Greenwald v. Metcalf, Graham & Co. , 28 Iowa 363 ( 1869 )

Dillon, Ch. J.

On the facts appearing in the statement of the cause, the court, in our judgment, properly decided the question submitted to it in favor of the defendants.

As collateral security for the note in suit’ the plaintiffs received the certificate of deposit of Barney & Co. Receiving this from the defendants, the plaintiffs would have the right to collect the same by suit, if necessary, and apply the proceeds on their debt. They held it in trust for this purpose. "Without authority from the defendants they would have no legal right to surrender the collateral to the makers of it, or exchange it for the promissory note of the makers, giving them Ume for payment. But this they did. It is said, indeed, by the plaintiffs in argument, that the Langworthys had no authority, being mere bankers, and holding the paper for collection, to make the arrangement to surrender the certificate of deposit and take in its place the promissory note of Barney & Go.

This point, however, it is not in' the power of the plaintiffs to make, since, by accepting the note, suing upon it, and buying in the land, they have ratified the act of the Langworthys. It is the same as if the plaintiffs had themselves done that which the Langworthys did for them.

The surrender of the certificate and the taking of the promissory note were the acts of the plaintiffs, and on this record, these acts were done without the authority, prior or subsequent, of the defendants.

But it is next insisted, that the plaintiffs’ act in so doing ought not to relieve the defendants from paying the balance of the note in suit, because Barney & Co., were' insolvent, and, hence, the defendants were not prejudiced by the act of giving up the certificate and the taking of the note. Whatever might be the law if the fact were established that the defendants were not prejudiced, it is our opinion that this want of prejudice does not appear.

The certificate was due, and although it is stated that Barney & Co. were insolvent, yet it also appears that they possessed property which was afterward mortgaged to secure the note.

Thp security taken for the note seems to have proved insufficient, but it does not appear that this was all the property the debtors had : nor does it appear that the taking of the note and the giving of time did not in fact injure the defendants. From the facts agreed upon, the plaintiffs must be held to have converted the collateral, and there is no case made which will relieve them from accounting to the defendants for the full nominal amount thereof.

Affirmed.