Case Name: CHARLES E. HOVEY, et al., Appellants, v. JOHN ELLIOT, Impleaded, &c., Respondent
Court: New York Superior Court
Jurisdiction: New York
Decision Date: 1886-05-12
Citations: 21 Jones & S. 331
Docket Number: 
Parties: CHARLES E. HOVEY, et al., Appellants, v. JOHN ELLIOT, Impleaded, &c., Respondent.
Judges: 
Reporter: Reports of cases argued and determined in the Superior Court of the city of New York
Volume: 53
Pages: 331–348

Head Matter:
CHARLES E. HOVEY, et al., Appellants, v. JOHN ELLIOT, Impleaded, &c., Respondent.
Lien not raising a trusteeship—Trusteeship of receiver ceases on his discharge and payment over■—Equitable lien not enforceable after bona fide sale of the property in hostility to it—Destruction of lien by such sale—Lien on right of action—Statute of limitations, subdivision 3 of section 382 applies —Equitable lien is property—Bevei'sal of a judgment dismissing the complaint in an action brought to establish and enforce a lien, followed by a judgment establishing it, effect of as to cause of action against persons not parties to the action, who, with notice of the claim to the lien, purchased the property on which it was and sold it to a purchaser in hostility to the lien, between the first judgment and its reversal.
One owning and in possession of personal property subject to an equitable lien therein is not a trustee for the lienor.
The trusteeship of a receiver appointed by a court, ceases on his discharge and payment, or delivery over by him of the property in his hands, pursuant to the order of the court appointing him.
The holder of an equitable lien on negotiable personal property cannot enforce such lien, after the party who owns the property and holds it subject to such lien, disposes of it, in hostility to the lien, to a bona fide purchaser without notice of the lien. Such a disposition of the property destroys the equitable lien, and the only remedy remaining to the lienor is an action at law against the destroyer for damages for such destruction ; or, perhaps, an action in the nature of an action for money had and received for the proceeds of his interest; to either of which actions the six years’ limitation prescribed by subdivision 3 of section 382 applies, the cause of action accruing at the time of such destruction.
An equitable lien is property, and an act destroying the lien is one lessening the estate of the lienor therein and an injury to his property.
Plaintiffs brought an action against parties (not the defendant herein) for the establishment and enforcement of a lien claimed by them on an award made on a claim pending under a treaty between this country and Great Britain ; a receiver was appointed for one half of the award, and he was directed to invest the money in certain bonds, which he did; the complaint was dismissed and the judgment directed the receiver to pay the funds belonging to the cause to the defendants in that action, and that he should thereupon be discharged. The receiver turned over the bonds to such defendants, who sold them to the defendants in this action, they being chargeable with notice of plaintiffs’ claim to a lien; defendants here sold them to bona fide purchasers in hostility to the lien. Thereafter the judgment of dismissal was, on appeal, reversed; and thereafter judgment was entered adjudging that plaintiffs have a lien upon said award, and upon any draft, money or evidence of indebtedness issued thereon or on the proceeds thereof,—Held, that the last named judgment did not create the lien; that it merely declared its existence; that plaintiffs had no right of action against the defendants here on said judgment; that plaintiffs’ right to enforce the lien had been destroyed that the only causes of action they had or might have were causes of action at law arising out of the action of defendants in so selling the bonds; that such causes of action accrued at the time of such sale, and werp barred by the six years’ limitation prescribed by subdivision 3 of section 382.
Before Sedgwick, Ch. J., Freedman and Ingraham, JJ.
Decided May 12, 1886.
Appeal from a judgment entered on the report of a referee.
The referee found as facts I. In or about the month of June, 1873, one Augustine B. McDonald had a claim pending before the mixed commission on British and American claims, under the treaty of May 8, 1871, for the value of certain bales of cotton ; and in the said month of June, 1873, he made an agreement with Charles E. Hovey and William P. Dole, the plaintiffs in this action, by which said parties were to aid him in the prosecution of said claim before the said commission, and he was to pay to them or their order, as their compensation, a sum equal to twenty-five per cent, of any amount allowed on said claim, and by the terms of said agreement, the pay6 ment of said sum of twenty-five per cent, was to be made a lien upon the said claim, and upon any draft, money, or evidence of indebtedness, which might be paid or issued thereon.
