In re Davis

• Decision Date: 16 July 1907
• Citation: 155 F. 671
• Parties: In re DAVIS.
• Court: U.S. District Court — Eastern District of New York

155 F. 671

In re DAVIS.

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

July 16, 1907

Thomas J. Ritch, for trustee.

Elmer P. Smith, for mortgagee.

CHATFIELD District Judge.

A petition in bankruptcy was filed herein upon November 22 1906. At that time the bankrupt had in his possession a stock of groceries, which has since been sold, under an order of this court, and the proceeds held to await a determination as to the validity of a chattel mortgage given by the bankrupt upon the 25th day of January, 1906, for $500, covering '2 horses, 4 wagons, 2 sleighs, 4 sets of harness, and all the stock and fixtures now in my store at Port Jefferson, L.I N.Y.' This mortgage was duly filed on February 5, 1906. The $500 for which the mortgage was given was made up of a loan to the bankrupt, amounting to $200, made previous to the execution of the mortgage, and to secure the mortgagee for indorsing a note of $300, made by the bankrupt, which the mortgagee was called upon to pay, and did pay, on the 1st of December, 1906. The trustee in bankruptcy, who now holds the proceeds from the sale, and the mortgagee, have submitted the question as to the validity of the mortgagee's lien, upon an agreed statement of facts. The horses, wagons, sleighs harness, and fixtures sold for the sum of $418.89. The stock in trade sold for the sum of $500. It is admitted in the statement of facts that portions of said stock in trade, amounting to not less than $200, remained in the store until after the sale by the trustee in bankruptcy, and that the sum of $130 was expended by the receiver for the feeding and care of the horses. No evidence is presented, and no facts shown, to indicate that the bankrupt was insolvent at the time of making of the chattel mortgage, or that the execution and delivery of this mortgage was with intent to hinder, delay, or defraud creditors or to create a preference.

On these facts it would appear that the mortgage was valid at the time of its delivery. In the case of Brackett v Harvey, 91 N.Y. 214, a chattel mortgage was held to be invalidated by an oral agreement to sell the mortgaged property, and to use the proceeds for the benefit of the mortgagor, either in carrying on business or replenishing a stock of goods. This depended on the doctrine that such an agreement would work to the fraud of subsequent creditors who had a right to suppose that the proceeds of whatever sales had been made had been applied to the payment of the chattel mortgage upon the original stock of goods. On the other hand, the case of Brackett v. Harvey, supra (as also the cases cited upon page 221 of the opinion in that case), held that a chattel mortgage was not void per se, because of the provision allowing the mortgagor to sell...