Marden v. Dorthy, 160 N.Y. 39 54 N.E. 726 (N.Y. 1899)
Marden v. Dorthy, 160 N.Y. 39 54 N.E. 726 (N.Y. 1899)
Marden v. Dorthy, 160 N.Y. 39 54 N.E. 726 (N.Y. 1899)
Caution
As of: Mar 13, 2009
PRIOR HISTORY: [***1] Appeal from were properly recorded. The court
a judgment of the Appellate Division rejected the bank's contentions,
of the Supreme Court in the fourth finding that the instruments were void
judicial department, entered December because the property owner never had
23, 1896, affirming a judgment in any intention of executing the
favor of plaintiff entered upon a instruments. The court ruled that the
decision of the court on trial at a bank was remiss in putting faith in
Monroe Equity Term. the instruments without making any
further inquiry because the property
Marden v. Dorthy, 12 App. Div. owner was in possession of the
188, affirmed. property at all times which was notice
to the bank of the property owner's
DISPOSITION: Judgment affirmed. rights. The court held that the
registrar's recording of the
CASE SUMMARY: instruments was not a recording of a
conveyance of the property because the
instruments were false records.
PROCEDURAL POSTURE: Appellant bank
sought review of a decision of the OUTCOME: The court affirmed the
Appellate Division of the Supreme judgment of the lower court. The court
Court (New York), which affirmed a held that the instruments were void
judgment of a trial court that set because the property owner never
aside written instruments of title to intended to convey her property and
property in appellee property owner's because the false instruments were not
action that alleged the instruments converted into genuine instruments by
were fraudulent. the act of recording.
OVERVIEW: The bank asserted that a CORE TERMS: deed, mortgage, mortgagee,
deed, mortgage, and a second mortgage signature, procured, artifice, trick,
were enforceable against the property genuine, certificate, grantee, notice,
owner because the property owner's acknowledgment, recorded, daughter,
signature on the instruments was forgery, innocent, purporting,
genuine and because the instruments estoppel, estopped, grantor, real
estate, bona fide purchasers, Enforceability
conveyance, mortgagor, genuine [HN4] The act of signing a deed is
signature, bona fide holders, only one step in the process of
fraudulent, fictitious, purchaser, changing the title to real property.
recording The instrument is perfected only by
delivery.
LexisNexis(R) Headnotes
The facts as found show gross The public records are necessarily
negligence on their face. If every relied upon; they are the foundation
one who has carelessly and negligently to-day of loans representing vast sums
signed a paper [*66] can take refuge of money. (Webb on Record of Title,
in the statement that he does not know §§ 4, 89, 90, 154, and cases cited.)
how it happened, there will be little It was such a public record that
safety in dealing with instruments this plaintiff by her negligent act
under seal, duly acknowledged and created.
recorded.
The plaintiff [***52] may set this
It is argued that plaintiff at the deed aside as between herself and
time of these transactions was in [*67] the grantee, but the
possession of the property, and that intervening rights of bona fide
consequently the mortgagees had notice mortgagees without notice she must
of her title. The finding as to respect.
possession is that the plaintiff
"continued in the possession and In Page v. Krekey (137 N. Y. at
occupancy of said premises and of the page 312) Judge O'Brien states this
whole thereof except as hereinafter rule with great clearness, although
stated." not writing in a real estate case: "If
he actually signed the paper, though
The findings that follow show the procured to do it by fraud, and is
defendants Dorthy and wife in joint chargeable with negligence, he is
liable to an innocent party who acted In Simpson v. Del Hoyo (94 N. Y.
to his prejudice upon the faith of the 189) it was held that as against a
instrument. Such cases are not purchaser in good faith and for value
governed by the rules applicable to of a mortgage upon land, executed by
the bona fide holder of negotiable one in possession of, and holding the
paper procured by fraud, but by the legal title to, the land, the grantor
equitable rule that where one of two of the mortgagor is estopped from
innocent parties must suffer, he who claiming that the conveyance was
has put it in the power of a third induced by fraud on the part of the
person to commit the fraud must latter.
sustain the loss. * * * If this
The rule that a purchaser of a non-
instrument had been a negotiable
promissory note the defendant's negotiable chose in action takes it
subject to all the equities existing
liability to the plaintiff would
depend upon the question of negligence between the original parties, and to
all the latent equities of third
and there does not appear to be any
sound reason for a different rule in persons, does not apply in such case.
