
    Rodney Hunt Mach. Co. v. Stewart et al.
    
    
      (Supreme Court, General Term, Third Department.
    
    September 25, 1890.)
    1. Conditional Sales.
    A provision in a contract for the sale of chattels, that the title of the seller is not to be divested until the purchase price is fully paid, makes the payment of the price by the purchaser a condition precedent to the vesting of the title in him.
    2. Conversion—Transfer of Property Purchased Conditionally.
    A transfer or mortgage of chattels by a conditional purchaser before he has fully paid the purchase price is a conversion of the seller’s property.
    8. Same.
    While Laws N. Y. 1SS4, c. 315, aS amended by Laws N. Y. 1888, c. 225, precludes a conditional seller of chattels, who has failed to properly file or refile the contract of sale, from pursuing his property, and recovering the same from a bona fide purchaser or mortgagee of the conditional purchaser, the obligations of the conditional purchaser to the seller are not changed by the act; and a transfer or mortgage of such chattels by the conditional purchaser is a conversion of the seller’s property.
    ■4. Same—Negligence of Seller.
    Neither the conditional purchaser nor his agents, who were fully cognizant of the state of the title, and who actively participated in the execution of a mortgage on the chattels by the conditional purchaser, can avail themselves of the seller’s alleged negligence in failing to properly file or refile his contract of sale as a defense to an action for the conversion of the chattels brought against them by the seller.
    5. Same—Demand.
    As the mortgaging of the chattels by the conditional purchaser and his agents was a conversion per se of the seller’s property, no demand by the seller was necessary to enable him to maintain the action.
    Action by the Bodney Hunt Machine Company against James M. Stewart and William B. Stewart for the conversion of four sets of water-wheels. There was a judgment in plaintiff’s favor, and defendants appeal.
    Argued before Learned, P. J., and Landon and Mayham, JJ.
    
      E. T. Brackett, for appellant. Charles S. Lester, for respondent.
   Mayham, J.

This is an appeal from a judgment upon the decision of a judge, upon a trial before him at a special term without a jury. The action was for the alleged conversion by the appellants and the Hew York Pulp Company of four sets or pairs of water-wheels furnished by the plaintiff to the New York Pulp Company under the following agreement:

“Hadley, N. Y., April 11, 1887.

“Bodney Hunt Machine Company: You will please manufacture and ship to the undersigned at Hadley, N. Y., four (4) sets or pairs of twenty-four (24) inch water-wheels, per plan submitted and described in letters; in consideration of which the undersigned agree to pay, with exchange, besides the freight from the manufactory, the sum of $2,600, and it is agreed that the above-specifled articles are to remain the property and subject to the order of the Bodney Hunt Machine Company until paid for in full, and that if notes are given for said sum, no payment thereof or thereon shall divest the right of the Rodney Hunt Machine Company until all said promissory notes are paid in full. Neither shall any payment on account or receipt therefor divest said title until-said sum is fully paid. It is further agreed that this instrument evidences the whole contract by which said articles are received by the undersigned.

Hadley, Saratoga County, N. Y.

“New York Pulp Company,

“James M. Stewart, Manager.”

The wheels referred to in the above memorandum were placed in the mills of the New York Pulp Company, for which two notes of the company were.given, on which there remained due and unpaid on the 1st of June, 1889, the time of the commencement of this action, the sum of $2,155.83. The memorandum or contract above set out was on the 9th day of April, 1887, filed in the Hadley town clerk’s office, but was never reliled. On the 1st day of June, 1888, the Yew York Pulp Company borrowed of Mary Matilda Stewart, the mother of the defendants James M. and William E. Stewart, the sum of $3,500 in money, and in consideration thereof, and as security therefor, executed and delivered to her its real-estate mortgage covering the mills and real property of said company, and containing this clause: “Also all the machinery, water-wheels, and fixtures now in or which may hereafter be in or upon the mill, or upon said premises.” The mortgage also contained a clause that, if the interest (which was payable semi-annually) was not paid within 30 days from the time when due, the whole principal sum became due at the option of the mortgagee. This mortgage was executed by and with the privity and procurement of the defendants, who did not inform the mortgagee, who was the mother, of the existence of the plaintiff’s claim under the contract for the wheels in question, and she took the mortgage without any knowledge of the existence of the same. Default having been made in the payment of the installment of interest on said mortgage which fell due on the 1st day of December, 1888, an action was commenced for the foreclosure for the full amount of principal and accrued interest on the 15th day of February, 1889, and a sale of the premises under judgment of foreclosure and sale was effected on the 4th day of May, 1889, to James M. Stewart, one of these defendants. On the 11th of March, 1889, by the procurement of the defendants, the Yew York Pulp Company executed and delivered to Mary Matilda Stewart a chattel mortgage upon the water-wheels in question to secure a debt due from the Yew York Pulp Company to her for $15,000. This mortgage purports to be collateral to certain real estate mortgages held by her in her own right and as executrix against property of the Yew York Pulp Company. The theory upon which the plaintiff prosecutes this action is that the Yew York Pulp Company was, under the contract, only plaintiff’s bailee of the wheels in question; and that, by the procuring and giving of a mortgage on the property, they (the company and these defendants) were guilty of a conversion of the same; and that these defendants are liablefor participating in that conversion. Before the commencement of this action, the plaintiff claims to have demanded the return of the wheels of the defendants and that they failed or refused to return or surrender them on such demand. The chattel mortgage has never been foreclosed, and no possession of the wheels ever taken by the mortgagee thereunder. The defendants insist that the contract between the plaintiff and the pulp company was a conditional sale, and not a bailment, and that the pulp company, under the same, got a morlgagable interest in the wheels, and that the mortgagee thereunder took the rights of the pulp company under the conditional sale,—a right which the,plaintiff could divest on the failure of the pulp company, or those succeeding to its interest, to pay the purchase price, unless the plaintiff, by failing to refile the conditional bill of sale within a year,' under chapter 315 of the Laws of 1884; as amended by chapter 225 of the Laws of 1888, had lost its right as against a bona fide purchaser or mortgagee;, and if it had it was through its own neglect, and created no right of action against the mortgagor, or those defendants at whose instance the mortgage was made.

