Marston v. Vultee — 21 N.Y. Super. Ct. 129

Majority

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Marston, Plaintiff and Respondent, v. Vultee et al., Defendants and Appellants.

Headnote

1. Where the property embraced in a chattel mortgage is left in the possession of the mortgagor, pursuant to au agreement between him and the mortgagee, made at the time, that he may go on with it as before, and sell it, so as to support his wife ,and children, the mortgage is, for this cause, fraudulent and void.

2. Upon uncontradicted testimony of such an agreement, it is error to submit it to a jury to determine as a question of fact, whether the mortgage was made in good faith, and without intent to hinder, delay and defraud creditors.

3. It is none the less fraudulent because the mortgagee was mother of the mortgagor, and made the agreement and left the property pursuant to it, to enable the mortgagor to support his family.

(Before Hoffman and Woodruff, J. J.)

Heard, December 14, I860;

decided, March 9, 1861.

Appeal by the defendants, Lewis H. Vultee, Jr., Stephen Bogart, Jacob Bogart and Charles Daly, from a judgment against them in favor of the plaintiff, Mary Marston, rendered on a trial had before Mr. Justice Hopfmas and a jury, on the 9 th of May, 1860.

The plaintiff brings the action to recover the possession of chattels mortgaged to her by her son, Robert Marston, to secure a just debt. Vultee, a constable, took them on an execution against Robert Marston. Daly acted in aid of the officer in removing the goods, and the Bogarts were licensed auctioneers, and acted as such in selling the property for the constable.

The mortgage was in proper form, was regularly filed, and the evidence tended to show that it was made to

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secure money loaned. Robert Marston was a gunsmith, and kept a store at Ho. 211 Fulton street. The property mortgaged consisted of his tools and stock in trade. The property was left in his possession. The plaintiff testified (among other things) thus, viz.: “After tké mortgage was executed and given to me, I allowed him to carry on his business, and sell just as he did before; I never took possession of any of the things mentioned in the mortgage; I never carried any of them away, but left them with him to sell and use, as he did before the mortgage was given; it was spoken of at the time of the giving of the mortgage, that he was sued, and that a judgment would be entered against him; he never paid me "any of the money back; after the mortgage was given, and before the levy, I did not take away any of the property; it was spoken of at the time of the mortgage being executed, and I told him that he could go on with the property, as before, so as to support his wife and children.”

The defendants moved a dismissal of the complaint, on this testimony, which was denied, and they excepted. A dismissal in behalf of Vultee was also moved, on the ground that no demand of the property had been made of him, before suit brought; which motion was also denied, and an exception was taken. The Judge left the question to the jury, as a question of fact, whether the mortgage was given in good faith, to secure a just debt, and without any intent to hinder, delay or defraud the creditors of R. Marston.

On the question of the effect of a want of change of possession, and in relation to the excuse therefor, he charged thus, viz. r“that the statute required an immediate delivery, and an actual and continued change of possession, but whether the omission of this was fraudulent or not, was for the determination: of the jury; that although it had been sometimes held that kindred love or affection would not be a sufficient cause for leaving mortgaged property in the possession of a mortgagor by a mortgagee, he should leave it to the jury to say whether there was a sufficient excuse upon the evidence, as sworn to by the plaintiff, of

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her having so left it to enable her son to support his family to negative the presumption of fraud.”

To that part of the charge allowing the jury to say whether the reason above assigned by the plaintiff, was a sufficient excuse for leaving the property with the mortgagor, the defendant’s counsel then and there excepted.

The jury found a verdict for the plaintiff, and from the judgment entered thereon, the present appeal is taken.

A. L. Pinney, for the appellants.

A. R. Dyett, for the respondents.

It was held in Edgell v. Hart, (9 N. Y. R., [5 Seld.,] 216,) that where it is provided in a mortgage upon chattels, either in express terms or by necessary implication, that the mortgagor shall not merely continue in possession, but that he may continue to retail the mortgaged property and receive the proceeds to his own use, the mortgage is fraudulent and void as against creditors, and it is the duty of the Court so to declare, and there is no question to be submitted to the jury. The instrument is of such an import that it must be pronounced void by its own provisions and a verdict sustaining it as a valid instrument must be set aside as often as one should be rendered. (See Williston v. Jones, 6 Duer, 504 .)

• The reason why it must be so pronounced is, that the writing furnishes conclusive evidence of the fraudulent intent. The instrument cannot operate according to its provisions without defrauding creditors. It cannot, therefore, be permitted to operate at all.

