88 Mo. App. 335 | Mo. Ct. App. | 1901
On March 29, 1898, E. E. Manning gave a chattel mortgage to defendant, and others for whom defendant aeted, on his stock of merchandise, then on hand, to secure them in the sum of $10,412.71. This mortgage was recorded on the next day, March 30. Manning remained in possession and by the terms of the mortgage was to continue to sell the goods in usual course, remitting to defendant the proceeds of sale less expenses. At the time the mortgage was executed defendant gave Manning a separate paper (not recorded) which authorized him to use twenty-five .per cent of the proceeds of sales with which to buy other goods from time to time, with a view of keeping up the stock. Manning then conducted the business, buying and selling goods, for nearly a year, viz.: January 12, 1899, and paid a portion (perhaps one-third) of his indebtedness to defendant. On that day he
Afterwards, on March 14, 1900, Manning, being unable to meet his indebtedness to defendant, turned over to him the entire stock, both original and after-acquired, the latter being of the cash value of $828.55. Shortly thereafter (March 27, 1900) Manning was adjudged a bankrupt and plaintiff was appointed trustee. The trial was had before Hon. S. P. Huston, special judge, who permitted plaintiff as trustee, asserting the rights of the creditors of the bankrupt, to recover the value of the after-acquired property, and defendant appealed.
The first question presented is as to the validity of the unrecorded agreement for Manning to purchase additional merchandise and to extend the lien of the original mortgage over such property. The parties have considered such agreement as equivalent to a mortgage, and we will therefore so consider it. The case, then, may be stated to be this: Manning made to defendant a chattel mortgage which was never recorded. Manning remained in possession of the property for more than a year when he delivered possession to defendant. That between the time of executing the mortgage and the delivery of possession, Manning’s indebtedness to these creditors arose. These creditors had no lien against the property and
In this State no chattel mortgage is “valid against any other person than the parties thereto, unless possession of the mortgaged or trust property be delivered to and retained by the mortgagee or trustee or cestui que trust, or unless the mortgage or deed of trust * * * be acknowledged and recorded.” E. S. 1899, sec. 3404. This statute is unlike that of many of the States and is unlike other kindred statutes of this State, in that it discards the use of the words creditors and purchasers, prior or subsequent, and uses the broader expression, “any other person .” Broad as this statutory phrase, “any other person,” is, it does not apply to strangers; and one claiming the mortgage to be void must have some right to, or claim upon, the mortgaged property. The statute, however, does undoubtedly apply to creditors. It applies to them whether they are prior or subsequent creditors. In case of prior creditors, if the mortgage be recorded, or the mortgagee takes possession of the property before such creditor obtains a lien thereon or changes position in relation thereto, it validates the mortgage as to him. Such is the extent of the cases of which Dobyns v. Meyer, 95 Mo. 132, is a type. But in case of subsequent creditors the mortgage is not validated by such registration or possession. The reason for this is founded in common justice, which the statute seeks to secure. The object to be attained by the statute is so apparent, is so well understood and universally acknowledged, that we need scarcely do more than mention it. Its object is to protect persons dealing with bim who claims to be the owner of the property with which he may be dealing, or upon the faith of which others may be dealing with him. It is necessary to the validity of the mortgage that the mortgagee take the possession out of the hands of the mortgagor so that all may see the true situation of the
“When a chattel mortgage exists and is concealed, it is, under the statute, void for the reason that it' produces a false appearance of entire solvency when in fact a person known to have mortgaged his stock would not be as likely to get credit as one who had given no such security; and those who deal with such a debtor are liable to be defrauded by appearances. One who gives credit under such circumstances is necessarily exposed to that mischief, and the law has removed all questions of suspicion or notice by making chattel mortgages void, at all events, against creditors who deal with a debtor so situated. Such creditors are directly within the policy of the statute.” It needs no more argument to show1 that such a man needs the protection and warning which a change of possession, or a registration, would give him, than it does to show that the terms of the statute aforesaid are broad enough to include him.
