564.
93
FEDER4L REPORTER.
le&!)Iy as you may choose; for the trust property will be made to ,yoll !iU alllounts and shall Indemnify you for, and keepyouh*rmless from, all the damages resulting from your'clj.relessness and negligen·ce. Waste, ruin, Imperil, and wreck, If you wish, for this contract will protect you foomal!.' "
It, is scarcely to be conceived that such apprehension can be seriously entertained, but it may be as well to state briefly the principles that:i:lpould govern the allowance of any claims made by the petitioner:' If there is a deficit in operating expenses, and the petitioner shows that such deficit is not in anY\l;ise due to his fault Of extravagance,and that he operated the road with care and d'iligence and 'economy, such deficit should be allowed. If . there was any extravagance, recklessp.ess, waste or betrayal, it should not be allowed. If the petitidner has' been compelled to pay for damages to persons or property, and such damages are due to his recklessness or gross carelessness, he should not be reim· bursed therefor; 'but if the damages are due to mere carelessness or negligence of' the servants employed by him in the operation of the road, and he employed them without the kndwledge that they were careless, exercising due care in their selection,-3uch care as'he 'exercised in the selection of servants on his own road, provided the master shall :find th:;tt his oWp. road was managed with ordinary such damages falL within the class of operating expenses, arid. the petitioner is entitled to be reimbursed there· for.'l:(l'other words, if the app'ellant can show that he operated the road, of the receiver, while it was in',his hands, with the same care, diligence, and economy that well-managed' railroad compaoperation of their Own roads, he is nies ordinarily exercisejn entitled to stlllld in the place of the receiver, whose agent he was, and to be reimbursed for his losses and damages.' The judgment of this <;oqrt is that the decree below be reversed,and the case tO'proceed in accordance with the principles herein announced. Reversed.
BALFOUR et aI. v. HOPKINS et aI.
(Circuit Court of Appeals, Ninth Circuit. 1.
February 13. 11199.)
ESCROW....,DEJ.IVERY OF DEED IN VIOLATION OF AGREEMENT--.,.PURCHASER WITH NOTICE OF ESCROW.
A prospective lender of money on a real-estate mortgage, who is advised that the intending borrower is without title, but that a deed conveying the properly to him is deposited in escrow, is' put upon inquiry as to the terms, of the escrow; and if he neglects to ascertain them, when means are within his reach, but accepts the statement of the depositary, and makes the and the deed is delivered by the depositary in violation of the esc'r6w agreement, he cannot claim to be an innocent' pur.chaser, as against the. rights of the vendor secured by such agreement, but takes his mOlltgage ,subject thereto. RIGHTS UNDER EecRiQw AGREEMENT -
2.
ESTOPPEL TO ASSE,RT MORTGAGEE.
SUBSEQUENT
A vendor, whose deed, deposited in escrow, together with a mortgage back for mon,ey, was delivered by the depositnry in violation of ,j;.he and who hal) the right. assert the priority of, his.
BALFOUR V. HOPKINS.
565
mortgage over another given by the purchaser, and. first recorded, Is not estopped to Insist on such priority by accepting and recording his mortgage, nor Ily any subsequent acts which in no way prejudiced the rights of the other mortgagee.
