Case ID: nys_36/html/1050-01.html
Source: Caselaw Access Project
Author: {"author": "PER CURIAM.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

MERRY v. WILCOX et al.
    (Supreme Court, General Term, Fourth Department.
    December 26, 1895.)
    1. Void Chattel Mortgage—Foreclosure—Liability oe Mortgagee to Receiver oe Mortgagor.
    Where goods are sold under a chattel mortgage, which is void as to creditors, etc., because it was neither filed nor followed by a change of possession of the mortgaged property (Laws 1833, c. 279), a receiver appointed in supplementary proceedings against the mortgagor may compel the mortgagee to account for the proceeds.
    2, Same—Title of Bona Fide Purchaser.
    Under Code Civ. Proc. § 2469, providing that the title of a receiver in supplementary proceedings shall extend back by relation to the commencement of the proceeding, that such provision shall not affect the title of purchasers for value in good faith, and without notice, one who buys mortgaged chattels at a sale under the mortgage, and pays value therefor, without notice that a receiver has been applied for in supplementary proceedings against the mortgagor, acquires a valid title, as against a receiver subsequently appointed pursuant to such application, though the mortgage was void as to creditors, etc. (Laws 1833, c. 279), because it was not filed or followed by change of possession.
    Appeal from special term, Oswego county.
    Action by A. D. Merry, as receiver of the property of Dwight Wilcox, against Dwight Wilcox and others. The complaint was dismissed on the merits, with costs, and plaintiff appeals.
    Reversed as to defendant Wilcox, and affirmed as to the other defendants.
    Argued before HARDIN, P. J., and MARTIN and MERWIN, JJ.
    Gill, Stilwells & White, for appellant.
    O. M. Reilly, for respondents Howard Wilcox and William Greene.
   PER CURIAM.

As indicated by the complaint, the purpose of this action was to procure a judgment adjudging that, as against the plaintiff, a chattel mortgage made by the defendant Dwight Wilcox to Howard Wilcox was void; that the title of William Greene, who purchased the property upon a sale under such mortgage, was invalid; that the plaintiff was the-owner of the mortgaged property; and that the defendants be required to deliver it to him, or that an accounting be had with the defendants, and that they be required to pay the plaintiff the value thereof. On October 18, 1894, the First National Bank of Syracuse recovered a judgment against Dwight Wilcox for $609.13, which was entered in Onondaga county. On that day a transcript was filed, the judgment docketed in Oswego' county, and an execution was issued thereon to the sheriff of that- county, where the defendant Dwight Wilcox then resided and now resides. Subsequently such proceedings were had that the plaintiff was duly appointed receiver of the property of the defendant Dwight Wilcox, and qualified as such. The order appointing him was entered in Onondaga county, and a copy thereof filed in Oswego county, December 12, 1894. On the 1st day of August, 1894, Dwight Wilcox was the owner of the property mentioned in the complaint, and, for the purpose of securing Howard Wilcox for the sum of $400 loaned by him to Dwight Wilcox, the latter on that day executed and delivered to the former a chattel mortgage thereon. At the time the mortgagor was indebted to various persons; among others, to the First National Bank of Syracuse, for the claim upon which its judgment was recovered. The mortgagee intentionally retained the mortgage in his possession until the 17th of October, 1894, when it was filed in the office of the clerk of the town of Granby, where the mortgagor resided. On the 20th day of October the mortgagee caused three notices to be posted in that town, advertising the property for sale under the power contained in the mortgage, and, in pursuance of such notice, sold it on the morning of October 27th to the defendant William Greene, for $225. Since the sale the property has been in the possession of the purchaser, except a small portion, which remains in the hands of the mortgagor. The execution of this mortgage was not accompanied by any immediate delivery of the mortgaged property, or followed by an actual or continued change of possession, nor was the mortgage filed until October 17, 1894. The execution in favor of the bank was returned wholly unsatisfied before the commencement of this action, and before that time the plaintiff demanded of the mortgagee and of the purchaser the possession of the mortgaged property, or payment of the value thereof. The defendant Howard Wilcox is irresponsible. The mortgage was given and received to secure the payment of an honest debt, with no intention on the part of either the mortgagor or mortgagee to cheat or defraud the bank, or any other creditor. The property was purchased by the defendant Greene without any notice or knowledge that the First National Bank had any claim against the property, or that any person claimed any interest in it, except the mortgagor and mortgagee. The foregoing is a brief statement of the facts found by the trial court. Upon these facts the special term held that the defendant Greene was a purchaser in good faith, for a valuable consideration, and without notice, and that the defendants were entitled to a judgment dismissing the complaint upon the merits, with costs. Upon filing this decision a judgment was entered in accordance with it. The propriety of this judgment is challenged by the appellant. The appeal in this case was heard upon the judgment roll and exceptions only, and in determining it the facts as found by the trial court may be regarded as established. The broad question presented is whether, upon the facts found, the conclusions of law and judgment entered in pursuance thereof can be upheld.

