Button v. Rathbone, Sard & Co. — 36 N.Y. St. Rep. 945

Majority

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Nelson L. Button, Resp’t, v. Rathbone, Sard & Co., App’lts.^[1]

(Court of Appeals,

Filed April 14, 1891.)

Headnote

1. Chattel mortgage—Boma eide purchasers—Beeect oe hot eilihg AS TO CREDITORS AT LARGE.

Plaintiff, on March 20th, received from one T. a chattel mortgage -on certain stoves, in gopd faith and without intent to defraud creditors, and loaned him $1,200 in cash. On June 13th T. gave a bill of sale of the stoves to defendants, from whom he had originally purchased them, and defendants gave back an instrument in writing agreeing that on payment of $1,000 in twenty days they would reconvey the stoves to T. and satisfy his indebtedness. The stoves were set apart with tags indicating plaintiff’s ownership, but he did not file the motgage until June 23d. Held, that the defendants having merely given credit for a pre-existing debt against T. were not subsequent purchasers or mortgagees in good faith, within the statute, and plaintiff’s mortgage was valid as against them.

2. Same.

The plaintiff by setting the property apart from the rest, in the store of the mortgagor, and marking the articles with his name by the use of tags, did not secure any such immediate delivery nor procure such an actual and continued change of possession as the statute requires, in order to obviate the necessity of filing the mortgage, so as to preserve its lien as against the parties named in the statute.

Appeal from judgment of the supreme court, general term, fifth department, denying -motion for new trial made by defendant, ordered to be heard at general term in the first instance.

Arthur L. Andrews, for app’lts ; Wm. F. Cogswell, for resp’t.

The appeal in this case involves the title to certain personal property which the owner at the time transferred to both parties to the action, at different dates and under different circumstances. Thus far the claim of the plaintiff has prevailed. The property, consisting of a quantity of stoves and their outfit, was originally sold and delivered by the defendants to one Francis Tully on credit. On the 13th of June, 1884, the defendants’ debt remaining due and unpaid, Tully by instrument in writing sold and transferred the property to the defendants in consideration of $968.65, which the defendants credited upon the account against Tully. The total .amount of the defendants’ debt was about $2,000, and at the time of receiving the written transfer of the goods from Tully they executed and delivered to him an instrument, whereby they promised and agreed, within twenty days, and upon payment of the sum of $1,000 to them by Tully, to re-convey and transfer the property to any one whom he might designate; and also to release and discharge all indebtedness which they then held against him, but in case of non-payment of this

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sum within the time specified the instrument was to become void. The deiendants took possession of the property, and as the $1,000 was not paid, retained it under the transfer. But prior to this transaction with the defendants, and on the 20th of March, 1884, Tully borrowed of the plaintiff $1,200 in cash, giving his note therefor, payable three months from that date, with interest, and to secure the payment of the same when due he executed and delivered to the plaintiff a chattel mortgage of the property in question. The goods were set apart from the other property in the store of the mortgagor, and to each article tags were affixed, with the plaintiff’s name written thereon, but the mortgage was. not filed till June 23,1884, and after the property had been transferred and actual possession thereof delivered to the defendants.

The mortgage to the plaintiff was also conditioned to secure him for endorsements upon the notes of Tully, upon which he was subsequently made liable and a part of which he paid. The defendants, at the time of the transfer to them, had no knowledge-of the existence of the plaintiff’s claim and resisted his demand for the property, alleging in the answer that his mortgage was fraudulent. On a former trial it was held that the defendants had no standing in court to question the plaintiff’s title under the unfiled chattel mortgage, and the value of the property being-undisputed, a verdict was directed for the plaintiff. This ruling was held to be erroneous, and upon appeal the judgment was. reversed. Button v. Rathbone, Sard & Co., 118 N. Y., 666 ; 27 N. Y. State Rep., 938. On the new trial, which resulted in the-judgment now under review, the question of fraud in plaintiff’s mortgage was submitted to the jury, and must be regarded as settled by the verdict in the plaintiff’s favor. The plaintiff’s-mortgage is prior in point of time, must be regarded after the verdict as free from fraud, and beyond dispute was given upon a valuable consideration. His omission to file it rendered it void only as against the parties specified in the statute, namely, “ the creditors of the mortgagor and subsequent purchasers and mortgagees in good faith.” Laws of 1833, chap. 279, § 1.

