Vreeland v. Pratt — 42 N.Y. St. Rep. 582

Majority

p. 582

Oliver S. Vreeland, Resp’t, v. Mortimer N. Pratt, Sheriff, App’lt.

(Supreme Court, General Term, Fifth Department,

Filed January 22, 1892.)

Headnote

1. Chattel mortgage—Validity.

In the absence of an agreement between the mortgagor and mortgagee

p. 583

that the former might deal with the property as his own, the mortgage is not rendered void by the fact that the property was thus dealt with.

3. Same—Effect of withholding- from record.

A chattel mortgage which is not filed within a reasonable time is void not only as to creditors whose debts accrue during the time it is withheld from record, but also those whose debts accrue before its execution and remain unpaid thereafter.

Appeal from a judgment in favor of the plaintiff, entered on the verdict of a jury at the Cattaraugus circuit, and from an order denying the defendant’s motion for a new trial on the minutes of .the court.

D. Hays, for app’lt; 0. D. Davie, for resp’t.

The plaintiff was a chattel mortgagee and the ■defendant represents an execution creditor. There are two questions in the case; 1st. Was the chattel mortgage void as to the creditor because the property was left in the hands of the mortgagor and he was permitted to deal with it as his own? And 2d. Was the chattel mortgage void as to the creditor because it was not filed for four weeks after it was executed; the credit having been given before the execution of the mortgage. We think the former of these questions was correctly disposed of by the judge .at the circuit. He submitted the question to the jury to say whether there was an agreement or understanding between the ■mortgagor and the mortgagee contemporaneous with the mortgage, that the mortgagor might so deal with the property, and the jury was instructed that, in the absence of such an agreement, the mortgage was not rendered void by the fact that the property was thus dealt with. The decisions on this question have been very conflicting, but the law must be regarded as settled, at present, in favor of the instruction thus given to the jury. Frost v. Warren, 42 N. Y., 204 ; Manufacturers' Bank v. Koch, 8 St. Rep., 37 ; Hangen v. Hachemeister, 114 N. Y., 566 ; 24 St. Rep., 526 ; Brackett v. Harvey, 91 N. Y., 214 ; Hincks v. Field, 37 St. Rep., 724 . And so the question whether such agreement existed was left to the jury upon a conflict between direct and circumstantial evidence, and the verdict for the plaintiff upon that issue cannot be disturbed.

The other question propounded above arises under the statute of 1833, Laws of 1833, chapter 279, § 1; Birdseye’s Statutes, vol. 1, page 479, § 1, which declares that every mortgage of chattels, ■“ which shall not be accompanied by an immediate delivery and be followed by an actual and continued change of possession of the things mortgaged shall be absolutely void as against the creditors of the mortgagor, and as against subsequent purchasers and mortgagees in good faith, unless the mortgage or a true copy thereof shall be filed ” as directed in the next section.

The precise question which arises in this case is whether a creditor, represented by the sheriff, defendant, whose debt accrued, or whose credit was given, before the chattel mortgage was executed, is entitled to the protection of the statute quoted. The jury in this case was instructed that it was only creditors whose debts accrued during the default in filing who were so entitled. We

p. 584

think the instruction was error which vitiates the judgment. The statute in question is an evident amendment of or addendum to the provision of the Revised Statutes, 2 R". S., 136, § 5, which relates to the same subject matter, and, with the addition of the provision for filing the mortgage, is in the same language. The earlier statute provides that every sale or assignment of goods and chattels by way of mortgage or security, “ unless the same be accompanied by an immediate delivery and be followed by an actual and continued change of possession of the things sold, mortgaged or assigned, shall be presumed to be fraudulent and void as against the creditors of the vendor, or the creditors' of the person making such assignment, or subsequent purchasers in good faith.”

The draftsman of the later statute evidently had the earlier before him and copied it so far as was consistent with the purpose to confine the new enactment to the case of chattel mortgages only, and to provide a mode of saving such securities, by filing. It would seem to be proper, therefore, to give to the same terms, employed in both statutes, the same meaning. And if this is to be done we are aided in our construction of the later enactment by definition which accompanies the earlier. By the next following section of the Revised Statutes, 2 R. S., 136, § 6, it is provided that “ the term creditors as used in the last section shall be construed to include all persons who shall be creditors of the vendor or assignor at any time whilst such goods and chattels shall remain in his possession or under his control.”

The language is not “ all persons who shall become creditors ” during the period mentioned, but “ who shall be creditors ” during that time; and this would embrace those who were creditors before the sale or assignment, and who continued to be so after such disposition of the property. The same, or an analogous, interpretation of the act of 1833 would extend the benefit of its provisions to those creditors whose debts had accrued before the execution of the chattel mortgage and remained unpaid after its execution and before it was filed. Moreover, the reason of the provision is in accordance with the plain import of the terms employed. Its object is to protect creditors against the misleading effect of the goods remaining in the possession and control of the debtor after they have been secretly transferred to another person. The effect is, at once, to encourage the giving of credit and the continuance of credit already given. The existing creditor relies upon the evidence of continued ownership of the goods by fils debtor, and foregoes those means of securing his debt, of which he might have availed himself had he known that his debtor was disposing of his property. The language of the enactment is certainly sufficient to cover both classes of creditors. It declares that a mortgage so given and not filed shall be absolutely void as against “ the creditors ” of the mortgagor. Ho distinction is made or suggested between the two classes of creditors. The language, and the analogy of the earlier statute, covers them both ; we think the reason of the enactment covers them both, and there has been up to this time, so far as we are advised, no adjudication which excludes either. It is true most of the re

p. 585

ported cases relate to credits given during the time the mortgage is withheld from the files, and the language of the decision goes no further than the case in hand. But such cases furnish no authority nor even dictum, against the wider application of the statute. The case of Clark v. Gilbert, 10 Daly, 316 , on the other hand, is directly in point in support of the present view of the statute; the language of the court being, “ The creditors intended by the section are not only judgment creditors, but such as were simple contract creditors when the mortgage was executed, and such as became or continued to be creditors of the mortgagor during the period that the goods remained in his possession and before the mortgage was actually filed,’’ and the cases of Thompson v. Van Vechten, 27 N. Y., 568 ; Parshall v. Eggert, 54 id., 18; Dutcher v. Swartwood, 15 Hun, 33 ; Fraser v. Gilbert, 11 id., 637, are cited as authority for that holding. See also Thomas on Mortgages, 325.

The objection that the construction of the statute here upheld would render every chattel mortgage void as to all existing creditors of the mortgagor, because some time must necessarily elapse between the execution and the filing of the mortgage, is not conclusive. A reasonable application of the statute would require, in every case, a reasonable time in which to procure the mortgage to be filed; and what was such reasonable time would, no doubt, be a question for the jury, dependent upon the particular circumstances of each case. Such was always the rule in analogous cases under the earlier statute already considered. A reasonable time was given for the actual delivery of the property, during which the presumption of fraud did not. arise. Lee v. Huntoon, 1 Hoff., 447 ; Randall v. Cook, 17 Wend., 53 .

The statute is a remedial one; it is directed against the evil of a fraudulent and secret transfer of property, to the prejudice of honest creditors ; it should have application according to the full measure of the import of the language employed. The case in hand we regard as calling for such an application of the remedy provided.

For the error above particularly specified, the judgment should be reversed, and a new trial granted.

Judgment reversed and a new trial granted, with costs to abide the event.

Macomber and Lewis, JJ., concur.