Hyperlawhypertext legal database Hull v. Carnley 9 N.Y. Super. Ct. 99

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Hull v. Carnley

9 N.Y. Super. Ct. 99 2 Duer 99 Court N.Y. Super. Ct. Decision date 1853-03-26 English

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Calvin E. Hull, Respondent, v. Thomas Carnley, Sheriff, and Joseph H. Colton, Appellants.
(Before Oakley, Ch. J., Duer, and Paine, J.J.)
March 8.
March 26, 1853.

Headnote

Where, by the terms of a chattel mortgage, the mortgagee has an immediate right of possession, the property cannot be levied on and sold under an execution against the mortgagor.
But where the mortgagor has a right of possession for a limited period, the weight of authority is, that Ms possessory interest is a proper object of levy and sale.
The sale, however, in this case, must be confined to the interest of the. mortgagor, for if the sheriff, having notice of the mortgage, sell the entire property as that of the mortgagor, he renders himself liable to the mortgagee, at least to the extent of the mortgage debt.
A provision in a mortgage that the mortgagor may retain the possession until a default in the payment of the debt, is no evidence of a trust, affecting the validity of the mortgage.
If the continual possession of the mortgagor under such a provision is any evidence of fraud, it only raises a presumption that may be repelled, and the finding of a jury or judge negativing a fraudulent intent, is conclusive.
Upon these grounds judgment for plaintiff affirmed with costs.
Appeal from a judgment at special term, in favor of the plaintiff.
The cause, hy the consent of the parties, was tried hy the Chief Justice without a jury, in October, 1852. The action was brought to recover against the defendants the value of three lithographic presses and fourteen lithographic stones, and the following are the material facts, as stated in the pleadings, and established by the evidence.
On the 14th of August, 1850, one Francis Michelin executed and delivered to the plaintiff a chattel, mortgage, covering the presses and stones in question, to secure the repayment of $230 —$100, with interest, in six months, and the residue in one year from the date of the mortgage; and, by an express provision in the mortgage, Michelin, until a default in payment, was to continue in the quiet possession of the property. On the day of its execution and delivery, a true copy of the mort
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gage was filed in the office of the Clerk of Kings County, where Michelin resides.
On the 28th of September,'l'SSO, the defendant, Colton, recovered a judgment against Michelin, in the Court of Common Pleas, for $488.46; and immediately issued an execution thereon, which was delivered to the defendant, Camley, then sheriff of the city and county. By virtue of this execution, Carnley, under an indemnity from Colton, levied upon and sold the property so mortgaged, as belonging solely to Michelin. Previous to the sale, written notice of the existence and terms of the mortgage had been given to him, and he was forbidden to sell in prejudice to the rights of the plaintiff.
The Chief Justice gave judgment for the plaintiff for $261.88-—the sum due upon the mortgage, with costs.
E. W. Chester and A. J. Vanderpoel, for the defendants,
insisted that thé property was subject to sale under the execution, and was rightfully sold; and, in support of their -argument, relied upon the following points and authorities.
I. The sheriff, in levying, was bound to levy on the property in substance, and not upon a right or interest springing out of the property. The property, if rightfully subject to the mortgage, was sold subject to it, and was liable to pay the mortgage ■debt.
H. The sheriff, in levying on property so circumstanced, is only to inquire whether he may lawfully seize and sell, but is not bound, either in levying or selling, to admit or decide upon the validity of the mortgage. Caveat emptor applies to the purchaser. He gets the right and title of the defendant in execution, not the right of a third person. The sheriff is liable to such third person, only in case his right is such that the levy is a trespass.
HI. The sheriff was not a trespasser—the mortgagee having neither the actual nor constructive possession, nor the right of possession, could maintain neither trespass, trover, nor case. In •these actions was formerly to be found a remedy for every injury to personal property. The Code has created no new rights, but only changed the form of remedy for a wrong,
IV". The sheriff has not, either in law or in fact, destroyed
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any right of the respondent to the property, nor created any difficulty in the assertion of that right. The property was all sold to one purchaser. In law the mortgage is just as effectual against the property as before the levy ; in fact, the property has been as much within reach of the mortgagee as if the levy had not been made. The property has been with the mortgagor, and at or within a few steps of its former situs ever since the sale. The purchaser has done no act in regard to it, that the mortgagor had not a full right to do. What wrong then has been done ? What injury or damage suffered?
V. The sheriff did not give notice that he sold subject to the mortgage. If he had done so, would he have been less a wrong-doer ? He had no right to judge whether the mortgage was valid—whether it was bona fide—whether paid or unpaid. It was enough that he had the right to levy, sell, and give possession. Ought he to have given notice that he sold subject to the mortgage, provided it was valid? Whether he gave such notice or not, all knew that he- did so sell, and the mortgagee was not damaged, much less injured by such an unusual notice not being given. The levy is as much a trespass on the mortgagee’s rights with the notice as without.
VI. If any one has a right to complain that the notice was not given, that the property was sold subject to the mortgage, it is the purchaser. But he pretends to no ignorance, and if the mortgagor is to be believed, he can well afford to pay the mortgage, since the value of the property sold was from $1600 to $1100, and it does not appear to have been sold for more than enough to satisfy the execution.
VII. There is no evidence that the plaintiff was damaged, nor of any amount of damage, by the sale.
VHI. If the respondent has a right of action, that right accrued on the day of sale, and was independent of the time when money was payable by the terms of the mortgage. The demand upon the sheriff after the sale, and paying over the money, was a nullity, and created no right of action.
IX. The finding was contrary both to law and evidence, and ought to be set aside, and judgment entered for the appellant.