If in any case a mortgage upon chattels is in fact made and delivered under that identical arrangement and with that same purpose it must be held alike fraudulent and void as against creditors, although the instrument does not on its face express that intent. It is because the instrument is made and delivered with intent that it shall operate in a manner which hinders, delays and defrauds

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creditors, that it is void; and when that is proved either by the language of the instrument or by clear and uncontradicted evidence dehors the instrument, it must be so found by the jury, or their verdict should be set aside as against evidence. The provision which makes all questions of fraudulent intent under our statute concerning fraudulent conveyances, questions of fact to be determined by the jury, does not make their verdict unqualifiedly supreme and final on such question. If they render a verdict against the evidence it may be set aside with the same propriety as in any other case, and if the Court submit the question of fraud to them generally without proper instructions, the verdict may be set aside in like manner.

Hence Mr. Justice Demo says in Gardner v. McEwen, (19 N. Y. R., 126), in substance that if there be an agreement between the mortgagor and mortgagee that the former may continue his business of buying and selling as usual, the mortgage to attach to what might remain when it should have to be enforced, the jury should be instructed that such arrangement renders the mortgage void as against creditors and to find accordingly. When it is afterwards said that the indications of. fraud arising upon possession of the goods, and the conduct of the parties .respecting them must be submitted to the jury, it was not intended to say anything, inconsistent with the proposition that if the jury should find that such an arrangement was made, it is their duty to find the mortgage fraudulent and void, and it is plainly suggested that if the verdict in such case should (the fact of the arrangement not being denied) uphold the instrument, the verdict should be set aside. ■

We have no hesitation in saying that the views' thus suggested are in harmony with the adjudged cases as well as with our own opinions.

Under this exposition of the subject, how stands the ■case of the present plaintiff? We will assume that there '.was fairly and.honestly due to her from her son, the debt ■which the mortgage was given to secure. The mortgage 'was-given to her duly executed and acknowledged upon

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his stock of goods. It was on its face legal and valid, and was duly filed as required by the statute. But the plaintiff herself states the arrangement under which it was executed and delivered. If necessary, it might be added that other witnesses strengthen the proof of fraud, but the plaintiff can have no cause to complain if her own statement of the transactions be taken as true and her rights be tested by that.

She says-: “After-the mortgage was executed and given to me, I allowed him to carry on his business and sell just as he did before; I never took possession of any of the things mentioned in the mortgage ; I never carried any of them away, but left them with him to sell and use as he did before the mortgage was given; it was spoken of at the time of the giving of the mortgage that he was sued, and that a judgment would be entered against him; he never paid me any of the money back; after the mortgage was given, and before the levy, I did not take away any of the property; it was spoken of at the time of the mortgage being executed, and I told him that he could go on with the property as before so as to support his wife and children.” However true it may be that the case discloses a kind and maternal regard, on the part of the plaintiff, for her son and his wife and children, a willingness to aid him and to give him indulgence, that he and his wife and children might be supported at the hazard even of losing the money she had lent him, we cannot resist the conclusion that, according to her own statement, this mortgage was fraudulent and void upon the very ground above stated. In fact, if the arrangement was carried out, the mortgage was no security to her at all, and was not intended to be; if he sold the property, as it was agreed he might, then she got nothing. Her testimony is very clear, however, to the distinct fact, that it was spoken of when the mortgage was given, and she agreed that he might go on as before, and, notwithstanding the mortgage, apply the property to his own use and the support of his family. The form of a mortgage was interposed between the property

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and Ms creditors, not in order to secure to the plaintiff her money, but in order that the debtor might retain possession and appropriate the proceeds of his sales to his own benefit, notwithstanding, or in spite of, impending judgments. We think, therefore, the defendants were entitled to have the jury instructed that if the arrangement testified to was made at the time the mortgage was given, that was evidence of a fraudulent intent which entitled the defendants to their verdict, and that it was erroneous to submit to them the question whether the plaintiff had shown a sufficient excuse for leaving the property with her son under the arrangement she had testified to.

In this we do not mean to say that in every case in which, a mortgage being given on a stock of goods, the mortgagor continues to sell, the mortgage is to be necessarily deemed fraudulent; but where the arrangement is made between the mortgagee and the mortgagor that the latter may do so and apply the proceeds to his own use, (whether that arrangement is shown by the face of the instrument, or is proved otherwise to be a part of the terms and conditions on which the mortgage was given,) such arrangement makes the transaction necessarily fraudulent, because it operates of necessity to Mnder, delay and defraud creditors; it secures to the debtor the use and benefit of his property and its proceeds, while it protects it from levy and sale for the payment of his debts.

The judgment must therefore be reversed, and a new trial granted, costs to abide the event.

Hoffman, J. I fully concur. I was on the point of taMng the case from the jury; but thought it so clear they could not find as they did, that it was more prudent to submit it to them and secure a verdict for defendants.