In re Beede

• Decision Date: 29 December 1903
• Citation: 126 F. 853
• Parties: In re BEEDE.
• Court: U.S. District Court — Northern District of New York

126 F. 853

In re BEEDE.

United States District Court, N.D. New York.

December 29, 1903

Stokes & Owen, for trustee.

S. L Wheeler, for John M. Wever.

RAY District Judge.

Orlando Beede, the bankrupt, was engaged in the business of lumbering and running two stores. Prior to March 23, 1901, he had become heavily involved, and had called on his brother Fletcher S. Beede for help by way of indorsements, etc. This brother agreed to indorse his paper, but stated that he ought to have and wanted security, and Orlando promised to give him security, but no agreement was made as to its form or nature. Fletcher S. Beede then and thereafter, and before the mortgage in question was given, indorsed notes and gave accommodation notes for the benefit of his brother to the amount of $30,000 and upwards. Notes and checks of Orlando had gone to protest, and he knew he was financially involved and unable to meet his obligations as they fell due, but it is not shown he actually figured up and ascertained his true financial condition. He knew what his property consisted of and substantially its value. He knew approximately the amount of his indebtedness, and must have had cause and reason to believe himself insolvent, as his indebtedness was nearly double the value of his property. from time to time commencing in April, 1901, judgments, some large and some small, had been obtained against Orlando, and it would seem from the evidence that the sheriff had levied on personal property of Orlando from time to time while the mortgage remained unfiled. The brother Fletcher S. Beede was not acquainted with the financial condition of Orlando. Apparently Orlando was doing a good business and making money. He had a large amount of property, real and personal, apparently free of incumbrance, and stated to Fletcher S. Beede that he was doing a good business and making money. He did know of protested notes owing by Orlando before the mortgage was given. On the 23rd day of March, 1901, in pursuance of his promise to give security, Orlando executed and delivered to his brother Fletcher a chattel mortgage in the words and figures following:

'To all to whom these presents shall come, Greeting: Know ye, that I, Orlando Beede, of the town of Keene, County of Essex & State of N.Y., am indebted unto Fletcher S. Beede, of the same town, County & State, in the sum of thirty thousand dollars and-- -- cents, being for money and notes advanced to me at various times.

'Now for securing the payment of the said debt and interest from the date hereof, to the said Fletcher S. Beede, I do hereby sell, assign, and transfer to the said Fletcher S. Beede, all the goods, chattels and property described in the following schedule, viz.:

'90 horses, all wagons, sleds, sleighs carriages stages, including lumber sleds chains & implements lumber tools, harness and vehicles of any and all description. All cows hogs and cattle blacksmith tools & appurtenances stock of goods in stores at Wadhams Mills and Beedes, N.Y. Furniture at New Pond Inn, Underwood N.Y. Stock of hay and grain at Wadham Mills and Beedes, N.Y. Also at my farm, Keene, N.Y., together with all farming implements, &c. Said property now being and remaining in the possession of Orlando Beede.

'Provided always, and this mortgage is on the express condition, that if the said Orlando Beede shall pay to the said Fletcher S. Beede, the sum of thirty thousand dollars with interest as follows, viz.: to be paid within one year from date which said sum and interest the said Orlando Beede hereby covenant to pay, then this transfer to be void and of no effect; but in case of non-payment of the said sum at the time or times above mentioned, together with interest, then the said Fletcher S. Beede shall have full power and authority to enter upon the premises of the said party of the first part, or any place or places where the goods and chattels aforesaid may be, to take possession of said property, to sell the same, and the avails (after deducting all expenses of the sale and keeping of the said property) to apply in payment of the debt and in case the said Fletcher S. Beede shall at any time deem this debt unsafe, it shall be lawful for him to take possession of such property, and to see the same at a public or private sale, previous to the time above mentioned, for the payment of said debt, apply the proceeds as aforesaid, after deducting all expenses of the sale and keeping of the said property. If from any cause said property shall fail to satisfy said debt, interest, costs and charges, the said Orlando Beede covenants and agrees to pay the deficiency.

'In Witness Whereof I have hereunto set my hand and seal the 23rd day of March in the year of our Lord one thousand nine hundred and-- -- 1901.

'Sealed and delivered

Orlando Beede.

