IV. PERSONS AUTHORIZED TO RECEIVE PAYMENTS 13. In General.-A payment in order to be effective to discharge an obligation must be made to the obligee himself or to an agent having authority, either express or implied, to receive the particular payment. A payment not thus made does not reach the debt.19 But if made to an agent having express authority to receive the particular payment, the obligation is discharged; 20 and the debtor is entitled to his credit without tracing the fund through the hands of the agent and into those of his principal.1 Payment made to one having apparent authority to receive the money will be treated as though actual authority had been given for its receipt. Likewise if it is made to one who by law is authorized to act for the creditor it will work a discharge. Thus the receipt of money due on judgment, by an officer authorized by law to accept it, will satisfy the debt. And payment made to the attorney of record who procured the judgment, before his authority is revoked, or before due notice of such revocation is given to the judgment defendant, is binding on the judgment plaintiff. In any case a payment to an agent is binding on the principal only to the extent of the agent's authority to receive it. And the burden therefore rests on the party making payment to show that the one receiving payment was authorized to do so. A debtor is bound to know his creditor, and if he pays to one who simulates the creditor the debt will not be discharged. The general principle is readily deducible from the authorities that a debtor takes the risk that a payment made to a third person will be by him applied for the 19. McKnight v. United States, 98 U. S. 179, 25 U. S. (L. ed.) 115; Hendry v. Benlisa, 37 Fla. 609, 20 So. 800, 34 L.R.A. 283; Hathaway v. Burr, 21 Me. 567, 38 Am. Dec. 278; Lewis v. Brehme, 33 Md. 412, 3 Am. Rep. 190; Finn v. Adams, 138 Mich. 258, 101 N. W. 533, 4 Ann. Cas. 1186; Moore v. Norman, 52 Minn. 83, 53 N. W. 809, 38 A. S. R. 526, 18 L.R.A. 359; Breck v. Blanchard, 20 N. H. 323, 51 Am. Dec. 222; Hale v. Patton, 60 N. Y. 233, 19 Am. Rep. 168; Smith v. Kidd, 68 N. Y. 130, 23 Am. Rep. 157. And see BANKS, vol. 3, p. 578. 20. Bailey v. United States, 109 U. S. 432, 3 S. Ct. 272, 27 U. S. (L. ed.) 988. 1. Note: Ann. Cas. 1917C 584. 2. Potter v. United States, 107 U. S. 126, 1 S. Ct. 524, 27 U. S. (L. ed.) 330; Hale v. Patton, 60 N. Y. 233, 19 Am. Rep. 168; Crane v. Gruenewald, 120 N. Y. 274, 24 N. E. 456, 17 A. S. R. 643; Seattle v. Stirrat, 55 Wash. 560, 104 Pac. 834, 24 L.R.A. (N.S.) 1275. And see ATTORNEYS AT LAW, vol. 2, p. 993; AUCTIONS, vol. 2, p. 1142. 3. Hendry v. Benlisa, 37 Fla. 609, 20 So. 800, 34 L.R.A. 283. 4. Shaffer v. McCrackin, 90 Ia. 578, 58 N. W. 910, 48 A. S. R. 465 and note. See JUDGMENTS, vol. 15, p. 825. 5. Curtis v. Innerarity, 6 How. 146, 12 U. S. (L. ed.) 380; Martin v. United States, 2 T. B. Mon. (Ky.) 89, 15 Am. Rep. 129 and note. Note: 17 A. S. R. 648. And see BANKS, vol. 3, p. 578. 6. Hoffmaster v. Black, 78 Ohio St. 1, 84 N. E. 423, 125 A. S. R. 679, 14 Ann. Cas. 877 and note, 21 L.R.A. (N.S.) 52. 7. People v. Smith, 43 Ill. 219, 92 Am. Dec. 109. benefit of the debtor to the debt. And money paid to a third person, not the agent of the creditor, does not vest in the creditor so as to make it his property, until he is notified of the transaction, and agrees to adopt the act of the third person in receiving the money as his own act, whereby the debt is to be extinguished. 14. Implied Authority to Receive Payment.