Calkins v. Lockwood

| Conn. | Jun 15, 1844

Williams, Ch. J.

The defendants claimed under attachments against one Nathaniel E. Bradley; and the only question finally made, was, whether the transfer of the property by Bradley to Payne, with the possession taken by Payne under it, which was prior to the attachments, was valid, and should prevail against the attaching creditors of Bradley.

The defendants claimed, in the first place, that the conveyance of the property was not valid as between the parties themselves; and secondly, that it was void as against the creditors of Bradley.

In support of the first proposition, it was claimed, that this property was not in existence, when Bradley undertook to convey it to Payne; Bradley having hired the premises of Payne, and Payne having agreed to become surety for him for the coal, which he had purchased, or might purchase, to carry on the manufacture of iron, in which he was engaged; and that the coal should be the property of Payne, and he should have a lien on all the iron made, or to be made, at the furnace, and all the stock and personal property that Bradley might have in and about the furnace, until said coal should be paid for, and said Payne indemnified; Payne to have a right to controul and direct the sale of the iron, and apply the avails to his liabilities, and account for the balance: his lien and right to controul the property, to exist at all times.

Upon these facts the defendants claimed, that as the iron was not in existence when the contract was made, no title passed, by virtue of the contract itself; that if it was a pledge, the general property remained in the owner; that no lien could be given, except possession was also given.

It is true, that at common law, by an executed contract, no title would pass to property, in which the owner had not, what was called, an actual or potential interest; and it is said, if a man conveys all the grass upon a piece of land, cut next season, which land he shall purchase of A. B., this will convey no title to the grass, even if he purchase of A. B.; because, at the time, he had neither an actual nor potential interest. But if he conveys all the grass which next season may grow upon lands which he then owned, this is good; because he had a potential, if not an actual, interest in such grass. Hob. 132. Pow. Contr. 152. But it does not seem necessary to examine these nice distinctions for this case. This is nothing more than an agreement, in which, for a valuable consideration, Bradley agrees with Payne, that if he will become surety for him, to aid him in carrying on the manufacture of iron, the iron shall be pledged to him to indemnify him for his guaranty, and he shall have right to take possession thereof, at his pleasure, for that purpose. In other words, he agrees with Payne, that if he will, by his credit, aid him to capital to carry on his manufacture, he, Payne, shall have the right to take, at his pleasure, the article so manufactured, and sell and apply it to the extinction of such debt.

Is there any principle of law, which, as between the parties, makes such a contract void? Among the cases cited by the defendants, no one goes this length. To create a pledge as a lien, possession may indeed be necessary; but when possession is actually taken, by virtue of a contract, it would be strange indeed to say, that the party who made that contract, could object to the possession so obtained. The case comes then to this. Payne has taken possession of property, by the consent of the owner, to indemnify himself for the debt of the owner, for which he was surety; and the owner would now repudiate the contract, because, at the time, he could not give possession, the property not then being in existence. But the contract was made in contemplation of the fact, and with reference to it, and to be completed when circumstances admitted of its completion, and in fact was completed, the moment the iron was manufactured, and possession taken of it. Possession taken by Payne, under an agreement from Bradley that he might take such possession, amounts to a delivery by Bradley, and ought to have the same effect; and we see no more reason to say, that Bradley could set up this defence, than if he had sold a horse, and authorized the purchaser to go and take possession of him, in an adjoining town. In each case, something is to be done; and when that act is done, in both cases, the contract is complete. The case of Macomber v. Parker, 13 Pick. 175. is very analogous to this. There H and L leased to E a brick yard; E to make bricks, and pay H and L for the clay; H and L to buy the wood and sell the bricks, and to divide the profits, with power to retain the bricks in possession, to the amount of all the money they might advance to E. H and L assign this contract to the plaintiffs, with the assent of E, who was to act as his agent, and the plaintiffs to make advances, as H and L were to do. The plaintiffs took possession, and gave the charge of the yard to E, with directions to sell the bricks, and deposit the avails to the plaintiff’s order. The bricks were afterwards attached as the property of E; and it was held, that the plaintiffs’ lien must prevail. The court say, it was an agreement for the pledging of the bricks, as they should be made. It is true, that where the property is to be thereafter acquired, it is not strictly and technically a pledge; it is rather a hypothecation; but when the title is acquired in future, the right of the pledge attaches immediately upon it. In Mont. on Lien, 36. n. 6. it is said, that it is usual to speak of lien by contract, though that is more in the nature of an agreement for a pledge. Taken either way, however, the question always is, whether there be a right to detain the goods till a given demand shall be satisfied. He cites Gladstone v. Bisby, 2 Mass. R. 404. 14 Pick. 499. The court add, every brick, as it was formed, may well be considered as delivered to the plaintiffs, in part execution of the contract. That case differs in no respect, in principle, from the present; and, if law, must controul it.

