11 Mont. 451 | Mont. | 1892
It appears from the record that on the twelfth day of August, 1889, Alphonse Benjamin, of Deer Lodge County, mortgagor, executed and delivered to A. Rocheleau, mortgagee, a chattel mortgage of property, described therein as follows:/‘All the following described property, situate and being in the city of Anaconda, Deer Lodge County, Montana, to wit: One bay horse, branded 44 on the left shoulder; one bay horse, branded P on left hip, and-on left shoulder; one express wagon; two sets of double harness; one bread-box; three show-cases; one counter scale; one milk-shake machine; one desk; four chairs; and baking outfit; stock on hand,” — to secure a promissory note executed and delivered by the mortgagor to the mortgagee of the same date, for the sum of $1,000, payable six months after date, which note was set out in the mortgage. Said mortgage provided for the possession of said property to remain with the mortgagor, and the mortgage was duly filed for record in the office of the county clerk and recorder of Deer Lodge County, as provided by law. There
Appellants admit by answer the execution of said promissory note and mortgage to secure the same, and the good faith of the transaction, but seek to justify the taking of said property under said processes on the ground that the mortgage was void as to said attaching creditors, because it was made and intended to cover by the words “stock on hand” certain merchandise, consisting of canned goods, dried fruits, bread, eggs, cigars, tobacco, etc., and that the mortgagor of such merchandise was left in possession thereof. Under an arrangement, understanding, or agreement of the parties to said mortgage, or with the knowledge and consent of the said mortgagee, the mortgagor was allowed to sell said merchandise, and convert the proceeds arising from such sale to his own use; and that no part of such proceeds were applied to the payment of the debt mentioned in said mortgage. All of which facts relied on in defense were fully set forth by answer.
The trial of the action resulted in a verdict by the jury in favor of plaintiff, the mortgagee of said goods, for the principal sum of said promissory note and the interest thereon. The jury also returned special findings to the following effect: (1) That after the execution of the mortgage, the mortgagor remained in possession of the “stock on hand” mentioned in the mortgage, and continued to sell and dispose of the same in the regular course of business; (2) that such sale of the merchandise was not made with the knowledge and consent of the mortgagee, Bocheleau; (3) that the mortgagor did not apply any of the proceeds arising from the sale of the merchandise to the payment of the amount secured by said mortgage; (4) that during the time the mortgagor, Benjamin, was selling said stock on hand the mortgagee, Bocheleau, was not in a position to know, and did not know that such sale was being made; (5)
Judgment was rendered against defendants for the sum mentioned in said promissory note and interest, and they moved the court for a new trial on the grounds: (1) That-the evidence was insufficient to justify the verdict and findings; (2) error of law occurring at the trial, and excepted to by the moving party. Upon the hearing of the motion for a new trial the court made an order overruling the same, from which order and the judgment this appeal was taken.
In relation to the first ground stated, upon which motion for a new trial was made, appellants insist that the second and fourth findings of the jury, to the effect that the sale of the merchandise which the mortgagor had in his place of business was not made with the knowledge and consent of the mortgagee, Bocheleau, and that he was not in a position to know of such sale, are not supported by the evidence. That appellants are correct in this proposition admits of no doubt when considered in reference to the conduct of the parties to the mortgage, according to their own testimony. According to the testimony of the parties to this mortgage, the mortgagor, Benjamin, was at the time of the execution thereof engaged in running a bakery at Anaconda. His principal business was that of baking and vending bread, cakes, pies, and such other supplies as are usually made and kept for sale at a bakery. In the sale-room of the bakery, in addition to such bakery supplies as were made and kept for sale, the mortgagor also had in stock some other goods, consisting of various kinds of canned goods, dried fruits, raisins, citrons, spices, teas, coffees, candies, cigars, and other tobaccos. According to the testimony of the mortgagor, the stock of such goods which he had on hand at the time of the execution of said mortgage was of the value ■of from $100 to $200, not including the bakery supplies. The mortgagee testified that at that time such stock on hand was •of the value of $75 or $100. Hamilton, one of the attaching creditors, stated in his testimony that he thought the goods in the mortgagor’s shop were worth $400, but he does not state what time he was speaking of — whether at the time the rnort
It is shown by the evidence without dispute that at the time the mortgage was executed, and during its existence, the mortgagee, Eocheleau, was engaged in running a butcher shop in the same town, on the same street, and but three or four doors from the bakery and sale-room of the mortgagor, Benjamin; that Eocheleau furnished Benjamin money to the extent of $800 to assist him in setting up and carrying on his bakery business; that about the time the mortgage was executed he borrowed of Eocheleau the further sum of $200, and executed said promissory note and mortgage for the whole amount owing, paid out said $200 to these same creditors who afterwards attached, and continued to carry on his bakery business as before, manufacturing and selling bakery supplies, and from time to time sold at retail and used the other goods mentioned, and used the proceeds of his business to carry the same on, keeping up the stock of goods and supplies as before the mortgage was executed, until the attachments were levied, about six months after the mortgage was executed. After said mortgage was executed Eocheleau continued to carry on the business of running his butcher shop at the place aforesaid, and occasionally called at said bakery and bought small quantities of supplies for the use of his family, and members of his family also obtained supplies at said bakery.
