258

94

FEDERALREPOltirER.

In Naddo v. gardon, 2,'C. C. A. 335,340,51 Fed. 493, '498, and 4 U. S. App. 642, 685, Justice Brewer,in delivering the of this court, said: "If is doubtless true that, where an e:ltpress trust is once shown to exist, it is presumed to continue, and therefore no ,lapse 6f;timewill defeat an: action,toenfdrce rights under it. But whenfthat'frnst is repudiated;:'and knowledge of the repudiation IS fYtbiight borne to the cestuis que'trustent, the ease, 1s brought within' the" ordinary rules Qf limitation and laches." The doctrine of h\clies is applied by courts of eqUity, in analogy to the statute of limitations at law, to promote, and not to defeat, justice. Under the statutes of Utah cited, the appellants were allowed at least four years, aft-:r i they learned,that their partnet had repudiated his trust, in,which to institute a suit against him for a dissolution of their partnership and an accounting, and, in my opinion,' their delay of two years ought not to be fatal to it. Bogant, M(jrtgage Co., 11 C" e. A. 128, '18;:>, 63 Fed. 192, 199, and 27 U. S, :4PP. 346; ltelley v . Boettcher, 29 'O.e. ,1\.. 14, 21, 85 Fed. 55, 62, and 56 U. So App. 363, 383. : ,,' ,
I'

,L)\'

'PIN;EJ MOUNTAIN IllON

1'1

&. COAL CO.etal:V '. BAILEY' etal.

I'

(Circuit Cour,t pf ..}ppeals, EigJ;1th OiVIlPit. , April 10, 1899.) No. 1,103; ·

1.

PRINCIPAl"

'

ADVERSE'

, ,

-

N()'I'ICE TO AS AFFECTING,

The fact that an agent also aetsas agent for the party adversely interested ,in the transacti9n does not, prevent bil:l' principa,l 'from being bound by, ,Ilptice toOl' knowledge acquire,d by &uch agent where the principal " , cOllsents to such adverse agency.
2.

SAME.,--AcQUJRING

Where one negotiating the sale ot it' mQrtgage for a trust company is also the agent of the proposed purchaser for the purpose of investing his moneY;aI\d examining his titles, and, pending the negotiations the agent becollle/S t4e, ,qwnt;l' of · w;it,hout the knowledge of the principal, the;;.'!-$¢pcy ceases, so that on the subsequent purchase of the mortgage by 'me principal he is not bound by notice to or knowledge of the agent 'as to defects in the mortgage or its title, and is a bona fide pur· chaser for value. '

AFFECTING PRINCIPAL.

Appealfrom the Circuit Court of the United States for the Distdct of Minnesota. '
This is, an ,appeal from a decree which dismissed a bill to remove an alleged cloud from the title of the. appellants to certain real estate in the state, ot Minnesota. The alleged cloud of perfect record title to the property in the appellee Charles Irving Bailey which had arisen in this way: On August 29, 1892, the appellee John D. Blake, wbo was the owneJ; of the property, made a mortgage upon it to the Metropplitan Trust Company, a corporation, to secure the payment of his promissory note to It for $17,290. This mortgage was recotded on October 27, 1892, and according to the record constituted a first lien upon the property in controversy. P. M. Woodman had been for many years, and was, a general agent ot the appellee Charles M. Bailey to procure first mortgages for him, and to examine the title, or to cause the title ot the property covered by such mortgages to be examined, on his behalf; and at the same time he 'was the trust or trading ofiicer of the Metropolitan

a

PINE MOUNTAIN IRON & COAL CO, y. BAILEY.

