Merchants' Bank v. . Weill

Gray, J. The claim of the appellant' Weill is that, upon the facts, which are uncontroverted, the bank took an assignment of the bond and mortgage from Thorne & Angelí, the mortgagees, subject to all the equities attending the original transaction and that it must abide by the case of its assignors; who could not alienate anything but the beneficial interest which they possessed, and who were bound by the private collateral agreement. The doctrine which he invokes is that early asserted in Bush v. Zathrop, (22 N. Y. 535), and which the cases since then have reiterated. (Trustees of Union College v. Wheeler, 61 N. Y. 112; Green v. Warnick, 64 ib. 220; Bennett v. Bates, 94 ib. 354; Hill v. Hoole, 116 ib. 299.) They hold that the assignee of a mortgage 'takes it subject to all the defenses which were valid between the original parties and this principle was borrowed from Lord Thur-low’s rule in Davies v. Austen (1 Ves. Jr. 247). Within its legitimate application, its correctness has not been disputed in this 'court; but, because of the broadness of its intended application in. Bush v. Zathrop, it was soon found necessary to place limitations upon the authority of that case in the decisions in McNeil v. Tenth National Bank, (46 N. Y. 325), and in Moore v. Metropolitan Nat. Bank, (55 ib. 41). They *491 overruled Bush v. Lathrop in the application of the principle to its own state of facts and held that a bona fide purchaser for value of a non-negotiable chose in action from one upon whom the owner has, by assignment, conferred the apparent absolute ownership, where the purchase is made upon the faith of such apparent ownership, obtains a valid title as against the real owner. The decision in the latter case was based upon the doctrine of estoppel, which will preclude the real owner from asserting his title against a bona fide purchaser from one upon whom he has conferred apparent ownership and apparent absolute authority to convey. (Green v. Warnick, supra.) The doctrine of Bush v. Laihrop was so broad as to be inequitable in applying a principle otherwise correct and undisputed to cases such as those of shares of corporations, or other personal property, where the legal title being capable of transfer by assignment, the true owner has apparently conferred upon another the full power of disposition. I do not think that the rule, upon which the appellant relies, applies to the facts of the present case, and that it relates, as Mr. Justice Follett observed of it, in rendering the opinion which prevailed below, “ to defenses arising out of matters inherent in the contract by which the chose in action is evidenced and existing before it is assigned.” When this assignment was made, there was no defense to the mortgage. It was a subsisting and valid obligation for the amount expressed as owing by Weill and his present defense to the enforcement of his liability arises from his exercising an option, conferred by an unrecorded and collateral agreement, to rescind the sale of the property and thus to be relieved from the obligation growing out of it. But this could not be said to have been a O O defense to the mortgage existing at the time of its assignment; for it was one which was brought into existence by the mortgagor at a time subsequent. Won constat that he would ever exercise his option to rescind under the collateral agreement and whether he would do so, would depend upon events, or considerations, subsequently occurrring and influencing its exercise. The cases, to which the appellant refers ns, are not *492 parallel in their facts and I find none which is. Generally, with reference to mortgages, they relate to defenses growing out of the original transaction and affecting their legal inception as liens, or as obligations of the mortgagor. I think- the rule was intended, and should be held, to apply to those defenses, legal or equitable, which were available to the mortgagor at the time of the assignment of the mortgage and that new equities arising,-or defenses accruing, thereafter, áre not within its application. The ordinary duty incumbent upon the purchaser of a bond and mortgage, for his protection, is to estop the mortgagor, by his formal declarations as to the amount being justly due and owing, from thereafter questioning his liability; but the bank could never, • in reason, have anticipated a defense to an actual obligation, which was dependent for its existence upon the mortgagor’s availing himself in the future of an option conferred by a secret agreement made between himself and the mortgagee. Had such an agreement appeared in the bond and mortgage, the assignee, of course, wpuld have taken at its risk, if at all. When this assignment was made the bond and mortgage were actual obligations, having a valid inception, and if the debtor chose not to give public notice of his private executory agreement, by recording, it was certainly incumbent upon him to inform the bank, if he proposed to avail himself of its provisions. In my opinion, the plaintiff was entitled to enforce the appellant’s liability upon his bond, to its full extent, for any deficiency arising upon a sale of the mortgaged premises; inasmuch as it is found that Thorne & Angell’s indebtedness was in an amount in excess of the amount due upon the mortgage held as collateral to the indebtedness. The judgment appealed from should be affirmed, with costs. Parker, Ch. J., O’Brien, Haight, Landon and Werner, JJ., concur; Martin, J., dissents. Judgment affirmed.