In re Thompson

• Decision Date: 24 March 1903
• Docket Number: 3,240.
• Citation: 122 F. 174
• Parties: In re THOMPSON.
• Court: U.S. District Court — Southern District of New York

122 F. 174

In re THOMPSON.

No. 3,240.

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

March 24, 1903

An unrecorded chattel mortgage which is good between the parties is valid as against the mortgagor's assignee for the benefit of creditors.

The following is the opinion of Referee Coxe:

William Thompson, the bankrupt above named, was, on and prior to November 27, 1900, engaged in the livery stable business, at No. 57 Irving Place, borough of Manhattan, New York City. On said 27th day of November, 1900, Thompson made, executed, and delivered a general assignment for the alleged benefit of his creditors to Herman R. Murray, under which assignment the said Murray duly qualified and entered into possession of the property formerly belonging to Thompson.

On December 4, 1900, William B. Parkinson and others filed a petition in this court in involuntary bankruptcy against Thompson, and thereafter, on December 26, 1900, Thompson was duly adjudicated an involuntary bankrupt. On February 26 1901, Isaac C. Wilson was duly elected by the creditors trustee of the estate in bankruptcy, and he thereupon duly qualified, and has since been acting as such trustee.

On March 4, 1901, upon the application of said trustee in bankruptcy, an order was made by the district judge of the United States for this district, directing that Herman R Murray 'forthwith deliver to said Isaac C. Wilson trustee herein, all books, papers, and documents of any description now in his possession relating to the estate of William Thompson, bankrupt, and that he present in this court, at a term thereof to be held at the post office building, in the borough of Manhattan, city of New York, on the 6th day of March, 1901, at 10:30 o'clock in the forenoon, or as soon thereafter as counsel can be heard, an account of all the moneys and papers received by him belonging to the said estate of William Thompson, bankrupt and thereupon deliver and pay over to said Isaac C. Wilson, trustee, all property and moneys as the court shall direct. ' Thereafter, and by an oral order of said United States district judge, the matters included in said order were referred to the undersigned, being the referee in charge of the case, for further proceedings. No question is made that this is the purport of the oral order, both the counsel for the trustee and the counsel for the assignee joining in a statement on the record to that effect.

Pursuant to this order, said Herman R. Murray was examined, and submitted an account of his receipts and disbursements as assignee. In this account the only assets with which the assignee charges himself are collections made on certain accounts due the bankrupt, assignor, amounting in the aggregate of $1,138.97. As against this the assignee credits himself as follows: Wages earned within three months of bankruptcy, $398.75; petty disbursements, $8.52; wages for labor subsequent to the assignment, $166.05; gas bills, $73.80; fee of counsel for assignee, $250.00; premium on assignee's bond, $20.00-- leaving a balance of $221.85, which the assignee either has paid or is ready to pay over to the trustee.

The trustee objects to all of the items of credit above set forth, except the first two; and, as the result of the examination in these proceedings of the bankrupt and the assignee and other witnesses, he further claims that the assignee has wrongfully appropriated other property of the bankrupt, and that he should be compelled to surrender the same or its proceeds to the trustee in bankruptcy, in addition to the sums above objected to. In order to arrive at a conclusion, it will be necessary to consider all these claims together.

It appears that at the time of the assignment there were upon the property of the bankrupt certain chattel mortgages. According to the testimony of Mr. Murray, there was a first mortgage, covering certain horses, in favor of Fiss, Doerr & Carroll, upon which there was due $400. There was a second mortgage in favor of Hincks & Johnston, executed January 21, 1899, covering all the property the assignor had in his business (except perhaps the harness and electric motor, covered by the Murray mortgage hereinafter mentioned), and including many carriages, as well as horses and other property, which mortgage was given to secure an indebtedness of $46,757.10, of which there was claimed to be due at the time of the assignment $29,150. There was also another mortgage in favor of Herman R. Murray, likewise executed January 21, 1899, to secure $5,625, and covering 21 horses, 20 sets of harness, and 1 electric motor. On this mortgage $1,000 had been paid, leaving an indebtedness thereon, at the time of the assignment, of $4,625. The horses covered by the Fiss, Doerr & Carroll mortgage were also included in the Hincks & Johnston mortgage, it being a second mortgage as to them, and the 21 horses covered by the Murray mortgage were also included in the Hincks & Johnson mortgage, it being a second lien as to them.

Murray, at the time of the assignment, was, and for many years had been, a member of the firm of Hincks & Johnston, who were carriage makers of Bridgeport, Conn.

Upon the assignment, Hincks & Johnston, with the permission of Murray, the assignee, took under their mortgage, as is testified by the partner Hincks, between 50 and 60 carriages. There is some conflict of testimony as to precisely the number of carriages taken by them, some of the witnesses placing the number higher than Mr. Hincks, especially with regard to certain hansoms, all the other witnesses testifying that there were 10 or 12 more hansoms than were accounted for by Mr. Hincks. However this may be, it seems that Hincks & Johnston took all they considered necessary in order to satisfy their debt, so that they were willing to forego any claim upon the horses, harness, or other property. Mr. Hincks at the hearing of June 13, 1901, repeatedly stated, in the most clear and positive terms, that Hincks & Johnston made no claim on the horses and other property except the vehicles, and that they waived all claim to such property.

Mr. Hincks testified as follows: 'Q. This mortgage, Mr. Hincks, appears to cover other property than carriages. A. Yes. Q. What became of that other property? A. I don't know. I say I don't know officially. We had nothing to do with it at all. I told Mr. Murray that I didn't care to bother with horses or property of that kind, and the assignee took it. Q. So that the firm of Hincks & Johnston made no claim to 119 horses, or about that number, that were covered by this chattel mortgage? A. No, sir; we had nothing to do with the horses or other property, except the carriages. Q. What became of those horses? A. I don't know. I suppose they were sold by the assignee. Q. And you wish to be understood as saying that you waive all claims-- A. We waive all claim to all of that property. Q. And also to all robes and liveries and harness? A. Yes. * * * Q. You never claimed to take that property? A. No; we never had any property except the carriages at any time.'

And, being again questioned upon this subject, Mr. Hincks testified as follows: 'Q. With reference to the horses that appear on the schedule, and all the other property that appears in the mortgage, I understand you to say that you waive all claim to those? A. Yes, sir; they haven't come into our possession at all, and we didn't assert any claim and we never shall. Q. Therefore you waive any rights to those that you might have under the mortgage? A. Don't understand me as waiving any rights of Mr. Murray. I am speaking now for myself and Mr. Johnston. I don't know that I ought to speak for Mr. Murray; but as an entity, the firm of Hincks & Johnston, those don't enter into its assets at all. Q. They are waived by that firm? A. Yes.'

I am unable to understand this testimony otherwise than as asserting that the firm of Hincks & Johnston waived all claim of lien to any of the property covered by their mortgage except the carriages; that they, of course, did not assume to waive any rights of Mr. Murray individually, but that all the rights of the firm of Hincks & Johnston, including whatever rights Mr. Murray had as partner of that firm, were waived. This being so, it would follow that all the balance of the property covered by this mortgage which was not covered by either the Fiss, Doerr & Carroll or the Murray mortgage would revert to the assignor for the benefit of his general creditors. And this is the contention of the trustee. On the contrary, Mr. Murray, the partner of Hincks & Johnston, and the assignee for the benefit of all the creditors, took not only the property covered by his own mortgage, but substantially all the other property of the assignor which had not been taken by his partners, to the entire exclusion of all the general creditors, of whom...