#### Kohl, Respondent, vs. Beach, Trustee, Appellant.

*September 7*

September *25, 1900.*

*Principal and agent: Delegation of agent’s authority: Subagents: Collections: Implied authority: Mortgages.*

In an action by the grantee of a mortgagor to compel satisfaction of a mortgage, it appeared, among other things, that defendant, a resident of New York, employed S. as agent to loan money under an *410agi-eement that S. should repay all sums advanced, together with six per cent, interest. S. was authorized to handle the loaning business, as if it were his own, defendant knowing that S. must necessarily employ others to assist him. S. employed P. as a subagent under an agreement in regard to loaning defendant’s money, that both should receive a percentage therefrom, that P. should make collection and remit to S., and that if collection of interest at maturity could not be made, P. should advance the same to 8., in order that he in turn might advance it to defendant. Defendant made a loan to plaintiff’s grantor, secured by the mortgage in question, the money being paid over by P., who received the note and mortgage and transmitted them to S., who in turn transmitted them to defendant. Default, having been made in an instalment of interest, P. commenced foreclosure proceedings, defendant being named as plaintiff, pending which plaintiff bought the mortgaged premises. At this time the mortgage debt was paid in full to P., who, though he did not have the note in his possession, gave an individual receipt therefor, which was accepted under the belief that he was authorized by the owner of the note and mortgage to receive payment thereof. P. also agreed to procure the note and mortgage, with a satisfaction thereof, and deliver them, which was never done, and P. never remitted the money. *Held*that, in the absence of any facts constituting an estoppel, S, had no authority from defendant to delegate to P. the essentials of his agency involving skill, intelligence, responsibility, and judgment: that P. was not the agent of, nor were his acts those of, defendant; and that the facts did not warrant the inference that P. was authorized by S. to collect the money.

Appeal from a judgment of the circuit court for Wood county: Chas. M. Webb, Circuit Judge.

*Reversed.*

Action to require the defendant to satisfy a mortgage. The issues raised by the pleadings were decided by the trial court substantially as follows:

On January 4, 1893, Casper Schafer and wife borrowed of defendant $550, agreeing to repay the same in five years, and to pay interest annually at the rate of seven per cent, per annum, and to secure such payment the debtors gave defendant their negotiable promissory note and a real-estate mortgage, which was duly recorded and is set forth in the complaint.

*411It was provided in the mortgage that in case of the nonpayment of any sum of money when due, either principal,, interest, or taxes, the entire debt should, at the option of the mortgagee, his representatives or assigns, be deemed tO' have become due and immediatedly collectible in a suit at. law or by foreclosure of the mortgage.

When the mortgage was executed defendant resided, and has ever since resided, in the state of New York. During a. period commencing prior to 1892 and extending to 1896, defendant furnished to one A. L. Smith, who resided in Appleton, Wisconsin, various sums of money to be loaned by the latter in his discretion, said money being the property of an estate of which defendant was trustee. It was agreed between defendant and Smith that the latter should repay to defendant all sums advanced to him to be loaned, with interest thereon at the rate of six per cent, per annum. Smith was authorized to handle the loaning business as if it were his own, defendant knowing that his agent must necessarily employ others to assist him.

Smith’s residence and place of business was at Appleton, Wisconsin, about 100 miles from the property covered by the mortgage' mentioned in the complaint and from the-residence of the mortgagors.

In 1892 the Marshfield Land Company, with B. W. Pulling as manager, was engaged in loaning money and obtaining loans for other persons, with its place of business at-Marshfield, Wood county, Wisconsin. Subsequent to 1892-Pulling succeeded to such business, and thereafter all loaning business done by defendant, and by Smith for him, in the counties tributary, in a business sense, to Marshfield, was carried on through Pulling.

Smith and Pulling made a joint agreement in regard to-loaning defendant’s money, to the effect that both should receive a percentage therefrom, and that Pulling should make collection and remit to Smith; and if collection off *412interest at maturity could not be made in any case, Pulling should advance the same to Smith in order that he might •advance the same to defendant.

The money received by Schafer and wife was paid them by Pulling, the note and mortgage was received by Pulling, ■the mortgage was recorded by him, and all the papers relating to the loan were then by him transmitted to Smith •at Appleton, and by Smith were transmitted to defendant.

