Opinion
December Term, 1854
E.W. Chester, for the appellants. D.D. Field, for the respondent.
I consider it well settled that chattels which have been mortgaged may, notwithstanding, be seized upon execution against the mortgagor, where he is in possession, and at the time of the seizure is entitled to the possession for a definite period against the mortgagee. This was assumed to be the law, in Mattison v. Baucus, in this court; (1 Comst. 295;) and the principle has been repeatedly recognized by the former and the present supreme court and the late court for the correction of errors, and has never, so far as I know, been denied by any court in this state. ( Otis v. Wood, 3 Wend. 498, 500, per Savage, C.J., citing McCracken v. Luce, unreported; Smith v. Dunning, 7 id. 135; Bailey v. Burton, 8 id. 339, 348; Wheeler v. McFarland, 10 id. 318; Randall v. Cook, 17 id. 53; Bank of Lansingburgh v. Crary, 1 Barb. S.C.R. 542.) The defendants did not therefore do an illegal act in seizing the property on the execution against Michelin the mortgagor. But with a knowledge of the plaintiff's mortgage, the defendant Carnley, as sheriff, by the procurement of the other defendant, sold the property, generally, without any recognition of the plaintiff's lien, and did not in terms, as it is argued he ought to have done, limit the sale to the interest of the judgment debtor. At the time of the sale, as well as when the seizure was made, Michelin was entitled to the possession, no default in paying the mortgage having occurred, and the time for making the first payment not arriving until more than three months afterwards; and the mortgage moreover contained an express stipulation, that until default the mortgagor should be entitled to the possession. I may here mention, in order to present all the material facts in the same connection, that this action was not commenced until after a default in payment had taken place; and that before bringing the suit, the plaintiff demanded the articles of the defendants. They could not, however, give them up, for they were in the hands of the purchaser at the sale.
Assuming the chattel mortgage to have been a valid instrument, (and I see no reason to doubt but that it was such,) the sheriff had a right to sell the interest of the mortgagor and to deliver the property to the purchaser, and the purchaser was warranted in taking it into his possession and in using it for the purposes to which it was adapted, until the day of payment; and he had moreover a right to pay the mortgage debt and thus extinguish the lien. Now, whether the sheriff assumed to sell the whole interest, ignoring the existence of the mortgage, or limited the sale to the mortgagor's interest, expressly recognizing the mortgage and selling subject to it, the rights of the purchaser and of the mortgagee would in either case be precisely the same. The mortgagee would not be deprived of his interest by a sale which did not recognize the mortgage, nor would the purchaser under such a sale acquire any thing more than the interest which was bound by the execution, to wit, the right of the mortgagor to the possession, and the equity of redemption; and these would be the respective rights of the parties if the sale was limited in terms to the interest which could effectually be sold, that is, the title of the mortgagor. The effect of the sale on execution against the mortgagor would be the same as a voluntary transfer of the mortgaged articles by the mortgagor to a third person. Such a disposition of them would not oust the mortgagee, whether his interest was repudiated or was recognized. Such sales, whether judicial or private, pass such title as the vendor, or party against whom the authority to sell exists, had to part with, and no other. The mortgagee, it is true, may be in a worse position, in some respects, by the property passing into other hands, for he must keep sight of it, so as to be able to find and take possession of it when his title shall become absolute by a default in payment. But he is not legally prejudiced, for the mortgagor may, when not restrained by the terms of the mortgage, remove it from place to place at his pleasure. He has the same right to do so which a purchaser on execution against him has. I do not therefore see any reason why such a sale as was made in this case should be considered a conversion of the property, or a disturbance of the mortgagee's title. That title was not divested or interfered with, and there was no disposition of the corpus of the property which was not authorized by law. When the mortgagee's title became absolute he could claim his goods in the hands of the purchaser, or maintain an action if they should be withheld from him. Upon principle I am therefore of opinion that the judgment of the superior court cannot be sustained.
