Marden v. Dorthy

The plaintiff in this action invoked the jurisdiction of a court of equity to cancel certain instruments purporting to be conveyances of real estate, which she alleges are fictitious and void'. It appears from the allegations of the complaint that at the time of the transactions stated therein, and for many years prior thereto, the plaintiff was the owner and in possession of the dwelling house and lot where she resided and still resides. The relief demanded is that three written instruments of record purporting to affect her title to the property be declared void and canceled. It is charged that the three instruments were fictitious and fraudulent. They were described as purporting to be (1) A deed bearing date and purporting to have been executed and acknowledged on the 31st day of October, 1892, and recorded December 12th, 1892,-from the plaintiff to her daughter, the defendant EllaM. Dorthy, the wife of the defendant John F. Dorthy.

(3) An instrument purporting to be another or second mortgage on the same premises, made by the same parties, bearing date and recorded November 19th, 1894, to the defendant Hiram L. Barker, to secure the payment of $1,300. It is alleged that on the second day of April, 1895, the savings bank commenced an action to foreclose the mortgage first mentioned, in which action a notice of pendency was filed. It does not appear that the plaintiff was made a party to that action.

The present action was commenced about a month after that by the bank, and the plaintiff avers that she never executed or delivered the paper purporting to be a deed to her daughter ; that she never acknowledged it, and never saw or heard of it until a few days before she instituted this action. It is further stated that.she never knew or heard o£ the two mortgages above described until the same time, and that the three instruments were absolutely and wholly fictitious and fraudulent.

These vital allegations concerning the execution of the deed, and the execution of -the two mortgages, were denied by the answers of the several defendants. The issues in the case, important as they certainly appear to be, were all issues of fact and presented nothing but questions of fact for trial. The decision and findings of the trial court Were in favor of the plaintiff, and the three instruments were set aside. It is distinctly found that the plaintiff never executed or acknowledged the deed; that she never knew of its existence until the time above stated; that it was never delivered to her daughter, and that the latter never knew of its existence until the time it was discovered upon record by her mother, the plaintiff, just before the commencement of this action. Moreover, it was found that the certificate of acknowledg

The most important finding for the plaintiff is the fourth, the first paragraph! of which is in the following words: “ Fourth. That the pdaintiff never executed or acknowledged the said instrument, and never knew of the existence thereof until sometime in the month of April, 1895, when a rumor came to her that such an instrument had been made, which was confirmed by an examination of the record thereof, in the said Monroe county clerk’s office, made by her on or about the 23d day of May, 1895. That although the signature affixed to said instrument is genuine, the plaintiff signed her name to the pap>er upon which said instrument was written without any knowledge or information that the piaper was a deed of her said premises, or that it was an instrument which in any manner affected her interest in said premises. The said plaintiff never at any time had any intention of selling, conveying or incumbering her' said premises, and her signature to said paper writing purporting to be a deed of her said premises was procured by the defendant John F. Dorthy by some trick or artifice perpetrated by him in some way or manner which does not ap>pear and is unknown to the plaintiff.” The finding then proceeds to state : “ That said plaintiff never acknowledged the execution of said instrument in

It would seem to be a difficult problem which the learned counsel for the defendants have assumed to elucidate, since it is nothing less than an effort to show that their clients, and especially the bank, have become vested with an interest in the plaintiff’s real property under what they call a deed, which, it is conclusively settled, the plaintiff never executed, acknowledged or delivered. It must be admitted that to sustain such a position requires both courage and ingenuity, and, accordingly, they have with commendable industry constructed an argument based upon three propositions of fact: (1) That, although the plaintiff never intended to sign a deed, and did not know that she had, her genuine signature appearing on the paper having been procured by some trick or artifice, yet it was the result of negligence on her part. (2) That the defendants holding mortgages are bona fide purchasers without notice or knowledge of the plaintiff’s rights. (3) That the pfiaintiff is estopped by the spurious deed and the false record of the same in the clerk’s office from raising any question against the validity of the two mortgages.

