August 17, 1928. The opinion of the Court was delivered by This action was commenced July 25, 1924, by T.H. McFaddin and Mary B. McFaddin against R.J. Bland, R.O. Purdy, S. Oliver O'Bryan, and L.S. Carson, alleging that a mortgage given by the plaintiffs to R.J. Bland, and by him assigned to L.S. Carson, had been fully paid and satisfied, and that the defendants failed and refused to cancel the same of record. The action prayed for judgment against the defendants for the penalties provided by the statutes for failure and refusal to enter satisfaction on the records of the mortgage within three months from the demand therefor. *Page 30
The defendants by their answers joined issue with the plaintiffs, and the defendant, L.S. Carson, then the owner of the McFaddin mortgage, prayed for a foreclosure of the mortgage. On the trial of said case, involving the issues between the plaintiffs and said defendants, on December 9, 1925, the defendants prevailed in the action; but an order was made by his Honor, W.H. Townsend, who heard that branch of the case, referring the cause to E.C. Haynsworth, Master of Sumter County, with authority to make additional parties and to take testimony and report the same to the Court on the issues raised.
The plaintiffs then filed an amended complaint, and the Federal Land Bank of Columbia, United States Fidelity Guaranty Company, C.P. Gable, and Black River Cypress Company, were made new parties to the action, and the Federal Land Bank of Columbia filed its answer, making the issues hereinafter considered. The subsequent litigation has been between the plaintiffs and the defendant, the Federal Land Bank of Columbia.
The attorneys for all of the respective parties to the action agreed on a statement of facts, embodied in nine paragraphs, including Exhibits A, B, C, D, E, F, and G, and Exhibit L to Exhibit L-16, and the agreement of facts follows:
"AGREED STATEMENT OF FACTS "Executed by attorneys for all parties January 6, 1927.
"In addition to the admissions of fact contained in the pleadings in this cause, the letters and correspondence, and other written documents hereinafter referred to, the following facts have been agreed upon by the parties to this cause for submission to the Court, as a basis for the adjudication of the above-entitled cause:
"(1) It is admitted that Mary B. McFaddin and T.H. McFaddin executed a bond and mortgage unto R.J. Bland, which was subsequently assigned to L.S. Carson, conditioned for the payment of $2,500.00, dated September 15, 1915, copies of which are hereto attached as Exhibits A and *Page 31 B, bearing interest at the rate of 8 per cent. per annum until paid, with interest on interest at the same rate, covering two tracts of land described therein, containing 60 and 40 acres, respectively, and that the same was recorded on the 15th day of October, 1915, in Book T-4, p. 362, in the office of the Clerk of the Court of Common Pleas for Clarendon County, which is the property of Mary B. McFaddin, and that said mortgage is a first lien on the land therein described.
"(2) It is further admitted that on or about the 30th day of January, 1920, the plaintiff, Mary B. McFaddin, made application to the defendant, the Federal Land Bank of Columbia, for a loan of $1,500.00, copy of which application is hereto attached as Exhibit C, and that said application contained a statement that it was to liquidate prior indebtedness, and that abstract of title furnished the Federal Land Bank of Columbia by S. Oliver O'Bryan did contain notice of the said Carson mortgage as an open lien upon said land.
"(3) That the Federal Land Bank of Columbia furnished to the applicant a list of attorneys for Clarendon County whose abstracts would be accepted by said bank, and that on said list was the name of S. Oliver O'Bryan and Purdy O'Bryan.
"(4) That an abstract was prepared by said O'Bryan, which was approved by said bank, and which showed the Carson mortgage as an open lien upon the land described therein, part of which land, to wit, 78 acres, were offered the Federal Land Bank as security for a loan of $1,500.00, which is described in the mortgage to the Federal Land Bank, a copy of which abstract is attached hereto as Exhibit D. That said mortgage and note were prepared by the Federal Land Bank of Columbia, and forwarded to S. Oliver O'Bryan for execution by the said Mrs. McFaddin, and that the said Mrs. McFaddin was instructed by said bank to go to the office of S. Oliver O'Bryan and execute the same, which she did, and that S. Oliver O'Bryan was instructed by said bank to have said mortgage recorded and returned to said bank, together with the note, which he did. *Page 32
"(5) On September 7, 1920, said Federal Land Bank issued a check for the sum of $1,412.50 on the Treasurer of the United States, payable to L.C. Tisdale, secretary-treasurer, and Mrs. Mary B. McFaddin, borrower. This was the amount of the loan, less the deduction of $75.00 for stock and certain small incidental charges for appraisal of land, etc., including one-fourth of 1 per cent. for premium on an indemnity bond given to Federal Land Bank of Columbia, by United States Fidelity Guaranty Company, of Baltimore, and others, for the purposes set forth in said bond. The note and mortgage bore interest at the rate of 5 1/2 per cent. Copy of said bond is hereto attached as Exhibit E, hereby referred to, and made a part of this stipulation.
