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property," within Code Civil Proc. § 982, defining local actions, but is merely an action at law to recover money alleged to be due on a contract, though the trial may involve the question whether the bonds were duly issued, and though a julgment for plaintill would be chargeable on the real property in the town. Appeal from special term, Erie county.
Action by Philip Becker against the town of Cherry Creek. From order denying a motion to change the place of trial from Erie county to the county of Chautauqua, defendant appeals. Affirmed.
Argued before DWIGHT, P. J., and BRADLEY, J.
BRADLEY, J. The action was brought to recover the amount due upon 131 town bonds of the defendant, alleged to have been duly issued pursuant to the statute in aid of the Buffalo & Jamestown Railroad Company in the year 1874. The defendant, by its answer, puts in issue the allegations of the complaint in support of the validity of the bonds and of the right of the plaintiff to recover upon them. The motion to change the place of trial from Erie to Chautauqua county was founded upon the contention on the part of the defendant that it was a local action, within the provisions of section 982 of the Code of Civil Procedure, which provides that certain actions must be tried in the county in which the subject of the action, or some part thereof, is situated, and, after mentioning some actions, it includes "every other action to recover or procure a judgment establishing, determining, defining, forfeiting, annulling, or otherwise affecting an estate, right, title, lien, or other interest in real property or a chattel real.” It is urged that this action comes within that provision of the section, because by the statutory adjudication, if effectual and duly executed, by the issue of town bonds, they became a charge upon the real property in the town. If they are such, they became so when they were issued. The purpose of the action is to enforce the liability to pay which it is alleged the town assumed by the issue of the bonds pursuant to such adjudication. They, with a view to that purpose, are the subject of the action. It is an action at law to recover a sum of money upon a contract which the plaintiff alleges was duly entered into, and by which the town undertook to pay the amount mentioned in the instruments known as its bonds. It is true that the trial may involve the consideration and determination of the question of the validity of the statutory adjudication pursuant to which the bonds were issued, and that, if a recovery be had, the amount of it, for the purposes of collection, will be chargeable upon the property, real and personal, in the town, subject to taxation. But the subject of the action is not the establishment of a lien upon real property, although the effect of a recovery by the plaintiff would be founded upon the fact that the bonds were such by force of the adjudication of 1872, and the judg. ment representing such recovery would be the means through which the performance of the undertaking to pay may be enforced. The
object of the statutory adjudication was consummated when the bonds were issued for the purpose in view; and in the present action it, and the proceedings upon which it was founded, are facts bearing upon the question of authority to issue them, which authority sought to be conferred or created for that purpose was effectual, or not so, to give validity to the bonds, which are the subject of the action in the sense applicable to that term. Insurance Co. v. Clark, 22 Hun, 506; Hogg v. Mack, 53 Hun, 463, 6 N. Y. Supp. 301. The only question to be tried and determined upon the issues made by the pleadings is whether or not the bonds were, pursuant to the statute, duly issued as such, and are valid obligations of the defendant; and the fact that the authority to issue them was dependent upon the preliminary proceedings, including the statutory adjudication, and may within the issues be contested is not important for the purposes of the question presented upon the motion. The order should be affirmed.
Order appealed from affirmed, with $10 costs and disbursements.
(69 Hun, 578.) STEPHENS v. PERRINE et al.
(Supreme Court, General Term, Fifth Department. June 23, 1893.) CHATTEL MORTGAGE -FAILURE TO FILE-RIGHTS OF CREDITORS.
Where a mortgagee in a bona fide chattel mortgage, which is void as to creditors of the mortgagors because not filed within a reasonable time, takes possession of and sells the property in satisfaction of her debt before such creditors obtain any lien thereon by levy of execution or otherwise, she is not liable to the latter, or the receiver of the mortgagors, for the value of the goods sold. Appeal from judgment on report of referee.
Action by John B. M. Stephens, as receiver of the property of Frank Aldrich and Charles W. Perrine, against Mary J. Perrine, Frank Aldrich, and Charles W. Perrine, to adjudge fraudulent and void a certain chattel mortgage given by the two last-named defendants to Mary J. Perrine, and to require the latter to account for the value of the property sold by her under the mortgage. From a judgment entered in Monroe county in favor of plaintiff, defendants appeal. Reversed.
Argued before DWIGHT, P. J., and LEWIS, MACOMBER, and HAIGHT, JJ.
William B. Hale, for appellants.
