Case ID: misc_32/html/0132-01.html
Source: Caselaw Access Project
Author: {"author": "Gaynor, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The Westinghouse Electric and Manufacturing Company, Plaintiff, v. The New Paltz and Poughkeepsie Traction Company, Defendant.
    (Supreme Court, Dutchess Trial Term,
    July, 1900.)
    Lien Law, L. 1897, ch. 418 — Unless the contract of a sale of chattels is acknowledged and recorded, the rights of an unpaid vendor, with condition precedent of payment, are lost as against subsequent purchasers in good faith.
    A railroad company which had mortgaged all its property, acquired and to be acquired, to secure its bonds, subsequently- purchased chattels of the plaintiff upon a condition precedent of payment, but the contract of sale was never acknowledged and recorded as required by the Lien Law (L. 1897, ch. 418, § 111). Before full payment had been made by the railroad company, the mortgage was foreclosed, the bondholders, by a committee, purchased all the property by surrendering their bonds and paying the balance of their bids 'in cash, organized the defendant, assigned their bids to it, and, after conveyance in foreclosure had been made to it, it refused to surrender the chattels to the plaintiff.
    Held, that the bondholders, the assignees of the defendant, were “ subsequent purchasers * * * in good faith ” within the meaning of the Lien Law, and that the failure to acknowledge and record the contract of sale in the manner required by that statute made the sale void as to the defendant, and entitled it to hold the chattels as against the plaintiff.
    Action for damages for conversion of chattels. The New Paltz & Walkill Valley Railway Co. obtained the said chattels from the plaintiff under a written contract of conditional sale, i. e., that the title thereto should not pass from seller to buyer until the purchase price had been paid in full in specified installments. Upon delivery of the said chattels the said railway company paid the plaintiff one third of the purchase price, but never paid any of the balance. Prior to such conditional purchase the said railway company had given a mortgage covering all of its property in the usual terms of such mortgages, viz., in terms, on all the property it then had and on all that it should afterwards 'acquire, to secure an issue of bonds under such mortgage. That mortgage has been foreclosed since the said conditional purchase of such chattels. The holders of the bonds issued under the said mortgage purchased at the foreclosure sale through a committee appointed by them for that purpose under an agreement among the bondholders to so purchase and organize a new corporation to take the property and run the railroad. The amount of the bid of the said bondholders at the sale was $10,000 in excess of the amount of their bonds, and they paid such bid by surrendering such bonds and paying the said $10,000 in cash. They then organized this defendant corporation and assigned their said bid to it, and the foreclosure conveyance was made to it, and it took possession of all of the property, and refused to deliver these chattels to this plaintiff.
    Seward, Guthrie & Steele for plaintiff.
    William D. Leonard for defendant.
   Gaynor, J.:

The lien of the railroad company mortgage attached to these after-acquired chattels (Platt v. N. Y. & S. B. R. Co., 11 Misc. Rep. 22; 9 App. Div. 87), but of course only to the extent of the rights the mortgagor acquired therein (United States v. New Orleans, 12 Wall. 362; Fosdick v. Schall, 99 U. S. 235; Meyer v. Car Co., 102 U. S. 1). The only right of the said mortgagor in the said chattels was to complete the conditional purchase it had made of them by paying for them in the installments agreed upon, and to have possession of them meanwhile. Until then this plaintiff, the seller thereof to the said mortgagor, retained the title to them. The foreclosure sale could convey only the rights in the said chattels which the mortgagor and mortgagee could unitedly convey (Code Civ. Pro., § 1632; The Sector, &c. v. Mack, 93 N. Y. 488). They could not convey a complete title thereto; no-more could the foreclosure sale (Ballard v. Burgett, 40 N. Y. 314; Austin v. Dye, 46 N. Y. 500). It follows that this defendant did not through the foreclosure sale get title to the said chattels as against this plaintiff (from whom the title thereto had never passed to the said mortgagor), unless by operation of section 111 or section 112 of the Lien Law (chapter 418 of the Laws of 1897; i. e. chapter 49 of General Laws). The former section provides that a' contract that the title to “ any railroad equipment or rolling stock ” sold to a railroad company shall remain in the vendor until the purchase price is paid “ shall be invalid as to any subsequent creditor of or purchaser from such vendee * * * for a valuable consideration and without notice ”, unless such contract is in writing, and acknowledged and recorded as though a real estate mortgage, in the county in which is located the place of business or principal office of the vendee. This requirement that the contract be acknowledged and recorded was not complied with. The mortgagee, it is true, was not a “ subsequent ” creditor or purchaser; on the contrary, the mortgage was given by the vendee prior to its conditional purchase of the chattels. But the purchasers at the foreclosure sale (who assigned their bid to this defendant) were subsequent ” purchasers. If the said mortgagor (the conditional vendee) had sold and delivered the said chattels to a purchaser for value and without notice, or if the mortgagor and mortgagee had unitedly done so, such purchaser would have got a perfect title by operation of this statute. It follows that the purchasers at the foreclosure sale got such a title. If the said chattels are not embraced in the said section 111 .(i. e. in the words “ railroad equipment and rolling stock”), but within section 112 (which is general), the result is the same. The. failure to file the agreement as there required makes good the title of subsequent purchasers, pledgees or mortgagees in good faith.” That the holders of the bonds purchased at the foreclosure sale does not make a different case. A bondholder, or any creditor of the mortgagor, was on the same footing as a purchaser at such sale as any other third person without notice of this plaintiff’s ownership of the chattels. The fact of his being such bondholder or creditor could not impute such notice to him as a purchaser at the foreclosure sale any more than if he had purchased of the mortgagor, or of the mortgagor and mortgagee united, without a foreclosure.

Judgment for the defendant.