Court Opinion

ID: 3598391
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:45:30.887257+00
Date Added: 2024-06-11T14:19:26.316666
License: Public Domain

[EDITORS' NOTE:  THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 400 
The alleged fraud by the mortgagee, in obtaining the mortgage, was fully proved and does not seem to have been disputed or denied at the trial. The plaintiff, as assignee, therefore took the mortgage, subject to the defence of fraud, unless the defendant, the mortgagor, is deprived of this defence by the certificate he executed at the same time he executed the mortgage. That certificate is to the effect that the mortgage was given "for a good and valid consideration to the full amount thereof, and that the same is subject to no offset or defence whatever." *Page 402 
If this certificate was given by the mortgagor, without fraud, to induce the plaintiff to purchase the mortgage or to enable the mortgagee to negotiate it, and the plaintiff took the mortgage believing in, and, in good faith, relying upon the certificate, then the mortgagor would be estopped from availing himself of the defence of fraud. But there are two reasons why this certificate cannot have the effect claimed for it.
1st. The judge at Special Term found that the certificate was obtained by the mortgagee by fraud, and that it was not given to induce the plaintiff to buy the mortgage or to enable the mortgagee to negotiate it, but that it was given with the express understanding that the mortgagee should not negotiate it. The mortgage and certificate were both tainted with fraud in the hands of the mortgagee, and, not being negotiable instruments, upon what principle or theory is it that the plaintiff gets them free from this taint? How is this certificate taken out of the general rule that all instruments may be avoided for fraud? The doctrine of equitable estoppel in pais, is founded upon principles of equity and justice, and is only applied to conclude a party by his acts and admissions, intended to influence the conduct of another, when in good conscience and honest dealing he ought not to be permitted to gainsay them. (Welland Canal Co. v. Hathaway, 8 Wend., 483.)
It would be carrying this doctrine to a preposterous extent to hold that a party is estopped from claiming that the very instrument claimed to estop him was obtained from him by fraud. But a further test of this claim of estoppel may be applied. This certificate was given to the mortgagee, to go with the mortgage into his hands and to be retained by him. It may then be treated as if embodied in the mortgage. Suppose it had been, would any one claim that the plaintiff, by the assignment to him, would be in any better position as to the defence of fraud than the assignor? (Mechanics' Bank v. New York and New Haven R.R.Co., 13 N.Y., 638.)
2d. But there is still another answer to this claim of *Page 403 
estoppel. The judge at Special Term found that the plaintiff did not rely upon the truth of the statements in the certificate, in purchasing the mortgage. There is some evidence, with circumstances and inferences from them, tending to sustain this finding, and hence it cannot be questioned here. If all other things concurred necessary to constitute the estoppel, the plaintiff could not have the benefit of it unless he believed in and relied upon the statement of facts made. It is not sufficient that he believed that, as a matter of law, the certificate would protect him, and hence that he would not have purchased the mortgage without it. He must have believed the facts stated, and in good faith have relied upon them as true, and in this reliance must have purchased. (Shapley v. Abbott, 42 N.Y., 443.)
Hence I conclude the defence of fraud, upon the facts found, was available against the plaintiff.
The court did not err in permitting proof of the value of the farm mortgaged at the time the mortgage was given. It had some bearing upon the question of fraud, and was therefore competent. If it did not have such bearing, then it was entirely harmless.
Neither was there error in excluding proof of the amount of judgments that were liens upon the farm at the time of the trial, nearly four years after the mortgage was given. Such proof could have had no bearing upon any question involved. It would have been otherwise if the proof had related to judgments upon the farm at the time the mortgage was given.
I am inclined to think that the evidence of defendant Howell, as to the prior conversation and transaction between him and Rosenthall, was competent. Rosenthall was one of the principal actors in the perpetration of the alleged fraud upon Howell, and this evidence tended to show how he came to confide in and rely upon Rosenthall, and the craft by which the latter had gained his confidence. But if the evidence was not competent, it was harmless, as its only bearing was upon the alleged fraud in the trade of the watches, as to which there was no dispute. It had no bearing, whatever, upon the *Page 404 
question of estoppel, which was solely relied on by the plaintiff.
Durand, a witness for defendant, testified that he, on behalf of Howell, called upon Isaac Picard, the mortgagee, and asked him to take back the watches and money, and give up the bond and mortgage, and that he declined. This was some days after the mortgage had been assigned to the plaintiff. He was then asked the following question: "Did you state to him in what the fraud consisted?" Plaintiff's counsel objected to this, on the ground that the witness was not a party to the suit, and his declaration could not, therefore, affect the plaintiff; and also upon the ground that the evidence established that the mortgage was assigned on the day it was executed. The court overruled the objection, and plaintiff's counsel excepted. The witness answered that he stated to Picard, in substance, that a fraud had been practiced in the matter of the watches, and that he did not make much reply, but remained very taciturn. This evidence was doubtless incompetent, but it did not amount to much, and for the reason also stated above, it was entirely harmless.
The following is a portion of the evidence of the same witness, given immediately after the evidence above alluded to, as the same appears in the printed case: "I saw Jacob Picard about the same time, and told him a great fraud had been committed on Howell, and wanted him to undo the thing and make it right; he put a roll of bills in my pocket, and said if that was not enough he would give me more. (This is received under objection and exception.) He said you do not want anything to do with the matter; according to my recollection, it was fifty dollars; I handed the bills back to him, saying it was not my mode of doing business; he took back the bills."
Jacob Picard was not a party to the suit, and there is no aspect of the case in which this evidence was competent as evidence in chief. It does not, however, follow that we must reverse this judgment. Jacob Picard had been examined as a witness for the plaintiff, and he gave evidence in reference to *Page 405 
the procurement of the certificate from Howell, and the assignment of the mortgage to the plaintiff, and testified in effect and substance, that the certificate was fairly and honestly obtained by him, to enable him to sell the mortgage to the plaintiff. The evidence objected to, tended to show quite an emphatic admission that the entire transaction with Howell, including the procurement of the certificate, was a fraud, and hence the evidence was proper, as contradicting the witness and affecting his credit. To have made it strictly competent, however, Picard's attention should first have been called to this conversation upon his cross-examination. But the objection to the evidence was not put upon this ground, and hence it cannot avail here. The omission to first call Picard's attention to this conversation, worked no injustice, as he was subsequently recalled and examined in reference to this conversation, and the plaintiff had the benefit of his denial and explanation of it. Hence, I conclude, but not without some hesitation, that there was no error in the reception of this evidence, for which we are called upon to grant a new trial. And I reach this conclusion the more readily, because I believe the evidence did not materially influence the result of the case, and because both law and ethics favor the judgment appealed from.
The judgment should, therefore, be affirmed, with costs.