But it is said that the creditors in this case being general creditors, or creditors at large, they can not invoke the aid or protection of the statute; and that if they could, they have not shown that they were harmed, or that they were deceived by the concealment of the mortgage. We are, however, of the opinion that the statute applies to and protects a general creditor, or, as he is sometimes called, -a creditor at large. While it is necessary that the creditor must be prepared to lay hold of the property in specie (such, for instance, as by attachment,
It is held in some jurisdictions that notice to the general subsequent creditor of an unrecorded chattel mortgage before he seizes the property with process will defeat His right to assail it. It is so held in Iowa, but the Federal circuit judge of that State condemns the view as lacking good reason. Crooks v. Stuart, 7 Fed. Rep. 800. And in this State there is a line of authority beginning with Davis v. Ownsby, 14 Mo. 170,
With regard to the contention that the creditors here did not show that they were harmed or deceived by the concealment, it is our opinion, where one shows that he extended credit to a chattel mortgagor after the execution of the mortgage, and during the period it was withheld from the record, the mortgage should be declared invalid as to him without an affirmative showing that he was injured or misled. The statute itself avoids the mortgage. Injury and deception will be assumed. It is clear that when one person extends credit to another he supposes that appearances are real and that that other is not making a silent affirmation of a falsehood. “In business affairs property is a basis of credit. It is a matter of common observation and knowledge that giving a chattel mortgage by a business concern injures its credit.” Williams v. Kirk, 68 Mo. App. 462. In Hildeburn v. Brown, 17 B. Monroe, 779, it was said that the effect of an arrangement to withhold a mortgage of real estate, though it may not have
So the Supreme Court of Mississippi, in speaking of an unrecorded mortgage of chattels and real estate, used this language: “We are of the opinion that the natural and logical effect of the agreement and assignment, and the conduct of the parties thereto was to mislead and deceive the public, and induce credit to be given to Baggett, which he could not have obtained if the truth had been known, and, therefore, the whole scheme was fraudulent as to subsequent creditors, as much so as if it had been contrived with that motive and for that object.” Hilliard v. Cagle, 46 Miss. 309. These cases are quoted with approval by the Supreme Court in Bank v. Buck, supra.
It is not necessary, under the statute aforesaid, that there be a fraudulent intent or purpose in keeping the mortgage off the record. The statute requires no such condition. But if it did, the intent would be presumed, since, in law, a man is presumed to intend the natural consequence of his act. Bank v. Buck, 123 Mo. 141; Dry Goods Co. v. Brown, 73 Mo. App. 245; State to use v. O’Neill, 151 Mo. 67, 85, 87. “There are many acts not the result of intentional fraud which the law, nevertheless, from their tendency to deceive other per~
While much is said in the cases about an agreement to withhold the mortgage from record for the purpose of giving false credit, yet, in our opinion, it is not necessary in making out the case that it should be shown there was any agreement, or any purpose. The statute requires no such condition. It is sufficient that the tendency and effect of so withholding the deed is to induce others to extend credit to the mortgagor. We have just seen that the purpose will follow the act of which it is the natural consequence. And so of the agreement; there can not possibly be a reason for requiring an agreement to do a wrongful and injurious act. If an act of such nature is committed, its consequences are equally as harmful and against the policy of the law as if it had been agreed upon. We said this much, in effect, in Williams v. Kirk, supra, and we are satisfied the logic of the foregoing authorities sustains the position.
It is of no avail to defendant that he took possession of the goods. The fraud had already been committed and the injury already done; “taking possession will not nullify or neutralize an actual fraud.” State to use v. O’Neill, 151 Mo. 67, 88. And so we held in Williams v. Kirk, supra.
There is nothing in the case of Barton v. Sitlington, 128 Mo. 174, which can be said to militate against any of the foregoing views. An undoubtedly sound proposition of law is there stated in reference to parties being induced to extend credit by reason of the absence of the mortgage from the record. But the further propositions herein considered were not involved in that case and were not referred to by the court.
The defendant combats the right of plaintiff, as trustee in bankruptcy, to recover the mortgaged property or its value, or
“Sec. 3- Acts of Bankruptcy. — (a) Acts of bankruptcy by a person shall consist of his having (1) * * * ; or (2) transferred, while insolvent, • any portion of his property to one or more of his creditors with intent to prefer such creditors over his other creditors; * * *.
“(b) A petition may be filed against a person who is insolvent and who has committed an act of bankruptcy within four months after the commission of such act. Such time shall not expire until four months after (1) the date of the recording or registering of the transfer or assignment when the act consists in having made a transfer of any of his property with intent to hinder, delay, or defraud his creditors or for the purpose of giving a preference as hereinbefore provided, or a general assignment for the benefit of his creditors, if by law such recording or registering is required or permitted, or, if it is not, from the date when the beneficiary takes notorious, exclusive, or continuous possession of the property, unless the petitioning creditors have received actual notice of such transfer or assignment.”
