Hyperlawhypertext legal databasebeta Eitel v. Bracken 38 N.Y. Super. Ct. 7

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Eitel v. Bracken

38 N.Y. Super. Ct. 7 6 Jones & S. 7 Court N.Y. Super. Ct. Decision date 1874-07-02 English

Contents

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JOHN M. EITEL, Plaintiff and Respondent, v. JOHN BRACKEN, and another, Defendants and Appellants.

Headnote

I. SUPERIOR COURT.
1. Jurisdiction over action and person. a. Mortgage has jurisdiction over an action to foreclose a mortgage on real estate in the city of New York, although some of the parties to the action do not reside in the city, and are not served with summons therein.
5. Appearance by defendant, generally, without settingup a defense; want of jurisdiction,
1. Prevents such defendant from questioning the jurisdiction.
II. Certifícate that a mortgage or other instrument is good
AND VALID, ESTOPPEL BY.
a. Basis of estoppel, what is.
1. That the certificate was made to induce a purchaser to act on its statements as true.
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Before Curtis and Sedgwick, J. J.
Decided July 2, 1874.
2. That the purchaser acts on the certificate, believing it» statements to be true.
b. When the certificate does not operate as an estoppel.
1. When the purchaser does not believe the facts to exist which the certificate stated to exist, and does act on a belief in the-existence of the facts induced by the certificate, the certifying party is not estopped from proving the real state of the-facts.
1. Usury. In such a case, although he has certified that a mortgage made by him is good and valid, he may defend an action, brought by the purchaser, to foreclose a mortgage, on the ground that the mortgage was-usurious.
1. This though the purchaser bought believing that as-matter oj law the certificate would protect him against such a defense and would not have bought, without the certificate.
Appeal from judgment entered on findings of fact and law by the court.
The action is to foreclose a mortgage for three-thousand five hundred dollars, made by the defendant, to Thomas Bracken, dated June 13, 1867, for one year, assigned by Bracken to Charles Emmons, March 25, 1868, and assigned by Emmons to James Appleby,, June 13, 1871.
On June 13, 1869, Emmons extended the time for the payment of the bond and mortgage to June 13,. 1870. On June 13, 1870, Emmons again extended the-time of payment for one year. On June 13, 1871, Emmons again extended the time of payment for one year. And thereafter, on the same day, assigned the bond and mortgage to James Appleby. On June 13,. 1872 Appleby extended the time for one year.
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On July 15, 1872, Appleby assigned the bond and mortgage to the plaintiff.
Attached to the mortgage was a certificate by the mortgagor that the mortgage was valid.
On June 15, 1870, defendant executed an instrument under seal, purporting to be an agreement between him and James Appleby, by which he covenanted that said mortgage was a valid and subsisting lien upon the premises therein described; that the whole principal sum, with interest from June 13, 1870, was unpaid, and that there were no claims, offsets or equities existing against the same.
On June 13,1871, defendant executed another instrument under seal, purporting to be an agreement between him and James Appleby, of a similar tenor to the one of June 15, 1870. On June 28, 1872, defendant executed another instrument (not under seal) purporting to be an agreement between him and plaintiff, whereby he covenanted with plaintiff and his assigns that the said mortgage was a valid and subsisting lien on the premises therein described, and that the whole of the principal, with interest thereon from June 13, 1872, was due.
The defense is usury; the defendant claiming that at the expiration of each year Emmons exacted from him a bonus of four hundred and sixty-one dollars as a condition for extending the payment of the mortgage another year, and that Emmons is the real owner of the mortgage, and not plaintiff.
On the. trial the defendant sought to introduce evidence, and offered to prove, that at the time the three thousand one hundred and fifty dollars alleged to have been given by Mr. Eitel for the payment of the mortgage, was given, it was paid to Charles Emmons, by a deposit to his credit, and that nothing appears on the account of the bank to show that he ever paid it to
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Appleby or anybody else ; and defendant’s counsel claiming that it was in evidence clearly by the admission of Mr. Eitel, plaintiff, that in his negotiations for the purpose of the assignment of the mortgage, Mr. Emmons acted as his agent, also offered to prove by the witness, Thomas Bracken, the acknowledgment on the part of Emmons, during that period, that he knew that the certificates which had been offered in evidence in this case were not real and genuine; and that all transactions in reference' to the mortgage were usurious; and that Charles Emmons was the real holder of the bond and mortgage, notwithstanding the nominal transfers of the same, up to the transfer of the same to the plaintiff; and defendant also offered to prove that the mortgage, which is the subject of this suit, in its inception, was executed without consideration, and for the purpose of being in condition to be sold ; that Thomas Bracken never gave or received anything for it, and that the first Mr. Emmons who obtained it, knew that fact at the time; and that Charles Emmons made a Joan upon it, at a rate that was usurious.