I do not think the case of Wheeler v. McFarland, (10 Wend. 318,) which is relied on by the plaintiff's counsel, tends to prove his position. The property which was in question in that case, was pledged for the payment of labor which had been bestowed upon it, to the full value; and the view which the court took of the case was that the pledgee was in possession, as he must have been, to constitute a valid pledge. The execution was against the pledgor, and the court held that the sheriff who had seised and advertised the property was liable in replevin to the pledgee, because in his advertisement he offered the whole property, and did not propose to sell subject to the plaintiff's lien, but in defiance of it. The authority to sell the pledgor's interest is given by statute, (2 R.S. 366, § 20;) and does not contemplate that the purchaser shall take possession by virtue of the sale, until he has complied with the terms and conditions of the pledge. It does not authorize any thing hostile to the interest or possession of the pledgee. The court in that case considered the levy and advertisement as equivalent to divesting the plaintiff of his possession; and as the sheriff had no right to do that, and as the plaintiff could not be deprived of his possession, unless temporarily, for the purpose of a sale, until his lien was extinguished, it was held that the action was sustained against the sheriff. The principle adjudged has no application to a case like the present, where the judgment debtor was entitled to the possession, and the party seeking to recover against the officer had no right to the possession at the time of the sale. The judgment itself was reversed in the court of errors, on the ground that the plaintiff had parted with the possession before the levy. (26 Wend. 467.) But the principle of law which was decided may nevertheless be correct. ( See Bakewell v. Ellsworth, 6 Hill, 484; Stief v. Hart, 1 Comst. 20.)
The cases which have been decided respecting the sale of the goods of copartners or joint owners, upon executions against one partner or joint owner, have a stronger analogy to this case; but I think they do not govern it. ( Phillips v. Cook, 24 Wend. 389; Waddell v. Cook, 2 Hill, 47 and note; Walch v. Adams, 3 Denio, 125.) All the partners, or joint owners, have an equal right to the possession with the one against whom the execution issues. The interruption of that possession is an injury, which can be only justified by the process. By assuming to sell the whole interest, when the authority extends only to an aliquot share, and delivering possession to the purchaser pursuant to such sale, the other owners are immediately divested of a concurrent right of possession. The authority to disturb the possession of the other owners is conferred by law, and to be effectual must be exercised in the manner which the law directs; and doing it in any other manner is an abuse of the authority, and renders the officer a trespasser from the beginning. This is the ground upon which the doctrine is placed by Judge Cowen in Waddell v. Cook, and upon this principle only can the decision be sustained. In the case under review, there is, as before remarked, no disturbance of any present right of possession. The mortgagee is in the same precise situation after the sale as before. No possession is invaded and no right is disturbed. It would be strange if in such a case a trespass had been committed.
The interest of a mortgagee of chattels out of possession and without an immediate right to the possession, resembles in some respects that of a lessor of goods for a limited term. The lessee in such a case has the present possession in fact and by right, but the lessor has the ultimate property, and consequently the right of possession at the end of the term. The title of the lessee is vendible on execution; but it is not necessary that in conducting the sale, the officer should specify that he sells the interest of the tenant only. A sale in general terms, such as was made of the mortgaged property in this case, passes such title as the lessee had; and inasmuch as the lessor is in no respect injured, he can maintain no action against the sheriff for selling in that manner. That precise question was decided in Van Antwerp v. Newman, (2 Cowen, 543,) Chief Justice Savage, in giving the opinion of the court, remarking that the sheriff had authority to sell the interest of the lessee, but that it was not in his power to divest the lessor of his property in the goods, and that he had not done so. The case does not seem to me distinguishable from the one under consideration.
There is another difficulty in the plaintiff's case. How can the defendants be held to be trespassers, for interfering with property, to the possession of which the plaintiff at the time of the act done had no right? In Ward v. Macauley (4 T.R. 489,) the plaintiff had demised a house ready furnished, and during the term the lessee had a judgment recovered and an execution issued against him, upon which a portion of the furniture was seized by the sheriff; and the landlord brought trespass against him. The court held that the plaintiff could not recover, on the ground that he was not in possession when the alleged trespass was committed; but Lord Kenyon, Ch. J., intimated that trover might have been maintained. A similar question again arose in Gordon v. Harper, (7 id. 9,) where the action was trover against the sheriff for selling goods belonging to the plaintiff in the possession of his tenant; and it was held that the action could not be maintained. Lord Kenyon said that what had fallen from him in Ward v. Macauley, to the effect that trover would lie in such a case, was an extra-judicial opinion, to which, upon further consideration, he could not subscribe. Ashhurst, J., said that to maintain trover, the plaintiff must have property in the thing, and a right of possession, and that unless both these rights concurred, the action would not lie. Although all the forms of actions are abolished, still we must, in determining the law on a particular subject, in the first place inquire under what forms the right claimed was formerly asserted, and then ascertain from adjudged cases whether an action could be sustained upon the facts of the case under consideration, in any form heretofore used. Trover or trespass would have been appropriate remedies for the injury complained of in this case, if any action could have been sustained. No injury to the property itself was proved, but the complaint was that the defendants had illegally deprived the plaintiff of its possession. On the ground that the defendants were justified by the process in doing what they are proved to have done, and the further ground that the plaintiff had not such a right of possession at the time of the alleged injury as to warrant him in bringing this action, we are of opinion that the judgment of the superior court was erroneous and ought to be reversed.