The question which seems first to be presented for consideration is whether the Yew York Pulp Company could, as against this plaintiff, legally mortgage this property. And the answer to this question must depend upon the construction of the contract between .the plaintiff and pulp company,—whether it was a conditional sale, the title to remain in the plaintiff until payment by the pulp company, which was a condition precedent to the vesting of the same, with a qualified fight of possession in the pulp company, dependent upon their performance of- that condition, or whether it was an absplute sale, under which the title passed at the time, and the condition as to payment was a mere security for the price, as in Wait v. Green, 36 N. Y. 556. I am of the opinion that this was an executory contract for a sale, dependent entirely upon- the payment, which was a condition precedent to the vesting of the title;1 and that the possession -of the pulp company was also dependent upon the performance of that condition. That being so, whether the-pulp company was a bailee in the strict and technical meaning of that word, or was a conditional purchaser, it had no greater right to dispose of the property than a naked bailee. In Ballard v. Burgett, 40 N. Y. 316, where the referee found that a yoke of oxen in controversy were by the contract to remain the property of the plaintiff until defendant’s vendor paid for them, although defendant had no knowledge of such agreement, plaintiff was entitled to recover the oxen. Grover, J., says: “The possession of. the contemplated purchaser gives him no better opportunity to impose upon purchasers than that of an ordinary bailee.” In Herring v. Hoppock, 15 N. Y. 411, where, under a written bargain for the sale of a safe, the purchasers' were to give a note for the price, and the writing contains a provision that-the vendor neither parts with nor does the vendee acquire any title until the note is fully paid, Paige, J., in delivering the opinion of the court of appeals,. says: “When there is a condition precedent attached to a contract of sale,• and the condition is not waived by an absolute and unconditional-delivery, no title passes to. the vendee until he performs the condition, or the seller waives it. * " *■ * No property vested in them under the .contract until payment of the price of the safe. It remained in their possession as the property of the plaintiff. Their implied right to use it until the maturity of the note "was not such an interest as could be levied upon. Their possession until that time was as mere bailees or servants of the plaintiffs.” See, also,. Frank v. Batten, 1 N. Y. Supp. 705. In Austin v. Dye, 46 N. Y. 502, the court says: “It is well established that neither an ordinary bailee of property nor one having possession under an executory agreement to purchase can give a title thereto to a purchaser, although the -latter acts in good faith, and parts with value without knowledge or notice of the want of title of his vendor, or that third persons-have claims upon the property;” and the court, upon this proposition, cites with approbation the case of Ballard v. Burgett, supra, and adds that the court held “that one who purchases personal property from an individual having possession under an executory agreement for purchase, - the conditions of which have not been performed, acquires no title as against the original owner.” From these, and many other cases which might be cited on this point, it would seem well settled that a conditional purchaser-under an executory contract to sell, not performed by him, takes no title which he can convey or transfer; and It must follow that a transfer or sale by him would- be a wrongful diversion of the property amounting to a conversion.

