People's Trust Co. v. Smith

• Decision Date: 13 July 1915
• Citation: 215 N.Y. 488,109 N.E. 561
• Parties: PEOPLE'S TRUST CO. v. SMITH et al.
• Court: New York Court of Appeals Court of Appeals

215 N.Y. 488

109 N.E. 561

PEOPLE'S TRUST CO.

v.SMITH et al.

Court of Appeals of New York.

July 13, 1915.

Appeal from Supreme Court, Appellate Division, Second Department.

Action by the People's Trust Company against John W. Smith and others. From a judgment of the Appellate Division (155 App. Div. 921,140 N. Y. Supp. 1140) affirming a judgment dismissing the complaint on the merits, plaintiff appeals. Affirmed.George W. Wingate, of New York City, for appellant.

John Mulholland, of New York City, for respondents.

CARDOZO, J.

The defendants Smith delivered to the defendant George F. Stainton, described in the record as George F. Stainton, No. 1, a bond and mortgage to secure a debt of $3,000. The mortgagee had a nephew of the same name, who is a member of the bar. He is described in the record as George F. Stainton, No. 2. The uncle placed the bond and mortgage, with other papers, in a separate bundle, and left them, solely for safe-keeping, in the safe in the nephew's office. The nephew purloined the bond and mortgage, and attempted to assign them to the plaintiff, the People's Trust Company. He executed, in his own handwriting, a document in the form of an assignment, and on that security obtained from the plaintiff a loan of $2,000. The payment of the loan was guaranteed by the defendant Ward. The bond and mortgage were delivered to the plaintiff, together with the assignment. Stainton, No. 1, had no knowledge of the transaction. His good faith is conceded. The good faith of the plaintiff and of Ward, the guarantor, is also conceded. The question to be determined is the incidence of the loss.

The trial judge held that Stainton, No. 1, had intrusted the custody of the bond and mortgage to Stainton, No. 2, and had estopped himself, because of the identity of their names, from denying the title of the custodian. The estoppel was held to be effective, however, only to the extent necessary to save the trust company from loss. The trust company had a remedy against the guarantor, Ward, who was found to be amply solvent. The trial judge held, therefore, that the enforcement of the mortgage was unnecessary for its protection, and on that ground gave judgment dismissing the complaint. The Appellate Division affirmed, without opinion.

[1] We think the dismissal of the complaint was proper, but we place our decision on other grounds than those that controlled the judgment in the court below. In our view, Stainton, No. 1, has done nothing that estops him from asserting his ownership of the bond and mortgage. It is conceded that this would be true if the uncle and nephew had borne different names. We think it does not cease to be true because they bear the same name. An owner who intends to put the title in the name of another, rather than in his own name, may lose his ownership by estoppel. Moore v. Met. Nat. Bank, 55 N. Y. 41, 14 Am. Rep. 173. But no such case is before us here. This owner never intended anything of the kind. The name ‘George F. Stainton,’ as used in this bond and mortgage, was not intended to be the symbol of any one except himself. First N. Bank v. Am. Ex. Nat. Bank, 170 N. Y. 88, 90,62 N. E. 1089;Graves v. Am. Ex. Bank, 17 N. Y. 205;Shipman v. Bank of State of New York, 126 N. Y. 318, 330,27 N. E. 371, 12 L. R. A. 791, 22 Am. St. Rep. 821; Seaboard Nat. Bank v. Bank of America, 193 N. Y. 26, 85 N. E. 829,22 L. R. A. (N. S.) 499. There was no purpose to clothe the custodian with the indicia of ownership. Estoppel, therefore, cannot be built in this case upon any representation that was intended by the true owner. It must be built, if at all, upon the owner's negligence.

[2] To make out an estoppel on that ground, it is not enough to show that the owner was careless. He must have been careless in respect of some duty owing to the plaintiff or the public. Knox v. Eden Musee Am. Co., 148 N. Y. 441, 462,42 N. E. 988,31 L. R. A. 779, 51 Am. St. Rep. 700;Swan v. N. B. Australasian Co., 2 H. & C. 181. Neither of these elements is present in the case at hand.

