Muth v. Goddard

72 P. 621, 28 Mont. 237, 1903 Mont. LEXIS 83

• Court: Montana Supreme Court
• Decided: May 25, 1903
• Docket: No. 1,914
• Status: Published

Opinion

MR' COMMISSIONER CALLAWAY

prepared tbe statement of tbe case and tbe opinion for tbe court.

Tbe following questions have been presented and argued by counsel: (1) Was Charles A. Clarke authorized by tbe power of attorney to execute the trust deed conveying bis principal’s individual property -to secure the notes of tbe firm-? And herein, did be have tbe authority to include in tbe trust deed a power of sale, and a provision for an attorney’s fee in case of foreclosure? (2) Can tbe power of sale be executed now that Albert G. Clarke, Sr., is dead ? We will treat these questions seriatim.

1. Authorities in great number have been cited by counsel in discussing tbe right of Charles A. Clarke to> execute tbe trust deed under the power of attorney above set forth. We have examined themi all, and also have made much independent research, in order to arrive at a correct solution of tbe propositions involved; but no case has been cited to or discovered by us, which, construing a power of attorney like tbe one in question, decides any similar point.

Tbe instrument in question muy be denominated an unrestricted general power of attorney. It will be noticed that tbe donor of tbe power placed bis agent in a position to perform almost every act that may ordinarily arise in tbe transaction of business. Practically the only limitation it contains i's to tbe effect that tbe attorney must act for tbe principal’s use and benefit. It must be presumed that in giving this power tbe principal understood tbe full meaning of tbe words be employed, and undertook tbe risk to which be might be subjected in case bis agent should carry tbe given powier to its utmost limit. Being a business man, be must have known that tbe transactions of business do not always result in profit, and be therefore delegated to bis agent, bis son, very extensive powers, including tbe authority to pledge bis credit and mortgage bis property. Being about to leave tbe state of Montana for tbe winter, and knowing that be could not personally attend to bis business affairs, he confided ini bis son, and placed him in bis stead. And tbe fiduciary relation then established continued until tbe donor died.

“Much of tbe business of tbe world is transacted by agents, or through agencies, representing their principals. It is a rule recognized by all tbe authorities that the acts of the agent, within the scope of bis employment, are the acts of his principal, and tbe latter is bound by them. * * * The rules governing tbe construction of written instruments generally are resorted to in construing powers of attorney. (18 Am. & Eng. Enc. Law (1st Ed.) p. 871.) Tbe obvious meaning of the terms used is not to be restricted or extended by implication in the absence of necessity. Another well supported rule relating to powers of attorney is that tbe intention of the parties, as ascertained by the language used, governs.” (White v. Furgeson, 29 Ind. App. 144, 64 N. E. 49.)

. “But it is said the power must be strictly construed. This may be true, but it does not require that it shall be so construed as to defeat tbe intention of the parties. "Where the intention fairly appears from the language employed, that intention must control. A strained construction should never be given to defeat that intention, nor to embrace in the power what was not intended by. the parties.” (Hemstreet v. Burdick, 90 Ill. 444. And see Marr v. Given, 23 Me. 55, 39 Am. Dec. 600; Carson v. Smith, 5 Minn. 78, 77 Am. Dec. 539; Lamy v. Burr, 36 Mo. 85, 88 Am. Dec. 135; Posner v. Bayless, 59 Md. 56.)

“If the writing be open to two constructions; one of which would uphold while the other would overthrow the contract, tbe former is, where possible, to be chosen.” (Mechem on Agency, See. 304.) And where third persons are concerned in cases- of doubt, the general- rule is that the words in tbe power are to be construed most strongly against tbe grantor. (Story on Agency, See. 74; Code of Civil Procedure, Sec. 3140.)