Appeal from the Oircuit Court of the United States for the Northern Division of the District of Washington. In 'October, 1892, Charles Hopkins owned lot 7 in block D of A. A. Denny's addition to Seattle. The government meander line ran nearly north and south through the block. Lot 7 was upland, abutting on the shore. Lot 8, and, the lots to the westward thereof, whiCh were not platted, but wplch were called lots 9 and 10, were· on submerged or tide lands, outside of the meander lines, The owner oflot 7 had, through an act of the legislature of the stl'jte of 1Yashington passed in March, 1890, the preference right to purchase from the state the lots outside of the meander line, as soon as the tide lands should be platted and the harbor lines established. On October. 20. 1892, Hopkins entered into a co,"ract with J. Parkinson to exchange his said property for lots 5 and 8 in" A. Denny's Broadway addition to Seattle, which then belonged to Parkillson. By the agreement the Parkinson property was valued at about $60,000. There was a mortgage outstanding upon it for about $34,000. Later the net value of the Parkinson property was ascertained to be $28.497.85. The HopKins property was valued at $90,000. Parkinson was to pay Hopkins It balance of $(n,502.15. The agreement was delivered to Hopkins, and was withheld from record. By its terms. Parkinson purchased from Hopkins the property aforesaid, describing the same as lots 7 and 8 in block D of A. A. Denny's addition to Seattle, 'Wash., "together witli all 'the riparilm and littoral rights belonging or appertaining thereto, and consisting of lots 9 and 10, adjoining, and extending westward along the north side of Seneca street. across both 'Vest street and Railroad avenue, to deep water or ship'schannel."for $90.000, to be paid by the conveyance by Parkinson to Hopkins of the Parkinson property at a net value as above stated. For the balance of the $90,000, Parkinson was to make Hopkins deferred payments,-two payments of $12,500 each to be secured by mortgage "on all tbe lots denominated berein 9 and 10, and all superstructures, consisting Of bouses. wbarves, and warebouses thereon," and the remainder to be secured l)y a mortgage on tbe same property, and alsO by a second mortgage on lots 7 and 8, eOllveyed by C. Hopkins to Parkinson, "and which are not to be mortgagpd by said Parkinson, as a first mortgage, for a greater sum than sixty thousand dollars. wbicb said sum, pursuant to said first mortgage. is to he placed into a brirk stnlcture on said lot 7, within one year from and after said 24tb day of October, 1892. to cost not less tban said sum of sixty thonsand dollars when finished." On October 24, 1892, Parkinson and wife conveyed the Pnrkinson property to Hopkins; and on the following day Hopkins placed the deed on record, and at once took possession of the property, and has since heW and owned the same. On Noyember 2, 1892. a deed was executed from Hopkins and wife to Parkinson, conveying to the latter the Hopkins property. Four promissory notes from Parkinson and wife to Hopkins for the dpferred payments were signed by Parkinson and wife. A mortgage from Parkinson and wife to Hopkins, as called for in the agreement, was signed. sealed, and acknowledged hy Parkinson and wife. A bond rm)ning to Hopkins ,vas signed by Parkinson and wife as principals. and by R. It Speneer and :VI. D. Ballard, officers of the National Bank of Commerce of Seattle. as surpties. conditioned upon the expenditure of the whole of said Sl1l11 of $60,000 in the erection of the brick building. An escrow card was signed by Hopkins and. wife and Parkinson and wife. The deed, the notes. the mortgage. HIP bond, and the escrow card were thereupon deposited In the National Bank of Commerce of Seattle, in escrow; and said Spencer, the cashier, wrote upon tbe esci'ow card a receipt, which reads as follows: "Received of Roger $. Grpene. acting In behalf of the parties signing the escrow card of whiCh the within is a copy, this 3d day of November, A. D. 1892, the instruments speeitied in said escrow card, to be held by the Kational Bank of Oommerce of Seattle, 'Vashington, as in said escrow eard directed, and to be delivered. when and as In said escrQW card directed, to the respective parties
93 FEDERAl.;'REPORTER. in,tended in said I ' ' ' ' , " I ' "
card:" , "
card reads as
; witnesseth ,ofMte 24th of OCtober, 1892, pursuant to a certain memorandum of agreement made and entered into Octooor, ,20th, 1892, by and :between' ',Charles Hopkins, anllJohn, Parkinson, respectively, providing, among other ;the sale ,aup conveyance by< said Charles jlaid .Tohn ParkiIJ.son of lots seven (7)\Wd \'light (8) in block D of" A. A. l?enny'saddition tQ Seattle;' 'Wllshingtoi1;J,lie :foilowing descriOO1 instruments Mve'been executed; that II! ''to say:; 1st One deed of conveyance 'and, wife to said'Johp f'l1rkinson of said seven (7) andeigh't·(S). 