Prior to 1896, under the arrangements mentioned, money •controlled by defendant was loaned to the amount of some $60,000, the loans being several hundred in number. Payments of interest and principal upon loans were made to Pulling from time to time, such payments being generally duly remitted to Smith. Schafer at no time received any notice that Pulling was not authorized to receive payments of interest or principal on the money borrowed by him. On the contrary, Pulling was by letter directed by Smith, in January, 1894, to collect overdue interest of Schafer. Eight •dollars and fifty cents of the first instalment of interest due •on the Schafer loan was in fact paid to Pulling.

In April, 1894, Pulling caused foreclosure proceedings to be commenced on the Schafer mortgage for nonpayment of the first instalment of interest on the mortgage debt, the •defendant being named as plaintiff in the action, and there•after, on May 17, 1894, Schafer sold the mortgaged premises to plaintiff, at which time the full amount of the mortgage debt, to wit, $595.35, was paid to Pulling. When such payment was made Pulling did not have in his possession ■the note and mortgage, but agreed to procure the same, with a satisfaction of the mortgage, and make delivery thereof to Schafer; but such ¡promise was not kept. Pulling gave to Schafer the receipt of his land company for the money received as aforesaid, which receipt was accepted by Schafer in the belief that Pulling was authorized by the ■owner of the note and mortgage to receive payment thereof.

*413About the time the foreclosure proceedings aforesaid were commenced, Pulling caused other foreclosure proceedings to' be instituted in the name of defendant to enforce mortgages owned by him, and subsequent thereto continued to conduct business in that way, some of which foreclosure proceedings were settled, and some prosecuted to judgment and sale, the lands being bid in in the name of *Daniel*Beach, trustee. In all of the foreclosure proceedings aforesaid the complaints were verified by Pulling as agent for the defendant. Smith had knowledge of the business transactions of Pulling in relation to the foreclosure of mortgages, and authorized the same.

Upon such facts the court concluded as matter of law that Smith had authority to employ Pulling and the Marshfield Land Company to assistJhim in making loans; that he exercised such authority; that Pulling was, at the time he received the money from Schafer, the agent of defendant by the authority of Smith, and that such payment was in effect payment to defendant and extinguished the mortgage in question, and that plaintiff was entitled to judgment accordingly. Judgment was duly entered in accordance with such conclusions, from which defendant appealed.

*Lyman E.*Barnes, for the appellant.

*George L.*Williams, for the respondent.

MaRshall, J.

The decision in this case is not grounded on any estoppel of defendant by his conduct, and the conduct of others for which he was responsible, to deny the authority of Pulling to receive payment of the mortgage debt; and there is no evidence in the record to sustain any such theory. Whatever was the customary way of conducting the business prior to the making of the loan to Schafer, between defendant and Smith and between Smith and Pulling or the Marshfield Land Company, or the way in which business was conducted between the parties thereafter, it is not *414■claimed, and there is not a word of evidence tending definitely to show, that Schafer knew anything about it or that he was influenced by any appearance of authority on the part of Pulling, other than the circumstance that he borrowed the money through Pulling and the latter had assumed the right to collect interest and to cause an action of foreclosure to be commenced for nonpayment thereof.

The customary and indispensable evidence of apparent authority, as was held in *Bartel v.*Brown, 104 Wis. 493,— possession of the note,— Pulling did not have, as Schafer well knew when he parted with the money. The note and mortgage, and all the papers relating thereto, were in the possession of appellant at New York. Schafer parted with his money upon the mere receipt of Pulling, executed in the name of his land company. The receipt does not purport to be given for appellant, and there was no pretense by Pulling that he was acting by authority, except what was infer-able from the fact that he assumed to act in the matter. As was well said in *Joy v. Vance,*104 Mich. 97, if Schafer had been as careful to ascertain the authority of Pulling as appellant was to guard his interest by keeping possession of the papers relating to the loan, no one would have suffered by Pulling’s dishonesty.

