Doxen v. Wagner

Offutt, J., delivered the opinion of the Oonrt. On tie 8th day of September, 1919, the Farmers Go-operative Company of Harford Oonnty, then owning certain real estate in the village of Clmrchville in that county, executed a mortgage on it to George F. Berkley to secure the repayment of a loan of $4,500. In addition to that property the company also owned certain personal property. At a meeting' held on February 4, 1922, the stockholders of.the company were informed that it was in bad financial condition and was indebted to various creditors to the amount of $13,500, but that Martin E. Wagner had offered to buy all the property of the company and sufficient stock to control it for $12,500.

This offer was accepted and it was agreed that, upon the payment of $10,000, the property of the company was to be turned over to Mr. Wagner, and that it was to be paid for in this way. He was to assume and pay the $4,500 mortgage, and to assume and pay the company’s note to the Farmers & Merchants Xational Bank of Bel Air for $4,500, and its note to Air. Joseph Ball for $1,000, and the remaining $2,500 was to be used in buying a sufficient number of shares of the capital stock of the company to1 control it. Wagner paid the $4,500 note to the bank and on March 4, 1922, gave Jacob A. Boxen, the secretary and treasurer of the company, a check drawn to the company’s order for $1,000 and directed him to apply it to the reduction of the Berkley mortgage.

The check was deposited in bank to the company’s credit. Some time later several changes were made in the personnel of the company’s directors and officers, and among the other changes M. X. Stewart was selected as its secretary, and Wagner as its treasurer1, instead of Boxen. After1 these changes had been made, the company on May°31, 1922, con ⁴⁴⁴ veyed all of its property to Martin R. and Augusta M. Wagner. On June 1st, 1922, Berkley entered a credit on the mortgage for $500, which appears to have been paid in 1921, and assigned the balance by an assignment absolute on its face, but actually for collection, to Jacob A. Doxen, the appellant, who was a practicing attorney, and Doxen their advertised the property for sale under a power of sale contained in the mortgage.

Thereupon the appellees, then holding title to the mortgaged property, deposited $3,500 with the clerk of the court and filed the hill of complaint in this case, in which they asked that the appellant, “Doxen-may by an order of your honors, be enjoined and strictly prohibited from selling, assigning or otherwise disposing of the aforesaid mortgage from the said Farmers Co-operative Company of Harford County, Inc., to the said George F. Berkley, dated the 8th day of September, 1919, and recorded among the Land Records of Harford County in Liber J. A. R. Ho. 165, folio. 262, or from proceeding further with the exercise of the power contained in said mortgage, or from selling or offering for sale said real estate therein described,” and upon that bill, affidavit and exhibits a restraining order was passed as prayed. An answer was filedj testimony taken and, after a hearing, a decree was passed making the injunction perpetual and crediting the mortgagor with the payment of $1,000 on the mortgage. From that decree this appeal was taken. The bill, order and decree all rest upon the theory that the $1,000 was paid to Doxen to be applied to the reduction of the mortgage and that, since he did not so apply it, and since he now holds the mortgage1, he must be charged with it as though it had been so applied without regard to the capacity in which he holds it.

The defendants’ theory is (1) that the money was never paid to or received by Doxen, hut that it was paid in the form of a check drawn to the order of the Farmers Co-operative Company, which was handed to Doxen and by him deposited to that company’s credit, where it still ⁴⁴⁵ remains; (2) that Doxen at the time the money was paid was not the agent of the mortgagee authorized to receive it'for him. hut was the secretary and treasurer of the mortgagor, and that the company alone had the power to apply the payment to the mortgage; (3) that he at present holds the mortgage only as trustee for the real o-wnei" thereof and that his cestui que trust cannot he charged with a payment which he never received, even though Doxen had received the check at a time when ho did not represent ’Berkley. Since these contentions are in conflict, it becomes, necessary to examine in some detail the evidence hearing on them, The ease is controlled by comparatively few fact's, and the evidence concerning them can be considered under two heads.: (1) Was the $1,000 payment made to the company, or, was. it made to Doxen, (a) as an individual, (&) as agent for Berkley, or (c) as agent for Wagner? (2) Were the appellees prejudiced by the fact that the payment was not applied in reduction of the mortgage ? Taking up these questions in their order, the uncontradicted evidence shows, that the cheek was drawn to the order of the Farmers.