While the rule is well established in
this case ( Chapman v. Rose, 56 N. Y.
137 * * *)." this court, it has a number of
exceptions and this is one of them. A
Chapman v. Rose (56 N. Y. 137). mortgage is never purchased on the
This case involves the legality of a faith of the assignor, but always in
negotiable instrument. The court held reliance upon the mortgagor's title.
that [***53] any one having the ( McNeil v. Tenth National Bank, 46 N.
opportunity and the power to Y. 335; Moore v. Metropolitan National
ascertain, with certainty, the exact Bank, 55 N. Y. 41; Green v. Warnick,
obligation he is assuming, yet chooses 64 N. Y. 220; Hill v. Hoole, 116 N.
to rely upon the statements of the Y., at page 303.)
person with whom he is dealing, and
In Valentine v. Lunt (115 N. Y.
executes a negotiable instrument
496) it is held that a grantee or
without reading or examination, is
mortgagee, for a valuable
bound as a bona fide holder for value.
consideration and without notice, from
The theory is that he is guilty of
one who obtained title by fraud and
laches or negligence in signing the
undue influence, acquires a good title
instrument without reading it. He had
or [***55] lien and will be protected
power to know with certainty its
contents, but saw fit to trust the against the claims of the defrauded
vendor.
statements of another. He thereby
placed in circulation what appeared to The court suggests that it would be
be, on its face, a valid promise to contrary to natural justice and reason
pay. The purchaser of this promise in and opposed to the rules and
the open market, for value, was principles of established equity by
entitled to rely upon these facts which courts are governed in cases of
which were disclosed upon the face of this nature to hold otherwise. The
the instrument. court here applied the doctrine of
estoppel.
This case rests upon a double
principle: that the maker of the The principle announced in the
instrument is liable for the acts of foregoing cases is fully recognized in
the person he saw fit to trust, and England.
that the transaction may be regarded
as an estoppel. This court held that In Briggs v. Jones (L. R. [10
to decide otherwise would be to deal a Equity Cas.] 92) Briggs was the
serious blow to commercial paper. mortgagee of leasehold property and he
There is no [*68] sound reason why loaned his lease to the mortgagor, for
instruments involving title to real the purpose of raising money upon it,
estate should not be equally protected but at the same time told the
as to the bona fide mortgagee without mortgagor to inform the person from
[***54] notice. whom he proposed to borrow the money
that he (Briggs) had a prior charge Lord Justice Sir W. M. James said,
thereon. The mortgagor borrowed money in the course of his opinion: "To my
from [*69] his bankers upon the mind it is almost ludicrous to
security by a deposit of the lease contend, and it would be most
without giving them notice of Briggs' injurious to hold, that a man
mortgage thereon. executing a deed and signing a
receipt, as a matter of form, should
The court held, Lord Romilly, be able [*70] to say that it is a
master of the rolls, delivering the nullity." * * * "I am of opinion that
opinion, that Briggs' lien on the the rule of equity is the rule of
lease must be postponed to that of the common sense; that the principal must
bankers, for the reason that by suffer for the fraud of his agent and
placing the lease in the mortgagor's not the stranger who is dealing with
hands Briggs had enabled him to the agent; that the man who has made
mislead the bankers. the representations, under whatever
In Hunter v. Walters, and [***56] circumstances, must bear the
two other causes heard at the same consequences of those representations,
time (L. R. [11 Equity Cas.] 291), the and not the man who has trusted to the
facts were as follows: Walters was a representations so made."
solicitor of two mortgagees, Hunter The general principle under
and Darnell, and put up for sale by discussion has also been recognized in
auction, without authority, the the courts of several of the states.
