#### Lillian Hof, Respondent, *v.*Martin Mager and Annie C. Carpenter, Appellants, Respondents, Impleaded with Marie A. Grening and Others, Defendants. Martin Mager, Plaintiff, *v.*New York and Western Specialty Company and Annie C. Carpenter, Defendants.

Second Department,

June 17, 1915.

Mortgage—mortgage of real and personal property — failure to file as chattel mortgage — when chattel mortgage not merged in deed — subsequent mortgagee in good faith.

The owner of hotel property, in possession of the chattels connected therewith, mortgaged the chattels in an instrument which also mortgaged the real estate, and was not filed as a chattel mortgage. The *319mortgage was assigned to one Hof, and was not paid at maturity. The mortgagor subsequently sold the chattels to a domestic corporation which was in possession of the same, and which, according to its certificate of incorporation, had its principal place of business in the borough of Manhattan. The transfer was contained in a deed which comprised real estate. The corporation then placed a chattel mortgage on the same chattels, among others, to secure a past due indebtedness to one Mager, which mortgage was filed only in the town of Southhampton. Thereafter the property was sold by a referee in an action in the Supreme Court to one Harrison, who claimed to be the owner, in which action the original mortgagor and mortgagee and the corporation were defendants. Harrison on the same day transferred the chattels to the husband of Hof. After a default in the condition of the Mager mortgage the corporation brought an action against Harrison and the husband of Hof, to whom the chattels had been transferred, for conversion, and recovered judgment, which was assigned to the wife of Harrison, and thereafter paid to the corporation with his money. Pending the suit for conversion the chattels were conveyed by Hof and wife by an instrument conveying the real estate to one Carpenter, who had no knowledge of the Mager mortgage. The husband of Hof had no knowledge of said mortgage until after the transfer of the chattels had been made to him and he had taken possession.

In actions by Hof and Mager to foreclose them mortgages, it was stipulated that they should be tried together.

Held, that the deed to Carpenter which Hof signed jointly with her husband, obviously to release her dower in the real property therein described, is no evidence of a merger of the chattel mortgage which she holds by assignment;

That the mortgage to Hof’s assignor, although not filed, was good as between the par-ties thereto;

That, since the mortgage made by the corporation to Mager was given to secure an existing debt, it did not constitute him a subsequent mortgagee in good faith, with the right to attack the validity of the mortgage to Hof’s assignor for a failure to file the same; that it is good, as between the parties thereto, and is a lien upon the chattels described therein, subordinate to the lien of the Hof mortgage;

That Carpenter, in equity, became vested with the chattels coming within the scope of the Harrison and Hof conveyances as soon as those chattels became the property of Harrison by the payment of the judgment in the action for conversion, and the complaint against Carpenter should, therefore, be dismissed.

Separate appeals by the defendants, Martin Mager and Annie 0. Carpenter, from parts of an interlocutory judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Suffolk on the 1st day of July, 1914.

*320*Emil Schneeloch [Edward J. McCabe*with him on the brief], for the defendant Martin Mager.

*Edward Lazansky [Adolph Feldblum*with him on the brief], for the defendant Annie C. Carpenter and for the plaintiff Lillian Hof.

Stapleton, J.:

Lillian Hof sues to foreclose a chattel mortgage made to secure the payment of $1,950. The mortgage was made on May 1, 1911. The debt secured was payable February 28, 1912. The mortgagor was Marie A. Grening. The mortgagee was Anna von der Leith. It was assigned to Lillian Hof on November 21, 1912. The chattels were mortgaged in an instrument which also mortgaged real estate. The real estate was hotel property and the chattels were contained in the hotel. The mortgage was not filed as a chattel mortgage in compliance with article 10 of the Lien Law (Consol. Laws, chap. 33 [Laws of 1909, chap. 38], as amd. by Laws of 1910, chap. 182).*