Co-operative Company, and after the endorsement of that company had been stamped on the back, it was presented at the bank on which it was drawn and the company credited with the proceeds. There is no. evidence that Doxen personally ever in any way received any part thereof. It is also undisputed that when it was signed and delivered to Doxen, the check bore the following notation: “For on account of Churehville property.” Wagner contends that when he signed the cheek the name of the payee was blank, but the evidence is to the contrary. Both Doxen and Mrs. Mildred Bailey, the stenographer who prepared the cheek and who is wholly disinterested, testified positively that when Wagner signed it the check contained the name of the payee, and as against the uncorroborated testimony of Wagner this must be accepted as conclusive., for considered in the light of common experience it is incredible ⁴⁴⁶ that a business man of ordinary prudence would make a payment of $1,000' on account of a mortgage, which was a lien on property which he had agreed to purchase, by a check in which the name of the payee was not filled in.

A check drawn to the order of the company, his vendor, would afford intrinsic evidence of a payment on account of his debt to the company; a check-drawn to- the order of Berkley, the mortgagee, would -show a payment on account of the mortgage; but a check drawn to the order of Doxen would in itself indicate neither of these things. A more orderly, natural and prudent course was that adopted in this case, which was to make the check payable to the vendor, who was also the mortgagor. Doxen was not the mortgagor, but only-the secretary and treasurer of the company which owed the mortgage debt. But even if we could assume that the appellee intended to make the payment to Doxen and not to the company, and that Doxen agreed to pay it on the mortgage; nevertheless, Berkley, who neither knew of nor authorized, nor ratified his acts, could not be made to' answer for any loss which they occasioned.

It is uncontradicted that the mortgage was 'assigned to Doxen only for the purpose of collection, and he therefore' holds it as trustee- for Berkley. The mortgage was bum fide and the assignment was made in good faith for the purpose stated. There is nothing illegal about such a transaction (Bouldin v. Reynolds, 58 Md. 491 ; Russum v. Wanser, 53 Md. 92 ), and the practice of assigning mortgages to1 agents or attorneys for collection has long been recognized and frequently adopted in this State, and its validity is well settled, and it is equally well settled that in such cases the assignee holds the mortgage as trustee for the assignor. Bouldin v. Reynolds, 58 Md. 495 .

The appellee was not a creditor of Berkley, and he had not paid-the thousand dollars either to him or to any person authorized by him to- receive it, because the assignment to- Doxen was not made until long after ⁴⁴⁷ that money was paid and the evidence shows that he did not know of the payment when he assigned the mortgage to Doxen. Since Doxen held the mortgage in trust for Berkley, it could not be subjected to any claims, no matter liow well founded, which Wagner may have had against him, for trust property is not liable for the trustee’s debts, and cannot be reached by attachment, or execution, even though the creditors have no knowledge of the existence of the trust, the estate being in tbe name of the trustee (39 Cyc. 227, &c.), and in 26 R. C. L. 1261, title Trusts, it is said: “Where a deed to a debtor conveys to him only a naked legal title, as a trustee for others, he takes under it no interest that can be seized under execution or attachment, nor can a judgment creditor have his claim satisfied out of property held in trust for another, no matter how completely his debtor may have exercised apparent ownership over it, unless it was on the faith of such ownership that the credit was given.” 23 C. J. 342; Cook v. Brice, 20 Md. 397 . So that even if Doxen had converted the money to his own use instead of paying it to Berkley, Wagner could not take Berkley’s property to reimburse himself for such loss as he may have sustained as a result of Doxen’s failure to carry out his instnictions, in the absence of any evidence that Berkley authorized or knew of the transaction, and, in the absence of any evidence to the contrary, it is reasonable to assume that the check was delivered to him for the company. Eor since the check was drawn to the order of the company when it was signed, we must presume that Wagner meant to make the payment to the company, as in fact it was made, and it became the duty of the company and not of Doxen to have applied it in accordance with the note written on the face of the check to the reduction of the mortgage.

Certainly Doxen, unless thereto authorized by some appropriate corporate action, could not himself appropriate funds standing to the credit of the corporation to the satisfaction or reduction of the mortgage debt. ⁴⁴⁸ The second inquiry is, how were the Wagners injured by the failure of either Doxen or the corporation to apply the $1,000' to the reduction of the mortgage. And in connection with that question it is important, but upon tbe record very difficult, to ascertain just- what was the contract between Martin E. Wagner and the company. James T. Evans, president of the company, in his testimony gave this description of the transaction: “We agreed at that time to sell the controlling interest in the company to Dr. Wagner ^ with the provision that he sustain the losses and manage the property. The property was to he turned over to him upon the payment of $10‘,000 — $4,500’ to the hank, assuming a mortgage of $4,500 on the real estate, and arranging for the payment of a note of $1,000 that Mr. Ball held.

The other $2,500 he was to assume and use it in paying the stockholders for the stock that he was to buy.” Martin E. Wagner, an appellant, on his cross-examination gave this version of it: “Q. You had agreed to pay $12,500 for the property, had you not ? A. Yes, sir; for the property and the trucks. Q:. I call the trucks