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FIRST DEPARTMENT, MARCH TERM, 1899.

[Vol. 38. receive the payments was held to exist because the owner, having made the investor his agent to make the instrument at his discretion, and having intrusted him with the apparent right to collect the money, was held to be estopped from questioning the extent of the authority which had apparently been given to one who was confessedly his agent in the original transaction. That this is the basis of the rule is apparent from what is said in the case of Doubleday v. Kress (50 N. Y. 410), in which it was held that mere possession of the security (which was a promissory note payable to the order of the owner), unindorsed, was not sufficient to authorize payment to him. Judge PECKHAM says (p. 413) that to give validity to the payment there must be some other fact than the mere possession by the agent of the security; "that the agent took the security or negotiated and made the loan for which the security was taken and was thereafter intrusted by the owner with its possession, is sufficient to render the payment valid." The reason of the rule that one who has made the loan as agent and taken the security is authorized to receive the payment when he retains possession of the security, as he says, "is founded upon human experience that the payer knows that the agent has been trusted by the payee about the same business, and he is thus given a credit with the payer." It was held in that case that the mere possession of the security, although with authority to receive the interest, did not carry with it apparent authority to receive payment of the principal, although the principal was then due, and a judgment holding that a payment of the principal to such a person was good was reversed. In the former report of this case (26 App. Div. 40) it was held that the authority to receive payment of the principal is not to be inferred from the attorney having received the interest, nor from the mere possession of the security, but it must result from the whole control of the investment, from beginning to end, by the attorney or solicitor. The lender must part with his money to the solicitor for investment, and give him absolute control of the whole matter.

The same principle was adopted by the Court of Appeals in Crane v. Gruenewald (120 N. Y. 274). To the rule, as thus stated, there can be no objection. The payer, to whom the loan has been made, knows that the person with whom he dealt was the agent of the investor to take the security. The fact of agency is, therefore,

App. Div.]

FIRST DEPARTMENT, MARCH TERM, 1899.

established to the knowledge of the debtor, and it is but just that the person who has thus created his agent in the matter of the security should not be permitted to deny the existence of the agency, or the authority of the agent, as long as he has possession of the security, and thus has apparent control over it. All the cases hold that the agency arises from the fact of the investment having been made by the agent with the payer, and continues only so long as he has the actual possession of the security. It is so stated in the text books. Judge Story says that if the agent made the loan and is intrusted with the security, an implication of authority to receive the money may be deduced from that fact in connection with the other. (Story Agency, 398, and cases cited.) In every case which I have been able to find, the agency has been held to depend upon the fact of the original investment having been made by the agent, and stress has been laid upon that fact in each of them.

The case of Williams v. Walker (2 Sandf. Ch. 325) is relied upon as constituting an exception to the rule. In that case Bancker, the alleged agent, had not made the original investment, but he had taken an assignment of it for Mrs. Williams, the plaintiff, and the securities were in his possession a large portion of the time. He was intrusted with the care of the plaintiff's money, and made investments for her, and the security was delivered to him by the owner to receive payments on it while Mrs. Williams was in Europe from 1835 to 1837 for about eighteen months, and at that time Bancker held a general power of attorney with one Pearsall to attend to Mrs. Williams' business. As such attorney, and under that power, Bancker had possession of the bond and mortgage, and received four payments of principal upon it amounting to $356. After Mrs. Williams' return, the bond and mortgage were delivered by Bancker to her, but he still continued to receive payments upon the principal until the whole mortgage had been satisfied, although the money thus paid was not delivered to the plaintiff, and she knew nothing about it. In an action brought by Mrs. Williams to foreclose the mortgage, the defendant claimed that she had fully paid it, and the question was whether the money paid to Bancker should be credited to her as a payment upon the mortgage. The assistant vicechancellor examined the case in a learned opinion, and, laying down the rule as stated above, held that Bancker's agency in this invest

FIRST DEPARTMENT, MARCH TERM, 1899.

[Vol. 38. ment was the same as that of a scrivener in England, and that he, having purchased the mortgage and having had possession of the security, had apparent authority to receive payments of the principal and interest upon it while it was in his possession; and that consequently Mrs. Williams was chargeable with the four payments made while the mortgage was in his possession, but that she was not chargeable with the payments made after the security had passed out of his possession by delivery to the true owner. There is no question that the case was well decided, because there is no dispute as to the general agency of Bancker to receive the money upon this investment which was known to the mortgagor. It is quite true that his general agency only existed in connection with that of Pearsall, and, undoubtedly, he would have no authority alone under that general power of attorney with Pearsall to make any investments; but it is equally true that, having the security in his possession, he was authorized to receive the money upon it, although Pearsall was attorney with him, because, although the principal, when he makes two persons his attorneys jointly, is entitled to the exercise of the discretion of both of them, yet, when the business intrusted to them is simply a matter of detail, such as receiving payment already due upon a security, that one of the attorneys who has the custody of the security may undoubtedly receive it, and the payment thus made to him would be good. For this reason a payment to Bancker, while he was one of two attorneys and intrusted with the security, was, undoubtedly, binding upon Mrs. Williams, and, therefore, it was proper to charge her with those payments. But the case has never been cited, so far as I can discover, to extend the scrivener's rule, so called, to a case in which the attorney did not make the original investment; but it has always been cited to the point that where the agent had possession of the security, with apparent authority to receive the payments, payment of the principal was good. In Hat field v. Reynolds (34 Barb. 612), Smith v. Kidd (68 N. Y. 130), and Crane v. Gruenewald (120 id. 274) the fact was that the attorney had been intrusted with the money and authorized to make the original loan, and left in possession of the security; and because of that fact it was held that, so long as he was in possession of the security, he had apparent authority to receive the money, principal and interest, and the case of Williams v. Walker (supra) was cited