mortgaged estate. Walters professed
to have bought the estate and prepared A very well-considered case,
a conveyance which purported to have involving these principles, but under
been made by the second mortgagee a different state of facts, is Heyder
under his power of sale. The v. Excelsior Building Loan Association
mortgagees both executed the (42 N. J. Equity, 403). [***58] It
conveyance to Walters and also signed was held there that the lien of a
indorsed receipts for money paid to mortgage duly registered will not be
them, although no money was in fact lost by a cancellation of record
paid to them. Walters took possession effected through accident, or the
of the estate and continued to pay mistake or fraud of third persons. If
interest to the mortgagees [**736] the cancellation be the result of the
and afterwards made an equitable negligence of the owner, he will not
mortgage of the estate, representing be permitted to establish his lien
it to be his own and unincumbered. As against subsequent bona fide
to the first mortgagee there was purchasers or mortgagees acting upon
evidence that he was deceived by the the faith of such cancellation of
solicitor, and as to the second record. In this case the mortgagor
mortgagee there was evidence that he was the attorney of the association
had trusted the solicitor implicitly. and had given it a mortgage to secure
a loan. The mortgagor subsequently
It was held by the vice-chancellor obtained possession of the mortgage
that Hunter and Darnell, though they and indorsed upon it the name of the
executed the conveyance in ignorance association without authority and a
of its contents, had passed the estate certificate of cancellation which was
to Walters; that they had, by signing recorded. He then sold the property to
receipts for the purchase money, armed a bona fide purchaser as free from
Walters with power dealing with the incumbrance.
estate [***57] as the absolute owner
and had thereby given priority to the The trial court held that the
lien of the subsequent mortgagee. This purchaser, not the mortgagee, should
decision was affirmed. (L. R. [7 bear the loss incident to the
Chancery App.] 75.) fraudulent cancellation of the
mortgage, but the Court of Chancery on
Lord Hatherly, lord chancellor, appeal reversed this judgment and held
wrote the main opinion, and two of the that the mortgagee should suffer the
lord justices also writing.
loss, as it was directly chargeable to deed, can it be said that his position
their negligence or fault that the in a court of equity is more favorable
mortgagor was placed in possession of than that of A.? He stands clearly
the unpaid mortgage. within the rule that where one of two
innocent parties must suffer from a
Judge Story, in his Equity wrongful act, he must bear the loss
Jurisprudence (Vol. [***59] I, § who enabled the wrong to be done; his
434), in commenting upon the position position is less favorable than A.'s,
of a bona fide purchaser for a for he has been guilty of negligence,
valuable consideration, without while the former trusted a person he
notice, under the circumstances that believed honest.
we have been considering, said: "Such
a person is a favorite in the eyes of This plaintiff, as matter of law,
a court of equity and is always on the conceded facts, is estopped
protected, [*71] as has been already from denying the acknowledgment and
intimated against claims of this delivery of the deed. She is, by the
sort." findings, ignorant of the trick or
artifice perpetrated upon her. The
In Gavagan v. Bryant (83 Ill. 376) deception, so far as this record goes,
the grantor was deceived and told he is a mere figment of her imagination
was signing a five years' lease, when, -- a suspicion. She admits her
in fact, it was a deed. He was held signature and stops there; as to how
negligent and bona fide purchaser it was obtained, this case is
protected. (See, also, Lawrence v. absolutely silent.
Guaranty Investment Co., 51 Kansas,
222.) The plaintiff is found to have
sigued [***61] a paper, of whose
It is urged that in some of the
[*72] contents she was wholly
foregoing cases the party sought to be
ignorant, which, unexplained, is gross
charged consciously and voluntarily
negligence, and, in the absence of
executed a conveyance or other
evidence to the contrary, it must be
instrument by fraudulent inducement,
presumed that she parted with the
and that the principle of equity
instrument by voluntary delivery.
therein invoked has no application to
(Holbrook v. N. J. Zinc Co., 57 N. Y.
the case of one whose signature was
at top page 624.)
obtained by trick or device to a
paper, the character of which was This case was decided below,
unknown by reason of the carelessness ignoring the doctrine of negligence
or negligence of the person so and estoppel, and apparently assuming
signing. There is no distinction that the mortgagees' rights depended
between the cases in sound reason or upon the validity of the deed between
on authority. If A., by reason of the parties.
fraudulent representations, knowingly
With all respect, I think to affirm
executes a deed, he [***60] is
the judgment before us is to disregard
estopped from urging the fraud against
well-settled principles which have
the subsequent bona fide mortgagee
long been recognized by courts
without notice; he trusted to the
person who deceived him, and must take [**737] of equity, to cast discredit
the consequences. If B., with utter upon record titles, and to deter
disregard of results, signs a paper at capitalists from loaning money on real
the solicitation of one occupying a estate security.
confidential relation to him, the The judgment appealed from should
contents of which he does not be reversed and a new trial ordered.
ascertain, but which was in fact a