McCloskey v. . Henderson

The plaintiff brought this action to recover for the alleged conversion of certain property conceded to have been in the possession of defendant. It consisted of a considerable amount of material supplied by plaintiff for the purpose of constructing and installing heating plants in a large number of dwelling houses and part of which had been actually installed and attached to the buildings and part of which was lying loose and *Page 132 unattached upon the premises; and also of a small amount of tools which had been brought and left upon the premises for the purpose of completing the work which plaintiff had undertaken to do. The trial court directed a verdict in favor of plaintiff for the value of all three classes of property. The Appellate Division determined that he was not entitled to recover for any of it and dismissed his complaint. We feel compelled to hold that both courts erred in the disposition thus made by them respectively. The substantial facts presenting the questions which we are to consider are as follows: Defendant sold to the Renslaw Realty Company two pieces of land in the borough of Brooklyn and took back two purchase-money mortgages, each to secure payment of the sum of $21,250. The purpose of the realty company in purchasing this land was to erect thereon a considerable number of dwelling houses, and in order to carry forward this purpose three agreements were made which enter into the present controversy. A building loan agreement was made with the Lawyers' Title Insurance and Trust Company to advance from time to time in installments on each of the buildings to be erected a certain sum to be secured by mortgage, and in said agreement it was expressly agreed "that all * * * furnaces, ranges, mantles, grates and similar fixtures and articles and every fixture and improvement attached to or placed in the said buildings to be used in connection therewith shall in each case form part of the mortgaged premises and shall be respectively covered by and subject to the liens of the mortgages given to secure the advances herein provided for." It, secondly, was agreed that if certain initial payments were made upon the above-mentioned mortgages given to defendant he would subordinate the liens thereof to mortgages to be given to the Title Company above mentioned to secure the advances by it from time to time *Page 133 made as above stated. And lastly, a contract was made between the plaintiff and the Realty Company that the former would supply the materials and perform the work necessary for the installation in each house of a heating plant. It was provided in this last agreement that the title to such property should remain in the plaintiff until paid for, but the agreement providing for such conditional sale was not filed in the proper office as required by statute until after various advances had been made by the Title Company under the building mortgages executed to it. The various parties entered upon the performance of the agreements above mentioned. The plaintiff supplied materials for the construction of heating plants in the different houses and partially completed the installation thereof. Between the dates when such materials were so supplied and affixed to the realty in the process of installing such plants and the date when the conditional sales agreement between plaintiff and the Realty Company was filed in the register's office the Title Company under its mortgages advanced various installments of moneys used in the erection of said buildings and the defendant, the initial payments having been made upon his mortgages, executed various agreements subordinating the liens thereof to the mortgages taken by the Title Company to secure payment of the installments by it thus advanced. After a while the building scheme of the Realty Company collapsed and operations thereunder were suspended. The defendant went into possession of the premises, whether strictly as mortgagee in possession or not it does not appear, and subsequently on the foreclosure of his mortgages became the purchaser of said premises subject to the liens of the mortgages held by the Title Company which so far as appears have never been paid. While he was thus in possession before the foreclosure sale and again after purchase under the latter, demand, assumed to have been sufficient in form, was made upon *Page 134 him for the property already described and this demand having been refused this action in conversion was brought. Upon the record and arguments as now presented we do not see any opportunity for debate of the proposition that plaintiff was entitled to recover the value of his tools which had been brought upon the premises for carrying on his work and which defendant refused to surrender. We, therefore, pass this branch of the case without further discussion in order to proceed with the consideration of the questions which arise in connection with the property delivered by plaintiff on the premises under his conditional bill of sale and of which part had been attached to the realty and part had not. We shall take up first a consideration of the property which had been attached. It seems to have been thought at the Trial Term and still to be thought by counsel that the question whether plaintiff can recover for the value of this property depends upon the further query whether it can be removed without injury to the realty and this was one of the questions submitted to the jury. But we prefer not to make that the controlling question. The evidence quite conclusively indicates that the property which had been actually installed and affixed to the real estate would have become part thereof and not removable unless this result was prevented by special circumstances indicating a different and controlling intention. It will be assumed that if it was operative the conditional character of plaintiff's contract for furnishing the heating plants would have been such proof of the intention of the parties as would have prevented the property from becoming realty. (Fitzgibbons Boiler Co. v. ManhassettRealty Corp., 125 App. Div. 764; reversed on dissenting opinion,198 N.Y. 517.) A decisive question, therefore, becomes the one whether plaintiff lost the benefit of the conditional sales provisions of his contract and was prohibited from detaching and taking away such property *Page 135 by force of the statute requiring the filing of agreements for conditional sales, and as a basis for the consideration of the effect of this statute as between plaintiff and defendant it becomes necessary primarily to consider what its effect was as between plaintiff and the Title Company which held the building mortgages. That company advanced certain installments under its mortgages between the times when the plaintiff's property was attached to the realty and the date when the conditional sale agreement was