The question which is presented is, whether the right of a mortgagor of personal property to remain in possession for a fixed period, is such an interest as can be taken in execution. The principle has frequently been recognized in our courts that it is. ( Marsh v. Lawrence, 4 Cow. 61; Otis v. Wood, 3 Wend. 498; Bailey v. Barton, 8 id. 347, 8; Wheeler v. McFarland, 10 id. 318; Mattison v. Baucus, 1 Comst. 293.) And it was expressly so held in the case of McCracken v. Luce, referred to in 3 Wend. 500. It is well settled that the interest of a lessee of personal property is subject to execution. ( Ward v. Macauley, 4 T.R. 489; Gordon v. Harper, 7 id. 9; Van Antwerp v. Newman, 2 Cow. 543; Otis v. Wood, supra.) The interest of a lessee is merely a right of possession and enjoyment for a definite time, and there can be no good reason why an interest of a similar character, in a mortgagor, should not be equally amenable to the claims of creditors. If then a sheriff, under an execution against a mortgagor of personal property, who has a right of possession for a fixed period, levies upon and takes such interest, he incurs no legal liability. He does nothing but what the law authorizes him to do.
But suppose that, instead of taking the mortgagor's interest, he takes and sells the property absolutely, does he then incur any liability? He certainly does not during the period fixed for the mortgagor's possession, as the mortgagee has neither possession, nor the right of possession, and as no injury is done to the reversion, he has no present cause of action. ( Gordon v. Harper, sup.) But is the mortgagee without remedy against the sheriff, after the time limited for the mortgagor's right of possession is at an end? I think not. It has been said, and undoubtedly truly, that after the mortgagee's right to the property has become absolute, he may claim it wherever he can find it. But it does not follow that this is his only claim. In the present case, it appears that the defendants knew that the property levied upon was subject to the plaintiff's mortgage. They knew that under that mortgage the mortgagor claimed no other interest in the property than a right of possession, and, instead of taking and selling that interest, the defendant Colton, who was the plaintiff in the execution, gave a bond of indemnity to the sheriff, who thereupon took the property and sold it absolutely; treating the mortgage as fraudulent and void.
After default was made in the payment of the money secured by the mortgage, the plaintiff demanded the property from the sheriff, and upon his refusal to deliver it, he having sold it, the plaintiff brought this action. At the time when the action was commenced, the plaintiff was entitled to the possession of the property as absolute owner; it had been taken by the defendants, and they were accountable for it, unless they could show a sufficient legal justification for their acts. They could not justify under the execution; for that was against the mortgagor, and authorized a sale of his interest only. They could not say that the only claim of the mortgagee was against those who were then in possession of the property; for the defendants had been wrongdoers from the beginning, and when the plaintiff's right to the possession accrued they were still wrongdoers, and could only discharge themselves by a delivery of the property, or at least, by satisfying the debt of the plaintiff.
