Kursheedt v. McCune , 8 N.Y. St. Rep. 440 ( 1887 )

By the Court.—Lawrence, J.

Our examination of the evidence in this ease satisfies us that the findings of fact made at special term are correct.

It is quite apparent, we think, that Brennan took advantage of the relation in which be stood towards the defendants of their ignorance in business matters, and of the extreme confidence which they reposed in him as their friend and legal adviser, to perpetrate the fraud which has given rise to this litigation. We think it clear that the defendants supposed that the bond and mortgage in suit constituted a transfer of the real property of the defendant James McCnne to his wife, the other defendant; and that they had not the slightest suspicion that they had executed any bond or mortgage to him, to whom at that time, as appears by the evidence, they were not indebted in any sum whatever. The plaintiff herself admits that although the bond and mortgage were advanced on June 7, 1880, the interest up to January, 1885, was paid to her by Brennan in person. .

Such being the facts, we are of the opinion that the judgment rendered at special term was right. The principle is elementary that an assignee of a mortgage, although a bona fide holder, takes the same subject to all defenses existing between the original parties (Ingraham v. Disborough, 47 N. Y. 421, and cases cited).

It cannot be contended for one instant, under the facts proven in this case, that Brennan could have enforced the bond and mortgage which, by his fraud, he obtained from "his clients. We might rest the decision of the case upon this point alone, but it may be as well to observe that the'plaintiff on the facts proven cannot be conceded to be a bona fide holder or owner of. the mortgage in suit, as against the defendants. She had given her money to Brennan for investment as early as April, 1880, and the. mortgage was not executed until June 5,-1880, nor was it assigned to the plaintiff until June 7, 1880. The plaintiff therefore parted with no new consideration at the time she received the assignment of the mortgage. "Her rights, as to Brennan, were then fixed, and she stood towards him as his bailor or creditor after April, 1880. She parted with nothing on the strength of the bond and mortgage in suit, arid under all the decisions she cannot be regarded as a bona fide purchaser of the bond and mortgage, even if, as already stated, she did not take them subject to all the equities existing between Brennan and the defendants. Morcan the plaintiff avail herself of the rule invoked by her counsel upon the argument that when one of two innocent parties must suffer, he must bear the loss whose act or negligence occasioned or permitted it to occur. It was her own negligence in intrusting her money to Brennan, wliich enabled him to commit the fraud as to her; he became her agent for the purpose of such investment, and the fact that Brennan succeeded in committing another fraud upon the defendants, does not entitle the plaintiff to shift her loss upon them, or to hold them liable therefor.

An exception was taken by the appellant’s counsel to the disallowance of this question to the plaintiff :

“Did you rely upon that bond and mortgage as a security for your money ?” The court, in sustaining the objection taken by the defendant’s counsel, remarked that “ she did not part with anything at that time.”

We think that the ruling was correct, because it distinctly appeared, as has been before stated, that the plaintiff had intrusted her money to Brennan, for investment, in April, 1880, and the question called for an answer as to a transaction which took place in June, Brennan had been in the possession of the plaintiff’s money between April and June, and, under the authorities above cited, the plaintiff could not, although a bona fide holder, avoid the defenses existing between the original parties to the mortgage.

The objection taken to the admission of the evidence by the defendants, as to their ignorance in signing the bond and mortgage, and also as to what was said by Brennan about the making of the transfer of the property to his wife, were also properly overruled. The defendants were certainly entitled to show the fraud which had been perpetrated by Brennan upon them, and those questions were competent for that purpose.

Eor these reasons, we are of the opinion that the judgment below should be affirmed, with costs.