Court Opinion

ID: 5188686
Source: CourtListenerOpinion
Date Created: 2022-01-06 15:32:38.104124+00
Date Added: 2024-06-11T08:26:50.395880
License: Public Domain

Spring, J. (dissenting):
The chattel mortgage was not filed and there was no transfer of possession to the mortgagee. However free from culpability the mortgagee may have been, the mortgage was void as against existing creditors of the mortgagor. (Laws of 1833, chap. 279, § 1; Stephens v. Perrine, 143 N. Y. 476.)
The claims need not be reduced to judgment to be within the protection of this .statute. As was said in Karst v. Gane (136 N. Y. 316), at page 323 : “ A simple contract creditor is as much within, the protection of the statute as a creditor whose debt has been merged in a judgment.” The creditor, of course, must have his judgment before he can assail the mortgage, but that is simply a necessity to its enforcement. The judgment relates back in its remedial effect anterior to the void mortgage if the claim antedated that instrument.
In the present case the mortgagee , demanded possession, of this ■ property, and it was surrendered to him on the 26th.of January, 1897. The demand was made and possession given by virtue of the *521mortgage, and the sale made by the sheriff was pursuant to that instrument. It is clear that though the mortgage be void the debtor may turn out the property to the mortgagee as a creditor to pay his debt. (Bowdish v. Page, 153 N. Y. 104; Karst v. Gane, supra.)
That is not this case, for the surrender was made in pursuance of a void mortgage, and the sale was founded upon that instrument. In the one case the mortgage is ignored and the transfer made regardless of it. In this case the parties acted upon the assumption that the mortgage was valid and possession and title were acquired solely through it. The two cases are vastly different. (Stephens v. Perrine, supra)
It is contended that as the case does not show that any lien was acquired by virtue of the judgment, and that, apparently, the sale was to a bona fide purchaser,- no relief can be had. The purchaser at the sale is not a party. The mortgagor and the mortgagee are the only defendants. Whatever money was paid to the mortgagee came through the sale under the void mortgage. That the avails paid his debt puts him in no better light, for that would be all he could get anyway. If the doctrine of the prevailing opinion is to stand, he is as fully protected as if the property had been turned out to him in payment of his debt, disregarding the mortgage.
To reach the money acquired by the mortgagee it is not necessary that the actual lien be acquired before the sale, but when the judgment creditor seeks to assert his lien he must be in a situation to maintain it. Here judgments were rendered, executions were issued and returned unsatisfied, and the plaintiff was appointed receiver in proceedings supplemental to execution, all of which were steps preliminary to the commencement of the action. They were all made with the purpose to attack this mortgage, and there was no delay in their prosecution. The sale might be made under the void mortgage before the debt is due or before any levy can be made or lien perfected. It cannot be that because the mortgagee has been swift to sell the property lie is absolved from attack. He has made a sale by virtue of an instrument which is within the condemnation of the statute, and he should account for what he has received, and that is all which can he accomplished in this action.
In Stephens v. Perrine (supra), which is an action closely akin *522to this,. no lien Gas acquired at the time of the sale. The preliminary procedure had heen complied with as in this case. The General Term had held that a lien must be secured before the mortgagee obtained possession and sold the property. The Court of Appeals decided this holding was error, and in commenting upon it says (at p. 480): “ 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. * * * This action is against the mortgagee, and I cannot see. the force of the reasoning which, while admitting that the mortgage is void as to creditors, nevertheless asserts that a title to the property covered by it may be obtained by the mortgagee by proceedings taken under it and which assert the validity of such instrument, ."provided they are taken before the creditors are armed with a judgment and execution so as to enforce their rights which rest upon the invalidity of the mortgage. If void, what right has the mortgagee as against creditors, to take possession in her character of ■ mortgagee, and to sell or dispose of property described in it ? Clearly she has none, and she does not acquire any by the celerity of her movements in seizing and selling property under it.”
It is possible that the purchaser at the sale, if unaware that there were existing creditors, may be secure in his title. But the mortgagee who is,not innocent, but a wrongdoer within the ban of the statute, cannot invoke the sale.made in the face of impending'attack •from the creditors, to protect himself in his illegal acts. He did not file his mortgage and is responsible, therefore, for the situation which avoids it. The fact a sale has been made is never a protection to the wrongdoer, and the money he receives always stands in lieu of the property and can be reached in equity. ■ The court says in Mandeville v. Avery (124 N. Y. 376) at page 386 : “ The right to collect the debt out of the mortgaged property could not be defeated by the mortgagee simply by selling the‘property.
" “ The same right that existed against the property would exist' in favor of the creditor against the proceeds of the sale in the possession of the mortgagee, and an action to reach such a fund would be maintainable either by the creditor or by a receiver appointed in ■ supplementary proceedings under the judgment. To hold other*523wise would be to decide that the beneficial provisions of the statute could be defeated by a fraudulent mortgagee or vendee, by merely selling the assigned property, and as this could in the great majority of cases be done before a judgment could be obtained by the creditor, and a levy made, the statute would be practically annulled.” This is a suit in equity, and the receiver can maintain it. (Cases last cited; Stephens v. Meriden Britannia Co., 160 N. Y. 178.)
The judgment should be reversed, and a new trial ordered, with costs to the appellant to abide the event.
Williams, J., concurred.
Judgment affirmed, with costs.