Case ID: ad_13/html/0268-01.html
Source: Caselaw Access Project
Author: {"author": "Rumsey, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

George W. Stephens, as Receiver of The McCall Publishing Company, Respondent, v. The Meriden Britannia Company, Arthur H. Page and Joseph H. Ringot, Appellants.
    
      A. chattel mortgage not filed is void as to creditors—right of a receiver in supplementary proceedings to maintain conversion against the mortgagee and purchasers from him —a demand necessary as to the latter only.
    
    Where a debtor gives to his creditor a chattel mortgage as security for rent due, and the creditor, at the request of the debtor, withholds it from record for eighteen days, and does not take possession of the mortgaged property for a considerable time thereafter, the chattel mortgage is absolutely void, under section 1 of chapter 279 of the Laws of 1838, as to a creditor of the mortgagor, who was such when the mortgage was given;, and a receiver, appointed in ■ supplementary proceedings instituted upon a judgment which such creditor has recovered for his debt, may, under the provisions of section 1 of .chapter 314 • of the Laws of 1858, maintain an action for a conversion against the mortgagee and persons to whom the mortgagee has sold the property after having unlawfully taken possession of it by virtue of the terms of the void chattel mortgage.
    
      A demand is not necessary as a condition precedent to a recovery against the fraudulent mortgagee, as his possession of the chattels is unlawful, btit one is necessary against persons who, in good faith and for value,-have purchased the chattels of the mortgagee.
    ■ Appeal by the defendants, The Meriden Britannia Company and. •others, from a judgment of the Supreme' Court in favor of the plaintiff, entered in the office of the clerk of the county of New 'York on the 5th day of June, 1896, upon the verdict of a jury rendered by direction of the court after a trial at a Trial Term of the Supreme Court' held in and for the county of New York, and also "from an order entered in said clerk’s office on the 29th day of May, 1896, denying the defendants’ motion for a new trial made upon the minutes.
    
      This action was brought by George W. Stephens, as receiver of the property of the McCall Publishing Company, to recover the sum of $3,000 for the alleged conversion, on the 9th day of January, 1893, by the defendants, of certain goods and chattels belonging to the said McCall Publishing Company.
    
      George S. Daniels, for the appellants.
    
      George W. Stephens, for the respondent.
   Rumsey, J.:

For some time before the 19th of November, 1892, the McCall Publishing Company had been and then was a tenant of the defendant, The Meriden Britannia Company, and owed $900 for rent, which it was unable to pay. The manager of the Meriden Com-. pony insisted upon having some security, and thereupon the McCall Company executed and delivered to the Meriden Company, as collateral security for the payment of the rent, a bill of sale of all its printing presses, machinery and type which were then in the building occupied by the McCall Company under the lease. It was testified by all the parties to this agreement that it was delivered as collateral to the rent and not as payment. The agent of the McCall Company, who gave the paper, testified that at the time he gave it he asked the agent of the Meriden Company not to register it, but to hold it, and that they would pay the rent to them, and the agent of the Meriden Company, who took the paper, testified that, while, he did not agree to do that, he did promise that if it did not conflict, with the security, nor was any damage to the security, he would hold the. paper. He did hold the paper and did not file it as a chattel mortgage until the seventh of December after it was given and after an attachment had been levied upon the property.

At the time this paper was given, on the 19th of November, 1892, Walter Logan was a creditor of the McCall Company to a considerable amount. On the 1st of February, 1893, he sued- the McCall Publishing Company for his debt and recovered a judgment on the eighth of February for $1,109.99, and on the 21st- of February, 1893, Mr. George W. Stephens was appointed a receiver in supplementary proceedings and cpialified on that day.

Before that had been done, and about the 21st of January, 1893, the Meriden Company took possession of this property by virtue of the mortgage, and not otherwise, and sold it to the defendants Page and Ringot. After the appointment of Stephens as receiver, he brought this action for the conversion of the property against-the Meriden Britannia Company and Page and Ringot, in whose possession it was at that time.

