CHAPTER XVII

Sales

Q. A mortgages to B all the wheat and corn which he is about to sow on his farm. When the same is planted, and before it can be harvested, C, an execution creditor, levies on the wheat and corn. B, by virtue of his mortgage, claims that his lien is prior. What are the rights of the parties? Answer in full.

A. C, the execution creditor, has a prior lien, because to effectuate a mortgage, the thing mortgaged must have an actual or potential existence. "A chattel mortgage cannot as a matter of law be given future effect as a lien upon personal property, which at the time of the delivery of the mortgage was not in existence, either actually or potentially, where rights of creditors have intervened. Such mortgage may, as between the parties, be regarded in equity, as an executory agreement to give a lien when the property comes into existence; some further act thereafter is requisite to make it an actual and effectual lien against creditors. Crops which are the annual products of labor and of cultivation of the earth have no actual or potential existence before a planting. Such limitation, however, seems to apply only when the rights of third persons have intervened. But it would seem that there may be a valid agreement to sell, or executory contracts of sale, where the subject thereof is something to be subsequently acquired by the vendor, though such vendor may not even have a potential right at the time in the thing contracted to be sold." Rochester Co. v. Rasey, 142 N. Y. 570.

(NOTE.) Sec. 33 of the Personal Property Law (Consolidated Laws, chap. 41) provides as follows: "An agreement for the purchase, sale, transfer or delivery of a certificate or other evidence of debt, issued by the United States or by any state, or a municipal or other corporation, or of any share or interest in the stock of any bank corporation or joint stock association, incorporated or organized under the laws of the United States or of any state, is not void or voidable, for want of consideration, or because of the nonpayment of consideration, or be

cause the vendor, at the time of making such contract, is not the owner or possessor of the certificate or certificates or other evidence of debt, share or interest."

Q. A agrees with B to sell him a horse for $500; payment to be made at the time of delivery. Before the same can be delivered, a fire breaks out on A's farm, where the horse is being kept, and the horse perishes in the flames. B sues A for nondelivery. Judgment for whom?

A. Judgment for A. In order to have a sale, the thing must be in existence at the time when title is to pass. "Where a contract is made for the sale and delivery of specified articles of personal property, under such circumstances that title does not vest in the vendee, if the property is destroyed by accident, without the fault of the vendor, so that delivery becomes impossible, the latter is not liable to the vendee in damages for nondelivery. The contract is subject to the implied condition of the continued existence of such thing." Dexter v. Norton, 47 N. Y. 62.

Q. A and B make an agreement, whereby A is to deliver to B a quantity of wheat, and B is to give him one barrel of "first rate superfine flour" for every four bushels of wheat so delivered. A delivers 500 bushels of wheat under the agreement at B's mill. A few days thereafter, the mill containing the wheat is destroyed by fire. A demands the quantity of flour which he is entitled to under the agreement, and upon B's failure to deliver the same, brings suit. B sets up the destruction of the wheat as a defense. Judgment for whom and why?

A. Judgment for A, as the terms of the contract imported a sale of the wheat; title passed and the property was at the risk of B. "There is nothing in the contract, that expressly or by implication obliged the defendants to deliver to the plaintiff flour manufactured from his wheat to the exclusion of any other in their possession, or which they might subsequently obtain. The agreement on their part, was satisfied by the delivery of a barrel of 'first rate superfine flour' for every four bushels of wheat received from plaintiff, whether manufactured at their mill or elsewhere, obtained by

purchase or otherwise. This is a controlling circumstance to show that the parties intended a sale or exchange, and not a bailment. The distinction between an obligation to restore the specific thing received, in the same or an altered form, or of returning others of equal value in the same or a different form, is the distinction between a sale and a bailment." Norton v. Woodruff, 2 N. Y. 153.

Q. A rented a farm with ten cows thereon to B, with the agreement that B at the termination of the lease was to leave ten cows thereon of equal value. The cows died from disease. On whom does the loss fall?

A. The loss falls on B. From the terms of the agreement, the same cows delivered were not to be returned, but B was at liberty to return others of equal value, therefore title passed to him, and the cows were at his risk. Smith v. Clark, 21 Wend. 83.

Q. A brewer sold and delivered 50 barrels of ale bearing his brand to a retailer, upon the agreement that the barrels were to be returned after the ale was drawn, but if any were not returned, he should pay $2 a piece for them. B returns 25 of the barrels, and is about to return the rest, when they are attached by a creditor of his (B). The brewer claims the barrels as his. What are the rights of the parties?

