Opinion
No. 75.
November 1, 1945.
Appeal from the District Court of the United States for the Eastern District of New York.
Proceedings in the matter of National Browne Company, Inc., bankrupt, on the petition of Samuel Breiter and Joseph Beim, copartners doing business as Gibralter Trading Company, for an order directing Israel Halpert, trustee in bankruptcy, to pay over to petitioners the proceeds of sale of bankrupt's equipment which equipment was subject to a mortgage in favor of petitioners. From a judgment of the District Court affirming the action of the referee in denying the petition, petitioners appeal.
Affirmed.
On August 25, 1944, the National Browne Co., Inc., delivered to appellant a series of promissory notes evidencing a loan of $2,500, and a chattel mortgage given as security for the payment of the notes when due. The mortgage covered certain machinery and equipment, situated at the time in the mortgagor's place of business which was stated to be at No. 1852 Flushing Avenue, in the Borough of Brooklyn, City and State of New York. All the documents bearing on the transaction recited that the property was located in Brooklyn, and there is no doubt that both parties honestly believed this to be the case.
On August 26, a copy of the chattel mortgage was filed in the Office of the Register of the City of New York, in the County of Kings, which is co-extensive with the Borough of Brooklyn. Sometime later, a creditor obtained a judgment against the National Browne Co., and on or about September 16, a levy was made on the property of that company, pursuant to an execution issued on the judgment. On September 22, the National Browne Co. executed and delivered to Halpert, the appellee, an assignment for the benefit of creditors, which was filed that day in the office of the Clerk of the County of Queens. On September 25, the first of the promissory notes fell due, but no payment was ever made.
The assets of the National Browne Co. were then sold by appellee, subject to a stipulation that the proceeds of the sale of the mortgaged equipment were to be held in escrow pending a determination of the mortgagee's rights therein. The National Browne Co. was adjudicated a bankrupt on December 6, and appellee was appointed trustee in bankruptcy. He now holds the proceeds of the sale subject to the stipulation.
Both parties agree that the property at 1852 Flushing Avenue is actually situated in the County of Queens. Appellant-mortgagee also concedes that the filing of the chattel mortgage in Queens County on September 29, after the assignment for the benefit of creditors, can have no effect on the rights of the parties.
The appellant applied to the Referee in Bankruptcy for a direction to the trustee to pay over the amount claimed to be due under the chattel mortgage. The Referee denied the application, and the District Court affirmed.
Jacob J. Schulder, of New York City (Gerson C. Young and Jacob J. Schulder, both of New York City, of counsel), for appellant.
Louis P. Rosenberg, of Brooklyn, N.Y., for appellee.
Before L. HAND, CHASE, and FRANK, Circuit Judges.
Under the law of the State of New York, a chattel mortgage which is not accompanied by an immediate delivery of the mortgaged property to the mortgagee is void as against creditors of the mortgagor, unless the mortgage or a true copy is filed pursuant to the Lien Law, Consol.Laws, c. 33, § 230.
Section 232 of the Lien Law (as the section stood on August 26, 1944) reads as follows: "If the chattels mortgaged are in the city of New York at the time of the execution of the mortgage, the mortgage or a true copy thereof must be filed in the county where the mortgagor alleges to reside at the time of the execution of the mortgage, and in the county where the property is situated."
The filing on August 26 did not sufficiently comply with this requirement. The statute requires that the copy must be filed in two places, i.e., (1) the county where the mortgagor "alleges to reside," and (2) where the property is situated. Petition of Turchin, 260 App. Div. 447, 23 N.Y.S.2d 144. There is no merit in appellant's contention that the statute is satisfied if the mortgage is filed in the county where the mortgagor alleges the property to be. Appellants rely on cases dealing with the alleged residence of the mortgagor, which are not in point here. We see no reason to read "and" as "or." Strict compliance with the statute is required to create the lien. In re Parkway Knitting Mills, Inc., 2 Cir., 119 F.2d 605; Ely v. Carnley, 19 N.Y. 496. The appellant has not shown such compliance, and consequently the appeal must fail.
The amendment to § 232, effective September 1, 1944, which reads "and also in the county where the property is situated" makes no material change pertinent here.
Affirmed.