Court Opinion

ID: 5194420
Source: CourtListenerOpinion
Date Created: 2022-01-06 15:41:07.928886+00
Date Added: 2024-06-11T08:27:00.650430
License: Public Domain

Hiscock, J. (dissenting):
I am unable to concur in the conclusion reached- by the- majority of my associates, that the judgment, appealed from should, be affirmed.
The action was brought by plaintiff to recover against, defendant . upon a note for $5,000 and interest, and .also the sum of $2,298.60 for moneys loaned and advanced.
*369Defendant, not disputing much of her indebtedness upon said claims, sought to hold plaintiff liable for the sum of about $24,000 and interest, being the amount at which, upon the foreclosure of certain mortgages, it had bid in certain real property, and to recover judgment for the balance of said sum over and above her indebtedness.
The referee before whom the case was tried found in favor of her demand, and heneé the judgment appealed from, which includes :a large amount of interest upon the principal sum found due to defendant.
I think such judgment was not authorized either by the pleadings or by the proofs upon the trial, and should be reversed.
Defendant is a resident of this State. Plaintiff, as its name implies, is a corporation organized and doing business in the State of Minnesota.
In December, 1886, one Whitney, at St. Paul in said State, executed and gave to defendant ten several notes, aggregating $20,100, and executed upon lands situated in said State five several mortgages securing said notes. These securities have become the source of the trouble and present litigation between the parties hereto.
Several years before this action was commenced, defendant deposited the same with plaintiff for collection and care. Subsequently she assigned them to it as security for moneys borrowed and already referred to. The lands covered by the mortgages were transferred by Whitney to other parties who failed to make proper payments upon the notes and to pay taxes. These defaults occasioned much correspondence between defendant and plaintiff and one Atwater, who, as attorney and friend, represented her in Minneapolis. Finally it was decided by defendant that it was necessary to have plaintiff foreclose the mortgages. It is claimed in her behalf that the final instructions by her upon this subject were embodied in directions given by Atwater to the plaintiff on or about July 5, 1894. As the exact nature and tenor of these instructions has been made a matter of importance under the defendant’s claim, we shall quote them as repeated in a letter by Atwater to defendant. The former says: “ f have talked over your matters with Mr. Lindley (one of plaintiff’s officers) and told him there was no *370other course except to proceed to foreclose the Sumbardo (Whitney), mortgages as soon as possible, bid in the property^ for somewhere near its present value and take a judgment against the makers of the note for any deficiency there might be.”
It is disputed by .plaintiff that these were the final or controlling directions, but we shall assume for the purposes of this appeal that they were.
After receiving them, plaintiff, in whose name the mortgagés stood, proceeded to foreclose the same by advertisement, and upon the sale, claiming to have acted as defendant’s representative, bid in the lands for the full amount due upon the notes and mortgages which was in the neighborhood of $23,000 or $24,000.
It was upon this sale that plaintiff did the things upon which has been built up its liability in this case. Defendant’s complaint against it rests solely upon the grounds, first, that it bid in the prop(erty in its own name, and, second, that it bid the same in at the full amount of indebtedness due rather than at the actual value of the lands, which is found to have been about $20,000, thereby canceling any claim against those personally responsible upon the notes for the difference between the amount of the indebtedness and the actual value of the property. Of course the criticism that no proceedings have been taken tó Secure any personal judgment against the inakers of the notes is comprised within the last ground of complaint. There being no deficiency there was no opportunity for a personal-judgment.
Having before our mind these simple and practically undisputed facts it may be remarked at the outset that it is interesting, if not a trifle perplexing, to note, the various theories upon which those stand who have advocated or approved defendant’s right to the judgment which she recovered.
