Davis v. Clark

48 P. 563, 58 Kan. 100, 1897 Kan. LEXIS 66

• Court: Supreme Court of Kansas
• Decided: April 10, 1897
• Docket: No. 9671
• Status: Published

Opinion

Dosteb, C. J.

This was an action brought by Charles S. Clark, the defendant in error, against Thomas H. Davis, as administrator of the estate of A. F. Harsh, deceased, and others, to recover on a note, and foreclose a mortgage securing it, executed by Harsh and his wife in his lifetime to one William P. Book, and by him assigned and delivered to the defendant in error. Special findings were made by the court, fully setting forth all the material facts of the case, as follows :

“ 1. During the summer of 1888, A. F. Harsh and Lalla C. Harsh applied to William P. Book for a loan of seven thousand dollars on four hundred acres of land situated in this county, and during said summer negotiations were had between said parties in reference to such loan.

“ 2. A short time prior to December 5, 1888, it was agreed between the parties mentioned in the preceding paragraph, that said'Wm. P. Book should loan A. F. Harsh and Lalla C. Harsh the sum of seven thousand dollars on four hundred acres of land, situate in this county, and that a promissory note on one year’s time should be given by said A. F. Harsh and Lalla C. Harsh to Wm. P. Book, and that said note should be secured by mortgage upon the four hundred acres of land; and that after said note and mortgage were executed, they should be delivered to Wm. M. Clark to be held by him until said Book paid to said Clark the seven thousand dollars so borrowed, said money to be paid to Lalla C. Harsh, and that upon such settlement said note and mortgage were to be delivered to said Book.

“ 8. On December 5, 1888, said A. F. Harsh and Lalla C. Harsh, his wife, made, executed and delivered the promissory note and mortgage, copies of which are attached to the petition of plaintiff herein, and placed said note and mortgage in the hands of Wm. M. Clark in pursuance to the agreement set forth in the last paragraph above.

“4. 'Soon after said note and mortgage were executed and placed in the hands of said Wm. M. Clark, said Clark notified said Wm. P. Book of their execution and delivery to him.

“5. At the time said note and mortgage were executed, as stated in paragraph three of these findings, defendants, Harsh and wife were at Pueblo, Colo., and said Harsh and wife were about to start upon a trip through the Southern states for the benefit of Mr. Harsh’s health, who was then very ill.

“6. On December 24,1888, Mr. Harsh died in Kansas City, Missouri, having immediately before returned to that place from his Southern trip.

“7. Lalla C. Harsh, now Lalla C. Collins by marriage, is the daughter of Wm. M. Clark and Wm. M. Clark is the brother-in-law of Wm. P. Book.

“8. On December 29, 1888, W. P. Book, who was then in New York City, obtained a certified check for seven thousand dollars, payable to the order of Lalla C. Harsh, and immediately forwarded said check to Wm. M. Clark, who was then living in this county.

“9. Upon the receipt of said check by Clark it was indorsed by the payee, Lalla C. Harsh, and by Wm. M. Clark deposited in the First National Bank of Salina, Kan., and in part payment therefor certificates of deposit were issued, one for fifteen hundred dollars, and five for one thousand dollars each, payable to Lalla C. Harsh.

“10. After the check mentioned in the last paragraph above was received by Clark, he forwarded to said W. P. Book the note and mortgage hereinbefore mentioned.

“11. On July 24, 1891, Wm. P. Book assigned, transferred and delivered to the plaintiff said note and mortgage, as collateral security for the payment of a debt due from Book to plaintiff.

“12. The amount due the plaintiff from Wm. P. Book is greater than the amount due upon the note for seven thousand dollars, upon which this suit was brought.

“ 13. On January 17, 1889, from moneys drawn on said certificates, Mrs. Harsh paid to Book on the note of seven thousand dollars the sum of two thousand dollars, and on the eleventh day of February following, she paid him the further sum of five hundred dollars, which was drawn from the bank on one of said certificates, and since then other small payments on the note have been made.

“14. There is now due upon said note of seven thousand dollars the sum of $5,844.78.”

From these facts the court concluded as matter of law:

“ 1. That the plaintiff is entitled to recover of T. H. Davis, administrator of the estate of A. F. Plarsh, deceased, upon the note of seven thousand dollars, the sum of $5,844.78.

