Case Name: Robert E. MacDonnell, as Receiver of the Medina Gas and Electric Light Company, Respondent, v. Buffalo Loan, Trust and Safe Deposit Company, Appellant
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1908-10-06
Citations: 193 N.Y. 92
Docket Number: 
Parties: Robert E. MacDonnell, as Receiver of the Medina Gas and Electric Light Company, Respondent, v. Buffalo Loan, Trust and Safe Deposit Company, Appellant.
Judges: 
Reporter: New York Reports
Volume: 193
Pages: 92–117

Head Matter:
Robert E. MacDonnell, as Receiver of the Medina Gas and Electric Light Company, Respondent, v. Buffalo Loan, Trust and Safe Deposit Company, Appellant.
1. Conversion — Demand and Refusal — Acts Constituting Conversion of Property by Custodian Thereof. The rule, that one who comes lawfully into possession of the property of another cannot be charged with the conversion thereof until after demand and refusal, has no application where the lawful custodian commits an overt and possible act of conversion by an unlawful sale or disposition of the property.
2. Same — Conversion of Bonds by Custodian Thereof—What Acts Constitute Conversion — Statute of Limitations. Where negotiable bonds of a corporation, issued for corporate purposes only, and lawfully in the custody of a trust company, designated as trustee of the mortgage executed to secure the bonds, were wrongfully pledged to the company by the secretary of the corporation as security for loans to himself, personally, the apparent participation of the company in the wrongful act of the secretary, with full knowledge thereof, by its acceptance of the bonds as a pledge, did not, in the absence of a demand and refusal, constitute a conversion; for it plight still have elected to hold the bonds as trustee. But, where, in consideration of the payment of its loan to said secretary by a certain bank, the trust company transferred the bonds to such bank, it assumed to treat them as its own and from that moment was guilty of a conversion of the bonds, and no demand therefor by the true owner thereof was necessary. Hence, the Statute of Limitations began to run against an action against the trust company, for the conversion of the bonds, not from the date the bonds were pledged, but from the date on which they were assigned and transferred to the bank.
3. Same — Corporation Mortgage — Term, “ Choses in Action,” in Description of Property Covered by Mortgage — Does Not Include Cause of Action Against Trustee of Mortgage for Conversion of Bonds Secured by the Mortgage; * Although the mortgage, given to secure the bonds in question, included in the description of the property covered thereby, all debts, demands, dues and choses in action which might be acquired after the execution of the mortgage and * ‘ after default ” therein, it cannot be held that the term “ choses in action ” includes a cause of action arising out of the conversion of the very bonds which the mortgage was given to secure and which arose after the execution of the mortgage but before default therein; especially, where a fair construction of the language employed does not support the conclusion, repugnant to justice and good morals, that it was the intention of the parties to include within the term “ choses in action,” a cause of action arising from a subsequent wrongful act, constituting a flagrant breach of trust, by the trustee of the mortgage.
4. Same — Corporation Mortgage — After-acquired Property— When It Is Not Sold at Foreclosure Sale. While a corporate mortgage may include property to he thereafter acquired, it is, as to chattels not then in esse, merely an executory contract to give a lien which a court of equity may enforce as between the parties, when -the chattels come into existence, or which the mortgagee may make effective by taking actual possession of the after-acquired property; but such contract will not be enforced where the rights of the creditors of the mortgagor will be affected thereby; especially where the mortgagee has not filed or refiled its mortgage as a chattel mortgage, as then required by law, or done anything to reduce to its possession any of the after-acquired property of the mortgagor.
5. Same — Action for Mortgagee’s Conversion —Ineffective Release Thereof, by Purchaser at Foreclosure Sale. Where, subsequent to the conversion of the bonds by the trust company, the trust mortgage was foreclosed and the property, covered thereby, sold under an order of sale in which after-acquired personal property was nominally included but none was specified or identified so as to bring it to the attention of the court and no provision, subjecting after-acquired chattels or choses in action to the lien of the mortgage, was made by the court, a release to the trust company, by the assignee of the purchaser at the foreclosure sale, is ineffectual as a bar to the action for the conversion of the bonds.
