Stark v. Olsen

Post, J.

This is a proceeding for the foreclosure of a mortgage or trust deed executed by the appellees Olsen and wife, covering certain lands in Cedar county. In addition to the mortgagor and wife the Lombard Investment Company and Andrew Burggen were named as defendants, but as their rights are not involved in this appeal they will not be noticed further in this opinion. The mortgage, which was acknowledged before a notary public of Cedar county on the 13th day of March, 1886, .was given to secure payment of the note of Olsen purporting to have been executed at Le Mars, Iowa, March 1, 1886, for $1,500, payable to the order of P. M. Dunn at Boston, Massachusetts, March 1, 1891, with interest from date at seven per cent, payable semi-annually, as evidenced by coupons attached thereto. Said mortgage or trust deed was executed to J. M. Dunn, as trustee for P. M. Dunn, the payee of the note above described, and provides that the said trustee shall have power to reconvey said premises whenever said principal note and interest coupons are fully paid to the said P. M. Dunn or her assigns. In this connection it should be mentioned that J. M. Dunn, who is named as trustee in said mortgage, was, at the time of the execution thereof, engaged in making loans at Le Mars and negotiating the notes and mortgages taken in the course of his business through brokers in New York, Boston, and elsewhere. It was customary for him to name P. M. Dunn, his wife, as payee of notes so taken, and to indorse them, when disposed of, in her name. She had no knowledge of the note and mortgage in this case, but the practice of her husband in thus dealing in her name is shown to have been with her knowledge and consent, if not, indeed, with her express approval. It should be mentioned also that she has so far ratified his action with respect to the transaction here involved as to disclaim any interest in the note or mortgage. On the 16th day of March, 1886, J. M. Dunn forwarded said note and mortgage to the firm of John Jeffries & Sons, brokers, doing business in Boston, with directions to sell the same and remit the proceeds thereof through his correspondent in New York. The. note at that time bore the following indorsement executed by J. M. Dunn:

“Without recourse I hereby sell, transfer, and set over to John Jeffries & Sons the within note and annexed coupons, together with all my rights and interest under the trust deeds securing the same. ■ P. M. Dunn.”

On the 11th day of March, 1886, the plaintiff, C. F. M. Stark, then acting as agent for his mother, Mrs. C. J. Stark, applied to Jeffries & Sons for investments, and was furnished with a list of securities held by them for sale, including this niortgageof which they had been previously advised by Dunn. Said mortgage was selected by Mr. Stark among others, and the agreed price therefor, $1,-502.91, left with the brokers named as a special deposit until the receipt of the note and mortgage, which was on the 20th day of the same month, and on which day they were delivered to the purchaser, said note bearing the indorsement of Jeffries & Sons identical in form with that above set out, although no written assignment of the mortgage by the said P. M. Dunn, or in her name, was made at that time. Previous to the commencement of this action Mrs. Stark died, and by her will, which was duly proved, the plaintiff, her only heir and sole devisee, was named as sole executor, The latter deeming an assignment of the note essential in order to perfect his title, as executor, indorsed the same without recourse to Geo. K. Barstow, a clerk in the office of Jeffries & Sons, by whom it w^s immediately in the same manner indorsed and transferred to him, accompanied by the mortgage. The foregoing history of the' transactions upon which the plaintiff’s title depends is essential to an understanding of the issues presented, as will hereafter appear.

It is deemed necessary to here notice some of the allegations of the answer of Olsen and wife, viz.:

1. That on or about December 8, 1888, they paid to P. M. Dunn and J. M. Dunn, trustee, the full amount of said note, with interest, and that the said P. M. Dunn and J. M. Dunn, trustee, executed and delivered to them a release in writing, whereby they acknowledged satisfaction in full of the said mortgage.

2. That no assignment of said mortgage had ever been filed for record in Cedar county, and that they had no knowledge or information that it had been assigned to, or was owned by, any person other than the mortgagee.

3. An express denial of the assignment by P. M. Dunn and an allegation that the pretended assignment in her name by J. M. Dunn was unauthorized and void.

4. That the said J. M. Dunn was, at the date of the alleged payment by the defendants, the general agent of the plaintiff and John Jeffries & Sons, with power to receive payment and execute a release of said mortgage in the name of the holder thereof.

In support of the allegation first above mentioned they introduced in evidence a written instrument bearing date of December 8, 1888, purporting to have been executed by P. M. Dunn and J. M. Dunn as trustee, whereby, in consideration of $1 and other good and valuable considerations, they “remise, convey, and quitclaim” to Magnus Olsen all their title, claim, or demand through a trust deed for the premises described in the pleadings, executed March 1, 1886. Said instrument was acknowledged before a notary public for Plymouth county, Iowa, and filed for record in Cedar county, December 17 following. We may for our present purpose construe it as referring to the mortgage which is the subject of this controversy, although not definitely described therein. Another fact to which our attention is directed by the briefs of counsel, but which sheds no direct light upon the transactions involved, is that Mrs. Dunn, on the 26th day of February, 1891, executed what purports to be a formal assignment of the mortgage or trust deed to Mrs. Stark, but in which the land mentioned therein is erroneously described as situated in Dixon county. There is, however, one fact worthy of note in this connection as tending to illustrate the business relations between Mrs. Dunn and her husband, viz., that the instrument last mentioned, including the name of the assignor in the body thereof, is upon a printed form, which is strongly corroborative of the statement that it was the custom of her husband to take securities in her name.

