#### Joseph Levy and Emil Ackermann, Appellants, *v.*Nathan J. Reich, Respondent.

(Supreme Court, Appellate Term, First Department,

December, 1912.)

Chattel mortgages — foreclosure of — debt secured by—possession and sale of chattels by mortgagee — action on original debt.

Where a mortgagee of chattels instead of foreclosing his security, takes possession of the chattels, the mortgage debt is thereby satisfied provided the chattels are of sufficient value for that purpose.

Where defendant, after purchasing chattels subject to a mortgage, payable on demand but not given to secure the purchase price, and held by plaintiffs, obtained from them a loan, satisfied the mortgage and paid over the balance, and thereafter without foreclosure plaintiffs took possession of and sold the chattels and credited the proceeds on the mortgage debt, a dismissal of the complaint in an action to recover on the original debt, on the ground that the court did not have jurisdiction of the cause of action, is reversible error.

Appeal from a judgment of the Municipal Court of the city of New York, borough of Manhattan, sixth district, dismissing the complaint on a trial by the court without a jTM',y.

Jacob J. Wilmer, for appellants.

Julius Liedler, for respondent.

Page, J,

The action was brought on the original debt as security' for the_payment of which a chattel mortgage had been given. The fixtures had been purchased from Lingelheim subject to a mortgage held by the plaintiffs on which there was due fifty-four dollars and eighty-four cents. Subsequently to the purchase of the fixtures the defendant borrowed one hundred dollars from plaintiffs; fifty-four dollars and eighty-four cents was applied in satisfaction of Lingelheim’s mortgage and the balance paid to defendant. As this was not *“*a chattel mortgage made to secure the purchase price of chattels,” section 139 of the Municipal Court Act *414did not apply. The learned justice below based his decision solely upon the ground that the court did not have jurisdiction of the cause of action. The mortgage was payable on demand. LTo demand for payment, which put defendant in default, was shown, although it might be inferred from some of the testimony that such a demand had been made.

The plaintiffs, without foreclosure, took the chattels into their possession and evidently disposed of them at private sale to a second-hand dealer for thirty dollars. This sum they credited upon the debt. Defendant was credited also with ten dollars and fifty cents for merchandise sold to plaintiffs. They bring this action, not to recover the deficiency, because there having been no foreclosure the deficiency had not been ascertained. Where, however, the mortgagee, instead of foreclosing the mortgage, takes possession of the chattels pledged, the debt is thereby satisfied, providing the chattel be of sufficient value for the purpose. Case v. Boughton, 11 Wend. 108; Stoddard v. Denison, 38 How. Pr. 296; M. Groh’s Sons v. Feldman, 40 Misc. Rep. 303, 304. It will become necessary to ascertain the true value of the chattels. If it equals or exceeds the debt the complaint will be dismissed. If it is less than the debt, the plaintiffs should have judgment for the balance. The evidence on this point being, contradictory there will have to' be'a new trial.

Judgment revers'ed and new trial granted, with costs to the appellants to abide the event.

Lehman and Hotghiciss, JJ., concur.

Judgment reversed and new trial granted, with costs to appellants to abide the event. •