At the date of the execution and delivery of the mortgage, Marie A. Grening was the owner in possession of the chattels. The mortgage debt was not paid at maturity. On September 19, 1911, Marie A. Grening sold and transferred the mortgaged chattels to the New York and Western Specialty Company, a domestic corporation, the principal business office of which, according to its certificate of incorporation, was located in the borough of Manhattan, city and State of New York. The transfer was contained in a deed which conveyed real estate. The company took possession of the chattels. On December 2, 1912, Jacob A. Freedman, a referee to sell, appointed by a judgment of the Supreme Court in an action in which John B. Harrison was plaintiff, and Anna von der Leith, Marie A. Grening, the New York and Western Specialty Company and Paul 0. Grening, the president and treasurer of that company, were defendants, delivered to John B. Harrison an instrument in writing purporting, among other things, to transfer the chattels mortgaged to secure the debt to von der Leith. The judgment roll in that action is not in evidence. The *321court found that at the sale conducted by the referee, the corporate defendant protested against the sale of any of the chattels covered by mortgage to one Martin Mager, hereafter considered, and that prior to the sale the corporate defendant here paid off a mortgage covering realty and chattels to secure the payment of $6,000. Harrison took possession of the chattels and on the same day transferred them to Henry Hof, the husband of plaintiff, Lillian Hof, by a deed which also conveyed real property. Hof thereupon took possession of them. Shortly before this period and on November 26, 1912, the New York and Western Specialty Company, to secure a past due indebtedness of $3,000, mortgaged certain chattels, including those we have been considering, to Martin Mager. The amount secured was payable on demand. That instrument was filed in the office of the town clerk of the town of Southampton on December 27, 1912, and in no other place. The learned trial court found as a matter of fact, notwithstanding the designation in the certificate of incorporation, that the mortgagor had its only office and carried on its principal and only business in the town of Southampton and that its stockholders duly authorized and consented to the mortgage. In February, 1913, the corporate defendant brought an action against John B. Harrison and Henry Hof to recover damages for the conversion on December 2, 1912, of the chattels mortgaged to Mager, including those mortgaged to von der Leith. The plaintiffs recovered judgment (which was entered June 28, 1913) for $2,040, the value of the chattels, which, with interest and costs, made the amount of the judgment $2,223.13. On July 22, 1913, that judgment was assigned to Annie M. Harrison, wife of the defendant therein, John B. Harrison. The consideration paid was $2,000. It was the money of John B. Harrison and was paid to the plaintiff there, the corporate defendant here. On the same day Annie M. Harrison executed, acknowledged and delivered to John B. Harrison a satisfaction of the judgment. The certificate of satisfaction was not filed. On June 16, 1913, Mager demanded payment of the amount secured by his mortgage. Pending the suit for damages for conversion and on April 18, 1913, Henry Hof and *322his wife, Lillian, by an instrument conveying the real estate, conveyed the chattels contained in the hotel to Annie 0. Carpenter, who thereupon took possession of them. She remained in possession until August 15, 1913, when they were seized by the sheriff in an action begun by Mager against the corporate defendant and Annie 0. Carpenter to foreclose his chattel mortgage. By stipulation upon the trial the actions in which Hof and Mager are plaintiffs were tried together. Henry Hof had no knowledge of the mortgage made by the corporate defendant to Mager until December 6, 1912, and after the transfer had been made to him and he had taken possession. Annie 0. Carpenter had no knowledge of the Mager mortgage until after the transfer of the chattels to her and none until April 25, 1913.

The learned trial court decided that the mortgage given by Marie A. Grening to Anna von der Leith and assigned to the plaintiff, Lillian Hof, was a good and valid chattel mortgage at the time of the commencement of the action, and a good and valid lien on the chattels covered by it, superior to the lien of the mortgage made by the corporate defendant to Martin Mager; that Mager was not a subsequent mortgagee in good faith, his mortgage having been given to secure an antecedent indebtedness; that Lillian Hof was entitled to a foreclosure of the von der Leith mortgage; that the mortgage made by the corporate defendant to Martin Mager was a good and valid first lien upon the chattels covered by it and not included in the mortgage to von der Leith, and a good and valid lien upon the other chattels, subordinate only to the von der Leith mortgage. A referee was appointed to identify the chattels covered by each of these mortgages. The court also found that the filing of the Mager mortgage in the office of the town clerk of the town of Southampton was a valid filing and that the defendant Carpenter, who purchased from Henry Hof and his wife, was not, as to the Mager mortgage, a subsequent purchaser in good faith. Mager appeals from so much of the interlocutory judgment as adjudges the priority of the von der Leith mortgage; and the defendant Carpenter appeals from so much of the interlocutory judgment as adjudges the validity of the Mager mortgage and as adjudges that Mager *323recover of her his costs and disbursements. It will be seen that the defendant Carpenter does not appeal from the judgment in favor of Lillian Hof.

