88 N.J. Eq. 545 | N.J. | 1918
The opinion of the court was delivered by
The complainant seeks to recover of the defendant the loss on two mortgages in which it had invested. This loss was caused
The case differs from cases brought by receivers in the interest of creditors or stockholders of which Williams v. McKay, 40 N. J. Eq. 189; 46 N. J. Eq. 25, is the leading instance. It differs also from cases brought by stockholders suing in their own right (Gerhard v. Welsh, 80 N. J. Eq. 203), and from cases where there was habitual neglect of duty, and the loss might have been prevented by proper attention; and from cases where the loan on its face was illegal or forbidden by the by-laws. The present case is more like Citizens Building Association v. Coriell, 34 N. J. Eq. 383. There the defendant was held liable for losses on loans made on personal security, which on their face were in violation of a by-law, but not liable for loss due to a defective acknowledgment of a mortgage because, as the chancellor held, the directors properly relied on the knowledge and attention of the' solicitor for the legality of the mortgages. In the present case, the proximate cause of the loss was the fraud of the solicitor; the complainant is seeking to hold the defendant for the fraud of its own agent, who either paid the money to the mortgagors improperly and without seeing to it that prior liens were lawfully discharged, or more probably embezzled that money himself. To sustain the complainant’s claim, reliance is had upon the fact that the defendant as one of the executors of an estate held a prior mortgage on each property. The real question therefore is whether the defendant was under any duty to the complainant to give actual notice of the existence of the mortgages held by the estate. Mortgages on two properties are involved, one of which may be called the Aschenbach East Orange mortgage, and the other the Sims-South Orange mortgage.
The Aschenbach mortgage was on a city lot on North 18th street, East Orange, described by metes and bounds referring to the street lines as the only monument; the number of the section and lot on a land company’s map is also stated. There are no other identifying marks. The prior mortgage held by the estate of which defendant was an executor was given by William H.
Oases might arise where a director of a building and loan association should be held even to so stringent a liability. It would depend on the circumstances of each case. Here the defendant as executor held many mortgages; in the course of his business he examined many properties; the description in the Aschenbach mortgage contained nothing to excite attention; it must have differed little from the description of adjoining lots; the defendant knew his mortgages by street numbers and not by numbers on a land company map. The name of the mortgagor was different. Above all that, the Aschenbach mortgage was accompanied by a regular abstract of title in which the Daly mortgage was not mentioned, and a certificate by the complainant’s solicitor, then a lawyer in good standing, that the Aschenbach mortgage was a first and valid lien. We think that the most that could be required of defendant by way of care upon an examination of the affairs of the association, would be to ascertain that the usual papers, bond, mortgage, insurance policy and abstract were in hand, and that the solicitor had certified as he had. In most cases this would be more satisfactory even than an actual reading of the mortgage.
But even if the defendant could be found guilty of negligence in this respect, there would still remain an insuperable difficulty in the complainant’s way. It is not claimed that the defendant should have been presbnt when the mortgage was executed and the money paid. As business is done, that would be obviously im
When the money was thus turned aside, the association had already suffered the loss without the defendant having had any opportunity to prevent it. He might, indeed, have subsequently made an examination and discovered that the mortgage was not a first lien, but there is nothing in the case to show that this discovery could have made it possible for the complainant to prevent the loss. The solicitor could hardly have been solvent; his dishonesty speaks loud to the contrary; at any rate, in the absence of evidence, we cannot find that he was solvent.
As to Aschenbach, no suggestion is made that recovery could ever have been had of him. If it could, complainant ought not to seek it of defendant. The result is that if we could find negligence on the part of the defendant, it necessarily came too late to be the cause of complainant’s loss, and the decree below was wrong. This is not a punitive proceeding, but an attempt to recover actual damages caused by defendant’s negligence.
The facts as to the Sims-South Orange property are somewhat more complicated. The property belonged, in 1909, to Roland D. Crocker, who was the solicitor of the complainant. He convej'ed to Mabel Daly, by deed dated October 1st, acknowledged October 11th and recorded October 19th, 1909. Mabel Daly and her husband, William H. Daly, mortgaged to the defendant an.d his eoexecutor October 11th, 1909, by a mortgage dated and acknowledged on that day and recorded October 21st, 1909. The property was then reconveyed by the Dalys to Crocker by a deed dated October 11th, acknowledged November 19th, and recorded November 20th, 1909, and the title remained in Crocker until as late as April 1st, 1913, when he conveyed it to Sims. On October 10th, 1912, Louis Wagner applied to the complainant for a
The prior lien would have been satisfied in the ordinary course; but tbe complainant’s solicitor, instead of taking the ordinary course, undertook to satisfy the record by a forged discharge. The defendant had no reason to anticipate the solicitor’s crime. Until the check had actually been cashed, and sufficient time bad elapsed for Crocker to pay off defendant’s mortgage without bis in fact doing so, tbe defendant might properly trust that the complainant’s own solicitor would protect his client’s interests. A delay of three months is not unusual when prior liens have to he satisfied. When the check was cashed and the money misappropriated, the loss was already incurred, as in the case of the Aschenbacli mortgage. Nothing that the defendant could do would save the complainant from the loss. If there had been proof that by prompt action the money could have been saved, the case would be different; the failure to take prompt action might, he negligence of the defendant intervening between Crocker’s act and the final loss to complainant. In that event, the failure to act promptly might well be the proximate cause; but in the absence of such evidence, the proximate cause, is the rascality of the complainant’s own solicitor.