99 Misc. 141 | N.Y. Sup. Ct. | 1917
This action has been brought to establish a first lien, which the plaintiff claims to have on the George H. Worthington collection of postage stamps, arising out of the following transaction: On May 7, 1912, the plaintiff was the apparent owner of 1,500 shares of the capital stock of the American Chicle Company, which was then quoted in the market at $225 per share. The defendant George H. Worthington borrowed this stock from the plaintiff, who was
The Chicle stock was thereafter and on the 6th of May, 1915, sold by the bank to which it had been pledged by the defendant Worthington, and transferred out of the name of the plaintiff, so that she ceased to draw dividends upon it from that time.
Between the 30th of July, 1915, and the 20th of October, 1916, the plaintiff received in monthly installments upon defendant’s indebtedness, either from the sale of stamps of the Worthington collection, or advancements thereon by an agent to whom some of the stamps were intrusted for sale, the aggregate sum of $25,500; but no other payments have been made to her upon the amount due on the note.
The defendant Worthington had been for a period of years possessed of large means, and engaged in important business enterprises which required the borrowing of large sums of money from banking institutions; and by July 30,1915, his indebtedness had become so great that he was financially embarrassed, and entered into an agreement with the defendants Warren S. Hayden, John F. Hagey and Wilber M. Baldwin, as a committee, the agreement reciting his inability to liquidate his indebtedness, and providing among other things that upon the request of the committee he would transfer to them or their nominees in trust all of his property and all income therefrom “ subject to any lien or encumbrance then existing,” for the purpose of paying his creditors; and providing further that the committee might require any part or all of the properties of the defendant to be transferred to a corporation to be organized by the committee, and that the committee might exercise through the medium of such corporation the powers delegated to it by said agreement; the agreement further providing that it
On September 27, 1915, a general assignment under the laws of the state of Ohio was made by the defendant Worthington to the defendant Harrison B, McGraw, of Cleveland, for the benefit of creditors of the defendant Worthington, which deed of general assignment was on that day duly filed in the Court of Insolvency in Cuyahoga county, Ohio.
No suits by creditors seeking money judgments were, or have been, instituted against the defendant in Ohio or elsewhere, nor has any judgment of any kind been obtained against him, and hé has not been thrown into bankruptcy under the National Bankruptcy Act.
The defendants other than George H. Worthington, in contesting the plaintiff’s claim to a prior lien upon the Worthington collection of stamps, urge that the plaintiff never owned the borrowed and pledged 1,500 shares of the capital stock of the American Chicle Company, and that they at all times belonged to the
The defendants further urge that even if the plaintiff was the owner of the stock there were involved in the arrangement made by her with the defendant Worthington at the time of the taking of the note and chattel mortgage two factors, each of which constituted a fraud upon the defendant’s creditors, to wit, the plaintiff’s compliance with his request that the chattel mortgage should not he filed, and the retention by him of possession of the collection of postage stamps, after the mortgage upon it was executed and delivered.
It is also claimed by these defendants that there was an oral arrangement made in parol between the
The omission of a mortgagee to file a chattel mortgage executed in good faith as security for a Iona fide debt is not necessarily evidence of fraud; nor is the retention of possession of the mortgaged property.
There is no proof that the defendant Worthington was insolvent in May, 1912, or was believed or known to be insolvent by the plaintiff either at that time, or when the first deliveries of the stamps were made to her by the defendant in 1914. The loan of the plaintiff’s Chicle stock which was made in good faith and pledged to one of the banks as additional security in the course of defendant’s financial transactions occurred more than three years prior to the time when the defendant Worthington made his assignment for the benefit of creditors to the defendant McGraw. He was then engaged in a large enterprise, the organization and building of a railroad called the Interurban Bailway and Terminal Company of Cincinnati, to assist which the banks were loaning him large sums of money. There was no fraud or fraudulent intent as far as the plaintiff was concerned in withholding from record at the request of the defendant the chattel mortgage given to the plaintiff covering the Worthington collection of stamps, so that injury would not be done to his credit in the circumstances.
