139 A.D. 800 | N.Y. App. Div. | 1910
Woodward, Burr, Thomas and Rich, JJ., concurred; Hirschberg, P. J., dissented.
For a number of years the plaintiff invested considerable sums ot •money on first mortgages through the medium-of one Murphey as her attorney. The details of the manner of investment were as follows: Murphey received the application from the intending borrower and submitted it to the plaintiff; her husband thereupon inspected the property and if the application was approved by him, Murphey received the amount of the proposed loan from the plaintiff and caused the title to be examined, closed the transaction and attended to all the details incident thereto. Sometimes he turned over the bond and mortgage to the plaintiff and at other times he retained them and collected the interest as it fell due, accounting to the plaintiff therefor. In late November, 1906, Murphey received an application from the defendant Horowitz for a loan of $4,500 on bond and mortgage on certain premises on Yandervoort Place in Brooklyn, the intended lien to be first mortgage.
Murphey submitted the application to the plaintiff who approved it and turned over to Murphey the sum of $4,500 to make this contemplated investment. -On the examination of the title to .these premises, some difficulty was encountered and. the transaction fell through, no loan being made. The plaintiff allowed her money to remain with Murphey until another opportunity for investment should present itself. This opportunity came shortly thereafter through another application from Horowitz for a loan of $4,500 on first mortgage on premises on Melrose street, Brooklyn. The plaintiff’s husband inspected the property and Murphey was authorized to make the loan. Neither the plaintiff nor Horowitz had ever met prior to this transaction nor until long after it was closed. The plaintiff dealt with Horowitz entirely through Murphey.
The premises on Melrose street were already incumbered with two mortgages, one for $3,000 as a first mortgage and a secón mortgage for $1,400. Horowitz informed Murphey of the exis ence of these liens, and his plan was to discharge the first mortgasr. of $3,000 out of the proceeds of the new loan and to procure from the holder of. the second mortgage of $1,400 am agreement subordinating that lien to the new mortgage of $4,500 which was to be
The question now in controversy is which of these parties, the plaintiff or Horowitz, should bear the loss resulting from Murphey’s dishonesty. The plaintiff asserts that the loss must fall upon Horowitz, on the theory that in retaining the money to discharge the original first mortgage Murphey became the agent of Horowitz. In support of this contention the plaintiff relies mainly upon two authorities in this State, viz., Josephthal v. Heyman (2 Abb. N. C. 22) and Henken v. Schwicker (67 App. Div. 196 ; 174 N. Y. 298). The defendant contends that Murphey remained the agent of the plaintiff throughout the whole transaction, and relies upon Yeoman v. McClenahan (190 N. Y. 121) and some earlier authorities.
The case at bar has some features closely resembling the facts which were before the courts in the various cases cited by the respective counsel, but there are such differences of facts that it cannot be said to be - on “ all fours” with any of them. All of these authorities, however, agree upon the rule that a controversy of this nature must be settled, if possible, by an application of the fixed rules of agency. Both of the parties to this, action intended that the mortgage now in suit should be a first lien on the premises. That it is otherwise arises wholly from the misconduct of Murphey, and each are equally innocent. For whom was Murphey acting when he misappropriated the money % In the Josephthal Case (supra) the facts were quite similar, but there was one controlling circumstance in that case which does not appear here. There the lenders advanced the money, $12,000, which constituted the amount of the loan, by delivering to their attorney,. one Levinger, two checks of $6,000, each drawn to the order of the borrower. After the delivery of the bond and mortgage the defendant indorsed one of the checks and redelivered it to Levinger, together with Ms own check for $1,245, which two checks made up the sum due on an outstanding mortgage which had to be
; In the Henken Case (supra) the defendants had engaged a broker to negotiate a loan of $3,200 on bond and mortgage on certain real property already incumbered by three mortgages aggregating $3,000, for $1,600, $1,000 and $400 respectively. Out of the proceeds of the new loan the' then existing liens were to be discharged. The broker applied to Henken for the. new loan on the condition that it was to be secured by first mortgage. Henken viewed the premises and on condition that the new loan was to be . secured' by a- first lien, gave his check to the broker for the full amount of the loan. The broker deposited this"check to his own áccount. The borrower then came to his broker’s office to find out if he had received the money. On learning that the money was in the possession of the broker, he signed the bond and mortgage and instructed the broker to apply the money to the satisfaction of the Outstanding liens. The broker applied part of the money to the
On the question whether the-lender or the borrower should bear the loss occasioned by the dishonesty of the broker, it was held by both the Appellate Division and the Court of Appeals that the broker was the agent of the borrower at the time of the misappropriation and the loss fell on him. The case was decided on the principles of agency, but in the two opinions, that "of the lower court and that of the Court of Appeals, there appears to be some difference in the rationale of the decision. In the opinion of the Appellate Division the court said that the broker was the agent of .the borrower when he received a check from the lender. (67 App. Div. 200.) In the opinion of the higher court- it is declared that when the broker received the check he became the lender’s agent for the purpose of paying it over to the borrower, but became the borrower’s agent when the bond and mortgage were delivered under instructions from the borrower to apply the money to the payment of the prior mortgages. (174 N. Y. 304.) Here again are differences of fact which if not fundamental are of great importance. In the case at bar, Murphey received the money not as the agent of Horowitz but while he was the agent of the plaintiff, and for use in an entirely distinct transaction. Horowitz gave him no instructions to retain any part of the money for any purpose. Murphey retained the money for the announced purpose of discharging the outstanding mortgage of $3,000, in' order that the mortgage b his client should be the prior lien, as was bargained for between him and Horowitz. In so doing he was but following the customary line of conduct of almost daily happening in law offices. If in retaining this money for that purpose and in the manner indicated, he became the agent of Horowitz, it was by implication of law. That such implication cannot be made under these circumstances seems to this court quite plain. Horowitz was not the obligor on the outstanding first mortgage. It imposed on him no personal liability. It was a lien, on his real estate, and it had to be discharged in order that the plaintiff might have a first lien under the new mortgage. There was no necessity of its being discharged by any direct act of Horowitz as it was overdue and the plaintiff
It seems clear to this court that Murphey was the agent of the ■plaintiff at the timé of the misappropriation and that the loss must fall on her. The defendant is entitled to a judgment reforming that part of the bond and mortgage which states the amount of the indebtedness at $4,500 by reducing it to the full amount actually received by Horowitz from Murphey, including the sums retained by Murphey for expenses and. ratified by Horowitz, which amounts to the sum of $1,450.83. As the mortgage is not overdue, and the interest has been paid by Horowitz to the plaintiff on the amount of the actual consideration, the defendant Horowitz. is likewise entitled to judgment dismissing the complaint on the merits.