Brown v. Platt — 21 N.Y. Super. Ct. 324

Majority

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Martin W. Brown et al., Plaintiffs, v. George W. Platt et al., Defendants.

Headnote

1. Creditors, on whose behalf the attorney of their debtor has, without authority from them, received a mortgage made by the debtor in their favor may ratify the act by a subsequent assent, and enforce the mortgage.

2. Where a debtor makes, at one time, several mortgages upon the same chattels to secure several creditors, the refusal of one of them, on being informed of the mortgage to him, to accept it, does not impair mortgages accepted by other creditor's.

3. The objection, that a chattel mortgage executed in another state was void • for illegally reserving the right to retain possession and to sell the goods as part of the mortgagor’s stock in trade, cannot be raised on appeal from a judgment, if not taken at the trial.

4. Nor can such a ground of objection be available where the mortgagor, before any creditor questioned the validity of the mortgage, delivered the chattels to the mortgagee, waiving his claim to the possession and to the period of credit, and authorizing an immediate sale.

(Before Hoffman and Woodruff, J. J.)

Heard, January 15, 1861;

decided, June 22, 1861.

The questions of law arising on the trial of this case were ordered to be heard in the first instance at General Term.

This action was by Martin Brown and Caleb K. Colby against George W. Platt and Hathan 0. Platt. It was tried on the 12th of March, 1860, before Chief Justice Boswoeth and a Jury.

The plaintiffs sued the defendants for converting certain chattels of the plaintiffs, valued at $1,934.31. The defendants’ answer denied the conversion, the ownership by the plaintiffs, and the alleged value; and set up the seizure of the goods on July 16, 1858, by the sheriff of Hew York, under an attachment at the suit of the defendants, against one Fernando 0. Gleason, whose property it alleged the goods then were.

Upon the trial it appeared that Gleason, who had been in business as a dealer in jewelry in Iowa in 1857, being indebted to merchants in Hew York, caused seven chattel

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mortgages upon his stock in trade to be drawn up, in favor of those creditors respectively, and executed them and caused them to be recorded. After record they were returned to Cooley, his attorney, who had drawn them. These mortgages were of even date, and were numbered from one to seven. Each was upon the whole of his stock in trade. Humber one was in favor of the plaintiffs, and each of the others referred to that one, and was expressed to be made subject thereto.

After making these mortgages, Gleason wrote to the defendants, to whom the mortgage number three was made, stating that he was pressed by unfriendly creditors, and was advised to give new notes to those he wished to secure, and a chattel mortgage; and that he had done so, and liad “ given mortgage on the whole stock to secure the same in this way. M. W. Brown & Co., No. 1, J. W. Vincent, No. 2, Platt & Brothers, No. 3,” &c. “ That covers my whole stock.”

The defendants replied to this letter that the arrangement met with their approval, that they did not comprehend the numbering from one to seven, but they understood that all would fare alike; and asked-for information as to this point.

Gleason, in his answer to this inquiry, wrote that the numbering was done by the attorney, who said it was necessary, but that all who were seemed were to stand equally in the payments.

All the mortgages contained a clause authorizing the mortgagees to take possession of and sell the property in case of default of any one payment, or any attempt to “ sell, assign or remove ‘ the property ’ out of Gleason’s possession.”

Gleason, the mortgagor, continued in possession of the stock and carrying on his business and selling the goods until June, 1858. About the first of July he sent the goods on to the plaintiffs. He, at the same time, sent to plaintiffs a letter stating that he had sent them and expressing his wish that all the creditors secured should be

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paid pro rata, without preference on their releasing him, ■but if that could not be done, he directed that the plaintiffs should sell the goods, and out of the proceeds pay themselves, and apply the residue towards payment of the other mortgages in the order in which the mortgages were numbered.

The goods being in the plaintiffs’ possession, the defendants brought an action against Gleason to recover their debt and attached these goods as being his property.

The Judge directed the Jury to find for the plaintiffs the cash value of the goods on the 16th of July, 1858, and ordered the questions of law arising on the trial to be heard in the first instance at the General Term.'

Edgar S. Van Winkle, for defendants.

I. At the time of the attachment the defendants had a right so to proceed, and their proceedings were regular.

II. When attached the goods were Gleason’s.

1. The mortgages were all void as against creditors.

They were on a stock in trade, and reserved to the owner the liberty to sell on his own account.

A mortgage on a stock in trade can only be good by way of assignment in trust, and then the clause permitting the owner to remain in possession and control of the same, in addition to the clause providing for a return of the surplus to the owner, renders it void.

2. Whether the instrument is treated as a mortgage or an assignment, it was fraudulent as against creditors.

As a mortgage it was void. (Edgell v. Hart, 13 Barb., 380 ; S. C. on appeal, 5 Seld., 213 ; Wood v. Lowry, 17 Wend., 492 ; Griswold v. Sheldon, 4 Comst., 581 ; Ford v. Williams, 3 Kern., 577 ; Gardner v. McEwen, 19 N. Y. R., 123.)