6. Same — Conversion of Bonds by Custodian Thereof—When Taking Thereof by Legal Process, Not a Defense to Action for Conversion. Although, at the time the bonds in question were transferred by the trust company to said bank, in consideration of the payment by the latter of the secretary’s indebtedness to the company, the bonds had been attached in an'action brought by said bank against the secretary, that fact does not relieve the trust company from the charge of conversion arising from the transfer of the bonds; where the attachment was invalid because the action was brought against the secretary and not against the corporation which owned the bonds, and where the trust company instead of notifying the owner of the bonds, or resisting the attachment action, assumed to hold the bonds as pledgee, and, upon the discontinuance of the action and the falling of the attachment, voluntarily turned them over to the bank in consideration of the payment of the secretary’s indebtedness for which the bonds were pledged.
7. Costs—Extiia Allowance. It is only where there is no power in the trial court to grant an extra allowance that the Court of Appeals will review an order granting the same, and when that power exists the amount of the allowance rests in the discretion of the court below, subject only to the limitations of the statutes relating thereto.
Medina Gas & El. Light Co. v. Buffalo Loan, T. & S. D. Co., 119 App. Div. 245, affirmed.
(Argued May 28, 1908;
decided October 6, 1908.)
Appeal from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered June 1, 1907, affirming a judgment in favor of plaintiff entered upon a decision of the court on trial at Special Term and an order granting an extra allowance of costs.
The plaintiff has recovered damages against the defendant for the alleged conversion of ten bonds which were each of the par value of $1,000. The judgment appealed from represents their face value with interest.
On the- 15th day of September, 1886, the board of directors of the Medina Gas Light Company adopted a resolution authorizing the corporation to borrow $10,000 upon its ten bonds to be issued. These bonds were to be negotiated by the president for the benefit of the corporation and the proceeds thereof were to be used “ for the purpose of defraying its existing indebtedness and for its other lawful purposes.” A mortgage was duly executed to secure these bonds, and delivered to the defendant as trustee. On the 21st day of September, 1886, before the mortgage was recorded, Stranahan, the secretary of the Medina Gas Light Company, pledged these bonds to the defendant as security for personal loans which it had made and was to make to him. This was done without the knowledge or consent of the Medina Gas Light Company and with full knowledge on the part of the defendant that the bonds were authorized only for corporate purposes and were to be negotiated only by the president of the gas company while they were in fact being used and negotiated by Stranahan, its secretary, for his personal ends. JsTone of the moneys loaned by the defendant to Stranahan were applied by the latter to any of the purposes recited in the resolution under which the mortgage was executed and the bonds were issued. In 1890 Stranahan became indebted to the German-American Bank of Buffalo. That bank commenced an action against Stranahan and caused an attachment to be issued upon the ten bonds executed by the Medina Gas Light Company then in the possession of the defendant. That action" was discontinued and the attachment withdrawn. On the same day the German-American Bank paid to the defendant the amount of Stranahan’s indebtedness to it and took over as security the ten bonds, together with other collateral which had been pledged to the defendant by Stranahan. At the time of this transaction between the German-American Bank and the defendant, the former had no knowledge or notice that there was any irregularity in the issuance or negotiation of the bonds, except such notice as might arise from the fact that all of the coupons which fell due from March 15th, 1887, to and including September 15th, 1890, were attached to the bonds and apparently unpaid.
This was the situation in April, 1891, when the Medina Gas Light Company and the Medina Electric Company became consolidated under the name of the Medina Gas and Electric Light Company. In 1893 the defendant, at the request of the German-American Bank, brought an action to foreclose the mortgage given to secure the ten bonds above mentioned. In that action the Medina Gas and Electric Light Company litigated the validity of the issuance and negotiation of the bonds and it was held that Stranahan had wrongfully used them to secure the payment of his own debt without the knowledge or authority of the Medina Gas Light Company and with full knowledge on the part of the defendant, but that they were valid securities in the hands of the German-American Bank because it was a Iona fide purchaser for value. Upon that decision a decree of foreclosure and sale was entered which was subsequently affirmed both in the Appellate Division and in this court.