The counsel in framing the argument have evidently overlooked or ignored a very important consideration, and that is

It is urged that since the court found that the signature of the plaintiff to the instrument was genuine, that she, therefore, signed a deed of her property, and having done that, and the defendants having advanced money on the faith of the false record, are entitled to be protected by a court of equity. The fallacy of the whole argument is found in the assumption that the genuine signature of the plaintiff was made to a deed, whereas the finding is that she never executed, acknowledged, delivered or was aware of the existence of such an instrument; that she never intended to execute a deed, or any other instrument affecting her title to the property. These findings plainly mean that she never signed a deed, since if she did she must have executed it, and the fact that her signature is genuine is entirely consistent with the

But the argument wholly ignores the other part of the finding, that the instrument was never acknowledged or delivered, and that the grantee named therein was not herself aware of its existence. The act of signing a deed is only one step in the process of changing the title to real property. The instrument is perfected only by delivery, and in this case that most important fact is negatived by the findings. Ho one can now claim that the grantee in the spurious paper ever received any title whatever under it, and, of course, she could not convey any better title through the mortgage than she had herself, unless some estoppel was established, and none was found. So that, even if the court had found that the plaintiff signed the deed of her house, instead of finding, as it ■did, that she did not, the other fact, that it was never delivered, would be a complete answer to the argument in support of the mortgages, since they must rest entirely upon the deed.

The learned counsel has cited cases in this court, and in ■other jurisdictions, which ho claims sustain his contention. (Chapman v. Rose, 56 N. Y. 137 ; Simpson v. Del Hoyo, 94 N. Y. 189 ; Valentine v. Lunt, 115 N. Y. 496 ; Simson v. Bank of Commerce, 43 Hun, 156 ; affirmed, 120 N. Y. 623 ; Page v. Krekey, 137 N. Y. 307 ; Lawrence v. G.

But in this case it would be preposterous to assert upon the facts found that the plaintiff’s daughter, whose name appears

¡Nor is there any basis for the proposition that the plaintiff is estopped from assailing the mortgages, any more than there is for questioning the deed. There was no act or declaration on the part of the plaintiff to create an estoppel. It does not appear that the party who took the mortgages ever saw the genuine signature of the plaintiff, or acted upon it. What they acted upon was a false and ■ fictitious record, which the plaintiff had no hand or part in making. That was made possible only by the genuine signature and false certificate of the acknowledging officer, who, though innocent of any wrong, had been imposed upon, as the officers of the bank were, subsequently. It is manifest that the genuine signature of the plaintiff played no part in the creation of the false record upon the faith of which the defendants loaned their money, since even the notary did not act upon it. ¡No one who had anything to do with the transaction seems to have known or seen the signature, and for all the purposes of the case, in view of the findings, it might as well have been simulated.

The rule that wher'e one of two innocent parties must suffer from a wrong, he must bear the loss whose action enabled the wrong to be done, has no application to the case. In a recent case in this court it was shown that this rule, at best, is one applicable only in peculiar emergencies, and the limitations upon it were very clearly pointed out by Judge ¡Finch, (Rapps v. Gottlieb), 142 N. Y. 164 .) If we were to ask what it was that the plaintiff did to enable the wrong in this case to be committed, it would be difficult for the learned counsel to answer it. The only answer to he found in his argument is that she signed the deed; but it has been shown, I think, that

It is further found that during all the time covered by these several transactions the plaintiff was in possession of the real property in question. Her name appeared in large letters on the front door and on the horse block in front of it, and while the possession of the plaintiff may have been somewhat obscured by the presence in the house with her of the son-in-law and his wife, this circumstance cannot change the legal effect of possession as notice of her rights to all the world. (Phelan v. Brady, 119 N. Y. 587 ; Holland v. Brown, 140 N. Y. 344 ; Kirby v. Tallmadge, 160 U. S. 379 .)

