Summary
In Stevenson Brewing Company v. Iba (155 N.Y. 224) the court held that a bona fide purchaser for value of a non-negotiable chose in action takes it subject to all the equities existing between parties to the instrument, and also to the equities which third parties could enforce against the assignor.
Summary of this case from Jermyn v. SearingOpinion
Argued February 4, 1898
Decided March 1, 1898
Alfred Steckler for appellants.
William G. McCrea for respondent.
One Sawyer, being indebted to the plaintiff and to the defendant Caspar Iba, made an agreement with them that the plaintiff should lend him the further sum of nine hundred dollars, and accept as security for the entire indebtedness a chattel mortgage which should be a first lien upon certain personal property of Sawyer's, Sawyer to turn over such sum of nine hundred dollars to Iba, to whom he owed one thousand nine hundred and twenty-five dollars, and give to him a second chattel mortgage on the same property to secure the sum of one thousand and twenty-five dollars. Not only was the mortgage from Sawyer to Iba second in point of fact, but it was agreed between the three parties mentioned that it should be second.
Iba, however, filed his mortgage first and a few days later assigned it to the defendants Lewis, to whom he was indebted in the sum of one thousand and thirteen dollars, they paying him the difference in cash. They knew nothing of the agreement between their assignor, the plaintiff and Sawyer, that the plaintiff's mortgage should be the first lien on the property. There was some controversy about the facts upon the trial, but the record comes to us with the facts found of which the above is a summary.
The trial court determined that plaintiff's mortgage was the first lien upon the property, and awarded a money judgment against the defendants Lewis for its value, they, under their mortgage a few days after its date, having taken possession of it against the protest of the plaintiff.
The learned counsel for the appellants, while recognizing the existence of the general rule that a bona fide purchaser for value of a non-negotiable chose in action takes it subject to all the equities existing against it in the hands of the assignor, insists that it is not applicable to latent equities held by third parties. By third parties he refers to those outside of the original debtor, and the subsequent transferees in the line of ownership of the chose in action. Formerly the view was entertained by some judges that the rule was thus confined, but in Greene v. Warnick ( 64 N.Y. 220) many of the prior cases on that subject were considered, and it was decided that an assignee of non-negotiable choses in action takes them not only subject to all the equities existing between the parties to the instrument, but also to the equities which third persons could enforce against the assignor.
Later on the question was presented in Decker v. Boice ( 83 N.Y. 215), whether an assignee in good faith and for value, of a recorded mortgage, obtains any preference over a prior unrecorded deed or mortgage by reason of such record, when his assignor could not claim priority because of notice or any other equity. The answer of the court was that he does not, because his assignor acquired no benefit by recording his mortgage, inasmuch as he was a party to the agreement that his mortgage should be of equal lien to the unrecorded mortgage. And his assignee stands in no better position, for he takes it subject to all of the equities existing against the mortgage in the hands of his assignor.
The doctrine laid down by the decisions to which we have referred has since been regarded as settled in this state, but the appellants refer to one of the latest cases in this court touching that subject ( Rapps v. Gottlieb, 142 N.Y. 164) as supporting their contention, inasmuch as it is there said that an assignee of a mortgage takes it subject to the equities between the original parties and has no greater right against the mortgagor than had his assignor. The facts of that case called for no broader statement. The question there was whether the assignee of a mortgage took it subject to the equities existing in favor of the mortgagor as against the mortgagee, and there was no occasion for a reference to the equities of third parties, for none such existed. But the court not only said that the "assignee of the mortgage takes subject to the equities between the original parties," but also that he "has no greater rights than the original mortgagee."
Thus is stated briefly, but accurately, the effect of the rule.
Iba, the defendants' assignor, as mortgagee acquired only a second lien upon the property described in it. Filing the mortgage did not help him. It was still affected by the agreement that it should be a second mortgage, and that agreement the plaintiff, as owner of the first mortgage, could enforce, not only as against Iba, but also as against any subsequent purchaser of his mortgage.
The judgment should be affirmed, with costs.
All concur, except GRAY, J., absent.
Judgment affirmed.