II. In the month of September, 1873, the said mixed commission on British and American claims, awarded to the said Augustine B. McDonald the sum of $197,190 in gold, to be paid by the government of the United States to the government of Her Britannic Majesty, in respect to the said claim of the said Augustine B. McDonald.
III. On or about October 2, 1874, the said Hovey and Dole, the plaintiffs herein, filed their bill in equity in the supreme court of the District of Columbia, against Augustine R McDonald and William White ; and in the said bill they alleged, among other things, that by reason of the agreement set forth in the first of these findings of fact, the defendant McDonald was indebted to them, the complainants, in the sum of $49,297.50 in gold, being an amount equal to one-fourth of the sum allowed on the claim of said McDonald by the said mixed commission, and that they had a lien upon the said claim, and upon the certificate of the amount allowed thereon, and upon all moneys which might become due and payable in respect thereof. That in the month of August, 1874, the said McDonald had assigned to the defendant White, the whole of said award, and that the said White, at the time of taking the assignment, had notice of the said hen and claim of the plaintiffs, and took with notice of the claim of the lien of said complainants ; and that, at the date of the filing of the said bill, the amount of said award was still in the hands of the diplomatic representatives of the British government, and they therefore prayed, among other things, that the defendants, McDonald and White, be restrained from assigning, disposing of, receiving or collecting, more than three-fourths of the said award, and that the lien of the complainants upon the said funds, and their interest in the same, be established by the decree of the said court. An injunction was issued in said action by the court in which the same was pending. On or about February 16, 1875, in another suit pending in the supreme court of the District of Columbia, wherein Thomas J. Phelps, assignee, was complainant, against Augustine E. McDonald and William White, and on the consent of Charles E. Hovey and William P. Dole, it was ordered that White, as the assignee of the said McDonald, receive from the agents of the British government one-half of the net amount of the award, free and discharged of all claims of Hovey and Dole, and Phelps, assignee, and that the remaining half of the net amount of the said award should be paid to George W. Riggs, as receiver, and that the said George W. Riggs should hold the said one-half of said award subject to the claims, liens and rights of the said Charles E. Hovey and William P. Dole, and of the said Phelps, assignee, to be determined by the court. And it was further ordered that the said receiver be directed to invest the money so placed in his hands in bonds of the United States, or in 3.65 bonds of the District of Columbia, guaranteed by the United States, as he might deem best for the interests of the parties concerned.
IV. George W. Riggs, as receiver, did make the investment of the funds referred to in the last foregoing finding of fact, in 3.65 bonds of the District of Columbia, and the said bonds were retained by him in his possession, as receiver, until the time mentioned in a subsequent finding of fact made herein.
V. On or about April 7, 1875, the defendants McDonald and White filed a demurrer to the bill of the complainants in the action, in the District of Columbia above mentioned, which demurrer was sustained, with leave to the complainants to amend. On April 27, 1875, the complainants in said suit filed their amended bill, and on May 7, 1875, the defendants demurred to said amended bill. On June 24, 1875, the said supreme court of the District of Columbia made a second decree, in and by which it. was ordered, adjudged and decreed that the demurrer to said amended bill of the complaint be sustained, and the bill be dismissed with costs. On June 24, 1875, the plaintiffs Hovey and Dole appealed to the general term of the supreme court of the District of Columbia from the decree sustaining the said demurrer. On June 28, 1875, the said supreme court of the District of Columbia, in the same action of Hovey et al. v. McDonald et al., made and entered another decree, in and by which it was ordered, adjudged and decreed that the demurrer to said bill of complaint be sustained, and the bill of complaint be dis missed at the cost of the plaintiff, and the receiver appointed in said cause, and in Phelps, Assignee, v. McDonald & White, be directed to pay the funds belonging to said cause, to the defendants, McDonald and White, or order, and thereon said receiver should be discharged.