I assume that no one will claim that the plaintiff changed or lost the possession of her house when she took in her daughter and son-in-law to live with her. In the case of Mygatt v. Coe ( 147 N. Y. 456 ) we held that the possession of a married woman of her house was not affected by the cir- , cuinstance that her husband lived with her and attended to the property, including the payment of taxes. Assuming that case to be still law, it is difficult to perceive how the plaintiff’s possession was affected by the presence in the house with her of her daughter and her daughter’s husband. The jDossession in fact and in law was still in the plaintiff, and that ■ possession was notice to all the world of her rights. The parties who made loans on the faith of a false record, had they but inquired of the plaintiff all the facts would have been revealed. They all resided in the same city, and all that was necessary for the mortgagees to do in order to defeat the

The case has thus far been discussed strictly upon the findings of the trial court, unanimously affirmed on appeal, but the defendants’ contention would not be aided much if it is viewed in the broadest aspect, or enlarged by a departure from the findings. I have said that the defendants’ claim rests upon a spurious or fabricated paper, but this expression" does not describe the true character of the instrument. It was simply a forgery in every legal or moral aspect in which it can be considered. That crime is defined by the common law to be the fraudulent making of a writing to the prejudice of another’s rights (4 Black. Com. 247), or the making malo animo of any.written instrument for the purpose of fraud and deceit. (2 East P. C. 852.) The false making of an instrument which purports on its face to be good and valid for the purpose for which it was created, with the design to defraud. (1 Leach, 366 ; Black’s Law Dic. 508.) The false making or material alteration, with intent to defraud, of any writing which, if genuine, might apparently be of legal efficacy or the foundation of a legal liability. (2 Bish. Crim.

It must be admitted that the case from which this quotation is taken was not nearly so rank in its general features as the case at bar. The grantor in that case intended to execute a deed, and it was executed and delivered, and, moreover, it was not infected, as the instrument in this case is, with the vice of a false certificate of acknowledgment. So that when the instrument under which the defendants now claim was placed among the public records, it was nothing but a forgery. It was not only a forgery at common law, but a forgery by statute. The term “ forgery” includes now, as it always did, the false making of a written instrument (Penal Code, § 520), and under section 521 it is forgery to utter or put off as true, with intent to defraud, a forged deed, knowing it to be forged. Placing the so-called deed in this case upon record, with intent to defraud, was an “ uttering or putting off as true,” within the meaning of the statute. (Paige v. People, 3 Abb. Ct. App. Dec. 439 .) Moreover, a false certificate of an acknowledging officer to an instrument purporting to be a deed, that the same was acknowledged by a party thereto, is forgery under section 510 of the Penal Code, and while the absence of knowledge or a criminal intent on the part of the officer would absolve him from liability, yet that circumstance cannot, of course, change the character of the instrument of which the certificate is an essential part, or make it any the less a forgery.

That the certificate attached to the paper in question was false, is not, and cannot be, denied. It is found that the party

The fact that a false and fabricated writing of this character is deposited in a public office for record, and is actually recorded, can add nothing to its legal efficacy. The Recording Act applies to genuine instruments and not to forged ones. (Albany Co. Savings Bank v. McCarty, 149 N. Y. 71 .) It may be that the actual record of such a paper may deceive ■ the unwary, but that circumstance does not change the legal rights of any one. A bank may loan money upon the security of a pledge or mortgage of personal property in the possession of the thief who has stolen it, and the loan may be made in good faith on the honest belief that the thief who has the possession has the title; but this would not prevent the real owner from pursuing his property and taking it wherever he could find it. (Knox v. Eden Musee Co., 148 N. Y. 441 .) It would not help the bank in that case to allege, as the defendants in this case allege, that it was a bona fide purchaser. It is legally impossible for any one to become a bona fide purchaser of real estate, or a purchaser at all, from one who never had any title, and that is this case. It is equally impossible to construct an estopjjel against the real owner upon a forged instrument, placed upon record without the authority of any one, and, of course, the paper in question was no more entitled to record upon the false certificate than if it contained no certificate whatever. Void things are as no things.

This fabricated writing and false record, it is said, has invested the defendants, holding fictitious mortgages, with the character of bona fide purchasers of real estate, and so has the effect in law of divesting the plaintiff of the title.to her house and transferring it to the defendants; or if this proposition should seem to be too drastic, then we are asked to hold that the plaintiff is estopped from raising any question with

The proposition that a person, or a bank, engaged in loaning money, may, if ignorant of the real facts, rely upon a falsehood placed upon record by criminal means, to the prejudice of the rights of the true owner of real estate, must open the door for the destruction of all titles, and make it much easier for the criminal to purloin real than personal

