Schermerhorn v. Farley — 33 N.Y. St. Rep. 900

Majority

p. 900

John E. Schermerhorn, Trustee, Resp’t, v. Mary A. Farley et al., Individually and as Adm’rs, App’lts.

(Supreme Court, General Term, First Department,

Filed October 24, 1890.)

Headnote

1. Foreclosure—Defense.

A mortgage given to plaintiff to secure a loan was loft with his attorneys for his benefit, and the business connected therewith was transacted with their clerk, who received the interest thereon. The principal was also paid to said clerk before it was due, and the same was misappropriated by him. Held, that such payment of the principal was no defense to an action to foreclose the mortgage.

2. Mortgage—Authority of agent to collect.

Possession of a mortgage by an agent, in the absence of any other actual authority, entitles him only to collect the interest and principal as. each should become due, and does not authorize him to receive the principal before it becomes due.

Appeal from judgment recovered on the decision of the special term.

Field & Feshon, for app’lts; Jones & Roosevelt, for resp’t.

The judgment from which the appeal has been brought is for the foreclosure of a mortgage upon premises known as 1990 Madison avenue, and the sale of the premises, and the recovery of any deficiency thereafter remaining against Patrick Farley, as administrator of Eliza M. Y. Farley, deceased. The mortgage was given by the defendant Franklin A. Thurston, who was at that time the owner of the premises, to secure a loan made to him by the plaintiff, amounting to the sum of $17,000. The defendant Thurston conveyed the premises to Terence Farley, who assumed the payment of the mortgage. And he in like manner conveyed them to Eliza M. Y. Farley, who assumed and agreed to pay the mortgage, and upon whose decease letters of admin-, istration were issued to the defendant Patrick' Farley. She, in her lifetime, conveyed the premises to John T. Farley, subject’ to the mortgage, and he in the same form conveyed them toi Mary A. Farley. The money was loaned for the plaintiff through.' the agency of the firm of Shipman, Barlow, Larocque & Choate," and the bond and mortgage were left with them, for thejbenefit

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of the plaintiff. They intrusted the "business to the immediate control and disposition of James D. Bedell, who was a clerk in their office, and placed by them in charge of their real estate transactions of this description. The interest on the debt was from time to time paid to him and endorsed upon the bond, which, with the mortgage, were accessible to him. And in their answer these appellants by way of defense alleged that payment of the principal sum secured had also been made to him for the plaintiff in the action. And upon the trial they proposed to prove that they had made payments to Bedell, who, at the times they were made, had possession of the bond and mortgage, which it was claimed had satisfied and extinguished the mortgage debt. But this evidence was rejected, and the defendants excepted. They did prove that the bond and mortgage had been surrendered by Bedell with a discharge subscribed with the name of the plaintiff, the execution of which had been proved by Bedell as a subscribing witness.

This had been filed with the register, and the mortgage discharged of record. But the plaintiff testified that his name had not been subscribed by him to the discharge. And there was no evidence that it had been, and the court thereupon found the fact to be that the name of the plaintiff to the discharge had not been placed there by him, or by his authority, and that it was a forgery. The defendants, consequently, can derive no advantage from the discharge itself, or the entry made of it on the record. It was, on the contrary, wholly inoperative.

The payments, which it was proposed to prove had in the manner already stated been made, took place in the years 1884 and 1885; while the principal secured by the mortgage did not, by its terms, become due until the 1st day of December, 1886. And it was not proved nor offered to be proved that any authority had been conferred by the plaintiff, either on the firm having the business in hand or upon Bedell, to anticipate that time by receiving any part of the principal sum before its arrival, unless such authority is to be inferred from the possession of the bond and mortgage. There were two other loans made at the same time by the plaintiff to Thurston, upon adjacent parcels of property. And their history and the transactions concerning them have been made a part of the evidence in this case. For those loans discharges were subscribed and acknowledged by the plaintiff himself, which were to be delivered when the debts secured were paid. But neither the dealings with the other mortgages nor the delivery of these discharges added anything which could be construed into an enlargement of the authority of Bedell, or of the firm in whose employment he was, over the debt or the securities now in controversy. These discharges are stated to have been intended to be delivered when the debts were collected. But no authority was given to collect either debt until the time when it matured. The discharges were provided to be used in that event, and without authority to use them otherwise.

The case of the defendants must, therefore, be determined upon the facts relating to it alone, unaffected by these other and discon

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nected transactions. And from those facts, as no actual authority was delegated to receive the principal before it matured, the authority of Bedell is to be ascertained and defined. And that . extended no farther than to collect the interest and the principal as each should become dile. The authority to do that is deducible from the possession of the bond and mortgage. That possession, in the absence of any other actual authority, conferred no power to collect or receive the money before it became due. But it was at most to receive it only as it became due, and then to pay it over to the plaintiff. To exceed that by receiving the principal before it became due, would practically change the language and effect of the bond and mortgage by nominating another time than that mentioned for the payment of the debt, and that the agent under this constructive authority could not do. He had them to collect as they had been made, and not to modify or act upon them differently ; and their simple possession was notice to persons dealing with him on the faith of that fact that such was the utmost extent of his authority. This was the inference considered to be supported by the possession of a note in Hutchings v. Munger, 41 N. Y., 155 . It was there said that “all the evidence of Silence’s authority was his possession of the notes for the pur}30se of receiving the money thereon. This possession was evidence of his authority to receive payment, but failed to show any authority to do anything else.” Id., 158 . And the principle was applied to commercial paper in the cases of Burbridge v. Manners, 3 Camp., 193, and Morley v. Culverwell, 7 M. & W., 174.

In the last case it was said of a bill that it. “ is not properly paid and satisfied according to its tenor, unless it be paid, when due.” Id., 181 . And it was followed and considered applicable to the payment of a' mortgage, in Smith v. Kidd, 68 N. Y., 131 . For there it was declared to be the law that “ even though an . agent have authority to receive payment of an obligation, this does not authorize him to receive it before it is due.” Id., 141 . And the principle has not been qualified or enlarged by anything which was decided in Brooks v. Jameson, 55 Mo., 505 ; Butler v. Dorman, 68 id., 298, or Seiple v. Irwin, 30 Pa., 513 . On the contrary, in the last case the court held that a party making an unauthorized payment took the risk of the integrity of the agent receiving it, and “must bear the loss which his unfaithfulness imposed.” Id., 515 . In the case of Heermans v. Clarkson, 64 N. Y., 171 , the payment was held to be within the authority conferred upon the receiver, and therefore to have been legally made, while in this case no authority to receive the principal was either made to appear or offered to be shown.

The case is an unfortunate one for the defendants. But the disaster encountered has arisen from placing too much reliance on the assumed existence of an authority not indicated by the facts themselves. If the proof which was offered and rejected had been received, it would have established no defense. But the plaintiff would still be entitled to enforce and collect the mortgage. The apparent authority of the agent was only to receive the money when it became due, and for a previous payment that afforded the

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parties paying no protection, as long as the money was never paid over to the plaintiff, but was misappropriated and applied to his own use, by the person receiving it.

Other positions have been taken in the brief of the counsel to sustain this appeal. But they are really identical with that already examined. And as that must be overruled, it follows that the judgment should be affirmed, with costs.

Van Brunt, P. J., and Brady, J., concur.