Lighthouse v. Third National Bank

Werner, J. The learned trial court found the facts substantially as above stated. Upon these facts it based the legal *341 conclusion, “ that the transfer to the defendant banks, by the said John 0. French and Adelpha C. Briggs, of the said bark upon the said Boody lands, peeled by said Duncan McBea under his contract with the United Lumber Company, was subject to whatever right the plaintiff acquired therein by the advance payment made by him upon the agreement to purchase 1,000 cords of bark of the Morrison Bun Lumber Company, and the payment to Duncan McBea of $1,825 of the proceeds of the discount of the plaintiff’s notes to apply on his contract for the peeling of said bark. And that, to the extent of the said sum of $1,825, such transfer was in fraud of the plaintiff’s right so acquired, which was the right to compel the specific performance of the contract between the Morrison Bun Lumber Company and the United Lumber Company to the amount advanced by the plaintiff and actually paid to said McBea.” “That the plaintiff is entitled to judgment against the defendant banks, the Third National and Farmers and Mechanics’ Banks, setting aside the transfer so made to them of tho bark, to the extent of the said sum of $1,825, paid by the Morrison Bun Lumber Company to said McBea, and that the plaintiff have judgment against said banks for the sum of $1,825, part proceeds of the sale of said bark by them.” The Appellate Division unanimously affirmed the judgment entered upon the decision of the trial court, and we are, therefore, compelled to accept the facts as found. This case presents a practical illustration of the difficulties with which courts are beset in the attempt to apply equitable principles to ill-considered and hastily-executed contracts. It would have been possible for the plaintiff to have made a contract under which the title to the bark bargained for passed at once. The identity of the subject-matter of the contract might have been so clearly fixed as to have left nothing to chance or doubt. If, in the nature of things, both of these precautions were impracticable, the plaintiff might still have exacted from French some security for the advances made upon the contract. As neither of these things were done, it *342 is our duty to ascertain whether the plaintiff, under' the contract which was made, acquired any rights, either legal or equitable, which can be upheld under the judgment herein. In the pursuit of this inquiry we must take the contract between the plaintiff and the Morrison Bun Lumber Company as it was made. The desire to reach a result which will accord with the apparent equities of the case will not permit us to clothe the contract with conditions and characteristics that are foreign to it. The trial court correctly decided that the contract was executory. There was no change of title at the time of its execution. This necessary conclusion is based upon the coincidence of absence of title in the vendor; and the lack of such identification and appropriation of the subject-matter of the contract, as is essential to the passage of title. The plaintiff’s executory contract with the Morrison Bun Lumber Company was subsidiary to an executory contract between the latter and the United Lumber Company. Beither the plaintiff nor his vendor could acquire title to any bark under either of said contracts until something was done by way of identification or appropriation that would render the amount of bark specified in the contracts capable of delivery. Under the finding of the trial court further discussion of this feature of the case is superfluous, and we have alluded to it simply to show that Kimberly v. Patchin (19 N. Y. 330), cited by respondent’s counsel, and kindred cases, have no application to the case at bar. If the plairijjitff, by virtue of his contract with the Morrison Bun Lumber Company, did not take title to the bark therein described, what interest did he acquire therein % The learned trial court seems to have proceeded upon the theory that the plaintiff, by virtue of his contract with the Morrison Bun Lumber Conqiany, became vested with the right to a specific enforcement, for his benefit, of the contract between the latter company and the United Lumber Company. By way of preface to what we shall have to say upon this subject, we may assume, although we do not decide, that this is a case in which the discretion of the trial court might have *343 been properly exercised in decreeing specific performance if, upon the facts established, the Morrison Run Lumber Company could have enforced specific performance of its contract with the United Lumber Company. This assumption is predicated upon the rules laid down in Johnson v. Brooks (93 N. Y. 337); Williams v. Montgomery (148 N. Y. 519), and Matter of Argus Co. (138 N. Y. 557), to the effect that in general a court of equity will not take upon itself to make such a decree, where chattel property alone is concerned, although its jurisdiction to do so is no longer to be doubted, and it is believed that no good reason exists against its exercise in any ease when compensation in dapiages would not furnish a complete and satisfactory remedy. But could the Morrison Run Lumber Company have enforced specific performance against the United Lumber Company ? Clearly not. The contract between these two companies was hardly more specific in its designation and appropriation of the subject-matter than the contract between the plaintiff and the Morrison Run Lumber Company. Under the plaintiff’s contract any 1,000 cords of good merchantable bark would have satisfied the specifications. Under the other contract the bark was to be of .that year’s peeling on the jobs of Duncan McRea. In the absence of any finding we may assume that McRea’s jobs were confined to the Boody lands. But upon those lands there were five hundred piles of bark containing in the neighborhood of two thousand cords of bark. A. Healey & Sons were first entitled to one-fourth of the same, and then out of the balance, which we may also assume amounted to about fifteen hundred cords, the United Lumber Company, had agreed to sell to the Morrison Run Lumber Company one thousand cords, to be delivered to the plaintiff. Could the Morrison Run Lumber Company have insisted upon the delivery to Lighthouse of any specific one thousand cords of that bark? We think not. Any one thousand cords of bark taken from the large amount upon those lands would have satisfied the terms of the contract. The only substitute for a manual delivery