So it is said that the presence of the plaintiff’s genuine signature on the paper rendered the fraud possible, but this assertion is manifestly without foundation. Even if it could be held that a woman who happens to own a house is bound by her signature to such a paper, by whatever trick or artifice procured, still, since she never delivered the paper, or in any way authorized it to be put in circulation, and as she never acknowledged it so as to entitle it .to be recorded, it is very difficult to see what connection her signature has with the acts of the defendants in taking the mortgages from Dortliy. The record found in the clerk’s office, upon which the defendants say they relied, was simply the result of a crime, and, if they were deceived by it, there is no principle of law or ecpiity that will permit them to make their loss good from the plaintiff’s property. They are the victims of a criminal contrivance in which they put faith, and they must seek redress from the criminal who conceived and executed the fraud.

The judgment of the courts below is right and should be affirmed, with costs.

It appears to me there are three fundamental propositions upon which the law is well settled that stand in the way of a reversal.

This case ivas tried before the court, who makes specific findings of facts and conclusions of law. The judgment" of the Special Term was unanimously affirmed in the Appellate Division. Hnder the Constitution this settles the facts to be as found. The trial court found that the plaintiff’s signature to the deed was procured by John F. Dorthy “by some trick

In the second place, I do not understand the facts as found to constitute an estoppel. The plaintiff’s signature to the deed was procured through some trick or artifice, she not knowing that she was signing a deed. In order to constitute an estoppel the act must be voluntary or intended: If a highwayman should point a loaded revolver at the head of a person and compel the signing of an instrument through fear, such person would not be estopped from afterwards alleging the fact that his signature was procured through duress, and I see no reason why the same principle should not apply where the signature is procured through fraud, trick and artifice. In Trustees v. Smith ( 118 N. Y. 634 -640) it is said, that it is a voluntary act calculated to mislead and which actually did mislead that constitutes an estoppel. In Barnard v. Campbell ( 58 N. Y. 73 ) Allen, J., in speaking upon the subject of an estoppel says: “ He must have parted with possession of his property with intent to pass the title to the wrongdoer, thus giving him the apparent right of disposal.” In Wilcox v. Howell ( 44 N. Y. 398 -402), in speaking of the doctrine of estoppel, Earl, 0., says: “ It would be carrying this doctrine to a preposterous extent to hold that a party is estopped from claiming that the very instrument claimed to estop him was obtained from him by fraud.” In Henry v. Carson (96 Indiana, 412) it was held that a deed never delivered, but obtained without the knowledge or consent of the grantor, does not divest the grantor’s title, and a subsequent purchase from tlie grantee without notice for value will not be protected. (See, also, Ford v. James, 4 Keyes, 300; Rapps

Finally, I do not understand that an innocent purchaser or mortgagee under the Recording Act gets a better title than he otherwise would have acquired had it not been for the provisions of the act, except in one instance, and that is, a failure to comply with the statute in having a deed or mortgage recorded so as to operate as a protection to innocent purchasers and mortgagees. The Recording Act, as I understand the authorities, never was intended to be a ¡protection to innocent purchasers against theft, forgery, fraud or duress. (Code C. P. section 936; Ritter v. Worth, 58 N. Y. 627 ; Lawrence v. Conklin, 17 Hun, 228 ; Taylor v. Davis, 72 Missouri, 291; Gould v. Wise, 97 California, 532; 2 Jones on Real Property, section 1256, and authorities above cited.)

This judgment should be reversed. Under the facts, as we must take them, it is a hard case of fraud practiced upon the plaintiff, whereby she was dispossessed of the title to her property, and, as between her and her grantee, doubtless the grant should be set aside. But a different principle operates, where it is sought to attack the rights of the mortgagees. Having in good faith loaned their moneys upon the faith of the record ’title of the mortgagors, they are entitled, in my opinion, to be protected. The plaintiff should be deemed to be bound by her act and to be estopped from denying it, as to them. Her signature to the deed is genuine and the notarial certificate of her acknowledgment is, also, genuine. The deed was, therefore, entitled to be recorded as a conveyance of real estate and, however open to attack as between the parties, surely the Recording Act may be relied upon to some extent by thebonafide mortgagee. Of course, we are bound by the facts, as found by

I cannot think that it would be a safe precedent to set, to hold that a grantor of property may come into court and nullify the claim of a bona fide mortgagee, who has loaned his moneys upon the faith of a record title in the mortgagor, which is rendered vulnerable by reason of the deceit of the grantee in obtaining his deed. The sentimental view is as little just as it is legal.

