Opinion
May 14, 1920.
Sam L. Cohen, for the appellants.
Samuel I. Goldberg, for the respondent.
The defendant Moses Levinson stored certain household goods with the Liberty Storage and Warehouse Company and received warehouse receipts therefor.
The defendants negotiated a loan of $2,500 from Levin-Burgh, Inc., and gave four promissory notes therefor. The plaintiff also loaned to the defendants the sum of $2,500, to be repaid, with interest, on or before June 1, 1917. Simultaneously with the execution and delivery of these notes defendants executed and delivered to plaintiff a bill of sale, a copy of which is annexed to the complaint, of the property stored with the Liberty Storage and Warehouse Company as collateral security for said loans, as shown by a separate instrument annexed to the complaint as Exhibit B. At the time the bill of sale was delivered the defendant Moses Levinson delivered to the plaintiff four storage receipts issued by the said Liberty Storage and Warehouse Company covering the property embraced in the bill of sale. The complaint further alleges that no part of the $2,500 due to plaintiff has been paid, and that $1,500 only has been paid to Levin-Burgh, Inc., leaving a balance due to Levin-Burgh, Inc., from the defendants of $1,000. After the default in payment the plaintiff demanded the goods of the Liberty Storage and Warehouse Company and on its refusal to deliver the same, brought an action to recover the possession thereof. The Liberty Storage and Warehouse Company thereupon moved that the defendants herein be interpleaded, and an order was made to that effect. The plaintiff reframed his complaint, setting forth the facts above alleged, and demands judgment that the plaintiff be declared the true and lawful owner of said property and entitled to the possession thereof, and requiring the warehouse company to deliver over to the plaintiff the property.
Although the bill of sale purports to be an absolute conveyance of the chattels to the plaintiff, Exhibit B annexed to the complaint shows that the property was transferred as security for a debt and that the same should be retransferred to the defendants on the payment of the debt. Thus the two papers (Exhibits A and B) construed together show that the real transaction was not a sale but a mortgage on the chattels.
We are not advised by the complaint whether the defendants were interpleaded under section 103 of the General Business Law or section 820 of the Code of Civil Procedure. The plaintiff claims that he has reframed his complaint to state a cause of action in equity instead of a cause of action at law. The facts stated in this complaint demonstrate that the plaintiff, although he might be entitled to the possession of the chattels, is not the true and lawful owner thereof, but that if he took the same actually into his possession he would still hold them subject to the terms of the mortgage, and where a party holding collateral security for a loan comes into a court of equity for the purpose of enforcing payment of the loan from the collateral, the court will not direct delivery of the collateral to the plaintiff but will direct that the property be sold, and out of the proceeds of the sale the loan be discharged and the surplus of the proceeds of the sale, if any, be paid over to the owners thereof.
In an action of this character Levin-Burgh, Inc., is a necessary party, in order that their debt may be discharged out of the proceeds of the sale. In my opinion, therefore, the demurrer was well founded, there is a defect of parties, and the complaint does not state a cause of action showing the defendants to be entitled to the equitable relief demanded.
The order should be reversed, with ten dollars costs and disbursements, and the plaintiff's motion for judgment on the pleadings denied and defendants' cross-motion for an order sustaining the demurrer and dismissing the complaint be granted, with ten dollars costs, with leave to the plaintiff to serve an amended complaint within ten days.
CLARKE, P.J., DOWLING, SMITH and GREENBAUM, JJ., concur.
Order reversed, with ten dollars costs and disbursements, plaintiff's motion for judgment on the pleadings denied, defendants' motion to sustain demurrer and dismiss complaint granted, with ten dollars costs, with leave to plaintiff to amend complaint on payment of said costs.