Court Opinion

ID: 5273096
Source: CourtListenerOpinion
Date Created: 2022-01-06 21:30:05.733693+00
Date Added: 2024-06-11T08:28:16.123590
License: Public Domain

Kelly, P. J. (dissenting):
I am obliged to dissent from the affirmance of the judgment in this case.
We should not lose sight of the obligation of the defendant trustee. The bonds were not the bonds of the defendant, but of the Dreamland corporation of which the plaintiff was the president. The defendant was the mortgagee named in the deed of trust and its duty is prescribed in article XVI: “ The party of the second part shall and will upon the execution hereof certify said bonds by signing the certificate thereon endorsed, and will deliver the same, so certified, to the party of the first part to be used or negotiated.” There is misleading reference in the points on both sides to the trustee “ duplicating the bonds,” or “ issuing the bonds.” The trustee had no power to issue the bonds or to duplicate them. Its duty related solely to certifying that a particular bond was one of the bonds described in the trust deed.
The bonds derived their status primarily from the signature of the Dreamland company by Mr. Reynolds as president and Mr. Sternberger as secretary and the seal of the corporation. The trustee had no control over the actions of the company or its officers.
Nor can there be any doubt, in my opinion, that the original bonds acquired by MacQuoid were valid and binding obligations of the company. They had been duly issued, they were part of the issue authorized by the company, and after issuance to Powell had been certified by the trustee.
I cannot see how the Dreamland company could deny their validity or how the failure to interplead Mr. Reynolds in the Municipal Court action (brought about by his refusal to be inter-pleaded) affected the situation at all. If Mr. Reynolds had been interpleaded, or if for some reason which I do not perceive, there was any obligation on the trustee to commence an action for interpleader, the result would be the same. They were valid obligations of the Dreamland company and MacQuoid was entitled to collect on them.
Mr. Reynolds’ dealings with Mr. (Powell were all outside of the duties of the trustee. Mr. Powell haying disposed of his bonds, conceived the idea of defrauding Mr. Rey molds and the Dreamland company by procuring the issue of a dupliu8-*® sei* °f bonds, which he accomplished by means of fraudulent stavements and perjury.
It is said that Mr. Reynolds (the president the Dreamland company) inquired of the trustee as to what wotfild be necessary to bring about an issue of duplicate bonds. I canno^ see bow the trustee was under any contractual or legal obligation to' advise the president of the company concerning; the issue of dupfiea,v° bonds, *564or how the trustee was involved in the criminal' transactions of Mr. Powell even assuming that it said it would certify duplicate bonds if the Dreamland company was satisfied that they should be issued and obtained surety.
These were not bonds of the Title Guarantee and Trust Company. The duties and obligations of the trustee must be found in the deed of trust. It is provided in article XXIII:
“ Said Trust Company for itself and its successors hereby accepts the trusts created and assumes the duties imposed by this instrument upon the following terms and conditions:
“ The Trustee may select and employ in and about said trusts and duties, suitable agents and attorneys whose reasonable compensation shall be paid to said Trustee by said Company, or in default of such payment shall be a charge upon the hereby mortgaged property and its proceeds paramount to said bonds, and the Trustee shall not be liable for any neglect, omission or wrong doing of such agent or attorney, if reasonable care shall have been exercised in his or their selection, nor shall it be otherwise answerable, save for its own wilful negligence or default.”
These duplicate bonds issued by the Dreamland company in July, 1915, were in excess of the issue authorized by the trust deed. They were the product of crime and perjury. The Dreamland company and its officers, including Mr. Reynolds, had no power to issue them. When the Dreamland company did in fact issue them and delivered them to Mr. Powell, it was a wrongful and illegal act, brought about without any intervention by the trustee, and when Mr. Powell turned them over to Mr. Reynolds, and Reynolds brought them to the trustee requesting certification, it is evident that the trustee relied on the fact that the Dreamland company had issued them.
The certification placed upon the bonds that they were part of a lawful issue is expressly limited by the statement they were “ issued in place and stead of the original bond of the same number said to have been lost or destroyed.” Who made the statement that the original bonds were lost or destroyed? Not the trustee, but Mr. Reynolds, the president of the company, who is the plaintiff in this action.
The trustee had no power to certify bogus bonds. No employee of the trust company had authority to impose liability on the trustee by expediting Mr. Reynolds’ desire to acquire the bonds from Powell. I think the causa causans of the loss was Mr. Reynolds’ negotiation with a criminal. I think the trustee acted upon the faith of the issuance of the bonds by the Dreamland company and Mr. Reynolds’ representations.
*565At the time Reynolds procured the certification of these bonds with the caveat attached, the trustee had no knowledge of the sale to MacQuoid. Later on, MacQuoid presented the genuine bonds for certification. I cannot see how MacQuoid’s rights were in any way affected by Mr. Reynolds’ dealings with Powell by which the bogus bonds were issued and certified to by the trustee.
I, therefore, vote to reverse the judgment upon the law and the facts, and to grant the defendant’s motion- for the direction of a verdict made at the close of the case.
Judgment affirmed, with costs.