VI. On said June 28, 1875, and after the entry of the decree of that date referred to in the last foregoing finding of fact, Augustine B. McDonald, one of the defendants in said suit, applied to George W. Biggs, receiver, for the surrender and delivery to him of the bonds of the District of Columbia, held by the said Biggs, as receiver, and in which the amount of money paid into his hands had been invested. The said George W. Biggs, receiver, made personal application to the judge holding the court, in which the decree was made, for instructions as to the delivery of the said bonds to said McDonald, and was informed by said judge that the delivery should be made. And thereupon the said Biggs, receiver, did deliver the said bonds, and all of them, to said McDonald. And upon the same day, the said McDonald sold the said bonds to the firm of Biggs & Co., of Washington, of which firm the said George W. Biggs, was a member, and the defendant in this action, John Elliot, was also a member. The said bonds were sold for the market value thereof, and purchased by Biggs & Co. from the said McDonald after they had been surrendered to the said McDonald by the said receiver; but the said firm of Biggs & Co., by reason of the said receiver being a member of said firm, had knowledge at the time of the said purchase of the claim made to the said bonds by the said Hovey and Dole. The said bonds of thec,District of Columbia were all registered bonds, with the exception of $300 thereof, which were in coupon bonds. Immediately after the purchase by Biggs & Co., aforesaid, the said bonds were taken to the treasury of the United States, and the title to said bonds was changed, the said bonds were surrendered to the said treasury department, and subsequently other and new bonds were issued to the said firm of Biggs & Co. And in the month of December, 1875, the same firm of Eiggs & Co. re-sold the said reissued bonds in the market, and the same parted from out their possession, and were dispersed among the purchasers thereof.
VII. On or about July 2, 1875, the complainants in the suit in the District of Columbia, aforesaid, to wit., Hovey and Dole, appealed to the general term of the supreme court of the District of Columbia, from the decree mentioned in the preceding finding of fact as having been made and entered on June 28, 1875. On July 12, 1875, a supersedeas bond was filed by the complainants on said appeal; and such proceedings were had upon the appeal thus taken, as resulted in a decree of the said general term of the supreme court of the District of Columbia, in said suit on March 4, 1876, reversing the judgments or decrees of June 24, 1875, and of June 28, 1875, and ordering and decreeing that the cause be remanded to the special term, with leave to answer the complainant’s bill within the time allowed, under the general rules of the court. On or about May 1, 1876, the defendants, McDonald and White, answered in the said suit in the supreme court in the District of Columbia.
VIII. On or about May 5, 1876, an application was made in the said supreme court of the District of Columbia, by Hovey and Dole, the complainants in the said suit, for an order requiring the defendants therein to pay into court a certain sum of money, to wit., the sum of $49,297.50, in gold, the decree of June 28, 1875, directing the receiver to pay the fund in his hands to McDonald, having been reversed by the decree of the said court at general term. On or about September 15, 1876, the said motion was transferred to the general term of the said supreme court of the District of Columbia ; and on June 15, 1877, the said Augustine E. McDonald and William White were ordered and required to pay into the registry of the said supreme court of the District of Columbia, the sum of $49,297.50, which said order was not complied with, and on December 8, 1877, a decree was made order ing the said defendants to pay the said money into court within six days, or their answer would be removed from the files of the said court, and said last mentioned order not having been complied with, on December 29,1877, the said supreme court of the District of Columbia, sitting in general term, made a decree in the said suit, in which it was ordered, adjudged and decreed that the answer filed in said cause by the defendants Augustine R. McDonald and William White, be stricken out and removed from the files of the court, and that the cause do proceed as if no answer therein had been interposed, and that all proceedings on the part of the defendants be stayed in the cause until said orders requiring the deposit in the registry of the court of the sum aforesaid were complied with. And on February 12, 1878, the said supreme court of the District of Columbia, sitting in general term, made an order that the bill of complaint of Hovey and Dole against McDonald and White be taken pro confesso against the defendants. And on April 17, 1878, the said supreme court, sitting in general term, made the said decree absolute, and ordered, adjudged and decreed, that the defendants, McDonald and White, pay to the complainants the sum of $49,297.50 in gold, and that the complainants have a lien upon the claim of Augustine R. McDonald against the United States, as awarded by the mixed commission on British and American claims, and upon any draft, money, evidence of indebtedness or the proceeds thereof, with legal interest from said April 17, 1878.
IX. That this action was commenced by the delivery of the summons herein to the sheriff of the city and county of New York on April 16, 1884.
And as conclusions of law that specific relief could not be afforded in equity for the enforcement of the lien, claim, interest or property right, in the said bonds of the District of Columbia, or in any other bonds or securities into which they were transmuted, or the proceeds of any such other bonds ; and that the only remedy which could be accorded to the plaintiffs would be for a recovery of money for the damages sustained by the destruction of their lien ; and that such action for damages was barred by subdivision 3 of section 382 of the Code of Civil Procedure, more than six years having elapsed since the time at which the right of action for such damages accrued.