As the mortgage in this case was not accompanied by an immediate delivery and a continued change of the possession of the property mortgaged, it was absolutely void, as to the creditors of the mortgagor, unless the mortgage, or a copy thereof, was filed as required by chapter 279 of the Laws of 1833. The bank was a creditor as to which the mortgage was void. Karst v. Gane, 136 N. Y. 316, 32 N. E. 1073; Stephens v. Perrine, 143 N. Y. 476, 39 N. E. 11; Mandeville v. Avery, 124 N. Y. 376, 26 N. E. 951. In this ease there was a delay of more than 2\ months before" the mortgage was filed, and there were no circumstances or facts found which indicated that any such delay was necessary. On the contrary, the court found that the mortgage was intentionally retained in the possession of the mortgagor from the time it was given until the date of its filing. Under such circumstances, the mortgage was void, as against the claim of the bank. Karst v. Gane, supra. In that case it was held that while the statute of 1833 does not in terms require an immediate filing of a chattel mortgage to make it valid, yet prompt and diligent action on the part of the mortgagee is required. It was also held that in the absence of circumstances rendering the delay necessary, where there was a delay of six weeks after its execution in filing a chattel mortgage, such filing was not a compliance with the act.

Assuming, then, as we must, that as to the creditor represented by the plaintiff, the mortgage was void, two questions are presented: (1) Whether the plaintiff was entitled to recover from the mortgagee the proceeds of the property sold; and (2) whether Greene, who was a bona fide purchaser, acquired a valid title to the property, as against the plaintiff.

We think the first question must be answered in the affirmative. Mandeville v. Avery, 124 N. Y. 376, 26 N. E. 951, seems to be in point, and decisive of the question. In that case it was held that although the mortgagee had an honest claim, which the mortgage was given to secure, yet as there was no change of possession, and the mortgage was not properly filed, he could not, as against a creditor of the mortgagor, retain the property obtained by him under his mortgage, and that when the property had been taken and sold, by virtue of the mortgage, before any lien was obtained by the creditor, the mortgagee might be compelled by the creditor to refund the proceeds. Hence, the plaintiff was entitled to a judgment requiring the mortgagee to account for, and pay over to the plaintiff, the proceeds of the sale.

This leads us to consider whether the plaintiff could enforce any claim to the property against the defendant Greene, who was a bona fide purchaser. When he acquired his title, neither the bank nor the receiver had any right to or interest in it. When the receiver was appointed, the title which the mortgagor and mortgagee had in the property had been wholly divested. It had been previously transferred to a bona fide purchaser. It is true that the supplementary proceedings were instituted the day before the mortgage sale, but, under the Code, the title of the receiver did not extend back by relation to that time. The provision of the Code which establishes the time when the title shall vest in such a receiver, and when it shall extend back by relation to the commencement of the proceeding, declares that its provisions shall not affect the title of a purchaser in good faith, without notice, and for a valuable consideration. Code Civ. Proc. § 2469. If the property had been purchased by the mortgagee, he would have acquired no title that could have been maintained against the creditor or receiver. Stephens v. Perrine, 143 N. Y. 476, 39 N. E. 11. But as the title had vested in a bona fide purchaser before the creditor acquired any lien upon or interest in the property, and before the receiver was appointed, we are of the opinion that the purchaser obtained a valid title, which he can maintain as against the receiver. Although not directly deciding the question, the cases of Kitchen v. Lowery, 127 N. Y. 60, 27 N. E. 357; Mandeville v. Avery, 124 N. Y. 376, 385, 26 N. E. 951; Zoeller v. Riley, 100 N. Y. 102, 2 N. E. 388; Simpson v. Del Hoyo, 94 N. Y. 189; and Ledyard v. Butler, 9 Paige, 132,—seem to recognize that doctrine. If the opposite doctrine were to obtain, titles to personal property which had been sold under a chattel mortgage would be rendered dangerously uncertain. We cannot believe that it was the purpose of the statute of 1833 to render such a mortgage void, except as between the creditors and parties to the mortgage, or persons acquiring title under it mala tides, or without consideration. These conclusions, if correct, require a reversal of the judgment as to the defendant Howard Wilcox, and that it should be affirmed as to the other defendants.

Judgment reversed and a new trial granted as to the defendant Howard Wilcox, and judgment affirmed as to the other defendants, without costs of this appeal to either party.