On the 26th day of August, 3895, the Medina Gas and Electric Light Company demanded of the defendant the bonds and coupons thus converted or their equivalent in cash, and this demand was not complied with. At that time the bonds had no quotable value and the real estate and plant of the gas and electric company was found to be worth upwards of $20,000. On the 7th of June, 1900, there was a sale of the property of that company under the decree of foreclosure above mentioned and it was purchased by one Andrew L. Fennessy for the sum of $14,450. In the decree and notice of sale under which Fennessy made his purchase the real estate comprising the plant of the Medina Gas and Electric Light Company was described by metes and bounds and this was followed by a clause, also contained in the mortgage, authorizing the sheriff to sell and convey “ All and singular the other real estate, lands, tenements and hereditaments of the said Medina Gas Light Company, whether the same then were or should thereafter be acquired by the said Medina Gas Light Company; and all and singular the scales, tools, machinery, fixtures, implements and appliances of every nature and description; and all brands, stamps, trade marks and other articles of personal property which then were or should thereafter be acquired by the said Medina Gas Light Company, and after default should be made in the conditions of said mortgage, all and singular the materials manufactured, unmanufactured, or in process of manufacture; bills receivable, debts, demands, dues, dioses in action, accounts and all other property real, personal or mixed which had been acquired or might thereafter be acquired by the said Medina Gas Light Company, with all and singular its rights, privileges and franchises ; and all and singular the estate, right, interest, property, possession, claims and demands whatsoever, as well in equity as in law of the said Medina Gas Light Company in or to the same and every part and parcel thereof with the appurtenances.”
On the 10th day of July, 1900, Fennessy assigned to one Ilenry Koons all the rights which he had acquired under his purchase in the foreclosure proceedings, and by virtue of this assignment Koons attempted, in February, 1902, to release the defendant from the claim which the Medina Gas and Electric Light Company, as successor in interest of the Medina Gas Light Company, had against this defendant on account of the alleged conversion of the bonds and coupons referred to. Upon tfiese facts, and others which are referred to in the opinion, the Supreme Court at Special Term decided that the plaintiff was entitled to recover, and the judgment entered upon that decision has been affirmed at the Appellate Division.
Edward W. Hatch, Tracy C. Becker and Lincoln A. Groat for appellant.