Was the mortgaging of the wheels such a transfer? The answer to this question must to some extent depend upon the effect which the mortgage may have upon the plaintiff’s right reserved under the contract with tile pulp company. We have seen that under that contract the title-remained in the vendor, subject to the power and right of the vendee-to divest the same by the ■performance of the subsequent condition of payment, provided in the agreement, which was a condition precedent to the vesting of the title in the vendee. Is that rule changed, as between the vendor and bona, fide purchasers or mortgagees of the vendee, by the- provisions of chapter 315 of Laws of 1884 as amended by chapter 225 of the Laws of 1888? Section 1 of chapter 315 of Laws of.1884 is as follows: “In every contract for conditional sale of goods and chattels heieafter made which shall be accompanied by an immediate delivery, and followed by an actual and continual "change of possession of the thing contracted to be sold, all conditions and reservations which provide that the ownership of such goods and chattels, is to remain in the nerson so contracting to sell the same, or other person than the one contracting to buy them, until such goods or chattels are" paid for, or until the occurring of any-future event or contingency, shall be absolutely void as against subsequent purchasers and mortgagees in good faith; and, as to them, the sale shall be deemed absolute, unless such contract for sale, with said conditions and reservations therein, or a true copy thereof, shall be filed as directed in the succeeding section of this act.” Section 2 of this act provides that such filing shall be in the office of the town clerk; and section 3 provides that unless a copy thereof is refiled within 30 days next preceding the expiration of each year, together with a statement of the amount due or unpaid, the conditions and reservations specified in the first section of the act shall cease to be valid as against subsequent purchasers and mortgagees in good faith after the expiration of one year from the filing of such instrument. As. we have seen, the first contract was filed, but it was not refiled, and the mortgages executed by the pulp company to Mrs. Stewart were both made more than one year after the filing of the original agreement in the town clerk’s office. It seems clear that the object of this statute was to change the rule between the vendor on a conditional sale and a subsequent purchaser or mortgagee of the vendee in good faith without knowledge of the condition, and that, unless the agreement evidencing the conditional sale is filed, and kept renewed from time to time, as required by that act, the subsequent purchaser or mortgagee in good faith will hold the property as against the conditional vendor. If this be so, the unauthorized sale or mortgage of the conditional vendee may and would, as between the vendor and the vendee or mortgagee in good faith of the conditional vendee, completely divest the original vendor of title-, and thus put it beyond his power to reclaim the property. Under such circumstances it would seem clear that the sale or mortgage by the conditional vendee, who, as we have seen, was before the performance of the condition under the conditional purchase but a bailee of the vendor, is a conversion of the conditional vendor’s chattel. While the conditional vendor would be precluded by the provisions of this act from pursuing his property, and recovering the same from a bona fide purchaser or mortgagee, the obligation of the conditional vendee to the vendor is not changed by this act. The conditional vendee is still,' in effect, the vendor’s bailee, and, as such, remains liable to the vendor for any conversion of the goods. But it is urged that the plaintiff -has been guilty of negligence in not refiling the contract of conditional sale, and by reason of that negligence, and not by the act of the pulp company, the plaintiff has lost its property in these wheels. I do not think that the defendants are in a condition in this case to avail'themselves of the plain tiff’s alleged negligence as a defense to this action. The mortgages in each instance were absolute, and do not purport to be subject to any other,or superior outstanding title. It is clear that these defendants were both cognizant of the plaintiff’s title in the property, and they were bound to. know that a sale or mortgage by the pulp company was an unauthorized disposition of the plaintiff’s property, which the company held as agent or bailee of the plaintiff before the performance of the condition which alone would perfect the sale, and vest the title in the pulp company. I think, under the circumstances of this case, the execution and delivery of the mortgages was a conversion of this property by the pulp company, and the part taken by the defendants made them liable as joint wrong-doers in that conversion.

The learned trial judge was right in holding that “the position of the pulp company in regard to these wheels is not unlike that of a mortgagor of a personal chattel after default, where the title of the mortgagee is held to be abso- ‘ lute.” In such a case, Thomas, in his treatise on Mortgages, says: “If the mortgagor, or any person in his behalf or under his title, does anything after breach of the condition which is inconsistent with the mortgagee’s title, he will have an. action against them for trespass or conversion.” Thomas, Mortg. 446; Dudley v. Hawley, 40 Barb. 397. In the case last cited it was held that a sale of the mortgaged property after default by the mortgagors or-their agent was a conversion of the goods, and that an agent of the mortgagor who sold the goods, and was ignorant of the existence of the mortgage, was liable as well as the mortgagor for the conversion, and that the loches of the mortgagee in not reducing the goods to possession for more than a year after default was no defense in an action for conversion. The mortgaging of the wheels being a conversion pe?1 se, no demand-was necessary, especially as we have seen that by that act the mortgagors put the property beyond their control, and as between the plaintiff and a bona fide mortgagee, beyond the reach of the former by reason of the operation of chapter 315 of Laws of 1884. As it is admitted in the pleadings, and found as a fact, that this wrongful act of the pulp company was done “by and with the privity and procurement of the defendants,” they, as well as the pulp company, are jointly and severally liable for the wrong. The rule is elementary that whoever aids or assists in the commission of a wrong is liable in an action for such wrong. On the whole case, we think the decision of the learned trial judge was right, and that the judgment should be affirmed. Judgment affirmed, with costs.  