Loth & Haas v. Carty

JUDGE HOLT delivered the opinion op tiie court. The lease of W. A. Yarty of the store-house of the appellee M. E. Carty began May 1, 1882, and ended May 1, 1888, at one thousand dollars per annum rent, payable monthly. It was paid to June 1, 1882, so that of the unpaid rent the first installment became due on July 1, 1882. On July 7, 1882, the tenant mortgaged to the appellants, Loth & Haas, his entire stock of merchandise then upon the leased premises, and the mortgage by its terms included .“all goods that may hereafter be added to said stock.” James Gallahue, as one of Yarty’s creditors, attached the goods on August 14, 1882; and subsequent thereto, — 593 — but upon the same clay, tlie debtor made an assignment to one Parker of all his estate for the benefit of his ■creditors. The trustee brought an action to settle the trust on September 19, 1882, to which the appellants and Mrs. Carty were defendants. The petition averred that they were claiming liens of some character against the assigned estate, and called upon them to assert them. The appellee Carty was summoned to answer on September 21, 1882, but for some unexplained reason she did not do so until June 23, 1883, when she asserted a preferred lien or landlord’s claim for her rent from June 1, 1882, to May 1, 1883. The attaching creditor Gallahue also claimed a lien superior to that of Loth & Haas as to so much of the stock of goods as had been purchased after the execution of their mortgage and before the assignment. This claim to priority was denied by them, they claiming that their mortgage, by virtue of its terms, attached to them as they were added to the stock. They also deny the right of Mrs. Carty to any lien for rent, first, because she never sued out any distress warrant or attachment for it; and second, because if this were not necessary to create or preserve the lien, yet she failed to assert it within three months from the time it became due. As the question as to her claim apparently presents more trouble in the true solution of it than that between the appellants and the attaching creditor, we will first consider the latter. The clause of the mortgage relating to any thing that anight thereafter be added to the stock was valid be — 594 — tween the parties ; but the mortgagee thereby acquired no available right to such subsequently acquired property as against the creditors of the mortgageor. The general rule is, that a mortgage of property to be acquired in futuro is void, and cannot avail against the claims of other creditors. (Ross, &c., v. Wilson, Peter & Co., 7 Bush, 29; Vinson v. Hallowell, &c., 10 Bush, 538.) We do not regard the case of Zaring, &c., v. Cox’s Assignee, &c., 78 Ky. Rep., 527, as in conflict with this rule. It is true that the facts of that case are not fully shown by the report of it; and it does not api>ear in it, as it does in this case, that any creditor had intervened by legal proceedings prior to the deed of assignment. Such an effort to mortgage what the debtor may subsequently acquire is constructively fraudulent; and when the court, in the last named case, said : ‘ ‘ Such a conveyance is evidently good between the parties, and the lien attaches so soon as any stock is added, and being good between the parties, it is good as to antecedent creditors, at least until attacked for fraud,” it no doubt merely meant that it being merely constructively fraudulent, was valid until another creditor asserted his claim and denied the validity of the mortgage as to property acquired after its execution. In such a case the attacking creditor need only state the fact that the property was obtained subsequent to the giving of the mortgage, and is only embraced by it by a clause attempting to cover property acquired in futuro. This of itself makes it constructively fraudulent as to other creditors; and when averred, constitutes an attack upon it for fra ud, and the portion of the opinion cited no doubt meant — 595 — that such a clause in a mortgage was valid as to antecedent creditors if they remained silent. We now return to the other question. In Petry, &c., v. Randolph, &c., ante, 351, the question presented was whether a landlord whose rent had been due more than one hundred and twenty days, but less than six months, could under the statute distrain for it after the tenant had assigned his property for the benefit of his creditors. It was there held, that as between the landlord and tenant, the former could dis-train for it within six months from the time it became due ; that as to Ziew-holders; lie must do so within ninety days; and as to all other persons having rights or equities against the property of the tenant, he must do so within one hundred and twenty days, and that in case of an assignment, the rights of other creditors having thereby intervened, he must do so within the last-named period ; and that the sections of the statute providing that before the lien-holder or an officer under an execution or attachment can remove the tenant’s property from the leasehold premises, he must pay to the landlord a year’s rent due or to become due, related to cases where the landlord had not lost his right as above indicated. The question now presented is, however, a different one. Unless the law requires what is needless, clearly where the tenant has assigned his property for the payment of his creditors, and the trustee has brought a suit to settle the estate, the landlord need not sue out a distress warrant or attachment for his rent. This would involve needless trouble and cost. It is, however, urged that in this instance the land — 596 — lord did not assert the lien until the expiration of three months after the rent became due. This is true as to nearly all of it; but the assignment was made within three months of the time when the first unpaid installment became due ; the suit by the trustee to settle the estate was brought within this time, and the petition averred that Mrs. Carty had a lien. By virtue of the assignment, the property was held in trust for the payment of her debt as a lien claim. The trustee represented her; and when the suit was brought the estate was in custodia legis for the satisfaction of her claim. The law made it the duty of the trustee to pay the lien claims first, and then the general creditors; he held the property for this purpose as the representative of the beneficiaries; and upon the bringing of the suit to settle the trust the matter was already in the charge of the court. Then why the necessity of the landlord proceeding by distraint; or how can it be said that her claim is barred by time when the property had already been placed in the hands of a party representing her for its payment 2 It is true, that the landlord has a statutory right merely and a legal remedy only. Undoubtedly, the law requires vigilance upon his part in the assertion of his rent claim. This is to prevent him from enabling the tenant to obtain false credit. No such reason exists, however, in a case like this, where the tenant has already parted with the title to it, and it is in trust for the payment of the landlord. The statute provides that if the property be removed openly and without fraudulent intent from the leased premises, and not returned, the lien of the landlord shall be lost unless asserted within fifteen days from — 597 — the time of removal. Here it appears it was removed, and, in fact, sold as early as December 15, 1882. It was, however, done by operation of law and by the assignee, who represented the appellants as well as all the other creditors of the tenant. The assignee in this instance retained control of the rented premises until the expiration of the lease; and we perceive no reason, either equitable or legal, for depriving Mrs. Carty of her right to be paid out of the proceeds now in the trustee’s hands arising from the sale of the property which was upon the rented premises; nór do we think it was error for the court to order the expenses of settling the trust to be paid out of this fund, because they were necessary to the settlement of the trust and the rights of the various creditors, including the appellants. Judgment affirmed.