Bnder a general power of atorney, however, the agent cannot lawfully do any act unless it be for the principal’s use and benefit. Thus he cannot lawfully act under it for tbe private benefit of himself or third persons. Belying on this principle, counsel for plaintiffs contend that under' the authority granted Charles A. Ciarte he could not lawfully execute the trust deed; not for the reason that the power of attorney is insufficient in form to warrant his execution of it, but because in so doing he was securing a debt of the partnership1, and thus was not acting for the use and benefit of his principal. We do not agree with counsel. Albert C. Clarke, Sr., as a member of the firm of Raleigh & Clarke, was liable to third persons for all the obligations of the partnership'. (Civil Code, Secs. 1941, 3250.) Now, where the principal was liable for every dollar of the indebtedness of the partnership, and the partnership was unable to pay its debts, and the other partner had arrived at the end of his resources) what would have been the result if the attorney in fact had neglected to take any action whatsoever? Obviously, the result would have been that the creditors of the firm of Raleigh & Clarke would have instituted suits and levied attachments; merged their claims in judgments running against Albert G-. Clarke, Sr., and W. B. Raleigh; issued and levied execution; sold all the firm property, and then a sufficient amount of Clarke’s separate property to satisfy their demands. Indeed, the creditors might have levied upon the firm property and the individual property of Albert G-. Clarke, Sr., simultaneously. Such action might have entailed great loss upon the solvent partner, Clarke; and it appears that thi$ state of affairs inevitably would have resulted had it not been for the prompt action of Clarke’s attorney in fact, and, under these circumstances, it seems clear that he acted for his principal’s use and benefit. Whether any benefit accrued to W. B. Raleigh by reason of the action of Charles A. Clarke as attorney in fact, it is unnecessary to inquire. Doubtless, when Albert GK Clarke, Sr., paid the debts of the firm, it relieved W. B. Raleigh to some extent, but did it change the status of Clarke, Sr., when he was personally liable for the payment of all of these debts, irrespective of any benefit which might or might not incidentally accrue to W. B. Raleigh, his partner ?

Upon this point plaintiffs say in their brief, “It is not pretended that Charles A. Clarke could, or attempted to, release Mr. Ealeigh from the liabilities of the firm.” The eases cited by plaintiff which they assert sustain their contention that the attorney in fact of a general partner cannot mortgage his principal’s property to secure a partnership! liability, even though the principal is solely responsible therefor, are not in point. No case has been cited by them which states the proposition that under a general power of attorney an agent may. not mortgage his principal’s property in order -to save the principal from loss. They mainly rely upon the language found in Mechem on Agency, Sec. 307. We think counsel place a broader construction upon this section than was intended by the learned author. The section, read as an entirety, does not conflict with our views in this case, and an inspection of the cases cited in support of the text discloses this clearly.

There can be no doubt that the attorney in fact, unless especially authorized so to1 do, cannot bind the principal for the private benefit of the agent himself, or of third persons only. And while we purpose to discuss the applicability of the authorities cited in Mechem on Agency and by counsel to the question here involved, wo suggest, in passing, this question: When Albert G. Clarke, Sr., was liable for all the debts of the firm of Ealeigh & Clarke, and his individual property was about to be seized by attachment levied by creditors of the firm, did not the agent act in the sole, separate, and individual business of his principal when he took such action as prevented him from being thus greatly injured!? And just here it must be remembered that Albert G. Clarke, Sr., was at this time the owner of all the property of Ealeigh & Clarke. Ealeigh, while still liable to the firm creditors, had transferred all his property to Clarke.

The first case cited by Mr. Mechem in support of Section 307, supra, and discussed by counsel, is Stainback v. Read, 11 Grat. 281, 62 Am. Dec. 648, in which it appears that the. controversy arose over a bill of exchange which was not drawn in the business of the principal, but in that of the attorney in fact exclusively. Attwood v. Muninngs, 7 B. & C. 278, 4 Eng. Rul. Cases, 364, is a leading and much misquoted case. The defendant had given to his wife a power of attorney authorizing her to accept for him “such bill or bills of exchange as should be dirawn or charged on him by his agents or correspondents as occasion should require.” She accepted a bill of exchange whicfy was not drawn by the principal’s agent for that purpose; in other words, the drawer of the bill of exchange had no authority to draw it, nor was it within, his ostensible authority. The court held that the wife, as attorney in fact, exceeded her power in accepting the bill, as the agent who drew it exceeded his in drawing it. North River Bank v. Aymar, 3 Hill, 262, was a case in which the attorney in fact executed notes for the accommodation of third persons, the notes having no connection with the principal’s business. The notes were, however, drawn within the ostensible authority of the attorney in fact; and, while they were held to be fraudulent as between the principal and the attorney in fact, nevertheless they were held to bind the principal when in the hands of a bona fide bolder. In the case of Camden Safe Deposit and Trust Co. v. Abbott, 44 N. J. Law, 257, the note in suit “was put forth for the personal benefit of Hie attorney, who converted its proceeds to his own use.” In Wallace v. Branch Bank at Mobile, 1 Ala. (N. S.) 565, the attorney in fact was given authority “for the plaintiff and in his name to draw or indorse promissory notes,” etc., and! the court said: “It is very clear that there is no express delegation of authority to the. attorney to' draw or indorse nctes for the mere accommodation of third persons; such notes, though they might be drawn or indorsed in his name, certainly would not be for the principal himself. Gallagher’s right to make and negotiate paper was not unlimited, but was to bo restricted to a transaction in which the plaintiff at least had the semblance of interest.” In Adams Express Co. v. Trego, 35 Md. 47, it was held that a general superintendent of the express company, with authority to employ and discharge agents and direct tbeir conduct, make contracts, and exercise a general supervision over the business of the company, had no power to license one of his employes, an assistant superintendent, to engage in and carry on a business in competition -with and injurious to the express company. The court said, “The powers of an agent are to be exercised for the benefit of the principal only, and not of the agent or of third parties.”