“2. That the plaintiff is entitled to foreclose the mortgage set forth in his petition to secure the payment of said sum of $5,844.78.”

To the above findings should be added the fact, appearing by the pleadings, that the title to the mortgaged lands was in the deceased, Harsh, and the further fact, appearing by the evidence, that Book, the mortgagee, before remitting the money on the note and mortgage, knew of the death of Harsh. Judgment of foreclosure was rendered and a motion for a new trial was overruled; from which judgment and decision the defendants below prosecute error to this court.

The important and difficult question which arises upon these facts is : What effect did the death of the principal mortgagor, occurring as it did before the mortgagee had paid the money to the intermediary, have upon the uncompleted transaction? On the part of the plaintiffs in error it is contended that Clark was the agent of Harsh alone, and that, according to the usual rule of such cases, the death of Harsh terminated the agency, leaving the agent powerless to make that delivery of the instruments in question without which they could have no legal efficacy. It is without doubt true that, according to the common law, the death of the principal operates as a revocation of the agency unless the latter be coupled with an interest. Long v. Thayer, 150 U. S. 520; Clayton v. Merrett, 52 Miss. 353 ; Lewis v. Kerr, 17 Iowa, 73. But the important, perhaps the determining, question in this case is : Whose agent was Clark — the custodian of the note and mortgage ? The answer to this question involves an examination of the law of escrows :

1. scrow defined. ‘ ‘ An escrow is an obligatory writing (usually, but not necessarily, in the form of a deed), delivered by the party executing it to a third person, ^ ^ kgpj by him until the performance of a specified condition by the obligee, or the happening of a certain contingency, and then to be delivered by the depositary to the obligee, when it becomes of full force and effect." Am. and Eng. Encyc. Law, vol. 6, 557.

2. Escrow not revoked, when. This definition, which seems to be collected out of all the authorities, applies fully to the instruments in question in this case. They were, in pursuance of an agreement with Book, delivered by the Harshes to Clark, to be held by him until the performance of a specified condition by Book, and then to be delivered to him. Contrary to the view of the plaintiffs in error, the depositary of an escrow is regarded as an agent of both obligor and obligee ; and he can neither return the deed or other instrument to the former without the latter’s consent, nor, save upon fulfillment of the agreed conditions, deliver it to the latter without the former’s consent. Roberts v. Mullenix, 10 Kan. 22 ; Grove v. Jennings, 46 id. 366 ; Shirley v. Ayers, 14 Ohio, 307 ; Cannon v. Handley, 72 Cal. 133. In Roberts v. Mullenix, supra, the delivery was made to the grantee without the knowledge of the grantor and without fulfillment of the condition ; but in Grove v. Jennings, supra, a redelivery to the grantor was made without the authority of the grantee, and without default in the performance of the conditions upon his part. According to these decisions, the depositary of an escrow is not the agent of the depositor, merely, and the agreement of deposit cannot be rescinded by him alone and the escrow withdrawn at his will. It would seem to follow, then, that the death of the depositor could have no greater effect to terminate the agency of the depositary and work a recall of the escrow than could the declared rescission of the contract of bailment by the depositor in his jifetime. We can think of no agreements terminable by death, which are not equally terminable by the express will of one or the other of the parties before death.

3. Mortgagee eptionpe?/!rmingy condition. It is said, however, that instruments such as those in question can take effect only by delivery ; that delivery is the act of .the obligor, personally, or of some one lawfully authorized to represent him ; that the obligor, being dead, cannot make the delivery, and no one can make it for him, because no one can perform an act for a dead person. We do not understand that a manual delivery of an escrow is necessary to invest tbe °blÍgee WÍtb tÍtle t0 ^ t0 PaSS t0 him the subject of the grant. Our own decisions are to the contrary, and likewise, we think, are those of all the courts :

“A note placed in escrow takes effect the instant the conditions of the escrow are performed, even though the depositary lias not formally delivered it to the payee.” Taylor v. Thomas, 13 Kan. 217.

4. Instrument takes effect from deposit The delivery, therefore, is constructively made the moment the conditions are performed. The second delivery, whether actual or constructive, , .. , n ¶ , operates retro actively, and, by relation back to the first delivery, is substituted to it in time and effect.