The bond and mortgage were not accompanied by any blank form of transfer, signed by the true owner. There was nothing about them to indicate that any transfer was contemplated. They were the expression of a static condition, of a ‘right at rest,’ rather than a ‘right in motion.’ Holland, Elements of Jurisprudence, p. 132. It was possible, of course, that the custodian might personate the mortgagee and forge an assignment. The same thing would have been possible, though perhaps more difficult, if the names had been different. It is not to be overlooked that the nephew's act, though he used his own name, was none the less a forgery. Graves v. Am. Ex. Bank, 17 N. Y. 205;People v. Peacock, 6 Cow. 72;Third Nat. Bank v. Merchants' Nat. Bank, 76 Hun, 475, 478, 27 N. Y. Supp. 1070; Penal Law, § 883. The owner was not at fault for failing to protect himself or the public against the consequences of such a crime. Many cases, not to be distinguished in principle, sustain that conclusion. Shepard & Morse Lumber Co. v. Eldridge, 171 Mass. 516, 528, 51 N. E. 9,41 L. R. A. 617, 68 Am. St. Rep. 446, was a case where the holder of an unindorsed check left it with a clerk who, if care had been used, would have been known to be dishonest. The clerk forged the indorsement. The court held that the employer had not lost his remedy through negligence. ‘He has the right to assume that his clerk will not commit a crime, and to rest upon the presumption that he has not stolen or forged, and will not do so, and he is under no legal obligation, either to the drawer of the check or to the public, to see to it that the check is not put in circulation with a forged indorsement.’ Shepard & Morse Lumber Co. v. Eldridge, supra, at page 528 of 171 Mass., at page 14 of 51 N. E. (41 L. R. A. 617, 68 Am. St. Rep. 446). To the same effect, Varney v. Curtis, 213 Mass. 309, 312, 100 N. E. 650, Ann. Cas. 1914A, 340. Faith in the honesty of trusted friends and relatives is seldom negligence. If circumstances may make it negligence, this case does not show them. We may say, with Bovill, C. J., in Société G ´enérale v. Metropolitan Bank, Ltd., 27 L. T. 849:

‘Persons are not to be supposed to commit forgery, and the protection against such a crime is the law of the land, and not the vigilance of parties in excluding all possibility of committing it.’

And with Keating, J., in the same case:

‘There is no duty in any one to suppose that those against whose character there is no imputation will commit forgery whenever the opportunity occurs.’

See, also, Knox v. Eden Musee Am. Co., supra, 148 N. Y. at page 460, 42 N. E. 988,31 L. R. A. 779, 51 Am. St. Rep. 700; Scholfield v. Earl of Londesborough, [1896] A. C. 514; Baxendale v. Bennett, L. R. 5 Q. B. D. 525, 530; Colonial Bank v. Marshall, [1906] A. C. 559; Longman v. Bath Electric Tramways, Ltd., [1905] 1 Ch. 646; Smith v. Prosser, [1907] 2 K. B. 735, 746.

We think, therefore, that the owner was not negligent in leaving his bond and mortgage with a nephew of the same name. But, if there was any negligence, the transaction was not one that made care and diligence a duty. This court, in Knox v. Eden Musee Am. Co., page 462 of 148 N. Y.,page 995 of 42 N. E. (31 L. R. A. 779, 51 Am. St. Rep. 700), supra, adopted the words of Blackburn, J., in Swan v. N. B. Australasian Co., 2 H. & C. 181:

‘The neglect must be in the transaction itself, and be the proximate cause of leading the party into the mistake; and also, as I think, that it must be the neglect of some duty that is owing to the person led into that belief, or what comes to the same thing, to the general public, of whom the person is one, and not merely neglect of what would be prudent in respect to the party himself, or even of some duty owing to third persons, with whom those seeking to set up the estoppel are not privy.’

The nature of this transaction did not charge the owner with any duty to the public. Varney...