
    Rumsey v. Lentz, Harrison, et al.
    
      Promissory note — Shares of stock as security — Contemporaneous agreement for conditional sale of security to holder — Authority of payee as agent — Contract law — Age?icy.
    One who executes a negotiable promissory note and contemporaneously therewith an instrument by which he transfers to the payee of the note and his assigns shai’es of the stock in an incorporated company as security for the payment of the note, and designating a price in excess of the amount to become due on the note at its maturity, upon the payment of which the holder may become the absolute owner of the stock, and delivers such note and instrument to the payee with knowledge that he does not furnish the consideration for the note, and with the intent that he shall obtain the same from another, thereby vests such payee with authority to receive such original consideration, but not with authority to receive from the holder at the maturity of the note a tender of the difference between the price of the stock and the amount due upon the note.
    (Decided November 29, 1898.)
    
      Error to the Circuit Court of Franklin county.
    The case was tried on appeal in the circuit court, the plaintiff in error being plaintiff there. In his petition plaintiff alleges that on the twenty-seventh of June, 1893, he executed and delivered to the defendant, Lentz, his promissory note for $5,000, payable September 1, 1893, with eight per cent, interest thereon; and to secure the payment thereof at maturity, deposited with him, duly endorsed, fully paid up stock of said fuel company, of the par value of $15,000. That said stock, at the beginning of the suit, was of the actual value of $9,000 ; that at the time of the execution of the note and delivery of the stock to Lentz, plaintiff executed to him the following memorandum.
    “27th June, 1893.
    This memorandum witnesseth: That I have this day delivered my promissory note for five thousand dollars ($5,000) due on first of September, 1893, with interest at the rate of eight per cent. (8 °J0) per annum, payable annually to John J, Lentz, and that I have deposited with said Lentz as collateral security for the payment of said note fifteen thousand dollars ($15,000.00) face value of the stock of The Central Ohio Natural .Gas and Fuel Company, being certificates No. 347 for one hundred shares, 585 for thirty shares, and 586 for twenty shares, one hundred-fifty shares in all, the market value of which is now estimated at seven thpusand dollars ($7,000) with full power and authority to said Lentz, his heirs and assigns to sell and assign and deliver the whole of the above mentioned security or any part thereof at public or private sale at the option of said John J. Lentz, his heirs and assigns, on the non-performance of any of the promises contained in the promissory note aforesaid or the non-payment of any of the liabilities assumed in said note at any time or times thereafter without demand, advertisement or notice. And after deducting all legal and other costs and expenses for collection, sale and delivery, to apply the residue of the proceeds of such sale or sales so to be made to pay any or all of said liabilities as said John J. Lentz, his heirs and assigns shall deem proper, returning the overplus to the undersigned. In case of deficiency of proceeds fully to discharge said note I promise to pay John J. Lentz or order the amount thereof forthwith after such sale with interest at the rate aforesaid. And further in consideration of the aforesaid loan to me made by said John J. Lentz and the additional consideration of one dollar to me paid by said Lentz, the receipt whereof is hereby acknowledged, I do hereby promise and agree and covenant to and with said John J. Lentz, his heirs and assigns, that he has and shall have until the first of .September, 1893, the right, privilege and option to purchase said fifteen thousand dollars ($15,000) face value of the stock of said The Central Ohio Natural Gas and Fuel Company for six -thousand seven hundered and fifty dollars ($6,750), and that at the time of his election to purchase said stock, he, his heirs and assigns may use in part payment therefor said note of five thousand dollars ($5,000) hereinbefore mentioned.
    Witness my signature this twenty-seventh of June, 1893.
    Signed: J. B. Rumsey.”
    Thereby giving him, or his transferee of said note, the option to purchase said stock at $6,750, on or before the first day of September, 1893, but not thereafter. The note so executed by the plaintiff was to be used as a part payment on the purchase of said stock, if said option to purchase should be exercised. Plaintiff further alleges that said option never was exercised, but on the contrary it was waived. That at the time of the maturity of said note plaintiff tendered full payment thereof, in lawful money of the United States, the sum of $5,081.11, and, tenders the same in court, demanding the surrender of said certificates, but that the defendants refused and continue to refuse to surrender them, Harrison claiming' to be the owner thereof. He further alleges that the principal defendant, Harrison, acting in collusion with said Lentz in refusing to permit the plaintiff to pay said promissory note and in refusing to surrender to him said stock certificates, threatens to, and will, unless restrained by order of the court, transfer and dispose of said stock, and that the company, unless restrained, will permit the transfer thereof upon its books, whereby the plaintiff will sustain irreparable damage.
    Plaintiff, therefore, prays that the defendants be enjoined from transferring, or in any manner disposing of the stock and that the defendant be compelled to surrender the said certificates to him.
