Farmers & Mechanics Bank v. Western Loan & Building Co.

Tolman, J.

— The respondent on or about the 23d day of July, 1912, made a loan of upward of $2,000 to the First State Bank of Marcus, and took as security therefor a deed to Ortho Dorman, as trustee, to lot 11, block 32, in the town of Marcus, and other property, which deed was not placed of record until September 17,1914. After the making of the loan and the delivery of the deed, the north forty feet of lot 11, block 32, was conveyed by deed to one James McClure, which deed was placed of record, and on February 16, 1914, the appellant made a loan of $1,200 to James McClure, and took as security a mortgage on the north forty feet of lot 11, block 32, which had been conveyed as stated. Afterwards the First State Bank of Marcus became insolvent and went into the hands of a receiver, respondent’s loan became delinquent, and this action was brought for the purpose of having the deeds held by respondent’s trustee declared to be mortgages, and for their foreclosure and the application of the proceeds toward the payment of the balance of $1,500 which still remained unpaid upon the respondent’s loan to the bank. For the purposes of foreclosure, James McClure, the appellant, the receiver of the bank, and C. W. Barringer, M. I. Barringer, and ■Paul Barringer were made parties defendant. All defaulted except the appellant, which appeared by cross-complaint seeking the foreclosure of its mortgage, and the receiver; and issues were joined upon the respondent’s complaint and the appellant’s cross-complaint.

The trial court found that James McClure was a fictitious person, that the mortgage executed by him and held by the appellant was null and void and constituted a cloud upon the title to the north forty feet of lot 11, block 32, and gave tbe respondent a judgment and decree of foreclosure accordingly. From this judgment the appeal is taken, and errors are assigned sufficient to raise tbe questions herein to be discussed.

Tbe particular points to be decided are, first, tbe question of tbe validity of tbe appellant’s mortgage, and, second, if valid, is it prior or subsequent to tbe ‘ lien of respondent’s mortgage?

Some contention appears to have been made in tbe court below as to tbe authority of C. W, Barringer, as president, and M. I. Barringer, as cashier of tbe bank, to execute tbe deed to James McClure, conveying tbe north forty feet of lot 11, block 32. Aside from tbe authority given to tbe president and cashier by tbe by-laws of tbe bank, which are in evidence, and which probably are sufficient, it appears that tbe Barringers were tbe principal stockholders of tbe bank as well as tbe officers through whom it transacted all of its business; and as tbe deed upon which respondent relies was executed by them without any special authority being shown from tbe directors of tbe bank, who at all times acquiesced in everything that tbe Barringers did, it must be held that it was within tbe scope of their apparent authority to execute tbe McClure deed. First Nat. Bank of Kennewick v. Conway, 87 Wash. 506, 151 Pac. 1129.

Tbe receiver’s answer to tbe cross-complaint alleged that McClure was a dummy used by Barringer to defraud tbe bank, and that McClure was a fictitious person nonexistent at tbe time of tbe execution of tbe mortgage. Upon a careful study of tbe record, we find that tbe evidence amply supports these allegations. This being so, it follows from all tbe evidence in tbe case, that James McClure was tbe name adopted by C. W. Barringer for tbe purpose of tbe manipulatión of the affairs of the bank. And the effect of the deed was to vest title to the property conveyed in Barringer. In Chapman v. Tyson, 39 Wash. 523, 81 Pac. 1066, we had occasion to consider the effect of taking title in, and conveying by, an assumed or fictitious name, and after reviewing the authorities at some length we there held that title would so pass. It follows, therefore, that the title being vested in Bar-ringer under the fictitious name of McClure, the mortgage and note made by Barringer under that name and delivered by him to the appellant were valid instruments in the hands of an innocent holder.

It appears from the record in this case that the appellant relied absolutely upon the record title in its acceptance of the mortgage made in the name of McClure and the advancement of the money thereby secured, and had no knowledge or notice of any fact which would put it upon inquiry, either as to respondent ’s' rights under its then unrecorded deed, or the wrongdoing of Barringer; and as respondent might by a timely recording of its deed have not only perfected its rights, but also have put it beyond the power of Barringer to further deal with the property, and thus have prevented loss to the appellant, a familiar rule of equity applies to the effect that as between two innocent persons the one whose act or omission made possible the wrong shall bear the loss.

The judgment will be reversed, with directions to the trial court to enter a decree establishing the appellant’s mortgage as a first lien upon the property therein described and directing its foreclosure.

Main, C. J., Mitchell, Parker, and Fullerton, JJ., concur.