State Trust Co. v. Casino Co.

The only question presented by the appeals is as to whether Maxwell’s lien for storage charges is paramount to the lien of the mortgage; appellant’s claim being that these chattels

“Where chattels covered by a mortgage duly filed are stored by the mortgagor, without the mortgagee’s knowledge, with the warehouseman, after, default under the mortgage, so that the mortgagee’s title and right to immediate possession have become absolute, the lien of the warehouseman for storage is subordinate to the lien of the mortgage,”

Here it appears that default was made -under the mortgage, and the trust company was therefore at liberty, had it so elected, to proceed to enforce its security, which, however, it did not do. It is also true that at the time the goods were stored the mortgage was perfectly valid, because it had been properly filed, and the year had not then expired. Undoubtedly, during that period, while the mortgage was valid, the lien of the warehouseman was subject to the lien of the mortgage. The respondent’s claim, however, is not put upon the ground of his lien being superior to that of the mortgage at the time it first attached, but that, by reason of the failure to refile within 30 days prior to the expiration of a year from the original filing, the lien of the mortgage was lost, and it became void as to existing creditors, among whom was the warehouseman. But it is insisted that, as against the warehouseman, the mortgagee, lost no rights; and we are referred to the case of Meech v. Patchin, 14 N. Y. 71 , which is authority for the proposition that “the omission to refile a chattel mortgage, pursuant to the third section of the act on that subject (Laws 1833, p. 402), does'not render it invalid as against purchasers or mortgagees, intermediate the original filing and the omission to refile.” The warehouseman, however, is neither a purchaser nor a mortgagee, but claims as a creditor; and the distinction between these classes is well pointed out in the case of Thompson v. Van Vechten, 27 N. Y. 582 , wherein it is said:

“The statute also declares that every mortgage filed pursuant to its provisions shall cease t.o be valid against the creditors of the mortgagor, or against subsequent purchasers and mortgagees, after one year from such filing, unless, within thirty days preceding the expiration of. the year, it shall be again filed, with a statement of the interest of the mortgagee. The question is whether a creditor must, in order to avail himself of this provision, have become such during the default in refiling. We have giren a construction of this provision, in its bearing upon-purchasers and mortgagees, in Meech v. Patchin, 14 N. Y. 71 , and we held that a mortgagee could not take advantage of an omission to refile, unless be became such mortgagee during the existence of the default. This was based very much upon the word ‘subsequent,’ which is used to qualify the term ‘purchasers and mortgagees,’ and means, as we thought, subsequent to the omission to refile. But this expression is not employed as regards creditors. Reading the statute literally, the creditors who may take

advantage of the default embrace all the creditors of the mortgagor, without regard to the time when the debts were contracted.”

And in Porter v. Parmley, 52 N. Y. 185 , it is held that failure to refile a chattel mortgage makes the same absolutely void as against creditors. While, therefore, the mortgage, as against creditors, is void, it “cannot be legally questioned,” as said in Thompson v. Van Vechten, supra, “until the creditor clothes himself with a judgment and execution, or with some legal process against his property; for creditors cannot interfere with the property of their debtor without process.” Where, however, as here, the warehouseman, being a creditor, as against whom the mortgage is void for failure to refile, has possession of the property, and a right to retain it for his lien, with a right to sell the same to discharge the amount thereof, he is in a very different position from a general creditor; because the latter, before he can levy on the property, or have the right to sell it, must obtain a judgment, and issue execution, or obtain some legal process against the property. We think, therefore, that, as against a chattel mortgage, a creditor in possession of the property, with a right to sell it in discharge of his debt, is in a position similar to that of a judgment creditor in respect to his right to assail or deny the validity of the mortgage.