Plaintiffs also quote at length from Mechanics’ Bank v. Schaumburg, 38 Mo. 228. In that case it appeared that Or-leana C. Schaumburg and Martha A. Wills each gave to John W. Wills a power of attorney authorizing him “in her business, for her use, and in her name” to perform certain acts; among others, “to borrow money and! execute notes.” Wilis was president of the Mechanics’ Bank, to which institution he was indebted in the sum of $45,000. As attorney in fact he executed notes in the joint names of his two principals for $85,000 to the cashier of the bank, who drew checks for the amounts in favor of Wills, and the latter immediately deposited the same to his own credit in the bank. All of this money was used by Wills for his private benefit. The bank knew that the loan was actually made to John W. Wills in his namq for his use, and in his business. The court correctly held that Wills’ principals were not bound by such acts on the part of their agent. The court held in Ferreira v. Depew, 17 How. Prac. 418, that the words employed in the power of attorney did not confer upon the attorney the right to transfer all the principal’s property to a trustee for the payment of his (the principal’s) debts. In Johnston v. Wright, 6 Cal. 373, the principal authorized the attorney in fact “to settle and adjust all partnership. debts, accounts, and- demands, and all other accounts and demands now subsisting, or which may hereafter subsist, between me and any person or persons whomsoever,” and, among other purposes, the power was given to execute releases. The attorney discharged a debt due the principal and two others jointly. In reaching its conclusion the court said: “In Attwood v. Munnings, 7 Barn. & Cress. 279, the power was to endorse bills Tor the principal, in his name, and to his use/ and also to ‘accept bills drawn by his agents or correspondents.’ In the suit upon a bill drawn by one of the partners of the principal for the benefit of the partnership1, and accepted by the agent, it was held that the power extended only to the individual business of the principal, and not to his partnership affairs.” It is apparent that the court did! not understand the ruling in Attwood v. Munmngs, as no such decision was reached in that case. The Californa court then went on to say that, as the debt released was neither an individual nor a partnership debt, but a joint debt, the language of the power of attorney was not broad enough to authorize the attorney’s act, and said that, if the principal had personally executed the release, and had used only the language contained in the power of attorney, it would! have been totally ineffectual to release the covenant on which the controversy rested.

Whether the agents in the last two cases cited acted or assumed to act for the use and benefit of their respective principals, we are unable to ascertain. All of the other authorities cited by plaintiffs will be found, upon examination, to treat of cases wherein the agent acted either for the private benefit of himself or third persons, or else clearly transcended the authority granted him.

