Title Guarantee Trust Co. v. . Haven ( 1909 )

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] Opinion in Action No. 2: The defendants had acquired by devise certain lands in the city of New York subject to a lien of $9,953.83 for assessments imposed by the city for regulating and grading an avenue. Being the owners of such lands, they agreed to sell the premises free and clear of all liens and incumbrances. Under the contract of sale, payment was made in three installments. Before the last payment, the assessments were paid, not by the defendants, by means of a check for the amount thereof drawn upon the plaintiff corporation to the order of the collector of assessments and arrears of New York city. The check purported to be signed by William O. Green, trustee, who had authority to draw checks against a deposit with the plaintiff to the credit of the estate of Andrew H. Green. The signature was a forgery but the plaintiff paid the check believing it to be genuine. There is no evidence as to the identity of the forger or that the defendants had any notice or knowledge of the payment of the assessments by means thereof until after the event. After ascertaining the forgery, the plaintiff restored to the credit of the estate of Andrew H. Green in its deposit account the amount of the forged check which had previously been charged against it.

Upon these facts, the plaintiff brought this suit praying judgment that upon the payment of the assessments the plaintiff became subrogated to the lien of the assessments upon the lands subject thereto and that such lien remains in full force as between the parties to the action; that the lien attached to the moneys received by the defendants as the purchase price, which in equity represents the land; and that the plaintiff recover the amount of the assessments from the defendants.

The answer denied all the allegations of the complaint except the ownership of the lands, the contract to sell the same and the conveyance thereof under the contract. It further averred that the premises were devised to the defendants by Marianna A. Ogden of Newport, R.I., subject to the assessments which were confirmed and levied during her lifetime; that Andrew H. Green, for many years prior to his death, was her agent and personal representative in reference to the management and care of her real estate; that the said Marianna A. Ogden sent him $9,953.83 for the purpose of paying the assessment but he never paid the same; and that all these matters were known to the plaintiff corporation when it restored to the credit of the Andrew H. Green estate the amount paid out on the forged check.

The issues were referred to a referee to hear and determine. He found the facts substantially as set forth in the pleadings, except that there is no finding of the receipt of any money by Andrew H. Green from Marianna A. Ogden with which to pay the assessments. The Appellate Division, by a divided court, has affirmed the judgment in favor of the defendants which was entered upon the referee's findings.

Both the referee and the judge who wrote the prevailing opinion below thought that the case was controlled by section 112 of the Negotiable Instruments Law which provides that the acceptor of a negotiable instrument admits "the existence of a drawer, the genuineness of his signature, and his capacity and authority to draw the instrument." This enactment is merely declaratory of the common law. The leading English case in which it is enunciated isPrice v. Neal (3 Burrow, 1354), decided by Lord MANSFIELD in 1762. The leading New York case to the same effect is NationalPark Bank v. Ninth National Bank (46 N.Y. 77). But the doctrine of these decisions, now found in the rule formulated by section 112 of the Negotiable Instruments Law, applies only in favor of one who is a holder for value of the instrument which turns out to have been forged. Thus, Lord MANSFIELD in Price v.Neal (supra) dwelt upon the fact that the bill of exchange there in question had been indorsed to the defendant "for a fair and valuable consideration which he had bona fide paid;" and in the leading New York case (National Park Bank v. NinthNational Bank, supra) it appeared that the draft had been discounted by the Livingston National Bank and indorsed to the defendant which was a bona fide holder. The rule, therefore, that he who accepts a negotiable instrument to which the drawer's name is forged is bound by the act and can neither repudiate the acceptance nor recover the money paid, has no application in behalf of one who has acquired the paper in the absence of any consideration whatever therefor either present or past. Such was the case here according to the finding of the referee. So far as appears, the check of the Green estate, which proved to be forged, was not given in payment of any existing or antecedent indebtedness either on the part of that estate or even of the forger. For these reasons we agree with the learned judge who wrote for the minority in the Appellate Division, saying: "Section 112 of the Negotiable Instruments Law upon which the referee based his decision has nothing to do with the question."

There being nothing in the law of commercial paper which constitutes an obstacle to a recovery by the plaintiff, it remains to consider whether the court below (all the judges concurring in this respect) were right in holding that no equitable remedy was available to the plaintiff under the doctrine of subrogation.

Upon the facts as found by the referee we have here the case of a purely gratuitous payment of assessments, constituting at the time a lien in favor of the city of New York upon lands owned by the defendants, which payment was clearly induced by the fraud and forgery of some party unknown. The money thus paid without any request or authority from the defendants is not recoverable in an action at law. "No one can thus make himself the creditor of another by the unsolicited payment of his debts." (Kelley v. Lindsey, 7 Gray, 287;Homestead Co. v. Valley Railroad, 17 Wallace, 153, 167.) The payment, however, operated as between the defendants and the city to discharge the city's lien which rested upon the defendants' land; and the theory upon which the plaintiff has brought the present suit in equity is that this lien under the circumstances is to be deemed still alive for the benefit of the party who actually paid the assessments and inasmuch as the defendants have conveyed away the land the lien is transferred to the proceeds in their hands.

