Edgell v. Hart

| N.Y. Sup. Ct. | Jun 3, 1851

By the Court, Welles, J.

After the evidence was closed, the defendant’s counsel moved for a nonsuit, upon the following among other grounds: That the chattel mortgage under which the plaintiff claimed, was fraudulent in law and void, in permitting the mortgagor not only to retain the possession and enjoyment of the property, but also to sell the same; and in assuming to mortgage property which Bostwick might put into the store after the giving of the mortgage; and also by reason of its being a general mortgage of all groceries, &c. without a particular description; and that the mortgage created a trust for the use of Bostwick. The circuit judge declined to nonsuit the plaintiff, and put the case to the jury on the questions whether the plaintiff had repelled the presumption of fraud arising from want of immediate delivery and actual and continued change of possession of the goods mortgaged, by making it appear that the mortgage was made in good faith, and without any intent to defraud creditors or purchasers; and whether the mortgage was intended to hinder or delay the creditors of Bostwick.

If the question was upon the mortgage alone, aside from the provisions at the end of the schedule annexed to it, I should think the nonsuit was properly refused. The instrument, without reference to those provisions, was an ordinary chattel mortgage, containing stipulations for the benefit and security of the mortgagee, none of which, that I am aware of, have ever been regarded as contrary to law; and the objections to it growing out of the evidence, and relating to the intention of the parties, were purely questions of fact for the jury. (Smith & Hoe v. Acker, 23 Wend. 653.)

The schedule or inventory of property annexed to the mortgage, however, contained the following clause: “ Said party of the first part not to sell any of said goods upon credit. If any of the said goods are sold upon credit, that shall be sufficient cause of forfeiture of the within mortgage, and entitle the said Edgell to treat the same accordingly, at his election.” This, it seems to me, must be taken as part and parcel of the mortgage, and as qualifying its effect. Without the schedule, the mortgage was a nullity, as there was no property but that enumerated in the schedule, upon which it could operate. In taking the mortgage, the plaintiff took with it the schedule and the stipulations and provisions connected with it. Taking both papers together—the mortgage and schedule—I think the agreement fairly to be deduced is, that Bostwick, the mortgagor, was at liberty to sell the goods, provided he sold for ready pay and not upon credit; and that he might sell upon eredit, subject to the plaintiff’s right to object to such sales, which he might or might not exercise, at his election. I am aware that the mortgage contains a provision allowing the mortgagee to take possession in case the mortgagor or any other person should attempt to sell the property. If this conflicts with the schedule, I think it must give way to it, as the mortgage is wholly dependent upon the schedule for its vitality.

The question then is, whether the transaction as it appears upon the face of these papers, as thus interpreted, can he sustained. I am clearly of the opinion that it cannot.

In Wood v. Lowry (17 Wend. 492,) where goods were furnished by a merchant in town to a merchant in the country, to enable him to carry on his business in his own name, and he took a chattel mortgage on the goods as security for their payment, and the mortgagor took the goods into the country and proceeded to sell them in the usual course of business, it was held that they were liable to execution in favor of any other creditor, nothwithstanding the mortgage.| It is said that this case, with several others decided by the late supreme court, previous to the decision of Smith & Hoe v. Acker, has been overruled by the latter case. That all the doctrines laid down in those cases are overruled, I deny. They are still, in my judgment, good authority on the questions they decide, excepting only so far as they have been overruled by the case of Hoe v. Acker. As I understand that case, the judgment of the supreme court was reversed upon the single point that the question of fraudulent intent should have been submitted as a question of fact to the jury. So far, and so far only, I believe it has been regarded as authority, and followed. There was no objection to the form of the mortgage in that case; but the circuit judge held as matter of law that the reasons for not delivering possession of the property mortgaged, were insufficient; and thab the mortgage must therefore be taken and deemed as fraudulent and void by reason of the statute. The court for the correction of erors held that the sufficiency of those reasons was a question of fact, which the circuit judge should have submitted to the jury, and therefore reversed the judgment of the supreme court. But where the illegality of the transaction stands out upon its face, upon the very papers under which the plaintiff claims title, as I think it does in the present case, it becomes a question of the legal construction of the papers, and upon that question there is nothing to submit to the jury. This must be so; otherwise, if the mortgage contained an express declaration that its sole object was to hinder or delay creditors, and to protect the property from executions, for the benefit of the mortgagor, the court would have no right to interfere, and the question must be submitted to the jury. I confess I am unable to distinguish this case in principle from the case of Wood v. Lowry, (supra.) Bostwick had the right secured to him, if the transaction is to be upheld, of selling the goods, provided he sold for ready pay, without restriction of price or quantity, and without being under obligation to apply the proceeds to the payment of the plaintiff or any other creditor. He might sell every dollar’s worth and put the money in his pocket, and set all his creditors at defiance, so far as the ordinary remedy for collection of debts by judgment and execution is concerned. This power in a debtor is not to be tolerated. Chattel mortgages are regarded with suspicion, on account of the ready means they afford to debtors, of covering their property from the reach of their creditors. They ought never to be held valid where their object appears to be any thing beyond a fair bona fide security for a just debt. That is their only legitimate object and office. Benefit to the mortgagor is no part of their theory. In their results, debtors may be benefited by obtaining credit through their means; but still their primary object is the security of a bona fide debt, and nothing else. As this case presents a violation not only of wholesome and sound policy, but, as I conceive, of well settled law, the judgment of the special term should be reversed for the error of the circuit judge in refusing a nonsuit. It therefore becomes unnecessary to discuss the other points raised upon the argument.

[Monroe General Term, June 3, 1851.

Welles, Selden and Johnson,, Justices.]

The judgment of the special term should be reversed, and a new trial ordered, with costs to abide the event.