I concur with my brethren that the third $1,000 of principal and interest paid upon it should be allowed to the defendant, but I am constrained to hold that the mortgage has been fully and legally paid.
The principle involved in this class of cases is a mere question of authority to receive payment of principal or interest or both. It is held to be sufficient evidence of authority if the attorney who negotiated the loan is subsequently entrusted by the creditor with the possession of the bond and mortgage. (Doubleday v. Kress, 50 N.Y. 413.)
It can make no difference whether the debtor sees the bond and mortgage when he makes the payment.
Hence, it is that a payment made at any time while the bond and mortgage are in the agent's possession, with the consent of the obligee, is evidence of the authority conferred by the obligee to receive payment. The authority to receive arises, in such case, from the permission of the creditor to let this evidence of authority remain with the alleged agent. The authority to receive payment consists in leaving the bond and mortgage in the possession of the receiver, and not at all in the fact of being seen in the receiver's possession by the obligor. (Hatfield v.Reynolds, 34 Barb. 614.) It is a species of a power of attorney. Such being its character, it must remain in force and operative until the creditor revokes this authority by withdrawing the bond and mortgage from the possession of the receiver or alleged agent. (Smith v. Kidd, 68 N.Y. 137.) The trial court found that Mrs. Crane did not know of the delivery of the bond and mortgage to Mount, but believed and intended that the bond and mortgage should remain in Baker's possession from the period of its execution to the 4th of August, 1884, nine years or more. Mrs. Crane *Page 282 herself testified that, "Q. During these three years or so that Baker told you that Gruenewald was delinquent in the payment of these interest moneys, what answer did you make to him? A. I was indignant about it, and asked him why he did not foreclose the mortgage, and he would say it would cost me too much money; then, again, he would tell me that Mr. Henry R. Mount would buy the mortgage of me; this was in January, 1884. Q. Did you not tell him to foreclose the mortgage? A. I did not; but asked him why he did not foreclose. Q. Then what did you mean by asking him why he did not foreclose the mortgage? A. I wanted the money; I, that is — I wanted the principal if I could not get the interest." Baker wrote to Mrs. Crane: "I shall commence foreclosure proceedings to-day." "Q. From all these letters, Exhibits 1 to 8, and C and D, you understood that Baker was making efforts to get Guenewald to pay off the principal of this mortgage? A. I supposed he was."
This finding by the trial court shows that Mrs. Crane intended that the bond and mortgage should remain with Baker (which, as we have seen, was sufficient evidence of his authority to receive payment), but this evidence is confirmed and strengthened by her evidence to the effect that she knew Baker was collecting and trying to collect the interest and principal, and even by a resort to foreclosure, of this bond and mortgage through this long period. As before stated, it is simply a question of Baker's authority to receive payments upon the bond and mortgage, and, while the possession of the bond and mortgage is sufficient evidence of such authority, it by no means precludes other evidence of such authority, either in connection with the fact of possession of the bond and mortgage or independently of such possession. (Hatfield v. Reynolds, supra, p. 614.) "The authority is implied from the possession of the papers and the continued receipt of money upon them, which are facts, and not from the exhibition of the papers by the agent, which is only evidence of the fact," and, it might be added, to the obligor.
Hence, I feel constrained to hold that the exclusion of any *Page 283 evidence which tended to prove that Baker had actual authority to receive payments and quite aside from the authority to do so arising from the possession of the bond and mortgage, was erroneous.
It was held in Dunn v. Hornbeck (72 N.Y. 81), where the plaintiff, as in this case, had testified she had never authorized the agent to receive the principal, that it was proper to contradict or overcome such testimony by showing that the agent always did her business; that he received the moneys paid for her, etc.
Under this authority the learned trial judge erroneously excluded the answers to the following questions: "Q. Did you ever hear any name mentioned with regard to the ownership of your mortgage other than John Willard?" "Q. You paid the interest on your mortgage to Baker?" "Q. Baker wrote you that he was making efforts to get Gruenewald to pay off this principal; what did you, in conversation, say to him with regard to the matter?" "Q. Was this mortgage on the avenue B property existing at the time John R. Crane arrived at age?" "Q. What other business did George A. Baker, Jr., have for you in 1875-6-7, besides investment of these mortgages?"
She never withdrew the possession of the bond and mortgage from Baker, or in any way limited or restricted his authority to be implied from such possession and his general authority to act in her business and especially in respect to Baker's authority in relation to the four other mortgages negotiated by Baker at the same time out of the $30,000 which Baker loaned for the plaintiff. The forged assignment and the retention of a simulated copy of it to deceive the defendant with, signify nothing in respect to the payments made by defendant. Baker was authorized by plaintiff to receive such payment and such authority was continued until it was in some manner revoked. During such period a payment to Baker was a payment to plaintiff and the forging of an assignment of the bond and mortgage could not affect the authority conferred upon him. Until his authority was revoked, Baker was the agent to receive payment. He was her agent, and in no sense the *Page 284 agent of the defendant, and she should lose by the unfaithfulness of her agent rather than that the defendant should.
I am in favor of a total reversal of the judgment and the award of a new trial.
All concur with PARKER, J., except POTTER, J., dissenting.
Judgment accordingly.