Bernard v. Madsen ( 1925 )

But two questions are presented in this case: (1) Did the Ruso bank have actual authority to act as plaintiff's agent in collecting the principal obligation, and, (2) did the plaintiff so conduct herself as to reasonably warrant the defendant, Sorenson, in believing that the Ruso bank had such authority? That is, was there actual or ostensible agency in the bank? The defendant contends that there was. The plaintiff asserts the contrary. The burden is upon the defendant to establish his contention. When he dealt with an agent he did so at his peril. It is undisputed that the note and mortgage were at all times in plaintiff's possession or in the possession of her agent, Burnap. While this is not a controlling circumstance, yet it is a circumstance of great weight against authority in the bank to collect the debt.

The majority opinion impales the plaintiff on both horns. It holds that there was both actual and ostensible authority. This holding, that there was actual authority, is based largely upon the course of dealing between the Chatfield bank and the Ruso bank. While Burnap was an officer of the Chatfield bank, yet a distinction must be drawn between his acts and the acts of the bank. He says, and his evidence is undisputed, that he looked after this matter for Mrs. Bernard individually and never turned it over to the bank for attention.

In the first place, I do not believe that the course of business as shown between the Chatfield bank and the Ruso bank justifies the majority holding that the latter was the agent of the former. The most that can be said is, that the Chatfield bank bought a number of real estate mortgages from the Ruso bank and other banks. Some of these mortgages were sold by the Chatfield bank to third persons, among whom was the plaintiff. When these mortgage loans fell due, or the interest was due, these banks, some times the ones from whom the mortgages were bought and some times others to whom the mortgagors went, notified the Chatfield bank that the money was ready and asked that the coupons or notes be sent forward to them. Then the Chatfield bank advised the holder of the mortgage of the fact, procured the coupon or the principal note, as the case might be, and sent it forward for collection by registered mail. Though this was the course of business, it does not establish authority on the part of the Ruso bank to collect notes that had not been sent forward to it and were not in its possession. If the holder of ten notes sends nine of them to a bank for collection, or sends nine of them to a bank upon notice that the latter has received the money for payment of the nine, surely it cannot be said that thereby such bank becomes the agent of the holder to collect the tenth note which it never had in its possession. If this be the rule, it is well that it be proclaimed to the commercial world, for surely the course of every day business will need to be and will be changed. Conceding however, that such is the rule, nevertheless, authority on the part of the Ruso bank is not thereby established as against the owners and holders of notes and mortgages who had in turn bought them from the Chatfield bank. In the instant case, no notice was received by the Chatfield bank that the money was collected or collectible, and the note and mortgage were not sent forward by the Chatfield bank to the Ruso bank. In fact, they never left the possession of the plaintiff. What difference can it make, that if such notice had been received by the Chatfield bank it would have obtained the note and mortgage from Mrs. Bernard and sent them forward for collection? The fact remains that this was not done. The note was at all times in Mrs. Bernard's possession. The custom, whatever its effect might be as between the banks, could not under the circumstances bind her. Nor, can the fact that her agent, Burnap, was also an officer of the Chatfield bank make any difference so far as she was concerned.