2nd. Four certain promissory llotes executed by saId John 'Pa'rkin,sonll-ud'wife, payable totp.eor\ler"of Ch,lJ,1'lkHopkins, namely: 15 hoo ($5,502.15) One, for tl:lesu,rnof five thousanll ,fivehU,4dred and two dollars, payable 'twelve months after date; one for, twelve thousand fi'Ve hundred ($12,500.00) demars, payable on or before ninety (90) days after date; one five hundred' ($1'2,500) dollars, payable on or before six for t'welve (6\ after, date; and one 'foi"tplrty-one thousalld ($31,000.00) dollars" paY,llble o'll or before six (6) 3rd.. One.bond In the penal sum of seyeilty-ftve thousand ($15,000.09) paYllbte to ,said Charles F£opkins, by said John his son !lD,d.,Wiife und suretIes. .,4th., One,mortgage,provIdmg, among other thlllgS, for the Irlortgaging of saidlots, seven (7) lil)deight (8),in block D to said CharJesIJ9pklris, and etl:icuted by sliiq ;J'0hnPurkiJison am:1wlfe. And where,of agreement it i/'l,among other things, proas, In lpld pysa,ld 'Vided, li;l,.efj'ect, that the said 'PirIi:lpson is to place ,the sum of sixty thoudollars into a brick l\tructure ,on said lotsevep (7); and to pI;ocure ,slJ.!dsixty thllUl:lapd ($60,OOO,OO) b;y: tOanQr IOllns, from 11 party orpartles in the part of, the Umted in/'ltrumerits are with the National Bank of tbe City of, Seattl¢. Wushiugton, witl). the follpwlng instrucSaiq, Qup.k to t!:le CJlstody of suld Instruments u,utU" S,,ai,i:l,' s'u,m,' ;0,f, Si,xty tho,l,lSIln.d ),' ,donars, sb-all have :n-r,ived .from the , East, and. be un.der the of sald bank, to the use of said Parkmson, for said and,', ,w,hen, s,,aid Six, t,Y thoui;and ($60,,000) dollars is so in POSl;lCSsio" of, or under t1).e cpntrolof, said bank, sai,d bank shall deliver said deed to salo. Jphn Parkipso'n, upon his'dem/ind therefor, and shall deliver said bond, said,pro;mjsspry notes, and,said.I)1ortgage ,to, said Charles Hopkins, on , " ,',,", ,.' ' his demand "Dated at Seattle, Washington, this 2d day of 1892. "Charles Hopkins. "Lucy S. Flopkins. "John Parkinson. "Meta B. Parkinson." The escrow pllpers were delivered In. an unsealed package. The property which the deed from Hopkins and wife ttl Parkinson described was as follows: "Lots numbered seven (7) and eight (8) of block D in A. A. Denny's addition to the cltyof, Seattle (being the same premises otherwise known us lots 7 and 8 of block D of that part of the'JQwn, noW-city. of Seattle laid off by A. A. Denny), and all littoral and ripll,tian rights thereunto belonging and appertaining, and' all houses, Wharves, warehouses, and structures situated and being to the westward (lflots seve!): (1) 'and eight (8), and extending across West street and Railroadli'Venue, in Said city, to deep water,-subject, however, to ull rights of .the United States or of the state of Wushlngton west of the government meander line, where the same crosses said premises." The mortgage froni Parkinson and Wife to Hopkins, which was deposited with the deed in escrow, bore the' same' date with the deed, anddescri1;>eq. the property exactly as the, same wus described In the deed. "It res.er:ved permissi9:U to the mortgagors 'to ,ma:kea prior incumbrance uPon a portion, of the property, as follows: . "And whereus, In and by ,n: certain memorapdum of agreement, dated the 20th day of October, 1892, made by and between the said Charles Hopkins arid ,John Parkinson, it was agreed, among qther things, In effect, that said JohnParkl'nson might mortgage said lots seven (7) and eight (8),by
'S,
567
first mortgage, for a sum not greater than $60,000, which sum, pursuant to said first mortgage, is to be placed into a brick structure placed on said lot 7 within one year from and after this 24th day of October, 1892, to cost not less than said sum of $60,000 when finished: Now, therefore, these presents are intended to be, and the said first parties, their heirs, executors, administrators, and assigns, hereby covenant that these presents shall be, a first mortgage upon the property and premises hereby intended to be mortgaged, except only as against such first mortgage for sixty thousand ($60,000.00) dollars, as is mentioned and intended in said memorandum of agreement; but said first parties shall be at liberty, pursuant to said memorandum of agreement, to place upon said lots seven (7) and eight (8) a first mortgage to secure said sum of sL'l:ty thousand ($60,000.00) dollars, and such mortgage shall be a first mortgage, as against these presents." Shortly after the papers were left in escrow, Parkinson applied to the agents of Balfour, Guthrie & CO., the appellants, for a loan of $60,000. The appellants understood that the security offered them was all of the property which had been purchased from Hopkins. Parkinson testified that he never clearly stated or defined that lots 7 and 8, exclusively, and not any property to the west thereof, should be eovered by the mortgage. The appellants instructed their attorney at Seattle to receive an abstract of title which was to be furnished by Parkinson, to make an examination of it, and to prepare a mortgage, which should contain the provision that the preference right to purchase the tide lands from the state should IJe covered thereby. The attorney found, upon the abstract, that the title rested in Hopkins. He cdlled the attention of Parkinson to that fact, and was informed by him that a deed conveying the property