259

Trust Company. On aecount 0,( certain agreeme!lts which Blake had made with the appellants, the Pine Mountain Iron.& Coal Company and the Germania Safety-Vault & Trust Company, they clll'im-and for the purpose of the decision of this case their claim will be conceded to be well founded without investigatlon_.._..that this mol'tgage was void as against them. Their agreements,' hQwever, were ):\ot of re.cord, and the record disclosed no notice of their claim. Upon the record their title appeared to be subject to the mortgage, and to, be founded upon a deed to Blake, which was not recorded until after the record of the mortgage had been made. Before the trust company paid to Blake the money which it loaned to him on this mortgage, however, the appellants notified Woodman, as the trust officer of that company, of their claim that the mortgage was void. In this state of the facts, Woodman wrote Oharles M. Bailey on .January 6, 1893, and asked him, if he would like "an 'A l' 7 per cent. mortgage, $17,290, on at least $60,000 worth of property; mortgage made by a good man, too. We have taken it in, and I think I can get it for you if you wish." On January 9, 1893, Bniley replied that he was short of funds, but that if it was a good mortgage he thought he could send a check for it some time that month. He inquired about the property It covered, whether Woodman could get 7% per cent. or 8 per cent. interest, and when the note was payable. On January 13, 1893, Woodman wrote to Balley: "This $17,290 mortgage of which I wrote you is on good city property, and is already made. Our company took it in, and it is exceptionally good, we think, in the matter of security; and I know the mal;:er, and bave known him for many years, and believe him to be perfectly good. The mortgage is dated August 29, 1892, and runs for three years at 7 per cent. We could not make it better than 7 per cent., as we get a very small commission." On January 17, 1800, Balley wrote Woodman that he did not care for the mortgage, but that, if they would allow him one'month's interest, and could make anything by sending it to him, he would send a check some time that month. On .January 20, 189R, Woodman replied that he could not allow him the January interest, but would give him half of their commission of $122.90, and asked him to send a check for the mortgage on or before February 1, 1893. Some time in January, 1893, while this negotiation was in progress, and before the sale to Bailey was made, or its teMllS agreed upon, Woodman had bought the mortgage and note of the trust company, in order to raise money for it. The trust company had assigned them to him. He had borrowed of a bank in Minneapolis, ullon his individual note, the necessary money to pay for them, and had pledged them to the bank as collateral security for his note. In other words, Woodman had become the owner of the note and mortgage, and the trust company had parted with its title to and interest in them, before Woodman sold them to Bailey. In this condition of the title, Bailey sent his check to Woodman for the note and mortgage on January 27, 1893, Woodman assigned them back to the trust company, that company then assigned them directly to Balley, and this latter assignment was recorded. The previous assignment to 'Voodman was not recorded, and 'Woodman never notified Bailey, and Balley did not learn until years afterwards, that "'oodman had ever owned the note and mortgage, or. that the appellants had ever ciaimed that it was not valid. In 1894 he foreclosed the mortgage, and in November, 1895, he conveyed the. property which it covered to his son, Charies Irving Bailey, by a quitclaim deed, which recites a consideration of $25,000. The record of this case discloses no evidence that the grantee in that deed was aware of any defect in the title, or of the claim of the appellants, before he paid the consideration for it; and there was no notice of auy such claim upon the record of the title. In this state of the facts the court below dismissed the bill on the ground that the Baileys were bona fide purchasers for value, without notice of any defect in the mortgage or titie.

1. E. Richards and Arthur M. Keith (John B. Baskm, A. G. Honald,
   ,R. G. Evans, Oharles T. Thompson, and Edwin K. Fairchild, on the
   

brief), for appellants. John Van Derlip (George P. Wilson, on the brief), for appellees. Before CALDWELL, SANBORN, and THAYER, Circuit Judges.

'94 FEDERAL' REPORTER.