As an assignment it was void. (Code of Iowa, § 977 ; 2 R. S., N. Y., 137 ; Bur. on Assignments, 400, 401 ; Goodrich v. Downs, 6 Hill, 438 ; Barney v. Griffin, 2 Comst., 365 ; Leitch v. Hollister, 4 Comst., 211 ; Doremus v. Lewis, 8 Barb. S. C. R., 124.)

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And it is immaterial whether the reserved trust or benefit was created by the assignor with fraudulent intent or was the result of mistake.

III. Personal mortgages, contrary to the general principles of law, if authorized by the State wherein made, can have no extra territorial force, especially if sought to be enforced or sustained in a place by the laws or decisions of which such mortgage would be invalid. (Story’s Confl. of Laws, §§ 388, 271, 416 ; Davis v. Bronson, 6 Iowa, [Clarke] 412, 424.)

It does not appear that the law of Iowa would sustain any personal mortgage which violates the general principles or policy of law.

See Code of Iowa, 1851, §§ 1193-1195, 1217, regulating personal mortgages.

The presumption is that the law-of Iowa is the same as ours. (Holmes v. Broughton, 10 Wend., 75 ; Bean v. Briggs & Felthauser, [Clarke,] 4 Iowa R., 464.)

IY. When defendants attached, plaintiffs did not hold as mortgagees, but under a special trust created by Gleason’s letter of July 1, 1858, and their title was invalid, for it was a transfer or assignment in trust, of part of the debtor’s property, which was void.

1. Because it made it a condition of any payment to any creditor that he should release the debtor. (Bur. on Assignments, p. 152.)

2. Because it gave to the assignee, in case creditors would not release him, and would not petition for his discharge, a power to dispose of the goods as indicated by the debtor. (Barnum v. Hempstead, Paige, 568 ; Boardman v. Halliday, 10 Id., 223 ; Sheldon v. Dodge, 4 Den., 217 ; Hyslop v. Clarke, 14 Johns., 458 .)

Y. If the plaintiffs are considered as holding under their mortgage, they can only claim the amount of their debt, the surplus belonged to Gleason. The verdict should be reduced to the amount of their debt. (Code of Procedure, § § 227, 231, 234 ; Leitch v. Hollister, 4 Comst., 211 ;

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Hendricks v. Robinson, 2 Johns. Ch. R., 284, and 17 Johns., 438 ; Hull v. Carnley, 1 Kern., 501, and 17 N. Y., 202 .)

Anthony R. Dyett, for the plaintiffs.

I. The plaintiffs were not entitled to a nonsuit.

1. There being no “ stipulations to' the contrary ” in the mortgages, the title and right of possession passed to the mortgagees immediately. (Code of Iowa, § 1210.)

2. The acknowledgment and recording by Gleason was a delivery. (Rathbun v. Rathbun, 6 Barb., 98 ; Code of Iowa, §§ 1194,1195, 1217-1223.) The delivery to Cooley, on behalf of the creditors, was a good delivery, though unauthorized by them, if such delivery was not afterwards dissented from. The Code of Iowa (§§ 1193-1195) makes the acceptance and record equivalent to taking possession.

3. The plaintiffs accepted their mortgage, and the delivery of it, and before the attachment was issued they had the actual possession, and, in addition to the title, constructive possession under the laws of Iowa. The mortgages were past due, and by their terms they had the right of possession and the absolute property. (Rich v. Milk, 20 Barb., 616 ; 4 Kern., 22.)

The defendants had accepted a delivery of the mortgages, both by not objecting and by their correspondence with Gleason.

4. But if they had not, it did not invalidate the plaintiffs’ mortgage or title.

5. Ho question was raised on the trial as to the delivery and acceptance of the mortgages either by plaintiffs or defendants.

6. Ho question of fraud arises to affect the plaintiffs’ title. The mortgages were, prima facie, valid by the Code of Iowa, and the defendants offered no evidence of fraud.

Gleason testified that the mortgages were all made to secure bona fide debts, and that there was no intent to defraud. And this testimony is admissible, (Seymour v. Wilson, 14 N. Y. R., [4 Kern.,] 567,) and was not contradicted.

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7. These mortgages were all contemporaneous, upon the same property, and alike in their form; the intent being to make all share pro rata.

The defendants, therefore, were so far privy to the plaintiffs’ mortgage as to be concluded from setting up fraud, unless they showed dehors the mortgages, some fraud of which they were not cognizant at the time of the execution of the mortgages. Ño such evidence was given.