Judge Story, in his treatise on Bailment, (p. 293. sec. 290. 294.) cites this case with approbation; and in his text declares, that of things not in existence, there cannot be a technical pledge, at common law; yet there may be a hypothetical contract, which will attach, as a lien or pledge, to them, as soon as they come into existence; (though he says, it is not easy to reconcile this with Bonsey v. Amee, 8 Pick. 236.)

It is true, that the authorities in the case front Massachusetts, are principally from the civil law; but unless they are opposed by authority from the common law, they are not to be rejected. Judge Story, too, in a former edition of his treatise, seems to have entertained doubts on the subject. The citation is from the third edition. The learned Judge says, he has added new matter, as more thorough researches into foreign and domestic treatises, as well as a diligent review of the recent adjudications in England and America, have enabled him to collect, and illustrate the subject. When we recollect, that one great principle of the common law, is, to carry the contracts of parties into effect, according to their intent, we do not discern why the principle laid down in the case from Massachusetts, is not correct, or that it depends upon any peculiarity of the civil law.

We have, therefore, no hesitation in saying, that the contract was good as between the parties.

But the great question in this case, is, whether the contract is good as against the creditors of the grantor.

It is said, the property was not in existence, when this contract was made. It is true, that the contract, on both parts, was made in relation to future events. The one was to become guarantor for the other; and the other promised to secure him therefor, by means of the very property, which was the fruit of said guaranty. We see nothing improper or unjust in this.

It is said, that possession was essential to accompany the contract, whether it was a sale or a pledge. The general principle upon this subject is not denied, as stated by the court, in Osborne v. Tuller, 14 Conn. R. 529, And so too it is the essence of the contract of pledge, that there should be an actual delivery; (Sto. Bail. 298. sec. 297.) though in case of an hypothecation, no such delivery is necessary. Sto. Bail. 300. sec. 297, 8. But as, in this case, possession was taken before the attachment, it does not seem necessary to settle the question what would have been the condition of the parties, before possession was taken.

Suppose Bradley, to induce Payne to become his guarantor, had stipulated with him, to secure him, at any time, by this very property, and had done it and delivered possession; could another creditor complain, because this was done under a contract to do the same, by which no possession was given? The answer would be, until possession taken, you might have secured your debt; and if it is held, even under this contract, that possession must be taken, the same answer may be given to other creditors: possession was taken under the contract, before you made any attempt to secure yourself. The owner had given Payne a right to take possession. That right may not have been complete until possession taken, or delivery had; and then it seems to us, the right of Payne became perfect and complete; and we have seen no case among those we have examined, that contradicts this principle.

It is further said, that it is an attempt to cover all the property of the grantor. The contract does not show that. It is indeed, all the property in and about the furnace. Whether that is all, or even a large portion, of the property of the grantor, the court cannot judicially know; nor is it stated to be claimed, that this is the only property of Bradley. But if it was so, this was only one among other facts to be left to the jury, for them to pass upon, relative to the fraud.