*Bartel v. Brown*rules this case in this respect: .The note not being in Pulling’s possession when he received the money, such receipt was not in fact a payment to appellant unless Pulling had actual authority to represent the. appellant in the transaction. The question of what is requisite to apparent authority in such cases received careful consideration in the *Bartel*Case, and the decision is inline with the great weight of judicial and text-book authority. The principle there declared must be considered as too firmly established to be open to reconsideration. In addition to the authorities cited in the *Bartel Case,*the following are directly in point: *Ilgenfritz v. Mutual B. L. Ins. Co.*81 Fed. Rep. 27; *Mutual*
      *415
      *B. L. Ins. Co. v. Miles,*81 Fed. Rep. 32; *Cummings v. Hurd,*49 Mo. App. 139; *Murphy v. Barnard,*162 Mass.*72; Johnston v. Milwaukee*& *W. I. Co.*46 Neb. 480; *Joy v. Vance, supra; Trowbridge v. Ross,*105 Mich. 598; *Wilson v. Campbell,*110 Mich. 580; *Church Asso. v. Walton,*114 Mich. 677; *Bacon v. Pomeroy,*118 Mich. 145; *Dexter v. Morrow,*76 Minn. 413; *Hollinshead v. John Stuart & Co.*(N. Dak.), 77 N. *M.*Rep. 89; Randolph, Comm. Paper, § 1450, and cases cited.

There is very little conflict in the evidence, and it is not contended, as we understand it, but that the facts were correctly found by the trial court so far as the findings are confined.to what was said and done by the parties. From such occurrences and the nature of the business Smith was employed to transact for defendant, the trial court found by inference, as a fact, that Smith was given authority by appellant to employ Pulling to transact the business done by Mm, including that with Schafer; and further concluded from the facts as a matter of law, that Pulling was the appellant’s agent and that his acts were the acts of appellant. That, as. we understand the trial court, is on the theory that the facts found indicate that Pulling was a general agent of defendant and as such was authorized to receive payment from ■Schafer, such act being within the scope of the general employment. The contest on this appeal is on the points indi■cated. ■

¥e are unable to agree with the trial court’s conclusion that the nature of appellant’s relations with Smith required 'the latter to employ assistants and delegate to them authority to perform the important branch of the business of the agency of collecting and remitting money. True, an agent may employ others to assist him in the purely ministerial and unimportant details of his employment, but not to do the essentials of the agency, involving the skill, intelligence, responsibility, and judgment that is at the very bottom *416of the employment. Tbe special confidence reposed in the-agent a^to snob matters precludes him from delegating his. trust to others, except upon some express understanding with his principal. Mechera, Agency, sec. 185, and cases cited.

The doctrine is familiar that if a person be intrusted with a note for collection, and the debtor resides so far from the place of business of such person that he cannot conveniently reach such debtor so as to properly and promptly perform the service, authority will be implied that such person may forward the note to a collector within convenient reach of the debtor and perform the service through such collector. That is within the general rule that authority to an agent, to do an act includes authority to use the usual and necessary means to effect the purposes of the agency.

If Smith had authority in this case to collect the note from Schafer, the fact that he did not have possession of the security effectually, *prima facie,*rebuts the theory that-he had-authority to transfer his trust to Pulling, because such possession and ability to transfer it to Pulling was indispensable to enable Smith to clothe Pulling with apparent authority to act in the matter and to enforce collection of the debt, if Schafer were to stand upon his rights or even act as a reasonably careful person should.

Having come to the conclusion that the facts found, from which the trial court inferred authority in Smith to employ Pulling, do not lead.to such inference, consistent with legal principles, we might decline to go further. However, wo have carefully considered the circumstances found by the court, and come to the conclusion, in the light of the law applicable thereto, that they do not warrant the inference-that Pulling was authorized by Smith to collect the money from Schafer. We cannot say the relations between Smith and Pulling, and the manner in which they conducted business, were sufficient to prevent Smith from denying Pulling’s authority under the doctrine of estoppel, because there-*417is no finding that Scbafer knew of such relation and course of business, neither is there any evidence to that effect, as before indicated. ¥e cannot say that Pulling had implied authority to collect the money from Schafer, because he did not have possession of the note and mortgage. We cannot say that the facts found implied express or actual authority to Pulling to collect the money from Schafer, because such a conclusion, against a person who exercises the precaution to protect himself from fraud or loss by keeping possession of his securities, in favor of another who claims to have extinguished them by payment to such person’s agent, within the great weight of, if not universal, authority, requires strong and convincing evidence,— much stronger evidence than the circumstances found to exist in this case. A review of a few of the cases already cited will demonstrate the correctness of what is here said.

