MITTNACHT against KELLY

MITTNACHT against KELLY. Court of Appeals ; March Term, 1867. Chattel Mortgage.—Validity of Levy. A chattel mortgage upon the merchandise and stock in trade of the mortgagor,-expressed to include “ the increase and decrease thereof,” is wholly void. Property embraced in tie mortgage, although not a part of the stock in trade which was the subject of the increase and decrease spoken of, is not ■ protected by the mortgage, and may be levied on under a judgment against the mortgagor. Appeal from a judgment. This action was "brought "by Georgs M. Mittnacht against John Kelly, sheriff of the city and county of New York. The facts are stated sufficiently in the opinion of the court. --, for the plaintiff and appellant. —I. The mortgage in question was not void upon its face as against the execution creditor in this action. (1.) The mortgage was founded upon a good and valuable consideration, namely, an advance of money. (2.) Leaving the possession of chattels in the hands of the mortgagor is not necessarily fraudulent (Thompson v. Blanchard, 4 N. Y. [4 Comst.], 303). (3.) From the testimony it appears that the motives of the parties to the mortgage were fair and honest, and that the mortgage was founded upon a-valuable consideration. Such testimony is sufficient to repel the presumption of fraud, arising from want of change of possession (Levy v. Welsh, 2 Edw. Ch., 438). (4.) The mortgage may have been void With respect to after-acquired property, and valid as to that which the mortgagor owned, and was entitled to incumber (Van Heusen v. Rodcliff, 17 N. Y., 580 ; Gardner v. McEwen, 19 Id., 123). (5.) The mortgage was, therefore, valid as to all the property described in the complaint. II. Default having been made by the mortgagor before the recovery of the judgments set up in the answer, the mortgagee became the absolute owner of the property in question, and the mortgagor ceased to have any interest therein, which could be the subject of a levy under an execution (Stewart v. Slater, 6 Duer, 83, 96 ; Mattison v. Baucus, 1 N. Y. [1 Comst.], 295). III. The court below erred in dismissing the complaint. (1.) The mortgage was lawful on its face. There was proof that the debt which it was given to secure, was fairly and honestly owing by the mortgagor to the mortgagee ; and that the mortgage had been filed in pursuance of the statutes. (2.) Any supposed indications of fraud, therefore, arising from-the possession of the goods, and the conduct of the parties respecting them, should have been determined by the jury (Gardner v. McEwen, 19 N. Y., 123). A. J. Vanderpoel, for the defendant and respondent. —I. The mortgage was void upon its face as against creditors. The schedule showed that the parties contemplated the use of the property in the ordinary business of the mortgagor. It covered the “increase and decrease thereof,”—words which are susceptible of only one meaning or construction, when considered in connection with the nature of the property and the business. In the language of Denlo, J., “ It was not intended to create an absolute lien upon any property, but a fluctuating one, which should open to release that which should be sold, and to take in what should be newly purchased.” The manifest tendency of such an arrangement is to defraud creditors by giving to the mortgagor a false credit, and is incongruous with the just and legal idea of a mortgage (Edgell v. Hart, 9 N. Y. [5 Seld.], 217, 219). II. The fact that default had been made in the payment of the mortgage debt when it was demanded, there being no change of possession, did not give the plaintiff an absolute title to the property, or strengthen it as against the judgment and execution under which the defendant acted (Ely v. Carnley, 19 N. Y., 496). [MAJORITY — Parker, J.] Parker, J. —The defendant was sued in. the court of of common pleas of the city of New York, for levying upon a horse, wagon, and harness which the plaintiff claimed under a chattel mortgage, which had been executed to him by the execution debtor. The mortgage was given August 12, 1859, and the execution- was issued September 27, 1859. Joseph Zorn, the mortgagor, carried on a family grocery store in Third-street, in the city of New York. By the terms of the mortgage schedule, he mortgaged, in addition to the property in controversy, “the whole stock of trade in goods, wares, and merchandise, the whole concern forming my grocery and liquor store, known as number 93 Third-street in the city of New York, with the increase and decrease thereoff &c., and, until default in the payment of the money secured, the mortgagor was “ to remain and continue in the quiet and peaceable possession of the goods and chattels, and the full and free enjoyment of the same.” Upon the trial the court dismissed the complaint upon the ground that the mortgage was void upon its face, as against the execution creditor, and judgment was entered for the defendant. The general term affirmed the judgment ; and the only question brought by the appeal to this court is, whether the mortgage is void upon its face. The mortgaging of the whole stock in trade, the whole concern forming the grocery and liquor store of the mortgagor, with the increase and decrease thereof.\ and the providing for the continued possession of the mortgagor, can have no other meaning than that the mortgagee should all the timé retain a lien on the whole stock by way of mortgage, the mortgagor making purchases from time to time, and selling off in the ordinary manner ; the intent being not to create an absolute lien upon any property, but a fluctuating one, which should open to release that which should be sold, and take in what should be newly purchased. This is just such an arrangement as was held in Edgell v. Hart (9 N. Y. [5 Seld.], 213), to render the mortgage void. This case cannot be distinguished from that, and the law as pronounced in that case must be held applicable to this. True, in this case the horse, wagon, and harness in question, did not constitute part of the stock in trade, which was the subject of the “increase and decrease” spoken of; yet if, as to the stock in trade, the mortgage was fraudulent as against creditors, that fraud infected the whole mortgage, and it is wholly void void (Goodrich v. Down, 6 Hill, 438 ; Mackie v. Cairns, 5 Cow., 547, 580 ; Grover v. Wakeman, 11 Wend., 187, 225). I am of opinion, therefore, that the judgment appealed from should be affirmed. Judgment affirmed.