22 Kan. 127 | Kan. | 1879
Lead Opinion
The opinion of the court was delivered by
Action of replevin. Judgment in favor of plaintiff, defendant in error, to review which this proceeding in error has been brought. Passing by all preliminary questions as to the sufficiency of the record, we pass to a consideration of the substantial matters in dispute. The case was tried by the court, without a jury, and upon an agreed statement of facts.
This statement of facts shows that on March 9th, 1876, one Charles J. Kendall was indebted to the defendant in error, Ellett, for money borrowed — $3,263.43 — and as an accommodation indorser for $2,500. To secure this, Kendall ‘executed to Ellett the chattel mortgage set out in the reeord, which was recorded in the proper office on March 10th, 1876. This borrowed money became due about May 9th, 1876. The notes on which Ellett was indorser became due respectively about March 24th, 1876, and about April 14th, 1876. About May 13th' 1876, Tenant, Walker & Co.
“The property sold is to remain in the possession of the said party of the first part until default be made in the payment of the debt and interest and indorsed notes aforesaid, or some part thereof; but in case of a sale or disposal, or attempt to sell or dispose of the same, or a removal of or attempt to remove the same from said county of Osage, or an unreasonable depreciation in the value, or if from any other cause the security shall become inadequate, the said party of the second part may take such property, or any part thereof, into his possession; and upon taking such property into his own possession, either in case of default or as above provided, said party of the second part shall sell the same at public or private sale, and after satisfying the aforesaid debt and interest thereon, and all necessary and reasonable costs, charges and expenses incurred, out of the proceeds of sale, he shall return the surplus to said party of the first part, or his legal representatives; and if from any cause said property shall fail to satisfy said debt and interest aforesaid, said party of the first part hereby agrees to pay deficiency.”
It is admitted that the notes secured by said mortgage represented a valid and bona fide indebtedness of said Kendall. There is no admission' that, at the time said mortgage was executed, Kendall had or ever entertained any idea or intention, by its execution or otherwise, to hinder, delay or defraud his creditors; nor is there any evidence of any such idea or intention, unless it can be said, as matter of law, from all the facts in the agreed statement, that he had such intention.
It is agreed that Ellett had no knowledge, at the time the mortgage was given, that Kendall intended either to hinder, delay or defraud his creditors, unless the facts of which he
The only other facts in the statement that can be material, are: That at the time the mortgage was given, Kendall owed several parties in different amounts, aggregating about $1,850; that the mortgage in question covered all Kendall’s property except about $2,000 in accounts, $1,600 of which were considered by Kendall to be good, and three town lots valued at $27.50. Ellett had knowledge that some of these claims were sent to the bank of which he was president for collection, and that K. could not pay his indebtedness in the usual course of his business. At this time K. made an effort to get extensions from all his creditors except Ellett, and before he got these extensions Ellett consulted an attorney, under whose advice the mortgage was given, said attorney informing Ellett that if the mortgage was duly filed for the period of two months the lien created by it would be valid. The mortgage was executed. Kendall got his extensions “under the impression and with the hope that before said indebtedness could again mature, he would be able to sell his entire stock of goods and pay his debts, and with the hope of avoiding the-odium of having failed in business.” Kendall did not inform these creditors that he was about to give this mortgage. After the execution of said mortgage, Kendall, with the consent, knowledge and agreement of Ellett, continued in his business of general merchant, and with Ellett’s consent and agreement held and controlled said mortgaged goods, disposed of the same in the usual way, received and controlled the proceeds and made deposit thereof, amounting to $1,350, in the Osage City Savings Bank, in the name of Ellett, for the purpose of having the same applied to the refunding to Ellett money advanced by him to. take up the note of $2,000 to said bank, upon which Ellett was accommodation indorser as aforesaid, and which $1,350
The statutes of Kansas that have any bearing upon this subject, are § 3 of the act for the prevention of frauds and perjuries, which reads: “Every sale or conveyance of personal property unaccompanied by an actual and continued change of possession, shall be deemed to be void, as against purchasers without notice, and existing or subsequent creditors, until it is shown that such sale was made in good faith and upon sufficient consideration. This section shall not interfere with the provisions of law relating to chattel mortgages.” And § 9 of art. 2, of ch. 68: “Every mortgage, or conveyance intended to operate as a mortgage, of personal property, which shall not be accompanied by an immediate delivery, and be followed by an actual and continued change of possession of the things mortgaged, shall be absolutely void as against the creditors of the mortgagor, and as against subsequent purchasers and mortgagees in good faith, unless the mortgage, or a true copy thereof, shall be forthwith deposited in the office of the register of deeds in the county where the property shall then be situated, or, if the mortgagor be a resident of this state, then of the county of which he shall at the time be a resident.”
In support of his views, counsel has furnished us with an elaborate argument, fortified by an abundant citation of authorities. Yet we cannot agree with his law or assent to his view of the facts. An examination of the authorities would be useless; to reconcile them is impossible. It will be sufficient to state our conclusions, and refer to a few of the leading authorities sustaining them.
There is nothing inhérently vicious or against public policy in a mortgage. The right to mortgage-is an incident to ownership. As a man may sell; so may he mortgage his personal property. Possession is not an essential element of title.' A man' may own property in another’s possession. This is universally recognized in cases of loan, agency, and bailment; and the owner, in such cases, does not forfeit his title, or the right to assert and protect it even against third
A mortgage is a lien. The grantor does not purport to transfer his entire interest. He retains all not necessary to perfect the security. Possession may be of little benefit to the grantee, but of great benefit to him. Why should he, after notice is given to the world of what has been done, be compelled to surrender that which is of so much benefit? A mortgage differs from a pledge, in that possession is necessary to perfect the latter, and not the former. If possession is not necessary, why should a lack of it' be held a wrong? Why should that which is right in and of itself be considered evidence of wrong ?