Her attorney in her answer as his theory alleges: “ That the plaintiff at its own option and volition without any request or direction of defendant * - * * by its own attorney * * * caused proceedings for foreclosure * * * and on such sale (of the premises) said plaintiff bid off and purchased and obtained title to each and all the parcels of land covered by said five mortgages for its own use and benefit and * * * has ever since held arid now holds title to all said lands in its own right absolutely free and clear *371from any claim of this defendant therein or thereto, * * * and by said foreclosure, sale and purchase * * * all other claims, sums and demands alleged to have been then owing to plaintiff by defendant became and were thereby paid and satisfied.”
The learned referee in his report, especially in findings of fact numbered 31, 32, 35 and 49, disavows this theory, and by controlling inference at least finds that plaintiff in instituting said foreclosure acted at the request and in the interest of the defendant and that it “ was negligent in the collection of the said collateral notes and mortgages in causing the mortgaged premises to be sold at the full amount due on the respective securities and thus releasing, from all liability on the same, the said Whitney, the maker of the said notes, and the said Van Dyke, the grantee of said premises, who had assumed the payment of the same,” and then holds'as a matter of law that “plaintiff having obtained title to the mortgaged premises and released the parties who were personally liable to pay the debts secured. thereby, has converted the pledged securities,” and must account to defendant for the full value thereof.
I have no doubt whatever that the referee was correct in refusing to adopt the theory set forth in the defendant’s answer, that plaintiff had proceeded of its own volition and upon its own account in foreclosing the mortgages. The correspondence between the parties establishes beyond any reasonable question whatever, that the plaintiff was trying to compel defendant to pay her indebtedness and that it was the defendant who desired that foreclosure should be instituted for her benefit as the best method of obtaining something upon her notes and mortgages.
The learned counsel for the respondent upon this appeal in his elaborate and able brief has, as it seems to me, thought best not to adopt the views either of the attorney or of the referee.
As I study his argument he does not anywhere seem to seriously . claim that plaintiff, as an actual fact, so acted in its own interests and in intentional hostility to the rights and equities of defendant in these securities as to have been guilty of a conversion of the same to its own use. Neither does he appear to much urge that this judgment can be sustained upon the finding of negligence made by the referee, but in the complete analysis of all of his argumént he seems to urge upon our consideration that this judgment for con ver*372sion by plaintiff of defendant’s securities may be affirmed because the former acted in disregard of its instructions to bid in said lands at their actual value; that having disregarded these instructions and caused loss to defendant in the cancellation of the personal liability of certain parties it cannot claim any authorization for anything which it has done in the foreclosure of the mortgages and, therefore, its acts being without authority gave to defendant the right to treat it as a wrongdoer and the election to charge it as a purchaser for itself with the full amount at which it has bid off the property.
By the findings of fact this court is limited to an affirmance of the judgment upon the ground that plaintiff, acting in behalf of defendant and being authorized to foreclose these mortgages for her, was negligent in that it bid in the property for about $24,000 instead of $20,000. That is the interpretation of the facts by which the trial court has arrived at the judgment ‘before us, and this court must be guided and controlled thereby unless upon this appeal it shall not only disregard the facts found, but also find others in their place.
The first, and to my mind apparently insuperable obstacle to affirming the judgment, is the impossibility of bringing the findings of the referee within the limits of any issue presented by the pleadings.
The defendant’s answer setting forth her cause of action against plaintiff, not only in its affirmative allegations already quoted, but by its denials of authority and agency alleged in the complaint, is ,framed broadly and unequivocally upon the lines that plaintiff, acting as pledgee of the securities, upon its own responsibility and of its own motion foreclosed the same and bid in the property at a certain price at and for which it is to be held accountable. This was a perfectly proper and logical attitude to assume towards, a pledgee which had- foreclosed its securities and become chargeable with the amount realized on their sale.
There is no suggestion of any obligation to defendant in the course of those proceedings by virtue of any relationship of agent or representative with any resulting liability by reason of negligence or defiance of authority.
The action was tried upon "those pleadings without amendment.Nothing occurred in the course of the trial which could fairly apprise the plaintiff of a change of complaint. The evidence of witnesses *373was all taken upon commission and was properly addressed to the issues framed by the pleadings as they stood. It was entirely pertinent for plaintiff to meet the allegation that it had been acting solely upon its own volition and for its own benefit, by giving evidence that it had been acting under and in accordance with defendant’s instructions.
