Opinion
No. 21629.
April 7, 1952.
APPEAL FROM THE CIRCUIT COURT, JACKSON COUNTY, PAUL A. BUZARD, J.
Kirchner Vanice, Louis L. Kirchner and Kaer P. Vanice, II, all of Kansas City, for appellants.
Robert L. Jackson, Solbert M. Wasserstrom, Francis L. Roach, all of Kansas City, for respondent.
This is a suit for cancellation of a promissory note and deed of trust securing it, both of which were executed by plaintiff, Edeth L. Steele. The court below found in plaintiff's favor and defendants appeal.
Briefly, the facts are: On May 8, 1944, plaintiff, a widow, purchased the residence known as 3221 Olive Street, in Kansas City, Missouri. The purchase price was $5500, of which Mrs. Steele paid $1100 in cash and gave her note, secured by the deed of trust, for the balance of $4400. The payee in the note and the beneficiary in the deed of trust was Ida E. Leach. She was merely a "straw" and the real owner of the note was one T. J. Clark. It was out of the latter's criminal acts that the present controversy arose.
The note called for monthly payments of $41 on principal and interest, but $9 additional was to be paid each month to cover the reserve for insurance and taxes. Accordingly, the regular monthly payment to be made by Mrs. Steele was $50. The note by its terms gave her the privilege of paying "two or more installments at any time."
Defendant, Perry W. Seaton, a highly respected member of the bar, is a party solely because of the fact he was the named trustee in the deed of trust. Defendant, Ferd C. Mueller, was an agent for the principal defendant, Victory State Bank, of Kansas City, Kansas.
T. J. Clark, the original owner of the note signed by plaintiff, Mrs. Steele, was the president, principal stockholder and moving force of the Pioneer National Corporation.
On July 20, 1945, Mrs. Steele's note, with others, was purchased by defendant Victory State Bank from Pioneer National Corporation through defendant, Ferd C. Mueller, acting then as a broker.
On July 16, 1945, four days prior to the transfer of said notes, defendant, Victory State Bank, entered into a "Service Agreement" with Pioneer National Corporation (Clark's company), by the terms of which Pioneer was to act as "Servicer" for all of the notes purchased by the defendant, Victory State Bank from Pioneer.
Paragraph 4 of that contract provided that: "The Servicer (Clark's company) agrees that it will maintain facilities for the collection of all sums payable by any mortgagor * * *". In paragraph 5 "The Servicer agrees to remit to the Purchaser, (Victory State Bank) the principal and interest collected by it from such mortgages * * *." And in paragraph 6: "The Servicer hereby agrees to keep complete and accurate account of, and to properly apply, all sums paid to it by any mortgagor under any loan covered by the contract.
Mrs. Steele, the plaintiff, made the regular payments of $50 each until March 3, 1947. On that date she cashed some bonds which she owned and purchased a cashier's check for $2550. This she endorsed and delivered to Clark. Afterwards, in her desire "to get the obligation paid off as quick as possible" she made payments ranging from $100 to $200 to Clark. Finally, on April 3, 1948, she paid the balance due on her note. At that time, Clark endorsed on Mrs. Steele's receipt book "received payment in full." He likewise endorsed on her copy of the note the same notation. Although Clark admittedly received these payments, he did not remit the entire amounts collected by him to defendant, Victory State Bank. Rather, he deposited the payments made by Mrs. Steele to his own account and remitted to defendant, Victory State Bank, only $50 each month.
Mrs. Steele testified that she never at any time received notice, written or otherwise, that defendant, Victory State Bank, was the owner of the note here involved.
In May of 1948, Clark's license as a real-estate broker was revoked. At that time, and, apparently for that reason, defendant, Victory State Bank, revoked the Pioneer servicing agency and transferred the same to defendant Mueller. In August of 1948, Mueller came to see plaintiff relative to payments on her note. Mrs. Steele told him that she had paid the note in full in the preceding April and referred him to Clark. Thus it was not until August, 1948, that either Mrs. Steele, Mueller, or Victory State Bank discovered the facts concerning Clark's embezzlement.
