In re the General Assignment for the Benefit of Creditors of Thelmco, Inc.

Smith, J.

On March 14, 1940, Thelmco, Inc., executed and delivered 'a chattel mortgage upon various fixtures owned by it to secure the payment of a certain loan. No circumstances are alleged which suggest in any way that this instrument was collusiveiy executed for the purpose of defrauding other creditors. The said instrument provides that all moneys due upon the mortgage shall immediately become payable and that the mortgagee shall become entitled to immediate and exclusive possession of the mortgaged property upon the occurrence of any one of the following contingencies: In the event that the mortgaged property shall be seized or levied upon under any process; or in the event that the mortgagor shall make an assignment for the benefit of creditors; or if a judgment is obtained against the mortgagor; or if dispossess proceedings be taken against it. On March twenty-sixth the mortgagor made a general assignment of its assets for the benefit of creditors. Such act constituted a breach of the chattel mortgage agreement and clothed the mortgagee with a right to immediate possession. That right is not impaired by the fact that the mortgaged property has been transferred by the assignor to the assignees. This is true for the reason that the latter stand in the shoes of their assignor and take subject to every equity and claim that might be asserted by third parties against such assignor. (Matter of Pellegrini, 248 App. Div. 526 , and cases therein cited; Wyckoff v. Bemsen, 11 Paige, 564 ; Lain v. Sayer, 50 App. Div. 554, 557 .)

It is thus my view that the mortgagee is entitled to possession as against the assignees.

The order will provide that upon a surrender of the property the mortgagee will sell the same at an advertised sale with notice to be given to the assignees, and in the event that such sale produces an excess over the mortgage debt, it will be paid over to the assignees.

Settle order on one day’s notice.