In re Myers

• Decision Date: 06 February 1928
• Docket Number: No. 102.,102.
• Citation: 24 F.2d 349
• Parties: In re MYERS et al. Ex parte DISTIN.
• Court: U.S. Court of Appeals — Second Circuit

24 F.2d 349 (1928)

In re MYERS et al. Ex parte DISTIN.

No. 102.

Circuit Court of Appeals, Second Circuit.

February 6, 1928.

A. T. Jennings, of Fulton, N. Y., for appellant.

William S. Hillick, of Fulton, N. Y., for appellee.

Before MANTON, L. HAND, and AUGUSTUS N. HAND, Circuit Judges.

L. HAND, Circuit Judge (after stating the facts as above).

The question is altogether of the New York chattel mortgage act (section 230 of the Lien Law Consol. Laws, c. 33), and has apparently never been determined by the New York courts. Distin agrees that his neglect to file the mortgage for 3½ months subjected it to the claims of those who became creditors, not only between execution and filing, but also before execution. Karst v. Gane, 136 N. Y. 316, 32 N. E. 1073. The trustee's position is that, under 2 R. S. pt. 2, c. 7, tit. 2, § 5, the mortgage was prima facie fraudulent, because of the mortgagor's retention of possession, and that, unless it was filed in season, section 230 of the Lien Law never came into effect at all. It is quite true that it was held in Karst v. Gane that sections 5 and 6 of title 2 were not repealed by the act of 1833 (Laws 1833, c. 279), the precursor of section 230 of the Lien Law. However, the whole of the title was repealed by section 40 of the Personal Property Law of 1897 (Laws 1897, c. 417), and again by section 80 of the Revision of 1909 (Consol. Laws. c. 41). The common-law doctrine perhaps remains, and the statute was no more than a declaration of the common law. Barrow v. Paxton, 5 Johns. (N. Y.) 258, 4 Am. Dec. 354; Bissell v. Hopkins, 3 Cow. (N. Y.) 166, 15 Am. Dec. 259; Hall v. Tuttle, 8 Wend. (N. Y.) 375; Sturtevant v. Bollard, 9 Johns. (N. Y.) 337, 6 Am. Dec. 281. But if the law of 1833, and later section 230 of the Lien Law, made filing an equivalent of the change of possession required by 2 R. S. pt. 2, c. 7, tit. 2, § 5, it is of no importance whether the repeal of that section revived the common law or not. In any case, section 230 is to be taken as the complete measure of the mortgagee's rights.

There is no inherent reason why the mortgage should not be valid as against subsequent creditors, even though the mortgagee was slack in filing it. We have not to do with a delay agreed to by the parties, which has at times been urged to vitiate the mortgage as a fraud upon creditors generally. Here the mortgagee has merely been guilty of neglect, whose consequences to him should be measured by its result upon others. Plainly his delay could have had no possible effect upon the action of those who became creditors after it had ended. We should have to hold that his failure in some way infected the mortgage forever, a gratuitous assumption, which would result in hardship to him without benefit to any one else.

So far as we can discover, the courts of New York take no such view. In Skilton v. Codington, 86 App. Div. 166, 83 N. Y. S. 351, it was said that subsequent creditors were not protected, and the declaration was scarcely a dictum. That decision was, however, reversed in Skilton v. Codington, 185 N. Y. 80, 77 N. E. 790, 113 Am. St. Rep. 885, and, although the same rule was repeated on page 86, this time, it must be owned, it was merely in passing. In Volker Lumber Co. v. Utah, etc., Co., 45 Utah, 603, 148 P. 365, Ann. Cas. 1917D, 1158; Carroll v. Anderson, 30 Wyo. 217, 218 P. 1038, and Maverick v. Bohemian Club (Tex. Civ. App.) 36 S. W. 147, the point was apparently ruled in the mortgagee's favor, but whether the doctrine obtains in those states that delay in filing invalidates the mortgage as to prior creditors does not appear. The same is true of Jones v. Bank of Exchange, 201 Mo. App. 545, 213 S. W. 892. Where the test is whether the creditor has obtained a lien before filing, the point cannot arise, and for this reason In re Shirley, 112 F. 301 (C. C. A. 6), is distinguishable. In such jurisdictions, lienors subsequent to filing, of course, must yield. On the whole, it is doubtful whether there can be said to be any authority on the question; but it is equally clear that the view we take is not foreclosed.

We are urged to regard our own decisions in Re Watts-Woodward Press, Inc., 181 F. 71, in Re Schmidt, 181 F. 73, and in Re Leslie-Judge Co., 272 F. 886, as contrary. In the first, the only question up was of those who had become creditors before execution, and our language referred only to them, as appears by our reliance upon Karst v. Gane. Indeed, there could scarcely have been any creditors after filing, for an assignment for the benefit of creditors followed almost at once. In re Watts-Woodward Press, Inc., and In re Leslie-Judge Co. each concerned mortgages originally valid but not refiled as required. While it might indeed have been held that refiling was analogous to filing, the original form of the relevant section had provided that upon failure to refile the mortgage should "cease to be valid," which the New York courts had construed drastically. Porter v. Parmley, 52 N. Y. 185; Marsden v. Cornell, 62 N. Y. 215.

The section,...