Wise v. Rider

Headnote

1. Fraudulent Conveyances—Chattel Mortgages.

The fact that a mortgage on a stock of goods is void, as to other creditors of the mortgagor, because it authorizes the mortgagor to sell the property and use the proceeds in his business, does not affect the right of the mortgagor to give another mortgage to secure the debt, free from such infirmity.

3. Same—Sale by Mortgagor.

The fact that a mortgagor sells goods covered by the mortgage, for a few days, with the knowledge of the mortgagee, does not render the mortgage fraudulent as to other creditors, where such sales were not made under an agreement between the parties.

Appeal from special term, Jefferson county.

Action by James B. Wise and Frederick Gayer against Clinton W. Bider, brought by plaintiffs, as judgment creditors of George B. Holbrook, to set aside three chattel mortgages given by him to defendant, on the ground that they were fraudulent obstructions to the collection of plaintiffs’ debt. The complaint was dismissed, -and plaintiffs appeal.

Affirmed.

The opinion of Mr. Justice VANN at special term is as follows:

The first and second chattel mortgages are conclusively presumed to be fraudulent on account of the implied agreement between the parties thereto that the mortgagor might sell the mortgaged property and use the proceeds in his general business. Southard v. Benner, 72 N. Y. 424 ; Hangen v. Hachemeister, 114 N. Y. 566 , 21 N. E. 1046 . The debt, however, which these mortgages were given to secure, was not fraudulent, but was supported by a valuable and adequate consideration. The fact that the mortgages were void, so long as the debt was valid, did not prevent the debtor, who still honestly owed the debt, from securing his creditor by giving him a third mortgage, free from the taint that had infected its predecessors. This was accordingly attempted to be done, at least in form, and the controlling question in this case is whether it was done in fact as well as form. The evidence of the debt was a promissory note, which was renewed at intervals, and the last renewal was on the 27th of May, 1894, while the last mortgage was given on the 27th of July following, but at too late an hour for filing in the clerk’s office on that day. It was filed, however, the next day, which was Saturday, at 8:50 a. m. On Monday, at about 9 o’clock, the sheriff seized the mortgaged property under the ■executions issued in favor of the plaintiffs, and an hour or two later the defendant took possession under his third mortgage, which was not yet due, but it contained the usual safety clause. During the period covered by all of the mortgages, the mortgagee occupied a desk in the store where the mortgaged

property was kept, was familiar with the business of the mortgagor, and knew that he was selling the property therein, which was a stock of hats, caps, and furs. The last mortgage was given upon the request of the defendant, who insisted that it should contain a clause requiring that the proceeds of all sales should be applied upon- his debt, but Holbrook refused to give it in that form, and it was executed without it, although Rider warned him that he must take the consequences. The defendant intended to foreclose this mortgage at once, as he had become alarmed- at the way things looked, but waited from Saturday, the 28th, until Monday, the 30th, at the request of an outside creditor, who was negotiating for the purchase of the stock, with the view of securing his ■claim. Mr. Rider did not know that Mr! Holbrook was owing any debts aside from those alluded to. The defendant was in and out of the store during the forenoon of Saturday, but at 2 p. m. went to Henderson Harbor, to spend Sunday with his family; and upon his return at about 9 o’clock on Monday morning found the sheriff in possession. No goods were sold from the store on Monday, but on Saturday sales were made by the clerk in charge to the amount of $12.30, of which he retained $6 for his weekly wages, and turned the rest over to Holbrook, who used some of it for himself. There is no evidence of any express agreement between the mortgagor and mortgagee that the former might sell the property and use the proceeds as he saw fit, nor am I satisfied that there was any implied agreement to that effect. There was, doubtless, an expectation on the part of Holbrook that he would be permitted to go on in the future as he had in the past; but, as was held in Brackett v. Harvey, 91 N. Y. 214 , this is not enough, for an actual agreement having “the conscious and concurrent assent of both” parties is required to vitiate the mortgage. I think the evidence warrants the conclusion that the defendant did not, even by implication, assent to any such arrangement, but that he had actually determined to take possession and foreclose at once, and was only prevented from doing so by the request of another creditor. It is true that he knew, or had good cause to believe, that sales were made on Saturday, and that Holbrook did not intend to apply the proceeds upon the mortgage; but, under the ■circumstances, I cannot draw the inference from that fact of an implied agreement of the character under consideration. It does not follow that he assented to it simply because he knew it. It has been held that the fact that the mortgagor continues to sell goods covered by the mortgage fdr a few days, with the knowledge of the mortgagee, in the absence of proof that this was pursuant to an agreement between the parties, does not render the mortgage fraudulent in law as against other creditors. Frost v. Warren, 42 N. Y. 204 . As was said in Hangen v. Hachemeister, supra, it is the agreement authorizing the mortgagor to sell that vitiates the mortgage, not the fact that a sale was made. The complaint should be dismissed, with costs, and findings may be prepared accordingly.