But it may be said that third parties, presuming title from possession, may be misled, to their prejudice. But with notice, they cannot be misled. Eegistration is notice.
Again, it is said that such a transaction may be used as a cover for wrong. So may almost any transaction. A delivery of possession is not conclusive against wrong. Why should a legitimate transaction be condemned because improper use may be made of it ? But the statute concerning sales says a failure to deliver possession is prima fade evidence of wrong as against creditors. True; but in sales
Again, the statute impliedly grants the right to stipulate, for a retention of possession by the mortgagor: (Gen. Stat., p.585, §15.) Can that which the legislature authorizes to be done be construed to be evidence of wrong? Can an act done in pursuance of law be adjudged fraudulent per se, or even evidence of fraud ?
Again, Kendall was permitted to replenish his stock; but the character of the goods purchased, the manner in which they were purchased and paid for, and subsequently held by-Kendall,. strongly indicate good faith. Only a few necessary staple goods .were purchased. Such purchases are always necessary to keep up the business and sell the other goods. Where all staple goods are sold, and their places not supplied, every one knows that business will fall away from the store, and that the sale of the other goods becomes slow, difficult, and generally at reduced prices; so that by such purchases Kendall was pursuing the very best course to enable him to realize the most out of his stock. Surely this does not indicate a purpose to let his creditors slip, and defraud them of their debts.
Again, the goods so purchased were not commingled with the mortgaged goods, but kept separate; and they were paid for by a new and unsecured loan from Ellett. To that extent, Ellett was foregoing his security and entering the list of unsecured creditors. It is as though Ellett was releasing some of the mortgaged goods from the servitude of his lien, and thus enlarging the amount of property available to the general creditors. Such conduct, so far from being evidence of bad faith, is very strong evidence to the contrary.
And it must further be borne in mind, that this was not part of the mortgage stipulation, but by virtue of a subsequent arrangement. It means simply that Ellett was willing to loan him $400 without security, to help him keep on -in business and make the most profitáble-.conversion of his property
There being no other question in this case, the judgment will be affirmed.
Dissenting Opinion
I do not concur in the decision in this case. I am clearly of the opinion that a chattel mortgage upon a stock of goods in trade, which permits by its conditions the mortgagor to remain in possession of the property, •and to dispose of it by sale, in due course of trade, until the maturity of the debt proposed to be secured by it, is fraudulent in law as to the creditors of the person making the same, .and as to subsequent purchasers, and is absolutely null and void as to them, without reference to the bona fides of the mortgage debt, or the intention of the mortgagor as to fraud. I further hold, that if the power of disposition does not appear upon the face of the mortgage, but is so understood or .•agreed by the parties at the-time the mortgage is executed, it is equally void; and in continuation of the same views, it seems to me that the license allowed to the mortgagor in this •case, to continue in his business of merchandising, and to •dispose of the mortgaged goods and chattels to purchasers in his usual way; to receive and largely control the proceeds of the sales, to use portions of the goods, together with sufficient •of the money derived in the business, to support himself and family, make the chattel mortgage in issue absolutely null
Again, this mortgage, accompanied with the license to the-mortgagor, is of no great advantage to the mortgagee, but benefits the debtor, and is exceedingly injurious to other creditors. Indeed, its main purpose is as a ward to keep off other creditors. When agreements are made to hinder and delay creditors, the law imputes to them a fraudulent purpose, and therefore they are held null and void. I think a like imputation lies against the arrangement of the parties to-this chattel mortgage, and that upon the agreed statement of facts, judgment should have been rendered in favor of the plaintiff in error. In support of these views, I refer to the following: Robinson v. Elliott, 22 Wall. 513; Collins v. Myers, 16 Ohio, 547; Freeman v. Rawson, 5 Ohio St. 1; Harman v. Abbey, 7 Ohio St. 218; Griswold v. Sheldon, 4 Comst. 581; May on Vol. and Fraudulent Conveyances, 126; Twyne’s Case, 3 Coke, 80; Ryall v. Rowles, 1 Ves. Sr. 348; Worseley v. De Mattos, 1 Burr. 467; Paget v. Perchard, 1 Esp. 205; Wordall v. Smith, 1 Campb. 332; Lang v. Lee, 3 Rand. 410; Addington v. Etheridge, 12 Gratt. 436; McLachlan v. Wright, 3 Wend. 348; Divver v. McLaughlin, 2 Wend. 596; Wood v. Lowry, 17 Wend. 492; Stoddard v. Butler, 20 Wend. 507; Edgell v. Hart, 13 Barb. 380; Edgell v. Hart, 9 N. Y. 213; Gardner v. McEwen, 19 N. Y. 123; Mittnacht v. Kelly, 3 Keyes, 407; Russell v. Winne, 37 N. Y. 591; Coburn v. Pickering, 3 N. H. 415; Ranlett v. Blodgett, 17 N. H. 298; Putnam v. Osgood, 52 N. H. 148; Horton v. Williams, 21 Minn. 187; Place v. Langworthy, 13 Wis. 629; Steinart v. Deuster, 23 Wis. 136; Bishop v. Warner, 19 Conn. 460; Davis v. Ransom, 18 Ill. 396; Barnet v. Fergus, 51 Ill. 352; Walter v. Wimer, 24 Mo. 63; Stanley v. Bunce, 27 Mo. 269; Armstrong