Opinion
No. 46/653.
06-09-1921
F. R. PATCH MFG. CO. v. WILLIAM A. GAHAGAN CO.
Leon Abbett, of Hoboken, for complainant. Robert Carey, of Jersey City, for defendants.
Bill by the F. R. Patch Manufacturing Company against the William A. Gahagan Company and others. Decree for complainant.
Leon Abbett, of Hoboken, for complainant.
Robert Carey, of Jersey City, for defendants.
GRIFFIN, V. C. The bill in this cause was tiled, among other things, to foreclose an instrument in the nature of a chattel mortgage or conditional bill of sale, dated January 23, 1917, whereby the complainant furnished and delivered to the Gahagan Company one carborundum coping machine, to be paid for as follows:
"$650.00 cash, against B/L, balance to be in the form of 13 notes for $100 each, for 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, and 13 months respectively, notes to be dated 30 days after date of shipment and bearing interest at 6 per cent."
In said instrument is the following clause:
"It is further agreed that the machinery and all property herein specified shall be and remain our property as security for deferred payments and subject to our control until fully paid for in. cash."
While the instrument has some earmarks of a conditional sale, the attributes of a mortgage are more prominent.
This instrument was not recorded.
A decree pro confesso has been entered against the Gahagan Company.
The Gahagan Company was indebted to Edward in upwards of $900, part of which was contained in a note of the company for $400 dated July 19, 1917. Edward entered judgment upon this note in the (First) district court of Jersey City against the company for $465 damages and costs.
Execution issued on said judgment, and the constable levied on the machine in question and other property, and sold the same to Edward on his bid of $200.
Shortly thereafter Edward sold to the defendant Gorman for $940, being substantially the amount due to him from the Gahagan Company.
The defendants Edward and Gorman now claim that the title which Edward derived from the sale is not subject to the instrument sought to be foreclosed because it was not recorded as required by the statute.
It appears that at the time the machine was delivered Edward was vice president of the Gahagan Company and signed the 13 notes given under the agreement. He assisted the constable in making the levy, furnished the list of goods upon which to levy, and, in fact, gave to the constable all the information upon which he acted.
The levy as to the machine plainly stated that it was made subject to the mortgage of the complainant. The notice of sale likewise informed prospective bidders that this machine would be sold subject to said mortgage.
At the sale the constable announced that the machine would be sold subject to the mortgage of the Patch Manufacturing Company (this fact is alleged in the bill, paragraph 9, and is not denied in the answers), and the evidence shows that both Edward and Gorman were at the sale.
The constable delivered a bill of sale to Edward with a schedule of the property sold thereto annexed, in which appears the following:
"Carborundum machine with wheels (subject to mortgage of Patch Manufacturing Company)."
And in the bill of sale from Edward to Gorman the same language is used with reference to this machine.
The defendants, in support of their claim, assert that judicial sales stand on a different footing from the ordinary ones between man and man, in this, that while in such ordinary sales the vendor may validate a void or voidable lien so that his grantee may not impugn it, this principle does not apply to sales by officers under judicial process, citing Hackensack Water Co. v. De Kay, 36 N. J. Eq. 548, 553, 554. To this latter principle there are exceptions. Warwick v. Dawes, 26 N. J. Eq. 548, 555, 556, to prevent fraud and inequity.
Here Edward furnished all the information to the constable upon which he levied and conducted the sale. He heard the announcement that the sale would be made subject to complainant's mortgage without protest, with the result that persons who otherwise might have bid may have refrained from doing so because of the prior lien of upwards of $1,000. The acknowledgment of the complainant's lien made it unnecessary for it to bid to protect its interest. He accepted a bill of sale in strict compliance with the terms of bidding. If he should now prevail he would obtain the property for about $1,000 less than it might otherwise have sold for, with the result that the complainant's lien will be lost and the Gahagan Company continue liable on its notes aggregating $1,000 and interest To countenance such a contention would be giving aid in support of fraud, a thing that can hardly be expected from a court of equity.
The conclusion I have reached is that the defendants Edward and Gorman are estopped from setting up this defense. The decree should be for the complainant. Warwick v. Dawes, supra; Hackensack Water Co. v. De Kay, supra, 36 N. J. Eq. at page 556; Lee v. Stiger, 30 N. J. Eq. 610; Camden Safe Deposit Co. v. Citizens' Ice Co., 71 N. J. Eq. 221, 223, 65 Atl. 980; People's B. & L. Ass'n v. Vaniewsky, 85 N. J. Eq. 551, 556, 96 Atl. 1074.
The Gahagan Company made the down payment of $650, and paid three notes thereafter: If counsel cannot agree on the amount due, it will be referred to a master.