In Duffus v. Howard Furnace Co. (8 App. Div. 567) the court said: "He must not only be a mortgagee for value, but also a mortgagee without notice."Summary of this case from New York Title M. Co. v. Mapark Holding Corp.
July Term, 1896.
Ceylon H. Lewis, for the appellant.
Walter S. MacGregor, for the respondent.
John Schaffer, of the city of Syracuse, was, on the 8th day of October, 1891, the owner of lot 21, in block No. 613, in the city of Syracuse, said lot being forty feet front and eight rods deep. Upon this lot a new house was constructed by Schaffer, and a portable furnace put therein by the defendant, under a contract between Schaffer and the defendant, whereby the defendant was to be paid for the furnace $155 on the following March. The contract was in writing and was signed in duplicate, and contained this clause: "The furnace, together with all material furnished by the first party (the defendant), shall remain the property of said first party until the contract price below named is fully paid, and the second party shall be liable for any damage to said apparatus, after completion, until said amount is paid in full."
This furnace was for the purpose of heating the house. It was set up in the cellar of the house upon a row of bricks placed upon the bottom of the cellar, connected with a smoke pipe that extended into the chimney, and with hot-air pipes made of tin, extending through the house, and there was a cold-air box also connected with the furnace. The furnace could be readily disconnected from the cellar and the pipes and cold-air box without any substantial injury to the building. The furnace was put in early in December, 1891; and two days before this, and on the seventh day of December, Schaffer and his wife executed and delivered to the plaintiff a mortgage upon the house and lot in question as a collateral security for the payment of any and all promissory notes which had had theretofore or which should thereafter be given by either Schaffer or his wife, and which had been or might thereafter be indorsed by the plaintiff for the accommodation and benefit of Schaffer; and Schaffer covenanted to save the plaintiff harmless from any and all loss, costs and expenses, or counsel fees, which might accrue to the plaintiff by reason of any indorsements as aforesaid, and as security for the payment of any other indebtedness, of any name or nature, to the extent of $3,500, which, if done, would render the conveyance void.
Schaffer was also the owner of four other houses and lots, or buildings and lots, in the city of Syracuse, upon which the plaintiff took mortgages from Schaffer as collateral security, with the same condition in each, as above given, one on August 27, 1891, for $1,000; another of January 15, 1892, of $2,000; one of February 20, 1892, of $6,000, and one of April 7, 1892, of $6,000, making a total of $18,500. These mortgages were collateral to notes that were renewed monthly, made by Schaffer and indorsed by the plaintiff, and the plaintiff was to receive as compensation for such indorsements at the rate of two per cent a month or twenty-four per cent a year. The business was all transacted at the same bank in Syracuse where the notes were cashed and the money advanced to Schaffer, less, we conclude from the evidence, the two per cent bonus to the plaintiff. The notes outstanding at the time of the trial in the Municipal Court were thirteen in number and of various amounts.
On the 6th of May, 1892, Schaffer and his wife executed to the plaintiff what was called in the case a blanket mortgage upon all the five lots above referred to, containing the same conditions as first above set forth and securing the plaintiff to the extent of $18,000. Three days later Schaffer executed to the plaintiff in writing a sale and transfer of all the right, title and interest of Schaffer to all the rents, with leases, then due and to become due to Schaffer on the said houses and lots, and the plaintiff went into possession of all the houses and lots and collected the rents and controlled the property thereafter. The plaintiff immediately commenced foreclosure upon this blanket mortgage, and afterwards amended his complaint by including all the other mortgages, none of which were surrendered upon the execution of the blanket mortgage, and this foreclosure resulted in a sale of the premises in August for $4,000, the property being bid in by the plaintiff, leaving a net application of the proceeds of the sale upon the mortgages of $2,640.30. In the meantime the defendant, claiming to own the furnace (it not having been paid for), removed the furnace, for which this action was brought with the result in the Municipal Court as above indicated.
We are favored with two able opinions in this case by the learned judges in the courts below, the first in favor of the defendant by the judge of the Municipal Court, and the second in favor of the plaintiff by the county judge, reported in 15 Miscellaneous Reports, 169; 37 New York Supplement, 19. The amount found due in the foreclosure action upon the notes was $12,523.01, with interest from July 3, 1893. The net result of these business operations of the plaintiff was, that he obtained all these properties upon the foreclosure, which but a few months before he had deemed security for $18,000, including the property where the furnace was placed, four brick houses and also brick flats on valuable lots in different portions of the city of Syracuse, and a deficiency judgment of nearly $10,000, including whatever he may have received from the bank at the rate of two per cent a month.