filed, as provided by the statute, and there is no suggestion that it was otherwise chargeable with knowledge of the conditional character of plaintiff's contract. The statute applicable to such conditional sales provides that "Every such contract for the conditional sale of any goods and chattels attached, or to be attached, to a building, shall be void as against subsequent bona fide purchasers or incumbrancers of the premises on which said building stands, and as to them the sale shall be deemed absolute, unless, on or before the date of the delivery of such goods or chattels at such building, such contract shall have been duly and properly filed and indexed as directed in this article," etc. (Personal Property Law [Cons. Laws, ch. 41], section 62.) Under these circumstances in our opinion the Title Company as to its mortgages covering the installments which have been mentioned was plainly a bona fide incumbrancer under the statute; the lien of its said mortgages covered the property affixed to the realty and it would have been an act of waste for the plaintiff to tear out the same which said Title Company could have forbidden and enjoined. (Kirk v.Crystal, 118 App. Div. 32; affd., 193 N.Y. 622; Schmaltz v.York Mfg. Co., 204 Penn. St. 1.) We then consider what position defendant had acquired at the time of the alleged conversion as to such attached property. We do not think that by subordinating his mortgages to the installments advanced by such Title *Page 136 Company he became a subsequent bona fide incumbrancer within the meaning of the statute, but it is not necessary definitely at this time to decide that question. We think that for other reasons he had a right to refuse to become a voluntary and permissive party to the act of waste and destruction of mortgaged property which plaintiff proposed to commit, by giving up the property. First, as it now appears defendant originally was in possession of the premises, so far as this question is concerned, in the general character of a mortgagee in possession and undoubtedly it was his duty to the first mortgagee, the Title Company, to refrain from committing waste himself and within certain limits to preserve the property from waste and destruction by other causes. As such he had a perfect right and an undoubted duty to refuse to aid plaintiff in his unlawful purposes by helping to detach and deliver to him the property in question. He would have made himself personally liable for waste if he had done otherwise than he did. (Barnett v. Nelson, 54 Ia. 41; Turner v.Johnson, 95 Mo. 431, 438; Miller v. Ward, 111 Me. 134;Benham v. Rowe, 2 Cal. 387; Shaeffer v. Chambers, 6 N.J. Eq. 548;Morse v. Whitcher, 64 N.H. 590; Place v.Sawtell, 142 Mass. 477.) Furthermore, and in the second place, we think that under the circumstances of this case the defendant in his own right and for the protection of the lien of his own mortgages was justified in refusing to consent to the proposed acts of waste by plaintiff. The evidence fairly justifies the inference that the mortgagor had become insolvent and that the premises were insufficient security for the mortgage liens. The defendant had subordinated his mortgages to the lien of the mortgages of the Title Company under circumstances and statutory provisions which gave the latter a lien for payment of its advances, so given priority, upon property which we are assuming was not subject to the lien of defendant's *Page 137 mortgages. In view of the apparent insufficiency of the security, under perfectly familiar principles defendant had the right to insist that the Title Company should enforce its lien against this extra property and that it should not by releasing the same throw a heavier burden upon the property to which defendant was compelled to look for satisfaction of his claims. If this be so, it must be also true that defendant had the right to refuse to comply with plaintiff's demand and refuse to aid the commission of the very act of waste which he would have had the right to forbid. There is some evidence of a renewed demand by plaintiff upon defendant for this property after the latter had become a purchaser at the foreclosure sale, but it does not appear to us that the situation had then so changed as to require any further discussion or different conclusions of or as to the rights of the parties. If defendant was guilty of conversion in not complying with the first demand plaintiff's cause of action then became complete and he gained nothing by a further demand. If, as we think, defendant had the right to refuse plaintiff's demand when he was in possession as a mortgagee, this right was not diminished or lost when he became seized and possessed of the premises as a purchaser at the foreclosure sale. This leaves for final consideration the rights of the parties in respect of materials which had been delivered upon the premises but not installed as a part of the heating plants or attached to the premises, but which are described as "lying loose" thereon. The evidence in respect of this class of materials is so indefinite and the discussion so incomplete that we can only speak in a tentative manner and subject to further consideration hereafter if the question becomes material. Assuming that this so-called loose material had not in any manner been attached to the realty and that it was not so connected with that which had been attached as *Page 138 to be an integral and constituent part thereof so as to be fairly regarded as going with it, we do not think that it was covered by the mortgages to the Title Company or that defendant through the processes of reasoning hereinbefore followed acquired any rights to retain possession thereof as against plaintiff's demand. So far as the present record discloses we are dealing with mortgages of real estate and not chattel mortgages, and in the case of such former mortgages it was the purpose of the statute to prevent that species of fraud which often resulted from the fact that a mortgagee advancing money upon real estate containing fixtures and improvements appearing to be permanently and finally attached thereto, found that with the assistance of conditional sales agreements covering the same his rights were liable to be defeated. The act cannot be construed for the benefit of a mortgagee of real estate as converting into real estate that which is clearly personal property. Therefore, as stated, without finally determining this question beyond the opportunity for a reconsideration if it shall be material, it seems to us upon the evidence as now presented that the plaintiff was entitled to retake this detached property and that defendant was guilty of conversion in refusing to surrender it to him. These views lead to the conclusion that the judgment of the Appellate Division dismissing plaintiff's complaint should be reversed and a new trial ordered, with costs to abide event.