
    Augustus K. Sloan, Appellant, v. National Surety Company, Respondent.
    First Department,
    February 9, 1906.
    Chattel mortgage — on default mortgagee must take possession or refile mortgage—when proof of taking possession sufficient — conversion by sheriff selling under execution —when surety who indemnifies sheriff liable to mortgagee. 1 ’
    The owner of a chattel mdrtgage not in possession of the property must, when the debt becomes due, either refile his mortgage or take possession of the property in order to protect himself against levy by a judgment creditor of the mortgagor.'
    Though on default of the mortgagor the title vests in the mortgagee and the mortgagor has. only an equity of redemption, the mortgagee to protect his titlti must take possession.
    When the mortgaged property consists of machinery situated in a building leased-by the mortgagor, whose lease has expired, except as such mortgagor holds over as monthly tenant, a taking of possession by the mortgagee is established when it is shown that he. demanded payment, which was refused, went to the room and claimed the machinery as his, secured a lease of the room containing the machinery from the owner, and employed and paid persons to operate the machinery in finishing up orders.
    When such mortgaged property has after default-and such possession by the mortgagee been sold by the sheriff under levy'by a judgment creditor of the mortgagor, a surety who has indemnified the sheriff is liable for the conversion, although the original levy was made before the bond of indemnity was given.
    Appeal by the plaintiff, Augustus K. Sloan, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of New York on the 17th day of February, 1904, upon a nonsuit-granted by the court after a trial at the New York Trial Term, and also from an order entered-in said clerk’s office on the 10th day of February, T904, denying the plaintiff’s motion for a new trial made upon the minutes.
    
      Albert R. Hager, for the appellant.
    
      Charles A. Boston, for the respondent.
   McLaughlin, J.:

On the 5tli of August, 1897, the plaintiff loaned to the Haney Manufacturing Company, a domestic corporation, the snm of $5,000, under a written agreement executed on that day, which, among other1 things, provided that the corpoi’ation, for the purpose of securing payment of such loan, should execute and deliver to the plaintiff "bills of sale of its machinery and plant, the corporation, however, to remain in possession and use of the property covered by the bill of sale in conducting its business. The loan was for one year, and if default were made in the payment of the same, then the agreement provided that th§ legal title should thereupon vest and become absolute in the plaintiff.' Pursuant to this agreement the plaintiff received three bills of- sale, covering the machinery and property therein specified, one of which was executed by the corporation and two others assigned by a person who had legal title to a portion of the property.. Upon their receipt the plaintiff filed them in the register’s office in the county of Kings. On the 5th of August, 1898, the day when the loan matured, plaintiff went to the place of business of the corporation, requested payment, and the same being refused demanded, and, as he claims, took possession of all of the property covered by the bills of sale.

On the 29th of July, 1898, the Cycle Age Company of Chicago, 111., recovered a judgment against the corporation in the Supreme Court of New York for'the sum of $453.16, and an execution was issued thereon to the sheriff of Kings county on the 1st of August, 1898. The sheriff, through his deputy, undertook to enforce the same by going to the place of business of the corporation and there attempted to make a levy, but he was then informed that the plaintiff had bills of sale of all of the property on which a levy was sought to be made, which were on file in the register’s office. Before proceeding to perfect the levy and' enforce the execution the sheriff demanded a bond of indemnity from the Cycle Age Company and the latter procured the same on August 9,1898, from the defendant in" this action in the sum of $1,500. Thereafter the sheriff j>erfected his levy by'taking the property into his possession, and advertised the same for sale. The plaintiff demanded that the levy be released and the possession of said property returned, and then a further bond of indemnity was required, in pursuance of which, on the 31st of August, 1898, an additional bond was given by the defendant in the sum of $2,000,'after which the sheriff advertised the property for sale, and the same was sold on the 6tli of September,' 1898, for $732. The- plaintiff then brought this action to recover the value of such property, on the ground that the same was wrongfully and unlawfully converted by defendant.

There have been two trials. The first resulted in a verdict for the plaintiff for the value of the property sold, but upon appeal the judgment was reversed (Sloan v. National Surety Co., 74 App. Div. 417), this court holding that the hills of sale, when construed in connection with the- agreement, were in fact chattel mortgages, and the" property covered by them having been permitted to remain in the possession of the mortgagor, the plaintiff, in order to protect his rights) was required, when the loan matured, either to refile his mortgages or take actual' possession of the property, arid he did not establish that he had done either. At the conclusion of the second trial the defendant moved to dismiss the complaint or for the direction of a verdict, pending -the determination of which the court submitted three questions to the jury for special findings thereon: (1) Whether the plaintiff on the 5th of. August, 1858, took actual possession of the property; (2) if he did, .whether he thereafter retained such possession until the levy by the sheriff; and:(3) what damage the plaintiff suffered if he were the owner of-the property. The first and second questions -were answered by the -jury in the affirmative, and the third $4,611.20. The special verdict was recorded, the jury discharged and the motion to dismiss the complaint granted, to which "an exception was taken. .Judgment- was subsequently entered to this effect, from which the plaintiff appeals.