HAIGHT, J. This action was brought to adjudge a chattel mortgage fraudulent and void as against the claims which the receiver represents, and directing the defendant Mary J. Perrine to account for the value of the property sold by her by virtue of the mortgage. The defendants Frank Aldrich and Charles W. Perrine were copartners engaged in business at the city of Rochester. On the 24th day of February, 1892, they borrowed from the defendant
Mary J. Perrine $2,250, and on the next day, to secure such loan, executed and delivered to her a chattel mortgage upon certain personal property belonging to them. On the 30th day of March, 1892, she caused the mortgage to be filed in the office of the clerk of Monroe county, and on the same day took possession of the property, advertised and subsequently sold it. On the 4th day of April, 1892, Bradley Redfield and another recovered a judgment against the de fendants Aldrich & Perrine, and on the 19th day of April thereafter an order was made by the county judge of that county, in proceedings supplementary to execution had upon the judgment, appointing the plaintiff receiver of the property of the defendants Aldrich & Perrine. The referee has found, as facts, that "the chatiel mortgage was made by the defendants Frank Aldrich and Charles W. Perrine without avy intent on their part to hinder, delay, or defraud any of the creditors of the said firm; that said chattel mortgage was received by said defendant Mary J. Perrine to secure a valid indebtedness, and without intent on her part to hinder, delay, or defraud any of the creditors of said firm,”—and, as conclusions of law, that the chattel mortgage is void as against the plaintiff, and judgment creditors whom he represents, and that the plaintiff is entitled to judgment against the defendant Mary J. Perrine for the sum of $1,017.43, with interest, costs, etc. Exceptions were taken to these conclusions of law, which present the questions brought up for our review.
It is contended on behalf of the respondent that the judgment can be sustained upon the authority of Thompson v. Van Vechten, 27 N. Y. 568; Vreeland v. Pratt, (Sup.) 17 N. Y. Supp. 307; Karst v. Gane, 61 Hun, 533, 16 N. Y. Supp. 385; while on behalf of the appellants it is claimed that the receiver in supplementary proceedings cannot maintain the action. Does a cause of action exist, under the facts as found? The cases upon which the respondent relies do not sustain his right to recover. They merely hold that a chattel mortgage not filed, of a chattel not delivered, is void as to a creditor at large, and that the term "creditor," used in the statute, includes any person whose debt accrued either before or after the chattel mortgage was given, but before it was filed. One case, that of Karst v. Gane, has recently been affirmed in the court of appeals, (32 N. E. Rep. 1073,) and we must consequently consider that question settled. But a very different question is here presented. In this case the mortgage was given in good faith, and was free from the taint of fraud. The mortgagee filed the mortgage, reduced the property to possession, and sold it by public sale, before the recovery of the judgment upon which the plaintiff was appointed receiver. Under the statute the mortgage was void as to creditors, for the reason that it was not filed within a reasonable time after it was given. Their position in reference to the property was the same as if no mortgage had been given.
It was subject to the levy of an execution, or other legal process. But, while the mortgage was void as to creditors, it was valid as to the mortgagors.
Before the lien of the creditors attached they had the right to sell the property, subject, of course, to the lien of the mortgagee, or to dispose of the property, in payment of the mortgage debt. They could even sell it to the mortgagee, for a fair price, in payment of her claim, thus dispossessing themselves of any interest in the property, or right of redemption. It would be but the preferring of the claim of one of their creditors, and the others would have no cause of complaint. It would be the same as if there had been no mortgage, and the defendants Aldrich & Perrine had seen fit to sell the property to the defendant Mary in payment of her claim. This they unquestionably had the right to do. Hence it follows that creditors, in order to take advantage of a void mortgage, by reason of its not having been filed, must first acquire a lien upon the property by virtue of a levy, or other legal process; and that must be done before the mortgagor has disposed of his interest therein, or before the mortgagee has reduced the property to possession, and sold it to satisfy his claim. In the case of Thompson v. Van Vechten, supra, Denio, C. J., in delivering the opinion of the court, says:
“It is true the mortgage cannot be legally questioned until the creditor clothes himself with a judgment and execution, or with some legal process against his property, for creditors cannot interfere with the property of their debtor without process.”