Some doubt is suggested as to the warehouseman being a creditor, due to the fact that the record is silent as to whether the person who delivered the property to the warehouseman had or had not authority to enter into a contract for its storage. It is true the record says nothing upon this point, but the validity of the warehouseman’s claim as a creditor was not questioned below; and it is not claimed, nor is there anything to show, that Bond had not such authority, and it does appear that the property, after the mortgagor was dispossessed^ was delivered, and therefore presumably rightfully delivered, to the warehouseman for safekeeping; and, in the absence of any evidence to the contrary, we have a right to assume that Bond had at least implied power to safeguard and protect the property for the owner, and we should not raise the question of the warehouseman’s status as a creditor, which was not assailed below, and is not raised by any party upon this appeal. Apart from this, we think the order below was right in denying the appellant’s motion for an injunction, because the receiver appointed in the action of the American Exchange National Bank represents a creditor of the Casino Company, who has obtained a judgment, and, therefore, is in a position to question the validity of the mortgage. Equally right was the order directing the receiver to sell the property, and, after paying the charges of the warehouseman, to retain the proceeds; because in the disposition of the latter the appellant has no interest, and the other parties affected do not appeal.

The appellant insists, however, that the mortgage was valid, and refers us to chapter 529 of the Laws of 1895, which removes the necessity for the refiling of a mortgage by a corporation. This statute amends chapter 779 of the Laws of 1868, entitled “An act

Recognizing the force of this suggestion, the appellant meets it by the claim that the mortgage "on the lease is one upon real property, within the meaning of the statute, and our attention is called to the following definition of the term “real estate,” as used in the recording acts :

“The term ‘real estate,’ as used in this chapter, shall be construed as coextensive in meaning with ‘lands, tenements, and hereditaments,’ and as embracing all chattels real, except leases for a term not exceeding three years.” 4 Rev. St. (8th Ed.) p. 2475, § 36.

Against this view, that a mortgage on a leasehold is a mortgage “creating a lien upon real property,” we have the definition in Despard v. Churchill, 53 N. Y. 199 , to the effect that a lease is personal property, and goes to the executor or administrator. As therein said:

“Estates for years are denominated estates in lands. * * * They are still chattels real, * * * and are not classed as real estate in the chapter of ‘title to property by descent.’ A judgment binds and is a charge upon them, yet they go to the personal representatives, as assets, for distribution. They vest in the executors as a part of the testator’s personal estate. These leasehold estates must, for the purposes of this case, be classed as personal property.”

A more conclusive definition, however, is to be found in the statutory construction act (chapter 677 of the Laws of 1892), wherein real and personal property are defined as follows:

“See. 3. The term ‘real property’ includes real estate, lands, tenements and hereditaments, corporeal and incorporeal.

“See. 4. The term ‘personal property’ includes chattels, money, things in action, and all written instruments themselves, * * * and everything, except real property, which may be the subject of ownership. The term ‘chattels’ includes goods and chattels.”

Our conclusion on this branch is, that the statute being clear and explicit, in order that a mortgage on chattels included in one upon

The remaining point urged by appellant, that, even in the absence of the mortgage, the warehouseman would not be entitled to sell the property until one year’s storage had become due, we think is without force. It is true the law of 1883 (chapter 421) provides that a warehouseman may, when one year’s storage is due, sell the property stored at public auction. There is nothing in this act to prevent a sale by a warehouseman at any other time, if done pursuant to an agreement made between the parties. The intention of that statute was that, if no agreement was made upon the subject, then the right of the warehouseman to sell would not accrue until one year’s storage was due. Here, however, it is distinctly stated that at the time the property was stored with the warehouseman a written agreement was entered into, whereby Bond agreed to pay the warehouseman the sum of $240 a month as storage of the goods, and that, if at any time the storage charges were unpaid for six months, the goods stored might be sold, to pay the storage charges, without further notice. This statement that a special agreement was entered into by Bond, as agent of the Casino Company, and the warehouseman, is not contradicted; and, as the statute upon which the appellant rests can apply only to a case in which no time has been fixed, the contention that the warehouseman could not sell until there was due one year’s storage charges falls to the ground.

We think that the orders appealed from were right, and should be affirmed, with $10 costs and disbursements.

VAN BRUNT, P. J., and PATTERSON, J., concur.

WILLIAMS, J., concurs in result.

(concurring). I do not think that chapter 529, Laws 1895, applies. The statute in question amends chapter 779 of the Laws of 1868, entitled “An act in relation to mortgages executed by railroad companies.” By chapter 529 of the Laws of 1895 it is provided, by section 1, that: “Section 1 of chapter 779, entitled 'an act in relation to mortgages executed by railroad companies,’ is hereby amended so as to read as follows.” Thus, by the amendment itself, the act is still an act in reference to mortgages executed by railroad companies. Section 1 of the act of 1868 provided that it shall not be necessary to file as a chattel mortgage any mortgage which has been, or shall hereafter be, executed by any railroad company upon the real and personal property, etc. Section 1 of the act, as amended, provides that:

. “It shall not he necessary to file or refile as a chattel mortgage any mortgage creating a lien upon real and personal property which has been, or shall hereafter be, executed by any corporation, as security for the payment of bonds issued by such corporation, and which has been or shall be recorded,” etc.