The cases of Ballard v. Burgett ( 40 N.Y. 314) and of Austin v. Dye (46 id. 500) finally settled the law in this State to be that, where personal property was transferred upon an agreement that the title to the property should remain in the conditional seller until paid for, the seller could retake the property, if not paid for as stipulated, even from a bona fide purchaser from the conditional purchaser while in his possession.
FOLGER, J., says in Tifft v. Horton ( 53 N.Y. 380): "It is well settled that chattels may be annexed to the real estate and still retain their character as personal property. (See Voorhees v. McGinnis, 48 N.Y. 278, and cases there cited.) Of the various circumstances which may determine whether in any case this character is or is not retained, the intention with which they are annexed is one, and if the intention is that they shall not by annexation become a part of the freehold, as a general rule they will not. The limitation to this is where the subject or mode of annexation is such as that the attributes of personal property cannot be predicated of the thing in controversy ( Ford v. Cobb, 20 N.Y. 344), as where the property could not be removed without practically destroying it, or where it or part of it is essential to the support of that to which it is attached."
Some of the cases use the expression that, where it is expressly agreed that the property attached to the freehold shall not become a part of the realty, that there is impressed upon it, although attached to the realty, the character of personal property, and as germane to this question we cite Sisson v. Hibbard ( 75 N.Y. 542); Ford v. Cobb (20 id. 346); Tyson v. Post (108 id. 217); Manning v. Ogden (70 Hun, 399); Phenix Iron-Works Co. v. McEvony ([Neb.], 66 N.W. Rep. 290).
In the case at bar the retaining by the defendant of the title in the furnace, with the implied right to retake it if not paid for, after it had been placed in the building, amounted to an agreement between the parties that the defendant could disconnect the property from the realty upon the failure of Schaffer to perform his contract, and, therefore, there was impressed upon this furnace, although attached to the freehold, the character of personal property, and the prior mortgage of the plaintiff upon the house and lot did not include it.
The case does not show that the removal of the furnace would create such an injury to the freehold as would bring it within the exception above quoted in Tifft v. Horton ( supra).
The County Court reversed this judgment upon the ground that, under the blanket mortgage which was given subsequent to the furnace being put into the house, the plaintiff was a purchaser for value, agreeing, however, that if the mortgage had been given for a pre-existing debt without any new consideration, he would not be such purchaser for value. ( Duffus v. Howard Furnace Co., 37 N.Y. Supp. 21. Citing Jones v. Graham, 77 N.Y. 628; Thompson v. Van Vechten, 27 id. 568-580; De Lancey v. Stearns, 66 id. 157; Asher v. Deyoe, 77 Hun, 531, which sustain the proposition thus laid down.)
The County Court then assumes that the plaintiff, being such purchaser for value, comes within the protection of the statute, chapter 315 of the Laws of 1884 and the amendments thereto; that portion of which is material here to consider is as follows: "In every contract for the conditional sale of goods and chattels hereafter made, which shall be accompanied by an immediate delivery, and be followed by an actual and continued change of possession of the things contracted to be sold, all conditions and reservations which provide that the ownership of such goods and chattels is to remain in the person so contracting to sell the same or other person than the one so contracting to buy them until said goods or chattels are paid for, or until the occurring of any future event or contingency, shall be absolutely void as against subsequent purchasers and mortgagees in good faith, and as to them the sale shall be deemed absolute, unless such contract for sale with such conditions and reservations therein or a true copy thereof shall be filed as directed in the succeeding section of this act." Then follows the direction as to where such instrument should be filed, which, in this case, would have been in the Onondaga county clerk's office in the city of Syracuse. There was no evidence before the trial court whether this instrument was filed or not. The judgment roll in the foreclosure was introduced in evidence upon the trial, and the plaintiff testified upon the subject of the consideration of the blanket mortgage. He did not give any evidence tending to show that he was ignorant at the time he took the blanket mortgage of the terms of the contract under which the furnace was put into the house (and there was no such evidence in the case), but the plaintiff did testify that he knew that the defendant, in the fall of 1891, was putting a furnace into the cellar of the house in question, that he saw it there after he had obtained possession, and that he asked Schaffer if it had been paid for; but Schaffer's answer does not appear in the evidence. It was not sufficient for the plaintiff to simply establish, if he has done so, that the blanket mortgage was given upon some new consideration in whole or in part, in order to establish that he was a mortgagee in good faith. He must not only be a mortgagee for value, but also a mortgagee without notice. ( Berner v. Kaye, 14 Misc. Rep. 1; Spicer v. Waters, 65 Barb. 227, 231, 232; Jewett v. Palmer, 7 Johns. Ch. 65.) The burden of proving that the plaintiff was a mortgagee in good faith was upon him; if there was an omission to file the mortgage, that omission does not relieve the plaintiff. The contract is not void as against him unless he proves himself within the class of persons against whom the statute declares the contract void. (See above cases and Abb. Tr. Brief, 716, and cases there cited.)