It was the referee’s report, so far as the record discloses, which gave plaintiff its first notice of a liability predicated, not upon the claim pleaded that it had been acting of itself and for itself, but upon the exactly opposite one that it had been acting for defendant and that in the discharge of its duties to her as such, it had conducted itself so negligently that, as matter of law, it had become guilty of conversion.
It seems to me that no further statement of the facts in this respect, or argument thereon, is necessary to demonstrate that the court is confronted with the question whether it will sustain a judgment rendered upon findings and a theory radically at variance with the pleadings.
Of course, unless the error committed by plaintiff in bidding in the property at the full amount of about $24,000 due upon the securities rather than at its actual value of $20,000, and which error was due to negligence, did make the plaintiff a trespasser ab initio and so guilty of conversion, it is impossible to see how the judgment can be sustained at its present amount in any event. The only damages suffered by defendant as the result of plaintiff’s negligent conduct was the loss of personal liability of the makers of the notes for the difference between the actual value of the property and the amount bid and being about $4,000.
It may be urged that this court has power upon this appeal to so amend the pleadings as to conform to the findings and sustain the judgment.- Both the authorities and the rules of fairness to litigants forbid that such an amendment should be made upholding a judgment upon charges substantially different from those alleged in' the pleadings, and which the parties have never had a chance intelligently to contest. The appellant in this case did not have an opportunity upon the trial to object to such an amendment because there was nothing to indicate that it was contemplated. (Southwick v. First Nat. Bank of Memphis, 84 N. Y. 420.)
*374Passing from this discussion of the pleadings I come to the consideration upon the merits of the question whether the proofs and findings of fact by the referee, which I must assume to be binding upon the defendant and this court, authorized any such conclusions of law and judgment as was reached.
As was stated at the beginning, defendant’s judgment ultimately rests upon two acts performed by plaintiff in the foreclosure as essential elements of its alleged liability to her. These are the bidding in of the property in its own name, and the. disregard of instructions in bidding the full amount due upon the securities rather than the actual value of the lands. It is to one of these things that the argument for defendant’s claim always reverts: In considering them we must not fail to remember that the referee has by necessary implication found that although plaintiff bid in the property in its. own name it was acting for defendant, and that its overbid was due to negligence and not to any intentional, willful misconduct.
I am unable to appreciate the significance which would be attached to plaintiff’s bidding in the real estate in its own name. I am unable- to see just what else it could have done. It concededly held the mortgages upon a perfectly valid and honest assignment as security for certain indebtedness. It was seeking from defendant payment of that indebtedness. As the evidence and findings abundantly show, she desired- and requested the foreclosure. In complying with her wishes, and although acting as her agent and for her benefit, it was not incumbent upon it to disregard or throw away its own interest in the securities. It was necessary to bid in the property in somebody’s name. Defendant was a non-resident of the. State, and I cannot conceive of any principle which required, or in the. exercise of good management permitted, the plaintiff to purchase the-property in her name and thus lose its claim in and upon the real estate which thenceforth stood in the place of its mortgages. It is suggested in the prevailing opinion that it elected to become the purchaser of the property, and-must stand upon its rights as such. There is nothing in the evidence that indicates that plaintiff ever contemplated anything else than foreclosing the mortgages and bidding in the property for defendant, subject, of course, to its own claims thereon. Under the findings, of the referee there cannot be *375the slightest doubt as- a question of fact that plaintiff now holds .the title for the defendant.
While the exigencies of sustaining defendant’s judgment apparently are deemed to require .utilization of the fact of plaintiff’s bidding off'the premises in its own name, it perhaps is td be stated that not so much-importance seems to be attached to that as to the other one, that plaintiff bid a higher price than it was authorized to.