Upon the trial, and after the evidence was all in, the plaintiff asked for the direction of a verdict, which was denied. The court thereupon requested the counsel for the defendant to state on what ■question he desired to go to the jury; to which he replied, I ask the right to go before the jury on the disputed question of fact, as to whether this was a conditional or absolute sale.” This' motion was -denied and the defendant’s counsel took an exception. The defend- • ant’s counsel then asked for the direction of a verdict in favor of the defendant, which was denied and an exception was taken to that denial. The court thereupon ordered a verdict for the plaintiff, which ivas excepted to by the defendant.

The defendant, at the close of the plaintiff’s case, had requested to go to the jury'on the question whether there was a conditional or absolute sale of the property pursuant to this paper; ivhich was also denied, and an exception Avas taken. We are quite clear there Avas no question for the jury upon that point. The paper itself does not specify whether it is given as an absolute sale or as security, but Mr. Bladworth, the treasurer of the McCall Company, Avho gave the paper, and Mr. Bacon,. th(j manager of the Meriden Company, Avho took it, both testify that the paper was given as collateral security for the payment of the rent, and it is not denied that the property Avas to be left in the possession of the McCall Company in the anticipation that the rent Avould be paid, and upon Mr. Bladwortli’s statement that he' would pay it in a short time. There was. no reason, therefore, for submitting that question' to the jury, and the court was right in refusing to do it.

It was not suggested that any other question should be submitted. When, therefore, the defendant, after having excepted to the denial -of his request to go to the jury upon an undisputed question, had asked for a verdict in his Own behalf, under the settled rules of practice, he waived, the right to have submitted to the jury any other ■question, and consented that the court should decide the case-upon the facts. If there was any disputed question of fact upon any point than the one upon which he requested to go to the jury, that question was submitted to the court by the parties when they asked for the direction of a verdict, and all such questions must be deemed to have been determined adversely to the defeated party if there was any evidence to warrant their being found in that way.

The case, therefore, depends purely upon. the questions of law arising from the undisputed facts. This bill of sale having been given as a mortgage, and having been kept off the files in pursuance of the understanding between the parties, was, as against any creditor of the- McCall Publishing Company, absolutely void. (Laws of 1833, chap. 279, § 1; 3 R. S. [9th ed.] 2013.) There was no necessity that any creditor should sue for a judgment declaring that this mortgage was not valid. The statute itself fixes its status, so far as the creditor is concerned. It does not say that it is voidable, or that it may be set aside, but it says that it is absolutely void. These words have been construed in the case of Stephens v. Perrine (143 N. Y. 476), where the court says that the mortgage, as to the creditors of the mortgagor, was always void, and that the mortgagee could not, as against those creditors, obtain any rights under it. The mortgage being void, it was, as to these creditors, precisely the same as though it did not exist, and no proceedings could be taken under the mortgage which would, as to the creditors, give the person named as mortgagee any other or different rights than he would hsive if no mortgage existed. It is quite true that if the debtor, being the mortgagor, had, before the lien of any creditor came to exist, transferred the actual possession of this property to -the mortgagee for the purpose of paying a debt, the transfer would have been valid', and the mortgagee might have held the property ; but that would occur, not because of the mortgage, but because the debtor turnep out the property in payment of his debt to a bona fide creditor;. (Stephens v. Perrine, 143 N. Y. 481.) The mortgage would cut no figure in that transaction, and the transfer would be good without reference to it. But in this case the debtor did not turn out the property to his creditor. The property was taken by the creditor by virtue of this instrument, and sold to Page and Ringot pursuant to the right which it claimed under this instrument, and without' any other or different consent of the debtor than might be inferred from the fact that the mortgage had been given as security. The creditor acquired no greater right because the property was taken than he had before that time, As is said by Brown, J., in Mandeville v. Avery (124 N. Y. 376): “ The mortgage being void, all proceedings under it were void; and although he (the mortgagee) may possess an honest claim, he cannot retain property obtained by him upon a fraudulent mortgage against a pursuing creditor.” It makes no difference .whether the creditor was one whose debt came into existence after the mortgage was given or before, if he actually became a creditor at a time when the property was in possession of the mortgagor and the mortgage had not been filed. (Karst v. Gane, 136 N. Y. 316.) Mr. 'Stephens was properly appointed a receiver in supplementary proceedings against this.foreign corporation, and as such he had precisely the same right as any other receiver would have in any other action. (Logan v. McCall Pub. Co., 140 N. Y. 447.) The statute says that any receiver of the property and effects of a corporation may, for the benefit of creditors, treat as void all acts done, transfers and agreements made in fraud of the rights of any creditor interested in any property held by or of right belonging to the trustee. (Laws of 1858, chap. 314, § 1.) It also says that every person who shall, in fraud of the rights of creditors, have received, taken or in any manner interfered with the property of any insolvent corporation, shall be liable to the receiver of such property for the same, oi'sfor the value of any property or effects so received or taken. (§ 2.) A mortgage which is void as against creditors for failure to file is fraudulent under this. section, precisely as though it was made in fraud of creditors. (Mandeville v. Avery, supra.)

