Payment of money due on written security, to an agent who has not either possession of the security or express authority to receive such money, is not good, and the principal may compel the debtor to pay it again.

The facts that a loan is made through the agent, and that he has collected the interest, and that he has, in special cases, been authorized to collect the principal of particular mortgages, are not evidence of general authority to collect moneys due his principal, and one who pays to him the amount of mortgage, without his having the mortgage in his possession, does so at his own risk.

Even though an agent has authority to receive payment of an obligation, this does not authorize him to receive payment before it is due.

When a principal took security from an agent for the payment of moneys which he had previously and without authority collected from debtors of the principal, and wrongfully appropriated to his own use, held, that this would not amount to a ratification of payments made to the agent where the principal had not full knowledge of all the material facts when the security was taken.

A

CTIONS to foreclose mortgages.

The opinion states the case.

A judgment was entered for the defendants upon the report of a referee, and this was affirmed by the General Term of the Supreme Court.

M. H. Hirschberg, for appellant. George was at no time invested with authority to collect the principal of the mortgages in suit. Williams v. Walker, 2 Sandf. Ch. 325; Doubleday v. Kress, 50 N. Y. 410; Wardrop v. Dunlop, 3 T. & C. 531; 59 N. Y. 634. Even if George had been authorized to collect plaintiff's bonds and mortgages, he had no power to collect them before they were due. Doubleday v. Kress, 50 N. Y. 410; Fellows v. Northrup, 39 id. 121, 122; 2 Greenl. Ev., § 65. There was no ratification by plaintiff. Coml. Bk. v. Warren, 15 N. Y. 577; 2 Kent's Com. 614, note 2; Story on Agency, § 251 a; Garvey v. Jarvis, 46 N. Y. 313; Nixon v. Palmer, 4 Seld. 398; Seymour v. Wyckoff, 6 id. 213; Smith v.

Smith v. Kidd.

Tracy, 36 N. Y. 79, 83; Baldwin v. Burrows, 47 id. 212; Howell v. Christy, 3 Lans. 238; Brass v. Worth, 40 Barb. 648; Owings v. Hull, 9 Pet. 629. Defendant was guilty of negligence and bad faith in making the payments without the production of the bonds and mortgages. Brown v. Blydenburgh, 7 N. Y. 141; Kellogg v. Smith, 26 id. 18; Purdy v. Huntington, 42 id. 339.

C. F. Brown, for respondent. George was authorized by plaintiff to receive payment of the mortgages in question. Olcott v. Tioga R. R. Co., 27 N. Y. 546, 561; Wardrop v. Dunlop, 1 Hun, 325; 59 N. Y. 634; Story on Agency, §§ 126, 254; Medbury v. N. Y. and E. R. R. Co., 26 Barb. 564; Kelly v. Fall Brook Coal Co., 4 Hun, 261; Cushman v. Locker, 2 Mass. 106; 1 Livermore on Agency, 47, 48.

RAPALLO, J. The judge before whom these actions were tried has found as facts that the mortgages sought to be foreclosed were, in March and April, 1867, paid by John McKinney, the owner of the mortgaged premises, to Thomas George, as the agent and attorney of the plaintiff, and that said George was at the time duly authorized by the plaintiff to receive the same.

The conclusion that George was, at the time of the payments in question, authorized by the plaintiff to receive the same, is based upon a preceding finding that at the time the mortgage to the plaintiff of $2,400 was executed (March 31, 1866), and previous thereto, and from that time till March, 1874, the said George was, had been, and continued to be the general agent and attorney of the plaintiff in the matter of the investing, managing, collecting and receiving both principal and interest moneys belonging to the plaintiff as executrix.

The judge further found that in the spring of 1874 said George absconded. That shortly before absconding he gave to the plaintiff a list of the mortgages belonging to her which he had not collected, and informed her that the rest had been collected, and offered to secure the plaintiff therefor by transferring to her certain securities belonging to him. That such securities, or some of them, were so transferred to the plaintiff and taken and received by her upon account of, and as security for, the payment by George of the sums collected by him on the plaintiff's bonds and mortgages.

Exceptions were duly taken to these findings separately; also to

Smith v. Kidd.

certain refusals to find facts, and also to rulings upon the admission and rejection of evidence upon the trial.

There was no direct proof of authority from the plaintiff to George to collect the principal of the mortgages in controversy, or of any general authority to collect the principal of her mortgages. Such authority was inferred by the court from the course of dealing between the plaintiff and George subsequent to the payment in question, and from her acceptance of securities from him in 1874, about the time of his absconding. The effect of taking these securities will be separately considered.