    •Harrison, the principal defendant, answers, admitting the execution of the note, as alleged by the plaintiff, and deposit of stock as collateral security, but denying each and every other allegation of the petition. He further alleges that on the twenty-seventh of June, 1893, the defendant, Lentz, assigned the note and the option contract, so executed by the plaintiff, to him and delivered to him the shares of stock, and that on the thirty-first of August, 1893, before the expiration of the option, he elected to exercise his said right to purchase the stock and become the owner of it, and did so elect to buy the stock, according to the terms of said contract; and thereupon, on the thirty-first of August, he notified Lentz as agent and attorney of the plaintiff, of said election, and paid to Lentz the balance due as purchase money for said stock as provided in said option and contract over and above the amount due upon the note, to-wit: The sum of $1,677.78, and thereby became the owner of the stock.
    Lentz, in his answer, alleges that at the time of the execution of .The note and the making of the contract, he was acting as the agent and attorney for the plaintiff, and that the plaintiff requested him to procure a purchaser for said gas stock, and the plaintiff knew that the defendant was procuring the money advanced to said plaintiff from a third party, that said option and contract were made with the understanding, agreement and intention, and for the express purpose of having them assigned to the party who should furnish the money so advanced. That on the twenty-seventh day of June, 1893, Lentz endorsed the option and contract to Harrison who furnished the money advanced to Rumsey; that on August 31, 1893, Harrison availed himself of the option to purchase said stock according to the terms of said contract, and delivered to Lentz, as the agent and attorney of Rumsey, said $5,000 note of Rumsey and paid to him the difference between the amount due upon the note and the agreed price at which the stock was to be sold. That he thereupon notified Rumsey of the election by Harrison and the payment of said difference to him, Lentz, and that he was ready to deliver the note and said money to Rumsey, less his commission for services in the premises.
    In his reply Rumsey denied that Lentz was acting as his agent and attorney, and denied that Harrison on the thirty-first day of August delivered to Lentz the promissory note or paid to him the difference between the amount of the note and purchase price of the stock; denies that Lentz had so notified him; denies that Lentz ever offered, tendered or has been ready to pay to him the difference between the note and the value of the stock.
    On the hearing of the evidence, the circuit court made a separate finding of facts as follows: That prior to the twenty-seventh of June, 1893, plaintiff employed Lentz as his attorney to negotiate and procure a sale of his stock in the fuel company, or to procure a loan for him of $5,000, using the stock as collateral, and that on that day, pursuant to said employment, Lentz procured the loan for Rumsey from Harrison. That at the time the loan was procured, and in order to obtain the same, the plaintiff executed to the ■ defendant, Lentz and his assigns, the option and contract already referred to. with the intent and for the purpose of having the same assigned, by Lentz as the attorney for Rumsey, to the third party who might furnish the money to be loaned to Rumsey. 'That Harrison paid the money to Rumsey and said option was assigned to Harrison pursuant to the agreement and understanding, and that in procuring said loan for Rumsey and in conducting the transactions described in the pleadings, Lentz acted solely as the agent and attorney of the plaintiff, Rumsey, and that as attorney for Rum'sey, on the twenty-seventh of June, 1893, and with the knowledge and consent and in the presence of Rumsey, he made an assignment of said contract and option. , That pursuant to said option and contract on the thirty-first of August, 1893, and within the time provided by the contract, Harrison elected to buy, and did take, the shares of stock described in the contract, and that he paid to the defendant, Lentz, as the agent and attorney of the plaintiff, the balance due the plaintiff und.er the said option and contract, and turned over to Lentz, as such agent, the promissory note therein described, and fully performed all things required of him under and by virtue of said contract. The court further finds that after the execution of the note there was no communication whatever between the plaintiff and Harrison, nor until the eighth day of September, 1893, was there any communication between Lentz and Rumsey, except the correspondence set out in the record. That on the eighth day of September, 1893, Lentz and Rumsey met, but could not agree as to the rights of Harrison and Rumsey in the premises, and that Lentz then offered to turn over to said Rumsey the promissory note of June 27th, and the balance of the proceeds due him on said sale of stock, but that Rumsey declined and refused to accept anything from Lentz, except his note and the stock, and that Rumsey then tendered to Lentz, (Harrison being as yet unknown to Rumsey ;in the transaction) in gold the full amount due upon said note. That on the said eighth day of September Lentz went to Harrison’s office and received from him a check of that date for the sum of $2,675.44, drawn on the Merchants’ & Manufacturers’ Bank, which Lentz deposited in his bank, and the same was paid on the ninth of September, 1893, by the bank on which it was drawn.
    As conclusions of law upon the foregoing facts the circuit court found that Lentz acted throughout the transactions as the agent and attorney for the plaintiff and not for himself or Harrison; that he performed all things required of him, in good faith; that Harrison, by virtue of the facts found, became the owner of the stock on the thirty-first ‘ day of August, 1893, and that the plaintiff had no cause of action, and adjudged that his petition Should be dismissed.
    ' This is a petition in error to reverse the judgment so rendered.
    