"(6) That said check, copy of which is hereto attached as Exhibit F, was, according to the practice and custom of said bank, forwarded to S. Oliver O'Bryan, said check being made payable to Mary B. McFaddin and L.C. Tisdale as secretary of Black River Farm Loan Association, with instructions as appears on Exhibit G, copy of which is hereto attached.
"(7) The parties being unable to agree as to whether or not any moneys were furnished by Mary B. McFaddin to S. Oliver O'Bryan, outside of and beyond the check of Federal Land Bank for $1,412.50, for the purpose of paying up the Carson mortgage, it is agreed that the testimony on this point shall be taken.
"(8) It is admitted that the bond and mortgage originally executed to R.J. Bland, and now known as the L.S. Carson mortgage, is a first and prior lien on the property therein described, and it is further agreed that, if any question arises as to whether said mortgage covers any of the lands referred to in the answer of the Black River Cypress Company and C.P. Gable, then such additional testimony may be introduced by the parties interested therein to determine any conflicting claims as to any part of said land. *Page 33
"(9) It is further agreed that Exhibits A-G and L to L-16 are to be used as part of the evidence in the trial of this cause. * * *"
It was alleged in the complaint that the Federal Land Bank procured an indemnity bond in said indemnity company, and that Black River Cypress Company and C.P. Gable claimed some interest in the property, but those three parties were simply formal, and in the status of the case no further reference will be made to the three said parties, the indemnity company, Black River Cypress Company, and C.P. Gable.
Said agreed statement of facts, with said exhibits and the testimony of certain witnesses, were offered in evidence before the Master. It appears from the agreed statement of facts that the Federal Land Bank of Columbia, upon application for a loan by the plaintiff, Mrs. Mary B. McFaddin, furnished to her a list of attorneys, among whom was S. Oliver O'Bryan, and he made an abstract of a tract of 78 acres of land offered as security for a loan of $1,500.00, and said abstract showed a mortgage lien open on said land in favor of L.S. Carson, and the note and mortgage for said plaintiff to execute were prepared by the Federal Land Bank of Columbia, and forwarded to S. Oliver O'Bryan for execution by Mrs. McFaddin, and she was instructed by said bank to go to the office of S. Oliver O'Bryan and execute the same, and this she did, and S. Oliver O'Bryan was instructed by said bank to have mortgage recorded and returned to the bank with the note, and this he did.
On September 7, 1920, said bank issued a check for the sum of $1,412.50, payable to L.S. Tisdale, secretary-treasurer, and Mrs. Mary B. McFaddin, borrower. This was the amount of the loan, less the deduction of $75.00 for stock and incidental charges, including one-fourth of 1 per cent. for premium on indemnity bond. It will be observed that both the plaintiffs executed the Bland mortgage, but only one, Mrs. Mary B. McFaddin, executed the mortgage to the Federal Land Bank of Columbia. *Page 34
Several days after the date of said check was received by O'Bryan, a payment of $800.00 was made by him on the Carson mortgage, and the facts and circumstances show by a clear preponderance of the testimony that this money was a part of that represented by said check; hence the Federal Land Bank of Columbia must be credited with that amount. The balance of money represented by said check, except the amount paid out for incidental expenses aforesaid, to wit, $612.50, was embezzled by the said O'Bryan, and this is the loss of the Federal Land Bank.
The main question to be reviewed by this Court is: Was O'Bryan the agent of the Federal Land Bank, or the agent of the plaintiffs, in disbursing that check? The Court thinks the conclusion is irresistible, under the facts in this case, that O'Bryan was the agent of the Federal Land Bank in disbursing the check, and that the plaintiff, Mrs. McFaddin, is entitled to credit for the amount embezzled by him, with interest at 8 per cent. from the date of embezzlement, until judgment entered, then 7 per cent.