The first proposition to which we will give attention is that the note in this ease is by its terms non-negotiable, because it is uncertain both as to amount and time of payment. The condition to which we are referred to support that contention is the following: “And if default be made in the payment of any interest coupon or part thereof, then said principal sum may, at the option of the legal holder of this note, become due and payable without further notice; and if suit be commenced to collect this note or foreclose the trust deed securing the same, I agree to pay a reasonable attorney’s fee as provided by law. This note bears ten per cent interest per annum from maturity until fully paid.” The note, as has been remarked, purports to have been executed at Le Mars, in the state of Iowa, while the mortgage was executed in this slate, the consideration for both being the loan mentioned. It is also disclosed by the record that said loan was made on the written application of Olsen, the mortgagor, in accordance with the custom of loan brokers. The inquiry is, therefore, naturally suggested whether the note is an Iowa contract and to be governed by the laws of that state, or whether the laws of this state will be applied in order to determine its negotiability. We shall not, however, undertake a careful examination of the authorities bearing upon the subject, since a solution of the question may be readily attained from a closer inspection of the facts established by the record.* We have not the benefit of the testimony of either of the Olsens, or of J. M. Dunn, but the mortgage, as we have seen, was executed and delivered twelve days subsequent to the date borne by the note. From the deposition of * W. L. Jeffries, a member of the firm of Jeffries & Sons, we learn that the application of Olsen for the loan was forwarded to said firm “shortly prior to March 11,” and that on the day last named the witness advised Dunn by telegraph of the sale of the loan. The irresistible inference from these facts is that the delivery of the note and mortgage and the payment to Olsen of the proceeds of the loan were contemporaneous acts, that they occurred as late as the 13th day of March, presumably in Cedar county, and that the former is, therefore, for all purposes, a Nebraska contract. But the laws of this state must govern the construction of the contract for another reason. The plaintiff alleges that the note was executed in Iowa, and pleads the statute of that state authorizing the allowance of an attorney’s fee which he claims in this action. That allegation is, however, put in issue by the answer and is not supported by any evidence in the record. We must presume, therefore, that the laws of Iowa, so far as they relate to the subject under consideration, are the same as ours. (Ruth v. Lowrey, 10 Neb., 260; Lord v. State, 17 Neb., 526; Fitzgerald v. Fitzgerald & Mallory Construction Co., 41 Neb., 374.) Turning to the decisions of this court we find the question fully settled by Heard v. Dubuque County Bank, 8 Neb., 10, where, referring to the question of costs and attorneys’ fees, it is said: “We do not think that the amount of money represented by a note or bill is made any the less certain by reason of its' containing a stipulation that if it is not paid at maturity the maker will pay a part of the expenses of its collection. * * * The stipulation to pay attorney fees is harmless, to say the least, while the note is undishonored and entitled to pass as commercial paper. It is only when it has become dishonored by its maker and ceases to have any standing in the commercial world that this provision becomes operative.” It was further held that the note therein was negotiable notwithstanding the following provision : “The said McDonald & Co. [payees] have full power to declare this note due and take possession of said machine at any time they may deem themselves insecure, even before the maturity of the note.”

It is urged however, by defendants that the note being payable in Massachusetts the question whether it is an Iowa or a Nebraska contract is wholly immaterial, for the reason that its character as regards negotiability must be determined by the laws of the state in which it is, by its terms, to be performed. It is not necessary to determine here whether the rule contended for has any application to mortgage securities, since what has been said respecting the laws of Iowa applies with equal force to those of Massachusetts. The presumption above alluded to is not limited to statutory enactments, but applies as well to the unwritten law of other states. (Rorer, Interstate Law, 122, and cases •cited.) Assuming, therefore, that the note was not negotiable according to the laws of Massachusetts, that fact, to be available to the defendants, should have been specially pleaded and proved as any other matter material to the rights of the parties.

This brings us to the question of the plaintiff’s title to the securities. The contention of the defendant, as will be inferred from what has been said, is that the indorsement ■by J. M. Dunn in the name of his wife is in legal effect a ■forgery and cannot, therefore, be made the basis of a legal title. The fact, however, that the business was concluded in her name, that she was aware of the custom of her husband in that regard, and especially of his course of dealing with Jeffries & Sons, not to mention her subsequent express ratification of his act, leaves no room to doubt his agency with power to contract in her name. But there is an additional fact of which mention was omitted in its natural order, and which should be noticed on account of its bearing upon this as well as upon another phase of the case. The coupons accompanying the note were assigned directly to Mrs. Stark, and those, seven in all, which matured prior ■to March 1, 1890, were paid by remittances from J. M. Dunn and presumably returned to the maker, and bearing •as they did the indorsement of Mrs. Dunn, were sufficient to charge him, defendant, with a notice of her equities.

