Mandeville v. Avery

• Citation: 124 N.Y. 376,26 N.E. 951
• Parties: MANDEVILLE v. AVERY et al.
• Decision Date: 03 March 1891
• Court: New York Court of Appeals

124 N.Y. 376

26 N.E. 951

MANDEVILLE

v.AVERY et al.

Court of Appeals of New York, Second Division.

March 3, 1891.

Appeal from a judgment of the generaterm of the fifth judicial department, entered upon an order made June 20, 1890, affirming a judgment entered upon a decision of the court at special term. The action was brought to have two chattel mortgages, executed by the defendant Henry J. Beck to the defendant Edward H. Avery and the National Bank of Auburn, adjudged fraudulent and void, and to require the defendant Avery to account for the proceeds of the sale of the mortgaged property, and pay over to the plaintiff such part of said proceeds as was necessary to satisfy the judgment of Lewis P. Ross, a creditor of said Beck, with the costs of supplementary proceedings, etc. The opinion states the facts.

FOLLETT, C. J., dissenting.

David Hays, for appellant.

J. C. Avery, for respondent.

BROWN, J., ( after stating the facts as above.)

The mortgage to the National Bank of Auburn, which was subsequently assigned to Mr. Avery, was executed January 24, 1887. The mortgage to Avery was executed February 8, 1887. As to the first mortgage, the court found that it was not accompanied by an immediate delivery, or followed by an actual or continued change of possession, of the chattels mortgaged, and that it was executed upon an agreement with the bank that the mortgagor might remain in possession of the property covered by the mortgage, and sell the same at retail, in substantially the same manner as before the execution of the mortgage, and use the avails. Similar findings as to the Avery mortgage were refused. The court found, as a conclusion of law, that the mortgage to Avery was valid, and that the mortgage to the bank was not fraudulent and void as against the judgment of said Ross, nor the plaintiff in this action. There was ample evidence to support the findings aforesaid, and the validity of the Avery mortgage cannot be questioned on this appeal. The finding quoted in reference to the mortgage to the bank rendered it void as to the creditors of the mortgagor. Gardner v. McEwen, 19 N. Y. 123;Russell v. Winne, 37 N. Y. 591;Southard v. Benner, 72 N. Y. 424;Potts v. Hart, 99 N. Y. 168, 1 N. E. Rep. 605; Brackett v. Harvey, 25 Hun, 502; Bainbridge v. Richmond, 17 Hun, 391. And the term ‘creditors' includes all persons who were such while the chattels remained in possession of the mortgagor under that agreement, and it was not essential to their rights that they did not obtain judgment or a specific lien until after delivery of the property to the mortgagee. Stimson v. Wrigly, 86 N. Y. 332; Dutcher v. Swartwood, 15 Hun, 31. The conclusion that this mortgage was not void as against the judgment of Ross or the plaintiff was based upon a finding that Ross, the judgment creditor, with full knowledge that the agreement in reference to the possession of the mortgaged property had been entered into, assented to such arrangement. This finding is challenged by the appellant on the ground that there is no evidence tending to support it, and whether there is or not is the vital question in the case. We are of the opinion that this finding cannot be sustained. An assent by a creditor to an arrangement between the mortgagor and mortgagee, which would preclude him from asserting his rights as a creditor of the mortgagor against the mortgaged property, must be such as to create against him an equitable estoppel, or it must exist in agreement, and in such case must be supported by a valid consideration. It could not be claimed in this case that there was an estoppel. The mortgage was executed and delivered, and the illegal agreement made, before Ross or his agent knew of it, and there is no evidence and no claim that Mr. Avery did any act to his own prejudice, or adopted any line of conduct, by reason of anything said or done by Ross or on his behalf. Nor was there any valid agreement. Without stating in detail the evidence, it appears that Beck, when he applied to Ross to sell him goods, informed him that Mr. Avery, who was president of the bank, was to loan him $1,000 to be used in his business, without security. Ross inquired of Avery by letter if that statement was true, and Avery replied that he had agreed to help him to the extent of $1,000. Ross understood this as an affirmative answer to his question, and made the sale. Soon after the mortgage was given, Ross learned of it, and sent his agent, Gordon, to Auburn to inquire about it. He called on Avery, and asked him why he took the mortgage after it was understood that the loan was to be without security. Avery told him that Beck had offered to give it, as he had used some of the money loaned him in paying incumbrances on his property, and that the bank would let him go on as if no mortgage had been made. Gordon replied that if Beck would continue in business, and pay Ross a little now and then, he would be satisfied, and that Beck had some of the goods which Ross had sold him which were out of season, and if he would return them he would have credit. Avery said that any arrangement that Gordon made with Beck about payment or return of the goods would be satisfactory to him. This conversation took place on February 3d, and on February 8th Beck gave Avery another mortgage, whereupon he immediately took possession of the stock in the store, and proceeded to sell it out under both mortgages. There is no evidence in the case that Gordon had any authority from Ross to make an agreement to waive or surrender his right to attack the mortgage as fraudulent, or that the fact of such an agreement ever was communicated to him, or that he acquiesced therein if it was told to him, and none that he ever knew, prior to the commenecment of this suit, of the agreement between the mortgagor and mortgagee which rendered the mortgage void.

I think a creditor could not be deprived of his legal rights as a result of an agreement made with his agent, without some evidence that he knew of the defect in the mortgage, and had authorized his agent to make an agreement in reference thereto, or had acquiesced in it when made, and this case is barren of any evidence tending to show any of these facts. But it is not necessary to rest our decision on that ground. Assuming Gordon to have had full authority to negotiate with Avery, and make the arrangement testified to, there was no consideration for the agreement. The only consideration claimed is in the implied promise of Avery to release from the lien of his mortgage the goods that Beck should return to Ross, and the payments that he would make to him presumably out of the proceeds of sales at the store. But no payments were ever made, and no goods were returned, and the mere promise to release in case Beck returned the goods did not constitute a consideration. It was conditioned solely upon Beck's action, and could become operative and binding only in case the goods were returned and payments made. It would be a remarkable proposition that Ross could be held to his contract in consideration of the return of goods never delivered to him and payments on account of his claim never made....