In the power of attorney before us Charles A. Clarke is given authority “to sell, remise, release, convey, mortgage, and hy-pothecate lands, tenements, and hereditament® upon such terms and! conditions and under such covenants as he shall see fit.” And also “to sign seal, execute, and deliver and acknowledge” such mortgages, hypothecations, bills, bonds, notes, receipts, evidences of debt, and “such other instruments in writing of whatever kind and nature as may be necessary or proper in the premises.” Under the languge used, can it be successfully contended by any one that Charles A. Clarke had not the right to execute and deliver notes, mortgages^ and hypothecations ? If he could execute such, for what purpose would the instruments be executed ? Certainly to secure debts on the part of the principal. When tbe principal executed tbe power of attorney be must bave contemplated that at some time it would be necessary for bis attorney in fact to execute instruments in writing in recognition of debts owed by bim, tbe principal; otherwise, for wbat purpose were sucb words as we bave last quoted inserted in tbe power of attorney? (Lamy v. Burr, 36 Mo. 85, 88 Am. Dec. 135.) If we were tol say tbat tbe attorney in fact bad no right to execute notes, mortgages, and bypotbecations, we might as well say tbat tbe principal never executed any power of attorney at all. We bave heretofore shown tbat tbe debt secured by tbe trust deed in question was tbe principal’s debt, and, after W. B. Raleigh bad executed tbe instruments conveying all of bis property to Albert G. Clarke, Sr., tbe debt secured was practically tbe sole and individual debt of Clarke, as between himself and Raleigh. The attorney in fact could not take a new partner into tbe firm of Raleigh & Clarke, and neither could be dissolve tbe partnership under bis power; but when Raleigh, tbe other partner, voluntarily turned over all of bis property to Clarke, Clarke’s attorney in fact, under the power given bim, bad tbe right to receive and protect it.

Plaintiffs contend tbat Charles A. Clarke, as attorney in fact, bad no'.right to execute tbe guaranty which be indorsed upon tbe notes. As we view it, this guaranty was useless and nugatory. Albert G. Clarke, Sr., was already liable for the payment of the’notes, and tbe guaranty executed on bis behalf imposed upon bim no additional obligations whatever, as it was in terms a guaranty of bis own-debt. (In re Wm. H. Blumer & Co. (D. C.), 13 Fed. 622.) Tbe question, then, is, as Charles A. Clarke bad tbe right as attorney in fact to secure tbe payment of the notes in question, did be bave tbe right to' execute tbe trust deed in controversy, including tbe power of sale ? Every general power implies every particular power necessary to its exer cise or performance; in other words, “tbe authority to- accomplish a definite end carries with it tbe power to1 adopt tbe usual legal means to accomplish tbe object. Cbitty on Contracts (Ed. 1860), 236; Anderson v. Coonley, 21 Wend. 279.” (Piercy v. Hedrick, 2 W. Va. 458, 98 Am. Dec. 774.)

In the ease of First National Bank v. Bell S. & C. M. Co., 8 Mont. 32, 19 Pac. 403, the court, speaking through Mr. Chief Justice McConnell, said: “While the exact boundary between mortgages with powers of sale, and deeds of trust, is not very clearly defined, we think the deed in question should be classed with the former. * * * But, from the view we take of it, we do not think it important to determine to which class it technically belongs. * * * ‘A mortgage is a pledge or security for a debt, whatever may be the form) which the transaction takes, whether a simple mortgage deed in form, or a mortgage with a power of sale, or a deed in trust, or a deed absolute on its face, accompanied by an agreement in writing to reconvey or to sell, or to do any other thing upon the payment of a certain sum of money. Courts of equity look upon it as a mortgage, and deal with it as such.’ Perry on Tfusts, Sec. 602d.” In reviewing and affirming this case the United! States Supreme Court said: “The joower of sale in the indenture, whether we call it a deed of trust or a mortgage, does not change its character as an instrument for the security of the indebtedness designated, but it is an additional authority to the grantee or mortgagee, and, if he does not choose to foreclose the mortgage by any of the ordinary methods provided by law, he can proceed under the power added for the sale of the property to obtain payment of the indebtedness.” (Bell S. & C. M. Co. v. First Nat’l Bank, 156 U. S. 470, 15 Sup. Ct. 440, 39 L. Ed. 497.) Section 3821, Civil Code, provides: “A power of sale may be conferred by a mortgage upon the mortgagee or any other person, to be exercised after a breach of the obligation for which the mortgage is a security.” Section 1293, Code of Civil Procedure, provides: “When a mortgage confers a power of sale, either upon the mortgagee or any other person, to be executed after a breach of the obligation for which the mortgage is a security, either an action miay be maintained under this chapter to foreclose, or proceedings may be had under the provisions of the mortgage.” We therefore conclude that Charles A. Clarke, as attorney in fact, had the right to execute a mortgage in the.form of a trust deed, containing a power of sale, just as he would have had the right to execute a mortgage in the ordinary form. Creating a trustee with power of substitution to his successors in trust was not delegating a delegated power. In effect, it merely provided a means for obviating the appointment of a receiver and foreclosure by an action in court in case of a default by the principal. Furthermore, Charles A. Clarke under the trust deed conveyed away the whole legal title. His power over the property then ceased. His act was not a delegation of power, but an execution of the power conferred under the power of attorney. (Lamy v. Burr, supra.)