The next question discussed involves a construction of sections 39 and 46, chapter 73, Compiled Statutes, entitled “Real Estate.” Section 46 merely authorizes the recording of assignments of mortgages. Section 39 provides: “The recording of an assignment of a mortgage shall not in itself be deemed notice of such assignment to the mortgagor, his heirs or personal representatives, so as to invalidate any payment made by them, or either of them, to the .morfgagee.” Those provisions were before us for our construction in the recent ease of Eggert v. Beyer, 43 Neb., 711, and the conclusion therein is decisive of every proposition asserted in connection with this branch of the case. It is in effect there held that the statute has no application to the holder of negotiable paper secured by mortgage whose title is acquired in the usual course of business for value before maturity, and that if the mortgagor in such case chooses to make payment to another than the holder of the security, he must do so at his peril. To the authorities there cited may be added the recent case of Williams v. Keyes, 90 Mich., 290, in which it is said, referring to the same provision: “The statute means no more than that the mortgagor shall not be required to search the record before making payment to the one prima facie entitled to receive it. In case of negotiable securities the holder alone is prima facie entitled to receive payment.” The analysis of the subject in the cases cited is so thorough and satisfactory as to leave nothing to be added at this time, and the rule therein stated must be accepted as the law of this case.

It is contended also that whatever may have been the rights and obligations of J. M. Dunn as to P. M. Dunn, the payee of the note, or her assigns, he was authorized as trustee to execute the release and his action in that regard is a sufficient protection to the defendant in this action. But his authority must be determined from the instrument itself, which is in reality a mortgage, although on its face-referred to both as a mortgage and a deed of trust. And unfortunately for the defendant’s contention, it confers no authority upon the trustee to acknowledge satisfaction before the maturity of the debt thereby secured, or upon any condition except payment in full to the holder of the security, or with his consent. It should be remembered here that a wide distinction is recognized between a case like this where the trustee is a mere agent for the beneficiary, whose powers are clearly defined by the instrument creating the trust, and one in which he is the holder of thélegal title. In the latter case it is well settled, on principle-as well as authority, that persons dealing with the trustee-are not chargeable with undisclosed limitations upon his-power. Although the rule thus stated is elementary law, it is not out of place to cite in this connection the case of Livermore v. Maxwell, and four other cases, 55 N. W. Rep. [Ia.], 37, which are instructive, since they are authority for the principle here applied, and for the further reason that they involve transactions of the same trustee in all essential respects identical with that presented by the record in this ease. The court there say: “Even if Mr. Dunn did have authority to receive payment at maturity of the-, note, that did not authorize him to receive it when he did.. The note was payable ‘on the 1st day of December, 1890,’' not on or before, yet Mr. Dunn assumed to receive payment nearly two years before it was due. It is argued that as Mrs. P. M. Dunn joined in the release of the deed, the payment should be held good as to these defendants. The defendants knew that the note was negotiable by indorsement, they had each paid interest coupons that were-returned to them bearing the indorsement to the plaintiff,, and they knew that neither J. M. nor P. M. Dunn had; the note or coupons to surrender at that time the payment was made. We are in no doubt but that these defendants knew that the note and coupons had been transferred and made the payment upon the mistaken belief that J. M. Dunn had authority as trustee to receive it.” We agree-with what is there said, as well as the conclusion reached..

Finally, it is argued that J. M. Dunn was the agent of the plaintiff and of his mother, Mrs. Stark, during the-lifetime of the latter, and authorized to receive payment in* their behalf; but that contention has no foundation whatever in the record. The only evidence which can be said to bear upon the question is the fact that Dunn forwarded-to Jeffries & Sons the amount of the coupons as they matured. The law will not from that fact alone infer , the relátion of principal and agent as against the plaintiff. The reasonable inference is that suggested by the supreme court of Iowa, viz., that the payments of both principal and interest were made by the defendant to J. M. Dunn in the mistaken belief that the latter, as trustee, was authorized to receive it; but, however that may be, it is evident that to the extent which he, Dunn, acted in a representative capacity in the'receipt of the money he was the agent of the defendant Olsen and not of the plaintiff.

It follows from what has been said that the decree ■should have been for the plaintiff. It will accordingly be reversed and remanded to the district court for a decree in accordance with this opinion

Reversed and remanded.

Case Details

Case Name: Stark v. Olsen

Court Name: Nebraska Supreme Court

Date Published: Apr 5, 1895

Citation: 44 Neb. 646

Docket Number: No. 5945

Court Abbreviation: Neb.