The learned counsel for the respondent argues, and the prevailing opinion seems to hold, that that amounted to a conversion which destroyed plaintiff’s agency and made it liable for the full amount of its bid as having acted for its own interest. This view suggests the general, inquiry whether a person acting for another who. discharges his engagement with perfect fidelity down to the final act and then negligently, but without intentional misconduct,-departs from his instructions, not in the general nature and character of the act performed, but only in some detail of its execution,, thereby destroys and loses all protection of his original, authority and becomes in effect a wrongdoer acting upon his own responsibility and constructively- for his. own benefit. Applied to the facts of this particular case the view so urged and adopted suggests the query whether plaintiff, because in discharging the contemplated duty of selling and bidding off the property negligently bid $é,000 too much, has thereby become deprived of all authority from defendant to act in her behalf and may be, treated as a purchaser in its own right and charged with the entire purchase price of the- premises. If this is the rule, that an agent who adheres with fidelity to his instructions as regards the substantial character of the acts which he performs and the general manner of performance thereof, is to lose the authority and indemnity of his principal and become personally responsible for all engagements because through mere negligence he has erred in some detail, it needs no argument to demonstrate that it will be rigorous and far reaching. . ,
. Of course it is elementary that an agent may so depart from liis instructions in respect to the substantial character of. the acts performed that he will lose the benefit and authority of his original agency and in a proper case become guilty of conversion..
But that does not seem to me to be this case. It seems to me that in such a case as this, where the agent has dealt with property *376in a manner and for a purpose authorized, it would be a harsh and forced doctrine to. hold that he has been guilty of unauthorized conduct in respect to his entire act, and of consequent conversion because the amount merely of the bid, which he was empowered to make, was tod large. It seems to me that it will be more sensible and equitable to regard the agency and authority as continuing and protecting him from the charge of conversion, leaving to the principal the right of appropriate remedy by which to recover such damages as have resulted from the violation of instructions. '
The principles embodied in this view seem to be fully sustained in Laverty v. Snethen (68 N. Y. 522).
In that case an agent intrusted with property of his principal parted with it in a way and for a purpose not authorized and he was held liable for conversion. In the course of its opinion, however, the court says, as pertinent to the present discussion : “ The cases most strongly relied upon by the learned counsel for the appellant are Dufresne v. Hutchinson (3 Taunt. 117) and Sarjeant v. Blunt (16 J. R. 74), holding that a broker or agent is not liable in trover for selling property at a price below instructions. The distinction, in the two classes of cases, I apprehend, is that in the latter the broker or agent did nothing' with the property but what he was authorized to do. He had a right to sell and deliver the property. He disobeyed instructions as to price only, and was liable for misconduct, but not for conversion of tlie property, a distinction which, in a practical sense, may seem technical, but it is founded probably upon the distinction between an unauthorized interference with the property itself and the avails or terms of sale. At all events the distinction is fully recognized and settled by authority. * * * The result .of the authorities is that if the agent parts with the property, in a way or for a purpose not authorized, he is liable for a conversion but if he parts with it in accordance with his authority, although at less price, or if he misapplies the avails, or takes inadequate for sufficient security, he is not liable for a conversion of the property, but only in an action on the case for misconduct.”
There would seem to be no difference in principle between the case where an agent authorized to sell has sold for too little, and the case Where an agent authorized to buy has bid too much.
In Sarjeant v. Blunt (16 Johns. 74, 75), Judge Spencer, writing *377in behalf of the court, says : “ If every departure from instructions; is to expose a party to an action of trover, I should consider it as introducing a new ride which might operate injuriously; there is; no need 'of this refinement. An action on the case is well calculated to redress any injury arising from a breach of instructions. In this case the defendant was authorized to sell the chronometer for a particular price. The complaint is not that he sold, but that he sold it for a less sum, and thus violated his orders. The selling was not a conversion; but selling for a less price was a breach of duty.”
