| Or. | Jan 15, 1879
By the Court,
So far as the overruling of the demurrer to the complaint is concerned, as the appellants have not insisted on it as a ground of error, we will consider it as waived by them. The mortgage is admitted to be sufficient in form and properly filed so as to give it validity, unless it was fraudulent in its inception, or rendered void by the subsequent acts of the parties to it. The testimony of both the mortgagor and mortgagee shows that the mortgage was executed to secure the payment of a note for the sum of two thousand one hundred and fifty-two dollars, which note was made in lieu of a former note for two thousand dollars, and interest, made February 2, 1878. The consideration of the two thousand dollar note was the sum of nine hundred dollars, loaned at that date by Iri Orton to his son, M. W. Orton, and his signing as surety for his son a note to Hied and Cox for one thousand one hundred dollars. If this testi
The evidence proves that after the execution of the first mortgage, Iri Orton permitted his son, M. W. Orton, the mortgagor, to continue to sell the mortgaged goods, which was a stock of merchandise, and apply the proceeds to his own use. And it seems from the evidence, that it was the intention of said Iri, at the time he took this mortgage, to permit his son to use the goods in the same manner as he had used them before the mortgage was given, and that this same understanding continued after the second mortgage (the one sued on) was given, and up to the time that the goods were attached by L. Goldsmith & Co. The respondent testifies that he knew the store was kept open and the goods were being sold by his son the same as before the mortgage was given, and when being examined as a witness he was asked this question: “It was your calculation that he (M. W. Orton) should just go along, and if everything went smooth, that he should sell goods and get other goods, and go ahead?” To which he answered: “Yes, sir; that was the idea.” And again he was asked: “And you expected him to do that, didn’t you?” Answer: “I didn’t know when I might close him right out; I didn’t know when. If he could have done well, I should not have closed him out.” He was then asked what he meant by doing well; to which he answered: “If he could have sold a good deal of goods and got money to keep him from going under.” It is true that the respondent claims that his son was not to so far diminish the stock of goods as to render it insufficient to the ample security of the note. But there was an unlimited right to dispose of the goods, and if the entire stock had beén sold by M. W. Orton, prior to the commencement of this suit, the respondent could not, un
It was claimed by the respondent’s counsel in the argument, that this mortgage is aided by the statute of this state, section 766, p. 262, which provides that every sale of personal property capable of immediate delivery to the purchaser, and every assignment of such property by way of mortgage or security, or upon any condition whatever, unless the same be accompanied by an immediate delivery and be followed by an actual and continued change of possession, creates a presumption of fraud as against the creditors of the seller or assignee, during his possession, disputable only by making it appear on the part of the person claiming under such sale or assignment, that the same was made in good faith for a sufficient consideration, and without intent to defraud creditors. But the presumption herein specified does not exist in the case of a mortgage duly filed or recorded as provided by law.
This statute does not in any way reach or provide for the case before the court. This mortgage is regular in form, and is recorded. The presumption raised by the statute which may be rebutted is as to mortgages that have not been recorded. But the statute is silent as to the effect of a provision in the mortgage, or an agreement between the mortgagor and mortgagee, that the mortgagor may sell the mortgaged property; and when this fact is made to appear, as in this case, then it becomes the question of law for the court to determine what shall be the legal effect
This question has been the subject of much discussion in the courts, and there is some apparent diversity in the authorities. We think the weight of authority as well as reason is in favor of the rule before indicated, that where there is an unlimited power given to the mortgagor by the mortgagee to sell the mortgaged property which still remains in his possession, that the mortgage is void as against the attaching creditors of the mortgagor. In this case it was the manifest intention of Iri Orton to have M. W. Orton continue the business in his store, and sell the goods in the same manner as before the mortgage was given. This power to sell and continue the business as before, enabled M. W. Orton to appear as the unembarrassed owner of the goods, and enabled him to obtain credit which would have been denied him had the right to sell the goods been denied. As the power to sell was unlimited, there was no security retained in the goods to Iri Orton ; for he abandoned his lien by his mortgage when he granted the power to his son to do with the goods the same as he had been doing. Such an agreement was utterly inconsistent with his claim under the mortgage, and annulled its provisions. The views we have taken harmonize with the English common law doctrine, and the rule as established in the federal courts, and many of the state courts. (1 Smith’s Lead. Cas., 52, 7 Am. ed.; 22 Wall. 513" court="SCOTUS" date_filed="1875-02-18" href="https://app.midpage.ai/document/robinson-v-elliott-89088?utm_source=webapp" opinion_id="89088">22 Wall. 513; 16 Ohio, 547.) We think the decree of the circuit court should be reversed, and the respondent’s bill dismissed.