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German-American Bank v. P. W. Scribner Lumber Co.

30 N.Y.S. 740 Court N.Y. Gen. Term Decision date 1894-10-17 English

Delivered by BRADLEY, J.

Contents

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p. 740
(81 Hun, 140.)
GERMAN-AMERICAN BANK OF TONAWANDA v. P. W. SCRIBNER LUMBER CO. et al.
(Supreme Court, General Term, Fifth Department.
October 17, 1894.)

Headnote

Payment—Sale oe Mortgaged Property.
After defendant had given a chattel mortgage to plaintiff and others,' the property was seized under attachment against one S. The mort
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gagees then appointed an attorney with power to do all things necessary to enforce the mortgage. The attorney replevied the property, and sold enough to pay the mortgage. Meld, that such sale was not a payment of plaintiff’s claim, because the attorney was a trustee to hold the proceeds of the sale during the' pendency of the attachment suit involving the title to the mortgaged property, and it was immaterial that defendant was not a party to the replevin suit
Appeal from circuit court, Erie county.
Action by the German-American Bank of Tonawanda against the P. W. Scribner Lumber Company and another on 13 promissory notes made by defendant company, a domestic corporation, and indorsed by the other defendant. The alleged defense is payment. From a judgment entered on a verdict directed in favor of plaintiff for $18,601.53, and from an order denying a motion for a new trial, made on a case and exceptions and on the ground of newly-discovered evidence, defendants appeal. Affirmed.
Argued before DWIGHT, P. J., and LEWIS, HAIGHT, and BRADLEY, JJ.
W. B. Simson, for appellants.
Tracy C. Becker, for respondent.

On October 30, 1891, the plaintiff held thirteen notes of the defendant corporation, amounting to $18,300. A like number of its notes, amounting to $24,783.44, were held by the Lumber Exchange Bank of North Tonawanda. Twelve of its notes, amounting to $9,517.62, were held by the State Bank of Tonawanda, and George F. Rand held two of its notes, amounting to $4,000. To secure the payment of those notes and any renewals thereof, the defendant, on that day, made to those holders of its notes a chattel mortgage, in the usual form, upon upward of 5,000,000 feet of lumber. The promissory notes in question were made in renewal of those mentioned in the mortgage as held by the plaintiff. In December, 1891, all the mortgagees except the State Bank, joined in a power of attorney to Benjamin L. Rand, to do "whatever was requisite to enforce the mortgage, and conduct all actions and proceedings necessary to accomplish the purpose in view. In actions brought by creditors of defendant Scribner for alleged claims amounting to $59,000, attachments had been issued to the sheriff, and by him levied upon the lumber. After the power of attorney was delivered to Rand, an action was brought in the name of the mortgagees against the sheriff to recover the possession of the lumber, founding their alleged title on the mortgage; and, the requisite bond being given, the property was delivered to the plaintiffs, and the possession of it was taken by Rand in their behalf, and he sold sufficient of it to produce $56,000, which he deposited in the State Bank to his credit, as trustee; and, by his checks as trustee, he transferred $12,000 to the plaintiff bank, and took, as trustee, its certificate of deposit by which the bank promised to pay interest at the rate of 4 per cent, per annum if left there three months.

On the part of the defendants it is insisted that the taking possession of the lumber and selling it by the plaintiff’s agent operated

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as payment of the notes. Such is the apparent effect of the transaction, and it must be so treated unless there is some special reason why the plaintiff was not required to make the application on the notes. Case v. Boughton, 11 Wend. 106 ; Charter v. Stevens, 3 Denio, 33 . At the time of the trial, the action brought against the sheriff had not been determined in favor of the plaintiffs therein. The question then was at least an open one whether they would succeed in supporting title under the mortgage. It is true that the mortgagor was not a party to that action, and therefore might not be concluded by its result, nor was he a party to the attachment actions. But in the former, as between the parties to it, the question whether, as against the attaching creditors, the title, when the mortgage was made, was in the mortgagor or in Scribner, could be determined; and, if the final determination should be that the plaintiff and its associates took no title by the mortgage, none of them would have received payment of their notes from the mortgaged property, although they had sought to do so by means of their action in replevin. The defendant corporation could not, although not bound by the determination, effectually, for that reason, assert in such event payment of the plaintiff’s claim, founded upon the taking and sale of the property. By virtue of the attachment levies, the sheriff had taken it from the mortgagor, and had the custody of it. The action against the sheriff is, in effect, an attempt to follow the property taken from the mortgagor; and whether the mortgagees will succeed in reclaiming it will depend upon the result of their action. Unless they do recover in their contest with the sheriff for the possession of the property, the lumber company cannot charge them for the property or its proceeds. When their action was instituted by Band, he procured sureties for the undertaking upon which the property was delivered to the plaintiffs in the action; and it was then understood that he would take charge of the property and the proceeds to await the determination of the suit. In that view, he, with the assent of the plaintiffs in it, assumed the relation of trustee to hold the proceeds of the sale during the pendency of that litigation, and to dispose of them as the result of it should require. At all events, that conclusion is warranted by the evidence. If the sheriff should recover, the plaintiffs in that action would have to account to him for the property. It seems clear that in the meantime the plaintiff is not required to apply the proceeds of the property upon the debt in question, and therefore there is no legal objection to the maintenance of this action.

There were exceptions taken to evidence relating to some of the proceedings in the action against the sheriff. They could properly be proved only by the records or papers in the action, if the question were raised by objection. But the facts that the actions were brought by the creditors of Scribner, in which attachments were issued to and levied by the sheriff upon the property, and that the action was brought against him by the mortgagees, and its nature and purpose were proved without objection requiring the production of the papers or records; and, when the pendency of the latter-action appeared, relief from it by a result favorable to the plaintiff

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became essential to require it to apply the proceeds of the property upon the notes. The evidence relating to the trial and verdict added to the facts, as they then appeared, nothing prejudicial to the defendant, and therefore the defendants were not in any manner prejudiced by the error of its reception. It may have been in view of the pendency of the replevin action that the defendants made and indorsed or guarantied the notes mentioned in the complaint in renewal of those mentioned in the mortgage after that action had been commenced and the property taken into the possession of the plaintiffs in it, as before mentioned. While any judgment in that action may not preclude the lumber company from asserting title to the property, and, as against it, may constitute no evidence in that respect, the liability of the plaintiff to be charged by that company with the property or its proceeds is dependent upon the right of the mortgagees to take and retain the property, as they have sought to do by their action. It is sufficient for the purposes of the present action that such right, at the time of the trial, was in litigation and undetermined. There were no errors in the rulings at the trial to the prejudice of the defendants; and as the direction of a verdict was requested by each of the parties, and no request by the defendants for the submission of any question to the jury, there was no error in the direction given by the court, as there was evidence to support a verdict for the plaintiff. Kirtz v. Peck, 113 N. Y. 222 , 21 N.

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