Section 60 is as follows:
“Sec. 60. Preferred Creditors. — (a) A person shall be deemed to have given a preference if, being insolvent, he has procured or suffered a judgment to be entered against himself in favor of any person, or made a transfer of any of his property, and the effect of the enforcement of such judgment or transfer will be to enable any one of his creditors to obtain a greater percentage of his debt than any other of such creditors of the same class.
“(b) If a bankrupt shall have given a preference within*346 four months before the filing of a petition, or after the filing of the petition and before the adjudication, and the person receiving it, or to be benefited thereby, or his agent acting therein, shall have had reasonable cause to believe that it was intended thereby to give a preference, it shall be voidable by the trustee, and he may recover the property or its value from such person.”
Section 70 is in the following words:
“Sec. 70. Title to Property. — (a) The trustee of the estate of a bankrupt, upon his appointment and qualification, and his successor or successors, if he shall have one or more, upon his or their appointment and qualification, shall in turn be vested by operation of law with the title of the bankrupt, * * * ’>
“(e) The trustee may avoid any transfer by the bankrupt of his property which any creditor of such bankrupt might have avoided, and may recover the property so transferred, or its value, from the person to whom it was transferred, unless he was a bona fide holder for value prior to the date of the adjudication. Such property may be recovered or its value collected from whoever may have received it, except a bona fide holder for value.”
It has been already stated that the mortgage was made on the twelfth of January, 1899, possession delivered to defendant the fourteenth of March, 1900, and Manning declared a bankrupt the twenty-seventh of March, 1900.
The dates just mentioned are important in that any preference given one creditor over another, within four months of bankruptcy, is void under the Federal statute just quoted. So, therefore, the question is, when was this preference given to defendant: Was it in January, 1899, when the mortgage was given? or, was it in March, 1900, when possession was taken? If the former, the preference being more than four months
But the foregoing cases arose under the bankrupt law of 1867. The present bankrupt statute, quoted above, is different from the law of 1867 in essential particulars, and we are left to construe it without much aid from the foregoing cases. Section 3 (subdivision “a”) declares what are acts of bankruptcy. Among these is where an insolvent person transfers any of his property to one creditor with intent to give a preference over other creditors. Subdivision “b” of that section declares that a petition may be filed against a person who has committed any of those acts within four months after the act is committed; and that the four months time shall not begin to run until the instrument is ^recorded, or possession is taken. Subdivision “b” of section 60 declares that if the bankrupt shall have given a preference within four months before filing the petition against him and the person receiving the preference has reasonable cause to believe it was intended to give him a preference, the trustee may avoid it.
Section 3 plainly reads that if an insolvent person transfers any of his property to a creditor with intent to prefer him over other creditors, he commits an act of bankruptcy. Sub
The preference spoken of in section 60 is not made except by act of bankruptcy. And the act of bankruptcy is not committed until it is made known .by delivery or record, or is otherwise known. As is said by Shíras, L, in In re Klingaman, 101 Fed. Rep. 691, “the intent of this statute is to declare that, as against creditors of an insolvent, the limitation of time for invoking relief against a preference does .not begin to run until in some form they have received actual or constructive notice of the transfer to the preferred creditor; and this intent is reached by the declaration that in such cases the transfer constituting the act of bankruptcy shall be held to date from the
It is contended that the trustee plaintiff can not avoid the transfer made by the bankrupt' — that he can not recover the property or its value, as in this case — that he stands in the bankrupt’s shoes in this respect and can not do what the bankrupt himself could not have done. The statute of bankruptcy itself disposes of this contention. It will be seen that section 60 (subdivision “b”) itself declares that the transfer “shall be voidable by the trustee.” And section 70 (subdivision “e”) reads that the “trustee may avoid any transfer by the bankrupt of his property which any creditor of such bankrupt might have avoided, and may recover the property so transferred or its value * *
The trial court gave an instruction to the jury for the plaintiff which omitted the question whether Manning was insolvent, or whether he intended to make a preference, when he made the transfer. Those questions were properly omitted from the instruction. They were determined in the adjudication of bankruptcy. The transfer under such conditions was the act of bankruptcy in this case. But whatever might be the cause or foundation of the adjudication of bankruptcy, when the party has been declared a bankrupt, then the statute authorizes the trustee to avoid a transfer of the nature herein discussed, provided the creditor had reasonable cause to know that he was being preferred, and this hypothesis was embodied in the instruction.
The judgment is affirmed.