Case ID: ad_55/html/0202-01.html
Source: Caselaw Access Project
Author: {"author": "Smith, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

John M. Barnett, Appellant, v. George W. Daw, Respondent, Impleaded with Ellen McC. Peltier, Administratrix, etc., of Eugene L. Peltier, Deceased.
    
      Principal and, agent—-transfer of the principal’s property to pay the agent’s debt — ratification of the agent’s act —the agent’s knowledge not imputed to the pi'incipal.
    
    An agent, acting under a power of attorney, authorizing him to transfer his principal’s property if for the interest of the principal, is not authorized to make such transfer in payment of his own debt, and his transferee has notice, from the nature of the transaction, that it is presumably in. excess of the agent’s authority.
    Long silence on the part of the principal does not operate as a ratification of the unauthorized act of the agent, where the principal had no ground for any suspicion of irregularity on the agent’s part; nor does the fact that the principal, in disaffirmance of the act of his agent, transfers property, acquired by him through the agent’s illegal act, to the person who would be entitled thereto as a condition of the return of the property improperly transferred by the agent, constitute such a ratification.
    The agent’s knowledge that the act was in excess of his authority cannot be • attributed to his principal.
    Appeal by the plaintiff, John M. Barnett, from a judgment of the Supreme Court in favor of the defendant George W. Daw, entered in the office of the clerk of the county of Rensselaer on the 2d day of December, 1899, upon the report of a referee dismissing the complaint upon the merits.
    The plaintiff, being the owner of certain premises in Wisconsin, sold them to Sunderland and Ostrander and took back as part of the purchase money two notes, one for $400 and the other for $425. These notes were secured by a mortgage on the property sold. One of these notes was paid; the other one is the subject of this action. Thereafter Sunderland and Ostrander conveyed the property to one Le Claire by a deed in which Le Claire assumed the payment of the notes and mortgage. Subsequently Le Claire sold the premises to the defendants in this action by a deed in which these, defendants assumed the payment of the said mortgage and notes. In February, 1891, these defendants sold the same property to one Deyo by a deed in which Deyo assumed the payment of these notes and this mortgage. At this time, and prior thereto, one Gates had been the general agent of tlie plaintiff in the State of -Wisconsin, with general authority to deal with his property as he thought wise for the best interest of the plaintiff. As such agent he had possession of this note, which was unpaid, and of this mortgage. Deyo, who was then the owner of this property, held a mortgage upon some land owned by the agent Gates. A barter was attempted to be made between them. Deyo assigned to Gates the mortgage which he held upon his land, and under a power of attorney Gates assigned this mortgage and this note to Deyo.
    Gates thereafter had recorded in the clerk’s office of his county a deed to this plaintiff of a three-fourths interest in one of the lots which had been freed from the Deyo mortgage. It does not appear in the case that any knowledge of this deed or of the consideration of the assignment of this mortgage and note ever came to Barnett until about a year after the transaction, when he, through his agent acting under a general authority, repudiated the transfer of the property, disclaiming the authority of Gates to assign to Deyo the mortgage and note, and brought an action to foreclose the mortgage.
    'Meanwhile Deyo, after having obtained possession of this mortgage and note, transferred the same to the Douglas County Bank, of which he was then president. This bank thereafter went into the hands of a receiver, the Northern Trust Company,, which took possession of this note and this mortgage. This receiver was made a party defendant in this foreclosure action, and set up in defense its own ownership of the mortgage. While that action was pending, with the concurrence of Gates, this plaintiff deeded to this receiver the land which Gates had attempted to deed to him, and took from the receiver an assignment of this mortgage and of the note. The foreclosure action proceeded to judgment and sale, and upon the sale the sum of about twenty-five dollars was realized. Thereafter this action was brought upon the note against the defendants upon their covenant to pay the same contained in the deed by which they purchased the property. The defendants have asserted two defenses to this action: First, that the transfer by Gates of this mortgage and this note to Deyo was authorized under the general authority possessed by Gates; secondly, that if not authorized the transfer was afterwards ratified by the plaintiff. Upon both of these contentions the defendants have prevailed with the referee, and from the' judgment dismissing 'the complaint this plaintiff has appealed.
    
      William H. Hollister, Jr., for the appellant.
    
      Samuel Foster, for.the respondent.
   Smith, J.:

The facts found by the referee are mostly admitted; his legal conclusions challenged. Upon January 29, 1896, Titus, as attorney for the plaintiff with full authority, repudiated in the plaintiff’s behalf both the attempted transfer by Gates to plaintiff and the attempted barter between Gates and Deyo. That Gates had specific authority from Barnett to make this, barter with Deyo is not pre-. tended. His power of attorney from Barnett was simply the instrument in the execution of the general authority to the agent "tb transfer the property if for the interest of the principal. This general authority gave to Gates no power whatever to .transfer to Deyo property of his principal in payment of his own debt and discharge of his own mortgage. This rule of law is based upon sound reason and is fortified by abundant authority. (See 1 Am. & Eng. Ency. of Law [2d ed.], 1174; De Bouchout v. Goldsmid, 5 Ves. Jr. 211; Holton v. Smith, 7 N. H. 446.; Benny v. Rhodes, 18 Mo. 147; Trustees v. McCormick, 41 Ill. 323 ; Warner v. Martin, 11 How. [U. S.] 224.) .

This attempted transfer then of the mortgage and note from Gates to Deyo was clearly voidable and has been disowned by the plaintiff both in the letter of Titus in January, 1896, and by the commencement of the action to foreclose the mortgage.

The defendants contend, however, that a ratification of this transfer can be found both in plaintiff’s long silence after the recording of the deed to him and also from his .dealings thereafter with the' Northern Trust Company in transferring to it the title of the, property received from Gates. But of this deed or attempted barter Barnett at that time had no knowledge. No ground is shown for suspicion on his part of irregularity on the part of Gates wdiich would naturally lead him to make -inquiry. The knowledge of Gates clearly cannot be attributed to the plaintiff because the act of Gates was in excess of his authority and for his own benefit. A ratification through constructive notice or presumed notice from Gates can hardly be urged in behalf of Deyo who knew he was dealing with Gates for Gates’ personal benefit and, therefore, presumedly in excess of his authority.

Nor can we find any ratification of this attempted barter in the ■ subsequent dealing between the plaintiff and the Northern Trust Company. If Deyo, the particeps crimmis, had still held this mortgage and note, Barnett would have been required to return to him the property received by him as the fruit of the barter as a condition of demanding the return thereof. The Northern Trust Company, the receiver of Deyo’s assignee, had the same right to demand this property in consideration of the return to plaintiff of this security. The transfer then by plaintiff to the Northern Trust Company was not only proper but necessary to the disaffirmance of this attempted barter. The plaintiff took this mortgage and note from the Northern Trust Company, not by reason of their assignment, hut through his legal right' thereto, after having disaffirmed a voidable transfer. The assignment to him by the Northern Trust Company in no way limits the rights he would have under the rescinded transfer, but only makes clear the record title. It.was in fact unnecessary and can be treated as surplusage. These defendants have covenanted to pay this note. From this covenant they have been in no way released by any act of Barnett and cannot be released by an unauthorized act of his agent.

From the evidence, therefore, we are unable to find any valid defense to the plaintiff’s cause of action. The judgment ordered by the learned referee must, therefore, be set aside and a new trial granted.

All concurred.

Judgment reversed on the law and the facts. Referee discharged and new trial granted, with costs to the appellant to abide the event.