-Authority to collect interest does not afford ground for inferring authority to collect the principal, where the agent or attorney is not intrusted with the possession of the securities; and if the creditor accepts payments of interest through the medium of an unauthorized person, such conduct does not imply an agency in such unauthorized person to receive payment of the principal or any part thereof.10 Some courts have taken the view that even though the principal retains possession of the security, agency may be established by evidence of previous payments of principal as well as interest to the person assuming to act as agent for the holder, to the knowledge of the holder, and without protest on his part. Authority to solicit or negotiate loans raises no presumption or implication of authority to collect such loans without the possession of the securities.11 But where in addition to authority to negotiate. loans, the agent does collect and transmit interest and the lender, with knowledge of the agent's failure to account with reasonable promptness, does not notify the borrower not to make payments to him, but continues to permit the agent to make collections without objection, the debtor will be justified in assuming that the agent had authority to collect the principal.12 Authority in an agent to sell property and take a note for the purchase price does not include the collection of the note, unless he has possession of it.13 And it has been held that a mortgage company is not by mere force of the fact that the owner of a mortgage is one of its stockholders constituted his agent for the collection of the mortgage.14 The possession of a signed receipt is sufficient evidence of authority to receive payment of the receipted liability, if the receipt is signed by the proper person,15 but the fact 8. Dutcher v. Beckwith, 45 Ill. 460, 92 Am. Dec. 232; Security Co. v. Graybeal, 85 Ia. 543, 52 N. W. 497, 39 A. S. R. 311. 9. Smith v. Kidd, 68 N. Y. 130, 23 Am. Rep. 157; Hoffmaster v. Black, 78 Ohio St. 1, 84 N. E. 423, 125 A. S. R. 679, 14 Ann. Cas. 877, 21 L.R.A. (N.S.) 52; Kohl v. Beach, 107 Wis. 409, 83 N. W. 657, 81 A. S. R. 849, 50 L.R.A. 600. Note: 21 L.R.A. (N.S.) 418. 10. Hollinshead v. Stuart, 8 N. D. 35, 77 N. W. 89, 42 L.R.A. 659; Hoffmaster v. Black, 78 Ohio St. 1, 84 N. E. 423, 125 A. S. R. 679, 14 Ann. Cas. Note: 23 L.R.A. (N.S.) 418. 12. Campbell v. Gowans, 35 Utah 268, 100 Pac. 397, 19 Ann. Cas. 660, 23 L.R.A. (N.S.) 414. 13. Draper v. Rice, 56 Ia. 114, 7 N. W. 524, 8 N. W. 797, 41 Am. Rep. 88. Note: 23 L.R.A. (N.S.) 423. 14. Wilson v. Campbell, 110 Mich. 580, 68 N. W. 278, 35 L.R.A. 544. 15. Nash v. Union Mut. Ins. Co., 43 Me. 313, 68 Am. Dec. 65. that a person has the copy of an account against another person is no evidence that he is the owner, nor is it any evidence of authority to collect it.16 15. Possession of Negotiable Security as Evidence of Authority.— The importance of protecting the holders of commercial paper is so great that to warrant finding that a person who assumes to have authority to receive payment of the principal sum on any such paper has such authority, in the absence of a showing of express authority, possession of the paper itself by such person is essential,17 and a payment to one not in possession casts the burden on the debtor of showing that such person was authorized to receive payment, or that the money paid actually reached the holder of the security.18 But the payment of a lost negotiable instrument after notice of loss will not operate as a discharge against the loser, unless the party presenting the instrument for payment is required before payment to establish a clear title thereto. 19 The converse of the proposition stated is true and if a negotiable instrument is paid at maturity in full by the acceptor or other party liable to a person having a legal title in himself by indorsement, and having the custody and possession of the bill ready to surrender, and the party paying has no notice of any defect of title or authority to receive, the payment will be good.20 The reason of the rule that one is authorized to receive payment, when he retains possession of the security, is founded on human experience that the payer knows that the agent has been trusted by the payee about the same business, and he is thus given a credit with the payer,1 or, as otherwise stated, faith is given to the holder, mainly on the ground of his possession of the instrument, ready to be surrendered and the actual delivery of it on payment. But the fact that payment to one not in possession of a note will be strong evidence of lack of authority does not mean that payment to one who has 16. Dutcher v. Beckwith, 45 Ill. 460. 