The cause of action alleged in the plaintiff’s complaint was included in the description of the property covered by the trust mortgage of the Medina Gas Light Company and was subject to the lien thereof, was included in the property directed to be sold by the judgment in the foreclosure action and passed to the purchaser at the foreclosure sale. (Purdy’s Beach on Priv. Corp. § 1176; Cook on Corp. [5th ed.] § 857; Platt v. N. Y. & S. B. R. R. Co., 9 App. Div. 87; 153 N. Y. 670; N. Y. S. & T. Co. v. S. G. Co., 88 Hun, 569; 157 N. Y. 689; W. T. Co. v. M. I. Works, 106 App. Div. 195; C. T. Co. v. Kneeland, 138 U. S. 419; Deeley v. Dwight, 132 N. Y. 59; Nat. Bank of Deposit v. Rogers, 166 N. Y. 390; Zartman v. F. Nat. Bank, 189 N. Y. 267; Ramsey v. Gould, 57 Barb. 398; Streever v. Birch, 62 Hun, 302; Matter of Denny, 2 Hill, 223; Parshall v. Eggert, 54 N. Y. 18.) The facts as found by the trial court constitute a conversion of the bonds in question by the defendant when they were delivered to it by R. A. Stranahan, on September 21, 1886, and a cause of action for such conversion accrued to the Medina Gas Light Company at that time. (B. L. T. & S. D. Co. v. Medina Gas Co., 162 N. Y. 67; Goodwin v. Wertheimer, 99 N. Y. 149; Tallman v. Turck, 26 Barb. 167; Pease v. Smith, 61 N. Y. 477; Briggs v. Jones, 8 Misc. Rep. 261; 149 N. Y. 577; Ranous v. Hughes, 19 Misc. Rep. 46; Korneman v. F. H. B. Co., 4 Misc. Rep. 299; Ganley v. T. C. Nat. Bank, 98 N. Y. 487; Moore v. Hamilton, 44 N. Y. 666; Perry v. levenson, 82 App. Div. 94.) The cause of action set forth in the plaintiff’s complaint herein became vested in Mr. Koons as assignee of the purchaser at the foreclosure sale, and was by Koons fully satisfied and discharged, and the defendant herein was released therefrom. (Code Civ. Pro. § 1910; McKee v. Judd, 12 N. Y. 622; Drake v. Smith, 12 Hun, 532; McKeage v. Hanover Ins. Co., 81 N. Y. 38; Baumann v. Jefferson, 4 Misc. Rep. 147.) The acts of Stranahan and Linley in pledging the bonds in question with the German-American Bank at a time when they were the owners of the entire capital stock of the Medina Gas Light Company ratified and confirmed all preceding transactions relating to said bonds and estO]3ped both the Medina Gas Light Company and the plaintiff, as its successor in interest, from maintaining this action. (Morawetz on Priv. Corp. § 625; Welsh v. I. & T. Nat. Bank, 122 N. Y. 177; Martin v. N. F. P. Mfg. Co., 122 N. Y. 165; Barr v. N. Y., L. E. & W. R. R. Co., 125 N. Y. 263; P. G. Co. v. Berry, 113 U. S. 322; Steinway v. Steinway, 2 App. Div. 301, 304.) The pledge of said bonds by Stranahan with the defendant to secure the payment of his individual debt on the 21st day of September, 1886, and the acceptance of said pledge by the defendant with full knowledge of all the facts, as found by the trial court, was an act of conversion on the part of the defendant, and more than six years having elapsed thereafter before the commencement of this action, it is barred by the Statute of Limitations. (F. Nat. Bank v. Shuler, 153 N. Y. 163; Matter of Rogers, 153 N. Y. 316; Matter of Van Voorhees, 55 Misc. Rep. 185; Int. G. Trust v. Tod, 170 N. Y. 233; Laverty v. Snethen, 68 N. Y. 522; Shotwell v. Wendover, 1 Johns. 65; Reynolds v. Shuler, 5 Cow. 323; Pickering v. Darling, 3 App. Div. 553; Usher v. Van Vranken, 48 App. Div. 413; Goodwin v. Wertheimer, 99 N. Y. 149.) The order granting to the plaintiff an additional allowance of costs is erroneous and should be reversed. (Campbell v. Emslie, 188 N. Y. 599; Code Civ. Pro. § 3253 ; S. T. Co. v. N. Y. C. & H. R. R. R. Co., 178 N. Y. 407; Smith v. L. V. R. R. Co., 77 App. Div. 47; Frey v. N. Y. C. & H. R. R. R. Co., 114 App. Div. 623.)
Louis Marshall for respondent.