The opinion of the chancellor in Jewett v. Palmer ( supra) is stated in the syllabus of the case, and is quoted with approval in Spicer v. Waters ( supra) as follows: "To support the plea of a bona fide purchase without notice the defendant must aver and prove not only that he had no notice of the plaintiff's rights before his purchase, but that he actually paid the purchase money before such notice."
The judgment in foreclosure confers only the right which the plaintiff possessed as mortgagee; and unless, as subsequent mortgagee in good faith, he is protected by this statute he must fail. ( Rector, Wardens, etc., v. Mack, 93 N.Y. 488; Code Civ. Proc. § 1632.)
The Municipal Court passed upon the fact as to whether the blanket mortgage was given for a pre-existing debt merely, and whether any new indorsement had been made or costs or liability incurred upon the faith thereof. It had before it evidence that all the notes which the blanket mortgage was given to secure were renewals of old notes, except a small one of $183 and a portion of another note, the amount of which was not defined. The plaintiff testified on the subject.
If any new indorsements were made or costs or liability had been incurred by the plaintiff upon the faith of this particular blanket mortgage it should have been shown. There were two mortgages in existence that had been given before the furnace was put in, including the one upon the house where it was put in, and we have no evidence that these new liabilities were not incurred upon the faith of one of those mortgages. It would naturally have been incurred upon the faith of the first mortgage, and as to such liabilities the plaintiff was not a subsequent mortgagee.
Upon this question of bona fides the trial court could take into consideration all the evidence in the case. It does not appear that any of the notes which were renewed from time to time were surrendered upon renewal, and we have seen that none of the mortgages were surrendered when the blanket mortgage was given. The plaintiff testified that the amount for which he was liable upon the notes fluctuated from $600 to $12,000, and also that he took the blanket mortgage to save costs in foreclosure; he collected about $600 in rents as mortgagee in possession. Under all the extraordinary circumstances of this case, the plaintiff being an interested party, the trial court was not bound to believe the evidence of the plaintiff that there was even the trifling amount of new consideration stated in the evidence. We think that there was evidence tending to justify the conclusions of the trial court upon the subject we are considering, which should have sustained its judgment in the County Court.
The appellant makes the point that, inasmuch as by chapter 684 of the Laws of 1893, portable furnaces were taken out of the statute of 1884 requiring the filing of the contract, that that fact operated as a repeal of the statute last mentioned, so far as portable furnaces are concerned, and that such repeal having been made without any saving clause, reserving former rights of action, the plaintiff's cause of action fell with such repeal. There is some authority upon this subject. In Butler v. Palmer (1 Hill, 334) the court says: "A repealing clause is such an express enactment as necessarily divest all inchoate rights which have arisen under the statute which it destroys. These rights are but an incident of the statute and fall with it unless saved by express words in the repealing clause." (And see upon this subject Knox v. Baldwin, 80 N.Y. 610; Church v. Rhodes et al., 6 How. Pr. 281; Richardson v. Pulver, 63 Barb. 67; Comstock v. Carr, 6 Wend. 526; Washburn v. Franklin, 35 Barb. 599.)
It is unnecessary, however, to determine this question and we put our decision upon the other propositions in the case.
The judgment of the County Court should be reversed, with costs in that court, and that of the Municipal Court affirmed, also with costs of this appeal.
Judgment of the County Court reversed, with costs, and judgment of the Municipal Court affirmed, with costs, with costs in the County Court and of this appeal.