trust Company bound the Farmers' Loan and Trust Company, Trustee. Was this error?

To support the judgment of the trial court it is contended that the word "trustee" in the assignment of the mortgage was merely descriptio personae, and could, therefore, be disregarded in estimating the capacity of the assignee. The argument is supported by certain cases in which descriptive words were ignored, and Kline v. Bank of Tescott, 50 Kan. 91, 31 P. 688, 18 L. R. A. 533, 34 Am. St. Rep. 107, is referred to, in which the following quotation is made:

"Where individuals subscribe their proper names to a promissory note, prima facie they are personally liable, though they add a description of the character in which the note is given; but such presumption of liability may be rebutted, as between the original parties, by proof that the note was in fact given by the makers as agents, with the payee's knowledge. (Byles, Bills, 27, n. 1.)"

The latter case involved merely the liability of signatories when sued upon an instrument they had executed, and the application of the doctrine of descriptio personae is usually made in cases of that character. Such decisions proceed upon the theory that, to escape liability on an undertaking of his own creation, a representative party must charge his principal by apt and express words, and, conversely, an obligor must fix with certainty the person who is to enforce the contract, or general descriptive words will not preclude a recovery by the promisee in his individual right. In the same manner the rule is frequently applied in the construction of pleadings in which some annexation is made to a name which does not necessarily impute a peculiar capacity or relation.

In controversies like the present one a different principle governs. The party named in the instrument is not to be charged with any liability as upon a contract, and the only duty it owed was to give reasonable notice of its authority and rights. When the record disclosed an encumbrance vested in a company expressed to be "trustee," every person, without knowledge of the facts, was bound to give the word its usual and ordinary signification. In the commonest affairs the term is pregnant with meaning to prudent business men. It is not usually a mere sentimental addition of the personal "estate, degree or mystery" of a party such as old law and custom sanctioned and required, but its constant office is to give solemn warning of qualified titles and fiduciary relationships. It was, therefore, sufficient in this case to notify the world that the Farmers Loan and Trust Company was not an owner absolute, but that it held the mortgage for the benefit of others.

The distinction noted is drawn in a case resting upon different facts by the court of appeals of New York. In the opinion it was said:

"The position urged by the counsel for the appellant, that this loan must be regarded as an individual transaction between Abner P. Downer and the defendant, although he was described in the bond and mortgage as Abner P. Downer, guardian, etc., cannot be maintained. It is thought to be supported by a line of cases holding that an addition to the name of a contracting party of his title or office does not deprive the contract of its personal character. These authorities have no application to this case. They relate only to the liability of the person employing such title in an action between him and a third party. (Sutherland v. Carr, 85 N.Y. 105.) The question here is that of the ownership of the moneys represented by this mortgage, and is to be determined by the principles governing the ownership and management of trust estates. The words 'guardian, etc.,' inserted in the securities in question, operated as notice to the defendant Longyor of the rights of the wards of whom Downer was guardian." (Fellows v. Longyor, 91 N.Y. 324, 331.)

In Sturtevant and others v. Jaques, 14 Allen 523, the owner of the equity of redemption took an assignment of a mortgage on the land in the following language:

"Know all men by these presents, that I, Samuel K. Williams, the mortgagee within named, in consideration of fourteen thousand six hundred and three 92/100 dollars, (being the amount of principal and interest due on the within mortgage,) to me paid by Newell Sturtevant, of said Boston, trustee, the receipt whereof is hereby acknowledged, do hereby assign, transfer and convey unto the said Sturtevant, trustee, all my right, title, interest and estate in and to the land and premises within described, together with this mortgage deed, the promissory note within described, and the debt secured thereby; to have and to hold the same, to the said Newell Sturtevant, trustee, and his heirs and assigns, to his and their own use forever," etc.

The court held that the use of the word "trustee" raised a presumption that the mortgage was taken in trust, and would cloud the title, so that a purchaser could not be compelled to accept a deed purporting to convey free of encumbrances, without a release. In the opinion it was said:

"If it had been a simple assignment, the title thus acquired would have been perfect. But the assignment was to him as 'trustee,' and the note was also indorsed to him as 'trustee.' This is a notice that he took the note and mortgage in trust, and raises a presumption that a trust existed. What the trust was does not appear, nor does it appear that any written declaration of trust is on record or in existence.

"But it is obvious that the property purporting to be thus held in trust was the sum of money due on the note, and the mortgage was merely a security for the money. The debt is always the principal, and the mortgage is merely the accessory. If the debt is assigned without the mortgage, the mortgage is held in trust for the assignee. (Parsons v. Welles, 17 Mass. 419.) A valid trust of chattels may be created, established and proved by mere parol declarations, as well since the statute of frauds as before. (Hill on Trustees, 57, and cases cited.) Here, then, is a notice of a trust which need not appear of record, and of such a character that it would not be extinguished by the union of the legal and equitable title to the land in Newell Sturtevant."

In Smith v. Burgess, 133 Mass. 511, the syllabus reads as follows:

"A. lent money held in trust by him for C., and took therefor a note and a mortgage of land, the note being payable to A personally, and the mortgage, which was recorded, reciting that the consideration was paid by A., 'trustee of C.,' and conveying the land to A., 'trustee as aforesaid.' A. afterwards borrowed money of B. and assigned the note and mortgage to him as security therefor; and the assignment of the mortgage was recorded. The note was delivered, but not indorsed, to B.; and the words 'trustee of C.' were erased by A. before the mortgage was delivered to B. B. did not examine the record, and his attention was not attracted to the words 'trustee as aforesaid,' and he had no actual knowledge of their...