
    COCKE ET AL. v. HATCHER ET AL.
    Jackson,
    April Term, 1887.
    1. DEED OE TRUST. To secure loan and credit; loss, by conversion of fund visited on married woman, -when.
    A married woman owning’ a separate estate in land, with power of absolute conveyance as if she was a feme- sole, but held by a trustee for her, together with her husband and her trustee conveyed her said property in trust to secure a loan of ten thousand dollars, for which a note was executed, for the purpose of enabling him to obtain credit for the firm to which ho belonged. The note and deed of trust was used by the husband to procure the agent of the beneficiary in the. deed of trust to accept a draft for ten thousand dollars in favor of his firm, payable in about three months, which the firm indorsed and deposited to its credit in a bank, and drew on it $500 or $000. The agent requested the president, of the hank not to negotiate the draft, and he promised not to do so; but the cashier negotiated it, and the bank then failed. The beneficiary in the deed of trust was sued upon the draft, and judgment was rendered against.it, which it paid. Held: The wife’s mortgaged property was bound for the amount of the draft and interest, or the loss suffered by the proposed lender, who is entitled to foreclose the mortgage for the same, because the loss must fall ón the party whose acts brought about the loss by putting it in the power of a third party, the bank, to cause the loss.
    2. SAME. Same. Lender loses sum retained in hands of trustee for his benefit, when converted by trustee.
    When the accepted draft was delivered to the president of the bank, the proposed lender took from him, as president, of the bank, a receipt therefor, in which was embodied an agreement that he, as such president, would, out of the proceeds of the draft, pay taxes on tire mortgaged property and the premium notes of the husband and another member of his firm, amounting’ in the aggregate to $2,893.11. To this extent the bank, or its president, was constituted trustee tor the proposed lender, or a trustee for his protection in matters in which he was interested. In adjusting' the equities between the parties, the case must be disposed of as if the proposed lender had retained that much of the funds in his own hands, and he must look to the bank or its president for the performance of that'agreement, for failure of which he cannot fall back on the mortgaged property.
    3. SAME. Same. Legal rate of interest embraced in a judgment in another state allowed here, when.
    The mortgagee will be allowed the judgment paid, with six per cent, interest from the date thereof, although there is embraced in the judgment the ten thousand dollars with interest at seven per cent, per annum from maturity of the. draft to date of the judgment, that being- the legal rate in the state of'New York.
    Appeal from chancery court of Shelby county.
    Harris & Turley, for appellants; Wright & Folkes, for respondents.
    STATEMENT OE FACTS.
    ■ Mrs. Mary Jane Oocke, by a deed of gift from her husband, Thomas H. Oocke, to a trustee in trust for her benefit, was the owner of land as her separate estate, with power of absolute conveyance, as if she were a feme sole. She, her husband, and her trustee, made a deed of trust on said property to secure a loan of ten thousand dollars, from a life assurance association, for three years, for which a note was executed, with an agreement that the association could not furnish the money till some three months thereafter, but that in the meantime the general loan agent of the association agreed to accept the draft of said Thomas PI. Cocke, in favor of the business firm of which he was a member, which was done. This draft was indorsed by said firm to the bank with which both Cocke and it did their respective banking business, and delivered to the president of the bank, who was also the local treasurer of the association, and the amount was placed to the credit of the firm, which subsequently drew on it $500 or $600. The loan agent of the association feared, if the accepted draft was negotiated, that the local association might incur the censure of the principal association, and he requested the president not to' negotiate it, and the president promised the agent not to negotiate it. But soon afterwards the draft was sent to the bank’s cashier, who was then in New York, and he transferred it for advances, and it finally fell into the hands of another party, who sued the association in New York, and recovered judgment, which the association paid. ■ The mortgagors had due notice of this suit. The trustee being about to sell said property under the deed of trust, Mrs. Cocke and the trustee holding the land for her, filed a bill to enjoin the sale. The association filed an answer, denying the equities of the bill, and a cross bill asking a sale of the land. The commission of referees granted full relief under the cross bill.
   Walker, Sp. J.,

delivered the opinion of the court:

The court is of opinion that the report of the commission of referees should be affirmed, with a modification. 'Without undertaking to review the facts, this conclusion is reached mainly upon these grounds:

1. That the notes and mortgage were executed and delivered to the life association for the purpose of establishing a credit with the city bank in favor of Hatcher & Co. S'o far as concerns the mortgagor, the credit to be thus established and used was limited only by the amount of the mortgage note.

2. The manner of establishing this credit — that is, by obtaining and indorsing to the bank the aceptance of the life association, due October 15th, thereafter — was known to, and acquiesced in, by Mrs. Cocke. But if the fact was otherwise, the same conclusion would be reached, upon the ground that the mortgage and notes were by her left under the power and control of her husband, for the express purpose of allowing him or Hatcher & Co., to use the same as a basis of credit, anterior to the fifteenth of October, and the manner of thus using the mortgage and note was left to Cocke, or to Hatcher & Go. Mrs. Cocke must abide the consequences of their acts and conduct; and the case must be disposed of as if the mortgaged property belonged to Cocke himself.

3. The indorsement of the draft, whether a general indorsement or a special indorsement to the city bank, is not deemed material, .and 'the delivery thereof to the city bank put an apparent absolute title in the bank, and enabled Tobey to commit the breach of trust out of which the whole difficulty of the case arises. The loss thus brought about must, except as stated directly, be borne by the mortgaged property, and the life association is entitled to the same extent to foreclose the mortgage.

But the conclusion already stated is reached, not upon the ground that the association is entitled to a strict recovery upon the note, but that, in settling the equities of the case arising out of Tobey’s misappropriation of the draft, the loss should fall upon the party whose acts brought about the loss. The original plans of the parties were never carried out; and the court is called on, rather to settle the equities between them, than to strictly enforce their original contract and intentions. The association is entitled to look to the mortgage solely to save it from loss, under all the facts of the case.

The report of the referees must, therefore, be modified in the tw?o respects, following, viz.: (1) The rate, of interest allowed will be seven per cent, per annum from October IS, 187-2, to the date of .the judgment in the New York court, October 13, 1874-, and six per cent, thereafter. (2) At the time the acceptance was delivered to Tobey, the association took iron} him, as president of the city bank, a receipt therefor, and in the receipt was embodied an agreement that he (Tobey), as such président, would, out of the proceeds of the draft, pay taxes on .the mortgaged property to the amount of $1,902.4-2,. and the premium notes of .Cocke and Hatcher, amounting to $990.69, an aggregate of $2,893.11.

It-is clear that if, as was contemplated, -the' draft had remained in the hands of .the bank to maturity, and at maturity, had been paid to the bank, Cocke would have had no power, to' the extent of the above-named sum, to check it out. In respect of that much of the fund, the bank, or Tobey, was either constituted a direct trustee for the association, or a trustee for the protection of the association in matters in which it tvas interested. The association reserved full control of that much of the fund, and, in adjusting the equities of the parties, the .case must be disposed of as if the association had retained that much of the funds in its own hands. In fact, the. arrangement adopted was but a substitute for that, and v^as made, by the association for its own protection.

The association must look to Tobey, or the city bank, for the performance of that agreement; and, failing in that-, it cannot fall back on the mortgaged property. A decree w’ill be entered, fixing the amount due the association on the- principles here stated, and decreeing a foreclosure of the mortgage by sale under the decree, and by the clerk of tbis court, unless tlie amount due, and costs as decreed against complainant, shall be paid into court within ninety days from the entry of decree.

The costs of the court below will be paid by complainants; those of this court (including costs of transcript) by the life association.

Folkes, J., incompetent.  