86 Md. 595 | Md. | 1898
delivered the opinion of the Court.
The appellees have moved to dismiss this appeal, upon the ground that the bill of exception was not signed by the Judge, within the time allowed by the statute, and this motion will be first considered'.
The verdict was rendered on the 20th of April, 1897. On the 7th of May the parties agreed that the time for signing and sealing the exception should be extended for the period of thirty days from that date, and on the 17th of May the Court so ordered. On the 28th of May the parties again agreed there should be a further extension until the 15th of June, and on the 29th May the Court passed an order in conformity with the agreement. On the 10th of June the Court ordered another extension until the 28th of June. On the 23 rd June the appellees filed a protest against the sign
This is an action of replevin, in which the appellant is seeking to recover the possession of certain goods and chattels from the appellees, who are trustees under a deed of trust for the benefit of creditors from the Horner-Miller Straw Goods Manufacturing Company of Baltimore City, which will be hereinafter referred to as the corporation. The articles replevied are ribbon bands, suitable to be used in the manufacture of hats. They were ordered by the corporation from the appellants in the month of May, 1895, and were delivered from time to time from the second day of August up to the sixth of September following.
The pleas of the appellees are, non cepit, property in Sheathar and Sanford, and property in the trustees.
The appellant offered evidence tending to prove, first, that the corporation was insolvent at the time of the purchase, and that its officers knew or had good reason to know of its insolvency, and had no reasonable expectation of paying the bill at maturity; and secondly, that before the goods were delivered the president and secretary induced the appellant
There were many prayers asked for on the trial—the appellant having presented twenty-eight and the appellee ten— and it is to the action of the Court in disposing of them, that this appeal is taken.
The appellee interposed special exceptions to many of the prayers of the appellant, and these will now be considered.
In the 1st and 8th instructions asked by the appellant, one of the facts upon which the plaintiff’s right of recovery depended, was that it was agreed between the parties, “ at the time ” of the making of the chattel mortgage, that the same was not to be recorded; and the special exception is there was no legally sufficient evidence of such agreement. It must be noted that the prayer requires the jury to find there was such agreement, and that it was entered into at the time the mortgage was made. Now there was evidence tending to prove there was an agreement of such a character made at a time which does not appear, and the Court in the appellants’ second and thirteenth prayers instructed the jury upon that condition of the proof. If there was such agreement made after the execution and delivery of the mortgage for a valid consideration, and for the purpose of deceiving the creditors of the corporation, it was a fraud and the mortgage in that event would offer no obstruction to the plaintiffs’ right of recovery. This the Court rightly ruled in granting these last mentioned prayers. But the first and eighth prayers of the appellant go much farther— they are based upon the theory that evidence had gone to
The appellees also excepted specially, on the ground of want of evidence; 1st to the 3rd, 4th, 10th, 12th, and 15th prayers of the appellant, that at the time of the execution of the chattel mortgage it was agreed that the mortgagors were to remain in possession of the chattels conveyed, with the power to sell and dispose of them ; 2nd to the 5th, that the mortgage was given for money to be advanced from time to time after its execution and delivery ; 3rd to the 6th, that the mortgage was given in consideration of the payment
The chattel mortgage to Shethar and Sanford was executed by the corporation and delivered on the 31st of August. On its face, it purports to have been given in consideration of the sum of $25,000 due to them from the corporation. It conveys all the “braids, bands and sundries,” machinery and all other goods and chattels then in the factory. It provides that until default the corporation shall possess the mortgaged property; and after default that the mortgagees may take possession, &c. ; and on payment of the said sum on or before the first day of May next, it is to become null and void. It assuredly cannot be contended successfully that by any of these provisions or all of them taken collectively authority is conferred upon the mortgagors to sell the goods and chattels, or intermingle them .with such chattels as it might thereafter acquire. It was executed by the president, vice president and treasurer of the corporation, and it is contended that in the absence of express authority, these officers had no power to pledge its assets. The evidence shows that under and by virtue of the contract Shethar and Sanford, on the day of the execution of the mortgage, paid five thousand dollars ; and a like sum on the fourth of September. These sums were received by the president, and were duly deposited in the National Marine Bank to the credit of the corporation, and were checked upon and used for the benefit of the latter in the ordinary course of business. Now while it may be true, as a general rule, that ministerial officers of a corporation without authority expressly conferred or to be implied from previous conduct, cannot pledge the property of the corporation, yet when a mortgage of its chattels has been made by such officers for the purpose of securing funds to pay its debts and continue its business, and it receives the full benefit of the trans
We are of opinion, therefore, that the corporation having received the money of Shethar and Sanford, and applied it to its own use, cannot now repudiate the act of its officers. The plaintiffs’ sixteenth prayer was properly refused. The consideration set forth in the mortgage is the sum of $2$,000, due from the mortgagor to the mortgagees. After the execution of the instrument that sum was in the hands of Shethar and Sanford, and the corporation could draw on it at its own pleasure. There is no evidence that the mortgage was executed for the purpose of securing other sums to be thereafter advanced. The sum to be secured having been particularly mentioned, the mortgage cannot be within the inhibitions of sec. 2 of Art. 66 of the Code. Nor is there any evidence of any commingling of goods with the knowledge or consent of either Shethar and Sanford, and without such knowledge or consent, the lien of the mortgage could not be impaired. Krenzer v. Cooney, 45 Md. 591.