92 Am. Dec. 232; Strayhorn v. Webb, 47 N. C. 199, 64 Am. Dec. 580. 17. Perot v. Cooper, 17 Colo. 80, 28 Pac. 391, 31 A. S. R. 258; Wilson v. Campbell, 110 Mich. 580, 68 N. W. 278, 35 L.R.A. 544; Kohl v. Beach, 107 Wis. 409, 83 N. W. 657, 81 A. S. R. 849, 50 L.R.A. 600; Marling v. Nommensen, 127 Wis. 363, 106 N. W. 844, 115 A. S. R. 1017, 7 Ann. Cas. 364, 5 L.R.A.(N.S.) 412; Bantz v. Adams, 131 Wis. 152, 111 N. W. 69, 120 A. S. R. 1030. Notes: 7 A. S. R. 141; 23 L.R.A. (N.S.) 422. 18. Security Co. v. Graybeal, 85 Ia. 543, 52 N. W. 497, 39 A. S. R. 311; Campbell v. Gowans, 35 Utah 268, 100 Pac. 397, 19 Ann. Cas. 660 and note, 23 L.R.A. (N.S.) 414 and note. 19. Hinckley v. Union Pac. R. Co., 129 Mass. 52, 37 Am. Rep. 297. 20. Wheeler V. Guild, 20 Pick. (Mass.) 545, 32 Am. Dec. 231; Hinckley v. Union Pac. R. Co., 129 Mass. 52, 37 Am. Rep. 297. 1. Doubleday v. Kress, 50 N. Y. 410, 10 Am. Rep. 502. 2. Wheeler V. Guild, 20 Pick. (Mass.) 545, 32 Am. Dec. 231; Murphy v. Barnard, 162 Mass. 72, 38 N. E. See also BILLS AND NOTES, vol. 3, pp. 29, 44 A. S. R. 340. 1288-1289. possession merely is conclusive evidence of authority. Thus mere possession of a note by an assumed agent, unindorsed, without any other sustaining facts, is not sufficient to authorize payment to him.3 By possession is meant actual physical possession, or a possession that may be made actual on demand of the payer, and it is not any protection to the maker of a note who pays an agent not having actual authority to collect that the note is under his nominal control in a distant place. Not only is possession by the person receiving payment necessary to establish authority, but the instrument must be surrendered to the payer, and if the agent gives a receipt merely or other evidence of the payment, and it turns out that the person thus receiving had not a good right and lawful authority to receive and collect the money, but that another person had such right, the payment will not discharge the party paying, but will be a payment in his own wrong.5 16. Possession of Mortgage.-If a mortgagee permits an attorney who negotiates a loan to retain in his possession the bond and mortgage after the principal is due, and the mortgagor, with knowledge of that fact, and relying on the apparent authority thus afforded, shall make a payment to him, the owner will not be permitted to deny that the attorney possessed the authority which the presence of the securities indicated that he had. This rule comprises two elements: (1) possession of the securities by the attorney with the consent of the mortgagee; and (2) knowledge of such possession on the part of the mortgagor. The mere possession of the securities by the attorney is not sufficient. The mortgagor must have knowledge of the fact. It would not avail him to prove that, subsequent to a payment, he discovered that the securities were in the actual custody of the attorney when it was made. For he could not have been misled or deceived by a fact the existence of which was unknown to him. It is the information which he acquires of the possession which apprises him that the attorney has apparent authority to act for the principal. It is the appearance of authority to collect, furnished by the custody of the securities, which justifies him in making payment. And it is because the mortgagor acts in reliance on such appearance that estops the owner from denying the existence of authority in the 3. Doubleday v. Kress, 50 N. Y. 410, 10. Am. Rep. 502; Hoffmaster v. Black, 78 Ohio St. 1, 84 N. E. 423, 125 A. S. R. 679, 14 Ann. Cas. 877, 21 L.R.A. (N.S.) 52. 