Karst v. Gane

• Decision Date: 17 January 1893
• Citation: 32 N.E. 1073,136 N.Y. 316
• Parties: KARST v. GANE et al.
• Court: New York Court of Appeals Court of Appeals

136 N.Y. 316

32 N.E. 1073

KARST

v.GANE et al.

Court of Appeals of New York.

Jan. 17, 1893.

Appeal from supreme court, general term, first department.

Action by Henry Karst against George A. Gane and others to have a chattel mortgage executed to defendants by Barr & Miller declared void, as regards certain judgments held by plaintiff against said Barr & Miller. From a judgment affirming the judgment of the special term in plaintiff's favor, (16 N. Y. Supp. 385,) defendants appeal. Affirmed.

Thos. J. McKee, for appellants.

Fred. W. Hinrichs, for respondent.

ANDREWS, C. J.

This is a contest between the plaintiff, a judgment and execution creditor of the firm of Barr & Miller, and the defendants, George A. Gane and Thomas T. Gane, mortgagees of chattels, as to priority of lien. In January, 1890, the plaintiff recovered judgments against Edward Barr and Herman C. Miller upon notes made by the firm of Barr & Miller during the year 1889, but prior to September 25, 1889, and which matured in October, November, and December of that year. Executions were issued upon the judgments, and levied upon certain machinery of Barr & Miller, then in their possession. On September 25, 1889, Barr & Miller executed to the defendants, George A. Gane and Thomas T. Gane, a chattel mortgage on the same machinery, subsequently levied upon under the plaintiff's execution, to secure the payment of $2,500 on demand. This mortgage was not filed until November 7, 1889. The bona fides of the debts of the respective parties is conceded. It is also conceded that there was no change in the possession of the machinery, but it remained in the possession of the mortgagors from the execution of the mortgage until taken by the sheriff under the executions in favor of the plaintiff. The sole question is whether the mortgage of the defendants is valid as against these executions.

It is claimed in behalf of the plaintiff that he was a creditor of Barr & Miller, within section 1, c. 279, of the Laws of 1833, and that the mortgage is void as to him by reason of it not having been filed until November 7, 1889, six weeks after its execution. It is claimed in behalf of the defendants that the word ‘creditors,’ in the act of 1833, only applies to a person whose debt originated after the execution of the mortgage, and during the default in filing, and that by the true construction of the act a mortgage of chattels is not void for an omission to file the same, as against a creditor whose debt antedated the execution of the mortgage, or, at least, that it is valid as against an antecedent creditor, provided it is filed before he acquires a lien upon the mortgaged property. It is to be observed that the limited meaning of the word ‘creditors' in the act of 1833, insisted upon in behalf of the defendant, has no support in the literal reading of the act. The first section declares that a mortgage of chattels which shall not be accompanied by an immediate delivery, and an actual and continued change of possession, of the things mortgaged, ‘shall be absolutely void as against the creditors of the mortgagor, and as against subsequent purchasers and mortgagees in good faith, unless the mortgage, or a true copy thereof, shall be filed as directed in the succeeding section of the act.’ There is nothing in the language of the section confining the meaning of the word ‘creditors,’ or restricting its natural sense, or which indicates an intention to distinguish between a creditor who became such before, and one who became a creditor after, the execution of the mortgage. The section speaks of ‘subsequent purchasers and mortgagees.’ There was a very good reason for this, since a prior purchaser or mortgagee would stand on his paramount right, and needed no protection, or would have the means of protection, against a subsequent mortgagee. The use of the word ‘subsequent,’ as applied to purchasers or mortgagees, may not be of great importance in ascertaining the meaning of the word ‘creditors,’ but it indicates that the legislature had in mind, and expressed, in respect to one class of persons to be protected by the statute, the time when their rights accrued with reference to the execution of the mortgage. The act of 1833 was supplementary to the provisions of the Revised Statutes relating to fraudulent sales and mortgages of goods and chattels. By 2 Rev. St. p. 136, § 5, a sale, assignment, or mortgage of goods or chattels, where possession is retained by the vendor, is made presumptively fraudulent and void ‘as against the creditors of the vendor, or the creditors of the person making such assignment, or subsequent purchasers in good faith,’ using substantially the same language as did the statute of 1833. The following section (6) defined the meaning of the words ‘creditors,’ used in section 5, declaring that ‘the word ‘creditors,’ as used in the last section, shall be construed to include all persons who shall be creditors of the vendor or assignor at any time whilst such goods or chattels shall remain in his possession, or under his control.' The act of 1833 is in pari materia with the provisions of the Revised Statutes, but added additional protection against fraudulent mortgages of chattels, by requiring them to be filed, and making the presumption of fraud from the retention of possession by the mortgagor conclusive, instead of rebuttable, as under the Revised Statutes, unless the mortgage should be filed as therein provided. The word ‘creditors' in the section of the Revised Statutes, (section 5,) as defined by section 6, plainly includes all creditors who are such while the goods or chattels remain in the possession of the vendor or mortgagor, irrespective of the time when they became such; that is, whether before or after the sale or mortgage. There is, we think, much force in the view taken by the supreme court in the fifth department, (Vreeland v. Pratt, 17 N. Y. Supp. 307,)-DWIGHT, J., writing the opinion,-that the word ‘creditors,’ in the act of 1833, has the same meaning as in the section of the Revised Statutes referred to, and that these sections may be resorted to, if any doubt exists, to explain the meaning of the word in the act of 1833. The argument, from the policy of the act of 1833, to the effect that it had for its object the prevention of the setting up of secret mortgages against persons dealing with the mortgagor on the faith that his property is not then incumbered, and that creditors whose debts were contracted before the execution of the mortgage were not misled, because at the time the credit was given no mortgage was in existence, and therefore they are not within the purview of the act, ignores the road and unqualified meaning of the word ‘creditors,’ used in the statute. In interpreting a statute, its object and policy, where the meaning is ambiguous, may be resorted to in aid of the interpretation, and is frequently of great importance. But in recent times courts are less disposed than formerly to depart from or qualify the plain words of a statute in favor of what is termed ‘equitable construction,’ in order to take particular cases out of its operation upon some supposed view of policy not indicated in the act itself. It was the plain purpose of the act of 1833, disclosed on its face, to require publicity to be given to chattel mortgages, for the protection of the claims of persons mentioned therein.

It is undoubtedly true that one, and perhaps the most important, purpose of the act, so far as it applies to creditors, was to protect persons giving credit to the mortgagor in ignorance of the existence of a mortgage upon his property. But the legislative policy was broader than this single purpose. It is impossible to say that only creditors who became such during the existence of a mortgage may be injured by keeping the mortgage secret. It certainly is not improbable that in many cases antecedent creditors may be lulled into security, and forbear the collection of their debts at maturity, by the apparent unincumbered possession and ownership by the debtor of property covered by an undisclosed mortgage. The statute prescribes a general rule which must be observed in order to entitle a mortgagee to assert his lien as against creditors; and, although a creditor may have notice of an unfiled mortgage at the time the credit is given, yet it is held that, as to a creditor with notice, such a mortgage...