While the referee has based his report definitely and solely upon the proposition that plaintiff was guilty of conversion, there seems to be some disposition, if necessary, to abandon this ground and to seek to uphold defendant’s judgment upon the apparently broader and more general one that plaintiff cannot claim any authority from defendant for bidding in the property because it disobeyed her instructions as to the amount to be bid. This amounts to the assertion of the principle that an agent cannot claim authority and indemnity from his principal for what he has done if he has in any detail failed or neglected to follow his instructions.
It is difficult to see how the assertion of defendant’s right to recover in this form differs materially from a statement of her right based upon an alleged conversion, or how it avoids the principles enunciated in the cases referred to. If plaintiff, being authorized to sell, would not have been guilty of a conversion because parting with the property intrusted to it for a less sum than was authorized, I fail to see how the agency of plaintiff authorized to bid in property can be repudiated because it has erroneously bid more than it was instructed to. If it would not have been guilty of a conversion in the former case, then in the latter I do not see how defendant can refuse to acknowledge its agency and accept the property which it has bid in for her, whether she bases her right to refuse upon an alleged conversion or upon a claim more general in form, that she is not bound to recognize an agent which in any respect has departed from its instructions. The mistake which plaintiff made in its bid for the property has not in any respect altered or affected the results of the substantial act • which it was authorized to perform in bidding the property in for the defendant. As her agent it bid in the property for her just as it was authorized *378to do. The only result of its overbid has been to destroy a possible incidental and collateral right to pursue the makers of the note to a deficiency judgment. Her loss, if any, in this regard can be easily and adequately compensated for as suggested in the' cases already .cited by an action or counterclaim against her agent for a breach of duty.
Something is said in behalf of defendant that there is in this case an element of conversion, in that the property has been placed where it cannot be restored to defendant, and that plaintiff’s action in bidding in the property deprived her .of all right in the mortgaged property and of all remedies against the makers of the notes and that she cannot be restored to her former position. Of course,' if this means that defendant could not have her mortgages foreclosed and at the same retain them, the proposition must be conceded. Otherwise, and outside of a loss of the right to recover a judgment for deficiency for $1,000 which has been fully discussed, I fail to see how the defendant has lost any rights in her property or has been placed in any different position than was to be anticipated. Her mortgages by the process of foreclosure have necessarily been exchanged into real estate to which, under the findings of the referee in this case, the plaintiff now holds title as her agent.
In addition • to the main questions involved upon this appeal, various exceptions to rulings made by the referee "upon the trial are urged upon our attention, and there is at least one which seems to deserve attention. .
Upon the examination of one Lindley, who was one of plaintiff’s witnesses and also one of its officials having charge of defendant’s matters, an effort was1 made by plaintiff to show that before the foreclosure, through commercial agencies and otherwise, he made an investigation as to the financial responsibility of one Whitney who was the maker of the notes secured by the mortgages and learned that he had none. This evidence was apparently offered for the purpose of explaining and excusing plaintiff’s' conduct in bidding the property in at the full amount of the securities and thus releasing. Whitney. It was ruled out by the referee as irresponsive, incompetent and hearsay. So far as the first ground is concerned, it is to be borne in mind that this evidence was sought upon interrogatories where less strict rule's-prevail as to the technical *379forms of questions and answers than upon the oral examination of a witness present in court. So far as the other grounds are concerned, they were probably tenable upon the issues presented by the pleadings, but if it is to be held that it was proper, irrespective of the pleadings, to incorporate into this case negligence as, a ground of plaintiff’s liability, then certainly this evidence was competent. It then became proper for plaintiff to introduce evidence, not only that Whitney was financially irresponsible, but also evidence which, though falling short óf establishing this as a matter of fact, did go to the extent of showing that it had investigated his responsibility, and had been informed that he was irresponsible, as an excuse for not-procuring a personal judgment against, him and as bearing upon the question whether it was negligent or not.
■For the various reasons discussed, I think that the judgment should be reversed and a new trial granted.
Spring, J., concurred.
Judgment and order affirmed, with costs.