X. The mortgage provides that until default be made in the
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payment of the said sum of money, the mortgagor is to remain and continue in the “ quiet and peaceable possession of the said goods and chattels, and in the full and free enjoyment of the same.” This is a “ trust for the use of the person making” the mortgage, and the statute declares it “ void as against the creditors existing, or subsequent of such persons.” (2 R. S. 135, § 1; Spies v. Boyd, 11th vol. Legal Observer, 54; Griswold v. Sheldon, 4 Coms. 581.) 1. This section is wholly independent of the subsequent provisions in Sec. 5 in the same title, and of the 1st section of Title 3, same chap., 7 (p. 137). 2. Under the Revised Statutes the distinction between an absolute sale and a mortgage of goods was abolished. A mortgagee acquires the same right to the immediate possession as the vendee in the case of an absolute sale. Continued possession by the mortgagee is in derogation of the legal nature of the conveyance. (2 R. S. 136, Sec. 5; Doane v. Eddy, 16 Wend. 523 ; Randall v. Cooks, 17 Wend. 53 . 3. Where .the possession is in derogation of the legal nature of the conveyance, the law presumes it may be by a secret consent or agreement of the parties, and pronounces it fraudulent and void, unless the good faith of the parties and absence of fraudulent intent is made to appear. The law will only sanction it as a privilege granted by the mortgagee or vendee founded on motives satisfactory to a jury, or where the situation of the property forbids an actual taking of possession. But where on the face of the instrument by which the party places the legal title out of his own control and beyond the reach of his creditors, he retains to himself the right of possession and full and free enjoyment for a certain time, he creates a trust in the property for his own use, a right which the statute says he shall not have, and makes his act void. (Goodrich v. Downs, 6 Hill, 433 .) 4. The right to possess and fully and freely enjoy personal property, necessarily gives the right to use it for its ordinary purposes and to enjoy its proceeds and benefits. The person exercising that right would -not be accountable to the owner for any injury to or destruction of his property, except for its abuse. At the end of the term the property may be worn out or of comparatively little value. It is hard to see how this would differ in effect from conferring upon the party the right to sell and dispose of the property as his
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own. (Griswold v. Sheldon, 4 Coms. 581; Spies v. Boyd, 11 Legal Observer, 54.)
XI. The plaintiff did not prove the absence of fraudulent intent by facts and circumstances so as to overcome the presumption of fraud which the law raises from the seller remaining in possession. (Randall v. Parker, 3 Sandford, 69.)
XII. Assuming that the mortgage is valid, the mortgagor having the right to the possession, the mortgagee’s only action would be in the nature of case for an injury to the reversion. This would only lie for an injury or a destruction of the property. The sale could not impair or affect the right of the mortgagee; his mortgage, notwithstanding the sale, remained a lien on the property in. the hands of the purchaser, and he could take it from the purchaser when his mortgage became due in the same manner as he could from the mortgagor. (Bank of Lansinburgh v. Crary, 1 Barb. S. C. 542 ; Hurd v. West, 7 Cow. 752 ; Gordon v. Harper, 7 T. R. 9; Van Antwerp v. Newman, 2 Cow.; Jackson v. Parker, 1M. and S. 234; 2 Saund. R. 47 (d.) (f.) and cases cited.)
XHI. The demand on the sheriff of the goods, and his neglect to deliver them after he had rightfully parted with the possession, did not show any conversion by him or render him liable. The law makes it his duty to take the goods into his possession and deliver them to the purchaser. As well might they in this case have demanded the goods of the mortgagor and sued him for a conversion.
XIV. There must be a demand of both defendants, and there is no proof that any demand was ever made of the defendant Colton. (Mitchell v. Williams & Roberts, 4 Hill, 13 .)
D. D. Field, for the plaintiff,
in support of the affirmance of the judgment, insisted upon the following points and authorities.
I. A bond fide mortgage of chattels, duly executed and filed, passes the legal title to such chattels to the mortgagee (Sto. on Bail., secs. 287,288, and cases there cited). In respect to title, the Statutes of this State have abolished all distinction between absolute sales and mortgages of chattels (Randall v. 0Cook, 17
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Wen. 523). It matters not that a mortgagor continues in possession of chattels mortgaged, or that /he has a right to hold such chattels for a definite period. He is simply a bailee until the condition of the mortgage has been complied with (Fuller v. Acker, 1 Hill, 473 ; Rogers v. Traders’ Ins. Co., 6 Paige, 583).
II. The interest of a mortgagor, in such case, is- a limited, prescribed interest. His use, appropriation and possession of such chattels are limited and prescribed (Smith v. Acker, 23 Wen. 653). A sale, any interference with the title of the mortgagee, any act inconsistent with such prescribed use on the-part of mortgagor, would at once terminate his right to possession; and at all times the interest of the mortgagee is one which the courts will protect (Matteron v. Baucus, 1 Com. 295; Wheeler v. McFarland, 10 Wen. 318; Howland v. Willet, 3 San. Sup. C. Rep. 607).
IH. A stranger claiming under mortgagor, can hold no more than his limitéd and prescribed interest. A levy upon, and sale of mortgaged chattels, under execution against property of the mortgagor, is an unlawful interference with the interest of the mortgagee, for which he has a remedy against the officer (Otis v. Wood, 3 Wen. 500; Bailey v. Borton, 8 Wen. 339 [see 347]; Butler v. Miller, 1 Com. 496).
IV. The duty of the sheriff is well established. He should discriminate. If he does more than is necessary, under his authority, he is a trespasser (King v. Manning, Comyn R. [619 mar, page]; Waddell v. Cook, 2 Hill, 47 ; Melville v. Brown, 15 Mass. 82 ; Burrall v. Acker, 23 Wen. 609, &c.).
V. The principle governing in case of sales of partnership property, under execution against property of one partner, or of property held by tenants in common, or joint tenants under execution, against property of a single tenant, is equally applicable to the case of a sale of mortgaged chattels under execution against the property of the mortgagor (White v. Phelps, 12 N. H. 382 ).
VI. The sheriff, or officer, by levy upon and absolute sale . of chattels mortgaged, assumes, personally, the payment' and satisfaction of the mortgage.

