Kommel v. Herb-Gner Const. Co.

• Decision Date: 12 May 1931
• Citation: 256 N.Y. 333,176 N.E. 413
• Parties: KOMMEL v. HERB-GNER CONST. CO., Inc., et al.
• Court: New York Court of Appeals Court of Appeals

256 N.Y. 333

176 N.E. 413

KOMMEL

v.HERB-GNER CONST. CO., Inc., et al.

Court of Appeals of New York.

May 12, 1931.

Action by Louis M. Kommel against Herb-Gner Construction Company, Incorporated, Central Chandelier Company and others. From a judgment of the Appellate Division (228 App. Div. 96, 239 N. Y. S. 148) reversing on the law and the facts a judgment of the Special Term in favor of plaintiff, and dismissing the complaint as to defendant last named, plaintiff appeals.

Judgment of Appellate Division reversed, and that of Trial Term affirmed.Appeal from Supreme Court, Appellate Division, First department.

R. Robert Caplan and Jacob Freeman, both of New York City, for appellant.

David M. Palley and Robert Netter, both of New York City, for respondent.

KELLOGG, J.

The defendant Central Chandelier Company, on April 26, 1928, sold and delivered to the defendant Herb-Gner Construction Co., Inc., certain electric lighting fixtures, under a conditional sale contract reserving title in the seller until payment had been made. The fixtures were designed for installation in an apartment house owned by the Herb-Gner corporation, and were so installed. Thereafter, on the 8th day of August, 1928, the Herb-Gner corporation executed and delivered to Samuel Langner and Irving Herbst a bond for the repayment to them of the sum of $30,000, together with a mortgage securing the bond. The mortgage described, as the property conveyed, not only the apartment house but ‘all fixtures and articles of personal property, now or hereafter attached to, or used in connection with the premises, all of which are covered by this mortgage.’ No moneys were advanced by Langner and Herbst in consideration of the execution and delivery of the bond and mortgage to them. On the same day, August 8, 1928, Langner and Herbst, by assignment in writing, transferred the bond and mortgage to the plaintiff to secure to him the repayment of $20,000 which he simultaneously advanced to them. The plaintiff had no knowledge of the rerms of the conditional sale contract. Immediately the moneys so advanced were paid over to the defendant Herb-Gner Construction Co., Inc. The mortgage and the assignment thereof were duly recorded on August 9, 1928; the conditional sale contract was not filed until August 20, 1928.

The Personal Property Law (Consol. Laws, c. 41), in article 4, § 65 provides as follows: ‘Every provision in a conditional sale reserving property in the seller shall be void as to any purchaser from or creditor of the buyer, who, without notice of such provision, purchases the goods or acquires by attachment or levy a lien upon them, before the contract or a copy thereof shall be filed as hereinafter provided.’ Definitions of terms employed in section 65 and other sections of article 4 are supplied by section 61. Among them are these: “Purchase' includes mortgage and pledge. ‘Purchaser’ includes mortgagee and pledgee.' Concededly, if Langner and Herbst had themselves advanced the moneys, to secure the repayment of which the bond and mortgage were ostensibly executed, they would have been ‘purchasers' within the meaning of section 65. If they had then had no notice of the condition, relating to the retention of title, contained in the contract for the sale of the electric fixtures, that condition would have been void, and the lien of the mortgage would have attached to the fixtures. Cohen v. 1165 Fulton Ave. Corporation, 251 N. Y. 24, 166 N. E. 792. However, they made no advances, nor were they, so far as the record discloses, ignorant of the terms of the contract. Consequently, they were not purchasers without notice within the meaning of section 65, and the conditional sale contract would have prevailed as against their subsequently executed mortgage. As the mortgage in the hands of Langner and Herbst would have constituted no incumbrance upon the fixtures, it is argued that it constituted none in the hands of their assignee, the plaintiff.

Undoubtedly, it is the general rule that the assignee of a mortgage takes it subject to any equities in favor of the mortgagor or of third persons which would have prevailed againt the assignor. Bush v. Lathrop, 22 N. Y. 535;Schafer v. Reilly, 50 N. Y. 61, 66; Trustees of Union College v. Wheeler, 61 N. Y. 88;Decker v. Boice, 83 N. Y. 215;Bennett v. Bates, 94 N. Y. 354;Owen v. Evans, 134 N. Y. 514, 31 N. E. 999;Stevenson Brewing Co. v. Iba, 155 N. Y. 224, 49 N. E. 677. In Davies v. Austen, 1 Vesey, Jr., 247, 249, Lord Thurlow made the often-quoted statement: ‘A purchaser of a chose in action must always abide by the case of the person, from whom he buys.’ If this were literally true, then the transferee of a mortgage, although paying value therefor, might never enforce it, if the named mortgagee had paid no consideration, since in the latter's hands the instrument would have evidenced no enforcible debt. We take it that the statement of Lord Thurlow, as well as the general rule, that an assignee of a mortgage takes subject to the equities existing against the assignor, are postulated upon the prior existence of a mortgage or other chose in action then having legal vigor. An instrument purporting to secure the repayment of advances made according to the terms of a certain bond, in the hands of a mortgagee named, who has neither made advances nor caused them to be made, is not a legal instrument; it is not a mortgage; nor is its holder a mortgagee. Schafer v. Reilly, supra; Spicer v. First National Bank, 55 App. Div. 172, 175, 66 N. Y. S. 902, 904;Id., 170 N. Y. 562,...