And, in support of his findings the referee wrote as follows :
° “ Edward Patterson, Referee.—It appears that Riggs & Company purchased from McDonald the bonds in which the fund had been invested by the receiver, surrendered them to the treasury, received a reissue, and shortly afterwards sold the reissued bonds in the market. Thus it is established that the lien which the plaintiffs held on the securities in which a part of the award had been invested by the receiver was utterly destroyed, and a recourse to those securities for the enforcement of that lien rendered impossible.
“In this state of the proof the point is made on behalf of the defendant, that the real cause of action inhering in the plaintiff, and arising out of Riggs & Company’s relations to the bonds, is one at law, and not one in equity ; and, therefore, under the provisions of the Code of Civil Procedure, is barred by the six years limitation prescribed by subdivision 3 of section 382 ; and, moreover, that the cause of action accrued at the time Riggs & Company purchased from McDonald, or from the time they resold the bonds, which seems to have been in December, 1875, or at the furthest from the time of the reversal of the two decrees of June, 1875, referred to in the evidence.
“ If the form of the action as framed by the draughtsman of the complaint, is to be the test of the application of the statute, then this case is a suit in equity, a limita tion as to which is not provided for specifically in the Code, and, therefore, the ten years’ bar of the statute would apply. But Ido not understand that such is the test. Whether the statute of limitations, pleaded as a defense, applies or not, must be ascertained from the whole case, with all of the evidence before the court. Then it may be determined what the cause of action arising from the proof and the facts, really is.
“If the facts as established by evidence, authorize both a legal remedy and equitable relief, then the rule is that the statute bar affecting the legal cause of action, would control. At all events, whatever may be the structure of the action, when the proof shows that the ultimate recovery can be but for a sum of money, and that a court of law has jurisdiction to give judgment on the facts for money, the bar of the statute applying to legal actions would control. Such are the rulings in Drake v. Wilkie (30 Hun, 537); Borst v. Corey (15 N. Y. 505); Peters v. Delaplaine (49 Ib. 362); Loder v. Hatfield (71 Ib. 92); Carr v. Thompson (87 Ib. 160); Pierson v. McCurdy (33 Hun, 520).
“It is obvious that no specific relief for the enforcement of the lien against the bonds cap be awarded here. All that could be done, would be to render a money judgment against the defendant, and the question then arises whether an action at law existed against Riggs & Co. in favor of the plaintiffs, and upon the facts developed upon the record, and if so, when that action arose. That leads to the inquiry as to what was the attitude of the plaintiffs to the bonds in the hands of the receiver. They had a lien by contract on the money which was awarded by the mixed commission and which was placed in the hands of the receiver, and invested in District of Columbia bonds. Strictly speaking, it was not a common law lien, depending for its maintenance on the possession of the res. It was something more than a mere equitable lien, specifically enforceable only in a court of equity. It was a lien by contract, that is to say, by the agreement of the parties, and in whatever shape the fund might be held, and in whatever securities it might have been invested, it and the securities were to be charged with the amount of the plaintiffs’ interest therein. That agreement gave to the plaintiffs a direct interest in all the bonds in which the receiver had invested the money, and although called a lien, it was, in my judgment, very clearly a property right which they possessed in the bonds. But it will be considered technically as a lien and as an equitable lien.
“ It is not necessary to inquire whether a common law lien, or a mere equitable lien is a jus in re, or a jus acl rem. Although it is said that a lien depending wholly on contract, is a jus ad rem (1 Duer on Insurance, note 538).
“ The interest Hovey and Dole had in the bonds was property. The word ‘ property ’ describes any estate, whether goods, money or lands, and its general signification includes anything capable of ownership (People v. N. Y. & Manhattan Beach Ry. Co., 84 N. Y. 565).
“ The term ‘ property ’ embraces every species of valuable right and interest, including real and personal property, easements, franchises and hereditaments. Property consists in the right to the use and enjoyment of the thing owned. An easement over the land of another is property (People v. Haines, 49 N. Y. 587; Arnold v. Railroad Co., 55 Ib. 661). The lien of a mortgage is property (Astor v. Hoyt, 5 Wend. 6,03). A contested claim to unliquidated damages is property (Irwin v. U. S., 7 Otto, 392). The right to a lien is a right of property (31 Ken. 559). A mechanics’ lien is property (13 Otto, 30).
