Bates v. American Mortgage Co.

1. Findings of Fact—Agbncy.—Where a corporation A makes a loan of money through a corporation B, which solicits loans and makes all necessary inquiries, examination of titles, and drafts of papers, through a designated person at the home of the borrower, such person taking a written application in which he is declared to be the agent of the borrower, this court sustained the finding of the Circuit Judge, that this person was the agent of B, and B the agent of A. 2. Findings of Fact by the Circuit Judge as to the credibility of a witness, whose testimony had been taken by commission, sustained. 3. Sub-Agents—Makkied Women..—-The mortgagor being a married woman, and her husband having informed the local agent that the money about to be borrowed on the security of her separate estate was to be used by him for his own purposes, and was afterwards so used, this knowledge by a sub-agent of the lending corporation, acquired in the course of the very business, is imputable to the principal. And, therefore, the mortgage so given by the married woman is null and void.

Before Izlar, J., Barnwell, March, 1891. Action by Savannah E. Bates against the American Mortgage Company of Scotland, Limited. The Circuit decree was as follows : The plaintiff, a married woman, brings this action to perpetually enjoin the defendants, their agents and servants, from selling the lands of plaintiff, or otherwise interfering therewith, under and by virtue of a certain note and mortgage set forth in the complaint, and the power of sale contained in said mortgage, and for such other and further relief as may be just. The facts alleged, and on which the plaintiff asks this relief, are that she was a married woman at the time of executing said mortgage upon her separate property, and that the same was executed by her as security for a loan effected by her husband, J. B. Bates, through one W. H. Duncan, the agent of the defendant corporation; that the moneys obtained on said security were received by her husband and applied by him to the payment of his own debts, and not to the uses of the plaintiff, or for the benefit of her separate property, and that the object for which said loan was obtained was well known to the agent at the time the same was negotiated. The main issues raised by the answer of the defendants are as to the agency of the said W. H. Duncan, and the notice to the defendant corporation that the money loaned on said security was to be applied by the husband of the plaintiff to the payment of his own debts, and not to the use of the plaintiff, nor to the benefit of her separate property. The case was heard at the March, 1891, term of the Court of Common Pleas for Barnwell County aforesaid, upon the pleadings and evidence previously taken. The issues raised were argued at length by the counsel of the respective parties. Before entering upon á discussion of the legal questions involved, it becomes necessary to state as concisely as possible our conclusions of fact as found from the testimony. In arriving at these conclusions, we deem it proper to say that we have made a careful study of the testimony in all its bearings, and have given to it such weight as in our judgment it is entitled. We are not favorably impressed with the testimony of Frederick W. Dunton, examined on behalf of the defendants. It does not strike us that this witness was actuated by a desire to “Speak the truth and the whole truth, ” but rather by a desire to evade and keep back the “whole truth,” especially when we take into consideration the fact of his long connection as a partner with the Corbin Banking Company, his opportunities of acquiring a thorough knowledge of its business methods and its business transactions, and his very recent withdrawal from the partnership. The following facts are, in our opinion, sustained by the weight of the evidence, in the light in which we view it: On the second day of March, 1885, the plaintiff, then a married woman, having a separate property, signed an apjjlication for a loan of one thousand dollars, upon her plantation in Barnwell County aforesaid, containing two hundred and thirty acres, giving description and quality of the land, with a plat thereof attached. This application contains the following clause: “I understand that if this application is negotiated by W. H. Duncan, it will be upon the representations herein contained, which are true in all respects, and are made by me to be used by him as my agent in procuring for me the loan.” And is signed “S. E. Bates, applicant.” On the 25th day of April, 1885, the plaintiff signed another paperj of which the following is a copy: “Whereas, I have this day employed W. H. Duncan to negotiate for me a loan of $1,-000 for a term of five years, with interest at the rate of eight per cent, per annum, upon a note and mortgage securing the same, which shall be a first lien upon my farm in Barnwell County, S. C. Now, then, if he shall succeed in negotiating-said loan within thirty days upon the usual conditions exacted by the Eastern money lenders as to security, perfecting of title, insurance, &c., I agree to pay the said W. H. Duncan'the sum of $200, which shall be in full of his commissions and negotiation. I also agree to furnish an abstract of title to the farm, and to pay the fee for recording my mortgage.” And on the first day of May, 1885, the plaintiff signed a receipt, of which the following is a copy : “Received from the Corbin Banking-Company one thousand dollars, proceeds of loan negotiated by them for me with the American Mortgage Company of Scotland, (Limited,) less commissions as agreed.” The note and mortgage referred to in the complaint were executed by the plaintiff on the 25th day of April, 1885, and the mortgage recorded in the register’s office for Barnwell County aforesaid on the fourth day of May, 1885. • The”Corbin Banking Company of New York was, at the time of negotiating the loan in this