Circuit JUdge, after statihg the facts as, above, delivopinion of 'the court. This case presents many interesting questions, but the answer to them necessarily determines its decision. It is admitted that the ·. deeree,'below should be affirmed unless the facts which we have recited charged OharlesM. Bailey, uilder the law, with notice of the claim of the appellants that the mortgage was invalid on or before Janua.I'y27, 1893, when he purchased and paid for it. The proof is conclusive that he had no actual notice of this claim, and that the record title of ,the prpperty mortgaged gave him no constructive notice ,of it; but the counsel,·forthe appellants insist that the notice whichWoodman had received while acting as an officer of the trust cOllWany was, under the law, notice,to Bailey, because Woodman was Bailey's general agent to i:n,vesthis money, and to examine his title8,and notice to the agent is'u,otice to the principal. Notice to and the knowledge of the agent or attorney acquired in prior transand present in his mind while he is exercising the poweNl and discharging the duties of his agency, are notice to and the knowledge of his principal. Railway Co. v. Belliw}th, 28 C. C. A.358, 83 Fed. 437, 440. For the purpose of this discussion we concede, without the issue, that knowledge of the appellants' claim had beeR-acquired by Woodman in Octqper,1892, and was present in his mind .when he sold thenoteanGl mortgage to BaileY, He entered upon: the negotiation of that sale as.the trust officer of the Metropolitan}l'rust Company, dUly authOrized 'to sell: the mortgage for it, and also as, the agent of Eailey to to examine titles for bim. Bailey, that he was an officer of the trust company, and that he was .a1:!ting for that cowpany in his ,atternptto',sell this mortgage to we concede, for the purposes bUbiS, case, that his consent that 'W ()odinan act as agent fOl' both these parties would estop hini from escaping on that. ground from the general rule that notice to the agent is notice to the principal. A principal who knows that his agent is also acting as agent in a transaction . with him, and for the party adver!3ely yet consents that he may act as 'his agent, is estopped from denying the notice and knowledge which the agent has during the negotiation. Astor v. Wells, 4 Wheat. 466; Fitzsimmons v. Express Go., 40 Ga. 330, 336;' Alexander v. University, 57 Ind. 466, 476; Leekins v. Nordyke & Marmon Co., 66 Iowa, 471, 475, 24 N. W.1; Mining Co. v. Senter, 26 Mich. 73, 77. But before the negotiation was closed, before Bailey bought or agreed to buy tbemortgage, Woodman had become the sale owner Of them, the trust company had parted with its title to thew, and Bailey was kept i» ignorance of this fact. W oodman had bol.'1'owed the money of the bank on his individual note to purchase the mortgage, and had paid this money over to the trust cqmpany. The note and mortgage had been assigned him, and he had:pledged them to the bank .as .collateral security for the payment of his note. It is doubtless true that the motive which induced him to take this. action, was to raise, money for the complmy. But his purpose is. not material here. TIle facts remain that before Bailey bought 0'1' agreed to buy the note and mortgage Woodman bad be-

PINE MOUNTAIN IRON & COAL CO. V. BAILEY.

261

come their owner; and when the agreement of sale was finally made, and when it was perfol1lled, he was the vendor, and Bailey was the purchaser, and Bailey was not informed of these facts. Now, tbe interest of vendor and purchaser are diametrically opposed. To the former the highest, and to the latter the lowest, price is the greatest good. To permit the seller to act as the agent of the buyer. augurates so dangerous a conflict between self-interest and duty that the law has wisely removed the temptation by forbidding the relation. No man can be a vendor or the agent of a vendor and the purchaser or the agent of the purchaser at the same time. unless he first obtains the consent of the party with whom he deals, after it complete disclosure of all the facts which condition his relation. The law absolutely prohibits the vendor from being at the same time the agent of a purchaser, unless the latter consents to the relation after he knows that his agent is the seller. Warren v. Burt. 7 C. C. A. 105, 107, 58 Fed. 101, 103, and 12 U. S. App. 591, 595; McKinley v. Williams, 20 C. C. A. 312, 74 Fed. 94, and 36 U. S. App. 749, 752. Every general agency is necessarily limited by this rule of law, and must be construed in its light. As long as the agent is conducting negotiations for his principal with third parties, he may act on his behalf; but the moment he undertakes, without the knowledge of his principal, to conduct them with himself, his agency ceases, and the powers and liabilities 9f that relation no longer exist. V. Hlackmur, 64 N. Y. 440, 446. In consonance with this principle of the law of agency, the rule' that notice to the agent is notice to the principal has an exception as well established as the rule itself. It is that when the agent acts for himself, in his own interest, and adversely to his principal, in a given negotiation or transaction, neither notice to nor the knowledge of the agent can be lawfully imputed to the principal. Surety Co. v. Pauly, 170 U. S. 133, 156, 18 Sup. Ct. 552; Frenkel v. Hudson, 82 Ala. 158, 2 South. 758; Waite v. City of Santa Cruz, 89 Fed. 619,' 630; Barnes v. Gaslight Co., 27 N. J. Eq. 33,37; 'Vinchester v. Railroad Co., 4 Md. 231, 241; Davis Improved Wrought Iron Wagon Wheel Co. v. Davis Wrought Iron Wagon Co., 20 Fed. 699, 702; Thomson·Houston Electric Co. v. Capital Electric Co., 56 Fed. 84!1, 853; Bank v. Cunningham, 24 Pick. 270, 276; Mechem, Ag. § 72;;. The reason of the general rule is that it is the duty of the agent to eommunicate to his principal the facts relative to anoY transaction in which he acts on his behalf, and that the law presumes that he has discharged his duty. But when the nominal agent commences to act in his own interest, and adver'sely to his principal, the presumption no longer obtains that he will communicate to him facts which might prevent the consummation of the negotiation which he is conducting on his own behalf, and the counter presumption that he will conceal them arises. Ai; the reason for the rule no longer exists, the rule ceases to apply, and the exception prevails. The case at bar falls far within the exception. The time when notice of the appellants' elaim that the mortgage was void became material, the time when that notice would naturally have been communicated to Bailey, was when it became the duty of Woodman to examine and certify the title