A chattel mortgage in all cases'

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vests the legal title in the mortgagee, and where, by the terms of the instrument, he has the immediate right of possession, the property cannot be rightfully levied on and sold under an execution against the mortgagor, even when the possession has not, in fact, been changed. In these cases the mortgagee is, in judgment of law, the absolute owner. The mortgagor a mere bailee at sufferance. (Marsh v. Lawrence, 4 Cow. 469 ; Otis v. Wood, 3 Wend. 500 ; and McCracken v. Luce, cited in the opinion of the court; Bailey v. Burton, 8 Wend. 346 ; Mattison v. Baucus, 1 Comst. 295.)

On the other hand, where the mortgagor is entitled to the possession for a definite period, the weight of authority seems to be, that his possessory interest is a proper object of levy and sale, and without meaning to commit ourselves by a positive opinion, we shall assume, for the purposes of this decision, that such is the law.

In this case, Ivlichelin, the mortgagor, by an express clause in the mortgage, was to continue in the possession of the goods and chattels mortgaged, until- a default in the payment of the principal debt, and it was during the period that he was thus entitled to the possession, that the levy and sale, which are the subject of the complaint, were made. The mortgage had previously, however, been filed, and the sheriff had also express notice of its existence and terms, and the question is, whether thus charged with notice constructive and actual, he has not rendered himself liable in the present action, by his proceeding to sell and deliver to the purchaser, the entire property as that of the debtor. If he is liable, the other defendant, the judgment creditor, under whose direction and authority he acted, must be equally so. If the claim and rights of the plaintiff as mortgagee have been disregarded and violated, they are jointly liable as wrong-doers.

The question as to the liability of the sheriff, we believe, has not arisen in any case, in all its circumstances, similar to the present, but it has arisen and been determined in several cases so strictly analogous, that, in principle, they are not distinguishable.