Now, the mortgage is conditioned that the mortgagor shall remain in possession of and use the property described therein until default in payment of the debt sought to be secured
It appears that the attaching creditors of the mortgagor sold him supplies, whereby their claims accrued after the mortgage was given, and finally attached not only the merchandise which the mortgagor had in stock, but all other property mentioned in the mortgage. The attaching creditors regarded said mortgage as wholly void, relying upon the case of Leopold v. Silverman, 7 Mont. 266, wherein it was declared that a mortgage upon merchandise left in possession of the mortgagor with a provision expressed in the mortgage, or with an understanding, permission, or agreement of the parties, although not expressed in the mortgage, whereby the mortgagor is allowed to sell the goods in the usual course of trade, and appropriate the proceeds, or any part thereof, to his own use, “is fraudulent and void as to other creditors, regardless of the good faith of the parties.” The appellants rely upon that case to affirm the
However general and far-reaching may be the conclusions expressed in the case of Leopold v. Silverman, it cannot be regarded as authority to sustain appellants’ position to the extent they contend for, because no point was involved in that case as to property outside of purely a stock of merchandise, which was mortgaged as a whole, and kept on sale; at least no mention is made' in the statement of facts as to property of other character or nature or separate from the stock of merchandise, and as to which there was no provision or permission for the mortgagor to sell or offer to sell the same. It is true, the language held in that case is sweeping, and, if taken literally, and adopted without reference to the facts before the learned judge who prepared the opinion, might be, as general dicta, applied to the case at bar, as it has undoubtedly been applied by appellants, and by the authority of which they expect their action to be sustained, in treating this mortgage as null and void as to all the property therein mentioned. This seems to have been the view of the respondents also in the case of Schwab v. Owens, 10 Mont. 381.
In the ease of Leopold v. Silverman it appears that the property mortgaged was a stock of merchandise, upon which the owners thereof executed three several mortgages to three several creditors: (1) The Stockgrowers’ National Bank to secure $3,500. The mortgage was dated November 12, 1886, and contained the following provision: “It is provided, however, that the said parties may continue to sell the said stock of merchandise in the usual course of trade, accounting, however, as often as requested, and at least once a month, to the second party for the proceeds of all such sales; ” and, as said in the opinion, “the bank at once placed an agent in possession of the mortgaged property.” (2) On the 22d of the same month, and while the agent of the bank was in possession, and the goods
After stating the above facts, and referring to the pleadings in that case, the court, in applying its conclusions as to whether or not the provisions contained in the first and second of said mortgages should be held to render them void, said: “ The case of Robinson v. Elliott, decided by the Supreme Court of the United States in 1874, reported in 22 Wall. 520, must govern us in the disposition of this case. It was held in that case, in effect, that any chattel mortgage upon a stock of merchandise in trade which permits, by its terms, the mortgagor to remain in possession of the goods, and to sell the same in the usual course of trade, at his discretion, and to appropriate the proceeds, or a
In the above statement of the effect of the decision in the case of Robinson v. Elliott, the court was supported by Mr. Pierce in his treatise on Mortgages of Merchandise, section 2, page 3. But it will be observed that the “general principle” declared in Leopold v. Silverman is somewhat narrower than the effect of the doctrine of Robinson v. Elliott, as interpreted in the same case. In the general principle laid down it is declared that a mortgage of merchandise “ under which the mortgagor is permitted by the mortgagee to sell the goods at his discretion in the usual course of his business is inherently and essentially fraudulent as to the creditors of the mortgagor; and this is so even though the agreement or understanding between the mortgagee and mortgagor, permitting such sales, is not shown upon the face of the mortgage, but is proven by extrinsic evidence.” It is declared in this general principle that a mortgage which comes within its description is void without reference to what is done with the proceeds in such a case; whereas, in Robinson