It is argued in the brief of counsel for respondents that subrogation to the lien of a state or city for assessments is discountenanced by the law and reference is made to the case ofMercantile Trust C. v. Hart (76 Fed. Rep. 673) where THAYER, J., intimated that it might well be doubted whether a person could ever claim subrogation to the rights of the state as respects a lien for taxes. The doubt thus suggested finds little support in the cases which we have been able to find bearing on the question. On the contrary, the cases are not infrequent in which such liens, although discharged as to the taxing power, have been kept alive to do justice between third parties. InCockrum v. West (122 Ind. 372) the property of the appellee had been applied to the payment of a tax which the land held by the appellant was justly and primarily bound to pay. Under these circumstances the Supreme Court of Indiana held that the appellee was entitled to be subrogated to the state's lien for taxes upon the land conveyed to the appellant. In Sharp v. Thompson (100 Ill. 447) where the mortgagee had paid taxes which it was the duty of the mortgagors to pay, it was held that the mortgagee was thereby subrogated to the rights of the state which had a lien upon the land for taxes. In McNish v. Perrine (14 Neb. 582) the purchaser at a void sale of real estate for taxes had paid the taxes legally levied upon the premises for subsequent years; upon the failure of his title he was subrogated to the rights of the county to the extent of the legal taxes so paid by him, notwithstanding the fact that the taxes for which the sale was had were void. The same doctrine is enforced and expounded with reference to many other Nebraska cases in John v.Connell (61 Neb. 267). In Fiacre v. Chapman (32 N.J. Eq. 463) a second mortgagee had paid taxes and assessments imposed on the premises after a sale to Jersey City for their non-payment, and upon foreclosure of the first mortgage he was held to be entitled by equitable subrogation to the city's lien. These cases suffice to show that there is nothing in the nature of a lien for taxes or assessments or in the fact that such lien exists in favor of a sovereign taxing power to prevent the application of the equitable doctrine of subrogation when justice demands it.

We think that justice demands its application here. Subrogation is not permitted (1) where the party seeking it has intermeddled with the affairs of the defendant; or (2) where it would prejudice the rights of innocent third parties. Here the plaintiff did not officiously interfere with the affairs of the defendants, but acted in fullfillment of what it supposed to be an obligation towards one of its depositors with the result that it relieved the defendants' land from the assessment lien thereon. Far from disturbing the defendants' affairs it aided the defendants to perform their contract to convey the premises free from incumbrances. The case, therefore, can hardly be called one of officious interference. The right of subrogation is denied because it is said that the money was advanced solely upon the personal credit of the depositor and it was a mere accident that it went to discharge the lien. But this last feature is the characteristic of the case which entitles the plaintiff to equitable relief that might otherwise be unavailable. It is suggested that another rule stands in the way of the plaintiff, namely that "a subrogee acquires no remedies different from those which might have been enforced by the parties to whose place he succeeds;" and the plaintiff here seeks a personal money judgment which, of course, the city could not have had against the landowner upon the assessments, inasmuch as they did not subject the landowner to any personal liability but merely created a charge upon the land. The answer to this objection is that the demand for a personal money judgment is only incidental and that the principal prayer of the complaint is for subrogation to the lien of the city, which is to be deem transferred to the proceeds of the land in view of the fact that the land has been conveyed away by the defendants. If the defendants still retained the land upon which the assessments were paid, the plaintiff succeeding to the rights of the city would have acquired its lien thereon for the amount of the assessments. Although the lien of the city of New York was terminated as to the city by the payment of the assessments it could be regarded as still existent for the purpose of doing justice between the party who had paid them and the owners of the land. The land having been converted into money in the pockets of the defendants the lien attaches to that money and is enforceable against it.

It must be distinctly understood that this view is predicated upon the assumption that the payment of the assessments was purely gratuitous and in nowise in discharge of any real or supposed obligation upon the part of the estate of Andrew H. Green or of the unknown forger, but was brought about solely by mistake induced by the forgery. Upon this assumption we think that the plaintiff on proof of the facts stated in the complaint would be entitled to be subrogated to the lien of the city as against the proceeds of the sale of the land in the hands of the defendants. If, however, it should be made to appear that the payment was not thus gratuitous, we are of opinion that the right of subrogation could not successfully be asserted.

The judgment should be reversed and a new trial granted, with costs to abide the event.

CULLEN, Ch. J., GRAY, EDWARD T. BARTLETT, HAIGHT, WERNER and HISCOCK, JJ., concur.

Judgment reversed, etc.