From the fraud practiced upon her by her trusted son-in-law, the plaintiff and not the mortgagees should suffer, and, therefore, so far as the latter are concerned, this judgment should be reversed.

This action was brought to set aside a deed purporting to have been made by the plaintiff to the defendant Ella M. Dorthy, of certain real estate in the city of Boehester, also to set aside two mortgages upon the

Ella M. Dorthy is the daughter of the plaintiff, and the wife of the defendant John F. Dorthy.

The Special Term set aside the deed .and mortgages as prayed in the complaint and the Appellate Division have affirmed the judgment.

The findings of the Special Term are in part as follows: The plaintiff became a widow in 1891 and received title from her husband of the real estate in question ; her family at that time consisted of herself and daughter Ida; the latter married on the 27th day of October, 189'2, and removed to Massachusetts. Prior to this, and in contemplation of the marriage, the plaintiff invited her married daughter Ella and her husband, John F. Dorthy, and their two children, to remove to-the home of the plaintiff, if Dorthy would pay the taxes, keep things in repair and furnish the plaintiff with board.

In pursuance of this 'arrangement, and in the month of March, 1892, Dorthy and his family removed to the house of the plaintiff and continued to reside there until June, 1895.

On the 12th of December, 1892, the defendant John F. Dorthy, an attorney and counselor at law, caused to be recorded in the Monroe county clerk’s office a deed purporting to have been executed and acknowledged by the plaintiff on the 31st of .October, 1892, in consideration of a dollar and other valuable consideration, conveying to the defendant Ella M. Dorthy the premises in question.

On the 6th of May, 1893, the defendant John F. Dorthy delivered to the defendant The Monroe County Savings Bank a mortgage, purporting to have been executed by defendant Ella M. Dorthy and himself, to secure the payment of five thousand dollars, covering the premises.

On or about the 19th of November, 1894, the defendant John F. Dorthy and his wife, Ella M. Dorthy, appear to have executed and delivered a mortgage to the defendant Hiram L. Barker, covering the premises, as a collateral and continu

On the 2nd day of April, 1895, the savings bank began an action to foreclose its mortgage, and shortly thereafter this suit was instituted.

As the decision of the Appellate Division was- unanimous, I approach the consideration of this case assuming the facts as found by the Special Term.

The additional and controlling facts are, in substance, as follows: The trial court found that, although the signature affixed to the deed is genuine, the plaintiff signed her name to the paper upon which it was written without any knowledge or information that the paper was a deed of her premises.

That the plaintiff never at any time had any intention of selling the property, and her signature was “ procured by the defendant John F. Dorthy by some trick or artifice perpetrated by him in some way or manner which does not appear and is unknown to plaintiff.”

That the plaintiff never acknowledged the deed before the commissioner whose certificate of acknowledgment is affixed thereto; that the signature of the commissioner to the certificate of acknowledgment is genuine, “ but the same was in some manner obtained by the said defendant John F. Dortliy, in what way does not appear, but without any acknowledgment by the plaintiff to said officer, and without her authority given in any manner whatever.”

That there was no delivery of the deed; that there was no consideration passing from mother to daughter; that the daughter had no knowledge of the deed until April, 1895; that the daughter,.Ella M. Dorthy, executed and acknowledged the two mortgages referred to “ without any knowledge or information on her part as to what the said instruments were, or that the said mortgages conveyed any interest in her mother’s said premises ” ; that the deed and the two mortgages were duly recorded in the Monroe county clerk’s office at a date prior to the loans made by the two mortgagees, respectively.

The mortgagees, when loaning, found a perfect record title in the defendant Ella M. Dorthy; the signature of plaintiff to the deed is genuine; the signature of the acknowledging officer to the certificate of acknowledgment is genuine; the record of the deed in the county clerk’s office is genuine. The mortgagees, relying on this record title, loaned their money, receiving from defendants Ella M. Dorthy and husband, a mortgage, in each loan, the execution and acknowledgment of which is not questioned, except that Mrs. Dorthy did not know what the instruments were that she executed.