It is the settled law of the state of New York that an unfiled chattel mortgage is valid between the par
Judge Haight, in writing the opinion of the court in that case, says (p. 503): “It has been repeatedly held that such a mortgage is only void as to the persons mentioned in the statute, to wit, purchasers in good faith, and creditors who are armed with some legal process authorizing a seizure of the property, and that it is valid as to the mortgagor and all other persons. The mortgagor, in assigning his property to the defendant Hillis, could not transfer to him any greater right with reference to this property than he theretofore possessed, and if the mortgage was valid as to him, it followed that it was valid as to his assignee. This was expressly held in this court as early as the case of Van Heusen v. Radcliff (17 N. Y. 580), and the same principle has been since repeatedly asserted in numerous cases. ■ This was the unquestioned condition of the law down to the time of the enactment of chapter 314 of the Laws of 1858. This legislation gave to an executor, administrator, receiver, assignee or other trustee the right to disaffirm, treat as void and resist all acts done, transfers and agreements made in fraud of the rights of any creditor, etc. This statute, with some amendments not material to be now considered, has been incorporated in the Personal Property Law of 1897. It invested assignees with a power which they did not theretofore possess. They were permitted, as the representatives of general creditors, to disaffirm and treat as void, transfers and agreements made in fraud of the rights of creditors, without having such claims established by a judgment.
And even though the defendants were or represented judgment creditors armed with process, and ready to make a levy, they would have no right to levy upon any stamps which the mortgagor had voluntarily delivered to the plaintiff to secure or pay her debt. Stephens v. Perrine, 143 N. Y. 476.
The fact that the law of the state of Ohio permits an assignee for the benefit of creditors to contest the right of a chattel mortgagee under an unfiled chattel mortgage, in direct contradiction to the law of the state of New York, is ineffective in this case for the reason that the forum is in the state of New York and not in the state of Ohio. The defendants, having submitted themselves to the jurisdiction of a New York court, are governed by the New York law as to remedies. Union Nat. Bank v. Chapman, 169 N. Y. 538; Hixson v. Rodbourn, 67 App. Div. 424.
The statutes of the two states as to the filing of chattel mortgages, and the right of creditors to take advantage of the non-filing thereof being the same, the means by which the creditor takes advantage of the non-filing relates to the remedy and is governed by the lex fori. In order to take advantage of the non-filing of the mortgage the defendants must arm themselves with legal process in this state in a suit against the defendant Worthington, as a preliminary to asserting their rights. Having failed to do so they have not complied with the law of the state in regard to the remedy, and cannot be heard. Dearing v. McKinnon Dash & Hardware Co., 165 N. Y. 78.
It is undisputed that the Citizens Savings and Trust Company of Cleveland has had the benefit of the plaintiff’s stock, and ultimately caused that stock to be transferred to itself upon the books of the Chicle Company, thus legally depriving the plaintiff of the stock, or of any right to retain it, since she had no contract relations whatever with that bank. Before any other creditor legally questioned the transaction between the plaintiff and the defendant Worthington, as appears by the undisputed evidence, the defendant delivered the postage stamps to the plaintiff; most of them prior to May, 1915; and on May 20,1915, he wrote a letter to Mr. Colson, the selling agent in Boston, to recognize the plaintiff as the owner of the stamps in his possession, and to account to her therefor. The plaintiff wrote a similar letter to Mr. Colson in June, 1915, and from that time Mr. Colson recognized the plaintiff as the person entitled to the possession of the stamps that had been sent to him, or to the proceeds of such sales
Whether this security was held under a mortgage, or by way of a pledge, is unimportant. The vital fact is that at the time the transaction was entered into the party parting with her property did so upon the faith of a promise by the other party that she should have a lien upon specific property as security for what she parted with. If we regard the mortgage as void under the laws of the state of Ohio, it is nevertheless evidence of the transaction entered into, and of the promise made, and of the security pledged. If we regard the
The pledge and transfer of the collection to the plaintiff would not be invalidated under the Assignment Law of Ohio, sections 11104 and 11105, assuming that this law applies to the case at bar, for the reason
Moreover, the defendants who are contesting the plaintiff's claim, having taken an assignment of the stamps expressly subject to the plaintiff’s lien, cannot now dispute the validity of it. It appears that the first assignment made to the committee under the agreement of July 30, 1915, was made subject to whatever lien there might be on the collection upon the part of Alice F. Halladay, and the assignment thereafter made to the defendant McG-raw as assignee, pursuant to the laws of the state of Ohio, was also made expressly subject to Alice F. Halladay’s lien.
The defendant Worthington undertook to assign and the other defendants undertook to take only subject to this lien; and taking subject to the lien they could not and cannot dispute the validity of the lieu. Hartley v. Harrison, 24 N. Y. 170; Cottle v. County of Erie, 57 App. Div. 443.
It appears that $25,000 worth of stamps were added to the collection after the mortgage was given to the plaintiff, and the defendants claim that these stamps are in no way subject to any lien or claim on the part of the plaintiff, and that as they'are so mixed with the
It follows from the discussion of the facts and the law applicable to this case that the plaintiff is entitled to a judgment against the defendant Worthington in the sum of $337,500, less the sum of $25,500 paid thereon, with interest on all sums unpaid from May 6,
Judgment accordingly.