"

94, .. FEDERAL REPORTER. .... ,

,

'

the ordinary course of bJlsiness that time did not ar'to., for it 'is l,md eertlfythe fitlefor a purchaser untIl he has if, it'is found to' be gOOd. 'Now, Bailey did not acsale ;Which. W<,lOdtlwn offered him until January 27, 1893,)i'ud;long before'that time Woodman had become the owner of In()rtgage, the the 'party' interested adformer, principal; in negotiations far their sale; and he ,was conducting In his own interest, and not in the 'interest of Bailey. He had, therefore, ceased to be Bailey's agent, and his notice and knowledgE' of the appellants' claim to his forl;Iler principal., 'rhe presumpcannot be tion, which arises from"his adverse, interest, that he did not communicate his is shown by th,e record to be in aceoMance with the fact. He n,everinformed Bailey of tbe appe11ants' claim that tbe,. mortgage ,was' void. He never, notified him, tbat he was the real owner and vendor of the note and mortgage whi<;h he caused tbe ,trll!!!t company to to All these 'material facts' he concealed, from his for,merprincipal, just as the law presumes from interest do; and in tbis way Bailey bought withqut either actual,'or constr,uctive notice of any defect or claim o(defecU Il tbe There was no error in the conclusion of tMcolu:t below that tlieBaileys bona fide purchasers for value, without notice of the appellants' c1aim, and the decree below is affirmed.

:Wq.ey

CLARKE v. NORTHWESTERN MUT: LIFE ": ...
,

' . '

;

CO. et at .

(Circuit Court of Appeals,Eighth Circuit.

April 17; 1800.)

.:

No. 1,088:

1

Under(Jode Civ. Proc.. Neb. 497a (Comp. St. p. 595), providing for redemption :bY the owner o'f' premises sold under foreclosure, the owner ma:r redeem, where other th8!1l'theplaintiffwas purchaser, by paying the purchaser, or tendering into eourt before the confirmation of the sale, the amount oJ his bid, with, 12 per cent. interest from the llate of sale.
S,f.ME-;-MTICIPATING QUESTIONS AS TO EFFECT.

"..

9

not' take' jurisdiction of a petition of the. owner of the equity of redemption 'asking leave to redeem' from a foreClosure sale, and the advice and in'struction of the court astotbe :effect of redemption, and the:nature of the title that will accrue to t1\e redemptioner,

It Olsnot ,the bmJiness of courts to ,anti<:ipate controversies, and it will

. .

a..

B.4.ME:

Where the court a. petition the owner of the equity of redewption asking leave to redeem from a foreclosure. sale, it cannot pass on'the question of the effect of the redemption, and the rights and title RCquired by it. .

'f

Appeal tbe Oircuit :<;Jourt of the United States for the District of Nebraska.. ,:
On the 31st. M JaUllal,'Y, 1888, William E. and Mary A. Clarke made. and delivered their ,prO,missory ]lote for $6,500 to the Korthwesteru Mutual Life Insurance Compl,luy, and. to secure the payment of the same, made and de-