Case ID: ny-st-rep_43/html/0223-01.html
Source: Caselaw Access Project
Author: {"author": "Hatch, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Louis M. Kimball, App’lt, v. The Farmers & Mechanics’ Bank of Buffalo, Resp’t.
    
      [Superior Court of Buffalo, General Term,
    
    
      Filed December 30, 1891.)
    
    1. Chattel mortgage—Vessels—Right op mortgagee to earnings.
    Plaintiff took a second mortgage on a vessel to secure a note and upon, default took possession, but released it on receiving an assignment of its net earnings for two round trips. Defendant, which held a third mortgage, subsequently seized the vessel, received the freight moneys and refused to pay the plaintiff. Held, that plaintiff’s assignment was superior to any right which defendant obtained by its seizure and that plaintiif was-entitled to recover the freight moneys, less expenses.
    2. Same.
    The first mortgagee can give no right, by consent and approbation, to the payment of inferior liens in derogation *of the rights of a superior lienor.
    Appeal from a judgment entered upon the report of a referee.
    
      Sherman S. Rogers, for app’lt; Spencer Clinton, for resp’t. -
   Hatch, J.

When this case was before us on a former appeal,. 33 St Rep., 870, the record showed that plaintiff held the first, mortgage lien upon the vessel, and default having been made, was, in consequence, vested with legal title to the vessel. It appears from the present record that plaintiff was not a first mortgagee, but that another mortgage prior in date, and prior of record, was a lien upon the vessel, and that default had been made upon that mortgage; under the former decision therefore-plaintiff held only a lien upon the mortgagor’s equitable interest,, as that was all the mortgagor could give, but as between the plaintiff and defendant the situation, so far as I can see, is not materially changed. It was asserted before that the equitable right of the second mortgagee was the same as the legal right of the first mortgagee as between the mortgagor and mortgagee. This right must continue to hold equally good as to every other lien inferior to» it. Treat v. Gilmore, 49 Me., 34; Newman v. Tymeson, 13 Wis., 172.

The doctrine was announced upon the former decision that the assignment was outside the questions involved, and this for the reason that plaintiff was supposed to have the legal title, and having seized the vessel, the subsequent navigation was the-navigation of plaintiff, as he had then constructive possession, and consequently he took title to the freight moneys by virtue of such possession irrespective of the assignment. The present situation is somewhat changed. I am still of opinion that as to-all persons, except the first mortgagee, the plaintiff had the right to seize, and to thereby obtain as to such persons the same rights-held by the first mortgagee as to all persons. But if we concede that plaintiff had no right of seizure, or that the right of seizure could not affect the freights, then certainly defendant had no superior right, as it was a third mortgagee.

In Liverpool Marine Credit Co. v. Wilson, L. R., 7 Ch. App., 507, it is said: “ What is the position of a second mortgagee of a ship-with respect to the freights ? He has no legal right to take actual possession, and cannot, therefore, by his own act give himself that which is equivalent to possession.” If we adopt this rule, it follows that mere seizure would fail to vest defendant with title-to the freight moneys, as against one who acquired a title prior in date to the seizure. Thus, plaintiff not'having the legal title to the vessel could, nevertheless, protect himself as to the freights by any legal method, and thereby obtain a lien upon the freights ; thus, the assignment is superior to any right which the defendant-obtained by virtue of its mortgage, for as it had no lien upon the freight by virtue of its mortgage, it could only obtain such right by virtue of the seizure, if it could at all, but when it seized plaintiff already had an assignment if he took nothing by virtue, of his seizure.

From the present record it is quite apparent that if the replevin, proceedings instituted in the courts of Wisconsin bad been based, upon the mortgage held by Mr. Spaulding, and he had then taken possession of the vessel, by virtue of the mortgage, and navigated' her to Buffalo, his right would have been superior to the right of plaintiff, but in such event he would have been bound to apply the earnings of the voyage, less expenses, to the payment of his-mortgage. Here the seizure of the vessel was by virtue of defendant’s mortgage, and all the legal rights obtained by it were-based thereon.

Mere “ consent and approbation ” by the first mortgagee cannot, change the legal or equitable rights of the parties. Spauldingcould enforce the payment of his mortgage by application of the-freight moneys if he chose to seize, and could also sell the vessel, but he could give no rights, by consent and approbation, to the payment of an inferior lien in derogation of the rights of a superior lienor; otherwise he might pay, by the earning power of the vessel, all inferior liens, and then seize the vessel for his own debt and. cut off a superior lienor to the inferior liens who had exercised the legal rights held by him, and eventually leave him remediless. I am of the opinion that neither legal or equitable rights are-thus, subject to the benevolence of a superior lienor in favor of inferior-liens, where the person affected has obtained rights which the law recognizes. I am, therefore, of opinion that plaintiff becomes entitled to recover the freight moneys, less the costs and expenses, of navigation from Milwaukee to Buffalo.

The judgment is, therefore, reversed and a new trial ordered, before another referee, with costs to abide the event.

Beckwith, Ch. J., and Titus, J., concur.