Objections were made by the plaintiff to these respective offers, and sustained, and exceptions were taken by the defendant. All these offers were excluded by the court, upon the ground that the mortgagor is, upon written papers in evidence in the case, estopped from contradicting his written statements. To this exclusion the defendant excepted.
When the cause was called for trial, defendant’s counsel interposed a preliminary objection to the jurisdiction of the court with regard to the service of the summons out off the county, and read an affidavit showing the service of the summons in the' city of Brooklyn. Plaintiff’s counsel read a notice of appearance of the defendant generally in the action. The
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court overruled the objection, and defendant excepted. The trial proceeded, and resulted in a decision for the plaintiff.
Afterwards judgment was entered, upon the finding of fact and law by the court, for the foreclosure of the mortgage.
From this judgment defendant appeals.
David R. Garniss, attorney, and, with Algernon S. Sullivan, of counsel for appellant,
urged:—I. The objection to the jurisdiction of the court was well' taken, and the motion to set aside the proceedings should have been granted, (a.) The court had no jurisdiction. It is a city court (3 Rev. Slat. 5 ed. p. 357, .§ 1), without authority to issue process out of the city (Id. 358, §§ 11, 13), and has jurisdiction only in cases enumerated in the statute (Id. 510, §§ 133, 134; 490, § 33). The subsequently attempted extension of its jurisdiction (Laws 1873, eh. 339, p. 363), was unconstitutional, and has been so declared (Landers v. S. I. R. R. Co., 14 Abb. Pr. N. S. 346; Towle v. Covert, 15 Id. 193). (b.) That the objection was not raised by answer is immaterial. The objection that a summons, as the commencement of a suit, was not properly served, is not available in an answer or demurrer, but only on a motion to set the proceedings aside. The meaning of the language of the Oode allowing it to be set up as a defense, that “the court has no jurisdiction of the person,” is that the person is not subject to the jurisdiction of the court, not that the process has been improperly served ( 5 How. Pr. 96 ; 3 Code Rep. 161 ; 8 Barb. 541 ). In this case the motion made at the opening of the trial was the proper one to raise the question, and was in time, especially as at the time issue was joined in the suit the act extending the jurisdiction had not been declared unconstitutional (Landers v. S. I. R. R. Co., supra).
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II. A mortgage made without consideration only to be sold at a discount, is usurious (Vickary v. Dickson, 62 Barb. 272 ; 35 Id. 96; cited 37 How. Pr. 187 ; 53 Barb. 356 ; Stanley v. Whitney, 47 Id. 586). There can be no estoppel in behalf of one having full knowledge of all the facts, and the principal is chargeable with the knowledge of the acts of the agent (Baker v. Union Mutual Life Ins. Co., 43 N. Y. 289 Dunlap’s Paley on Agency, 261; Hutchins v. Hebbard, 34 N. Y. 24 ; Lawrence v. Brown, 1 Seld. 401; Plumb v. Cataraugus Ins. Co., 18 N. Y. 392 ; Story on Agency, § 140).
III. The refusal to allow the defendant to show that the proceeds of the check given by Eitel were still to the credit of Emmons in the bank; that Emmons was the real owner of the bond and mortgage at the time of its assignment to plaintiff, notwithstanding his different nominal assignments of same, and that the bond and mortgage were usurious, and made without consideration, and that Emmons, as agent of plaintiff, knew these facts, on the ground that defendant was estopped from contradicting his written statements, was erroneous. So was the refusal to allow defendant to show that prior to the assignment and certificate to James Appleby, the equitable assignee and holder of the bond and mortgage was Charles Appleby, and that at the time of the transfer there was np title in James Appleby. If proven, it was a complete bar to plaintiff’s ownership. The door for this had been opened by the plaintiff’s offering in proof the certificate to Charles Appleby. The certificates given to Charles Appleby and James Appleby, and the one to Charles Appleby subsequently altered to John IN". Eitel, were given to Emmons to cover the usury. He up to Eitel owned the bond and mortgage. The certificates therefore were nullities, the parties to whom they were made never received them, and never owned the bond
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and mortgage. The doctrine of estoppel could not and did not apply.
A mortgagor is not estopped from setting up fraud in procuring him to give a mortgage by his own certificate or written declaration that the mortgage is valid. Both are voidable in whosever hands they may be. He is not estopped by the belief of the other party that the certificate was a protection (Wilcox v. Howell, 44 N. Y. 398 ). Appellant was not estopped by the certificates of Emmons, Owen, or Appleby (Mech. Bank v. N. Y. & N. H. R. R. Co., 13 N. Y. 599 ), nor was he by the later certificate delivered after the assignment in name of Charles Appleby, subsequently altered to plaintiff. Admissions which come after the act do not relate back and make an estoppel by relation (Pike v. Acker, Lalor's Supplement to Hill & Denio, 90).
S. C. Conable, attorney, and of counsel for respondent,
urged :-I. The plaintiff having proved the above facts,-the defendant was estopped from alleging usury in the bond and mortgage. He was estopped by the covenant contained in Exhibit F., between defendant and Appleby, plaintiff’s assignor—that covenant was to Appleby and his "assigns.”
II. The exceptions to the findings of fact can not be raised here. To enable defendant to raise those exceptions here, he should have moved for a new trial at special term, and appealed from the decision thereat; besides, in any event, said findings are sustained by the evidence.