The uncontradicted facts establish a perfect cause of action in favor of the plaintiff against the defendant for the conversion of the ten bonds and of the coupons thereto attached which were delivered by it to the German-American Bank. (B. L., T. & S. D. Co. v. M. G. & El. L. Co., 162 N. Y. 67; S. & L. P. R. R. Co. v. Arnold, 167 N. Y. 368; Palmer v. Ring, 113 App. Div. 643; Smith v. Hurd, 12 Metc. 371; Humphreys v. McKissock, 140 U. S. 312; G. S. Bank v. Vil. of Suspension Bridge, 75 Hun, 590; 159 N. Y. 362; Shaw v. S. II. N. Co., 144 N. Y. 220; Decker v. Mathews, 12 N. Y. 313; Comstock v. Hier, 73 N. Y. 269; Farnham v. Benedict, 107 N. Y. 159.) The plaintiff’s cause of action accrued upon the demand of the bonds from the latter by the plaintiff therefor, and the refusal to return the same on August 26,1895, irrespective of the fact that at the time of the commencement of the action the plaintiff had not actually paid the amount of the bonds. (Decker v. Mathews, 12 N. Y. 313; Thayer v. Manley, 73 N. Y. 305; Betz v. Dailey, 3 N. Y. S. R. 309; M. E. Ry. Co. v. Kneeland, 120 N. Y. 134.) The pretended release of the defendant by Koons from the cause of action described in the complaint herein, is ineffective and constitutes no defense to this action. ( Wertheimer v. Goodwin, 99 N. Y. 149; Converse v. Sickles, 146 N. Y. 206 ; Cas tle v. C. E. Bank, Hun, 89; 148 N. Y. 122; Tompkins v. F. G. L. Co., 188 N. Y. 261; Moran v. Abbott, 26 App. Div. 570; Madison v. Gross, 54 App. Div. 129; Nat. L. Assn. v. Thompson, 38 App. Div. 445; M. & M. R. R. Co. v. M. & W. R. R. Co., 20 Wis. 147; Eaton v. Simonds, 14 Pick. 98; Wells v. Cooper, 25 N. J. L. 137; James v. Morey, 2 Cow. 284; Strout v. N. W. Co., 9 Cal. 78.) The action is not barred by the Statute of Limitations. (Zebley v. F. L. & T. Co., 139 N. Y. 461; King v. Mac Kellar, 109 N. Y. 215; Code Civ. Pro. § 410, subd. 1; Henry v. Allen, 151 N. Y. 1; Shipman v. Bank of New York, 126 N. Y. 318; Bienenstok v. Ammidown, 155 N. Y. 47; Edwards v. Dooley, 120 N. Y. 40; Timpson v. Allen, 149 n. Y. 513; Ring v. L. I. R. E. Exchange, 93 App. Div. 447; Gauley v. T. C. Nat. Bank, 98 N. Y. 494.) The order granting an extra allowance of $1,000 was clearly justified, the action being both difficult and extraordinary. (S. T. Co. v. N. Y. C. & H. R. R. R. Co., 178 N. Y. 407; People v. Bootman, 180 N. Y. 1.)

Opinion:
Werner, J.
The legal conclusion that the defendant converted the bonds in suit is based upon findings of fact which are amply supported by the evidence. All of the learned justices of the Appellate Division w*ho sat in the case agreed that there had been a conversion of the bonds, but differed as to the time when it was effected. Four of the justices were of the opinion that the conversion took place when the defendant transferred the bonds to the G-erman-American Bank on December 27th, 1890, and one of them thought that the conversion was consummated when Stranahan pledged the bonds to the defendant on September 21st, 1886. Thus there is unanimity of opinion as to the fact of the conversion, but a difference of views as to the time when it took place, and the importance of this divergence lies in the fact that if the bonds were converted in September, 1886, the six years' Statute of Limitations had expired before this action was commenced in September, 1895; but if the conversion was not committed until December, 1890, the defense of the Statute of Limitations, interposed by the defendant, is of no avail. The plaintiff asserts that there was no conversion until the 26th day of August, 1895, when his predecessor in title made a demand upon the defendant for the return of the bonds or the payment of their value, and this is upon the theory that the defendant's original possession of the bonds was lawful, so that no cause of action for conversion could have arisen until after a demand by the plaintiff and a refusal by the defendant. W e think the plaintiff's contention is not tenable. The rule that one who comes lawfully into possession of property cannot be charged with conversion thereof until after a demand and refusal is too well established to justify extended discussion. (Goodwin, v. Werthemier, 99 N. Y. 149; Converse v. Sickles, 146 n. Y. 200; Castle v. Corn Exchange Bank, 148 N. Y. 122; Tompkins v. Fonda Glove Lining Co., 188 N. Y. 261.) But it has no application in a case where the lawful custodion of property commits an overt and positive act of conversion by an unlawful sale or disposition of the same. (Pease v. Smith, 61 N. Y. 480.) So long as the defendant was in possession of the bonds, under circumstances which might have made that possession lawful or unlawful