Now, by later decisions of the Supreme Court of the United States (People’s Sav. Bank v. Bates, 120 U. S. 556; Jewell v. Knight, 123 U. S. 426; Means v. Dowd, 128 U. S. 273; Etheridge v. Sperry, 139 U. S. 266), the intent and meaning of the court in the opinion in Robinson v. Elliott has been fully expounded, by which it appears that the interpretation and application of that case in Leopold v. Silverman and other cases and treatises was erroneous. In the case of Etheridge v. Sperry, supra, the court was considering the validity of two chattel mortgages on a stock of merchandise situate in Knoxville, Marion County, Iowa, where there was an understanding between the mortgagee and mortgagor to the effect that the latter was to remain in possession of the merchandise mortgaged, and “go on selling goods in the ordinary way/’ and receive the money derived from the sales, and out of the same pay the running expenses of the establishment and support his family, and to replenish the stock; and that the surplus received from such sales was to be applied on the debt mentioned in the mortgage. Creditors attached said stock of goods, relying on the cases of Bank of Leavenworth v. Hunt, 11 Wall. 391; Robinson v. Elliott, and Means v. Dowd, supra, as authority for treating said mortgages as void. In the course of the opinion, which appears to have been unanimously concurred in, Mr. Justice Brewer says: “While there are some points of similarity in each of those cases [last above cited] and this, and while there are observations in the opinions filed in them pertinent and correct with reference to the special facts which, if disconnected from those facts and applied here, might seem authoritative, yet there are clear and sufficient reasons why neither the decisions nor the opinions should control this case. .... In Robinson v. Elliott, a case coming from Indiana, the objection to the chattel mortgage appeared on the face of the instrument, in that it permitted the mortgagor not only to retain possession, but to sell and buy as theretofore, with no stipulation for the application of the surplus proceeds to the payment of the mortgage debt, the only stipulation being that the pur
Then follows an examination of the law concerning mortgages of merchandise in Iowa, according to the statute and decisions of the Supreme Court of that State, whereby it is found that such a mortgage as the one under consideration would be held valid there; and the Supreme Court of the United States, applying the same construction, holds the mortgages under consideration valid. But the opinion does not stop there; it goes into the discussion of general principles relating to mortgages of merchandise, in which the following observations are made: “We are aware that there is great diversity in the rulings on this question by the courts of the several States; but, whatever may be our individual views as to what the law ought to be in respect thereto, there is so much of a local nature entering into chattel mortgages that this court will accept the settled law of each State as decisive in respect to any case arising therein. (Union Bank v. Kansas City Bank, 136 U. S. 223.) Indeed, if this were an open question, we could not be blind to the fact that the tendency of this commercial age is towards increased facilities in the transfer of property, and to uphold such transfers so far as they are made in good faith; and it is at least worthy of thought whether the rulings made by the Supreme Court of Iowa do not tend to make chattel mortgages more valuable for commercial purposes, without endangering the rights of unsecured creditors. The law now generally requires a record of all such instruments; and that, like the recording of a real estate mortgage, gives notice to all parties interested of the fact and extent of encumbrances.
For the reasons set forth it is perceived that parties dealing with questions touching mortgages or assignments of chattels, especially such as have merchandise included therein, should not rely upon extending the doctrine of the Silverman Case, nor, perhaps, rely too strongly upon having that case applied to a like state of facts, where, as in that case, everything is admitted to have been done in good faith to secure the debts mentioned and honestly owing; because, while there are many strong cases declaring mortgages of merchandise void under a given state of facts, still we have not found any declaring that instrument void under facts similar to that ease, nor where the
In the ease at bar there are two questions to be determined: (1) Was the mortgage void as to the merchandise which was mentioned, or wholly void, by reason of the possession of such merchandise being left in tbe possession of tbe mortgagor with permission to sell the same in the usual course of trade, and use the proceeds of such sale, without reference to the mortgage? (2) If said mortgage should be held void as to its attempt to cover merchandise under the conditions stated, should it by reason of that fact also be held void in tato; i. e., as to other property mortgaged, and as to which there was no permission to sell or dispose of the same, and where the good faith of the transaction is admitted ?
