J. Tredwell Richards and Alfred S. Brown,. Respondents, v. Norman S. Washburn and Others, Appellants

J. Tredwell Richards and Alfred S. Brown,. Respondents, v. Norman S. Washburn and Others, Appellants. Loan—services of attoi'neys in the matter—their retainer a question of fact — insistance upon a receiver’s clause in the mortgage. The complaint in an action brought by attorneys’ alleged that the defendants had agreed with a client of the plaintiffs to borrow money of him upon bond and mortgage, and that the defendants had employed the plaintiffs to examine the title, including the procuring of a policy insuring the title, which examination they made, and offered to procure the policy, which the defendants refused to accept, and also refused to pay the plaintiffs for their services. It appeared that the lender, a client of the plaintiffs, by their advice, insisted upon having: a “receiver’s clause” inserted in the mortgage, to-which the borrowers objected — the insurance company being willing to issue a policy, although there was-no such clause in the mortgage. Held, that the direction of a verdict for the plaintiffs- was erroneous; That upon the facts the defendants were entitled to have the jury determine whether the defendants ever employed the plaintiffs as their attorneys, and also whether the defendants ever prevented the plaintiffs from procuring the policy of insurance. Quaere, whether, assuming that the agreement between the plaintiffs and defendants was not an independent employment, but dependent upon the lender, the plaintiffs’ clients, making the loan, the insistance upon the insertion of the receiver’s clause in the mortgage was not a breach of his agreement on the part of the lender, which discharged the defendants from any liability to the plaintiffs. Appeal by the defendants, Norman S. Washburn and others,, from a judgment of the Supreme Court in favor of the plaintiffs,, entered in the office of the clerk of the county of New York on . the 5th day of June,. 1896, upon the verdict of a jury rendered by direction of the court, and also from an order bearing date the 2d day of June, 1896, and entered in said clerk’s office, denying- the defendants’ motion- for a new trial made upon the minutes. • • : The-plaintiffs, a firm of'lawyers, allege.in their complaint that-the defendants “having previously agreed with a client of these plaintiffs to borrow from him the sum of. ^ROOO, to be secured' by their bond accompanied by. their mortgage, * * - * employed these plaintiffs to examine the title, * * ' * including the procuring of searches and á policy of insurance from the- Lawyers’ Title -Insur.ance Company for the purpose of such loam and agreed to pay these plaintiffs for such services * . * *. That, plaintiffs in pur- suance of such employment examined the title to said premises, procured said searches, and were ready and willing and offered to procure the policy of insurance from , the Lawyers’ Title Insurance Company for the purposes of such loan, but the defendants refused to accept such policy of insurance and prevented these plaintiffs from procuring the same, and refused, and still refuse, to pay these plaintiffs the’amount which they had'-agreed to pay for the services .aforesaid.” The defendants deny that they employed the plaintiffs, “ but admit that they agreed to pay the price thereof — the plaintiffs being employed by one Harbeck, who was to make the said loan. They admit that the plaintiffs examined said' title, procured said searches and assumed to be ready and wiHing'to -procuféi:thó;pó'licy .of .in'snrance for the purposes of such loan; but they deny that they refused to accept said policy of insurance or that they prevented the plaintiffs from procuring the same, and they allege that plaintiffs never did procure said policy.” The value of the services,was .admitted. ,: Upon the1 trial it appeared that the services were performed, searches had been procured, and that the Title Insurance Company was ready to. issue the policy upon the lawyers’ certificate that the mortgage was recorded, Mr, Brown,- one of the plaintiffs, testified .as follows: “ The mortgage which' was to be executed had been prepared under the direction of Mr. Harbeck. I gave it to Mr. Henry J. Washburn for execution. ^ * * He brought it back and said that he wouldn’t sign it with the1 receiver’s clausefin it. *• * * I said I wouldn’t" strike the clause out without- Mr. Harbeck’s 'instructions.- I asked Mr. Harbeck whether he was'willing- to have the receiver’s clause stricken out of the mortgage, and he said that he was not.”. On cross-examination he said : “ When Mr. Harbeck instructed me not to strike it out I then refused to strike it out under his- instructions. * * * I have been Mr. Harbeck’s counsel for a number of years, and I do the searching of titles for him when he loans money on real estate whenever parties who are to take the loan request me to do it and agree to pay my fee for it. Mr. Harbeck sends the borrowers to me and tells them to make any arrangements that they can make as regards the payment - and the charge for my services. I act as attorney and counsel for Mr. Harbeck in searching the title, and I protect his interest. Q. So that he "was the party you represented in this transaction? A. Tes, I did.” He further testified that, after seeing Mr. Harbeck and Mr. Washburn about the mattér, he wrote a letter to" the latter in which he said: “I will examine the title to property Ho. 859 Broadway, including the procuring of full official searches and a policy of insurance from the Lawyers’ Title Insurance Company, for the purpose of a loan, for $110.” After the plaintiffs rested, the defendants moved to dismiss the complaint on the grounds, among others, that the plaintiffs had not shown that the refusal to execute a mortgage with the receivership" clause in it prevented the issuing of a policy of insurance; and that the defendants having offered to execute a mortgage in the usual form, on which the Lawyers’ Title Insurance Company would "issue a policy of insurance, did not prevent the plaintiffs from completing their contract. It was admitted that it was not essential to the issuing of a policy of insurance by the Lawyers’ Title Insurance Company for a loan that a receiver’s clause be in the mortgáge. The motion to dismiss was denied. The defendant Washburn then testified to substantially the same facts in regard to seeing Mr. Harbeck and asking him for the loan. “ He said that the title would have to be satisfactory