CHAPTER XXV.

OSTENSIBLE OWNERSHIP AND AGENCY - EXECUTION OF DOCUMENTS.

There are two classes of cases to which attention is now asked:

I. Cases in which the execution of documents has been fraudulently obtained; and

II. Cases in which executed documents have been fraudulently completed.

And the questions for discussion are: (1) Under what circumstances are signatories bound by the documents with regard to third persons who have changed their position upon the faith of the documents? and (2) Upon what ground does such liability rest?

Estoppel the Ground of Decision.- It may be as well at the outset to suggest that the rules for such cases are those of estoppel as applied to cases of assisted misrepresentation. Instances arise in this way: The signature, whether fraudulently obtained or fraudulently applied, is by the defrauder represented to some innocent party as being of obligatory character, while, as a matter of fact owing to the fraud, it is not. Now the law of estoppel provides that a misrepresentation will estop not only him who makes it, but him who, in disregard of some duty, did that which provided the opportunity or occasion for the misrepresentation, and so made the misrepresentation credible. Applied to the case in hand, then, estoppel would say that if there be a duty of carefulness in the execution of a document towards persons who afterwards and upon the faith of it may change their positions; and if that duty be disregarded; and if upon the faith of the document the position of some third party is changed, then the executing party will be estopped. One further qualification ought to be expressed, namely, that the document must be one of ambulatory character; that is to say, one that not merely operates between the original parties

1See ch. IV. The presence of other necessary conditions is assumed.

to it, but one that is usually passed on to other persons or acted upon in some way by them.

A priori there does not seem to be much difficulty in asserting a duty of carefulness with regard to the execution of ambulatory documents; indeed, the duty seems to be of the most apparent and obligatory character. Some one asks me to sign two documents, telling me that they are a petition in duplicate for a sewer; after I have signed them, they turn out to be a mortgage upon my lands and an order for the payment of the money to the defrauder; the mortgagee acts upon these documents, and, exercising every usual precaution, accepts the mortgage and pays my order. I ought to lose. And observe the reason. If the law imposes no duty of carefulness upon me, I have been no more negligent than the mortgagee, for without duty there can be no negligence.1 If I have neglected no duty, I have acted quite properly. If I have acted properly, I cannot be blamed for the mortgagee's loss. And if I am not responsible for the loss, I ought not to pay it. Positing the existence of a duty of carefulness, however, we may say that, although the documents were not binding upon me when I signed them, yet by reason of my neglect of duty they became obligatory when the mortgagee changed his position upon the faith of them; or rather that I then became estopped from denying their obligatory character.

I. EXECUTION FRAUDULENTLY OBTAINED.

A study of the authorities of this class reveals the greatest confusion; principally, it is thought, because of the almost entire absence from them of conscious reference to the principles of the law of estoppel. Various other principles and various distinctions have been attempted, but without satisfactory result, or with this result only, that they may when closely examined be found to be, in one way or another, unconscious illustrations or adaptations of the principles of estoppel.

Laymen and Lettered; Void and Voidable.- For example, distinctions are drawn between the case of a dupe who is "a layman and not a lettered" individual, and a dupe of greater

1 Per Bramwell, L. J., in Dickson v. Reuters, etc. (1877), 3 C. P. D. 5; 47 L. J. C. P. 1. And see ante, ch. V.

pretension; between occasions in "which no extraordinary caution was necessary" and those in which it was; between cases in which the dupe was deceived as to the actual contents of the document, and in others as to its legal effect; between cases in which the deception was as to the land affected by the document, and in others as to the disposition made of the land; and above all between cases in which the document was void, and in others in which it was voidable.

To the writer all these distinctions may be supplanted by the law of estoppel; and the various circumstances referred to will have their due effect in helping us to determine whether or not in each particular case the dupe ought to be estopped.

The Authorities. A short review of some of the authorities is necessary to make this clear.

(1582) In Thoroughgood's Case1 Lord Coke held that if a deed be read or explained

"to the party who delivereth it

it shall not bind

in other words than in truth it is, so as he who maketh it be a layman and being not lettered be (without covin in himself) deceived; and that is proved by the usual form of pleading in such cases, that is to say, that he was a layman and not learned, and that the deed was read to him in other words."

Lord Coke said nothing as to lettered but lazy people who complacently assume the truth of that which is told them and are deceived; but it is not hard to see what he would have said to them.

In Touchstone (56) we find the following:

"So if the party that is to seal the deed can read himself and doth not, or being an illiterate or a blind man doth not require to hear the deed read or the contents thereof declared, in these cases, albeit the deed be contrary to his mind, yet it is good and unavoidable.”

These two authorities are old, but their doctrine is whole

some.

(1831) In Edwards v. Brown 2 it is said:

"I agree with my brother Russell that whatever shows that the bond never was the deed of the defendant may be given in evidence under non est factum. But if the party actually executes it, and was competent at the time to execute it, and was not deceived as to the actual contents of the bond, though he might be misled as to the legal effect, and though he might have been entitled to avoid the bond by stating that he was so misled, it nevertheless became by the execution the deed of the defendant, and he is not at liberty upon the plea of non est factum to say it was not." (1852) Hiorns v. Holton. The execution of a deed was "fraudulently obtained" (particulars not given), upon the faith of which money was advanced by a third person; and Sir 12 Rep. 9a.