But it is said on the part of the defendants, that the sheriff, having a right to take possession of the property for the purposes of the sale of the mortgagor's interest, and to deliver possession to the purchaser, was not bound to state that the property was subject to a mortgage. The answer to this is, that the execution authorized him to sell the property of the defendant in the execution, and nothing more. If he chose to sell the property of a third person, there is no immunity which protects a sheriff, who thus acts without right, any more than it will protect any other wrongdoer. In the case of a lease of personal property, the sheriff who has an execution against the lessee has a right to take possession of the property, and to deliver possession to the purchaser of the lessee's interest; but it does not follow that he has the right to treat the property as if the lessee were the absolute owner. Neither would he be justified in saying to the lessor, after his right of possession had accrued, that although he had no right to sell the property absolutely, yet that the only claim of the injured party was against the purchaser, or the party then in possession. If such a justification was allowable, then we would have this extraordinary principle established, that an execution creditor of a lessee of personal property, or of a mortgagor having a right of possession for a limited time, might sell the whole property, and receive its full value, or in other words, might treat the lessee, or mortgagor in possession, as the absolute owner, without subjecting himself to any liabil ity whatsoever. Such, I think, is not and cannot be the law. But, for the purpose of testing the principle, let us carry it out in its practical operation, and see where it will lead us. If a sheriff, under an execution against a judgment debtor, who has an interest in personal property, either as lessee or as mortgagor with the right of possession for a definite period, can sell the property absolutely, and obtain the full value thereof, the purchaser at such sale may do the same thing. There is no distinction between the two cases. The right of the purchaser is equal to that of the sheriff. It follows then that, as far as the claims of judgment creditors are concerned, a lessee, or mortgagor in possession of personal property, is in effect the absolute owner during the continuance of his term, and may be so treated. The judgment creditor thus possesses a privilege which, hitherto, he has probably never dreamed of. It will be no longer necessary for him to contend that the possession of the mortgagor furnishes evidence of fraud; neither will it be necessary for the sheriff to require a bond of indemnity against damage, in case that he sells the property absolutely, and treats the mortgage as a nullity. The rights of the mortgagee will undergo a suspended animation until the term of the mortgagor is at an end, and then the only rights that the mortgagee will have will be to claim possession of his property, if he can find it. But I am told that the mortgagee might be subjected to inconveniences, even if nothing but the interest of the mortgagor were sold. If so, and they were simply the natural consequences of proceedings strictly legal, no one would have any cause for complaint. But the case is very different as to the consequences of an illegal act. In the present case, it appears that the sheriff was unwilling to treat the mortgage as fraudulent and void, and it was not until the judgment creditor gave him a bond of indemnity that he would consent to do so. But, if the doctrine contended for be sound, this was a useless ceremony. The sheriff thought that unless the mortgage was found to be fraudulent, he would be liable as a wrongdoer; but in this he was mistaken.
I think that the fallacy on which this conclusion is founded, arises from confounding property in a thing, with the thing itself. The chattel which is the subject of a mortgage with a right of possession reserved to the mortgagor is one thing, but the right of property in the chattel, is a different thing. The chattel is single, but it is the subject of two kinds of property. The right of possession for a limited time is one species of property, and is vested in one person; the absolute right of property, or the reversion, is a different kind of property, and is vested in another person. It is said, however, that the sheriff who sells the whole property under an execution against the mortgagor does no wrong, for the reason that the purchaser cannot acquire a title to any more than the sheriff had a right to sell. If that be good reasoning, then it may with equal propriety be said that when a sheriff in an execution against A. takes and sells the property of B., he does no wrong, for the purchaser acquires no right to the property thus sold. Property of which A. is owner cannot be taken and sold under an execution against B., and I cannot see upon what sound principle of logic the property of A. can be made liable for the debt of B., when that property arises out of a thing in which B. has another and a totally different kind of property, any more than it can be when the subject matter of property consists of two different things. A sheriff must always make a levy at his peril; that is, under an execution against A., he can take and sell only the property of A., and if he takes and sells the property of B. he must suffer the consequences. This has never hitherto been considered as a hardship; and I can see no reason why it is a greater hardship to insist that the sheriff shall respect a right of property of one kind, than it is to insist that he shall respect a right of property of another kind.
The case of Van Antwerp v. Newman, (2 Cow. 543,) has been referred to as sustaining the doctrine contended for on the part of the defendants. In the marginal note of that case, it is stated that if a sheriff, who has an execution against a lessee of personal property, sell the goods as the absolute property of the tenant, not mentioning his special property, though he knew of it, no action lies against him for this act, at the suit of the lessor, for it does not divest the lessor's right, or impair his reversionary interest. The rule here laid down is unqualified, and it seems to sustain the doctrine contended for by the defense. But it will be seen, upon examination, that the reporter's note is not warranted by the decision. Indeed no such decision could have been made upon the facts of the case before the court. The statement of the case says that the sale was made, and the action commenced, during the term for which the goods were out upon lease; and the court in giving their opinion say, not that the owner of the reversion would not have a right of action at any time, but that he was premature in bringing his suit, thus leaving the implication that the suit might be commenced when the lease was at an end. In my judgment, the doctrine contended for by the defendants is without authority, and cannot be sustained upon principle, and there is good reason to fear that its adoption will be productive of mischievous consequences.
I think that the court below held correctly that the defendants are liable to the plaintiff for the whole amount secured by his mortgage with interest, it being less than the admitted value of the property, and that the judgment should be affirmed.
GARDINER, C.J., SELDEN, PARKER and ALLEN, Js., concurred in the opinion of DENIO, J. JOHNSON and RUGGLES, Js., took no part in the decision.
Judgment reversed.