“ A lien is an interest in the nature of a charge on some specific thing, as lands, merchandise, goods, bonds, &c. That charge is property the same as an incorporeal hereditament is property; it is something which may be owned exclusively, which may be assigned, and the title thereto vested in the assignee. It is a clear, exclusive right, and may be enforced against that to which it attaches. Its legal status in the present instance, is analogous to a mortgage, and in this respect is like the lien upon the cattle referred to by Chief Justice. Waite, in Gregory v. Morris (6 Otto, 619). The lien, therefore, existing in favor of the plaintiffs upon the bonds, being property, Riggs & Company, by their purchase of such bonds from McDonald, by their surrender and cancellation of such bonds, by the procurement of others in their place, and the subsequent dispersion of those bonds by sale in the market, destroyed the lien of the plaintiffs upon the particular securities held by the receiver. Their conduct in so doing was actionable. A cause of action at law accrued to the plaintiffs at the time these things were done by Riggs & Co. Their acts constituted an injury to property within the meaning of subdivision 3 of section 382 of the Code. It is not necessary to inquire what the measure of damages in such an action would be, whether they would be nominal or substantial, though probably the latter, for there was a complete destruction of the lien. The wrongful act and the special injury give rise to a remedy which the law affords (Yates v. Joyce, 11 Johns. 136 ; Lane v. Hitchcock, 14 Ib. 213 ; Van Pelt v. McGraw, 4 N. Y. 110 ; Manning v. Monaghan, 23 Ib. 539).
“An action for damages lies for the destruction of an equitable lien (Husted v. Ingraham, 75 N. Y. 251).
“I consider that the lien, charge or interest which the plaintiffs had upon the bonds, was property within the meaning of subdivision 3 of section 382 of the Code, referring to an action to recover damages for an injury to property, not only because such charge falls under the signification of the word as hereinbefore given, but also because in the Laws of 1876, chapter 449, the words ‘ injury to property ’ have received a definition. It is stated therein that ‘ an injury to property is an actionable act whereby the estate of another is lessened, other than a personal injury or a breach of a contract.’ The word £ estate,’ as used in that definition, has a broad meaning. In 1 Preston on Estates, 20, the word is defined as ‘ the interest which any one has in lands or in any other subject of property.’
“ I do not go quite so far as the plaintiffs’ counsel does in defining the right which the plaintiffs had in the bonds. He requests me to find that the plaintiffs actually owned one-half of the bonds in the receiver’s hands. I do not think it can be said that they owned any particular number of the bonds, but merely that they had a right in the bonds to the extent of their agreed compensation, and that that right was property.
“It having been established that a cause of action at law existed against Eiggs & Go., it remains to be considered when that cause of action arose. In actions of trespass or on the case for wrong-doing, the cause of action arises at the time the wrong is done; the action may be instituted .when the wrong is done, and it is from the time the action might have been instituted that the bar of the statute begins to run (Granger v. George, 5 B. & C. 149 ; Kelsey v. Griswold, 6 Barb. 436; Read v. Markle, 3 Johns. 523 ; Howell v. Young, 5 B. & C. 259 ; Morgan v. Plumb, 9 Wend. 287; Argall v. Bryant, 1 Sandf. 98).
“And this is so, whether the plaintiff knew or was ignorant of the wrong-doing (Troupe v. Smith, 20 Johns. 33; Leonard v. Pitney, 5 Wend. 30 ; Humbert v. Trinity Church, 24 Ib. 587 ; Allen v. Mille, 17 Ib. 202).
“ It is true that in this case the action might not have been maintainable while the decrees of June 24 and June 28, 1875, remained in force. But those decrees were reversed in March, 1876, and, immediately they were reversed, the right of action was restored.
“It is insisted by the plaintiffs that they could not have sued, even assuming that they had an action at law and not in equity (or concurrently with a suit in equity), until after the rendition of the decree of April 17, 1878. If this be so, their action was begun within the six years’ limitation. But I cannot accept the view that the lien of the plaintiffs depended upon the decree of April 17, 1878. Their lien was not created by that decree; it merely declared that such a lien then existed, and had existed ; it merely established judicially that that lien might be enforced. Their rights are not due to the decree ; they are due to the agreement which gave to them their sfcipu lated compensation, and made that compensation a charge upon the award which the commissioners should make upon McDonald’s claim.
“ I am of the opinion that the plaintiffs were in a condition to sue, and might have brought the suit against Riggs & Co., after the reversal of the two decrees of June 24 and June 28, 1875, namely : immediately upon the entry of the decree of March 4, 1876, and that, not having brought their suit within six years after that date, then’ claim in the present action is barred by the terms of subdivision 3 of section 382 of the Code of Civil Procedure.