to him, from Hopkins and wife, was in the custody of the National Bank' of Commerce, to be delivered whenever the loan should be effected, and $60,000 placed under control of the bank. The attorney went to the bank, repeated to the cashier what Parkinson had said, and inquired If It was correct. He was informed' by the cashier that the statement was correct. The attorney then asked lea,e of the cashier to examine the deed. The deed was produced, and he examined it. Parkinson had informed the attorney that, after the loan was effected, Hopkins was to have a second mortgage upon the property for some unpaid amount of the purchase price. The attorney was not then informed of the existence of any of the papers that had passed between Hopkins and Parkinson, nor of any of the papers in escrow, except the deed. The attorney' prepared· a mortgage for $60,000. On December 21, 1892, Parkinson and wife executed the notes and mortgage, and acknowledgep. the latter, and them to the attorney. On the following day, the attorney, being authorized by Parkinson to accept the delivery of the deed, went to the b'ank, together with Hie agent of the appellants, and an arrangement was made whereby the.suIn of $20,000 of the $60,000 was to be deposited in the bank forthwith to the credit of Parkinson; the remainder to remain in the possession of the appellant/!, subject to draft by the bank, in installIllents, the building shonld progress. The bank then delivered the deed to the attorney, who on the same day filed it for record, and immediately thereafter filed fot record the mortgage to the appellants. On December 27, 1892, the appellants paid the ban.k., the' sum of $20,000, but paid none of the rema..iJ;lder of said loan until on and afterl\Iarch 28, 1893. Hopkins knew. uothingof the mortgage to the appellants, nor of the delivery of the .deed, until January 2, 1893. He then went to Parkinson, and accused him 'of having departed from the agreement, and went to the bank, and accused the cashier of·viohlting theescrovV instructions.· rrhe same day he demanded and received from the bank the other escrow papers,. the four notes, the mortgage, and the bond, and on the following. day filed his mortgage for record in the office of the county recorder. On or about January 6,1893, he sent his attorney to'tbe appellants, to obtain, if possible,1t release of the property lying outside·ot lots 7 and 8, which had been jucluded in their mortgage. Up to this time theappellants had no notice of any of .the rights reserved to Hopkins in the agreement, nor of the contents o·f th'e escrow card, or of any of the papers' that were in escrow, except the deed. On January 7, 1893, the appellants wrote to Hopkins a conditional offer to release the submerged lands lying to the westward of lot 8, as soon as the building on lot 7 should be completed. free
50S
93 FEDERAl:. REI'ORTEX.
from· mechanics' and material men's liens, a:nd complete title' t.o lot 8 should be obtained from the state. to which,.,oIl. ,January 10, 181J&, ,Hppkius. by his attorney, answered that the proposition badbeen>l!lubmitted to: Oapt. Hopldns, '!Ilnd', illfter being duly considered,. It not worth the while to give the 'same further attention at present; therefore declines the same."The appellants thereafter; In the spring all.d'summer of 1893,. proceeded to pay to the bank the remainder of the moneyaue upon the mortgage; and the whole thereof went into the construction; of the building; which was completed In September, 1893. In November, 1893, Hopkins obtained from. Parkinson a mortgage upon property which the latter owned In tbe state of Oregon, which was Intended asaddttional security for the debt which Parkinson owed Hopkins. The mortga/!;e reeited that its acceptance should not be.constrned as a recognition of the validity of the appellants' mortgage, and that Hopkins, by accepting It, should not waive his right to contest the validity of the appellants" mortgage. In xIay, 1894, Hopkins brought suit to foreclose his mortgage.upon the property which he had sold to Parkinson..The appellants were not made parties to the suit. On the, foreclosure sale the property was purehased'byHopkins; and he thereupon entered into the possession of it. Subsequently Hopkins commenced an action on the bond against Parkinson and wife and the sureties, Spencer and· Ballard, alleging that but $30,000 of the $60,000 had been actually expended in the erection of the building on lot 7. After· July 12, 1894, Hopkins paid interest to the appellant!;! upon their mortgage, out of the ·rents collected by him from lots 7 and 8, amounting in all to $5,750. The interest was not promptly pa.id to the appellants, and they postponed foreclosure of their mortgage, at the request of Hopkins. until the present suit was commenced. The eircuit court found and decreed that the lien of Hopkins was prior to that of the appellants upon the property lying to the westward of lot 8, and th.at the appellants had a first lien, by virtue of their mortgage, upon lots 7 and 8. 84 Fed. 855; J!'rom that decree the appellants appeal, contending that their lien is first as to all the property.