The sole question before us is whether the payments made by Mrs. Steele to Clark were payments made to an agent authorized to collect same for defendant, Victory State Bank. In our opinion the question is answered by the plain terms of the written contract entered into between defendant, Victory State Bank, and Clark. By that "Service Agreement" the "Servicer" (Clark, in fact) was authorized to collect " principal and interest" payable by any mortgagor. The note gave Mrs. Steele a prepayment privilege. When defendant, Victory State Bank, made Clark its agent to handle these collections, it knew or should have known that sums in excess of the minimum monthly payments might and would likely be received by its agent. To us it is clear that Mrs. Steele had the right to make the payments to Clark and he had authority to receive them.
Defendants' chief contention is based upon Finding of Fact VI given by the trial court. That Finding is:
"The court further finds that Edeth L. Steele attempted to exercise the prepayment privilege granted in her note and paid to T. J. Clark amounts as described in evidence in excess of the monthly installments due thereon without demanding that her said note be exhibited to her and said excess payments of principal not yet due be endorsed thereon; and that said Edeth L. Steele failed to inquire or ascertain from the holder of said note whether T. J. Clark had authority to accept for said holder said excess principal payments which had not yet matured under the terms of said note."
Defendants claim that Mrs. Steele made these excess principal payments at her peril and was negligent, and, inasmuch as said payments were not received by the Victory State Bank, she was not entitled to credit therefor. In their brief, defendants discuss five cases in support of their position. Those cases hold that the obligor in a negotiable note cannot assume continuing ownership by the original payee, for the obligor is on notice that the note may be negotiated at any time. They say that the obligor must satisfy himself that the person to whom he pays is still in possession of the note, or he must assume the obligation of proving that the one to whom he did pay the money was an agent authorized to accept on behalf of the holder of the note. Thus, those cases make it clear that even if the obligor does not demand production of the note and endorsement of payment thereon, nevertheless he is entitled to the benefit of the payment if he can show that the one to whom he paid stood in the position of agent to the rightful owner of the note. Showing this is true, we quote from the first case discussed by defendants, that of McDonald v. Smith, 201 Mo.App. 78, 206 S.W. 591, 592, as follows:
"The law has often been stated that when a debtor owes a negotiable note, and pays money thereon to another as agent, it is his duty at his peril to ascertain that the person thus paid is in possession of such note; and, if not in such possession, the debtor must then show that the person he pays has express or implied authority to collect the note not in his possession." (Italics ours.)
The court in the McDonald case then went on to discuss the evidence on the question of agency and said: "There can be no claim that the defendant, after she acquired this note, gave any express authority to Bonfoey or his company to collect the interest coupons, much less the principal note itself." The court further held that there was no evidence of implied authority to receive the payment.
The other four cases cited by defendants turned upon the same proposition. All of those cases held that the plaintiffs therein had not shown that the persons to whom payments were made were agents of the note holders.
A case somewhat similar to the instant case and in which plaintiffs were granted the relief sought is that of Wheatley v. McRoberts, Mo.App., 157 S.W.2d 805.
We conclude that the learned trial court was correct in finding "that Edeth L. Steele made payment in full of all her obligations on the said note in good faith, without knowledge of any interest in said note to the Victory State Bank, was justified in so doing, and acting in the exercise of and by reason of the authority expressly extended to the Pioneer National Corporation by Victory State Bank; that the acts and conduct of Pioneer National Corporation were as the agent of Victory State Bank, and that the note of May 8, 1944, in the sum of $4400, executed by Edeth L. Steele, payable to Ida E. Leach, or order, endorsed in blank by Ida E. Leach, has been paid in full."
It follows that the judgment directing the cancellation of the note and deed of trust should be affirmed. It is so ordered.
All concur.