Deeley v. Dwight

Larremore, C. J. The learned judge who tried this case evidently had grave doubt as to whether or not a correct disposition had been made of it, and therefore ordered the exceptions to be heard in the first instance at general term. After reflection and an examination of authorities, the opportunity for which is always limited at trial term, we have concluded that such doubt was well founded. It appears that defendants in or about September, 1883, entered into a contract with one Gandolfo to procure and sell to them certain articles of machinery to be selected by him. Gandolfo engaged plaintiffs to manufacture a portion of such machinery, and they agreed to do soV arranging to take a note and a chattel mortgage from Gandolfo upon the articles to secure the payment thereof. Such note and mortgage bear date, and were delivered in, February, 1884; but previous to such time, to-wit, in December, 1883, upon representations as to the nature of the proposed machinery, Gandolfo had secured payment in full therefor from the defendants to him. This fact must be deemed established for the purposes of this trial. See the admission of the defendant John Dwight at folio 292. The articles were de- • livered to Gandolfo, and by him to the defendants, but Gandolfo never, paid plaintiffs for them, and the latter claim in this action for the price thereof, under their chattel mortgage. Said mortgage was not filed until May, 1885.- Plaintiffs’ cause of action is founded on the mortgage, and defendants contend, on several grounds, that this instrument must be disregarded. It is claimed, in the first place, that the mortgage was void, because at the time oi its execution some of the articles which it then purported to, and which it did eventually, cover were not in existence. But I cannot discover any substantial force in the argument for this view. The situation was that Gandolfo and plaintiffs made a contract for the manufacture of the machinery, one of the terms of which was that they should retain a lien upon the articles until paid for. I can see no good reason why a purchase-money mortgage on chattels should not be equally favored in law with a purchase-money mortgage on land. There is of course the distinction that a mortgage on land is theoretically only a lien, while a mortgage on personal property effects a conditional sale. We have therefore a sale to the vendee, and a simultaneous conditional sale back to the vendor. Still, this was practically the condition of affairs as to mortgages on real estate at common law, and is yet in many states of the Union; and everywhere a purchase-money mortgage is one of the securities most jealously protected by the courts. The element of futurity does not operate to take the present case out of the usual rules governing purchase-money mortgages. It rather tends to make such rules apply with greater force. A vendor contracts to manufacture certain specific articles, and also contracts for the security of resort to the articles themselves for his compensation. The only possible view to take under these circumstances is that the mortgage so given, which describes the articles to be made, attaches to the same as they are successively turned out and delivered to the vendee. See Ludwig v. Kipp, 20 Hun, 265; Willetts v. Brown, 42 Hun, 140, and cases there cited; Stevens v. Watson, 4 Abb. Dec. 302; McCaffrey v. Woodin, 65 N. Y. 459; Wisner v. Ocumpaugh, 71 N. Y. 113; Coats v. Donnell, 94 N. Y. 168. [62] Defendants, however, claim that such mortgage was void as to them, under the statute,1 because it was not filed until over a year after it was made. The law makes a chattel mortgage, unless filed, void as against subsequent purchasers and mortgagees in good faith; and the question which was principally argued on this appeal is whether defendants can be held to be “subsequent purchasers in good faith, ” within the meaning of the act. I think this question has been so decisively answered in the negative by a long line of authorities in this state that little discussion will be required on our part. Van Heusen v. Radcliffe, 17 N. Y. 583; Thompson v. Van Vechten, 27 N. Y. 580; Wood v. Robinson, 22 N. Y. 564; Weaver v. Barden, 49 N. Y. 286; Barnard v. Campbell, 65 Barb. 286, 55 N. Y. 456, and 58 N. Y. 73; Voorhis v. Olmstead, 66 N. Y. 116; Dusenbury v. Hulbert, 59 N. Y. 541; Kursheedt v. McCune, 20 Abb. N. C. 265. The principle is well established by these cases that a “subsequent purchaser in good faith” is one who parts with value at the time of the transfer of title to or delivery of the identical property, and on the faith of such transfer or delivery. The term cannot be held to include one who receives the property in question, either in pursuance of an executory contract of sale, or in satisfaction of an antecedent debt. It is not claimed that any transfer of title, either by constructive delivery or otherwise, was attempted to be made to defendants until the actual delivery of the machinery. On the other hand, it is proved conclusively, by the aforesaid admission of one of the defendants, that the money w'hich defendants intended for the purchase price was all paid before the execution of the mortgage, and before the greater part, if not all, of the articles were made. Defendants did not, as has been argued here, ■make themselves “subsequent purchasers in good faith” by expending various sums in charge of the machinery, and in setting the same up in their factory. Such expenditures, though in one sense made upon the faith of the transfer and delivery of the property7, have not the least significance in determining in what character they became purchasers, or whether they became purchasers at all. These expenses would necessarily have been incurred no matter how they acquired the machinery, whether as purchasers or hirers, or by gift. The ■determining factor is, when and upon what reliance was the purchase price paid? Here the purchase price was paid before defendants received the articles, and they relied simply upon Gandolfo’s word that he would procure such articles for them. Defendants, therefore, were not subsequent purchasers in good faith within the definition of that phrase given by the authorities above cited, and it follows that, as between the parties to this action, the mortgage was valid, and is operative. Van Heusen v. Radcliffe, supra; Thompson v. Van Vechten, supra; Kennedy v. Bank, 23 Hun, 496. We are also of the opinion that plaintiffs may maintain the present action of conversion. Their right is disputed on the alleged ground that they are n'ot entitled to the immediate possession of the chattels; but this is error. We have decided that the mortgage is valid, as between the parties to this litigation, and, ■consequently, all the rights it purports to confer on the mortgagees are valid. ■One of such rights is to take possession of and dispose of the mortgaged chattels in ease of default in payment of the debt. Plaintiffs are therefore entitled to assume immediate possession, and, a demand for such chattels having been ■made, it follows that they may bring an action to recover such damages as they may have sustained by the unlawful detention of the same. Jones v. Graham, 77 N. Y. 628. The exception should be sustained, and a new trial ordered, with costs to abide the event. Footnotes [1] Laws N. Y. 1833, c. 279, § 1.