The learned trial justice was evidently of the opinion that the evidence on the second trial had not been materially changed from what it was on the first trial, and if he were correct in this,then the' complaint was properly dismissed under our former decision. There was no evidence that the mortgages were refiled, and the only remaining question is whether the evidence tended to show and was sufficient to sustain a finding that the plaintiff on the 5th -of August, 1898, took actual possession of the property covered by the mortgages and thereafter remained in actual possession until the same was taken from him by the sheriff.

On the first trial.substantially the only evidence hearing upon the question of possession was that given by the plaintiff himself, in which he stated that when, he demanded payment, of the loan and • the same was refused he demanded and took possession by going into the room, putting his hands on the different pieces of machinery ?wd announcing that the same were his; that none of the machinery was removed, and after the execution of the several bills of sale the same was continued in use by the Haney^Manufacturing Company in connection with its business * * up to the time of the sale by the Sheriff.’/ This did not constitute taking actual possession, but at most constructive possession. (Steele v. Benham, 84 N. Y. 634.)

On the second trial, however, the plaintiff testified, and the credibility of his testimony in so far as the same was in conflict with that given by him on'the first trial was for the jury, that on the 5 th of August, 1898 (the day the loan fell due), he demanded payment; that this was refused; that he then went into the room where the machinery was and claimed the property; that he put his hands on all of the machinery and claimed it; that on that day'he leased" the room in which the machinery was from Mr. Tollner, the owner; that in order to get the lease he had to pay the. rent from the first of the preceding July ; that he paid the rent for the months of July, August and September. He produced a letter which he wrote to the landlord on the fifth of August, in which he stated : “ I will take the floor now occupied by the Haney Mfg. Co. 290 Graham St., Brooklyn, paying you $100 pr. month for same, subject to a two -weeks’ notice on either year side or mine, to terminate this agreement, which it is understood to date from July 1st, 1898. Enclosed please find my check for one hundred dollars for July rent, for which please send me receipt & oblige.” In this letter was inclosed a check for $100. He also produced the answer of the landlord, written on the same day, in which he stated: “ Replying to your favor* of even date, and acknowledging receipt of your check for $100, to pay the rent for one month 'ending July 31st, for floor now occupied by Hanej' Mfg. Co., I would, say that I will mail you a properly drawn receipt for same shortly.” The check which was inclosed in the letter of August fifth was introduced in evidence. It was dated August fourth, was for $100, payable to the order of Tollner, was indorsed by Tollner arid payment made through the clearing house on the fifth of August. The plaintiff further festified that the Haney Manufacturing Company did no business in the room after the fifth of .August and that the only business which was done there.was done by plaintiff himself in finishing up orders taken for him, and that all of the persons employed in doing this business were paid by him or persons representing him with cash which he furnished for that purpose.

As to the.leasing of the rooms he was corroborated by Tollner, who testified that on the 5th of August, 1898, he leased to the plaintiff the room in which the machinery was stored; that the, lease •of the Haney Manufacturing Company expired on the 30th' of April, 1898, audit continued to occupy the premises thereafter down to August 5,1898, merely as monthly tenant, but did not pay the rent for the month of July, and under tlie.arrangement with the plaintiff he paid the rent for that month. He further testified that he received the letter written by the plaintiff on or about the 5th of August, 1,898, and that he-wrote the one above quoted in reply, thereto ; that in that letter, was the check referred to¿ which was used by him.

