35 N.Y.S. 53 | N.Y. Sup. Ct. | 1895
The trial court decided that the provision in the mortgage relating to after-acquired property rendered it, as to such property, void against the assignee. He found, however, that the execution and delivery of the mortgage was an honest transaction, and held the mortgage to be a valid lien upon such of the mortgaged property as was transferred to the assignee; and the question presented upon this appeal is whether this latter ruling can be sustained, in view of the undisputed agreement between the parties relating to the mortgagor’s power to sell the property. The rule has been settled by numerous authorities that an agreement between the mortgagee and mortgagor that the latter may sell the mortgaged property for his own benefit will render the mortgage void as to the mortgagor’s creditors, and it is immaterial whether the agreement is expressed in the mortgage itself or exists by tacit understanding and arrangement between the parties. Mandeville v. Avery, 124 N. Y. 376, 26 N. E. 951; Reynolds v. Ellis, 103 N. Y. 115, 8 N. E. 392; Potts v. Hart, 99 N. Y. 168, 1 N. E. 605; Southard v. Benner, 72 N. Y. 424; Robinson v. Elliott, 22 Wall. 524. There is nothing in Brackett v. Harvey, 91 N. Y. 214, which is in conflict with this rule. That case decided that a chattel mortgage was not rendered void by an agreement by which the mortgagor was permitted to sell the mortgaged property and apply the proceeds to the payment of the mortgage debt, and, as subsidiary thereto, an agreement by the mortgagee to take and apply on the debt good business paper given to the mortgagor on sales made on credit, and that the mortgagors might use a part of the avails of such sales tq replenish their stock, the substituted property being placed under the lien of the mortgage by monthly renewals thereof. The rule that agreements which permit a mortgagor to sell for his own benefit are necessarily fraudulent was distinctly recognized by the court. Such agreements, it was said, “strip the mortgage of its whole force as a security to the holder, and make it merely a shield to the debtor.”
The judgment must be reversed, and, as a new trial would be useless, the complaint is dismissed, with costs. All concur.