In the presence of Thos. W. Murihead.

'County of Essex-- ss: On this 23rd day of Mch., 1901, before me came Orlando Beede to me known to be the person described in and who executed the foregoing instrument and who acknowledged that he executed the same.

'Wm. F. Bailey, 'Notary Public, 'March 23, 1901.'

This mortgage was not filed until October 11, 1901, the day before Orlando was adjudged a bankrupt on his own petition. On that day it was filed in the office of the town clerk of the town of Westport, where the mortgagor resided. This chattel mortgage covered substantially all the personal property owned by the mortgagor. It is not shown that it was kept from the files pursuant to any agreement to that effect, or with any actual fraudulent intent. It was understood between the parties thereto that Orlando was to continue to sell and dispose of the property as his own, but the mortgagor to keep an account of it, and hold the proceeds for him. This he did not do. The mortgagor continued to sell and dispose of the mortgaged property in the usual course of business, but kept no account of such sales; nor did he hold for or turn over to the mortgagee any part of the proceeds, nor was he at any time called upon to account therefor.

October 12, 1901, on his own petition, Orlando Beede was duly adjudged a bankrupt, and thereafter a trustee was duly appointed. At the time of the adjudication the bankrupt was in possession of the mortgaged property (not disposed of by the mortgagor), and same was thereafter sold by the trustee for the sum of $12,806.34, under an agreement that the lien of the mortgage, if any, should attach to the proceeds of such sale, which were to stand in place of the property itself. Prior to the time Orlando Beede was adjudged a bankrupt, judgments in favor of different creditors, to the amount of $5,943.85, had been duly obtained and docketed against him, and remained unpaid at the date of adjudication. October 12th a judgment for $5,494.26 was obtained and docketed against said Orlando Beede in favor of Daniel F. Payne, and thereafter judgments to the amount of $7,648.31 were duly obtained and docketed against said bankrupt in favor of divers parties. There are other creditors of the bankrupt.

January 17, 1902, the Daniel F. Payne judgment was assigned to Samuel L. Wheeler; and December 13, 1901, the Citizens' National Bank of Port Henry duly assigned their judgments, amounting to $3,284.46, and obtained prior to the adjudication, to said Wheeler. On the hearing and in open court said Samuel L. Wheeler, as assignee of said judgments, stated as follows:

'I waive all claim, as owner of the assignments of three judgments which I have offered in evidence, to the chattel mortgage put in evidence being void from want of timely filing.'

After the chattel mortgage was given, and before the adjudication, Orlando gave to Fletcher S. two bills of sale of certain of this personal property, but no part of the property was delivered. No claim is made under them. They bore date August 21, and September 2, 1901, respectively, within four months of the adjudication.

April 11, 1902, about six months after the adjudication, Fletcher S. Beede, by an instrument in writing under seal, and duly acknowledged, executed and delivered to the claimant here, John M. Wever, an assignment of said chattel mortgage and of said bills of sale as collateral security for the payment of a certain real estate mortgage for $7,500 made by said Fletcher S. Beede and wife on the 11th day of April, 1902, to said John M. Wever; and such assignment recites, 'To have and to hold the same to the said John M. Wever, his executors, administrators and assigns, so far as may be necessary for the purpose of such security;' the remainder, if any, to be paid over to Fletcher S. Beede. John M. Wever claims $7,500 of the proceeds of such sale of such personal property by virtue of this chattel mortgage and the assignment thereof.

It is urged by the trustee that knowledge of the protested notes gave Fletcher notice of the insolvency of Orlando. This court cannot hold that the evidence is sufficient to establish that the mortgagee had reason to believe the mortgagor insolvent at the time the mortgage was given.

Nor can this court hold that there was any agreement that the mortgagor should sell the mortgaged property for his own benefit, and apply the proceeds to his own use. True, this was done, but it was in violation of the agreement made. Even were it shown that the mortgagee knew the mortgagor was not holding the proceeds for him as he had agreed to do, still, as the mortgagee had become indorser to a large amount, and must have learned in the summer and fall after the mortgage was given that the mortgagor was heavily involved and hard pressed, it may be that he preferred to have the proceeds applied to the satisfaction of the debts of the mortgagor. This would make the mortgage void as to creditors.

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