Tschetinian v. City Trust Co.

I do not think the complaint states a cause of action against the defendant. It alleges, in substance, that on May 1, 1900, a New Jersey corporation, known as the United States Carbonate Company, executed to the defendant, a trust company chartered in this state, a mortgage upon certain lands in the state of New Jersey, which mortgage is annexed to and forms a' part of the complaint. By the mortgage it appears that it was executed to the defendant as trustee, and that it provides for the issue of a series of first mortgage bonds to be certified by the defendant in a form set forth in the instrument, and to be returned after such authentication to the president or vice president of the mortgagor, whose receipt for such bonds “shall be full acquittance and authority to the trustee for such certification and delivery/' The mortgage further provides as follows;

“The said United States Carbonate Company further agrees for itself its successors or assigns, and for the holders of any of the bonds to be issued and secured hereby, and this trust is accepted on the express condition that the trustee shall not nor shall any future trustee, incur any liability or responsibility whatever in consequence of permitting or suffering the party of the first part hereto to retain or to be in possession of the estate and premises hereby mortgaged or agreed or intended so to be or any part thereof, and to use and enjoy the same; nor shall it be responsible in any way for any breach on the' part of the party of the first part of any of the covenants herein contained, or of any act of said company, its agents or servants, nor shall the said trustee, present or future, be or become liable or responsible for any cause, matter or thing except its own gross negligence or willful default in the trusts herein expressed and contained. , The trustee shall be under no obligation or duty to perform any act hereunder or to defend any suit in respect hereof unless indemnified to its satisfaction nor shall the trustee be bound to recognize any person as a bondholder until his bonds are submitted to the trustee for inspection, if required, and his title satisfactorily established, if disputed, nor shall it be any part of the duty of the trustee to see to the proper recording of this instrument.”

The plaintiff demands judgment against the defendant for the amount of the purchase price of the bonds upon the theory that the certificate signed by it is a representation and guaranty that the bonds are in fact secured by a mortgage which is a first lien upon the mortgaged property, arid that such mortgage includes all the property and franchises of the mortgaging company. The certificate cer'hnly does not purport upon its face to create such a guaranty, or to make such a representation. It is confined in apt language to the assertion that the bonds which the plaintiff purchased constituted a part of the issue mentioned and described in the mortgage, and there is no claim or pretense but that such statement is strictly true, both in substance and in spirit. Nor was there anything in the defendant’s connection with the transaction at all calculated to deceive. Prospective purchasers of the bonds were fairly referred to the mortgage by the documents themselves for a disclosure of the nature and extent of the security, and the mortgage contains an explicit statement of the measure and the limit of the liability assumed by the defendant. The plaintiff at the time of his purchase had within his possession or control the means of knowing that the defendant did not assume to guaranty the acts of the mortgagor, the freedom of the property from prior lien, the sufficiency of the title,

I cannot refer to- all the cases cited by the respondent. They are chiefly cases wherein the indorser of a promissory note or bill of exchange has been held to guaranty the genuineness of the instrument, or that it is what it purports to be, and confers the rights which it pretends tó do. Such cases have obviously no application. Others are cases where false and fraudulent representations were undoubtedly made by vendors at'the time of a sale, and for the purpose of effecting the sale. Such were the cases of Haight v. Hayt, 19 N. Y. 464 , and Schwenck v. Naylor, 102 N. Y. 683 , 7. N. E. 788. In Bruff v. Mali, 36 N. Y. 200 , the officers of the company were charged with selling certificates representing stock fraudulently overissued by them, and it was held that they were liable to the assignees in good faith for the false certificates so issued by them. In McClure v. Central Trust Co., 165 N. Y. 108 , 58 N. E. 777 , 53 L. R. A. 153 , the defendant was sued for damages resulting from the sale of its own certificate of stock, the sale being made by it as the agent of an undisclosed principal. The court held that the nature of the transaction and the relative situation and circumstances of the parties bound the defendant to the promises of- the prospectus by which the sale was heralded to deliver marketable stock free from lien; that the law imposed upon the defendant the duty of inquiry to see whether there was anything conflicting with the advertised engagement under which it acted; that the rule of caveat emptor could not be invoked to protect it from the liability incurred by its own delinquency; and that the fact that the purchaser knew that it was acting only as agent could not avail as a defense, since it did not disclose the

The interlocutory judgment should be reversed, with costs, and the demurrer sustained, with costs. All concur.