8. But there was nothing on the face of the mortgages, or in the evidence, to show fraud.

9. The letter of Gleason, of July 1st, could not vary or change the legal rights of his creditors. It was, however, a good assignment in trust to pay the mortgages. The fact that it directed preferences did not per se render it void, but was merely a reason for equity to interfere.

The plaintiffs had a right to hold the property under their mortgage and disclaim all title under the assignment.

10. The mortgages were valid by the laws of Iowa, where they were made and recorded, and are valid everywhere.

The goods, for the taking and conversion whereof this action is brought, were mortgaged to the plaintiffs by a mortgage duly executed, acknowledged and recorded in Iowa, where the property was situated at the time the mortgage was made. The mortgage to the plaintiffs was, by the terms of the other mortgages, severally, made a first mortgage, the others being in terms declared to be subject thereto. Although the correspondence between the mortgagor, (Gleason,) and the defendants would indicate that the mortgagor represented and, probably, believed the mortgages to stand upon an equal footing, the terms of the mortgages forbid * such a construction. This, however, does not seem very material to the decision of the present case, for, if the plaintiffs’ title as mortgagees was valid, the defendants had no right to take the goods from them.

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The objection that the mortgages were not delivered, we think fails. They were delivered, not to the defendants personally, but to an attorney who undertook to receive such delivery for them. Although such attorney had no previous authority to act for the plaintiffs, still the act was for their benefit and they had a right to assent thereto, And the subsequent delivery of the mortgaged property, or so much, at least, thereof as is in question in this suit, removes any doubt or difficulty in respect to the question of delivery so far as the plaintiffs are concerned. If, as now insisted, the defendants did not accept the mortgage made to them, that would not impair the mortgage to the plaintiffs.

It is, however, insisted that the mortgage to the plaintiffs, (as well as the others,) was void because it contained an illegal reservation of the right, not only to remain in possession of the goods until default in the payments secured by the mortgage, but the right to sell the goods as part of the mortgagor’s stock in trade. If this be the true construction of the mortgage, then, according to the decisions in this State, the mortgage, if given here upon property in this State, was void as against creditors. (Edgell v. Hart, 9 N. Y. R., 216 ; Gardner v. McEwen, 19 N. Y. R., 126 ; Williston v. Jones, 6 Duer, 504 ; Marston v. Vultee, 12 Abb. Pr. R., 143.) The language of the mortgage is not altogether consistent with itself. After describing the goods on hand which are mortgaged, it adds, “ and also all the goods that may hereafter be added, from time to time, to said stock by the party of the first part to take the place of such goods as may be sold from said stock.” But a subsequent clause in the mortgage expressly provides that, “if the party of the first part * * attempt to sell, assign or remove said property out of his posses- - sion,” the mortgagee is “ authorized to take immediate possession of the above described goods and chattels, or any part thereof, and sell the same” to satisfy the mortgage debt.

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The debtor, however, appears by his letter to the defendants to have contemplated the continuance of business, and expected to deal with the mortgaged property.

Without discussing the question whether this mortgage was void by our law, or whether it must be presumed, in the absence of proof on this point, that by the laws of Iowa it was also void, we think the defendants cannot rely upon any such objection on this appeal. No such claim was made on the trial—no such objection to the validity of the plaintiffs’ mortgage was suggested. The plaintiffs may have had it in their power to show the objection to be groundless.

But what we regard as rendering it clearly unavailable, is that before any creditor questioned the validity of the mortgage, the goods in question were delivered into the actual possession of the plaintiffs upon terms securing to them the custody and the right of disposition, freed from any feature of the kind alluded to, and authorizing them to appropriate, the proceeds first to the payment of their own debt.

Now whether the plaintiffs could or could not originally have enforced their mortgage, this delivery of the goods entitled the plaintiffs to receive and dispose thereof and appropriate the proceeds in satisfaction of their own debt, and if there was a surplus, to hold it for the benefit of the other mortgagees.

The mortgagor, by his letter advising the plaintiffs of the forwarding of the goods, and by his actual sending of them to the plaintiffs, not only waived the possession thereof, but in very terms waived the period of credit mentioned in the mortgage, and authorized the immediate sale of the property.

It is true that the letter states that Mr. Vincent (one of the creditors secured by mortgage) advised the distribution of the goods among all the creditors, and that he (Vincent) thought that all would accept such dividend and release the debtor; but the delivery was not charged with any such condition. He could not impose such a

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condition and did not attempt it. He of course was content and even desirous that this should he done, hut such an arrangement would require the assent of the plaintiffs themselves, as well as of the defendants and others; aud he therefore adds that if the suggestions of Mr. Vincent could not be made to work satisfactorily, then the plaintiffs would dispose of the goods; and this we think they had a right to do.

We do not perceive that this is in conflict with any of the principles which are involved in the authorities to which our attention is called.

The plaintiffs should have judgment upon the verdict.