The mortgagees insist that they are entitled to protection in a court of equity, because they are bona fide mortgagees, without notice, relying on a perfect record title; that the loss must fall on the plaintiff, who is responsible for this state of affairs, and not upon them.

Giving to the plaintiff all the advantage she can claim by reason of the facts as found, upon wliat does she rest her cause of action demanding the cancellation of the deed, the mortgages, the certificates of record, upon which loans have been made in the due course of business, and that these lenders go out of court losers to the extent of their respective advances %

The plaintiff says, it is true my signature to the deed is genuine, but it was obtained by my son-in-law through some trick or artifice, perpetrated by him in some way or manner unknown to me and which does not appear ; the acknowledging officer says, when confronted with his signature, it is genuine, but it was obtained by defendant John F. Dorthy in some manner unknown to me and without plaintiff’s

These are the facts upon which plaintiff rests her cause of action against the mortgagees.

It is argued in her behalf that the issues in this case, while important, were issues of fact, and that the findings in her favor are an end of the case as they have been unanimously affirmed.

The argument is that because plaintiff never knowingly executed and delivered the deed it is nothing but a spurious paper, a forgery ; that in order to' hold her to the deed she must have consciously executed it; that if the mortgagees acted on a fictitious record, it was one in which the plaintiff. had no hand or part in making; that during the time of these transactions the plaintiff was in possession of the property ; that the mortgagees omitted a plain duty in not calling upon the parties to this transaction and testing the verity of the record.

This argument closes with the suggestion that the rule to the effect where one of two innocent parties must suffer from a wrong, he must bear the loss who enabled the wrong to be done, has no application to this case.

I am of opinion that the facts referred to as found are no answer to the claim of the mortgagees, and that the plaintiff is estopped from denying the execution, acknowledgment, delivery and due record of the deed, for the reason that the present situation is due to her negligent act. The plaintiff being the victim of a fraud by reason of signing a paper, the nature of which she did not take the precaution or trouble to ascertain, cannot claim protection as against bona fide mortgagees without notice. The plaintiff’s counsel argues that it does not appear how the fraud was perpetrated, and that in the absence of proof it cannot be assumed that plaintiff was careless.

The facts as found show gross negligence on their face. If every one who has carelessly and negligently signed a paper

It is argued that plaintiff at the time of these transactions was in possession of the property, and that consequently the mortgagees had notice of her title. The finding as to possession is that the plaintiff “ continued in the possession and occupancy of said premises and of the whole thereof except as hereinafter stated.”

The findings that follow show the defendants Dortliy and wife in joint occupancy of the premises with plaintiff during the period in question. This joint occupation was not inconsistent with Ella M. Dorthy’s title, but rather tended to confirm it.

It was entirely consistent with the title of the apparent owner by the record. (Pope v. Allen, 90 N. Y. 298 , 303; Brown v. Volkening, 64 N. Y. 76 .)

The Appellate Division, referring to this argument in favor of the mortgagee appellants, said : “ The proposition stated by the appellants appears to be sound, but it is immaterial in view of bur assumption that the defendants are tona fide mortgagees without .notice.”

The suggestion that the mortgagees omitted a plain duty in not calling upon the parties to this transaction and ascertaining whether the record title was to be relied upon is without force, as the Recording Act is designed to do away with the necessity of an inquiry that would not only make the loaning of money on real estate a work of great difficulty, often involving impossibilities, but would create risks that life insurance companies, savings banks and individuals would hesitate to assume.

The public records are necessarily relied upon ; they are the foundation to-day of loans representing vast sums of money. (Webb on Record of Title, §§ 4, 89, 90, 154, and cases cited.)

It was such a public record that, this plaintiff by her negligent act created.

