Following is the decree of Memminger, Circuit Judge:
This is an action for foreclosure of a mortgage given by authorized officers of a negro Baptist Church, of Columbia, to J. S. Land, money lender, through the law firm of Barron, McKay, Frierson & Moffatt, of Columbia.
“The negroes paid interest to the law firm, and, pursuant to an agreement with the law firm made at the time of the execution and delivery of the mortgage, paid before maturity on account of the principal two payments amounting to $1,700. Barron had put bond and mortgage in the possession of Land, and the negroes did not call for the production of the originals when they made their payments, but got Barron’s receipts for the payments. The mortgage shows on its face that it was executed by ignorant people on behalf of a negro church. Of course, the face of the mortgage shows that it was made to Land, but it is not probable that the negroes knew this, and no doubt believed they were dealing with Barron.
“Barron died, and Land never received the payments, which had been made on the principal. He forecloses for the whole amount. The master finds for Land, and declines the credits set up in the answer.
“Exceptions are taken, and a request made for permission on behalf of defendants, to take further testimony along the line that the firm of Barron were absolute general agents of Land, and that payment to the firm was payment to Land. I granted this, and testimony was taken and reported, and the whole matter was presented before me for decision.
“Upon first impression, I was inclined to make the usual decision in cases where a loan is negotiated through a lawyer, authorized to draw up the papers and collect interest, that a payment on the principal by the borrower to the lawyer would not bind the lender; however, after a careful study of the whole record, I find that the case differs materially from the ordinary case of such transaction.
“I cannot but conclude that Barron was the general agent of Land for investing his money, and actually collecting principal and interest and reinvesting it as he saw fit, and it was a mere matter of form that the papers were made out to Land and put in his possession. Land had an agreement with Barron that Barron was to pay him interest on all funds of Land’s in his hands, whether loaned out or not, and, in a number of cases appearing in the testimony, Barron did collect principal for Land and remitted it to him and then procured satisfaction for the borrower. Barron thus being the general agent for Land, under Knight v. Jackson, 36 S. C., 10; 14 S. E., 982, his declarations at the time of execution of the papers were part of the res g,est3s, admissible as evidence and binding upon Land. It is obvious that the declaration of Barron that payment on principal before maturity would be credited was binding on Land, and Land put Barron in a position to thus deceive these ignorant negroes, and should not now be heard to contest. Barron naturally was interested in getting the loan paid up as soon as possible and lending the money out again, and getting another fee from a new borrower. It made no difference to Land, because, under his agreement with Barron, he was to get interest on his money whether Barron loaned it out or not.
“Upon another ground, also I am satisfied that the exceptions to the master’s report are well taken, and that the defendants are entitled to have the payments of principal credited upon the debt; that is, under the general principal that, where one of two innocent persons must suffer by the wrongful act of a third, he will be required to bear the loss who was most at fault in letting it be brought about.
“Measured by this rule, it seems to be apparent that the loss should be upon Land. The only fault that can be put upon the negroes is that they trusted the statement of Barron, clothed, or apparently clothed, with power, to conduct the whole transaction, and actually conducting it, and not requiring from Barron the production of papers when the payments were made. This is insignificant, to my mind, as compared to the negligence of Land in holding ,Baron out as his agent to invest his money, to collect interest, in some cases to collect principal, to do nothing more than have the papers made payable to him and delivered to him. These special papers showed the loan was to a negro church; he would know they were usually ignorant and easily deceived. He could have easily notified them to make payments only to him. On the contrary, he gave the Barron firm a full swing in investing and reinvesting his money. He took no care at all in protecting innocent persons conducting transaction with Barron, and he himself was all the while protected by his agreement with Barron for investment on his funds.
“No argument should be drawn from a knowledge which comes after the fact, and upon that idea it may be reasoned that Land ha3 absolute confidence in Barron; but the testimony in this case shows that he seemed anxious to get money out of the hands of Barron when it was paid in to his credit. He had become apprehensive — he should have ' warned these people, and not waited and caused them a loss ‘after the Deluge/ as a decision now in his favor would entail.
Messrs. Moorman & Moorman, for appellant,
Messrs. Cole L. Blease, C. T. Croydon and D. T. Paulkenbury, for respondents.
April 6, 1926.
On petition for rehearing August 17, 1926.
“Let a formal decree be prepared carrying out the views herein expressed on the footing of this decree and as a part hereof; and it is so ordered, adjudge and decreed.”
The opinion of the Court was delivered by
Mr. Justice Watts.
The decree of Judge Memminger is satisfactory to us, and it is the judgment of this Court that the judgment of the Circuit Court be affirmed.
Affirmed.
Messrs. Justices Cothran, Blease and Stabler and Mr. Acting Associate Justice R. O. Purdy concur.
Mr. Chiee Justice Gary did not participate.