
    PORTER against PARMLEY.
    
      Court of Appeals;
    
    February, 1873.
    Reversing 13 Abb. Pr. N. S., 104; S. C., 43 How. Pr., 445.
    Chattel Mortgage.—Effect of Forfeiture.— When Refiling is Necessary.—What Constitutes Change of Possession.—Sale on Execution.
    The forfeiture of a chattel mortgage, by default, does not make the mortgagee’s title to the chattels absolute, in such sense as to dispense with the necessity of refiling the mortgage under the statute, unless
    
      there is an actual change of possession. Even after forfeiture, the mortgagee’s claim rests upon the mortgage; and the mortgage is absolutely void as against judgment creditors, &c., unless there is such change of possession.
    
    One partner owning certain chattels which were used by the firm in their business under the joint management and control of both, mortgaged them to a third person; and after default in the mortgage, the mortgagee and the partners agreed that the chattels should be and remain in the possession of the other partner. Held, not an actual and continued change1 of possesion such as is required by the statute.
    
    A sale on execution of “ all the right, title and interest ” of the mortgagor of chattels, is not a sale subject to the mortgage; but it passes, to the purchaser not only all the vendible interest that the mortgagor had, but also the right of the execution creditor to treat the mortgage as void for omission to file it.
    
    Appeal from a judgment.
    This was an action brought in the New York superior court for the conversion of plaintiff’s property. John F. Porter, on June 1, 1850, being the owner of certain furniture which was used in a hotel business, carried on by him and one Rathbun as partners, mortgaged the furniture to defendant by a chattel mortgage payable on demand. This mortgage was duly filed on June 15, 1850. On the day of the execution of the mortgage, and again some time in April, 1851, payment of the mortgage was demanded by defendant. On one occasion, and after the first demand, it was agreed between defendant and John F. Porter, that Rathbun should take and keep possession of the property for defendant, but no other actual change was made, and the property continued to be used as before by John F. Porter and Rathbun. On July 3, 1851, the mortgage was refiled, but on July 2, 1851, the property was levied on under an execution on a judgment in favor of Giles W. Porter against John F. Porter, and subsequently, under the execution, the interest of John P. Porter was sold to Giles W. Porter, the present plaintiff. Subsequently one Hillyer, under a power of attorney from defendant, took possession of the property, and by virtue of a power of sale contained in the mortgage, sold it. This action was thereupon brought by Giles W. Porter (for whom, on his death, his executrix, Mary 0. Porter, was substituted), to recover the value of the property. The case was referred, and on the report of the referee judgment was entered for plaintiff. The judgment was reversed by the court at general term, and plaintiff appealed to the court of appeals. For a full statement of the facts in the case see 13 Abb. Pr. N. S., 104, where the decision at general term is reported.
    
      A. R. Dyett, for plaintiff, appellant,
    Cited: Tell v. Beyer, 38 N. Y., 162; Dennis v. Snell, 50 Barb., 95; McKyring v. Bull, 16 N. Y., 297; Bradley v. Powers, 7 Cow., 330; Babcock v. Lamb, 1 Id., 238; Saunders v. Wilson, 15 Wend., 338; Brazill v. Isham, 12 N. Y., 9, 17; Paige v. Willet, 38 N. Y., 28, 31; Hurd v. West, 7 Cow., 752; Skinner v. Powers, 1 Wend., 456; Cunningham v. Cassidy, 17 N. Y., 276; Stephens v. Baird, 9 Cow., 274; Bruce v. Westervelt, 2 E. D. Smith, 440; Cunningham v. Cassidy, 17 N. Y., 276; Jackson v. Bartlett, 8 Johns., 361; Bond v. Willett, 31 N. Y., 102; Hull v. Carnley, 17 Id., 202; Goulet v. Asseler, 22 Id., 225; Manning v. Monaghan, 28 Id., 585; Ball v. Pratt, 36 Barb., 402; Van Antwerp v. Newman, 2 Cow., 543; Fiero v. Betts, 2 Barb., 633; Lewis v. Palmer, 28 N. Y., 271; Waring v. Warren, 1 Johns., 340; Cow. & H. N. to Ph. Ev., 1,211, 2 ed.; Jackson v. Root, 18 Johns., 60; Briggs v. Evans, 1 E. D. Smith, 192; Jackson v. Neely, 10 Johns., 374; Partridge v. Badger, 25 Barb., 146; Bridges v. Hyatt, 2 Abb. Pr., 449; Bank of North America v. Embury, 33 Barb., 323; Jackson v. Frien, 16 Johns., 193; Graham v. Chrystal, 1 Abb. Pr. N. S., 121.
    