The. plaintiff was also corroborated in material respects,, both as to his leasing the room on the fifth of August and taking actual possession of the premises on tliat day,, by' the witness Haney, who was the president of .the Haney Manufacturing Company* He stated that the Haney Manufacturing Company had a lease which expired on the thirtieth of the preceding April, and from that time ©n it occupied the-premises as monthly tenant and as such paid the rent to the first of July; that proceedings were about to be taken to dispossess it for. non-payment of rent, and on the 5th of August, 1898, the plaintiff, leased the premises which it had previously dccupied; that on that day he.demanded payment of his loan, which was refused, and- thereupon he went into the factory, put his hand on each machine, each piece of goods, and said:' “ This is my property.”- This witness further testified, that no work was thereafter done in this room by the Haney Manufacturing Company ; that the plaintiff employed and paid a few persons to finish up an order which,he had taken; that the last payroll of the Haney Manufacturing Company was either the last of June or first of: July; that the last business which the corporation did was early in July, The plaintiff was further corroborated by the- witness Holland, the secretary of the Haney Manufacturing Company, who testified that the last check drawn by the company was on the 13th of1 June, 1898; that pn the fifth of ’August following the corporation was not doing any work in the room; that after that date there were one or. two girls and - possibly one or- two men who were employed to finish some work for the plaintiff; that the witness paid these employees with money furnished by the plaintiff. The . testimony of these witnesses was mot disputed or contradicted in any way, inasmuch as the defendant offered no evidence, except in so far as the same was discredited by cross-examination, and I am clearly of the opinion that there was not only sufficient evidence to go to the jury upon the question of whether the plaintiff on the fifth of Augustdook and thereafter remained in actual possession until . after the levy was made, but that a finding to the contrary would be against the weight of evidence..

When default occurred in payment of the amounts secured by the. chattel mortgages, the legal title to the property covered by them vested absolutely in the plaintiff, and the only interest which the Haney Manufacturing Company thereafter had was the mere naked equity of redemption. (Casserly v. Witherbee, 119 N. Y. 522; Charter v. Stevens, 3 Den. 33; Stoddard v. Denison, 38 How. Pr. 296.) In order, however, to protect this right it was necessary for the plaintiff to take actual possession, but in doing so it- was not necessary for him to remove the machinery to some other room or take it into the street and then carry it back into this room. He could just as effectively take actual possession by taking possession of the room in which the machinery was and excluding the Haney Manufacturing Company therefrom. Tins is precisely what the jury was justified in finding from the evidence that he did. He claimed he was entitled to possession, which fact was recognized by the mortgagor by its acquiescing in the correctness of his claim. He went into the room where the machinery was, looked it over and announced that he took possession and that it belonged to him. He leased the room and paid the rent and thereafter the mortgagor ceased to do any work in the room or do any act hostile to or inconsistent with plaintiti’s possession. The fact that Haney, the president of the company, was occasionally about the room, or that Holland, the secretary, volunteered to disburse plaintiff’s money in paying the employees, could not destroy plaintiff’s interest if he had previously obtained possession. What else should he have done ? It is difficult to suggest an answer. He had done all, as it seems to me, that the law required. The jury, therefore, was justified, from the evidence, in finding that the plaintiff on the 5th of August, 1898, took arid thereafter continued in actual possession of the property until the same was taken from him by the sheriff, and that he had been damaged to the extent of the value of the goods.

If I am correct in. this, then the trial court erred in dismissing the complaint. It should instead under the stipulation have directed general verdict in favor of the plaintiff for $4,611.20, the value, as found by the jury, of the goods taken by the sheriff.

The defendant, as already indicated, gave the bonds to indemnify the sheriff in making thé sale, but, notwithstanding that fact, it strenuously urges that it cannot be held liable for conversion of the property inasmuch as it did nothing further. This same question was presented'on the former appeal, and in reversing the judgment then appealed from and ordering a new trial we-necessarily determined (otherwise there would have been no occasion for ordering a new trial) it adversely to the contention. The sheriff refused to sell the property until lie had received bonds indemnifying him against damage. The defendant gave the bonds which brought about the sale, and by that act made itself liable as principal for the original wrongful seizure, as well as for the sale. (Dyett v. Hyman, 129 N. Y. 351; Ball v. Loomis, 29 id. 412; Herring v. Hoppock, 15 id. 411; Cassani v. Dunn, 44 App. Div. 248; Posthoff v. Bauendahl, 43 Hun, 570; Davis v. Newkirk, 5 Den. 92.) The defendant, by the mere act of giving the bonds, induced the sheriff to do an unlawful act, in which it participated. It, therefore, became jointly and severally liable with the sheriff for all the damages sustained, to recover which the plaintiff could, at his option, maintain an action against them jointly or severally.. .(Wehle v. Butler, 61 N. Y. 245; Van Dewater v. Gear, 21 App. Div. 201; Rose v. Oliver, 2 Johns. 365.)

If the foregoing facts be correct, then it follows that the judgment and order appealed from must be reversed; and while this court has the power to direct judgment for the plaintiff on the special verdict, we think that justice will be best subserved in this case by ordering a new trial.

O’Brien, B. J., Ingraham, Laughlin and Clarke, JJ., concurred.

Judgment and order reversed, new trial ordered costs to appellant to abide event.  