We have, then, this situation of affairs: Mr. Stephens was properly appointed receiver of this insolvent corporation; as such receiver he represented the Creditors; he found that 7the Meriden Company had taken possession of all the property of the McCall Publishing Company by virtue only of a paper which, as to the receiver and creditors, had no validity whatever, and which, as to:.them, the law said he might treat as void. So far as he was concerned, then, the Meriden Company had unlawfully taken possession of that property, and the law said that that company was liable to him in a proper action for the value of the property. The Meriden Company had sold the property. If he brought an action for the money, he would necessarily affirm the sale and be precluded from recovering anything more, even if the necessary result were not, by affirming the sale, to affirm everything which had been done to lead up to it. The proper action to recover the property or its value, where it has unlawfully been taken possession of, is an action for the conversion of it; and it was proper to say that it had been converted from the McCall Publishing Company, because, so far as Stephens was concerned, the mortgage, being void, he could still treat the property as belonging to the McCall Company after the taking and before his appointment. Not only was he, therefore, correct in bringing this action, but he was strictly accurate in the allegations of his complaint.

' But it is said that he should have made a demand upon the Meriden Company before bringing this action. No demand was necessary. As to Stephens, the Meriden Company was a wrongdoer] and was not entitled to a demand. It appeared, also, and was not disputed in the case, that before this action was brought the Meriden Britannia Company had disposed of the property by selling it to Page and Ringot, so that it could not have been returned if it had been demanded, and the demand would, therefore, have been of no avail. In such a case as that no demand need be made. (Pease v. Smith, 61 N. Y. 477.) For these reasons we think that the judgment, so-far as the Meriden Britannia Company is concerned, was right, and. should be affirmed.

But Page and Ringot stand upon a different footing. They bought the property in good faith and for value from the Meriden Britannia Company, who had possession of it, and although that possession as to the creditors was unlawful, Page and Ringot had no notice of it, and were not wrongdoers in buying the property, nor could they be made so until there had been a demand of the property from them, and a refusal on their part to deliver it. This was. not done.' The point was made upon the trial, and the motion to-dismiss, as to them, should have been granted for that reason.

The judgment as to them should, therefore, be reversed. Judgment and order affirmed as to the Meriden Britannia Company, with. costs to the plaintiff, and judgment and order reversed as to the defendants Page and Bingot, and a new trial granted as to them, with costs to them to abide the event.

Van Brunt, P. J., Barrett, Williams and Patterson, JJ., concurred.

Judgment and order affirmed as to the Meriden Britannia Company, with costs to plaintiff; judgment and order reversed as to defendants Page and Bingot, and a new trial granted as to them, with costs to them to abide event.