      W. F. Shepard, for the defendant, respondent.
    
      
       This decision accords with Cook v. Kelly, 9 Bosw., 358 ; George v. Toll, 39 How. Pr., 497.
      It is otherwise as against wrongdoers. Moses v. Walker, 2 Hilt., 536. See also Wisser v. O’Brien, 44 How. Pr., 209.
      The refiling is not a waiver of the forfeiture. Hulsen v. Walter, 36 How. Pr., 385 ; Fuller v. Acker, 1 Hill, 473. And see Dane v. Mallory, 16 Barb., 46.
      Compare Lane v. Lutz, 3 Abb. Ct. App. Dec. ; S. C., 1 Keyes, 203, as to what circumstances estop a creditor,
    
    
      
       As to change of possession, compare Hale v. Sweet, 40 N. Y., 97.
    
    
      
      
         And one who purchases under terms of sale requiring the purchaser to comply with the conditions of the mortgage, does not become bound to pay the mortgage, even if he subsequently sells the property absolutely, for more than enough to pay it. Hamill v. Gillespie, 48 N. Y., 556.
      Compare Butts v. Edwards, 2 Den., 164.
    
   Peckham, J.

By the terms of the mortgage it became due on demand, and a demand was made of payment fourteen days before it was filed, viz: June 15, 1850. A demand was again made in the month of April, 1851. It was provided that the mortgagor should remain in possession of the property mortgaged until default in payment.

The mortgage was not renewed by refiling within the year. It was filed some days after the year from its original filing expired. After the year expired, and before the mortgage was refiled, the mortgaged property was seized and sold under an execution against the mortgagor.

After the mortgage was refiled the same property was seized and sold by defendant under the mortgage. For that seizure this action is brought.

The question then arises, was it necessary to refile the mortgage after default in payment had occurred, to uphold the mortgagee’s title as against judgment creditors?

Conceding the general rule that.after a default in the condition of the mortgage, the mortgagor has no interest in the property mortgaged, subject to be seized upon execution, and that this is so, even though the mortgagor still retains possession of the property ; it is equally clear that the mortgagor has some interest in the property after forfeiture of the condition. He has confessedly the right of redemption, until such right is foreclosed (Farmers’ Bank v. Cowan, 2 Keyes, 218; West v. Crary, 47 N. Y., 423).

It is said that after forfeiture the mortgagee is not bound to receive the money, but that the mortgagor must resort to equity for relief. This relief, according to well settled rules, however, he is entitled to, so that if the mórtgagee refuse the money, he can be compelled by suit to accept it, and restore the property.

If he can be thus compelled, it can scarcely be said that he is not bound to accept the money, after forfeiture.

The mortgage, then, is not dead by the forfeiture of the conditions.

The statute is express that the “mortgage shall cease to be valid at the expiration of one year from its filing,” as against the creditors of the mortgagor, if not refiled as directed (Laws of 1833, p. 403, § 3).

The mortgage thus and thereby, as against such creditors, becomes absolutely void (Ely v. Carnley, 19 N. Y., 496).

This be it observed is while the property remains in the possession of the mortgagor, and nothing has occurred to change the relations of the parties except the forfeiture.