In the case of Jones v. Graham, 77 N. Y. 628, it was held that one not having a judgment and execution is not such a creditor as can take advantage of an omission to file a chattel mortgage. To the same effect are Button v. Rathbone, Sard & Co., 126 N. Y. 187, 27 N. E. Rep. 266; Bullard v. Kenyon, (Sup.) 21 N. Y. Supp. 32; Field v. Baker, 12 Blatchf. 438, 443; Lane v. Lutz, 3 Abb. Dec. 19--26.
Jones on Chattel Mortgages, at section 243, says: *Possession taken under a mortgage, or a record of it made shortly before the insolvency or bankruptcy of the mortgagor, is sufficient to protect a mortgagee.”
And again he says: "The mortgage is valid between the parties without either record or possession, if it be made at a time when the law imposes no restriction upon the dealings of the parties with reference to creating a preference, although the mortgagee delays to record it, or to take possession under it, until a short time before the mortgagor's insolvency, when the law would prohibit the making of the mortgage, as a preference. Yet the mortgage may then be made effectual by the mortgagee's recording it, or taking possession under it, because he only asserts and makes secure a right which he had previously acquired."
And again, at section 245, he says: “As against general creditors, having no lien by attachment, an unrecorded mortgage is valid and conclusive, unless it can be impeached as fraudulent, or as giving a preference under a bankrupt or insolvent law. But in New York it is held that a mortgage not duly filed is void as against a general creditor whose claim has accrued during the continuation of the default in filing the mortgage, although the creditor is not in a position to raise the question until he has obtained a judgment or process against the property. The object of the act is to prevent the setting up of secret mortgages against persons who may deal with the mortgagor on the faith that his property is not thus incumbered.”
In the case of Hale v. Sweet, 40 N. Y. 97--103, it is said by James, J., in his dissenting opinion, that:
“As between mortgagor and mortgagee the instrument was a valid and binding security, notwithstanding the omission to file. A breach of its conditions entitled the mortgagee to take possession of the property mortgaged, and, if he did so before any lien of a creditor of the mortgagor attached, such possession would hold the property."
That case was disposed of upon other grounds, but the prevailing opinion does not question the soundness of the proposition quoted. In Powell v. Preston, 1 Hun, 513, it was held that on a conditional sale of goods, under which the title was to remain in the vendor until certain moneys should be paid by the vendee, the sheriff will not be protected in levying upon the goods under an execution against the vendee, when before such levy the vendor had taken possession of the goods, and in an action brought by the vendor against the sheriff, for taking and selling the goods, it was held that in the absence of fraud he was entitled to recover their fair value. In the case of Tremaine v. Mortimer, 128 N. Y. 1, 27 N. E. Rep. 1060, Sewell had executed a chattel mortgage to one Chase.
The mortgage was filed, but it was not refiled until about six months after the expiration of the year, and subsequently the mortgagee took possession of the property, default having been made in the conditions thereof. The day following, Sewell made a general assignment for the benefit of creditors. Subsequently the property was levied upon and sold by virtue of executions issued upon judgments that had been recovered against Sewell.
In an action by the purchaser under such sale for a conversion of the property, it was held that he acquired no title to the property under the sale on the executions, and the complaint was dismissed. Earl, J., in delivering the opinion of the court, says:
“While the mortgage, in the cases mentioned in the act, is valid as between the parties thereto, it is void as to the creditors of the mortgagor. But the act confers no title to the property upon the creditors, and by virtue of the act they take no interest in it. The mortgage is not to be treated as made for their benefit, and the mortgagee does not hold the property in trust for them. The effect of the statute is simply that in the cases mentioned, as between the creditors and the mortgagor, the mortgage has no force or opera tion whatever, and the case is to be treated as if the mortgage had never existed. While the mortgage is void as to creditors, they cannot touch the property until they come with an execution. As between the mortgagor and creditors, if the latter can claim that the mortgage had no existence, so, also, can the former make the same claim. They cannot at the same time asserts its invalidity and validity. They cannot seize the property as belong. ing to the mortgagor, and at the same time deny that he has any title to the property. They must consequently stand upon the position that the mortgige is a nullity. As between them and the mortgagor, both parties have the right to act as if the mortgage had never existed, and before the creditors obtained a lien on the property by virtue of their executions the mortgagor may deal with the same in any honest way. He may sell it and convey absolute title, subject to any rights the mortgagee has, or he can deliver the property to the mortgagee in payment of the debt secured by the mortgage.'
In Wheeler v. Lawson, 103 N. Y. 40, 8 N. E. Rep. 360, Shoemaker executed a chattel mortgage to the plaintiff's assignor. The mort