
    Joseph Tedesco et al., Plaintiffs, v. Richard Oppenheimer and David B. Sickels, Receiver, Defendants.
    (Supreme Court—New York Special Term,
    January, 1896.)
    1. Chattel mortgage—Bill "of sale intended as a, must be filed: •
    A bill-of sale which is intended as a chattel mortgage, where there is no change of possession of the goods, is void as to" "creditors unless filed. . " ■ _ ‘
    2. Same—Change of possession.
    The change of possession to which the statute refers-is a physical • and not merely a legal .or' constructive change, and must" he open, visible and free from concealment. ' .
    3. Same.
    An agreement between the parties by which the. mortgagor is to ■sell the goods as agent for the mortgagee,.not -evidenced by any-apparent change in. the manner of conducting the business, is not sufficient to show a’ change of possession under the statute." "
    4. Pledge—Title.
    A transaction cannot be construed ás a pledge; where it was the intention of the parties that" the title" to the goods should pass.
    Action to set aside certain bills of sale on the ground " that they were intended to operate as" -chattel mortgages, and as such were void as to creditors because not filed.
    George W. Seligman, for plaintiffs.
    
      George M. Mackellar, for defendants.
   Beekman, J.

The defendant Opponheimer, being indebted-to the Harlem Elver Bank, gave, the latter- three bills of sale, covering a large number of pictures, as" security for a past •indebtedness and for future advances. The bills of. sale bore date respectively on the 20th day of" May, 1892, the. 15th day of September, 1892, and the 15th day of February, 1893. In,-September, .1892, his indebtedness -amounted to about $15,000, and in May, 1894, when the bank passéd into the hands- of a receiver, it had increased to the sum of about-$24,000 ; so that, during this intervening-period, the bank had. apparently continued to make advances -underits- arrangement with Oppenheimer. The hills of sale were absolute in form, each expressing a substantial money consideration, and in terms transferred the title without qualification. The plaintiffs are judgment creditors of the defendant Oppenheimer, and bring this action to set aside these transfers on the ground that they were intended to and did operate as chattel mortgages, and as such were void because they were not filed as required by law, the property having remained in the possession of the mortgagor. The receiver of the bank alone contests the action, and while admitting that the bills of sale were never filed, insists that the bank was in possession of the property. He also 'contends that the transfer was not by way of mortgage, but that the pictures were pledged to the bank, and that the arrangement between it and the defendant Oppenheimer, which will be mentioned later, gave it sufficient control over and possession of the property to support the pledge as against Oppenheimér’s creditors.

Whether the possession was adequate for this purpose it is unnecessary to inquire, as I am of the opinion that the transaction was really a mortgage of the property, and the turning point of the case is found in the solution of the question whether the hank, as mortgagee, had that possession of the property which satisfies the requirements of the statute. Chapter 2'¡>9 of the Laws of 1833 provides that “ every mortgage or conveyance intended to operate as a mortgage of goods and chattels hereafter made, which shall not be accompanied by cm immediate cleli/uery and be followed by an actual cmd continued change of possession of the things mortgaged, shall be absolutely void as against the creditors of the mortgagor, and as against subsequent purchasers and mortgagees in good faith, unless the mortgage, or a true copy thereof, shall be filed as directed in the succeeding section of this act.”

I have italicized a portion of the quotation in order to call attention to the clear and vigorous language used to define the possession which must exist in order to exclude a cáse from the operation of the statute. Little room is left here for judicial construction, and the conclusion is immediate that the change of possession intended is physical, and-not merely-legal or constructive. . The mischief which the law was-intended to prevent was the deceptive and resultant injury which would inevitably arise from the indicia of ownership ‘being -vested in one who had no title, or only a defeasible One, and-who would thus- be in a position to secure credit to which he was not entitled, and to perpetrate frauds upon the public, deluded- by the evidence of title which the possession and visible-dominion over property bespeaks. ' It is, therefore, a necessary feature of the possession to which the statute refers, that 'it should be open, visible "and free from concealment. It then becomes notice- in its highest form of the claim of the possessor, and the constructive notice which arises- from the filing o'f the' mortgage becomes unnecessary. But where the change of possession is- not of that character, so that it' fails to disclose itself to others than the immediate parties to the transfer, however honest they may have been in their intentions, the situation exists which the statute was designed to .prevent. Crandall v. Brown, 18 Hun, 461; Hale v. Sweet, 40 N. Y. 97 Steele v. Benham, 84 id. 634.

In Steele v. Benham the authorities are reviewed for the purpose .of showing the insistence of the courts upon a literal construction of the statute. Among these the case, of Topping v. Lynch, 2 Robt. 484, is referred t-o, where it-was said that the words “ ‘ actual and Continued ’ are applied to the change of possession. They mean an open public change of' possession which is'to continue and be manifested continually by outward and visible signs, such as render' it evident that the. possession of the judgment debtor has ceased.”

The possession claimed in this case on the part of the bank-utterly fails to come within the prescription- of the statute. It . was not until the month of September, 1892, about the time when the second bill of sale was made, that any attempt wash made to secure even a colorable custody of' the property. An arrangement was then made with Oppenheimer by which he was to'hold the pictures in question on.consignment for the bank.- -They were then in Oppenheimer’s store and continued to remain there. The bank paid the rent, and agreed also to pay Oppenheimer fifty dollars a week for his services, but the name of the bank nowhere appeared in connection with the business; there was no visible change of possession, and, so far as the public had the m.eans of knowing, Oppenheimer continued to be the owner and possessor of 'the property to the same extent as he always had seemed to be. He sold some of the pictures and the bank received the proceeds, but to the public he was acting exclusively in his own right in so doing. Nor was this the result of any oversight on the part of the bank. It was quite deliberate. The vice-president testifies that the arrangement with Oppenheimer was that the business was to be conducted and the pictures sold in his own name, and that when he suggested the expediency of having the business done in the bank’s name, the directors objected on the ground that it was not the business of the bank to sell pictures.

In view of this, it is quite unnecessary to refer to the appearance of control by the bank which was kept up between it and Oppenheimer. It is sufficient to say that it was between them alone, and the public were advisedly excluded from their confidence. It is, therefore, quite plain that the bank' did not have that possession of the property which the statute demands, and having failed to file the bills of sale, it must accept the consequences which the statute, declares in pronouncing such a transaction to be absolutely void.

The counsel for the- receiver earnestly contends that the court, failing to find grounds for supporting the transaction as a mortgage, should ex débito justitiae sustain it as a pledge. The difficulty with this is that upon the undisputed facts of the case there was no pledge. A characteristic feature of the law of pledge is that the title — except in certain cases where the property is intangible —does not pass. Here the intention that the title to the property should vest in the bank was unmistakable. The form of the transaction shows it, and the claim made by the officers of the bank has been that of ownership. The facts of the case must determine the legal princi- . pies which are to he applied, and the court, has no right to formulate an inconsequent conclusion, although a result may thus he reached- in better accord with abstract justice.

I am,-therefore, constrained- to-find that the- bills óf sale in question were intended to operate by way of mortgage; that there was no change of possession of the property, and that the bank having failed to file them as required by the statute, the plaintiffs are entitled to ' judgment setting them aside. Judgment for plaintiffs, with costs.

Judgment for plaintiffs, with costs.'  