This doctrine of relation back to the first delivery was countenanced by Lord Coke, who said :

“If the grantee dies between the first delivery and the deed becoming absolute, the deed is good, for there was delivery begun in the life of the parties ; sed postea consummata existens by the performance of the condition takes its effect by force of the first delivery, without any new delivery.” Perryman’s Case, 5 Co. 84.

It is likewise .countenanced by all the authorities : Peck v. Goodwin, Kirby (Conn.) 64; Shirley v. Ayers, 14 Ohio, 307 ; Taft v. Taft, 59 Mich. 185 ; Price v. Rld. Co., 34 Ill. 13 ; Bostwick v. McEvoy, 62 Cal. 496 ; Foster v. Mansfield, 3 Metc. 414; Ruggles v. Lawson, 13 Johns, *285; Wallace v. Harris, 32 Mich. 380; Prutsman v. Baker, 30 Wis. 644.

Different reasons for the adoption of this legal fiction are assigned by the courts. By some, it is said to be equitable in its nature and intent, and devised to avoid injustice. By others, it is said to be for the general purpose of effectuating the intention of the parties, and, in case of deeds in consideration of love or affection, it is resorted to by some courts for the purpose of upholding the transaction as in the nature of a testamentary disposition. Whatever the reasons in support of the doctrine of relation from second to first delivery, there seems to be unanimity in the adjudged cases to the effect that the escrow, for instance, of a femme sole, deliverable upon conditions which remain unperformed until after coverture, may nevertheless be delivered upon their performance notwithstanding the intervening disability; and that, likewise, escrows deliverable upon conditions remaining unperformed at the death of the depositor, may also be delivered upon their performance after such death; and that, in such cases, by fiction of law, the second delivery is given effect as of the first. Chief Justice Shaw announced the rule, and gave it authority in this country, in Foster v. Mansfield, supra, by saying :

“Whether, when a deed is executed, and not immediately delivered to the grantee, but handed to a stranger, to be delivered to the grantee at a future time, it is to be considered as the deed of the grantor presently, or as an escrow, is often matter of some doubt; and it will generally depend rather on the words used and the purposes expressed, than upon the name which the parties give to the instrument. Where the future delivery is to depend upon the payment of money or the performance of some other condition, it will be deemed an escrow. Where it is merely to await the lapse of time, or the happening of some contingency, and not the performance of any condition, it will be deemed the grantor’s deed presently. Still it will not take effect as a deed, until the second delivery, but when thus delivered, it will take effect, by relation, from the first delivery. But this distinction is not now very material, because where the deed is delivered as an escrow, and afterwards, and before the second delivery, the grantor becomes incapable of making a deed, the deed shall be considered as taking effect from the first delivery, in order to accomplish the intent of the grantor, which would otherwise be defeated by the intervening incapacity.”

The Supreme Court of California had under consideration a case, quite like the present one, in which a mortgage, with the note of the mortgagor and another, as his surety, were delivered in escrow to await the clearing up of the title to certain lands. Before the performance of the condition the surety died. The condition was, however, performed, and the estate of the surety was in consequence held to the discharge of the note ; the court, among other things, saying :

“When the condition on which an original delivery made in the lifetime of a party transpires, the conditional delivery becomes absolute, and the absolute delivery takes effect against the contracting parties from the date of the delivery of the contracts as escrows, notwithstanding the death of one of the contractors before the happening of the condition.” Bostwick v. McEvoy, 162 Cal. 496, 499.

Finally, it can be said that the terms of the contract of deposit by the deceased Harsh — the conditions of the escrow in this case — were carried out literally and fully notwithstanding his death, and as they might have been had not his death occurred. It is true, the reason upon the part of the Harshes for making the loan was to procure funds to enable Mr. Harsh to travel in search of health; but with this Book had not, either in law or in equity, any concern. His contract was to furnish the money, not to Mr. Harsh, but to Mrs. Harsh, the wife. He bound himself to invest her with the possession and legal title to certain funds. He did so. She was then in being to receive that title and possession. Whatever legal difficulties might have existed had the conditions of the escrow required payment to Harsh, and had such payment been rendered impossible by his death, they did not exist under the facts as found by the court. The payment was made to the person to whom Harsh in- liis lifetime directed it should be made. The judgment of the court below is affirmed.