The plaintiff, by setting the property apart from the rest in the store of the mortgagor, and marking the articles with his name by the use of tags, did not secure any such immediate delivery, nor procure such an actual and continued change of possession of the property as the statute requires, in order to obviate the necessity of filing the mortgage so as to preserve its lien as against the parties named in the statute. Steele v. Benham, 84 N. Y., 634 ..

The claim which the plaintiff obtained to the property by the execution and delivery to him of the mortgage and the payment of the consideration must prevail, unless it can be shown that the defendants are either creditors of Tully or subsequent purchasers or mortgagees in good faith from him within the meaning of these terms as used in the statute. If the question was new much might be said in favor of the construction which the learned counsel for the defendants asks us to give to the statute. But we think that these terms have, from the course of adjudications in this state, obtained a settled meaning adverse to his contention.

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The term “ creditors of the mortgagor ” has been defined by these decisions - to be a creditor armed with some legal process which authorizes him to seize the property, such as an execution issued upon a judgment or an attachment. A mere creditor at large, without some process for the collection or enforcement of his debt, is not in- a position to question an unfiled mortgage given by his debtor, which is otherwise valid. Jones v. Graham, 77 N. Y., 628 ; Kennedy v. National Union Bank, 23 Hun, 494 .

The defendants cannot be considered as claiming any rights as creditors. Their claim is under the written instruments above described, and whether this transfer is to be treated as an absolute sale or as a mortgage, its sufficiency as against the plaintiff must depend upon the consideration paid by the defendants. The statute declaring unfiled chattel mortgages void as against subsequent purchasers and mortgagees in good faith has been construed in analogy with the rule that has prevailed in this state in regard to negotiable paper and conveyances of real estate under the recording acts. This rule was stated by Judge Denio in Van Heusen v. Radcliff, 17 N. Y., 580 , as follows: “ When the act respecting the filing of chattel mortgages was passed, the term Iona fide purchaser had acquired a settled meaning, which did not include a person whose purchase was on account of an existing debt, and who parted with no property or right to obtain his conveyance.” And again : “ When a conveyance is said to be void against creditors, the reference is to such parties when clothed with their judgments and executions, or such other titles as the law has provided for the collection of debts.” In determining the rights of parties under conflicting claims or transfers of personal property, these rules have been uniformly applied by the courts in this state. Jones v. Graham, supra; Thompson v. Van Vechten, 27 N. Y., 568 ; Stevens v. Brennan, 79 id., 254; Marsden v. Cornell, 62 id., 215; Weaver v. Barden, 49 id., 286.

The defendants having merely given credit for the value of the goods upon a pre-existing debt against Tully, were not subsequent purchasers or mortgagees in good faith, within the statute. There is no claim that the debt was actually and absolutely released or extinguished by the transaction, and hence it is unnecessary to inquire whether the principle so frequently applied to transactions with banks in regard to negotiable paper has any application to transfers of personal property within the statute providing for the filing of chattel mortgages. Coddington v. Bay, 5 Johns. Ch., 57 ; 20 Johns., 637 ; P. Ins. Co. v. Church, 81 N. Y., 218 ; Mayer v. Heidelbach, 123 N. Y., 332 ; 33 N. Y. State Rep., 610. The facts failed to show that the defendants occupied such a position as the statute requires in order to enable them to overcome the prior transfer to the plaintiff, and the judgment appealed from must, therefore, be affirmed.

Judgment affirmed, with costs.

All concur, except Finch and Gray, JJ., absent.