Harold Preston, E. M. Carr, and L. C. Gilman, for appellants. Thomas Burke and Thomas R. Shepard, for appellees. GlLBERT, ROSS, and MORROW, Circuit Judges. GILBERT, Circuit Judge, after stating the facts as above, delivered the opinion of the court. The deed which was placed in with the tashier of the Commercial :Bapk was delivered to the of the appellants in violation of the conditions stipulated in the agreement of the parties. The cashier had in his possession a'writing referring expressly to the mortgage,thebond, and the preliminary agreement between Hopkins and Parkinson. The prelimina,ry agreement :was not deposited with him, but the mortgage, which was placed in his possession, was sufficient to advise him of the condition upon which he was to deliver the deed. did not define the' condition. It inThe escro'};. card,. it is structed thepanI{ to retain the custody of the deed .until Parkinson should prooure a loan of $60,000, and place that sum in the bank, .subject to its conn-ol, and to be used inthe constructionof.abnilding upon lOt 7. By t'he agreement of the parties; however, the deed was not to be delivered,upless Parkinson should procure the loan upon, a first ,mortgage on lots 7 and 8, leaving Hopkins with a first niortgageon the property lying to the westward thereof. That condition was not ·fulfilled. ButH is urged that the appellants stan\! in the attitude of that their attorney had no actual notice of the innqcent terms of the agreement, nor of the terms ·of the mortgage, which was with the papers in escrow, and that his only information was that which
B_;'U'UCH V. HOl'KLS.
569
he had received from Parkinson and from Spencer, which was to the effect that the deed was to be delivered whenever a first mortgage for $60,000 should be obtained. upon the property deseribed in the deed, and that sum should be plaeed in the bank; and that the appellants acted in good faith,and without notice of the agreement between Hopkins and Parkinson, and without knowledge that the former was to have a first mortgage upon any portion of the property. The authorities are not in entire harmony as to the effect of the delivery of a deed which has been left in escrow, to be delivered to the grantee upon the performance of a condition, and which has been wrongfully delivered before the condition was performed. The decided weight of authority seems to sustain the view that such a delivery is inoperative to convey title. even in favor of an innocent purchaser without notice, unless the grantor has, by some act or conduct of his own, estopped himself to deny the delivery. The principle on which the doctrine I'ests is that a deed delivered in violation of the terms on which it has been placed in escrow is not in fact delivered, and that its possession by the grlantee is no more effective to convey title than would be the possession of a forged or stolen instrument. Everts v. Agnes, 4 Wis. :14B; Berry v. Anderson, 22 Ind. B6; Jackson v. I..ynn (Iowa) 62 N. W. 704; Whipple v. Fowler (Neb.) 60 N. W. 15; Smith v. Bank, 32 Vt. 342; Haven v. Kramer, 41 Iowa, B82; Tisher v. Beckwith, BO Wis. 55. In Provident Life & T'rust Co. of Philadelphia v. Mercer Co., 170 U. S. 59B, 604. 18 Sup. Ct. 788, 793, the supreme court distinguished between the case of a bona fide purchaser of negotiable paper which had been wrongfully delivered by a depositary and that of a purchaser of real estate under like conditions, and quoted with approval the language of Chief Justice Bigelow in Fearing v. Clark, 16 Gray, 74, as follows: "The rule is different in regard to a deed, bond, or other instrument placed in the hands of a third person as an escrow, to be delivered un the happening of a future event or contingency. In that case no title or interest passes until a delivery is made in pursuance of the terms and conditions upon which it was placed in the hands of the party to whom it was intrusted. But the law aims to secure the free and unrestrained circulation of negotiable paper, and to protect the rights of persons taking it bona fide, without notice."
