Stephens v. Perrine

• Decision Date: 27 November 1894
• Citation: 39 N.E. 11,143 N.Y. 476
• Parties: STEPHENS v. PERRINE et al.
• Court: New York Court of Appeals Court of Appeals

143 N.Y. 476

39 N.E. 11

STEPHENS

v.PERRINE et al.

Court of Appeals of New York.

Nov. 27, 1894.

Appeal from supreme court, general term, Fifth department.

Action by John B. M. Stephens, as receiver, against Mary J. Perrine and other, to set aside a chattel mortgage. From a judgment of the general term (24 N. Y. Supp. 21) reversing a judgment for plaintiff, plaintiff appeals. Reversed.

In February, 1892, the defendants Frank Aldrich and Charles W. Perrine composed the firm of Frank Aldrich & Co., and on the 25th of that month they gave a chattel mortgage on personal property owned by the, and then in their possession, to the defendant Mary J. Perrine, for the purpose of securing to her the payment of something over $2,000 then loaned by her to the firm. The mortgage was not filed until March 30, 1892, on which day it was filed in the Monroe county clerk's office. The omission to file was intentional. The mortgage property remained in the possession of the mortgagors until the 30th of March, 1892, when the mortgagee took possession of it under her mortgage, and, after advertisement, the property was sold, and the mortgagee became the purchaser, as the highest bidder at the auction sale. The mortgage was made without any fraudulent intent on the part of the mortgagors, and it was received by the mortgagee to secure a valid indebtedness, and without any intent to defraud on her part. Prior to and at the time of the execution of this mortgage, the mortgagors were indebted to many other people, and among them to Redfield & Sons, and also to Hill Bros. & Co. Subsequent to the date of the filing of the chattel mortgage, and the taking possession of the property by the mortgagee, the creditors above mentioned commenced separate actions against the mortgagors, and recovered judgments therein subsequent to the sale of the mortgaged property by the mortgagee under her mortgage. Executions were issued upon these judgments, and returned wholly unsatisfied, and the plaintiff was subsequently appointed receiver in proceedings supplementary to execution based upon such judgments. Before the commencement of this action the plaintiff demanded of the defendants the delivery to him of the property covered by the chattel mortgage, or payment of the value thereof, which was refused. This action was thereupon commenced to set aside the mortgage, and to recover the property or its value. Some claim was made on the part of the plaintiff that the mortgage was executed for the purpose of defrauding creditors, but the referee found against the plaintiff on that issue. He gave judgment for the plaintiff on the ground that the failure to file the mortgage or to deliver the possession of the property to the mortgagee at the time of the execution of the mortgage rendered it void as against the creditors represented by the plaintiff, and the referee further held that the plaintiff, as a receiver in proceedings supplementary to execution, could maintain this action. The general term reversed this judgment, and the plaintiff has appealed to this court.

Albert H. Harris, for appellant.

William B. Hale, for respondents.

PECKHAM, J. (after stating the facts).

The single question argued here has been, which of these parties, upon the foregoing facts, is entitled to judgment? At the threshold of an examination of the subject it may be stated that this mortgage was void as against those creditors who were such at the time it was executed, although at that time they had obtained no judgments in their favor, and then stood in the condition of simple contract creditors. The failure to file the mortgage, there being no change of possession of the property mortgaged, rendered it void as aginst creditors then existing. Laws 1833, c. 279, § 1; Karst v. Gane, 136 N. Y. 316, 32 N. E. 1073. The supreme court has reversed the judgment for plaintiff upon the ground that although such mortgage was void even as to existing creditors, yet as the mortgagee filed her mortgage, and under it took possession of the property mortgaged, and sold the same by virtue of it, before the creditors represented by the plaintiff had obtained any lien on the property by judgment and execution, or by some other legal process, the mortgagee had the right to hold such property, or its proceeds, against these creditors. The court stated that the creditors, in order to take advantage of this void mortgage by reason of a failure to file it, must not only acquire a lien upon the property by virtue of a levy of other legal process, but such lien must be had before the mortgagee has reduced the property to possession, and sold it to satisfy his claim. In this holding we are of the opinion the court below erred. The mortgage, as to the creditors of the mortgagor, was always void. It continued to be void notwithstanding the fact that the mortgagee assumed to take possession under, and to sell the property by virtue of, such void instrument. As between these mortgagors and creditors, it was the same as if the mortgage did not exist, and the mortgagee could not, as against these creditors, obtain any rights under it. How could a mortgagee in a void mortgage, as against creditors, obtain any title to property by virtue of such mortgage? As against them, the mortgagee could not rightfully take the property by virtue of this void instrument, and, if she did take it in spite of the fact that the mortgage...