Court Opinion

ID: 6734897
Source: CourtListenerOpinion
Date Created: 2022-07-20 23:17:31.313123+00
Date Added: 2024-06-11T16:01:44.314850
License: Public Domain

ON REHEx\RING.
Bartholomew, C. J.
On petition of appellant a rehearing was ordered in this case, and, there having been a change in the members of the Court in the meantime, the case has been again fully agrued upon all points. But, as to all the points except the one hereinafter mentioned, we are satisfied with the opinion as it stands, and shall not notice them further. It is urged upon us, however, that in our former opinion we carried the doctrine of equitable estoppel in pais to an unwarranted length, and that the facts recited in the opinion do not constitute such estoppel,' under the circumstances of this case; and, after a very careful- consideration of the point, we have reached the conclusion that this Contention must be sustained. What we regard as the general rule of law was correctly stated by Chief Justice Corliss in the original opinion, in these words: “Although the purchaser of such [negotiable] paper does not notify the debtor of the fact of such purchase, and although *41the latter is ignorant thereof, still he is, in law, chargeable with notice of the rights of the purchaser, and therefore he pays the original creditor at his own risk.” The authorities cited abundantly sustain the proposition. The principle has been further illustrated by many cases. Williams v. Walker, 2 Sandf. Ch. 325, involved kindred questions to those that arise in this case. There the money had been paid by the maker of the bond and mortgage to the solicitor who made the loan, and who for a time held the securities as agent for the payee, and received the interest thereon, but the payee had withdrawn such securities before the payment of principal was made. The payment was made in ignorance of such fact. The decision, as condensed in the syllabus, reads: “The debtor is authorized to infer that the solicitor or agent is empowered to receive both interest and principal, from his having possession of the bond and mortgage. But such inference, being founded upon the custody of the securities, ceases' whenever they are withdrawn by the creditor; and it is incumbent upon the debtor who makes payments to the solicitor or agent, relying upon such inference, to show that the securities were in his possession on each occasion when the payments were made.” In that case the chancellor reviewed the English and American authorities at length, commencing with Henn v. Conisby, 1 Ch. Cas. 93, decided in 1668, and following down to the date of the decision (1845); and all the authorities thus reviewed support the conclusion reached, except the single case of Spencer v. Wilson, 4 Munf. 130, which case, the chancellor says, “is either carelessly reported, or was a loose decision.” The matter of hardship in requiring the debtor to pay the same debt twice was as apparent in the case reported in Sanford as in this case. The chancellor said: “This is a case of great and peculiar hardship,— one which I would gladly have relieved against, were it possible, consistent with the maintenance of sound and important rules of equity, and with dispensing exact justice to the equally innocent creditor.” No question of negotiability was discussed in that case, and the rule requiring the production of the securities in order to protect a debtor who pays to an agent or a supposed agent applies equally whether the securities be negotiable or non-negotiable Mechem, Ag. §. 373, and cases cited; Jones, Mortg. § 964, and cases cited. In Doubleday v. Kress, 50 N. Y. 410, it was held that possession by a presumed agent of an unindorsed negotiable note was not sufficent to protect the debtor. The case of Wilson v. Campbell (Mich.) 68 N. W. Rep. 278, is strongly in point. The action was brought by a grantee of the original mortgage to enforce satisfaction of the mortgage of record. The defendant, Campbell, was an indorsee before maturity of the note secured by the mortgage, and held the note and mortgage in his possession. No assignment of the mortgage to him was of record. He forwarded the interest coupons to the Michigan Mortgage Company, Limited, for collection; and the interest was paid to said company by Wilson, *42and the coupons delivered to him. Wilson also paid the principal to said company at about the .date of the maturity of the note, by executing to said company a new mortgage and note. He testified that he supposed that the Michigan Mortgage Company, Limited, was the owner of the first note. The trial Court held Campbell estopped from denying the authority of the mortgage company to receive the money. The Supreme' Court, in reversing the case, said: “In Williams v. Keyes, 90 Mich. 296, 51 N. W. Rep. 520, we held, following Dutton v. Ives, 5 Mich. 515, that the holder of a negotiable security is alone the one prima facie entitled to receive the payment, and the maker is not authorized to assume the negotiable paper secured by mortgage has not been transferred. See, also, 2 Jones, Mortg. § 957. However the failure to record the assignment may affect one subsequently deriving title or right-through the mortgagee, the maker of a negotiable note secured by a mortgage cannot discharge his liability by payment to one not the holder, or authorized by the holder to receive payment. We are not able to discover that the defendant ever authorized the Michigan Mortgage Company, Limited, to collect the principal of this note, or to collect more than the interest coupons on the same being- forwarded to it for the purpose. In this respect the case is so similar to others decided by this Court that we think it unprofitable to discuss this feature here at length. See Joy v. Vance (Mich.) 62 N. W. Rep. 140, and cases cited; Bromley v. Lathrop (Mich.) 63 N. W. Rep. 510; Trowbridge v. Ross (Mich.) 63 N. W. Rep. 534.” To exactly the same effect see Richards v. Waller (Neb.) 68 N. W. Rep. 1053; Stark v. Olsen (Neb.) 63 N. W. Rep. 37. In Bronson v. Ashlock (Kan. App.) 41 Pac. Rep. 1068, the note and mortgage were executed by Ashlock. The Guarantee Investment Company was the payee. Bronson was an indorsee before maturity. • Hill was Ashlock’s grantee. Bronson brought an action to foreclose. Hill answered, setting up payment to the investment company by Ashlock. The evidence showed the payment of the principal to the investment company before maturity. Bronson held the note and mortgage, but forwarded the coupons to the investment company for collection, and upon payment they were delivered by said company to Ashlock. Ashlock had no knowledge of the transfer to Bronson. The trial Court held Bronson estopped by the payment to the investment company. The Supreme Court reversed, and said: “In this case there is nothing to show that the investment company had possession or claimed possession or control of the note and mortgage after their transfer to Bronson in 1887. The payment under such circumstances was made wholly at the risk of the payor.” The Court cites a large array of authorities on the point. There is some very pertinent language in Murphy v. Beard (Mass.) 38 N. E. Rep. 32. There the original maker of the note paid to the original payee, supposing his ownership to continue. The payee had collected *43the interest on the note. The maker sought to charge the holder with payment through an authorized, or at least an ostensible, agent. The Court said: “But we need not consider that question, because it does not arise upon the facts. The plaintiff was unacquainted with the fact that the mortgagee was an agent of some owner of the note, and was not thereby induced to make payments. He made them solely because he himself assumed, without inquiry, and without any representations made, and without requiring the production of the note, that the mortgagee continued to be its holder and owner; and he dealt with him as owner, and not as an agent.” Again the Court said: “Nor is the case one where, if one of two innocent persons must suffer from the wrongful act of a third, the plaintiff should be relieved from the consequences of his payment to the wrong party. The owner of the note was not the cause of his making the payments, and did not induce him to make them, but he acted solely upon his own supposition that the mortgagee was himself the owner of the note and mortgage.”
It has been suggested that the fact that the note in this case was made payable at the office of the Globe Investment Company, in Boston, made that company the agent of any holder of the note for the purpose of receiving payment, if tendered at that office. Such is not the law. If a negotiable note be made payable at a particular place, such provision is so far an agreement on the part of the holder to have the note at the specified place at maturity, that, if the maker be there with the money to make the payment, and make a proper deposit, he is relieved from all further obligation to seek the holder. He cannot be charged with costs, and interest will cease from that date. If the holder has seen proper to place the note in the designated place, then the person in charge becomes the agent of the holder to receive the money and deliver the note to the maker. But, if the note be not so deposited, then no authority exists in the person in charge to receive the money. Ward v. Smith, 7 Wall. 447; Pease v. Warren, 29 Mich. 9; Daniel, Neg. Inst. § § 325, 326. In the case at bar the evidence shows that intervener sent the coupon notes to the Boston office of the Globe Investment Company, and when they were paid said company delivered them to respondent. We may admit that respondent was an entire stranger to intervener, and that he made such payments fully believing that such company was the owner of the note and mortgage. We may go further, and admit that intervener knew, or might reasonably suspect, that respondent was-so dealing with the investment company That fact cannot estop intervener. Respondent knew the note was negotiable, and that the quality of negotiability would adhere to it every minute until it reached maturity. He knew it was intended to pass from owner to owner by indorsement, and that it was liable thus to pass at any moment, and he knew that the last person thus receiving it could require at his hands the full amount of the note. That the note belonged, *44or he thought it belonged, to the Globe Investment Company when one coupon matured furnished him no warrant for believing that it would belong to the same party when the next coupon matured, or when the principal fell due. He had in his own hands the means of absolute protection. He had only to see to it that he received his note when he paid his money. If he neglected this simple requirement, demanded not more by the law than by common prudence, he paid at his peril; and, if loss occurs, he must bear it. One party or the other must suffer, and he, being the party in fault, must bear the burden.
(77 N. W. Rep. 89.)
These views lead to an entirely different result from that heretofore announced. Perhaps we ought to say that the rehearing in this case was ordered largely at the instance of the late Chief Justice Corliss. Before his resignation from the bench he reached substantially the conclusion we here announce. Our former order of affirmation is set aside, and the District Court of Barnes County is directed to enter judgment and decree of foreclosure in the usual form in favor of intervener, John Stuart & Co., Limited, and against the plaintiff, Charles Hollinshead, as prayed in the petition of intervener, with costs of both courts to intervener.
Reversed.
All concur.