The leading case is Wheeler v. McFarland, 10 Wend. 320 . The plaintiff had a lien for advances made by him to the judg

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ment debtor on the property levied on hy the sheriff, who had notice of the facts, but who, nevertheless, proceeded to take possession of, and advertise for sale, the whole of the property, as belonging absolutely to the debtor. The court held that by thus acting, he rendered himself liable as a trespasser ab imitio, so as to entitle the plaintiff to a recovery against him in an action of replevin. It is true that the lien of the plaintiff in this case was created by a pledge, and not by a mortgage, but as the interest of a pledgor is just as liable to be sold under an execution as the qualified interest of a mortgagor (2 E. S., p. 366, s. 20), we cannot perceive that this distinction detracts at all from the weight of the decision, as a relevant authority.

So the interest of a debtor, as a joint owner or partner, may undoubtedly be sold under an execution against him, but if the sheriff, having notice, proceeds to sell the entire property, thus jointly held, as that of the debtor, it is settled by many decisions that he becomes immediately liable to the other joint owners or partners, who are entitled to recover against him in a suitable action, the property itself, or its value. ( Walsh v. Adams, 3 Denio, 125 ; Waddell v. Coit, 2 Hill, 49 ; Mellville v. Brown, 15 Mass. 82 ; White v. Phelps, 12 N. H. R. 182 ; Johnson v. Evans, 7 Mann & G. 240.)

These decisions, as it seems to us, can only be explained and justified upon the ground that,-whenever it is known to the sheriff, or he has reason to believe, that the interest of the judgment debtor in the property upon which he has levied, is special and limited, it is his duty to declare the fact, and by express words, confine the sale to such right, title and interest, as the debtor may really possess. It is this doctrine, therefore, that we must now consider as established, and so far from thinking that goods covered by a mortgage can be justly excepted from its operation, we are clearly of opinion that it is to the relation of mortgagor and mortgagee, that it applies with a peculiar force. A mortgagee of chattels is in all cases the real owner, and the mortgagor, when permitted to retain the possession, simply his bailee. (Bancroft v. Jones, 4 Comst. 509; Fuller v. Acker, 1 Hill, 473 ; Rogers v. Traders' Ins. Co. 6, p. 583.)

And, as we before intimated, we seriously doubt whether a

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right of possession, which in its nature is strictly personal and incapable of transfer (for if a power of disposition is given to the mortgagor, the mortgage itself is fraudulent and void, 2 Oomst. 581), is a proper subject of levy and sale, under an execution, at all. Where fraud cannot be justly imputed, we see no reason why the rights and interests of a mortgagee ought not to be as carefully protected as those of a pledgee; and consequently, if a sale of goods and chattels, covered by a mortgage, is allowable at all under an execution against the mortgagor, it is evident that it ought to be so conducted as not to defeat, or in any degree impair, the remedy of the mortgagee. It should, therefore, comprehend the entire property as a single lot, be limited to the right and interest of the defendant, and be expressly subject to all the terms and conditions of his prior conveyance.

It is said, that when the property levied upon is in the possession of the mortgagor, the sheriff is not bound to inquire and determine whether the mortgage is valid or not—-in other words, he has a right to be silent, and cast the risk upon the purchaser. The reply is, that the duty of the sheriff to inquire and determine whether the defendant is an absolute owner, or has only a special and limited interest, is exactly the same, in the case of a mortgage as in that of a pledge or of a partnership—a pledge may be a cover for fraud, as well as a mortgage —the asserted partnership may not exist, or may not embrace the goods in question. The sheriff, however, in proclaiming the fact that a title is asserted by a third person, to which that of the defendant in the execution is subordinate, and in selling the property subject to this claim, determines nothing as to its validity—he merely pursues the course which the law judges to be necessary for the protection of rights and interests, which might otherwise be sacrificed or endangered; he cannot say that a mortgage duly tiled is a valid security, but he cannot treat it as not existing. He has no right to say that it is invalid by selling the property which it embraces, as belonging absolutely to the judgment debtor—it is at his own peril that he thus conducts the sale. As embracing a denial of the title of the mortgagee, it is an invasion of his rights, for which the law gives him an appropriate remedy. When the mortgage is valid,

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the sheriff is as much a trespasser and wrong-doer as if the judgment debtor had no interest in the property at all.

There is no force in the objection that the property is still subject to the mortgage, and as such, may be even now seized and sold by the sheriff. - In all cases where goods are wrongfully sold, the owner has an election to reclaim the property from the hands of the purchaser, or recover its value from the tortious vendor. If the sale made by the defendant was unlawful, we see no reason for denying this election to the plaintiff.