As to the first proposition, our statute provides: “No mortgage of goods, chattels, or personal property shall be valid, as against the rights and interests of any other person than the parties thereto, unless the possession of such goods, chattels, or personal property be delivered to and retained by the mortgagee, or the mortgage provide that the property may remain in the possession of the mortgagor, and be accompanied by an affidavit of all the parties thereto; or, in case any party is absent, an affidavit of those present, and of the agent or attorney of such absent party, that the same is made in good faith to secure the amount named therein, and without any design to hinder or delay the creditors of the mortgagor, and be acknowledged and filed as hereinafter provided.” (§ 1538, div. 5, Comp. Stats.) By this statute it is seen that the possession of the mortgaged property is to be fixed somewhere, and remain subject to the lien, until that lien is released in some proper manner, consistent with the law and nature of the mortgage, or the property is applied to extinguish the debt secured. The possession may be “delivered to and retained by the mortgagee,” or the possession may remain with the mortgagor, and the mortgage be accompanied by the required affidavit of “ good faith to secure the amount named” in the mortgage, and filed in the office of the recorder of deeds, to give notice of the exist
Numerous decisions may be found to support this conclusion. The conclusion is often announced as founded on the idea of “constructive fraud,” or “fraud in law”; and the treating of the question on that theory has given rise to much controversy, for those opposing always point to the fact, usually admitted in the discussion, that there is no element of fraud in fact in the conduct of the parties; and where a statute exists (like § 231, div. 5, Comp. Stats.) providing that questions of fraudulent intent in making conveyances of property shall be deemed questions of fact for a jury, and not questions of law, such statute is pointed to also as forbidding the court from deducing, presuming, or inferring fraud in the transaction, where the jury has not so found. In Brett v. Carter, 2 Low. 458, Lowell, J., of the United States District Court for Massachusetts, has given a most trenchant exposition of reasons opposed to the theory of “constructive fraud” or “fraud in law,” as appli
There can be no question that the statute mentioned must control, where a conveyance of property is made, and the good faith of the transaction is drawn in question, i. e., the question as to whether or not the conveyance was conceived and made with an intent to hinder, delay, or defraud creditors, or others mentioned in the statute. But that is not the question in the case at bar. The good faith of the parties in the transaction was admitted, and the question was, did the transaction, considering the conditions agreed upon between mortgagor and mortgagee concerning the property, or concerning certain portions of it, amount to a mortgage of chattels under the provisions of the statute? The facts are admitted. The mortgagor
There is another ground upon which this mortgage should be held void in so far as it attempted to cover merchandise. That infirmity is the want of such description as to indicate with reasonable certainty what goods, wares, and merchandise were intended, and in what place situate. The words of the mortgage attempting to describe this class of property are, “stock on hand.” This may be a convenient phrase to cover a stock of merchandise in some transactions; but it is not such a description as would show to third persons, with reasonable certainty, what particular goods the mortgage applied to. It may well be asked, and asked in vain, what stock of goods was intended? Was it the stock on hand when the mortgage was made, or the stock which might be on hand when the debt to be secured became due? The phrase used is so convertible, capable of such dilation and contraction, and such diversity of construction and application, it is doubtful whether the parties to the mortgage both intended one and the same thing by it. But as to third parties the description must be more certain than is required between the parties to the instrument, and from that point of view the description as to the merchandise is insufficient. (Barrett v. Fisch, 76 Iowa, 553; 14 Am. St. Rep. 238, and cases cited; Stewart v. Jaques, 77 Ga. 365; 4 Am.
Upon the second proposition, in view of the fact that the good faith of the parties to the mortgage is admitted, we can find no just ground for holding the mortgage void as to property mentioned therein, other than merchandise. It is not contended that there was any arrangement, understanding, or permission allowing the mortgagor to deal with such other property as he did with the merchandise and the proceeds derived therefrom. Where fraudulent intent was not the motive which led to the transaction, a defect by which it loses part of its intended effect is not held to vitiate the whole transaction. In the case of United States v. Bradley, 10 Peters, 360, Mr. Justice Story, expressing the opinion of the court concerning this feature of an instrument, says: “That bonds and other deeds may, in many cases, be good in part, and void for the residue, where the residue is founded in illegality, but not malum in se, is a doctrine well founded in the common law, and has been recognized from a very early period. Thus, in Pigot’s Case, 11 Coke, 27 b, it was said that it was unanimously agreed in 14 Hen. VIII., 25, 26, that if some of the covenants of an indenture or of the conditions indorsed upon a bond are against law, and some are good and lawful, in this case the covenants or conditions which are against law are void ab initio, and the others stand good. And notwithstanding the decision in Lee v. Coleshill, Cro. Eliz. 529, which, however, is distinguishable, being founded on a statute, the doctrine has been maintained, and is settled law at the present day in ail cases where the different covenants or conditions are severable, and independent of each other, and do not import malum in se, as will abundantly appear from the case of Newman v. Newman, 4 Maule & S. 66, and the other cases hereafter stated; and many more might be added.” The following cases are directly in point, and apply the doctrine to which Mr. Justice Story refers to cases like the one at bar: Hayes v. Westcott, 91 Ala. 143; 24 Am. St. Rep. 875; Jones on Chattel Mortgages, § 351; Barnet v. Fergus, 51 Ill. 352; 99 Am. Dec. 547; Lund v. Fletcher, 39 Ark. 325; 43 Am. Rep. 270; Donnell v. Byern, 69 Mo. 468; In re Kahley, 2 Biss. 383; In re Kirkbride, 5
It is our opinion that a new trial should be granted, and therein the proceeding should conform to the views herein expressed; and it is so ordered.
Reversed.