The plaintiff may set this deed aside as between herself and

In Page v. Krekey (137 N. Y. at page 312) Judge O’Brien states this rule with great clearness, although not writing in a real estate case: “ If he actually signed the paper, though procured to do it by fraud, and is chargeable with negligence, he is liable to an innocent party who acted to his prejudice upon the faith of the instrument. Such cases are not governed by the rules applicable to the bona fide holder of negotiable paper procured by fraud, but by the equitable rule that where one of two innocent parties must suffer, he who has put it in the power of a third person to commit the fraud must sustain the loss. * * * If this instrument had been a negotiable promissory note the defendant’s liability to the plaintiff would depend upon the question of negligence and there does not appear to be any sound reason for a different rule in this case (Chapman v. Rose, 56 N. Y. 137 * * * ).”

Chapman v. Rose ( 56 N. Y. 137 ). This case involves the legality of a negotiable instrument. The court held that any one having the opportunity and the power to ascertain, with certainty, the exact obligation he is assuming, yet chooses to rely upon the statements of the person with whom he is dealing, and executes a negotiable instrument without reading or examination, is bound as a bona fide holder for value. The theory is that he is guilty of laches or negligence in signing the instrument without reading it. He had power to know with certainty its contents, but saw fit to trust the statements of another. He thereby placed in circulation what appeared to be, on its face, a valid promise to pay. The purchaser of this promise in the open market, for value, was entitled to rely upon these facts which were disclosed upon the face of the instrument.

This case rests upon a double principle: that the maker of the instrument is liable for the acts of the person he saw fit to trust, and that the transaction may be regarded as an estoppel. This court held that to decide otherwise would be to deal a serious blow to commercial paper. There is no

In Simpson v. Del Hoyo ( 94 N. Y. 189 ) it was held that as against a purchaser in good faith and for value of a mortgage upon land, executed by one in possession of, and holding the legal title to, the land, the grantor of the mortgagor is estopped from claiming that the conveyance was induced by fraud on the part of the latter.

The rule that a purchaser of anon-negotiable chose in action takes it subject to all the equities existing between the original parties, and to all the latent equities of third persons, does not apply in such case. While the rule is well established in this court, it has a number of exceptions and this is one of them. A mortgage is never purchased on the faith of the assignor, biit always in reliance upon the mortgagor’s title. (McNeil v. Tenth National Bank, 46 N. Y. 335 ; Moore v. Metropolitan National Bank, 55 N. Y. 41 ; Green v. Warnick, 64 N. Y. 220 ; Hill v. Hoole, 116 N. Y., at page 303.)

In Valentine v. Lunt ( 115 N. Y. 496 ) it is held that a grantee or mortgagee, for a valuable consideration and without notice, from one who obtained title by fraud and undue influence, acquires a good title or lien and will be protected against the claims of the defrauded vendor.

The court suggests that it would be contrary to natural justice and reason and opposed to the rules and principles of established equity by which courts are governed in cases of this nature to hold otherwise. The court here applied the doctrine of estoppel.

The principle announced in the foregoing cases is fully recognized in England.

In Briggs v. Jones (L. R. [10 Equity Cas.] 92) Briggs was the mortgagee of leasehold property and he loaned his lease to the mortgagor, for the purpose of raising money upon it, but at the same time told the mortgagor to inform the person from whom he proposed to borrow the money that he (Briggs) had a prior charge thereon. The mortgagor borrowed money from

The court held, Lord Romilly, master of the rolls, delivering the opinion, that Briggs’ lien on the lease must be postponed to that of the bankers, for the reason that by placing the lease in the mortgagor’s hands Briggs had enabled him to mislead the bankers.

In Hunter v. Walters, and two other causes heard at the same time (L. R. [11 Equity Cas.] 291), the facts were as follows : Walters was a solicitor of two mortgagees, Hunter and Darnell, and put up for sale by auction, without authority, the mortgaged estate. Walters professed to have bought the estate and prepared a conveyance which purported to have been made by the second mortgagee under his power of sale. The mortgagees both executed the conveyance to Walters and also signed indorsed receipts for money paid to them, although no money'was in fact paid to them. Walters took possession of the estate and continued to pay interest to the mortgagees and afterwards made an equitable mortgage of the estate, representing it to be his own and unincumbered. As to the first mortgagee there was evidence that he was deceived by. the solicitor, and as to the second mortgagee there was evidence that he had trusted the solicitor implicitly.