      T. E. Poioell and Dan Danehy, for plaintiff in error.
    
      George K. EashwxA J. J. Stoddart, for defendants in error.
   Shaitck, J.

It is admitted that by the terms of the instrument by which Rumsey transferred his stock to Lentz and his assigns the option to pur'chase the stock for $6,750 was required to be exercised by Harrison as transferee by the first day of September, 1893, and that the exercise of the 'right required the payment or tender to Rumsey of the difference between that sum and the amount then due upon the note. It is also admitted that Harrison did not comply with this requirement otherwise than by notifying- Lentz of his election to take the stock at the price named, and agreeing with him that money belonging to Harrison and held by the firm of which Lentz was a member should be devoted to the payment of the difference. This occurred on the thirty-first day of August, 1893. It is, therefore, indispensable to Harrison’s, claim to be the owner of the stock that Lentz was the agent of Rumsey having authority to receive pay-~ ment of the difference. The opinion of the circuit court shows that this view was taken there and it agrees with the briefs of counsel for the defendant in error.

It is said that the fact of such agency is conclusively established by the finding of the circuit court that “in procuring said loan for Rumsey and in conducting the transactions described in the pleadings herein, Lentz acted solely as the agent and attorney of Rumsey. ” Although this conclusion is stated by the circuit court as one of its findings of fact, and substantially repeated in its conclusions of law, it becomes evident upon a consideration of the entire entry that it was an inference drawn by the court from the primary facts in the case. For it is further found that after the execution of the note there was no communication whatever between Rumsey and Harrison and that from that time until the eighth day of September, 1893,, there was no communication between Rumsey and Lentz except the correspondence set out in the, record. Moreover there was no conflict in the evidence concerning any fact affecting the authority of Lentz as the agent of Rumsey. Whether such agency can be inferred from the undisputed facts, including the written communications, is a question which the conclusions of the circuit court do not foreclose. Concerning the written communications, which passed between Lentz and Rumsey after-the execution of the note and the transfer of stock by the latter it is sufficient to say that counsel designate no part of them which is supposed to; renew or continue the authority given to, Lentz at the time of the execution of the note, and that we find in them nothing having that effect. They relate to the application by Lentz of the proceeds of the note received from Harrison in June, to inquiries concerning the intention of the transferee to take the stock under the option and to Rumsey’s refusal, upon inquiry, to extend the time fixed by the contract for the exercise of the option.

The authority in question seems to have been inferred from the transaction in June when Rumsey executed to Lentz or order his promissory note for $5,000 and executed the transfer of stock to secure its payment, conferring upon the transferee the right to purchase it within the time and upon the terms fixed therein, with knowledge that Lentz was not himself furnishing the money which constituted the consideration for the note and that he was procuring it from some one unknown to Rumsey. It is entirely clear that the transactions clothed Lentz with authority to act as the agent of Rumsey. It is quite as clear that his authority was limited to the receipt of the proceeds of the note and their application according to the directions of Rumsey to the discharge of certain obligations which were pressing him. The duty of Lentz in that regard, it is admitted, has been fully performed by him. The present controversy does not concern either his authority or his good faith with respect to that transaction. When the note and stock were transferred to Harrison he and Rumsey became the adversary parties to the contract whose terms fixed their rights and liabilities. Although Rumsey did not know who held his note and stock, Harrison knew whose note and stock he held There was no circumstance to excuse him from the duty required by theeontraet of tendering the difference between the price of the stock and the note either to Rumsey or to some one authorized by him to receive payment of that amount, and within the time limited.

Judgment reversed and judgment for plaintiff in error.  