Cady v. Jennings — 24 N.Y. Sup. Ct. 213

Majority

p. 213

MARTIN H. CADY, Appellant, v. GEORGE H. JENNINGS and SARAH M. JENNINGS, Respondents.

Headnote

Bond and mortgage — when void for want of consideration.

A bond, and mortgage executed, with the name of the mortgagee in blank, was . delivered to Bancroft, to raise money for a company with which the mortgagor was connected. Bancroft, having theretofore received money belonging to plaintiff, sent to him a worthless check of the conrpany for the amount, and then, having told him that the check would not be paid, induced him to take the bond and mortgage therefor.

In an action to foreclose the mortgage, held, that the mortgage was wholly without consideration as to the mortgagor, and that he was entitled to avail himself of that defence.

Appeal from a judgment in favor of the defendants, entered upon the report of a referee. The action was brought to foreclose a mortgage. ■

William JR. Lynch and John A. Taylor, for the appellant.

Bancroft, being in possession of the instrument by authority of ■the mortgagor, for the express purpose of getting in his hands the .amount expressed on its face, $7,000 — authority to fill in the blanks, or to do any other act requisite to give validity to the instrument, in furtherance of this general purpose, will be implied. (Van Fita v. Fvenson, 28 Wis., 33 ; 9 Am., 486; Field v. Stagg, ■52 Mo., 534; 14 Am., 435; Hatch v. Taylor, 10 N. H., 538 ; Inhabitants of South Berwick v. Huntress, 53 Me., 39 ;- Gibbs v. Frost, 4 Ala. [N. S.], 720; Bank v. Hammond, 7 Rich., 287 ; Goundin v. Commander, 6 id., 497; JDuncom v. Hodges, 4 McC., 239.) But, whether the instruments are valid or not, Jennings is estopped from setting up their invalidity against a bona fide holder. (TexiraY. Evans, 1 Anstruther’s Repts., 228; approved in Woolley v. Constant, 4 Johns., 54 ; Chcmncey v. Arnold, 24 N. Y., 338»; Bank of Buffalo v. Oartm'ight, 22 Wend., 365 ; Knapp v. Waltby, 13 Wend., 587 ; McNeill v,' Tenth Nat. Bank Brooklyn, 46 N. Y., 325 ; Moore v. Metropolitan Bank, 55 id., 41; Drury v. Foster, 2 Wall., 33 ; Hemmenway v. Muloch Daily Register, Sept. 23, 1878; Judge Lawrence's opinion.) Defend

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ants having placed in the power of their agent an instrument so far executed as to become dangerous as indicia of authority in his hands, to obtain the surrender of the Biddle check for $7,000, the case involves that elementary principle of equity that, when one of two innocent persons must suffer, he should suffer who has contributed to the injury. ( While v. Vermont and Mass. It. JR. Go., 21 How., 578 ; Garrard v. Haddon, 67 Penn., 82 ; Ash v. Putnam, 1 Hill, 307 .) By his negligent execution of this mortgage, he has enabled Bancroft to mislead plaintiff, and he, and not plaintiff, must bear the loss. (Chitty on Bills, 262-425; Byles on Bills, 323; Montague v. Perkins, 22 Eng. L, & Eq., 516; Griggs v. Hove, 31 Barb., 100 .)

Rufus B. Govoing, for the respondents.

The bond and mortgage were made and delivered in blank to one Bancroft, for the purpose of raising money for the use of a manufacturing company with which the mortgagor was connected. That purpose was not accomplished. Neither the mortgagor nor the company received any sum on account of the mortgage. But. Bancroft, having received $7,000 belonging to the plaintiff, which it was his duty to remit immediately, sent him a worthless check of said company, ostensibly for the purpose of making such remittance ; and, on the same day the check was received, Bancroft informed the plaintiff that the check would not be paid, and induced him to take said bond and mortgage in lieu thereof. The name of the plaintiff was inserted therein as obligee and mortgagee, and the instruments were then delivered by Bancroft to the plaintiff.

Assuming that Bancroft had authority to fill up the blanks in the instruments, they were utterly without consideration. The mortgagor received nothing for them from Bancroft, nor from the plaintiff. The plaintiff had no right to assume that Bancroft was authorized to deliver them to him in behalf of the mortgagor under any circumstances, and especially without obtaining the amount thereof in cash, but was bound to inquire of the mortgagor respecting Bancroft’s authority, and the means whereby he

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acquired possession of the instruments. A payment of the full amount thereof to Bancroft, without the sanction of the mortgagor, would not create a valid consideration for them. A fortiori the delivery of a worthless check to Bancroft did not have that effect.

The bond and mortgage being without consideration, and never having had a legal inception, and the mortgagor having done nothing to disable him from setting up that defence, the judgment should be affirmed, with costs. (Schafer v. Reilley, 50 N. Y., 61 .)

Barnard, P. J., and Dykman, J., concurred.

Judgment affirmed, with costs.