The same reason, then, remains for refiling that existed before the forfeiture. The mortgagor is to the public the apparent owner. The statute requires a statement to be filed to show the true interests of the parties for the protection of the public. Whatever its purpose, it is enough that the statute so declares. It “ shall cease to be valid” if not refiled.

Any other construction would nullify the statute.

If payable one day after date, and that day expires before any levy upon the property, the mortgage need never be filed, by defendant’s rule'; and thus the statute would be avoided. In fact, in this case the demand of payment was made fourteen days before the mortgage was filed, yet the mortgagee filed it as a valid mortgage after the" default. The defendant’s counsel concedes that it was necessary to file it to comply with the statute. The same reason requires its refiling. The claim of defendant to this property is founded entirely upon the mortgage. In a certain event (its non-refiling), its lien ceases as against creditors ; as to them it is no mortgage. It is not in existence, and of course it is no defense.

This question has never been decided in this court. But the dicta of judges of this court have accorded with this view, and other courts have differed with each other.

If the possession had been changed, if the mort- - gagee had taken actual and continued possession,, then there would be no occasion for refiling thereafter, as the purpose of the statute was already accomplished.

Then was possession changed %< Did the mortgagee take actual possession of the property before the levy ?

The referee finds no delivery to him, he finds no change of possession. He finds that it was agreed between the parties to the mortgage on an occasion when demand was made for payment, and for the prpperty, that Rathbun, a partner of the mortgagor in a hotel and in the use of this property, should be and remain in possession of said property for the defendant, defendant stating on that occasion that he would not trust the mortgagor with the property. But he finds that they continued as partners in said hotel, and in the actual use of said property therein, till after said seizure and sale by the creditor.

There was no actual change of possession. It continued in fact precisely the same as before.

Saying there was a change when in fact there was none, made none in law as to this statute (Bullís v. Montgomery, decided last term, not yet reported).

When did the creditor acquire any title to the property by this sale on the execution ?

Ho question is here made as to the regularity of the sale.-

But it is insisted that the creditor must be held to have purchased subject to the mortgage.

The sheriff did not in fact sell subject to the mortgage. He sold all the right, title and interest of the defendant in the execution (the mortgagor) in the property. He did not in form sell the property itself. But he did in fact.

A sale of all the right and interest was a sale of all that was vendible on execution against the defendant." If the defendant in the execution had no interest in the property liable to be sold on execution, then the sheriff, by this sale of all his interest, was a trespasser, and liable to an action by the owner.

In this case, contrary to the general rule, the sale gave to the creditor a better title than the defendant had. Because, as to the creditor, the mortgage was no lien. This was the necessary effect of the statute.

The purchaser at an ordinary sale on exeecution, has all the right of the creditor as to remedies (Sands v. Hildreth, 14 Johns., 493; Same v. Same, 2 Johns. Ch., 36.)

A sale by the sheriff of the entire property, without mentioning any mortgage, conveys a title subject to a mortgage, if the mortgage be a valid lien (Manning v. Monaghan, 28 N. Y., 585); and the sheriff is not a trespasser by such sale in general terms, though the property be subject to an incumbrance (Horton v. Davis, 26 N. Y., 497.)

It is clear in this case that the sheriff did not sell subject to the mortgage.

A different result, I apprehend, would have worked better justice in this case. But the defendant seems to have recognized its legality, and can only charge the misfortune to his own laches.

Order reversed, and judgment on report of referee affirmed. 
      
       In Liebig v. Soule (N.Y.Com.Pl. 1846), referred to in 3 E. D. Smith, 489, the dissenting opinion was to the effect that where the mortgage had become forfeited at the expiration of the year for which it had been filed, no refiling was necessary, since by the forfeiture the title vested absolutely in the mortgagee, and the title so vesting, he held the property as if by a bill of sale, which the statute did not require to be filed.
     