Neither is there in the record any ground for the holding that ostensible agency is proven. Sorenson bought the land in February, 1919. He had not prior to that time dealt with the Ruso bank respecting the mortgage. Apparently he paid the interest in 1919 and made arrangements for an extension in 1920, and in 1921 wrote the letter, Exhibit G. Nothing that was done prior to the writing of the letter and nothing that he had learned prior to that time so far as the record shows, could have caused him to believe that the Ruso bank had any authority to collect the principal for the plaintiff, and in fact, there is no testimony on his part that it did. In 1921 Sorenson was in Montana. He wrote the plaintiff from Sydney. This letter is not in evidence and the testimony as to its contents is rather uncertain. Sorenson is unable to say much about it. His testimony is open to the inference that at least one of the reasons why he wrote, was, that he was selling the land and wanted the abstract. In any event, Burnap, answering for the plaintiff wrote, (Exhibit G) "any matters that you have relative to your abstract and new loans, etc., kindly take up with your banker as we do not deal direct with any of our loaning parties. We have no money for new loans." Great stress is laid upon this letter in the majority opinion. Conceding that the reference to "your banker" was to the banker at Ruso, nevertheless, I cannot see how this letter could have reasonably induced Sorenson to believe that the Ruso bank had authority to act for the plaintiff. Nothing was said in Sorenson's letter about payment of the old loan. Though the letter was lost, Sorenson could not be led to say that there was. He wanted an extension or a new loan. The reference in Exhibit G was to "your banker." Whose banker? Surely Sorenson's banker and not the plaintiff's banker. Had Burnap said, "take this matter up with your lawyer," could it reasonably be argued that Sorenson's lawyer thereby became the plaintiff's agent? It seems plain that the most unfavorable (to the plaintiff) inference that can be drawn from the letter in question was, that she did not want to deal with any unknown and irresponsible parties. She required them to deal through "their bankers." Can it, for instance, be argued that if Sorenson had taken the matter up with a Sydney banker or with any other, that the plaintiff would have objected? I think not. Sorenson was acquainted with and dealt with the Ruso bank. That bank looked after his business and drew his papers. He was not induced to do business with or to trust the Ruso bank or banker because of the reference in Burnap's letter. His contention in that regard is an after-thought. He had already entered into a contract to sell his land, and the Ruso banker wrote the contract for him. The Ruso bank was Sorenson's bank. The Ruso banker, "his banker." When he sold his land, that banker wrote the contract for him and the purchaser paid the purchase price to that bank for Sorenson. The payment to the bank was payment to Sorenson and the banker retained out of that payment the monies for the discharge of the plaintiff's mortgage. Beyond question, all that was done in that behalf, was done at Sorenson's direction, with the bank acting as Sorenson's agent. Sorenson had the means of protecting himself. He could have insisted that the money be not turned over until the note, with a satisfaction of the mortgage was delivered. He did not do that. He was satisfied to entrust this matter to his banker. That banker proved dishonest. The loss should be Sorenson's and not Mrs. Bernard's.

As was well said by Chief Justice Bartholomew in Hollinshead v. John Stuart Co. (Hollinshead v. Globe Invest. Co.) 8 N.D. 35, 42 L.R.A. 659, 77 N.W. 89, concerning a mortgagor who gave his money to one without authority from the holder of the mortgage debt to collect it:

"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."

The majority opinion quotes Burnap's letter, Exhibit I, as recognizing and confirming the agency of the Ruso bank to act for the plaintiff. I can not read it so. It was written after the fact. Rather it is a more inelegant, if not a more vigorous statement of the sound common sense doctrine enunciated in the Hollinshead Case and quoted above. It is said in the majority opinion that the evidence in this case "is all one way." I think this is true, but that way leads from, rather than towards, the conclusion there reached. I view the matter as the trial court who saw and heard the witnesses viewed it. The case turns wholly upon the testimony of Burnap and Sorenson. They both testified in person before the trial court. Burnap's testimony was clear and direct. Sorenson's vague and uncertain. The holding of the trial court is in accord with the decisions heretofore rendered by this court, (see Fitch v. Engelhardt, 34 N.D. 187, 157 N.W. 1038; Martinson v. Kershner,32 N.D. 46, 155 N.W. 37; Trubel v. Sandberg, 29 N.D. 378, 150 N.W. 928; Corey v. Hunter, 10 N.D. 5, 84 N.W. 570; Hollinshead v. John Stuart Co. supra; Stolzman v. Wyman, 8 N.D. 108, 77 N.W. 285. See also notes in 23 L.R.A.(N.S.) 414 and L.R.A. 1916B, 860) and should be affirmed.