App. Div.]

FIRST DEPARTMENT, MARCH TERM, 1899.

as to the effect of permitting the attorney to have the custody of the security. But in this case Weeks did not make the original loan, and there was no reason on the part of the mortgagor to believe that he had any authority to receive any payments whatever upon the security, nor was there any reason to believe that he was an agent of the trustee for any purpose except to receive payment of the interest.

But authority to receive payment of the interest does not authorize the agent to receive payment of the principal. (Brewster v. Carnes, 103 N. Y. 556.) Therefore, the rule of the Scriveners' Act cannot be extended to protect the payment of the principal in this case, unless it shall be held that the part taken by Weeks in the transfer of the mortgage from Mrs. Saalfield to Morison as trustee was the making of the investment within the scriveners' rule. It is apparent that Weeks did not make this investment in any other sense than any attorney makes an investment for his client. It is quite true that he had the bond and mortgage in his possession, and that he called the attention of Morison to it; but he never had vested in him any authority to take that mortgage, or to pay the money of the trustee for it, and he never had any communication with the mortgagor or the person by whom payment was to be made, so that he might infer from Weeks' connection with the security that he had authority to act for Morison in any way. No money was ever given to Weeks to invest at his discretion, and all the power he had with reference to this mortgage was to receive the check made to his order, transfer it to the credit of Mrs. Saalfield, and procure an assignment to Morison as trustee. In all that no discretion whatever was vested in him. He cannot be said, therefore, to have made this investment in any sense whatever.

Folsom, who made this payment, had no knowledge whatever of Weeks' agency, and no reason to believe that Weeks was an agent of Morison for any other purpose than to receive the interest. He did not know what part, if any, Weeks had taken in the purchase of this mortgage. So far as appeared to him, Morison had done nothing to warrant the inference that Weeks was his attorney for any other purpose than to receive the interest on that mortgage. He made no inquiry of anybody, not even of Weeks, as to the extent of his authority, although he knew that Morison, as trustee, was the

FIRST DEPARTMENT, MARCH TERM, 1899.

[Vol. 38. owner of this bond and mortgage. It seems to us, therefore, that this is not a case where the scriveners' rule should be applied to the full extent; and for that reason the learned justice at the Special Term was in error in the conclusion which he reached, and the judgment should be reversed and a new trial ordered, with costs to the appellant to abide the event.

VAN BRUNT, P. J., and INGRAHAM, J., concurred; BARRETT and O'BRIEN, JJ., dissented.

BARRETT, J. (dissenting):

ton.

Was Weeks clothed by Morison, trustee, with apparent authority to receive payment of the principal of the mortgage? That is the precise question. Mr. Folsom, when he made the payment, knew that Weeks had possession of the securities. They were, in fact, delivered to him by Weeks upon such payment. He also knew Weeks' previous relation to the securities. That relation extended over a long period. For many years Folsom had been in the habit of paying interest upon the bond and mortgage to Weeks as attorney for a prior assignee thereof, a Mrs. Saalfield, formerly Mrs. SutDuring all these years Weeks had possession of the securities. He in fact negotiated the transfer to Morison as trustee of Madame Isabel von Linden. Morison did not even know Mrs. Saalfield. All he knew was that Weeks told him it was a client of his who wanted the money. "I have an idea," he testified, "that "Ada L. Sutton' was the name." He gave his check to Weeks for the price of the mortgage, and Weeks did the rest. Weeks arranged the purchase from Mrs. Saalfield, drew the assignment, witnessed it, and as notary public took her acknowledgment. All that Morison did from beginning to end was to look at the property to see if it was sufficient security for the money, and to give Weeks a check for the purchase price. Upon this transfer, the securities remained in Weeks' possession just as they had during Mrs. Saalfield's ownership. They were not even physically delivered to Morison; and so little had he to do with it then that he could not, upon the previous trial, swear even to a remembrance that in his trust estate there was a mortgage known as the G. W. Folsom mortgage. Weeks simply took these securities out of one pigeon hole in his safe (Mrs. Saalfield's) and put them in another (Morison's), or put them in the lat

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