case, doing a general banking business, and engaged in negotiating loans in the Southern States, secured by mortgages of real estate, for various companies and corporations in this country and in Europe; and the said W. H. Duncan held himself out to the public in negotiating loans in this State as the agent of the said Corbin Banking Company, and that the loan negotiated by bim in this case was as such agent. The Corbin Banking Company, in effecting said loans, furnished all the necessary blanks for applications, &e., to their local State agénts, fixed the terms, examined and approved the securities offered, paid over the moneys loaned for the lenders; took the receipts for same in their own name; shared in the commissions, and looked after the collection of the securities. The moneys loaned in this case were secured by the note of the plaintiff, and a mortgage of her separate real property; and the moneys thus obtained were applied by her husband, J. B. Bates, to the payment of his own debts, and not expended by the plaintiff, or for the benefit of her separate property; and no part of said money ever came into the hands of the said plaintiff. 'William H. Duncan was informed by J. B. Bates, the husband of the plaintiff, at the time the application for said loan was made, that the money was wanted to pay his debts, and that his wife would sign the mortgage to secure the loan, in order that he might get the money. In negotiating this loan, the evidence does not satisfy me that J. B. Bates was the authorized agent of his wife, and effected the loan for her. This action was commenced on the 1st day of August, 1890, and thereafter an order was made by Judge James Aldrich, restraining the defendants from further attempting to sell the property of the plaintiff under the power of sale contained in said mortgage until the cause was heard and determined on its merits. We think it now the settled law of this State that it is necessary, in an action to enforce a contract executed by a married woman, to show that such contract was made with reference to her separate estate, and that the .burden of proof is upon the party seeking to enforce such contract; and that while a married woman may borrow money for her own use, either directly or by her husband as her authorized agent, and secure the same by a valid mortgage of her separate estate, yet she can not do this for the benefit of her husband, provided the lender has knowledge of such intended use when he makes the loan. These propositions have been so recently and plainly decided by our Supreme Court, and are so well known to the profession generally, that it would be a waste of time to review the cases. See Tribble v. Poore, 30 S. C., 97; Gwynn v. Gwynn, 31 Id., 482; Greig v. Smith, 29 Id., 429; Goodgion v. Vaughn, 32 Id., 499; Salinas v. Turner, 33 Id., 231. It is enough to say, the cases are recent, and fully sustain the propositions laid down. Applying these principles to the facts as found in this case, there can be but one conclusion, namely : That the note and mortgage executed by the plaintiff herein to the defendant corporation, and now sought to be enforced by said corporation against the plaintiff, are void, and, therefore, not binding upon her, or enforceable against her separate property. As this case, however, turns mainly upon the question of agency of these middle men of the defendant corporation, and the notice to them of the object for which said loan was obtained, it becomes necessary, perhaps, that we should discuss briefly the facts relating to this question, and the law applicable thereto. The defendant corporation, it is evident, had money to lend, and this money it was willing to entrust to the Corbin Banking Company to lend, if said company was satisfied with the security. The Corbin Banking Company was engaged, as we have seen, in negotiating loans on real estate security in the Southern States, for foreign corporations. The moneys, as well as the securities to be taken therefor, were entrusted to the Corbin Banking Company. The company sought and effected these loans by and through their agents at different points, to whom they furnished printed blanks for making applications for loans. They fixed the terms, examined and approved the securities offered for those who had entrusted them with moneys to lend, and looked after the collection of the securities for those persons for whom they acted and made loans. We find nothing in the testimony to satisfy us that the defendant corporation held control of their money, and decided for themselves when they would part with it, or made the terms and approved the securities offered. On the contrary, all these things appear to have been done by the Corbin Banking Company and their local agents. The moneys of the defendant corporation were committed to the Corbin Banking Company for investment. They made the loan in this case, fixed the terms, and accepted the security for the defendant corporation. If this be so, the relation of principal and agent was clearly established between the Corbin Banking Company and the defendant corporation. The relation of principal and agent is a question of fact, and may be proved by the acts, declarations, or conduct of the principal and agent; a.ud the plaintiff here was not estopped by the clause contained in the application for the loan, from showing that W. H. Duncan was the agent of the Corbin Banking Company. Agency may be implied when one party accepts the benefits resulting from the transactions of another party, who ostensibly acted as his agent. The acts, declarations, and conduct of W. EL Duncan, as also the fact that the benefits derived by the transaction, were accepted and shared in by the Corbin Banking Company, all show conclusively that in negotiating this loan, W. El. Duncan acted as the agent of the Corbin Banking Company, who, as we have already seen, were the agents of the defendant corporation. We do not think, under the circumstances, the