A. The brewer is entitled to the barrels; this is a mere bailment, and not a sale of the barrels. In Westcot v. Thompson, 18 N. Y. 363, a case exactly in point, it was held that the property in the barrels remained in the vendor, and that the specification of the value operated not to give an election to the vendee to retain them at that price, but to fix damages in respect to such as he should be unable to return.

Q. A delivers a mare to B, with the understanding that if at the end of two months B is satisfied with the mare, he (B) is to have title to her on the payment of $500. While in the possession of B, and through no fault of his, the mare took sick and died. A brings action against B to recover the value of the mare. Judgment for whom and why?

A. Judgment for B, as this was a bailment with the privilege of purchase, and not a sale. In the absence of negligence or want of care on the part of the bailee, he is discharged from liability, and the loss must fall upon him who has the title. Where the property is delivered for the purpose of trial, with the agreement that if it is satisfactory, the receiver will retain it, and pay an agreed price for it, the transaction is considered to be a bailment until the receiver exercises his privilege to purchase; it then becomes a sale. Title does not pass until exercise of the option by the receiver. Whitehead v. Vanderbilt, 4 Daly, 214.

Q. A sells B 500 bales of cotton, upon the agreement that if the cotton is not satisfactory for the purpose of B's business, he can return the same. A sends the cotton to B, who duly receives the same. A few days thereafter it is destroyed by fire. B refuses to pay for the cotton, claiming that A must bear the loss. A brings suit. Judgment for whom and why?

A. Judgment for A. "Contracts of sale made on condition that the property may be returned at the option of the buyer, carry the title to the buyer. The act of returning the goods is a condition subsequent which may, if performed, defeat the title already vested. If the right of return is not duly exercised, and the property is retained, the right is forfeited and the sale becomes absolute. Where the contract prescribes the time within which a return must be made, that time controls; and if no time is stated, then the vendee must return the goods within a reasonable time." Costello v. Herbst, 18 Misc. 176. In the question put, the transaction was a sale with the privilege of return, and title passed to B; therefore the loss falls upon him.

Q. B owes A certain money and gives him a chattel mortgage to secure the payment of the debt. There was a default made. What steps should A take to foreclose the mortgage?

A. A chattel mortgage is a conditional sale, and title to the property passes to the mortgagee on default. The mortgage is foreclosed by a sale under the power of sale, which is given in the instrument.

The mortgage may also be foreclosed by an action to foreclose a lien upon a chattel under sec. 1737 of the Code of Civ. Pro.

Q. A pledges a diamond with B for the loan of $100. A defaults. What proceedings should B take in realizing upon the jewel?

A. Sec. 200 of the Lien Law (Consolidated Laws, chap. 33) provides as follows: "A lien against personal property, other than a mortgage upon chattels, if in the legal possession of the lienor, may be satisfied by the public sale of such property according to the provisions of this article." Sec. 201 provides: "That notice of sale must be given to the pledgor." Sec. 202 provides: "That the sale must be advertised." Secs. 203 and 204 provide for a redemption and the disposition of the proceeds, the pledgor to receive the surplus remaining after satisfying the lien.

Q. A, while upon his death bed and while in full realization of his condition, gave to B his bank book on a savings bank, saying that he gave it to him as his own. Is this gift valid?

A. The gift is valid; it is a gift causa mortis. "The gift was consummated by the delivery of the books, and no other formality was needed to constitute the actual delivery of the bank deposit, needful to vest the possession and title in the donee; any delivery of property is sufficient to effectuate a gift. To consummate a gift, whether inter vivos or causa mortis, the property must be actually delivered, and the donor must surrender the possession and dominion thereof to the donee. In the case of gifts inter vivos, the moment the gift is thus consummated, it becomes absolute and irrevocable. But in the case of gifts causa mortis, more is needed. The gift must be made under the apprehension of death from some present disease or some other impending peril, and it becomes void by the recovery from the disease or escape from the peril. It is also revocable by the donor, and becomes void by the death of the donee in the lifetime of the donor. When a gift is made in the apprehension of death from some disease from which the donor did not recover, and the apparent immediate cause of death was some other disease with which he was afflicted at the same time, the gift becomes effectual." Earl, J.,