276 F. 1020 | N.D.N.Y. | 1922
This is a review of an order of the referee, holding a chattel mortgage given by Buel G. Brayton, the bankrupt, to the Glens Falls Trust Company, to be valid.
The bankrupt conducted a meat business, doing substantially all his banking with the Glens Falls Trust Company. In 1916 he gave to said company a chattel mortgage covering his stock, and in March, 1919, gave the mortgage in question, which, it is claimed, was the renewal mortgage to the one in 1916. Within a month thereafter Bray-ton filed a voluntary petition in bankruptcy.
The bank, above all others, knew the financial status of the bankrupt. He overdrew his account in the bank 17 times in the two preceding cal endar months, and 11 times during the calendar month (March) in which the chattel mortgage was given, whereas, in former times, he carried a large balance. On the day, March 20th, when the chattel mortgage was given, a note of the bankrupt for $15 became due, to retire which the bankrupt paid $5 in money and gave a renewal note for $10. It was on this day that the bank’s representative went to the bankrupt’s place of business and had him execute the chattel mortgage
While a substitution of securities does not create a preference, in this case there can be no such substitution. The mortgage given in 1916 was void as against creditors and subsequent purchasers in good faith, because of failure to refile within a year. See Lien Law (Consol. Laws N. Y. c. 33) § 235; Stich v. Pirkl, 100 Misc. Rep. 594, 166 N. Y. Supp. 440; Benedict v. Zutes, 88 Misc. Rep. 214, 150 N. Y. Supp. 147; In re Watts-Woodward Press, 181 Fed. 71, 104 C. C. A. 105.
The transfer, while the bankrupt was hopelessly insolvent, being for an antecedent debt, and given within four months prior to the bankruptcy, under circumstances which must have given the bank reasonable cause to believe that a preference would thereby result, is void.
The order of the referee should be reversed, and the chattel mortgage declared void. An order may be entered accordingly.