Rothschild v. Title Guarantee & Trust Co.

• Decision Date: 20 February 1912
• Citation: 204 N.Y. 458,97 N.E. 879
• Court: New York Court of Appeals Court of Appeals
• Parties: ROTHSCHILD et al. v. TITLE GUARANTEE & TRUST CO.

204 N.Y. 458

97 N.E. 879

ROTHSCHILD et al.

v.TITLE GUARANTEE & TRUST CO.

Court of Appeals of New York.

Feb. 20, 1912.

Appeal from Supreme Court, Appellate Division, Second Department.

Action by Hattie Rothschild and others, individually and as executors of, and trustees under, the last will and testament of Caroline Strauss, deceased, against the Title Guarantee & Trust Company. From a judgment of the Appellate Division (139 App. Div. 672,124 N. Y. Supp. 441) affirming a judgment for plaintiff, defendant appeals. Reversed, and new trial granted.

Lynn C. Norris, for appellant.

Edward T. Horwill, for respondents.

COLLIN, J.

The plaintiffs, as the executrices and devisees under the probated will of Caroline Strauss, demand a judgment compelling the defendant to cancel and discharge of record a mortgage, in form, held by it upon premises owned by the testatrix at the time of her death and devised to them. The mortgage, dated and recorded November 6, 1899, purported, on its face, to have been executed by Caroline Strauss and Baldwin F. Strauss, her husband, to the defendant to secure their bond of even date for $2,000, to mature November 6, 1902, with interest from its date to be paid April 1, 1900, and thereafter semiannually. Caroline Strauss did not execute, and was wholly ignorant of the negotiations for and the giving of, the instruments. Her name thereon was forged. Baldwin F. Strauss, the son of Caroline, negotiated the loan, effected the execution of the bond and mortgage, and received the $2,000 paid by the defendant in two checks to the order of Caroline Strauss and Baldwin F. Strauss. He was an attorney in Brooklyn, receiving an income of several thousands of dollars a year and of good reputation until his disappearance in March, 1903. About one year after the making of the loan, Caroline acquired full knowledge that it had been made upon the security of the said instruments and that her signature had been forged thereon by the procurement of Baldwin, and, having such knowledge, on or about November 27, 1900, caused to be paid to the defendant out of her own moneys the six months' interest due October 1, 1900, and on or about May 1, 1901, caused to be paid to the defendant out of her own moneys the interest which then became due. Each other interest payment up to and including that which became due October 1, 1904, was made at or soon after its maturity, but it does not appear in the defendant's books of account, duly kept in the ordinary course of its business, who made any of the payments, including those caused to be made by Caroline. Caroline died December [204 N.Y. 461]21, 1903. Soon after October 28, 1904, the defendant acquired its first knowledge or notice of the forgeries, and refused upon the demand of the plaintiffs to surrender the mortgage. Since Baldwin F. Strauss' disappearance, defendant has made diligent search and inquiry for him and has learned that he left the state, but has been unable to discover his whereabouts or whether he is still alive. The trial court rendered its judgment, which the Appellate Division affirmed, that the mortgage was a cloud upon the plaintiff's title and should be discharged and surrendered by the defendant. The appellant contends that the facts as found did not authorize the judgment.

[1] A principle of law is: Where a person wronged is silent under a duty to speak, or by an act or declaration recognizes the wrong as an existing and valid transaction, and in some degree, at least, gives it effect so as to benefit himself or so as to affect the rights or relations created by it between the wrongdoer and a third person, he acquiesces in and assents to it and is equitably estopped from impeaching it. This principle is applicable to the facts found and requires the reversal of the judgment.

[2] When Caroline Strauss acquired, about one year after the transaction between the defendant and her son, full knowledge of the facts constituting the transaction, the right of action to compel the defendant to discharge the mortgage was vested in her . It was a cloud upon her title to the lands it described, impeachable only by extrinsic evidence proving that it was not her act or deed and was executed without her knowledge or authority. Nor did the protection of her property lie solely in that right of action. She might have defended against an attempted enforcement of it by foreclosure, upon the facts constituting her right of action for its cancellation. Viele v. Judson, 82 N. Y. 32. She did not lose this right of action or protection by her silence. The law does not withdraw its remedies from a person against whom a wrong is committed merely because he in silence and without proclamation or complaint recognizes and endures the wrong. Mere silence or passivity on the part of Caroline would not have precluded her from the remedies protective against the effects of the forged instruments. Her silence instigated no action and caused no wrong.

[3] A fraudulent purpose or a fraudulent result lies at the basis of the doctrine of equitable estoppel through silence or inaction. Actual or intended fraud is not an element essential to it. Neither affirmative acts or words nor silence maintained with the fraudulent intention of deceiving are indispensable elements of it. But it arises only when, relatively...