Opinion
Argued October 20, 1911
Decided November 21, 1911
Henry D. Hotchkiss for appellant.
S. Mack Smith for respondent.
The question for our consideration is whether the court properly admitted the testimony of the plaintiff as to the conversation with Robinson, one of the defendant's vice-presidents. In answering that question, two other questions are involved: 1. Does it appear from the facts disclosed that the defendant had power and authority to make representations in regard to the mortgage given by the improvement company and thereby become an insurer that such mortgage was a first lien on the real property described therein? 2. Does it appear from the facts disclosed that Robinson had authority to speak for the defendant and make it responsible for any damages occurring by reason of a false statement made by him in response to the plaintiff's question?
The questions involved in the admission of plaintiff's conversation with Robinson are open to review in this court, notwithstanding the judgment in favor of the plaintiff has been unanimously affirmed by the Appellate Division. They are questions of law in the consideration of which it is necessary to examine the record so far as it relates to them.
The powers of a trust company are expressly defined by statute, and such powers and also the unexpressed and incidental powers possessed by a corporation were considered by this court in Gause v. Commonwealth Trust Company ( 196 N.Y. 134), and in that case, in speaking of the power of a trust company, the court say: "The legislature intended, and the public interests demand, that trust companies shall be confined not only within the words, but also within the spirit of the statutory provision which declares that a corporation shall not possess or exercise any corporate powers not given by law or not necessary to the exercise of the powers so given. Such authority does not permit a trust company to enter into speculative and uncertain schemes or, unless under peculiar circumstances not disclosed in this case, become the guarantor of the indebtedness or business of others." (p. 155.)
It is not shown that the defendant was in any way interested in the improvement company or the bonds to secure which the trust mortgage was given, or that it was to receive a commission or pecuniary advantage by the sale of the bonds. The bonds sold to the plaintiff had previously been certified and delivered to the improvement company and at the time of the sale were apparently owned by Russell who was, so far as appears, in no way connected with either party to the trust mortgage except as the owner of such bonds secured thereby.
The defendant's duties as trustee are stated in the trust mortgage and are substantially confined to the following:
1. The authentication of the bonds by a certificate thereon.
2. The delivery of the bonds to the treasurer of the improvement company upon its written order.
3. The execution of releases of lots upon payment of amounts as specified in the mortgage.
4. The registration of bonds.
5. The foreclosure of the mortgage upon default if properly indemnified.
6. The payment of prior mortgages as provided in the twentieth paragraph of said mortgage if money for such payment is paid to it by the improvement company as provided by said paragraph.
The defendant was not required by the trust mortgage, nor, so far as appears from the facts disclosed, was it authorized by statute or otherwise to make representations to prospective purchasers as to the value of the bonds or to insure the title to the mortgaged property or the relative priority of the trust mortgage upon the improvement company's real property.
There is no presumption of law that Robinson, as a vice-president of the defendant, had authority to make false or other representations to the plaintiff in regard to the priority of the trust mortgage as a lien upon the improvement company's property. The record does not include the charter or by-laws of the defendant. No evidence was given of any action taken by the defendant through its board of directors relating in any way to the matters under consideration.
All that the record discloses of acts by Robinson in connection with the improvement company's transactions is the fact that he executed the trust mortgage on behalf of the defendant; a letter written by him to a third person purporting to be in behalf of the defendant, but for what purpose does not appear, in which he says: "We have accepted the trusteeship after securing the services of a competent real estate appraiser and it is his opinion that the property covered by the mortgage is ample security for the same;" the conversation with the plaintiff and a similar conversation with a third person in no way associated with the plaintiff.
It is quite unnecessary to consider the competency of the letter because the court found that the statement therein was not shown to be false and the conversation with the third person is not competent as will appear, among other reasons, from what we say regarding the conversation with the plaintiff. It is now claimed that Robinson had apparent authority to act in all matters relating to the improvement company and that authority for the defendant to make the representations to the plaintiff is found in the trust mortgage itself. We do not agree with such contention.
Purchasers of bonds are expressly referred therein to the mortgage for a statement of the property pledged, the nature of the security, the rights of the holders of said bonds and the conditions upon which the bonds are secured and issued. The reference in the bonds is to the mortgage and not to the defendant as the trustee for the mortgage bondholders. The trust mortgage was delivered to the defendant and presumably was in its possession and the plaintiff as a bondholder doubtless could have asked the defendant to show him the mortgage for the purpose of ascertaining, so far as it could be ascertained from the mortgage itself, any of the facts for a statement of which the bond referred to said mortgage.
The plaintiff did not ask the defendant to see the mortgage nor did he ask for the contents of the mortgage as such. Indeed, he testified that he did not assume that the mortgage was in the defendant's possession. The question by the plaintiff was an incidental and collateral one, entirely disconnected from any duty imposed upon the defendant as a trustee under the mortage.
It must again be borne in mind that the defendant had no interest in the bonds or in the mortgage, except as such trustee, and it was in no way the agent of the mortgagor in the sale of the bonds. The recital in the trust mortgage of the prior liens was in connection with the defendant's duty in paying the same if the money therefor was subsequently paid to it as in the trust mortgage provided. No duty was imposed upon the defendant by express terms of the mortgage in regard to the proceeds of the bonds unless such proceeds were paid to it by the improvement company. Nothing by which the defendant became liable to pay the prior liens on the property has been shown. If the plaintiff had asked at the regular place of business of the defendant whether any money had been paid to it for use in paying prior liens, or if it had been asked whether the prior liens had been paid by it pursuant to the terms of the trust mortgage, and a false statement had been made in answer to such question, by reason of which the plaintiff was injured, a very different question would have been presented. The plaintiff did not call upon the defendant to perform a duty under the trust mortgage or attempt to ascertain whether a duty imposed upon it had been performed, but he asked a question in answering which Robinson cannot, from anything that appears, be presumed to have had authority to speak for the defendant, even if the defendant had power and authority to make such representations.
The authorities relied upon by the respondent do not sustain his position. They are each based upon facts entirely different from those shown in this case. As an illustration, in Nash v. Minnesota Title Insurance and Trust Company ( 159 Mass. 437), a case much relied upon by him, the representations upon which the action is brought were made in the name of the defendant by an officer fully authorized to act for it, and his authority to speak of the title in question is convincingly shown by the following quotation from the opinion: "It (the trust company) was in the business of insuring titles to real estate, and was paid for issuing policies of insurance on this title; making representations in regard to the title was so far incident to the principal undertaking for which it was paid, that it might properly make such representations to those who were about to take bonds."
The judgment should be reversed and a new trial granted, with costs to abide the event.
CULLEN, Ch. J., GRAY, WERNER, HISCOCK and COLLIN, JJ., concur; WILLARD BARTLETT, J., dissents.
Judgment reversed, etc.