at its will, a demand and refusal were necessary to put it in the wrong, but when it assumed to transfer the bonds to the German-American Bank it committed an act which was in hostility to the right and title of the plaintiff. This was a distinct and unequivocal conversion. It was a wrongful taking, which at once created a cause of action in favor of the owner of the bonds. Ho demand was necessary. The sole object of a demand is to convert an otherwise lawful possession into an unlawful one. In such a case the refusal furnishes the only evidence of a conversion. We think that the majority of the justices of the Appellate Division were clearly right in holding that the defendant converted the bonds on the 27th day of December, 1890, and not on September 21 st, 1886, as contended for by the defendant, or on the 26th day of August, 1895, as claimed by the plaintiff. "The defendant acquired lawful possession of the bonds in 1886 and retained such possession until it transferred them to the German-American Bank in December, 1890. The character- of this possession was not affected by the wrongdoing of Stranahan in pledging the bonds to secure his personal indebtedness to the defendant, nor by the apparent participation of the latter in this unauthorized act, for it could still have elected to continue in custody thereof as trustee. Having once lawfully acquired the physical custody of the bonds, the defendant could not be guilty of a conversion of them until it did something to indicate that it proposed to ignore the owner's rights and- assert its own claim in hostility thereto. Nothing of that kind transpired until December, 1890, when the defendant assumed to treat the bonds as its own by transferring them to the German-American Bank in consideration of the payment by the latter of Stranahan's indebtedness to the defendant. That was the time when the defendant first evinced its purpose to ignore its trust and repudiate its lawful custody of the bonds by claiming" dominion over them in hostility to the rightful own'- \ ership of the plaintiff's predecessor in title. As this action was commenced within six years of defendant's conversion of the bonds, and within two years and seven months of the time when the plaintiff's predecessor in title discovered the fact, it is clear that the defense of the Statute of Limitations cannot be upheld.
The defendant also contends that the cause of action upon which the plaintiff has recovered in this suit was included in the description of the property covered by the mortgage of the Medina Gas Light Company to the defendant as trustee for the bondholders; that it was subject to the lien of the mortgage ; and that it passed to the purchaser at the foreclosure sale and through him by assignment to Koons, who executed a release to the defendant. This contention is planted upon the clause in the mortgage quoted in the foregoing statement of facts by which the subsequently acquired real and personal property of the mortgagor is declared to be subject to the lien of the mortgage. This clause, after enumerating various kinds of personal property which might be subsequently acquired, includes " bills receivable, debts, demands, dues, choses in action and accounts," but it is to be observed that these items are restricted to such as might be acquired after the execution of the mortgage " and after default shall he made herein." Conceding then for the moment that the general designation " choses in action" is broad enough to include causes of action arising out of torts, the plaintiff's cause of action would not be embraced because it came into existence before any default had occurred in the obligations which the mortgagor had assumed.
A careful study of the context of the clause in the mortgage relied upon by the defendant to uphold its title to the cause of action in this suit clearly shows, however, that it could not have been within the contemplation of the parties to the instrument that the term " choses in action " should include a cause of action arising out of a tort committed in dealing with the bonds Avhicli the mortgage was given to secure. The " choses in action " referred to in that clause were obviously such as might come into existence and be acquired by the mortgagor through its contractual relations with others in the "regular course of business. Wo find the expression associated with such items as " bills receivable, debts, demands, dues and accounts." These kindred terms define " choses in action " as property ejusdem generis, and not causes of action arising out of torts committed after the execution of the mortgage. The principle of noseitur a sooiis applies.