The result is, that the defendants must be answerable in damages to the full extent of the sum for which judgment has been rendered against them, unless the title of the plaintiff as mortgagee can be’ successfully impeached. If the mortgage, as has been contended, was upon its face fraudulent and void as against creditors, or was rendered so by the continued possession of the mortgagor, the property which it embraced was rightly sold under the execution, as belonging exclusively to the debtor. It is evident, from the fact that an indemnity was required and given, that it was upon the ground that the mortgage was wholly void, that the sale proceeded, and it is upon this ground alone that it can be justified. That the mortgage was founded upon a full and valuable consideration was clearly proved, and is not denied, but it is insisted that it was rendered void as against creditors by the provision which it contains, that until default in the payment of the moneys meant to be secured, the “ mortgagor should remain and continue in the quiet and peaceable possession of the goods and chattels which it embraced, and in the full and free enjoyment of the same.” The objection is founded upon the interpretation given by the counsel for the defendants to S,l, Tit. 2, of the Statute of Frauds (2R.S., p. 135), which declares that “ every conveyance, transfer, or assignment of goods and chattels, in trust for the use of the person making the same, shall be void, as against his creditors existing or subsequent;” but the learned counsel, we think, greatly erred in assuming that the stipulation to which he objected created a trust in favor of the mortgagor, within the meaning of the statute. Such a construction may very reasonably be given to 'a provision which not merely gives to the mortgagor for a time the right of possession, but authorizes him

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to deal with the property, during that period, as an absolute owner, nor have we any difficulty in assenting to the decisions in which, in such cases," this construction has been adopted (Wood v. Lowry, 17 Wend. 492 ; Griswold v. Sheddon, 4 Comst. 582; Spies v. Boyd, 11 Leg. Obs. 54). bn Such a case, it may be justly regarded as the established law. But when the provision is limited to the personal use and enjoyment of the property by the mortgagor, that it created no trust affecting the validity of the mortgage, was, in our judgment, expressly decided by the Court of Errors in Smith v. Acker ( 23 Wend. 653 ), and is a necessary inference from the opinions delivered in the Court of Appeals in the recent case of Griswold v. Sheddon.

The objection arising from the actual possession 'of the mortgagor will be disposed of in a few words. In this court it has uniformly been held that the continued possession of a mortgagor, when consistent with the terms of the mortgage, and limited to endure only until a default in payment, where the mortgage has been duly filed, is not even presumptive evidence of a fraudulent intent, nor are we aware that until the adoption of the Revised Statutes, it has ever been doubted that such was the established law, in this State, as well as in England. The immediate delivery of the possession is indeed essential to the validity of a pledge ; and its omission, where there is an absolute sale, as inconsistent with the nature of the contract, may be justly held to raise a presumption of fraud. But the main object of a mortgage, as distinguished from a pledge, is to enable the debtor to retain the possession and enjoyment of the property, so long as he fulfils the conditions of the contract, and this is just as true of a mortgage of chattels as of lands, nor can we believe that the Revised Statutes meant to abolish so important and vital a distinction—we cannot believe that it was the intention of the Legislature, in effect, to convert every chattel mortgage into a pledge. As the danger of fraud is now effectually guarded against by requiring every such mortgage to be filed (Laws of 1833, chap. 299), we are not at all disposed to favor a doctrine which is not only clearly opposed to the general understanding of those engaged in business, but plainly repugnant to their interest and convenience.

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It is not necessary, however, to insist upon these views in the present case, nor to explain more fully the reasons which have led "us to adopt them. Let it be admitted that the act of 1833, requiring a chattel mortgage to be filed, as notice to creditors and purchasers, has not repealed these provisions in the Revised Statutes, upon which the argument is founded (2 R. S., s. 5, p. 136), and that, according to the literal construction of those provisions which the Supreme Court has adopted, an immediate delivery of the property, followed by an actual and continual change of its possession, is just as necessary in the case of a mortgage as of an absolute sale. When there is no such change of possession, it is only a presumption of fraud that is raised, and this presumption, by the express words of the statute, may be repelled by evidence that the mortgage was made “ in good faith, and without any intent to defraud creditors or purchaser.” This question, it is now settled,, is a question, not of law but of fact, and hence the finding of the judge, by whom alone this cause was tried, must have the same effect as that of a jury. He has decided, as á question of fact, that there was no fraudulent intent, and as the case is now before us solely upon exceptions of law, we are as much concluded by his decision as we should have been by the verdict of a jury.

The judgment at special term must therefore be affirmed with costs.

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