But it is not necessary to determine whether the title passed to Parkinson at the time of the delivery of the deed. When Hopkins placed his own mortgage upon record, he undoubtedly ratified the deliver)' of the deed, and acknowledged that the legal title to the property had vested in Parkinson. We are unable to agree with the earnest contention of counsel for the appellants that, in admitting the legal title to be in Parkinson, he admitted the priority of their mortgage over all the property. When he found that the deed had been delivered, and that a mortgage had been placed of record which violated the rights that had been reserved to him, it is evident that, by placing his mortgage of record, he sought only to protect his own interests, and to give notice of his rights. It does not follow that, by ratifying the delivery of the deed, he ratified the inequitable use. which Parkinson had made of the title which he thereby acquired. He gave immediate and positive no-
570
93 FEDERAL REPORTER.
tice to the contrary. The utmost that the appellants can predicate upon his ratification of the delivery of the deed is that he acknowledged the validity of their mortgage to the extent only that Parkinson was authorized to incumber the property. The whole case therefore resolves itself into a question of what were the rights, if any, which the,appellantlil :acquired as innocent purchasers., To constitute a bona ,fide purchaser,there must be want of notice, both at the time,of the pnrchase and at the time of the actual payment ofthepufchase price. Notice before payment is equivalent to notice before the contract, even though the unpaid balance is secured. BhtDchard v. Tyler, 12 Mich. 338; Brown v. Welch, 18 Ill. 342; KohL v.' Lynn, 34 Mich. 360; Lewis v. Phillips, 17 Ind. 108; Boone v. Chiles, 10 Pet. 211 ; Everts v. Agnes, 4 Wis. 343. At the time when the appellants received notice in this case, they had paid but $20,000 of the $60,000 which they had contracted to advance upon the mortgage. The $20,OO{) so paid stilI remained in theba:p.k, ,from which it was to be disbursed in the erection of the building. The appellants undoubtedly had the right; at this point, to 'rescind the contract; for both Parkinson and the bank had violated the escrow agreement, and Parkinson had executed a mortgage upon property Which he'had no night to incumber. Instead of (rescinding, theappellahts chose to pay the bank the remainder ,of the loan. ,Thi$'tlley did with full knowledge of the; facts. By' electing to pr,oceed a:md ,pay over the· :Ji'emainder of the money, theYillustbe deemed to 'have l\ssented tbat their mortgage shouldstan.,d as a lien upon ' the propet'tyonly wbich Parkinson could,'i'ightfuUymortgageto them under his agreement. Itmay be concedell that, if they wereinnocentpullchasers 'to the extent of the $20,000 which they had paid before notice of the dghts of :aopkinS"tlley had to ,make further payUlents on the,mortgage, to hold the mortgage. itself as security pre tanto for theamoun! all'eady ,paid, provided that sum had been paid beyond their powertorecall it.. , Butit is not shown that the bank, whichll,.eld the money, and had give;n'abond for its disbursement for,aspecified,plfrpose, declined to surrender the money to the appellants, or that it was requested to do so. No ground is perceived npon which the bank could have resisted:such a demand, which' it held had been bbtained in violation of since the the escrow agreement of which it was the depositary: · The burden of prOVing all the facts· necessary to constitute themselves innocent purchasers rested upon the appellants. 'Not only have they failed to show that they· could not 'have rescinded the loan, and recovered the $20,000 so paid to the bank, but the evidence in the record is insnfficient tO'convince us that they were in fact innocent purchasers, 'even to the extent of said sum so paid to account upon the loan. In entering into the contract of loan, as it is disclosed in the record,the appellants were not in the attitude of dealing with one whom they found apparently clothed with the muniments of title. They had notice that Parkinson had no title. They found a deed which was in the possession of neither the grantor nor the grantee, but in the hands of a depositary. They knew that the