The mortgage also provides that the corporation shall remain in possession of the goods ; but there is no right or power of sale reserved by any of its provisions to the grantor. Aside from that instrument, was there any contract or understanding between the parties permitting the corporation to sell for. its own use or otherwise ? Mr. Horner testifies that “ Shethar and Sanford were to sell the product of the company that “ these were to be billed from Shethar and
It has been held by some Courts that a mortgage conveying a stock in trade and containing an express covenant, or accompanied by an independent agreement, permitting the mortgagor to remain in possession with power to sell for his own use and benefit is fraudulent in law. First Natl. Bank v. Lindenstruth, 79 Md. 139. But that is not the
The principle laid down in these cases is a highly salutary one; it is founded upon the reason that a power to the mortgagor to sell the goods and chattels conveyed for his own use has the effect of hindering and delaying creditors. A chattel mortgage containing a covenant permitting this to be done leaves the mortgagor in full control of his property and business, and at the same time operates as a “ shield against the attack of creditors.” But no such reasons can be assigned in a case where the agreement accompanying the mortgage only authorizes the mortgagor in possession to find purchasers and to deliver the chattels on behalf of the mortgagee and for his benefit. Such an agreement, if made and carried out in good faith, is not open to the objections we have just stated ; it cannot operate to hinder, delay or defraud creditors ; and in the absence of proof of actual fraud, ought to be respected. This subject was ably discussed by Mr. Justice Brewer in the case of Etheridge v. Sperry, 139 U. S. 266. There the decision turned on the question as to the ruling in the State of Iowa. After a review. of the cases from that State, and after determining that the settled construction of the doctrine by those Courts was that a power of sale to the mortgagor for the benefit of the mortgagee does not, as matter of law, invalidiate a chattel mortgage, the learned Judge concludes his opinion by saying: “ So, if the question were open or a new one unaffected by any settled law of the State, we incline to the opinion that the question is not one of law, so much as it is one of fact and good faith, and that the decision of the
The appellants’ fourteenth and eighteenth prayers should have been refused.
The remaining prayers of the appellant having been granted, we are now to consider those allowed by the Court on behalf of the appellees.
The main legal proposition, contained in all of the prayers on both sides, is conceded. That is, that if the appellant were induced by the fraud of the officers of the corporation to make sale of the goods in question, upon becoming cognizant of the fraud, they had the right to rescind the contract and demand the return of the goods. But the jury in this case would not be warranted in finding there was such fraud, even though the corporation was in fact insolvent, unless its officers at the time of the purchase had no reasonable expectation of making payment at the maturity of the bill. Powell v. Bradlee, 9 G. & J. 222; Diggs v. Denny, ante, p. 116.
There were therefore two questions before the jury of the first importance. First, was the corporation insolvent when the purchase was made, and second, if it was, had its officers then a reasonable expectation of being able to make payment when the bill became due.
The first prayer of the appellees instructed the jury that if they found the corporation was insolvent when the pur chase was made, yet if its officers had a reasonable expectation to pay the account when due, “based on all its resources, including assets in hand and available, its lines of credit, and money to be realized from the sale of manufactured products, and 'that,” &c. This prayer not only
The defendant’s 5th and 7th prayers were granted properly.
For error in the defendant’s first prayer the judgment must be reversed and new trial awarded.
Judgment reversed and new trial awarded.