“Upon the two remaining questions earnestly discussed in the case, of the effect of the judgment rendered in the District of Columbia, upon striking out the answer of McDonald, and of the negotiable or non-negotiable character of the bonds, I do not consider it necessary, in the view I have taken of the defense of the statute of limitations, to give any expression of my views other than to say, that for the purpose of this action, I shall hold, with very great misgiving, that the judgment is a valid and enforceable one, and that the bonds were not negotiable instruments, my intention being to dispose of the case altogether upon the defense of the statute of limitations.”
Thomas M. Wheeler, attorney, and IT. B. Titus, of counsel, for appellants.
JR. JD. Harris, attorney, and Wm. G. Choate, of counsel, for respondents.

Opinion:
By the Court.
Ingraham, J.
The referee directed judgment for the defendants on the ground that the cause of action proved on the trial was barred by the statute of limitations, and the question to be determined on this appeal is which of the sections of the Code providing for the limitation of the time in which actions shall be commenced, applies to the cause of action proved on the trial.
It is clear that plaintiffs have no cause of action against the defendants on the judgment rendered in the action in the supreme court of the District of Columbia. The defendants were not parties to that action. Plaintiffs' cause of action against defendants arises out of the act of the defendants after the commencement of that action. Taken in the most favorable view for plaintiffs, the judgment in the supreme court of the District of Columbia was conclusive as against the defendants in that action and all parties claiming under them, as to the plaintiffs' lien upon the award of the commissioners and on the securities in which such award had been invested ; but the judgment itself imposed no liability upon defendants in this action to pay any sum of money to plaintiffs. Nor did a trust relation exist between plaintiffs and defendants, that would justify the plaintiffs in treating the defendants as trustees. On the appointment of George W. Eiggs, as receiver, by the supreme court of the District of Columbia, Eiggs became trustee for the plaintiffs. Such award was paid to him as receiver, and he, under the direction of the court that appointed him,, invested such award in bonds of the District of Columbia. Such bonds in the hands of the receiver became trust property. The receiver was the trustee, and as long as such trust continued, he was liable as a trustee to the owners of the bonds or any one having an interest in them.
The court that appointed him such receiver granted a judgment in the action in which he was appointed, by which it was adjudged that the complaint be dismissed, and that the receiver be directed to pay the funds held by him as such to the defendants in that action, and thereupon said receiver should be discharged.
In pursuance of said decree the receiver delivered the bonds, in which the award had been invested, to the defendants in that action as directed by said decree. He reported the same to the court, and such report was confirmed.
It is clear that by this action the trust came to an end. The trustee was discharged and the bonds were no longer trust property. The bonds, having been purchased with the proceeds of the award, stood in the place of the award, and the plaintiffs having a lien on tire award the lien attached to the bonds, and as long as the bonds remained in the hands of the defendants" in that action, they were subject to such lien.
The defendants there, however, were not trustees for the plaintiffs. They had agreed that the plaintiffs should have a lien upon the award, not that they were to act as trustees for plaintiffs in collecting the award and paying them the amount thereafter to which they were entitled, or to hold it in trust for them.
On the delivery of the bonds to the defendants in the action in the supreme court of the District of Columbia, under the decree of the court such defendants became the owners of the bonds, subject to the lien of the plaintiffs, and as such owners, subject to that lien, had a right to sell the bonds ; and as long as these bonds remained intact in the hands of the defendants in that action, or in the hands of any one receiving them with notice of the lien, such lien could be enforced in equity.
The defendants in that action, therefore, had the right to sell the said bonds to Biggs & Co., the defendants in this action, who having received them with notice of such lien, became the owners of the bonds subject to the lien ; so, as long as the bonds remained in the hands of the defendants in this action, plaintiffs could have enforced their lien in equity. Plaintiffs could not recover a judgment against the defendants at law, as defendants were under no obligation to pay the plaintiffs any money. They simply owned property upon which the plaintiffs had a lien.