21 Cr. & J. 311; 9 L. J. Ex. 984.

116 Beav. 259.

John Romilly held the dupe bound, although "he did not understand what he was doing." He was probably a lettered individual.

(1857) Vorley v. Cooke. A solicitor laid before his client a mortgage reciting that costs (£780) were owing to the solicitor, and that it had been agreed to give a mortgage for the amount. The solicitor told the client that the instrument was a covenant to produce title-deeds, similar to other instruments which he had theretofore executed. The client took the solicitor's word for it, and executed the mortgage, which, of course, was shortly afterwards transferred to an innocent holder for value. Kindersley, V. C., decided in favor of the dupe, saying:

"If the solemnities of signing, sealing and delivering are tainted with imposture and deceit, these solemnities cease to have a binding effect, and the instrument to which they have been fraudulently applied cannot be the act and deed of him who had no mind or intention to execute such an instrument, and who applied these solemnities on a false representation of the nature of the deed, and with the mind and intention to execute a deed of a different kind and for a different purpose from that which, by deceit and fraud, was substituted. Therefore it is that evidence of the imposture, falsehood and fraud of such a description can be given at law under the plea non est factum, for the instrument is no more a genuine deed than if the signature had been forged."

No distinction here between lettered and lay people.

(1860) Ogilvie v. Jeaffreson, three years later and by the same judge, was to the same effect, but with this important suggested qualification:

“When the plaintiff was imposed upon, the occasion was one on which no extraordinary caution was necessary.'

3

(1869) Foster v. McKinnon. The indorsement of a bill was obtained by fraudulently alleging that it was a guaranty, similar to one previously given. The bill was "in the ordinary shape of a bill of exchange, and bore a stamp, the impress of which was visible through the paper." The dupe placed his signature on the back of the bill, immediately after that of another indorser. In an action upon the bill by a bona fide holder a verdict went for the dupe upon the following charge:

"If the indorsement was not the defendant's signature, or if, being his signature, it was obtained upon a fraudulent representation that it was a guarantee, and the defendant signed it without knowing that it was a bill and under the belief that it was a guarantee, and if the defendant was not guilty of any negligence in so signing the paper, the defendant was entitled to the verdict."

In term this charge was held to be right; but the court was evidently not very well satisfied that there was no negligence,

11 Giff. 230; 27 L. J. Ch. 185. 22 Giff. 353; 28 L. J. Ch. 905.

3 L. R. 4 C. P. 704; 38 L. J. C. P. 310.

for a new trial was ordered so that there might be "further investigation."

(1871) In Hunter v. Walters1 Lord Hatherley said:

"I apprehend that if a man executes a solemn instrument by which he conveys an interest, and if he signs on the back a receipt for money -a document which, as the vice-chancellor observes, could not be mistaken,he cannot affect not to know what he is doing, and it is not enough for him afterwards to say that he thought it was only a matter of form."

Mellish, L. J., said:

"Now in my opinion it is still a doubtful question at law, on which I do not wish to give any decisive opinion, whether, if there be a false representation respecting the contents of a deed, a person who is an educated person, and who might by a very simple means have satisfied himself as to what the contents of the deed really were, may not, by executing it negligently, be estopped as between himself and a person who innocently acts upon the faith of the deed being valid and who accepts an estate under it."

And James, L. J., said:

"I am of opinion that the rule of equity is the rule of common sense, that the principal must suffer for. the fraud of his agent, and not the stranger who is dealing with the agent; that the man who has made the representations (i. e., the man who although deceived has executed the doc. ument), under whatever circumstances, must bear the consequences of those representations, and not the man who has trusted to the representations so made."

(1886) National v. Jackson. One Jackson induced his twosisters to execute conveyances of property to him by telling them that they

were two deeds respecting the mortgage of £700, which it was necessary that they should sign, as he was going to clear off King's mortgage and send the deeds to King."

Cotton, L. J., said:

"The defendants trusted Jackson, both as their brother and solicitor, and cannot be said to have been guilty of neglect in so doing. Now the rule of law is, that if the person who seals and delivers a deed is misled by the misstatement or misrepresentation of the persons procuring the execution of the deeds, so that he does not know what is the instrument to which he puts his hand, the deed is not his deed at all; because he was neither minded nor intended to sign a document of that character or class, as, for instance, a release while intending to execute a lease. Such a deed is void. . . . On the evidence it is clear that nothing was said to mislead them as to the nature of the instrument they were executing. It is doubtful how far they understood the nature of the deeds, but it is in my opinion clear upon the evidence that they knew that the deeds dealt in some way with their houses. This contention therefore fails."

Lindley, L. J., said:

"It is impossible, consistently with legal principles, to hold the conveyance executed by their sisters absolutely void. They knew that they related to their houses although they did not understand their effect. They trusted their brother and were cheated by him. On the authority of Thoroughgood's case and other cases these deeds cannot be considered void, though they may be set aside as voidable, except as against a purchaser for value without notice."

IL R. 7 Ch. 82; 41 L. J. Ch. 175.

2 33 Ch. D. 1.