The difficulty that defendant labors under in sustaining his objection to the jurisdiction of the court is, that the mortgaged premises are in the county of Hew York, and that he •appeared generally, and answered without alleging

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want of jurisdiction as a defense (Spyer v. Fisher, Superior Court Reports, 2nd Serial No., p. 94, vol. 37, p. 94.)

Passing to the principal objections raised by the defendant, it must be conceded that a mortgage has so little of the element of negotiability, that the assignee, though a tona fide holder, takes it subject to ail the equities and defenses existing between the original parties. The assignee of a security of this nature has no greater title than his assignor (Davis v. Austin, 1 Ves. Jr. 247 ; Ingraham v. Disbrough, 47 N. Y. 421 ; Bush v. Lathrop, 22 Id. 535 ).

But the question arises whether the mortgagor, having given certificates of the nature shown, is estopped from contradicting these written statements.

It is well settled, that a mortgagor who induces a person to purchase the mortgage by representations, that it is valid in its inception, or free from fraud, or that a certain amount is due upon it, is estopped from setting up any of these defenses (Watson v. McLaren, 19 Wend. 557 ; Lesley v. Johnson, 41 Barb. 359 ; Ferguson v. Hamilton, 35 Id. 427 ; Clark v. Sinson, 4 Duer, 408 ).

It is a wise and just restriction, that if a mortgagor makes a false statement, orally or in writing to influence the purchase of the security, he can not take advantage of it as against an innocent purchaser. The law adjudges him to be estopped from profiting by his own fraud.

Consequently, looking at the case from this point simply, the learned judge correctly excluded the offers of the defendant.

But it is a principle also as well settled and as important for the protection of society, that in order to create this estoppel, it must appear that the party caused the other to believe the existence of the facts to which the estoppel relates, and also that the other has

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acted upon such belief (Keeler v. Davis, 5 Duer, 507 ; Lawrence v. Brown, 5 N. Y. 394 ; Chautauqua Co. Bank v. White, 6 Id. 236; Jewett v. Miller, 10 Id. 402).

If a mortgagor can show that a purchaser did not believe tile existence of the facts in reference to which the estoppel is sought to be interposed, and did not act upon any such belief, he is at liberty to do so. He can, in this way, defeat the claim that he is estopped, for the estoppel set up fails in the chief elements that unite to create valid estoppel.

In this view of the law, it seems that the defendants’ offers to show, that Charles Emmons was the real' holder of the bond and mortgage in question, and that the certificates of the defendant were not real and genuine, should have been received. Also all other offers, to show facts tending to prove that the plaintiff never believed, or acted upon the statements in the certificates, should have been received.

In the case of Van Sickle v. Palmer ( 2 N. Y. 612 ), where the action was to forclose a mortgage, the defense being usury, it was held, that the written certificate was not conclusive as to the defendant, but that he was entitled to show by the attorneys, whether the plaintiff shared in the five hundred and sixty-six dollars paid to them for their services.

In Wilcox v. Howell ( 44 N. Y. 398 ), it was held insufficient to create an estoppel, that the certificate of i he mortgagor that the mortgage was valid, and that no deiense existed to it, was believed by the holder to be a protection, as a matter of law; but that the facts stated therein must be relied on as true, and in this" reliance the holder must have purchased.

These decisions sustain the principle, that this class of certificates, amount to very little by way of estoppel, except where an innocent party believes in the statements contained in them, and acts upon them. It is

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contrary to good morals, that a certificate containing an unadulterated falsehood, and known to both the maker and the recipient, to be simply such, should be sustained as sufficient to protect the latter in the purchase of a mortgage, because he believed it would so protect him as a matter of law, and would not have bought the mortgage without it.

The evidence offered by the defendant in this aspect of the case, was material, and admissible, and should have been received, and is of such importance as to entitle the defendant to a new trial.

The judgment appealed from by the defendant should be reversed, and a new trial ordered.

Sedgwick, J., concurred.

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