It is also contended by plaintiffs that, even had Charles A. Clarke, as such attorney, the right to execute the trust deed in question, he had no right to include therein a provision for an attorney’s fee. It is unnecessary for us to decide this question. The mortgage foreclosure was commenced under the power of sale therein contained, whereas it is distinctly specified in the trust deed that the attorney’s fee shall be collected only if the mortgage be foreclosed' by an action. Plaintiffs are therefore complaining of something which is not in controversy in this action.

2. Can a power of sale be executed after the death of the mortgagor? The decisions are not in harmony as to- whether such a power can be so executed, for the reason that some affirm and some deny the power to be one coupled with an interest. If the power is one coupled with an interest, it can be executed after the death of the grantor; otherwise not. Chief Justice Marshall, in Hunt v. Rousmanier's Administrators, 8 Wheat. 174, 5 L. Ed. 589, in speaking of such a power, uses the following language: “We hold to be clear that the interest which can protect a power after the death of a person who creates it must-be an interest in the thing itself. In other words, the power must be ingrafted on an estate in the thing. The words themselves would seem to import this meaning. A. power coupled with an interest’ is a power which accompanies or is connected with an interest.” In Bergen v. Bennett, 1 Caines’ Cases, 1, 2 Am. Dec. 281 — a leading case on this subject — the court said: “It is admitted that a naked authority expires with the life of the person who gaye it; but a power coupled with an interest is not revoked by the death of the grantor. In my opinion, the power contained in the mortgage is of the latter description. A‘ power simply collateral and without interest, or a naked power, is when, to a mere stranger, authority is given to disposing of an interest in which he had not before, nor hath by the instrument creating the power, • any estate whatsoever. But when power is given to a person who derives, under the instrument creating the power or otherwise, a present or future interest in the land, it is then a power relating to the land.” It was said by our own court, in First National Bank v. Bell S. & C. M. Co., supra: .“But the mortgagee has an interest in the land mortgaged. He has a lien upon it for the security of his debt, and this will support the power of sale, and so- couple it with an interest in the land that it becomes a part of the security and irrevocable.” Says Mr. Jones, in his work on Mortgages (Section 1792) : “This being [a power] coupled with an interest in the estate cannot be revoked or suspended by the mortgagor. Of course, after his death the. power cannot-be exercised in his name, but the authority to execute it in the name of the grantee continues.” And see cases cited; Whitmore v. San Francisco Savings Union, 50 Cal. 146; More v. Calkins, 95 Cal. 435, 30 Pac. 583, 29 Am. St. Rep. 128.

Prom the foregoing authorities it clearly appears to us that the power of sale included in the trust deed in question is a power coupled with an interest; but, irrespective of this, the legal title to the property having passed to the trustee and from the mortgagor, the death of the latter, could in no wise affect the trustee’s right to carry out the trust which the mortgagor had reposed in him.

It is argued, however, that foreclosing under a power of sale is inconsistent with our probate law, and that the mortgagee should enforce his rights either through the regular course of administration or by foreclosure in court. Tbis argument cannot be maintained. “The law may suspend its own process. As it gives the process, it may regulate it. But deeds of trust and mortgages with the power of sale arise from the consent and agreement of parties, and there is no propriety in depriving creditors of the fruits of their foresight and caution.” (Beatie v. Butler, 21 Mo. 313, 64 Am. Dec. 234.) The Texas eases cited by plaintiffs are not in point. See In re Horsfall's Estate, 20 Mont. 495, 52 Pac. 199. It follows that the trustee or his successor in trust, having the legal title, could execute the power of sale (a power coupled with an. interest) without reference to the administration of the mortgagor’s estate, if he so elected. (Code of Civil Procedure, Section 2603.)

Rehearing denied June 13, 1903.

In our opinion, the order should be reversed.

Pee Cueiam. — Por the reasons given in the foregoing opinion, the order is reversed, and the' cause remanded.