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Matter of Younger

Appellate Division of the Supreme Court of New York, Third Department
May 31, 1967
28 A.D.2d 627 (N.Y. App. Div. 1967)

Opinion

May 31, 1967


Appeal by a creditor bank from so much of a decree of the Surrogate's Court of Schuyler County as limited the bank's recovery from the proceeds of sale of certain personal property, upon which it held chattel mortgages, to the amount of the promissory notes specifically referred to in the chattel mortgages, and treated the balance of such proceeds as general assets of the estate. The chattel mortgages, executed by respondent's testator to the appellant bank, covered certain cattle and specifically secured payment of testator's indebtedness aggregating $3,000, evidenced by his promissory notes particularly described in the instruments. Each instrument expressly mortgaged the cattle thereinbefore described and, at the option of the mortgagee, mortgaged, also, the proceeds of any and all sales by the mortgagor of any of the mortgaged property, all to secure payment of the note thereinbefore described and "any and all other liabilities and obligations of the mortgagor(s) * * * to the mortgagee(s) * * * and claims of the mortgagee(s) * * * against the mortgagor(s) * * * whether now existing or hereafter incurred". Concededly, testator was, and his estate is, indebted to appellant in amounts additional to the amounts owed upon the two notes particularly described in the two chattel mortgages. Each mortgage provided, also, that the mortgagor might sell the property, with the written consent of the mortgagee, "and whether or not such consent has been obtained, the proceeds of such sale or exchange at the mortgagee(s) option shall be: (1) applied on the above described obligations, or (2) subject to the lien of this mortgage". Respondent executrix, with the consent of the mortgagee bank, sold the mortgaged cattle, deposited in a bank account the proceeds of the sale, and therefrom tendered to the bank the amount of the two notes, which amount the bank declined to accept in satisfaction of the chattel mortgages. Despite the provision in the mortgage that mortgaged the proceeds of any sale and that which extended the security of the mortgage to any and all other obligations of the mortgagor to the mortgagee, whether then existing or thereafter acquired, the Surrogate held that "upon the facts * * * the consent to sell given by the Trust Company indicated an intent that the cattle should be sold and from the proceeds that the notes be paid and that, except as to the payment of those two secured notes, the Trust Company's consent and acquiescence waived the lien of the mortgage * * * [and that] There is no convincing showing that the Trust Company intended that any surplus should be regarded as a set-off against any other indebtedness of the decedent." The findings quoted are without any support in the evidence. The uncontradicted and unchallenged testimony of the bank's vice-president was directly and unequivocally to the contrary. The executrix, who obtained the bank's oral consent to her selling the cattle, if anyone obtained consent, when asked by her attorney whether in the course of her conference with the bank vice-president there was any discussion regarding the sale of the cattle, replied, "I suppose we must have mentioned it. I only remember that it seemed a good idea to sell the cattle because they were a lot of work for me to take care of them." The rights of the bank as against the proceeds of sale were fixed by the hereinbefore quoted terms of the instruments, as were its rights to apply the proceeds to testator's other indebtedness; and thus the Surrogate's finding that there was "no convincing showing" that the bank intended that the proceeds be so applied is completely unsupported and, indeed, without relevance; inasmuch as the unimpeached and undiluted provisions of each chattel mortgage explicitly fix the parties' rights by expressly creating a lien upon the proceeds of sale and by extending the security thereof to the mortgagor's additional indebtedness, and no waiver of these provisions has been demonstrated. It is interesting to note that under the Uniform Commercial Code (§ 9-306, subd. 2), which was not in effect at the times of the transactions in issue, the same result would follow, as the mortgagee's security interest continues in any identifiable proceeds of a sale by the mortgagor. Decree, so far as appealed from, modified, on the law and the facts, in accordance herewith and, as so modified, affirmed, without costs, and matter remitted to the Surrogate's Court for appropriate proceedings not inconsistent herewith. Gibson, P.J., Herlihy, Reynolds, Aulisi and Gabrielli, JJ., concur in memorandum by Gibson, P.J. [ 43 Misc.2d 699.]


Summaries of

Matter of Younger

Appellate Division of the Supreme Court of New York, Third Department
May 31, 1967
28 A.D.2d 627 (N.Y. App. Div. 1967)
Case details for

Matter of Younger

Case Details

Full title:In the Matter of the Accounting of OGDEN W. YOUNGER, as Executrix of…

Court:Appellate Division of the Supreme Court of New York, Third Department

Date published: May 31, 1967

Citations

28 A.D.2d 627 (N.Y. App. Div. 1967)