V. HOPKINS.
571
depositary was bound to deliver the deed only upon the per'formance of a condition, and that .he was equally bound to withhold its delivery until performance. The depositary was the agent of the grantor, but he was also the :agent of the grantee. His authority, sofaI' as he represented either, was not like the authority of a general agent. His agency was special, and for a single act. In procuring the deliverjY of a deed so held by him in escrow, the appellants were bound to kilow whether or not the conditions on which its delivery depended had been met. It was not sufficient that they were ignorant of the rights of the grantor, or that no special fact or circumstance came directly to their notice to suggest his rights. It was not sufficient that the depositary voluntarily .surrendered the deed, or .stated that the terms of the escrow had been fulfilled. The circumstance that the deed was in escrow was of itself sufficient to require them to ascertain the facts. Their attorney had been informed by Parkinson that his trade with Hopkins was conditioned upon his borrowing $60,000 upon the security of a first mortgage upon the property.. He did not inquire of the bank upon what terms the deed was held in escrOw. He did not see the escrow card, nor ascertain if the instructions were in writing. He had notice, however, from Parkinson's statement to him that Hopkins had not been paid the purchase price of his property, and that a mortgage was to be given to secure it. He had no right to rely upon Parkinson's statement of the terms of the escrow agreement. The facts which came to his knowledge were sufficient to put him upon inquiry. If he had read the escrow card, he would have been advised by its terms that a preliminary agreement had been executed, and that a mortgage from Parkinson to Hopkins was among the escrow papers. From the mortgage he would have discovered that the deed could not be delivered unless the grantee borrowed the $60,000 without incumbering lots 9 and 10 with a first lien. In loaning money upon the whole property without further inquiry, the appellants acted at their· peril. . 'I'he appellants point to various acts and conduct on the part of Hopkins which they contend establish against him an estoppel to deny that their lien is first upon lots 9 and 10, and amount to a ratification upon his part of their mortgage in all its terms. These are the fact that Hopkins received the bond, .of the bank, conditioned upon the disbursemeut of the money in the construction of the building upon lot 7, and subsequently sued the bank upon the bond, alleging that not more than $:JO,OOO of the $60,000 loan had been thus used; the fact that he wrote the letter of January 10, 1893; the fact that he foreclosed his mortgage, and bought in all of the property which he had sold to Parkinson, in a foreclosure suit to which the appellants were not made parties; and the fact that he demanded of, and received from, Parkinson additional security upon property in Oregon for the unpaid balance of the purchase price which Parkinson owed him. All of these circumstances, except the delivery of the bond to Hopkins, and the letter of January 10, 1893, occurred after the appellants had parted with
93 FEDERAL REPORTER:
the iull amount <;>f the $60,000 loan.. It is not shown that in pllrsUlubleiofj or :relying upon, any or all of said acts, the appellants changed ,their relation to thetransactioD; or that they have ,therebyi been! placed in any different iposition from that inwliich they would otherwise have been. The letter of January 10, 1893, reject· ing their proposition, and declining to give the matter "further attention at present," was not! inconsistent with an intention upon the part Of Hopkins to rely upon his rights as he understood the same to be then defined and fixed by the antecedent facts; nor was it inconsistent with his present contention, that their mortgage upon lots 9 and 10 was, in equity, postponed to his. The fact that he demanded and obtained of Parkinson further security in no way affected their rights, nor were they. injured by his foreclosure of his mortgage; nor can the fact that he failed to make them parties to his foreclosure suit, or that he paid interest upon their mortgage, or that he requested them to delay the commencement of their foreclosure suit, be construed to be a ratification of their mortgage, or an admission of the priol'ity of their lien. He held a lien second to upon a portion of the property, and claimed a prior lien upon the Temainder. 'Vhile so' asserting his claim, he iwalved none of his rights by paying the appellants the interest on their mortgage, ordby requesting them to delay their foreclosure, or by any other act of which the record advises us. We·'find no error for which the decree should be reversed. His therefore affirmed.
RICHARDSON v. DE:KEGRE et aI. (Circuit Court of Appeals, Fifth Circuit. No. 748. DEPOSITS WHEN INSOLVENT CHECKS BY DEPOSITOR. RECOVERY OF
March 14, 1899.)
Checks delivered to a bank by a depositor for collection and deposit at a time when the bank was insolvent, as must have been known by its iOfficers, and which had not been collected when the bank closed its doors, remain the property of the depositor, and may be recovered by him from the receiver.
Appeal from the Circuit Court of the United States for the Eastern District of The case made by the pleadings and sustained by the testimony Is as follow$: On August 5, 181l6,the appellees, regular deposltor$ In the American National Bank at New Orleans, deposited therein, a few minutes after the bank closed at 3 o'clock p. m., the follOWing checks: New Orleans. July 30. 1896. "No. 8,935. "New Orleans :Katlonal Bank, pay to the order of J. P. Blair. Esq., forty-one and 66/100 dollars. R. Eo Craig, Vice President. "Fergus G. Lee, Secretary. "$41.66." On end: "Sun Mutual Ins. Co., .52 Camp St." Indorsed: "Pay Denegre, Blair & Denegre. J. P. Blair. "Pay to AmeriCan :Katlonal Bank for collection and deposit. Denegre, BlaIr & De'llegre."