Stewart v. Platt

APPEAL from the Circuit Court of the United States for the Southern District of New York.

This is an appeal from a decree whereby the distribution of a fund in court was ordered, and certain conveyances of real estate declared to be void as in violation of the provisions of the bankrupt law.

The record presents the following facts, in addition to those stated in the opinion of the court:--

By an indenture executed April 30, 1867, Alexander T Stewart leased to Simeon Leland, Warren Leland, and Charles Leland, copartners, the Metropolitan Hotel, in the city of New York, for the term of four years from that date, at an annual rent of $79,186, payable in equal monthly instalments. One of the conditions of the lease was that, simultaneously with its dolivery, the rent reserved should be secured by the lessees giving a first mortgage and lien upon their household furniture and chattels of every description then contained in, and used for the purposes of, the hotel; and also that they should every year during the term, and within thirty days prior to the thirtieth day of April therein, renew such mortgage, and execute an additional one, convering all property of the like kind used at its date in the hotel for hotel purposes, including that described in the first mortgage.

The lessees accordingly executed and delivered to Stewart a first mortgage upon the property described, dated April 30, 1876, which they acknowledged June 11. It was filed September 2 in that year in the office of the register of deeds for the city and county of New York. Among its stipulations was one that in case of default in the payment of rent, at the times and in the manner specified in the lease, the lessor might 'take and carry away the said goods and chattels,' dispose of them at the best price he could btain, and apply the proceeds in satisfaction of the rent due and unpaid. As required by the lease, mortgages in renewal, and in addition containing similar conditions, were executed by the lessees during the subsequent years of the term, and filed in the same office.

At the respective dates of the several chattel mortgages, as well as during the entire term of the lease, Simeon Leland resided with his family at New Rochelle, in Westchester County, New York, where he had resided since 1850; Warren Leland resided with his family in the same county, and had resided there since 1857; and Charles Leland then and for the ten or twelve previous years resided with his family at Mt. Vernon, in the same county.

None of the mortgages were filed in the towns where the lessees resided with their families.

In pursuance of an arrangement made in January, 1871, between the lessees and Stewart, the former caused conveyances to be made to the latter as follows: 1st, Certain houses and lots on Crosby and Jersey Streets in New York City, at the price of $10,000, by conveyance from George S. Leland, dated Jan. 23, 1871, acknowledged and recorded in the proper office on the following day; 2d, Certain houses and lots on Prince Street, in the same city, at the price of $14,000, by conveyance from George S. Leland, dated Feb. 9, acknowledged Feb. 13, and recorded Feb. 15, 1871; 3d, An improved farm in the town of Harrison, Westchester County, at the price of $19,500, by conveyance from Warren Leland and wife, dated Feb. 1, acknowledged Feb. 2, and recorded Feb. 24, 1871.

The real estate conveyed by George S. Leland was the property of the lessees or of some of them, the legal title having been transferred to him, as was claimed, for the convenience of the real owners when they should sell to others.

The farm conveyed by Warren Leland and wife was purchased by him in 1866, and in pursuance of his directions conveyed to her in 1868.

There were at the time of these transactions unsatisfied mortgages for large sums upon all the real estate. Stewart took it subject to them, but without assuming to pay the debts thereby secured.

During the months of February and March, 1871, numerous creditors obtained judgments against the lessees, in the courts of New Youk, and sued out executions, which were levied upon the property covered by the chattel mortgages. The judgments were also docketed in the proper offices in New York City and in Westchester County, so as to create a lien upon the real estate of the lessees. The first, in point of time, of these executions was issued February 3, and the last March 29, in that year.

Upon the petition of one of their creditors, filed March 24, 1871, the lessees were duly adjudged bankrupts April 1, 1871. Under an order of the bankrupt court, directing possession to be taken of their property, the marshal took into his custody that covered by the chattel mortgages to Stewart. It was inventoried at $47,253.92, and under subsequent orders of the court was sold at public auction, bringing the sum of $43,469.31. After paying sundry expenses there remained at the date of the decree in the District Court about $26,867.29, subject to distribution.

This suit was commenced in the District Court May 26, 1871, by the assignee in bankruptcy of Simeon, Warren, and Charles Leland, against them, their judgment creditors, Stewart, and others. The bill, besides seeking the distribution of that fund, assails as invalid, not only the several chattel mortgages and the conveyances of the real estate heretofore described, but also the judgments obtained in February and March, 1871. The assignee claimed that he was entitled to the fund in court, and also to the proceeds of the sale of the real estate, for distribution among all the creditors of the bankrupts, without any preference among them, except one Ramaley, who was conceded to be entitled upon his judgment to priority.

The court, upon final hearing, held that the chattel mortgages as well as the conveyances of real estate w re void as against the assignee in bankruptcy. Stewart was ordered to convey the real estate to the assignee, and he was adjudged to be liable for the net rents and profits arising from the same subsequently to the execution of the several conveyances. The court also held that the judgments obtained against the bankrupts within four months preceding the commencement of the bankruptcy proceedings were void as against the assignee, and by its further order prohibited Stewart and the judgment creditors from proving their claims in the bankrupt court.

An appeal was taken to the Circuit Court, pending which Stewart died. His representatives were made parties to the proceedings. The decree of the District Court as to the chattel mortgages and the conveyances of the real estate was affirmed, and reversed only as to the creditors who had obtained judgments against the lessees within four months prior to March 24, 1871. The court held that the several judgments had not been obtained in violation of the bankrupt law, and that the claim upon the fund in court, asserted by the creditors, whose executions had been levied prior to the commencement of the proceedings in bankruptcy, was superior to the respective claims of Stewart and the assignee.

From that decree this appeal is prosecuted by the devisee and the executors of Stewart.

The case was argued by Mr. Roscoe Conkling for the appellants, and by Mr. A. H. Dana and Mr. Dennis McMahon for the appellees.

MR. JUSTICE HARLAN delivered the opinion of the court.