If, however, this should not be so, I agree with Mr. Justice O’BRIEN that the mortgage in question was not a mortgage creating a lien upon real and personal property, within the meaning of the section. It seems clear, therefore, that the necessity of refiling this chattel mortgage was not affected by the act of 1895. This being so, the mortgage executed by the Casino Company to the appellant was good as between the mortgagor and the mortgagee, and those claiming under him as transferees, but is void as to creditors; not having been refiled, as provided for by the statute. If this question was solely between the appellant and the warehouseman, and no other right had intervened, it might well be said that the lien of the warehouseman, having been acquired while the mortgage was valid and in force, was subordinate to' that of the mortgage, and that the warehouseman could not enforce his lien as against the mortgage, upon the principle applied in the case of Baumann v. Post (Com. Pl.) 12 N. Y. Supp. 213 , and cases there cited. It is only as to the creditors of the mortgagor that the failure of the mortgagee to refile the mortgage, as required by the statute, makes the mortgage void. It is true that Maxwell claims to hold this property as a creditor of the mortgagor, but it is extremely doubtful as to whether the facts show that he is a creditor; the property having been stored in the name of one Bond, and there is no evidence in the record that Bond had any authority to bind the corporation for any personal obligation. It is quite clear, however, that Maxwell could not hold this property as such creditor, if he were shown to be one, as he has no judgment against the corporation; being, at most, a mere contract creditor. As such, he cannot question the mortgage. This was expressly held in the case of Thompson v. Van Vechten, 27 N. Y. 582 . It was there held that, although the mortgage was void as to all creditors who were such at the time of the failure to refile the mortgage, as required by the statute, such creditors could not legally question the mortgage until “the creditor clothed himself with a judgment and execution, or with some legal process against his

It further appears, however, by the complaint, that the American Exchange National Bank was a creditor of the Casino Company, and, as such, had obtained a judgment, had issued its execution, which had been returned unsatisfied, and that in an action brought upon such judgment, to sequestrate-the property of the corporation, the defendant Franklin Bien was duly appointed receiver of the corporation. This receiver stands, therefore, as representing a creditor of the Casino Company, who has obtained its judgment against the company, the execution of which has been returned unsatisfied; and he is in a position to enforce the rights of the creditors to this property, notwithstanding the mortgage. It is clear, from the record before us, that the receiver is entitled to the possession of the property, free from any lien in favor of the appellant under his mortgage, and the court, therefore, was right in denying the motion for an injunction.against the defendants, based upon the validity of the lien of the plaintiff’s mortgage, as against the receiver, representing the judgment creditor. The order denying the motion for an injunction was right, and must be affirmed, with §10 costs and disbursements to the respondent Maxwell.

The second appeal is from the order entered in the case of American Exch. Nat. Bank v. Casino Co., in which the receiver was appointed, and which directs the receiver to sell the property, and, after paying the charges of the warehouseman, to retain the proceeds in his hands until the further order of the court. Neither the receiver nor the judgment creditor appeal from this order, and, as the State Trust Company has no interest in the disposition of the proceeds of the property by the receiver, it is not aggrieved by this order. I think, however, that, as between the receiver, representing these judgment creditors, and the warehouseman, it is quite clear that the warehouseman is entitled to be paid his charges for storing the property. While it is not at all clear that he could recover from the Casino Company in an action at law for the amount due him, he has a warehouseman’s lien upon the property stored with him for reasonable charges as warehouseman, and is entitled to be paid for his charges, as between himself and creditors. The court below was therefore right in directing the receiver to pay these charges before it took the property out of his hands to be applied to the payment of the creditors’ judgment.

It follows, therefore, that the appeal from the order directing the receiver to sell the property fails, and the order should be affirmed, with §10 costs and disbursements to the respondent Maxwell.