Commercial Credit Corp. v. Northern Westchester Bank

• Decision Date: 02 June 1931
• Citation: 256 N.Y. 482,177 N.E. 12
• Court: New York Court of Appeals Court of Appeals
• Parties: COMMERCIAL CREDIT CORPORATION v. NORTHERN WESTCHESTER BANK.

256 N.Y. 482

177 N.E. 12

COMMERCIAL CREDIT CORPORATION

v.NORTHERN WESTCHESTER BANK.

Court of Appeals of New York.

June 2, 1931.

Action by the Commercial Credit Corporation against the Northern Westchester Bank. From a judgment of the Supreme Court (231 App. Div. 817, 246 N. Y. S. 888) affirming a judgment of Trial Term in favor of defendant (136 Misc. Rep. 325, 240 N. Y. S. 5), a jury having been waived, plaintiff appeals.

Judgment of Appellate Division and Trial Term reversed, and new trial granted.

Appeal from Supreme Court, Appellate Division, First Department.

Berthold Muecke, Jr., and Duane R. Dills, both of New York City, for appellant.

Edward P. Barrett, of Katonah, and William H. Weeks, of Brewster, for respondent.

HUBBS, J.

This is an action in replevin for the recovery of six automobiles. Both appellant and respondent are organized under the Banking Law of the state of New York (Consol. Laws, c. 2); appellant being engaged in commercial financing and respondent in the general banking business. One John F. Bryan was an automobile dealer, and will be designated hereinafter as ‘the dealer.’

Appellant originally acquired title to the six automobiles directly from the manufacturer thereof. The automobiles were delivered to the dealer on his execution of certain trust receipts, held by the appellant, which provided that the dealer should hold the automobiles in trust for the appellant, and that the dealer should not lend, rent, mortgage, pledge, incumber, operate, use, or demonstrate the same, but might sell all or any of them for cash and hold the proceeds in trust for the appellant. The trust receipts also provided for the retaking of the automobiles by appellant in the event of dealer's default.

The dealer placed the automobiles in his showrooms, and thereafter executed and delivered to the respondent certain promissory notes, and as collateral security for the payment of the notes delivered to it bills of sald of the six automobiles in question. Subsequently the dealer defaulted in payment of the notes, and the respondent took possession of the automobiles. Thereupon the appellant replevied them from respondent pursuant to the writ of replevin issued in this action.

Appellant's trust receipts were neither filed nor recorded. In fact, it was conceded that the trust receipts were not conditional bills of sale or chattel mortgages, and accordingly the statutes relating to the filing and recording of such instruments have no application.

The action was submitted upon a stipulation and agreed statement of facts, which sets forth the appellant's original title, the delivery of the automobiles to the dealer, the execution of the trust receipts, the execution of the bills of sale as collateral security for the promissory notes given by the dealer to respondent at the time of the execution of the bills of sale; that the dealer remained in complete and undisturbed possession of the automobiles until they were taken by respondent upon the dealer's default in payment of the notes; and that respondent had no notice or knowledge of the existence of the trust receipts, and no notice, information, or knowledge that the dealer was not the owner of said authomobiles at the time when the bills of sale and promissory notes were delivered by the dealer to the respondent.

The trial court gave judgment to the respondent upon the ground that the appellant, having clothed the dealer with apparent ownership, and having expressly conferred upon him permission to sell, was estopped to deny, as against a creditor in good faith who contracted with such dealer for the sale or disposition of the automobiles, that the dealer had the right to dispose of the same. It was also held that the rights of the parties are governed by the Factors' Act (Personal Property Law [Consol. Laws, c. 41], § 43, subd. 1), under the provisions of which an agent intrusted with the possession of merchandise for the purpose of sale is deemed the true owner thereof so far as to give validity to a contract made with the agent for the sale or disposition of the merchandise.

The act in question reads as follows:

‘Factors' Act. 1. Every factor or other agent, entrusted with the possession of any bill of lading, custom-house permit, or warehouseman's receipt for the delivery of any merchandise, and every such factor or agent not having the documentary evidence of title, who shall be intrusted with the possession of any merchandise for the purpose of sale, or as a security for any advances to be made or obtained thereon, shall be deemed to be the true owner thereof, so far as to give validity to any contract made by such agent with any other person, for the sale or disposition of the whole or any part of such merchandise and any account receivable or other chose in action created by sale or other disposition of such merchandise, for any money advanced, or...