The defendants could sell the bonds subject to such lien, and so long as the hen was not destroyed or affected by such sale, defendants would not be liable to plaintiff. There was no agreement by defendants, express or implied, to pay the amount of the lien to plaintiffs, and the mere fact of the ownership of the property on which the hen existed imposed no obligation on the owners to pay the amount of the hen. •
Up to the time, therefore, that the bonds were sold to bona ficle purchasers without notice and for value, plaintiffs could not have recovered any personal judgment against the defendants. Prior to the sale of the bonds by the defendants there was no obligation on the part of the defendants to pay plaintiffs anything, and if there is any cause of action against the defendants it arises from the acts of the defendants in selling the bonds. The bonds being negotiable, however, a sale to a bona fide purchaser without notice for value, would convey a good title to the purchaser, discharged of the lien, and would prevent plaintiffs from enforcing their hen against the bonds. Defendants, being the owners of the bonds, subject to such hen, sold them to such bona fide purchasers and thus destroyed the plaintiffs' hen thereon.
It is well settled in this state that this act of the defendants gave the plaintiffs a right of action against defendants for the destruction of such equitable lien.-
In Hale v. Omaha Nat. Bank (49 N. Y. 626 ; S. C., 64 N. Y. 655), it was held that such an action could be maintained, and in Husted v. Ingraham (75 N. Y. 251), it was held that where the defendant had sold property subject to an equitable hen, in hostility to the hen, or in such a way that the hen was destroyed, plaintiff had a cause of action against the person selling the property.
I think it clear that plaintiffs' hen on the bonds was personal property. Subdivision 7 of section 3343 of the Code defines the words "personal property" to include money, chattels, things in action, and evidences of debt, and by subdivision 10 of the same section, an injury to property is an actionable act whereby the estate of an other is lessened, other than a personal injury, or a breach of contract.
The plaintiffs' lien upon these bonds was, under this definition, clearly personal property, and the act of the defendants in destroying that lien was an act whereby the estate of the plaintiffs was lessened, and it was thereby an injury to his property.
By subdivision 3 of section 382 of the Code it is provided that an action to recover damages for an injury to property must be commenced within six years after the cause of action accrued. I think it clear that the cause of action accrued at the time the lien was destroyed. That lien was not created by the judgment of the supreme court of the District of Columbia, but was created by the agreement between the parties, and the moment the award was made, the lien attached to such award.
On the payment of the award to the receiver and his investing the amount paid in the bonds, the bonds stood in the place of the award, and the lien attached to those bonds. The judgment of the supreme court did not create the lien, but it established that such lien had existed by agreement between the parties, and the act of the defendants in destroying the Hen when they sold the bonds in December, 1875, gave plaintiffs an immediate cause of action against them for such wrongful act. The cause of action, therefore, accrued in December, 1875, and was barred by the provisions of the section above referred to, in December, 1881. This action not having been commenced until April, 1884, such cause of action was barred by the statute.
We do not think that plaintiffs had a cause of action against the defendants to which the ten years' Hmitation contained in section 388 of the Code would apply. Plaintiffs had no cause of action against the defendants for the enforcement of the equitable lien. The property upon which the Hen had existed was not in possession of the defendants, nor did the defendants have at the commence inent of this action any thing upon which the plaintiffs' lien existed.
There can be no lien upon the proceeds of the bonds in the hands of the defendants. Defendants were the owners of the bonds subject to plaintiffs' lien, and as such sold the bonds and received from the purchasers the price for which they were sold. As before stated, plaintiffs had their action for any damages sustained by them in consequence of the wrongful act of the defendants, and that right of action is based upon the act of the defendants in destroying the lien. If the lien was not destroyed the right of action would not exist.
The defendants sold their interest in the bonds and received the proceeds, and it does not appear that such proceeds were held by them as a fund to which the lien could attach, but the sale was made by them as owners, and the proceeds used by thepi as their own.
This subject was exhaustively discussed by Mr. Justice Daniels in the case of Pierson v. McCurdy (33 Hun, 520), and it was there held that where trust property was received by a third person with notice of the trust, the remedy was either an action for money had and received, or for a conversion of property lawfully belonging to another, and that to such causes of actions the six years' statute of limitations applies.'
It might be that on the facts in this case, plaintiffs would have a cause of action against the defendants for the proceeds of the plaintiffs' interest in the bonds received by defendants, in the nature of an action for money had and received, but if such a cause of action existed it was barred by the statute.
We agree, therefore, with the referee, that plaintiffs' cause of action against defendants was barred by the statute, and the complaint was properly dismissed.
The exhaustive examination of the authorities by the referee renders a further review of them unnecessary. Judgment should be affirmed, with costs.
Sedgwick, Ch. J., and Freedman, J., concurred.