On appeal from the Superior Court, Law Division, Middlesex County.
Michels, Gaulkin and Deighan. The opinion of the court was delivered by Gaulkin, J.A.D.
[209 NJSuper Page 72] Plaintiff Foley Machinery Company (Foley) sued (1) to recover from defendant Amland Contractors, Inc. (Amland) the balance due on the purchase price of a track loader which Foley had sold to Amland, (2) to recover, as a secured party loss payee under a insurance policy issued to Amland by defendant The Camden Fire Insurance Association (Camden), for its loss arising out of the theft of the track loader and (3) to recover damages against third-party defendant Alpine Wrecking Corporation (Alpine) for conversion of the track loader. Camden, as subrogee of Foley, asserted its own claim against Alpine. Judgment was entered in favor of Foley against Amland in the sum of $60,881.84 together with interest and against Camden in the sum of $41,829; Foley's demand for prejudgment interest
against Camden was denied. The claims of both Foley and Camden against Alpine were dismissed with prejudice. Foley and Camden now appeal.
Both Foley and Camden challenge the dismissal of their claims against Alpine. It is undisputed that Alpine came into possession of the track loader on or about July 21, 1981, when it purported to purchase the equipment from one John Mnieczniaowski, who concededly had no title. It is also undisputed that the machine had been stolen from Amland on July 18, 1981. Since Alpine was not a buyer in the ordinary course of business (N.J.S.A. 12A:9-306, 307) and did not purchase the equipment from a dealer (N.J.S.A. 12A:2-403), Foley's security interest in the equipment remained paramount. Cf. O'Keefe v. Snyder, 83 N.J. 478, 488 (1980). Foley and Camden thus had made a prima facie case of conversion against Alpine, even if it be assumed that Alpine acted in good faith and in ignorance of the rights of both Foley and Amland. Chemical Bank v. Miller Yacht Sales, 173 N.J. Super. 90, 99-100 (1980). Foley, as a secured party with a right to possession, and Camden as subrogee, were proper plaintiffs to assert the conversion claim. Id., 100.
The trial judge, however, held that the claims against Alpine were barred by Foley's "contributory negligence." That holding was based upon the proofs of the contacts between Foley and Alpine before and after Alpine acquired the equipment. Alpine had been informed by a business associate that the associate's head mechanic wanted to sell a track loader. Alpine instructed one of its mechanics, Edward Bernard, to inspect the machine and to contact Foley, whose decal was affixed to the machine. The purported seller had told Bernard and Robert Suval, Alpine's president, that he had acquired the equipment in payment of a debt. Bernard took the serial number of the equipment to Foley's offices where he inquired of the area sales representative, one Nodes, "if this machine was legitimate, if it
was all right to buy." Nodes consulted a loose leaf book, looked up the serial number and gave Bernard the name of the company that owned the machine. Bernard testified that he "didn't really pay any attention to the name" which Nodes gave because Nodes said he "had a record of it and it was all right." Bernard was "really not sure" whether Nodes mentioned the name Amland and did not recollect any mention of the name Mnieczniaowski.
Bernard reported the results of his investigation to his superiors and told them that "it looked like a decent machine" for the $28,000 price. Alpine thereupon made the purchase on July 21, 1981. Suval testified that he did not request evidence of ownership from the purported seller*fn1 but relied instead upon a bill of sale because "this mechanic had a responsible job and a responsible position."
Foley did not learn of the machine's theft until July 28, 1981, at which time it informed the manufacturer, the FBI and Camden. Thereafter, at the request of Alpine, Foley made repairs to the machine, noting the serial number on the job orders. In addition, on about 14 occasions Alpine ordered parts from Foley, each time indicating the model and serial number of the equipment. Apparently Foley did not recognize that the Alpine machine was the one it had reported stolen. In November 1982, the FBI notified Foley that the machine was in Alpine's possession. Alpine did not relinquish it until October 1983, after a New York court had determined that Foley was entitled to possession.
According to the trial judge, Foley was chargeable with "contributory negligence" because it "did not notify Alpine or review its records, so that it could be discovered that this tractor had been stolen, in which case Foley could have recovered the tractor within three weeks of the date of ...