fact that the plaintiff here acknowledged in the written application that said application was to be used by the said W. H. Duncan as her agent in procuring the loan, is at all conclusive of the question as to the agency of W. EL Duncan in negotiating said loan. To our mind this fact rather strengthens the conclusion to which we have arrived. The clause is unusual in transactions of this nature, and is, therefore, to be looked upon with suspicion. The intention seems to have been to estop the plaintiff at the outset from denying or proving that the said W. H. Duncan acted in any other capacity than that of agent for the borrower in negotiating said loan ; and thereby enable the lender to escape the express notice that the money was obtained on the security of the wife, for the sole purpose of paying and satisfying the debts of the husband. Such efforts to evade the law are never looked upon by Courts of Equity with favor. These intermediaries, W. H. Duncan and the Corbin Banking Company, were, no doubt, for certain purposes, the agents of both parties, yet, for certain other purposes, they were clearly the agents of the lenders only—such as making the loan, fixing the terms, and accepting the security. And, as was said by Chief Justice Simpson, in the case of Salinas v. Turner, su/pra: “To allow this solemn constitutional provision for the protection of married women and their separate estates to be evaded in this roundabout way, would, it seems to us, be a mockery, emasculating said provisions, and rendering the whole law upon the subject utterly useless and worthless.” The only question that remains is, is the knowledge of the agent the knowledge of the principal1? We can not better answer this question than by adopting the language of our own court in the case of Salinas v. Turner, supra. The court says: “Assuredly so as to matters within the scope of his agency. This is elementary, and certainly does not need the citation of authority to support it.” We must, therefore, hold that the defendant corporation, the real lender, knew that this money was borrowed for the express purpose of paying the debts of the plaintiff’s husband. These intermediaries, W. H. Duncan and the Corbin Banking Company, being agents of the defendant corporation, the lender, for making the loan, fixing the terms, and accepting the security, their knowledge is the knowledge of their principal. And it goes without contradiction that W. H. Duncan, the agent of the Corbin Banking Company in this State, was expressly informed by the husband of the plaintiff, before the loan was negotiated, that the object of procuring the loan was to enable the husband to pay and satisfy his own debts. We come next to consider the relief demanded by the plaintiff. The plaintiff asks an injunction against the defendants, perpetually restraining them, their agents and servants, from selling the lands of the plaintiff under the note and mortgage mentioned in the complaint. Among the equities set out in the complaint, and on which the relief by injunction is asked, is that such sale will put a cloud upon the title of the plaintiff to said land. That this is a ground for equitable relief, there can be no question. In Ketehin v. McCarley, 26 S. C., 7, the court says: “The jurisdiction of a Court of Equity to prevent, as well as to remove, a cloud upoD the title to real property, seems to be well settled.” Again : “It is difficult to establish any exact test, which will be applicable in all cases to determine what constitutes such a cloud upon the title as to authorize a Court of Equity to interfere for its protection. It has been held, however, that if the sale, which it is sought to restrain, is such that in an action of ejectment brought by the purchaser under the sale, the real owner of the property would be obliged, to offer evidence to defeat the recovery, then such a cloud would be raised as to warrant the interference of equity to prevent the sale.” The present case seems to us to come clearly within the rule laid down by our Supreme Court. If the defendant corporation is allowed to sell the mortgaged premises under the power of sale contained in the mortgage, the plaintiff could only protect herself in an action of ejectment brought by the purchaser at such sale, by offering evidence tending to show the invalidity of said mortgage in order to defeat a recovery. If the only question before the court was whether the plaintiff had made out such a case as would entitle her to an injunction perpetually enjoining the defendant corporation, their agents and servants, from selling the mortgaged premises under the power of sale contained in said mortgage, the answer would certainly be in the affirmative. The answer of the defendants, however, puts in issue the validity of said note and mortgage, and demands a judgment of strict foreclosure and sale of the mortgaged premises. The defendants having failed to show either that the note and mortgage of the plaintiff had reference to her separate property, or that there was a want of notice on the part of the defendant corporation as to the object of the loan, are not entitled to the affirmative relief demanded by their answer. The note and mortgage being invalid for the reasons hereinbefore stated, the plaintiff is entitled to judgment to that effect, and that the same be delivered up can-celled. It is, therefore, Ordered, adjudged, and decreed, that the note and mortgage executed by the plaintiff to the defendant corporation, and bearing date the 25th day of April, 1885, be, and the same are hereby, set aside as null and void, and that the same be delivered up to the plaintiff cancelled, and that the injunction heretofore granted in this cause be, and the same is hereby, made perpetual. Finally ordered, that the costs of this action be taxed by the clert of Barnwell County, and be paid by the defendant corporation. Defendants appealed on the several grounds set forth in the opinion.