15 Colo. App. 116 | Colo. Ct. App. | 1900
A debt for goods of the value of about $500 is the subject-matter of this action brought by Reid, Murdoch & Company against the Schutt Mercantile Company and Willis E. Bird; The case went off on a nonsuit and we state the facts as we
The case was begun in the county court and afterwards tried in the district court. The Schutt Mercantile Company was a commercial corporation doing business in Durango. It had been transacting business for some years, and in October and November, 1896, bought the goods sued for. Part of them were sent on telegraphic order from a salesman, and part of them were delivered from a supply house in Durango. The goods were all delivered early in November, 1896. About the time of the sale the mercantile company became embarrassed, and as we may be permitted to state, though the instrument is not before us, gave a chattel mortgage to the defendant Bird to secure debts owing to the Colorado State Bank of Durango and the Struby-Estabrook Company. Whether the mortgage secured any other creditors we are not advised. Bird took possession and proceeded to close out the stock. Reid, Murdoch & Company immediately instituted inquiries about it, traced the goods and found that they had been turned over to Bird. They served a written demand on him for them with which he refused to comply. It did not very clearly appear whether at the time of the demand Bird had all the goods, nor whether all of them were turned over to him under the mortgage, though that he received some and had some in his possession at that time appears from his admissions. Thereupon the plaintiffs brought this suit against the mercantile company and Bird to recover the goods or their value, setting up facts which if established entitled them to rescind the sale on the ground of fraud, and therein had judgment against the mercantile company, but were non-suited as to Bird. During the trial the plaintiff produced testimony tending to prove that the Schutt Mercantile Company through its proper officers had made statements to Bradstreet & Company and Dun & Company concerning their financial condition and the representatives of those two mercantile agencies testified as to the statements which had
The matter of reports to commercial agencies has been before this court, and while I expressed some doubt regarding the propriety of the rule which had been adopted by the various courts, believing that there ought to be proof not only of a report but a report made with the intent to deceive the vendor bringing suit, yet we conceded the law to be that where there is ample proof of a misrepresentation to the agencies, or either of them, and proof of a reliance on the report for the purposes of sale, the vendor may rescind, even though when the report was made there was no distinct and direct intention to defraud the vendor who sold the goods. This we stated and held in Burchinell v. Hirsch et al., 5 Colo. App. 500. This doctrine is necessarily subject to some other limitations which need not be expressed. There was evidence tending in this direction and the plaintiff was entitled to have the question go to the jury under proper instructions concerning its force and effect. It is always true that insolvency is a fact for the jury and has some bearing on the question of intent. Alone it would not be sufficient to warrant a finding, but in connection with other facts, it is proper subject-matter
It is quite earnestly insisted by the attorney for the appellee that the plaintiffs do not sufficiently attack Bird’s title because they failed to prove value or to overthrow the mortgage or attack its good faith. We think he is wrong with respect to both propositions. There is enough evidence of value to go to- the jury wherefrom they could ascertain the
Respecting the other branch of the proposition, and that is the burden to establish the validity and good faith of the mortgage, we think that the rule is misstated. Should the jury find from the testimony that the mercantile company were insolvent when they bought the goods and had no intention to pay for them, or that they misrepresented their financial status whereby they procured credit and whereby under the law the vendor would have a right to rescind the sale, then in order to defend his title, it would be incumbent on Bird to produce proof of the character of his mortgage, the consideration on which it was based, and in general uphold the validity of his title. This seems to be the general current of authority on this question. Starr Bros. v. Stevenson, 91 Ia. 684; Easter v. Allen, 8 Allen, 7; Shotwell v. Harrison, 22 Mich. 410; Sillyman v. King, 36 Ia. 207; Dry Goods Co. v. Kahn Bros., 53 Kan. 274; Wafer v. Harvey County Bank, 46 Kan. 597; Devoe v. Brandt, 53 N. Y. 462; McLeod v. First Nat. Bank, 42 Miss. 99. Many others might be cited. The courts are in unison and we have been referred to none which announce a contrary doctrine.