4. Murphy v. Barnard, 162 Mass. 72. 38 N. E. 29, 44 A. S. R. 340. 5. Wheeler v. Guild, 20 Pick. (Mass.) 545, 32 Am. Dec. 231; Murphy v. Barnard, 162 Mass. 72, 38 N. E. 29, 44 A. S. R. 340; Doubleday v. Kress, 50 N. 6. Smith v. Kidd, 68 N. Y. 150, 23 Am. Rep. 157; Crane v. Gruenewald, 120 N. Y. 274, 24 N. E. 456, 17 A. S. R. 643; McLeod v. Dispain, 49 Ore. 536, 90 Pac. 492, 92 Pac. 1088, 124 A. S. R. 1066, 19 L.R.A.(N.S.) 276; Kohl v. Beach, 107 Wis. 409, 83 N. W. 657, 81 A. S. R. 849, 50 L.R.A. 600. attorney which such possession indicates." But a payment to an attorney having possession of a bond and mortgage is not invalidated by the fact that the mortgagor who made the payment did not then see the bond and mortgage, if, in response to his inquiry, he was informed that they were still in the possession of the attorney, and such information was true. Still if an attorney is given apparent authority to receive payment of a bond and mortgage by the fact that he negotiated the loan, and they are by the mortgagee left in his possession, there is no presumption that this authority or possession continues; and every time the mortgagor makes a payment to such attorney, he must ascertain that the bond and mortgage remain in his possession." 17. Payment to One Having Apparent Authority but Not Possession. If money is due on a written security, it is the duty of the debtor, if he pays to an agent, to see that the person to whom he pays it is in possession of the security.10 But that the person to whom money due another is paid is not in possession of the instruments by which the indebtedness is evidenced is not conclusive of the question of the authority or lack of it in the party receiving the money to collect it.11 It is only evidence, although it may be controlling in a given. case, to be weighed and considered in connection with all the facts and circumstances shown.12 The authorities maintaining this view proceed on the theory, not that some one particular fact, such as the failure of the assumed agent to have possession of the securities, is determinative or conclusive of the question of agency and authority, but on the broader doctrine that where a principal has, by his voluntary act, placed an agent in such a situation that a person of ordinary prudence, conversant with business usages and the nature of the particular business, is justified in presuming that such agent has authority to perform, on behalf of his principal, a particular act, such par 7. Murphy v. Barnard, 162 Mass. 72, 38 N. E. 29, 44 A. S. R. 340; Crane v. Gruenewald, 120 N. Y. 274, 24 N. E. 456, 17 A. S. R. €43. 8. Crane v. Gruenewald, 120 N. Y. 274, 24 N. E. 456, 17 A. S. R. 643. 9. Smith v. Kidd, 68 N. Y. 130, 23 Am. Rep. 157; Crane v. Gruenewald, 120 N. Y. 274, 24 N. E. 456, 17 A. S. R. 643. Nat. Bank v. Austin, 65 Neb. 632, 91 N. W. 540, 101 A. S. R. 639, 59 L.R.A. 294; Smith v. Kidd, 68 N. Y. 130, 23 Am. Rep. 157; Crane v. Gruenewald, 120 N. Y. 274, 24 N. E. 456, 17 A. S. R. 643; Campbell v. Gowans, 35 Utah 268, 100 Pac. 397, 19 Ann. Cas. 660 and note, 23 L.R.A. (N.S.) 414. Note: 23 L.R.A. (N.S.) 414, 416, 422. 12. Quinn v. Dresbach, 75 Cal. 159, 10. Smith v. Kidd, 68 N. Y. 130, 23 16 Pac. 762, 7 A. S. R. 138; Harrison Am. Rep. 157; Kohl v. Beach, 107 Nat. Bank v. Austin, 65 Neb. 632, 91 Wis. 409, 83 N. W. 657, 81 A. S. R. N. W. 540, 101 A. S. R. 639, 59 L.R.A. 849, 50 L.R.A. 600. 294; Campbell v. Gowans, 35 Utah 268, Notes: 17 A. S. R. 648; 23 L.R.A. 100 Pac. 397, 19 Ann. Cas. 660 and (N.S.) 414. 11. Quinn v. Dresbach, 75 Cal. 159, 16 Pac. 762, 7 A. S. R. 138; Harrison note, 23 L.R.A. (N.S.) 414; Kohl v. Beach, 107 Wis. 409, 83 N. W. 657, 81 A. S. R. 849, 50 L.R.A. 600. |