In *Murphy v.*Barnard, 162 Mass. 72, cited by appellant’s counsel, the mortgagee, a lawyer, having assigned the note and mortgage, by consent of the assignee was allowed to retain possession thereof for the purpose of collecting the interest as it should fall due. Thereafter the mortgagor, in ignorance of the assignment, and without knowing of, hence without relying upon, the mortgagee’s custody of the securities, and at a place other than the mortgagee’s office where the papers were kept, made pajnnents to the mortgagee to apply on the principal of the debt, which payments the mortgagee embezzled. It was held that, regardless of the hardship to the mortgagor, the stringent rules governing the handling of negotiable paper required the court to hold that the mortgagor, in making the payment to the mortgagee on the mere assumption that he was the owner of the note, because of want of knowledge of the assignment, did not preclude the true owner of the securities from enforcing full payment of the debt.

In *Bromley v.*Lathrop, 105 Mich. 492, the assignor of a *418mortgage, who was engaged in loaning money on real estate and subsequent to the assignment associated others with him in carrying on the same business under the corporate name of the Michigan Mortgage Company, collected the semi-annual instalments of interest on the mortgage debt for about nine years, once in the meantime arranging an extension of the time of payment of the principal, and sent such collections, as made, to the assignee upon receipt of the interest coupons. The mortgagor did not know of the assignment of the mortgage, and the assignee did not know that the assignor and his successor assumed to the mortgagor to have any authority other than to receive the interest payments and to remit the same upon receipt of the coupons. At the maturity of the debt, the securities being in the hands of the assignee, the mortgage company demanded payment of the note of the debtor, whereupon he paid the same, supposing from the manner in which the business had been conducted for years that it was the true owner of the debt or had authority to collect it. The court held that there was no ground for a conclusion that the assignee of the mortgage gave to the mortgage company either general or special authority to receive the money for him.

In *Church Asso. v. Walton,*114 Mich. 677, the Michigan Mortgage Company was again the mischief-maker. A long-correspondence between one Bissell and the mortgage company was received in evidence, very much the same as in this case, showing that Bissell, as- agent, made a large number of mortgage loans through the mortgage company, the business covering a considerable period of time, and that the company made all collections of interest on and principal of the loans, and remitted the same to Bissell as such interest and principal became due; that the company received express directions from Bissell, from time to time, or the papers were sent to it for delivery on payment of the money. The mortgage company collected the interest on the loan in *419question as occasion required, and in the end collected the principal without any express directions to do so, assuming to have general charge of the Bissell loans, and without having possession of the note and mortgage. The mortgagor made the payment, in ignorance that the mortgage and the debt secured thereby had been assigned, supposiug that the mortgage company was the owner thereof. The ■court held that such facts did not establish a general agency in the mortgage company to collect the principal of the Bis-sell loans or of the one in question.

The case before us, like those above referred to, and many more that might be cited, is one of great hardship to respondent and his vendor. If there were a way by which they could be protected, consistently with established legal principles, the court would gladly do so. It is plain that ■one of two parties must suffer from the dishonesty of Pulling. The court cannot determine which one must bear the 'burden by the standard of which can best bear the loss, but must be guided by the law governing such situations. Appellant used the precaution to keep possession of his securities, the indispensable evidence of implied authority to collect the mortgage debt. No express direction was given to Pulling, by any one, to make the collection, and he had no ■general authority covering the subject. There is certainly mo definite evidence that he was in the habit of collecting the principal of appellant’s loans without express direction to do so, or possession of the securities. He did not, by anything he said or did at the time the payment was made by Schafer, indicate to him that he was acting under' the directions of appellant or Smith. He was responsible to Smith for the payment of interest on the debt, and his closing up •of the transactions with Schafer, upon default being made in the first instalment of interest, without the option to de-miare the principal of the debt due being exercised bj?- the mwner, indicates that he was acting to save himself rather *420to save Smith or appellant, or to perform an authorized service for them or either- of them. Ilis. position enabled him to impose on Schafer by obtaining the latter’s money without a surrender of the note and mortgage, simply because Schafer neglected to insist on such surrender before making the payment. The penalty of such negligence must, rest upon the one who was at fault. The misfortune cannot be shifted to appellant, who rightfully relied on the possession of his securities for collection.

*By the*Oourt.— The judgment of the circuit court is reversed, and the cause remanded with directions to render judgment dismissing the complaint, with costs.