It it quite true the cashier of the State Bank was put on the stand by the plaintiff to show the untruthful and misleading character of the statement which the mercantile company had furnished the commercial agencies. From Mr. Kimball’s evidence it is quite evident the bank’s account was represented to be some $20,000 less than it was when the report was furnished, but he also testified that Mr. Bird was the mortgagee in possession of -the property in the interest of the Colorado State Bank and Struby-Estabrook & Company. From his evidence it would likewise appear Bird had no personal interest in the matter, but was simply the representative of those two creditors. It is sought by argument to give this evidence greater weight than it is entitled to for the purposes of this appeal. The appellee insists it appeared.from the plain
We are compelled, however, to advert to another proposition on which the appellee greatly relies. By the argument he seeks to apply a doctrine which has been expressed in several cases in the supreme court and by a quotation from an early opinion which is, “ that one who takes property in payment or security of a pre-existing debt is to be regarded as a purchaser for valuable consideration.” This doctrine was very early announced and ever since that time the courts have universally held that a pre-existing debt is a good consideration for the transfer of property either in payment of, or as a security for a debt. This, however, has only been holden so far as the cases themselves show where there has been an actual transfer of the title, or a turning over of the property in payment, or as a security. We have been referred to no case, nor have we found one where it has been held that the
In the first case Rose owned the property and gave a title bond to Kettlewell for a named price. It was afterwards assigned by mesne transfers whereby it vested in McGovney, who became the holder of the bond and entitled to the conveyance on the payment of the consideration. In January, McGovney took up the bond, paid the consideration and delivered the instrument to Rose, who destroyed it, but Rose did not then make the deed to Knox. That was done in January, 1876. Suit in ejectment was then begun to recover possession. McFarran undertook to defend contending that he was McGovney’s creditor when the deed was executed, and attempted to make proof of the want of consideration as between McGovney, Rose and Knox. In that suit he was defeated because in an action in ejectment under the old practice the legal title must prevail and Knox had judgment. Subsequently, however, McFarran filed a bill in equity in the proper county and alleged that he had recovered judgment against McGovney prior to the time of the transfer, filed his record in the proper office, and thereby obtained a lien superior to the title which Knox subsequently got by the conveyance from Rose. McFarran had judgment and when the case came to the supreme court the judgment was affirmed on the ground that the bond was a proper instrument for record under the recording act, and since it was not filed Mc-Govney’s claim took precedence. It will be observed the whole case turned on the recording act and the failure to comply with it and want of knowledge on McFarran’s part of the outstanding title.
The next case and the only other in the supreme court to which our attention has been called is that of Merchant's Bank v. McClelland. It is sufficient to say that this only concerns the title to commercial paper and can in no sense be regarded as a direct authority on the proposition, that he who takes property in payment of or as security for a preexisting debt, is to be regarded as a purchaser for a valuable consideration. The rights of a holder of commercial paper wholly depend on other considerations. In all jurisdictions, even those which do not concede that a pre-existing debt is a good consideration for the sale of property or its pledge, it is universally held that one who takes title to commercial paper either in payment of a debt or as a security for it, gets a good title if he receives it without notice. The holder of commercial paper who takes it in the usual course of business is unaffected by the equities of antecedent parties. The rule is the same whether the instrument is received as a security for or in payment of the pre-existing debt. This is conformable to the recognizable usages of the commercial world, and had its origin in the necessity to protect commercial paper in the hands of the holder. This doctrine was very clearly announced by the supreme court of- the United States in Swift v. Tyson, 16 Peters, 1. This case has always been followed
This court followed the same general rule in Haraszthy v. Shandel, 1 Colo. App. 137. In that case we held the court speaking through me, that Mrs. Shandel took a good title, although there was an attempt to rescind the sale. The reason for the application of the doctrine is very apparent from the facts. Therein Haraszthy had possession of the goods and turned them over to Mrs. Shandel on a present consideration. There was not only a pre-existing indebtedness between Mrs. Shandel and Haraszthy, but there passed at the time of the transfer a present consideration which under all the authorities would make her a purchaser for value.
We now come to the consideration of what will prove a pivotal question in this case, and it may ultimately defeat Bird’s title, though whether the facts will permit its application we are at present not advised. The question, however, is fairly raised by the record, urged by counsel, and we deem it our duty to decide it. The only modification, if it be deemed a modification of the doctrine expressed in the supreme court cases is first found in Cassidy v. Harrelson, 1 Colo. App. 458. Therein there were conflicting claims between prior and subsequent mortgagees. We held, undertaking to distinguish it from them and commenting also on Brereton v. Bennett, 15 Colo. 254, that subsequent lienors who have taken their security with no other consideration passing between them than the pre-existing debt, hold the goods open to the equities and exceptions as to title which could be asserted if they were in the hands of the mortgagor. This principle was supported
We are now brought face to face with the proposition whether a creditor can take a chattel mortgage on the property of his debtor, and thereby as an innocent purchaser acquire a good title against the vendor of the goods who has the right to rescind the sale because of fraud in the purchase. This is widely different from any of the cases yet decided in any of" the two tribunals. We have been very exact about it because we believe the distinction is an important one and the question is likely to arise many times in this jurisdiction and we know of no way by which the present case can be taken to the supreme court for ultimate determination. We have neither doubt nor hesitation in declaring the doctrine because neither the precise question nor any analogous one has been determined by the supreme court and we find our position sustained by a very late case in the supreme court of the United States; Peoples Savings Bank v. Bates, 120 U. S. 566. There are many other cases tending in the same direction, but personally I am always willing to end my examination of a question when I find a unanimous decision by this tribunal deciding it. In that particular case we find cited Johnson v. Peck, 1 Woodb. & Min. 334, 336, wherein it was held that a mortgagee in a mortgage given to secure a pre-existing debt due from a mortgagor who had purchased goods on representations, which entitled his vendor to rescind, acquired thereby no such rights as belong to a purchaser for a valuable consideration without notice, but held the goods open to the same equities and exceptions as to title that they would be open to if found in the hands of the mortgagor. This was a direct and conclusive adjudication on the principal question involved in this litigation. It would therefore follow, if we accept it, that should Reid, Murdoch & Company establish to the satisfaction of the jury fraud in the transaction
This disposes of every question pressed on our attention which we feel at liberty to decide, and for the error which it is apparent from this opinion the court committed in nonsuiting the plaintiff, this case must be reversed and sent back for a further trial in conformity with this opinion.
Reversed.