1 S.D. 117 | S.D. | 1890
On the 3d day of October, 1883, respondent, who was then the owner of a store-building in the city of Sioux Falls, leased the same, by a written contract, to Waxman & Co., for the term of five years, which lease was duly filed for record October 12, 1883; in the office of register of deeds of the proper county, and “was duly entered upon the chattel mortgage calendar of said office.” The lease contained the following provision: “That said rents, whether due or to become due, shall be a perpetual lien on any and all gbods and merchandise, furniture and fixtures now contained, or which may at any time during the continuance of this lease be contained, in the building, except such goods as are sold in the usual course of retail trade.” Afterwards the lessees, Waxman & Co., gave several chattel mortgages, to secure different creditors, upon the stock of merchandise, furniture, and fixtures contained in the said leased store-building, being the same personal property described and referred to. in the provision of said, lease above quoted. Afterwards the appellants Winsor & Swezey, as the attorneys and agents of the several mortgagees, undertook to foreclose said chattel mortgages, and to that end took possession of said mortgaged property, and advertised the same. Greeley, the lessor, and respondent herein, then commenced an action against said Winsor & Swezey to restrain such foreclosure sale. At this time, by an arrangement between the parties, the respondent dismissed the said action and released his claim
The controversy is over the force and effect of the provision in the lease for a lien for rent. If, as against the mortgage creditors represented by appellants, respondent had “a valid and subsisting lien” upon the property taken by them under their mortgages, then the condition of the bond is met under which appellants’ liability as obligors should attach, and the complaint would state a cause of action against them. If such a provision is effectual at all as against creditors, it is plain it must be as a chattel mortgage. The rents were to be a “perpetual lien.” The possession of the property did not change, and no lien except that of a chattel mortgage is tolerated by our statute, unless accompanied by 'possession in the lienor. It seems to have all the requisites of a chattel mortgage, both as to its construction and its execution, and the statutory requirements as to filing as a chattel mortgage were fully complied with.
The pivotal question, then, is, what was the legal value of respondent’s chattel mortgage upon his lessee’s stock of goods, furniture, and fixtures, “except such goods as are sold in the usual course of retail trade?” for the answer to this question must determine whether or not respondent held a “valid and subsisting lien” upon such property, or any part of it. While
The question is before us on demurrer to the complaint. The complaint presents this mortgage as showing respondent’s right to the property which the bond of appellants represents. If the mortgage on its face is presumptively fraudulent, then the complaint would state no cause of action, because, if presumptively fraudulent it is presumptively void; and no facts are stated in the complaint tending to negative or rebut such presumption. The bond was only to be operative in case the respondent had a valid and subsisting lien upon the property, and the complaint offers the mortgage clause of the lease as showing such lien.
A more troublesome question occurs when we come to consider the effect of the power of sale upon the property in the mortgage not covered by nor included in such power of sale. The mortgage was upon “goods, merchandise, furniture, and fixtures.” The permission to sell covered only “such goods as are sold in the usual course of retail trade.” Is the mortgage jmma facie fraudulent in toto, or is it good as to the furniture and fixtures; they evidently not being included in the permission to sell? The law condemns such a mortgage as this, not because its terms prove any fraudulent or corrupt motive on
There are other reasons for applying this rule to the entire mortgage provision in this case. The mortgagee, while claiming to have security upon all this property, has stipulated and consented that the mortgagor might gradually, by retail sales, deplete and consume the bulk of his security, leaving the burden of the debt not upon the entire property which he pretends to hold under, and which he protects by his mortgage, but upon the furniture and fixtures, which alone, of all the mortgaged property, is to remain under the lien of his mortgage, and must constitute his real security. It is very evident that all the real security respondent could have under his mortgage was the property that the mortgagor had no right to sell. Power to sell the goods was power to annul and destroy the lien of the mortgage upon them; and this respondent had agreed might be done, and that without any diminution of the debt as the result of such sales. If respondent were content with security upon the furniture and fixtures only — and such conclusion the facts clearly argue, — he ought not to be allowed to incumber by the same instrument a large amount of other property from which he expected no benefit or advantage. To the creditors of the mortgagor, respondent said by this mortgage: “I hold a mortgage
It follows that the demurrer should have been sustained. The judgment of the court below overruling the demurrer is reversed.
I am of the opinion that the court should go further, and hold that the mortgage or agreement in this case is not only at least presumptively fraudulent, but absolutely fraudulent, as to the creditors of the mortgagor. A chattel mortgage in which the mortgagor is permitted, by the terms of the mortgage, to sell all or any part of the property embraced in the mortgage and apply the proceeds to his own use and benefit, is, in my opinion, fraudulent in law, without regard to the intent of the parties. It is evident that, .as to the property so permitted to be sold for the benefit of the mortgagor, the mortgagee has no real interest in. or lien upon it,