to Mr. Brown. Mr. Brown had to search it, and if it was satisfactory to him he (Mr. Harbeck) would loan the money.” Such of the other facts as are material appear in the opinion. William H. /Sage, for the appellants. J. Tredwell Richards, for the respondents. [MAJORITY — O’Brien, J.:] O’Brien, J.: The question presented is whether or not, as matter of law, defend- . ants were obligated to pay plaintiffs’ fees.. It appears that the searching of the title and the procuring of a policy from the'Lawyers’ Title Company were mere incidents to the main purpose of the defendants,, which was the procuring of a loan from Mr. Harbeck. Under these circumstances, whether we regard the ..plaintiffs as acting for Mr. Harbeck or for the defendants, we are brought to the same conclusion. Mr. Harbeck agreed to loan on an undivided interest, and to take a mortgage as security. In the absence of any agreement to the contrary, this meant the usual mortgage, which would not inclnde a receiver’s clause. As the defendants had but an undivided interest in the property, and such a clause would cause complications with the other part owners in the collection of the rents and the management of the property, and as the value.of the security was not questioned, the defendants were justified in objecting to the receiver’s clause. If this or any other burdensome clause-was to be insisted upon by the plaintiffs acting for Mr. Harbeck, it was their duty to disclose that fact to the defendants; and, if omitting such duty, they were not able to procure the policy of insurance or the loan for the defendants, the fault was theirs or Mr. Harbeck’s, If, on the other hand, they were acting as attorneys' for the defendants, then it was clearly their duty to obey the latter’s instructions;; and when requested, they should have omitted the receiver’s clause, it appearing that without it the- mortgage would have been acceptable to the title company and the policy would have been issued, and thus the plaintiffs would have been, able to perform their agreement. As the defendants, therefore,- Were not responsible for the. failure, we do not think, as matter of law, that they were liable. It is fairly inferable from the facts that the searching of the title and the procuring of a policy were not to be for their benefit, but were to be used, as already said, in connection with the procuring of a loan, and the only benefit they were to derive from the services was. denied them because of the unreasonable insistance upon the receivership clause by the plaintiffs and Mr. Harbeck. The defendants asked to go to the jury upon two questions of' fact: (1) Whether or not they ever employed the plaintiffs as their attorneys, and (2) whether or-not the defendants ever prevented the plaintiffs from procuring the policy of insurance. Upon these the jury might have found that the plaintiffs were Harbeck’s attorneys; that they were examining the title for his information, and that when he unjustly refused to accept a proper mortgage, the plaintiffs were remitted to him for compensation for services which had by his act become useless to the defendants. Without going so far, therefore, as to hold that upon the whole case the complaint should have been dismissed, we are of opinion that the defendants were entitled at least to have the questions proposed submitted to the jury, and that in any event the direction of a verdict upon the theory that the defendants, as matter of law, wrere liable, was erroneous. The judgment should be reversed and a new trial granted, with costs to the appellants to abide the event. Van Brunt, P. J., Williams, Ingraham and Patterson, JJ., concurred. [CONCURRENCE — Ingraham, J. (concurring) :] Ingraham, J. (concurring) : I concur with Mr. Justice O’Brien on the ground that the plaintiffs acted throughout as counsel for Mr. Harbeck and not for the defendants, and that the agreement of the defendants to pay Mr. Harbeck’s lawyer’s fees for examining the title, was part of the contract .for the loan, and not an independent contract between the defendants and the plaintiffs, under which the defendants could be liable for the amount agreed upon as the plaintiffs’ fees, irrespective of the completion of the contract between the defendants and Harbeck. Brown, one of the plaintiffs, testified: “ I have been Mr. Harbeck’s counsel for a number of years, and I do the searching of titles for him when he loans money on real estate, whenever parties who are to take the loan request me to do it, and agree to pay my fee for it. Mr. Harbeck sends the borrowers to me and tells them to make any arrangements that they can make as regards the payment and the charge for my services. I act as attorney and counsel for Mr. Har•beck in searching the title and I protect his interest. Q. So that he was the party yon represented in this transaction? A. Ves, I did. Q. And the only arrangement that was made between you and Mr. Washburn was an arrangement as to the amount that was to be allowed for searching the title ? A. And the agreement to pay my fees.” It thus appears that the plaintiffs were not employed by the defendants; did not act for them, but did act for Hr. Harbeck as his counsel in searching the title. The agreement between the plaintiffs and the defendants was that the defendants were to pay the plaintiffs’ fees for searching the title, not as an independent -employment, but while they were acting as counsel for Harbeck and representing him. The payment of the plaintiffs’ fees by the defendants was, therefore, a part of the contract to make the loan, and the defendants were liable only in case Harbeck performed his agreement. I think, also, that Harbeck’s refusal to perform his agreement without the insertion of a receiver’s clause in the mortgage, when it was not a part of the original agreement for making a loan that such receiver’s clause should be inserted in the mortgage, was a breach of his agreement, and that the failure to make the loan was, therefore, by reason of a refusal on the part of Harbeck. to perform, and not a refusal of the defendants. The loan not having been made in consequence of a failure on the part of Harbeck to perform Ms agreement, the defendants were released from any •obligation to perform the contract made by them; and, as part of that contract was to pay Hafbeck’s counsel for examining the title, that being no independent liability that the defendants incurred therein, were not liable. Judgment reversed, new trial granted, costs to appellants to abide •event.