of a parcel of personal property mixed with an ascertained and defined larger *344 quantity consists of such an identification of the same that the purchaser can take it. (Stephens v. Santee, 49 N. Y. 35; Riendeau v. Bullock, 48 N. Y. S. R. 876; Foot v. Marsh, 51 N. Y. 288; Bacon v. Gilman, 57 N. Y. 656, and Kein v. Tupper, 52 N. Y. 550.) There was here no such identification of the property as would have enabled the Morrison Bun Lumber Company to take it. There was, therefore, no sale, and there could be no specific performance so long as this essential requisite of the contract remained unperformed. But it seems to have been assumed by the learned trial court that the plaintiff was clothed with certain equities which were superior to those possessed by his vendor. What had he done that had been omitted by his vendor? The answer is that the Morrison Bun Lumber Company used $1,825.00 of the proceeds of his notes to pay for the “ peeling ” charges upon said bark. It will be observed that this circumstance could have no possible influence upon the questions whether title passed or specific performance could be enforced. If such payment had been made pursuant to an agreement, either express or implied, between all parties interested in, and to be affected by, the transaction, it might have created an equitable lien in favor of the plaintiff. But in the absence of a sufficient identification or appropriation of any specific 1,000 cords of bark, such a lien would have attached to all the bark on said lands, and not simply to a part thereof. It is not claimed that there was any such agreement. We must, therefore, look for plaintiff’s superior equities in another direction. The decision seems to imply that by such application of a part of the moneys produced by plaintiff’s notes, the plaintiff acquired an equitable lien upon said 1,000 cords of bark. But here we meet the same obstacle,' which stands in the way of a completed sale or specific performance. One of the first essentials to the creation of an equitable lien is the specific thing or property to which it is to attach. “Though possession is. not necessary to the existence of an equitable lien, it is necessary that the property or funds upon which the lien is claimed should be distinctly traced, so that *345 the very thing which is subject to the special charge may be proceeded against in an equitable action and sold under decree to satisfy the charge.” (Jones'on Liens, sec. 34, and Grinnell v. Suydam, 3 Sandford, 132.) The difficulties referred to, which prevent an affirmance of the judgment herein, all arise upon the assumption that there is some legal or equitable connection between the contracts under consideration. But when they are viewed from the true perspective there are other circumstances than those adverted to, which are inconsistent with the existence of an equitable lien in favor of the plaintiff. His contract was with the Morrison Bun Lumber Company. . The bark he was entitled to receive under it might have been produced from other places than the “ Jobs of Duncan McBea.” The assumption of the Morrison Bun Lumber Company to pay McBea’s “ peeling ” charges was part of another contract in which the plaintiff had no interest, and the use of a part of the proceeds of his notes to pay such charges was without his knowledge or direction. There was no express agreement for such a lien, and the circumstances were not such as to create one by implication. Upon the facts before us it is precisely as though the Morrison Bun Lumber Company had used other moneys to pay the charges of McBea. In this connection it is to be remembered that the thing upon which the plaintiff’s claim to a lien is predicated is chattel property, and not a fund which is incapable of actual delivery. The distinction to be observed is well stated in Clemson v. Davidson (5 Binn. [Pa.] 392): “ Any order, writing or act which makes an appropriation of a fund, amounts to an equitable assignment of that fund. The reason is plain; the fund being neither assignable at law nor capable of manual possession, an appropriation of it is all that the nature of the case admits. A court of equity will, therefore, protect such appropriation, and consider it equal to an assignment. But very different is the case of a parcel of flour, which admits of actual delivery. Every man who purchases an interest in property of this kind ought to take immediate possession; if he does not, he is guilty of negligence and can *346 have no equity against a third person who contracts with the actual possessor without notice of a prior right.” The learned counsel for the respondent dwells with considerable emphasis upon the fact that the sole consideration for the transfers to the banks was an antecedent indebtedness. If the plaintiff had neither title to nor lien upon the bark transferred to the banks, the former and the latter stood upon an equal footing. Both were mere creditors at large of the two lumber companies, and a transfer to either for an existing indebtedness would be good as against the other. As stated in Seymour v. Wilson (19 N. Y. 417): “ When the equities are equal the legal title must prevail.” The transfer of the bark to the banks was simply the preference of one creditor over another. (Murphy v. Briggs, 89 N. Y. 446.) We have discussed at lenglh every possible phase of this case in the hope that some suggestion would arise which would enable us to render a decision in accordance with the apparent equities of the case*; but an analysis of the facts in the light of controlling principles has convinced us that these equities are more apparent than real. This is simply a case where the confidence of one of the parties,to a contract has been abused by the other. Instead of transferring to the plaintiff at least enough of this bark to reimburse him for the advancements made upon his contract, the defendant French conveys all his interest in the bark to another creditor. Similar transactions are constantly taking place in the commercial world, and they create only the ordinary relation of creditor and debtor — nothing more. As it is possible that a more minute inquiry into the facts upon another trial may show a different legal status ; and as in any event, the plaintiff is entitled to judgment against the defendant French, who is really the Morrison Lumber Company, the judgment of the court below should be reversed and a new trial granted, with costs to abide the event. Parker, Ch. J., Gray, Haight, Land on and Gulden, JJ., concur; O’Brien, J., dissents. Judgment reversed, etc.