The investigation of this complex series of transactions may proceed from the conceded fact that prior to any of them Marie A. Grening was the owner in possession of certain chattels. She mortgaged them to von der Leith. This mortgage was not filed. It was good as between the parties. *(Stephens*v. *Meriden Britannia Co.,*160 N. Y. 178, 181.) It was assigned to the plaintiff Lillian Hof. The assignment was not filed. There is no evidence that the mortgage was foreclosed and the mortgagee and assignee barred in the action brought by Harrison against Grening, the mortgagor, and von der Leith, the mortgagee. The judgment roll was not offered in evidence. It-cannot, therefore, be determined what relief was grantable in that action. *(Briggs*v. *Oliver,*68 N. Y. 336.) The referee’s deed is not helpful. The referee had no title and could transfer none except such as he was empowered by the judgment to give. *(Heller*v. *Cohen,*154 N. Y. 299, 308; *Baer*v. *McCullough,*176 id. 97, 105.) There is a finding that Marie A. Grening transferred the chattels to the corporate defendant, but there is no finding that the corporate defendant was a purchaser in good faith. It is only as such a purchaser that it may invoke the statute. The failure to file the mortgage made it void only as to the persons mentioned in article 10 of the Lien Law, *supra. (Sheldon*v. *Wickham,*161 N. Y. 500, 503; *Gildersleeve*v. *Landon,*73 id. 609, 610; *Southard*v. *Benner,*72 id. 424, 428.) Of course, the mortgagee in a mortgage made by a person who is not found to be a subsequent purchaser in good faith, is in a position no more favorable to attack the unfiled mortgage. Lillian Hof was not a party to the action for conversion, and is unaffected by the judgment entered there. The deed to Carpenter, which Lillian Hof signed conjointly with her husband, obviously to release her dower in the real property therein described, is no evidence of a merger of the chattel mortgage which she holds by assignment. *(Bascom*v. *Smith,*34 N. Y. 320.) We do not see why the plaintiff has not a prior lien for the amount secured by the von der Leith mortgage upon the chattels described in *324that mortgage or which may he identified by the terms used therein. The lien of the Hof mortgage being preserved, the sale of the chattels by Marie A. G-rening to the corporate defendant was good as between the parties to that transaction. The mortgage made by the corporate defendant to Hager was given to secure an existing debt. It did not constitute him a subsequent mortgagee in good faith with the right to attack the validity of the von der Leith mortgage for a failure to file as a chattel mortgage. *(Button*v. *Rathbone, Sard & Co.,*126 N. Y. 187.) It was good, however, as between the parties to that transaction, and is a lien upon the chattels described in that mortgage, or which may be identified by its terms, subordinate to the lien of the von der Leith mortgage affecting the same chattels and without subordination as to chattels not covered by the von der Leith mortgage, unless it was lost through the payment by Harrison of the judgment in the conversion suit by operation of the principle applied in *Marsden*v. *Cornell*(62 N. Y. 215, 223). There was a default in the performance of the condition of the Hager mortgage on June 16, 1913. On June 6, 1913, there was a trial of the conversion suit and a verdict rendered. The damages were fixed at $2,040. The judgment was entered on June 28,1913. The judgment was assigned for the sum of $2,000 on July 22, 1913, and on that day the judgment was satisfied.

*Marsden*v. *Cornell (supra)*is a case in which Harsden, the mortgagee of a chattel, sued Cornell for conversion. Nelson, who purchased from the mortgagor, who was the owner of the chattel, had theretofore sued Cornell for converting the chattel and recovered a judgment, which was paid. The court said: “It thus appears, that a default in the performance of the condition of the mortgage had occurred before the recovery of the judgment by Nelson against Cornell for the conversion. The effect of that default was, that Harsden, the plaintiff, had become the absolute owner of the boat, subject only to the right of redemption in the mortgagee [sic] or his assignees, and had the right to take immediate possession of the boat. *(Lewis*v. *Palmer,*28 N. Y. 271; *Hall v. Sampson,*35 id. 274.) Harsden was thus, at the time of the recovery by Nelson, the general owner, with the right of immediate possession. Nel*325son was thus, the person who [had] been *[sic\*deprived by Cornell of actual possession, and was as one who had the special property in the boat, and could and did maintain his action of trover. Marsden having the legal title, the general ownership, with the right of possession, could, at that time, have maintained trover for a conversion of the boat. *(Mattison*v. *Baums,*1 N. Y. 295; *Butler*v. *Miller,*Id. 497; *Coles*v. *Clark,*3 Cush. 399.) Thus either of them could maintain an action for a conversion of the chattel; whichever of them first recovered would recover the full value of it; a recovery thereof by either barred a recovery by the other; satisfaction of the judgment transferred the title of both to the judgment debtor, who thereupon held the property against the whole world; and the one who recovered was accountable to the other for the avails, according to then equitable rights. Thus, by the operation of these principles, Cornell acquired a title to the boat, which he can maintain against the plaintiff.”

It was found as a fact that there was a default in the condition of the Mager mortgage prior to the time of the recovery and payment of the judgment. (See *Keiny*v. *Ingraham,*66 Barb. 250, 257.) Whoever succeeded to the interest of Harrison acquired title free from the lien of the Mager mortgage and is entitled to the surplus remaining after the satisfaction of the von der Leith mortgage, which mortgage is not assailed by the defendants in the action for conversion or their assignees. We think the defendant Carpenter in equity became vested with the chattels coming within the scope of the Harrison and Hof conveyances as soon as those chattels became the property of Harrison by the payment of the judgment in the action for conversion. (See *McCaffrey*v. *Woodin,*65 N. Y. 459, 468, and cases cited.) The complaint against Carpenter should, therefore, be dismissed.

The judgment should be modified in accordance with the views herein expressed, and as modified affirmed, with costs to the plaintiff Hof and the defendant Carpenter against the defendant Mager.

Jenks, P. J., Thomas and Rich, JJ., concurred; Putnam, J., concurred in result.

*326The parties hereto having stipulated in open court that a justice may be substituted in place of Burr, J., deceased, Mr. Justice Thomas was so substituted. Judgment modified in accordance with opinion by Stapleton, J., and as modified affirmed, with costs to the plaintiff Hof, and to the defendant Carpenter against the defendant Mager. Order to be settled before Mr. Justice Stapleton.

*

 Since amd. by Laws of 1911, chap. 826.— [Rep.