The defendant called the plaintiff as a witness, and proved by her that she was applied to by McKinney for a loan, upon mortgage, of $2,400 in the latter part of March, 1866; that she agreed to make the loan, provided the title was satisfactory, and designated Mr. George as the lawyer to draw the papers; that George had never done business for her before that transaction. It appeared that George had attended to the matter of the probate of the will of the testator, but this appears to have been his first transaction with the plaintiff in the matter of loaning money. She sent him a check payable to his order for the $2,400, and afterward on his statement by letter that there was a prior lien upon the property for $1,000, she agreed to take an assignment of that mortgage, and sent him a check for the purpose. He closed the matter, and sent her the bond for the $2,400, and afterward the mortgage and the assignment of the $1,000 mortgage after having procured them to be recorded, and she ever afterward retained these papers in her possession until 1874, about the time George absconded.

After taking these mortgages, and before April 1, 1867, the date of the payment of the principal, George, as the attorney for the plaintiff, received and paid over to her six months' interest, but the plaintiff testified that she never gave him any general authority to collect the principal of her mortgages. She did, from time to time, give him express authority to receive payment of particular mortgages, of which she executed satisfaction-pieces, and to reinvest the money, but none of these transactions occurred until after the payment now in question. None of her mortgages had then been paid off.

George was the attorney of McKinney from before March 31, 1866, to and including April 1, 1867. This fact is found. On

Smith v. Kidd.

the 28th of March, 1867, and while the papers were in plaintiff's possession, McKinney paid to George $1,000, and took from him a receipt, as follows:

"Received of Jno. McKinney, one thousand dollars, to be applied on mortgage to A. U. Smith, executrix.

"March 28, 1867.

T. GEORGE, Atty."

On the 1st of April, 1867, McKinney made further payments to George, for which he gave a receipt, as follows:

"Received April 1, 1867, of John McKinney the amount of mortgage to Miss Smith. THOMAS GEORGE."

$1,000 2,275 244

$3,519

McKinney at this time asked for his papers, but was informed by George that Miss Smith was not at home, and was told to call in the next time and he could get them. McKinney testified that George agreed to get the papers. He was fully aware that George did not have them. George then handed the money back to McKinney and told him to take it to the Newburgh bank and deposit it to his (George's) credit, which McKinney did.

At the time of this payment the $2,400 mortgage was not due, being payable April 1, 1871, and having still four years to run. No inquiry appears to have been made by McKinney, whether the plaintiff would consent to the mortgage being paid off before maturity, nor was she in any manner notified of the payment. McKinney applied several times subsequently to George for his papers, but did not obtain them; he made no application to the plaintiff, and did not inform plaintiff of the facts until after George had absconded in 1874.

That George, at the time of receiving this money, intended to defraud either his client, McKinney, or the plaintiff, is quite apparent, for he not only omitted to inform plaintiff of the payments, but on the following day, April 2d, he wrote to her for $3,500, for which he sent her the bond of one Mr. Laughlin, notwithstanding that he already had in his possession the $3,519 received from McKinney; and from that time, during a period of six or seven years, he regularly paid to her semi-annually, the interest on

Smith v. Kidd.

the McKinney bonds and mortgages of $2,400 and $1,000, treating them as subsisting securities, and she having them in her possession.

Laying out of view the subsequent dealings had by the plaintiff with George, in ignorance of his fraudulent conduct, it is very plain that there is no evidence, that at the time of this payment, April 1, 1867, George had any authority to receive the principal of these two mortgages as her attorney. Had this controversy arisen immediately after that payment it is clear that the defendant must have failed in his defense. Miss Smith, the plaintiff, was the only witness by whom he sought to prove actual authority, and she expressly negatived it. There was no evidence of apparent authority at that time, for George had never before undertaken to collect principal. The fact that the plaintiff, on the 31st of March, 1866, advanced the money to McKinney through George was no proof of authority to him to collect the principal, when she did not intrust him with the custody of the securities, but held them in her own possession. Neither was the defendant warranted by the fact of the attorney being authorized to collect the interest, in inferring that he was also authorized to receive the principal. Such authority, in the absence of direct proof, may, in some cases, be inferred from the attorney having possession of the bond and mortgage, but in such cases it is incumbent upon the debtor who makes payments to the attorney, to show that the securities were in his possession on each occasion when the payments were made, for the withdrawal of the securities would be a revocation of the authority. Williams v. Walker, 2 Sandf. Ch. 325, and cases cited; Doubleday v. Kress, 50 N. Y. 410; S. C., 10 Am. Rep. 502.

The finding that George was the general agent of the plaintiff in the matter of collecting both principal and interest prior to, and at the time of, the payment in question, therefore, depends wholly for its support upon the subsequent transactions, from which a general agency is sought to be implied retroactively. These transactions consisted in the receipt by George of the interest on plaintiff's bonds and mortgages and his payment over of such interest to the plaintiff, while she retained possession of the securities. That authority to collect interest in such cases does not afford ground for inferring authority to collect principal, where the agent or attorney is not intrusted with the possession of the securities, was expressly adjudicated in Williams v. Walker, 2 Sandf. Ch. 325. VOL. XXIII.- 21