Summary
In Husted v. Ingraham, (75 N.Y. 251) the plaintiffs had an equitable lien, and it was held, that the only relief to which the plaintiffs were entitled was equitable, and consequently they could not recover in the action for alleged conversion of the property, although it had been sold by the receiver of the parties, who had the title, but that the plaintiffs had a remedy in equity against the receiver founded upon the lien, to obtain the proceeds of the sale.
Summary of this case from Hovey v. ElliottOpinion
Argued June 14, 1878
Decided November 26, 1878
Charles A. Davison, for appellant.
Dan'l. P. Barnard, for respondents.
The judgment entered on the report of the referee was reversed at the General Term on questions of fact as well as of law. The only fact however in controversy, upon the evidence, was the date at which the delivery of the carpets was completed. The plaintiffs in their petition verified by the plaintiff Carll, state that they commenced such delivery, cutting and laying down the carpets, on the 28th of August, 1869, and finally completed the same on the 29th of October, 1869. The only evidence conflicting with this statement is the testimony of Mr. Husted another of the plaintiffs, who testified on his direct-examination that he could not recollect the date of the last delivery but it must have been about October. That the bulk of the goods was delivered in October. That they were delivering them up to December. On cross-examination he testified that the delivery was not complete when he saw Mr. Miller, which was on the same day when he got the mortgage, and was shown to be the eighth of December, but that the only respect in which the delivery was incomplete as far as he could remember was that one carpet was unfinished, not having the border on. The mortgage presented by Mr. Husted for execution purported to secure the payment of the purchase-money in two, four and six months from the 1st of November, 1869. This in connection with the statement in the plaintiffs' petition that the delivery was completed on the twenty-ninth of October shows that the parties treated the delivery as completed, and considered that the firm of J.E. Miller Co. had incurred the indebtedness, as early as the 1st of November, 1869, notwithstanding the trifling deficiency of a border to one of the carpets.
No objection or complaint appears to have been made by the purchasers on this ground. We think therefore that the finding that the delivery was completed on the twenty-ninth of October is sustained by the evidence. The residue of the finding, viz.: That the plaintiffs made the delivery of the goods without insisting upon the delivery of the chattel mortgage or otherwise making the delivery conditional is also in accordance with the evidence. There is no evidence that any demand was made for the mortgage until the eighth of December, when the mortgage presented to Miller for execution was executed by him and accepted by the plaintiff Husted and filed by the plaintiffs.
It seems to us to be beyond question that the title to the carpets was vested by the sale and delivery, in the firm of J.E. Miller Co. It was the intention of the agreement that the title should so vest, and that Miller Co. should give back to the vendors a chattel mortgage thereon. All that the vendors were to have in any event was a lien upon the property, to be created by the vendees, and this presupposes that they should take the title and have the power to create the lien. Under this agreement the property was delivered to them and continued in their possession over a month before the mortgage was demanded, and it appears that Miller, the only person of whom the mortgage was demanded, complied with the demand made, and executed the mortgage prepared and presented by the plaintiffs. This action clearly could not be maintained on the ground that the title had not passed out of the plaintiffs.
But we think that the referee went too far in holding that the plaintiffs had no lien upon the property. The carpets having been delivered under an agreement that the price should be secured by a mortgage thereon, that agreement could have been specifically enforced in equity and constituted an equitable lien upon the property as against J.E. Miller Co. and all persons claiming through or under them except bona fide purchasers having no notice of the lien. ( Holroyd v. Marshall, 10 House of Lords, 191; Mitchell v. Winslow, 2 Story, 631; Smithhurst v. Edmunds, 1 Car., 408; Hale v. Omaha Nat. Bk., 49 N.Y., 626; S.C., 64 id., 550.)
The omission to demand the mortgage simultaneously with the delivery of the property, or to make the delivery conditional upon the execution of the mortgage, and the subsequent delay in demanding the mortgage, were sufficient to preclude the plaintiffs from denying that the property had been delivered, and from alleging that the delivery was conditional, but these omissions did not absolve the purchasers from their agreement to give the mortgage, nor deprive the vendors of the equitable lien which resulted from that agreement. No such ground was taken by the parties, but, on the contrary, on the eighth of December both parties treated the delivery as completed and the stipulation to give the mortgage as in full force. The plaintiffs demanded a mortgage, and the demand was complied with in the form in which it was made, although not in the form originally agreed. The plaintiffs had the right to demand a mortgage executed by the firm, but instead of so doing they demanded one drawn in the name of Miller alone, and the demand was complied with. This mortgage, standing alone, was insufficient to create a legal lien on the partnership property, for several reasons. It was under seal, purported to be the deed of Miller alone, the firm name not being used, and at the time of its execution the firm had been dissolved by the withdrawal of Mrs. Loeb and her assignment of her interest to Peters and the appointment of a receiver of the firm property. But taken in connection with the previous agreement of the firm to give the mortgage, and the recitals in the mortgage itself, it was manifest that this instrument was given in attempted performance of the agreement of the firm, and in its behalf, and the lien of the plaintiffs would have been protected in equity.
Under these circumstances the plaintiffs had ample remedies. They could have applied to the court to restrain the sale, or to cause it to be made expressly subject to their lien, or to have the proceeds first applied to the payment of the lien. They could have protected their interest by bidding at the sale, and they still can demand the application of the proceeds of sale to the payment of the lien; if such proceeds are still in the hands of the receiver. Their claim to these proceeds would take precedence of those of either of the parties to the action or of the general creditors of the firm. But no such relief was sought in this action, nor does it appear that any claim for equitable relief was suggested at the trial. The action was framed and tried as an action at law against the receiver personally, for damages for an unlawful conversion of the property, and was founded wholly on the allegation that the legal title to the property had never passed out of the plaintiffs. The referee decided against this claim, and for the reasons already stated we think he decided correctly. He was not asked to give any relief for the destruction of or interference with the equitable lien of the plaintiffs, nor were the facts alleged or found which would have entitled the plaintiffs to such relief. In this respect the case is precisely like that of Hale v. Omaha National Bank ( 64 N Y, 555). The plaintiff in that case claimed under an agreement to give a lien on the furniture of a hotel. Before any instrument had been given to create a legal lien, the property was taken by the defendant, and sold. It was conceded in that case that an action in the nature of trover or trespass would not lie for such taking and conversion, and it was held by this court that in order to sustain an action for depriving the plaintiff of the equitable lien which he claimed, it was necessary to show that the property was sold in hostility to the alleged lien, that it was scattered and dissipated or sold to bona fide purchasers having no notice of the lien, and that in the absence of those facts the action could not be maintained. In the present case the receiver could lawfully have sold the interest of the firm in the carpets. If sold in a block, and the plaintiffs gave notice of their lien to the purchaser, their position would not have been changed nor would they have been injured by the sale. As before said, this action was not brought or tried upon the theory that the plaintiffs had a lien, but is founded solely on the alleged technical conversion, by the receiver's sale, of property to which the plaintiffs claimed the legal title, and none of the facts which were held in the case last cited to be essential to maintain an action for injury to an equitable lien, were either alleged or found.
The order of the General Term should be reversed, and the judgment entered on the report of the referee affirmed.
All concur, except EARL, J., not voting; HAND, J., not sitting.
Order reversed and judgment affirmed.