There was certainly no abuse of discretion on the part of the trial Judge in refusing to allow to be rescinded the agreed statement of facts. Jones Parkerv. Webb, 8 S.C. 206. Beck v. Railway Co., 99 S.C. 310;83 S.E., 335. The application of Mrs. McFaddin stated that the money realized from the loan was to be used in liquidating her indebtedness. This was notice to the Federal Land Bank, when it mailed its check to O'Bryan, who was to disburse the money, that the money represented by the check was to be paid on the indebtedness of Mrs. McFaddin.
O'Bryan was one of the attorneys that the Federal Land Bank suggested to Mrs. McFaddin. She could not retain any attorney she pleased, but was restricted to a selection from a list given her by the lender. O'Bryan made the abstract, and it was approved by the Federal Land Bank. The check was made payable to her and L.C. Tisdale, secretary-treasurer, *Page 35 but forwarded to O'Bryan; but the indorsement of said check by the payee, while necessary, was simply formal in that transaction, for the money was to be disbursed by O'Bryan.
So, while the Federal Land Bank and Mrs. Mary B. McFaddin were both innocent parties, Mrs. McFaddin evidently went to O'Bryan because directed to him by the Federal Land Bank, and delivered to him the check indorsed, as aforesaid, as required to do by the Federal Land Bank, and the Federal Land Bank relied on him to see that the record was clear and the loan closed, and the money applied to the indebtedness of Mrs. McFaddin. O'Bryan was required to follow the directions of the Federal Land Bank, and not the directions of the plaintiff, Mrs. Mary B. McFaddin.
Unless the facts are admitted, the question of agency is a question of fact, and the trial Judge found as a fact that O'Bryan, in the disbursement of the check, was the agent of the Federal Land Bank. We think this finding of fact is correct. See Mayfield v. B. A. MortgageCo., Ltd., 104 S.C. 152; 88 S.E., 370. AmericanMortgage Co. v. Felder, 44 S.C. 478; 22 S.E., 598. LandMortgage Co. v. Gillam, 49 S.C. 345; 26 S.E., 990; 29 S.E., 203. Bates v. American Mortgage Co., 37 S.C. 88;16 S.E., 883; 21 L.R.A., 340. Banks v. Express Co., 73 S.C. 214;53 S.E., 166. Mitchell v. Leech, 69 S.C. 420;48 S.E., 290; 66 L.R.A., 723; 104 Am. St. Rep., 811.Weathers v. Sovereign Camp, 119 S.C. 402;112 S.E., 44.
In Land v. Reese et al., 136 S.C. 267;134 S.E., 252, it is held:
"Where one of two innocent persons will suffer for wrongful act of third, one who was most at fault in letting it be brought about will be required to bear loss."
See Middleton v. Cockfield, 113 S.C. 282;102 S.E., 328. *Page 36
The Court is of opinion that the principle announced in the last two cases avails the plaintiff in this case.
The case of Atlantic Life Insurance Co. v. Rowland (C. C.A.), 22 F.2d 126, quoted in behalf of the Federal Land Bank, is not in point, as it was found as a fact in that case that the attorney was the agent of both the borrower and the lender, and the Court held that, where the equities of the parties are equal, a Court of Equity will leave them where it found them; whereas in the case under consideration it is clear that Attorney O'Bryan was agent of the Federal Land Bank, and said trust committed by it to his care made the fraud of O'Bryan possible.
The plaintiff made three exceptions to the decree of his Honor, Judge Dennis.
The first exception, to wit, that the Court erred in admitting the transcript of the testimony taken at the trial at Kingstree, should be sustained, as that was not included in the stipulation of the evidence to be considered in the trial of the issues for review; however, this error does not affect the result reached, and is harmless.
Exceptions 2 and 3 have been disposed of in considering the exceptions of the Federal Land Bank.
All six exceptions made by the appellant in this case have been carefully considered, though not seriatim, and there is no merit in Exceptions 1, 2, 4, and 5, and they are overruled; but Exception 3 should be sustained, and Exception 6 modified as herein stated.
The judgment of this Court is that the judgment of the lower Court be modified as herein set out, and otherwise affirmed.
MR. JUSTICE BLEASE concurs.
MR. JUSTICE CARTER concurs in result.
MR. JUSTICE COTHRAN dissents. *Page 37
ON PETITION FOR REHEARING MESSRS. JUSTICES BLEASE and CARTER, and MR. ACTING ASSOCIATE JUSTICE J. WM. THURMOND. Rehearing denied.