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

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 E. 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, aud 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 Inmber, 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 if to produce $56,000, which he deposited in the State Bank to his credit, as trustee; and, by his checks as trustee, he transferred

On the part of the defendants it is insisted that the taking possession of the lumber a,nd selling it by the plaintiff’s agent operated 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 ques-' tion 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 plaintiffs 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 is,