Again, it is said, that the consideration is debts not then existing. On this subject, it has been often holden, in other states, that whether the engagement for which the surety was given, was a future debt, or a then existing debt, it was equally valid. Badlam v. Tucker, 1 Pick. 398. Holbrook v. Baker, 8 Greenl. 96. De Wolf v. Harris, 4 Mass. R. 515. Conrad v. Atlantic Ins. Co. 1 Pet. 448. Sto. Bail. 303. sec. 300. In Hendricks v. Robinson, Chancellor Kent says, nor is an assignment, if honestly made, bad, though made to secure against future as well as present responsibilities. It is altogther a question of intention; and if that be free from fraud, the assignment is not void within the statute. Hendricks v. Robinson, 2 Johns. Ch. R. 308. Lyle v. Ducomb, 5 Binn. 585. And whatever doubt may have existed in this court, we think it has been entirely removed, by the case of Hubbard v. Savage, 7 Conn. R. 215. Of course, it must follow, that the fact of the debts not being due, could not affect the right of Payne. The contract was a contract to indemnify him against loss, by something more substantial than the mere agreement of the party. It was therefore coupled with an agreement, that he might enter and take possession of this security. Such a contract may indeed give a better opportunity to one creditor than another; but so does every contract, by which a creditor is preferred to another creditor.

It is said, that the holding this contract good, will be to destroy the salutary rule as to possession. The time and circumstances under which possession is taken, may be very proper, (as are the other objections made by the defendants, in the present case,) for the consideration of the triers, when considering whether this contract is fraudulent or not. But no one of them, nor all of them together, will authorize the court, as matter of law, to say, this contract, upon its face, is void. It is true, that contracts of this kind may be made a cover for fraud; and so of many others confessedly good. The same argument was used in the late case of Forbes v. Marsh, 14 Conn. R. 384. but without success. This case differs entirely from that class of cases, where the instrument itself discloses a trust for the grantor. Nothing of that kind appears upon this instrument. We think, therefore, that a new trial must be granted.

In this opinion Church, Storrs and Hinman, Js., concurred. Waite, J.

The contract between Bradley and Payne, clearly, of itself, created no lien upon the property in question. No principle is better settled, than that a bill of sale will not operate as a conveyance of property not in existence. Mucklow v. Mangles, 1 Taun. 318. To perfect the sale, there must be a delivery of the articles specified in the bill of sale. In this case, there was no delivery by Bradley. He had failed and absconded, before Payne made any claim upon the iron.

It is not necessary to inquire, whether the instrument might not operate as a power to sell, had Payne actually conveyed the iron to the plaintiffs, before the attachments of the defendants. The case shows, that the attachments were first made.

The question is then reduced to this, whether the seizure by Payne, under the contract, rendered his title valid as against these defendants. The contract does not purport to convey the iron, which Bradley should thereafter make, but merely to create a lien upon it, with power to sell.

Many have been the devices, which creditors have resorted to, for the security of their debts; but, so far as my researches have extended, this is the first experiment of the kind. The counsel for the plaintiffs have furnished us with no authority or precedent in support of their claim. The novelty of the instrument may well awaken suspicion that it was never before adopted, because it was supposed, that it would not prove available.

It seems to me, that the doctrine, established in Pettibone v. Stevens, 15 Conn. R. 19. applies, with peculiar force, to the present case. The Chief Justice, in giving the opinion of the court in that case, said, “it is not whether there was actual fraud, but whether the transaction is not one of the kind, calculated to delay, hinder or defraud creditors: and we have no hesitation in saying, that if tolerated, it would become an inlet to fraud, and lead to all imaginable abuse.” P. 26.

Here it appears, that the existence of this contract was unknown to the community. Bradley was enabled to employ workmen, and purchase materials upon credit, to carry on his business—a credit, which he could never have obtained, had it been known, that there was a secret lien upon all the iron he was making.

Payne stood by, and suffered him to carry on his business, and dispose of the iron he made, as he pleased, without any claim or interference on his part. He even purchased a part of the iron manufactured himself. It was not until after Bradley had failed and absconded, that he attempted to assert any title. He then seized upon what remained.

These circumstances, in my opinion, are not merely evidence of fraud, but evince, that the contract is one against the policy of our laws—one which, “if tolerated, would become an inlet to fraud, and lead to all imaginable abuse.” It seems to me, that to render this contract available to Payne, there should have been at least a delivery to him of the iron, after it was made—that a bare seizure of any portion of the iron, at his pleasure, would not give him a valid title, as against the attaching creditors.

New trial to be granted.