It was held by the vice-chancellor that Hunter and Darnell, though they executed the conveyance in ignorance of its contents, had passed the estate to Walters; that they had, by signing receipts for the purchase money, armed Walters with power dealing with the estate as the absolute owner and had thereby given priority to the lien of the subsequent mortgagee. This decision was affirmed. (L. R. [7 Chancery App.] 75.)

Lord Hatheely, lord chancellor, wrote the main opinion, and two of the lord justices also writing.

Lord Justice Sir W. M. James said, in the course of his opinion : “ To my mind it is almost ludicrous to contend,* and it would be most injurious to hold, that a man executing a deed and signing a receipt, as a matter of form, should be able

The general principle under discussion has also been recognized in the courts of several of the states.

A very well-considered case, involving these principles, but under a different state of facts, is Heyder v. Excelsior Building Loan Association (42 N. J. Equity, 403). It was held there that the lien of a mortgage duly registered will not be lost by a cancellation of record effected through accident, or the mistake or fraud of third persons. If the cancellation be the result of the negligence of the owner, he will not be permitted to establish his lien against subsequent bona fide purchasers or mortgagees acting upon the faith of such cancellation of record. In this case the mortgagor was the attorney of the association and had given it a mortgage to secure a loan. The mortgagor subsequently obtained possession of the mortgage and indorsed upon it the name of the association without authority and a certificate of cancellation which was recorded. He then sold the property to a bona fide purchaser as free from incumbrance.

The trial court held that the purchaser, not the mortgagee, should bear the loss incident to the fraudulent cancellation of the mortgage, but the Court of Chancery on appeal reversed this judgment and held that the mortgagee should suffer the loss, as it was directly chargeable to their negligence or fault that the mortgagor was placed in possession of the unpaid mortgage.

Judge Stoey, in his Equity Jurisprudence (Vol. I, § 434), in commenting upon the position of a bona fide purchaser for a valuable consideration, without notice, under the circumstances that we have been considering, said: “ Such a person is a favorite in the eyes of a court of equity and is always pro

In Gavagan v. Bryant ( 83 Ill. 376 ) the grantor was deceived and told he was signing a five years’ lease, when, in fact, it was a deed. He was held negligent and bona fide purchaser protected. (See, also, Lawrence v. Guaranty Investment Co., 51 Kansas, 222.)

It is urged that in some of the foregoing cases the party sought to be charged consciously and voluntarily executed a conveyance or other instrument by fraudulent inducement, and that the principle of equity therein invoked has no application to the case of one whose signature was obtained by trick or device to a paper, the character of which was unknown by reason of the carelessness or negligence of the person so signing. There is no distinction between the cases in sound reason or on authority. If A., by reason of fraudulent representations, knowingly executes a deed, he is estopped from urging the fraud against the subsequent bona fide mortgagee without notice; he trusted to the person who deceived him, and must take the consequences. If B., with utter disregard of results, signs a paper at the solicitation of one occupying a confidential relation to him, the contents of which he does not ascertain, but which was in fact a deed, can it be said that his position in a court of equity is more favorable than that of A. % He stands clearly within the rule that where one of two innocent parties must suffer from a wrongful act, he must bear the loss who enabled the wrong to be done; his position is less favorable than A.’s, for he has been guilty of negligence, while the former trusted a person he believed honest.

This plaintiff, as matter of law, on the conceded facts, is estopped from denying the acknowledgment and delivery of the deed She is, by the findings, ignorant of the trick or artifice perpetrated upon her. The deception, so far as this record goes, is a mere figment of her imagination — a suspicion. She admits her signature and stops there; as to how it was obtained, this case is absolutely silent.

The plaintiff is found to have signed a paper, of whose

This case was decided below, ignoring the doctrine of negligence and estoppel, and apparently assuming that the mortgagees’ rights depended upon the validity of the deed between the parties.

With all respect, I think to affirm the judgment before us is to disregard well-settled principles which have long been recognized by courts of equity, to cast discredit upon record titles, and to deter capitalists from loaning money on real estate security.

The judgment appealed from should be reversed and a new trial ordered.

O’Brien and Haight, JJ., read for affirmance; Parker, Ch. J., and Martin, J., concur; Gray and Bartlett, JJ., read for reversal; Vann, J., not voting.

Judgment affirmed.