While these considerations are entirely sufficient to annihilate the defendant's contention that it has acquired the cause of action upon which the plaintiff has recovered herein, they are almost technical as compared with the higher and broader reasons for which the defendant's plea should be ignored. To speak plainly, it seems to us like trifling with the meaning of plain English, expressed in a solemn contract to argue that the term " choses in action " can possibly refer to a cause of action arising out of a conversion of the very bonds which are the subject-matter of the mortgage in which that term is employed. To uphold the defendant's bold and novel contention in this behalf we should have to adopt the theory that' the parties to the trust mortgage contemplated that the trustee would be derelict in its duty, and had deliberately decided in advance that any cause of action which might arise from the trustee's turpitude should subsequently be acquired by it to serve as a shield against those affected by its wrongful acts. This is so repugnant to good morals and so shocking to the sense of justice that we find it difficult to discuss the subject with any degree of judicial moderation. We leave it, therefore, with the additional suggestion that under no construction which can possibly be given to the term " dioses in action " could the defendant be permitted to succeed upon this branch of the c&se.f' A mortgage may be so drawn as to embrace within its lien property that may be acquired by the mortgagor subsequent to the execution of the mortgage. This is one of the familiar innovations upon the common law which have been absorbed into our jurisprudence. But such a mortgage,'as to chattels not in esse when it is executed, is merely an execútóry contract to give a lien which a court of equity may enforce, as between the parties, when the chattels come into existence, or which the mortgagee may, in some cases, make effective by taking actual possession of the after-acquired property. (National Bank of Deposit v. Rogers, 166 N. Y. 380, 390; Zartman v. First Nat'l Bank of Waterloo, 189 N. Y. 267; Rochester Distilling Co. v. Rasey, 142 N. Y. 570.) While such a contract is enforceable, as suggested, between the parties thereto, it is hedged about by the limitation that it shall not affect the rights of other creditors of the mortgagor.,, It is said that here there are no such creditors. We think otherwise. In 1891 the mortgagor was consolidated with the Medina Electric Company under the name of the Medina Gas and Electric Light Company. The latter corporation, which succeeded to all the rights and obligations of the mortgagor, executed a second mortgage to the riollandTrnst Company for $75,000 to secure bonds to be issued to that amount. Of the bonds thus authorized $64,000 were in fact issued and are still outstanding. If these subsequent bondholders are not creditors, of the first mortgagor, it is difficult to define their legal status. But even if we assume that they are not creditors within the rule which they invoke that does not help the defendant. Prior to the commencement of the foreclosure suit the defendant had done nothing to reduce to its possession any of the after-acquired property of the mortgagor. It had not filed or refiled its mortgage as a chattel mortgage although that was required bythe law as it stood until 1897. (L. 1897, ch. 418, sec. 91.) The complaint, decree, sheriff's deed and other proceedings in the foreclosure action all emphasize the fact that the court was not asked to lend its equitable aid for the purpose of subjecting to the lien of the mortgage any chattels or dioses in action that came into existence after the execution of the mortgage. The whole record in the foreclosure suit indicates that although after-acquired personal property was nominally included in the mortgage and was referred to in the decree, notice of sale and sheriff's deed, none was specified or identified so as to bring it to the attention of the court. It was, in short, the usual foreclosure of a corporate mortgage in which the recital as to after-acquired personal property was treated as an empty formality as to which the court's action was neither sought nor desired. Thus there is no aspect of the case in which the purchaser at the foreclosure sale can be said to have acquired the cause of action upon which the plaintiff has recovered herein, and it follows as a logical corollary that the assignees of the purchaser could not convey or release it to the defendant.
The argument on behalf of the defendant to the effect that Stranalian's ownership of practically all of the capital stock of the Medina Gas Light Company gave.him the right to deal with the corporate bonds for his own personal benefit, was disposed- of in the foreclosure action (162 N. Y. 76) and need not be further discussed now.
The defendant's contention that it was legal error to grant the plaintiff an extra allowance of costs cannot be upheld. In a case where there is no power in the trial court to grant an extra allowance, the right to review that question extends to this court; but when the power exists and the question arises whether it was properly exercised, the Appellate Division is the court of last resort. In this case the power existed, and the amount to be granted rested in the discretion of the courts below, subject only to the limitations of the statute. (People v. Bootman, 180 N. Y. 1.) The other questions presented on behalf of the defendant have been considered. We do not think it necessary to discuss them since they capnot affect the conclusion which we have reached.
The judgment of the Appellate Division should be affirmed, with costs.