Mercantile Exchange Bank v. Taylor

Hocker, J., (after stating the facts.) There are ten assignments of error, the first based on the interlocutory order of the Chancellor enjoining The Mercantile Exchange Bank from foreclosing its mortgage against the property of Ruth E. MacDonald, and the remainder based on the final decree, and upon the several features of that decree. The contention made here by the appellees to support the decree both orally and in their briefs, may be divided into two prospositions: First, that the mortgage of the bank was not given upon good consideration, was not bona fide and was void, and, second, that the notes and mortgage hindered, delayed and defrauded other creditors of Ruth E. MacDonald. The testimony establishes the following facts: That Mrs. M. G. MacDonald who was a married woman, the wife of M. G. MacDonald, for several years before the notes and mortgage were executed to the bank, had been engaged in carrying on in her own name, and for her own benefit, a mercantile business in Jacksonville, Florida, buying and selling millinery and other goods; that she had during that time kept an account with The Mercantile Exchange Bank, and had been in the habit from time to time of borrowing money from the bank with which to pay for goods used 'by her in her said business; that she had given the business her personal experience and attention; that the property thus acquired by her was her separate statutory property; that about the time of the execution of the notes described in the bill she had become indebted to the bank on account of moneys borrowed by her for use and used in her — 485 — said business in paying for merchandise which went into her stock to the extent of $4400.00, evidenced by the said notes; that to secure the payment of this indebtedness she and her husband executed the mortgage which the bill seeks to have annulled; that the mortgage itself in the plainest terms states that the money which was so borrowed was used by Mrs. MacDonald in carrying on her said mercantile business, and contains a covenant by both Mrs. M. G. MacDonald and her husband to pay the indebtedness evidenced by the said notes, and provides for the delivery of possession of the mortgaged property, which was clearly the separate statutory property of Mrs MacDonald, to the bank and authorizes it to sell and dispose of the same and apply the proceeds to the payment of the costs of selling and disposing of the same, and to the payment of the indebtedness to the bank, and provides for attorneys’ fees for collecting and enforcing the rights of the mortgage. The mortgage was recorded in Duval county on May 27th, 1903. The bank immediately took possession of the mortgaged property, Mrs. MacDonald being in poor health, and began to dispose of it, and up to the time it was enjoined and the property put in the hands of a Receiver in the suit of Armstrong, Gator & Company v. the defendants, viz: on the 16th of July, 1903, the bank had realized the net sum of $5541.87 from the property. On June 11th, 1903, The Mercantile Exchange Bank filed a bill to foreclo.se its mortgage, which by its terms was then due and payable. On June 12th, 1903, one of the creditors of Mrs. MacDonald filed an involuntary petion in bankruptcy against her in The United States Court charging that said mortgage was a preference, and an act of bankruptcy, and that she was insolvent. It appears from some of the testimony that upon a hearing — 486 — of this petition upon the testimony it was denied on the ground that Mrs. MacDonald was not insolvent. It appears from the testimony that the stock of goods about the time the mortgage was executed was worth $18,000. but it does not clearly appear what amount of money Mrs. MacDonald owed at that time. One of the witnesses, F. P. Fleming, Ji*., who was of counsel for the bank states that under the directions of his firm an inventory was made of Mrs. MacDonald's stock, and a list of her assets and liabilities made up, which enabled the firm to conclude that she was at that time solvent. This evidence was objected to, but no ruling was ever made upon this objection. We cannot discover from the evidence any lack of good faith in the transactions between Mrs. MacDonald and The Mercantile Exchange Bank, culminating in the execution of the notes and mortgage, or in the delivery of the possession of the mortgaged property to the bank for disposition in accordance with the terms of the mortgage. The appellees, however, contend, as we understand the contention, that the mortgage was void because the notes of Mrs. MacDonald which it was given to secure were void, and there was not consideration for said mortgage such as is contemplated in section 2, Article 11 of the Constitution of Florida of 1885, as affording a basis for a charge in equity upon the separate statutory property of a married woman, and that there is no authority under the laws of Florida for the execution of such a mortgage. This section of the Constitution has been examined several times by this court, beginning with the case of Halle v. Einstein, 34 Florida 589, 16 íáouth. Rep. 554, and has never been construed so far as we are informed as a limitation upon the power of a married woman to dispose of her separate statutory property on her own motion for any purpose which is — 487 — lawful under the statute laws of Florida, and in construing the constitution and statutes relating to this question we should always keep in mind that the statutes permit a married woman at her discretion to mortgage her real estate (section 1956, R. S. 1892) and to make sales, transfers and conveyances of any of her separate statutory property (section 2072 R. S. 1892) under the conditions there given, while section 2, Article 11 of the Constitution gives a court of equity the power m invitam to declare liens upon her separate property in the cases there enumerated. The first section of Article 11 contains a limitation upon her power of encumbering her separate property with liability for the payment of her husband’s debts. It provides that in order for it to be so liable, she must have given consent by some instrument in writing executed according to the law respecting conveyances by married women. Therefore. such a liability cannot be created in any other manner. But as we understand the case of Halle v. Einstein, supra, the second section of said Article does contain a limitation upon the power of Courts of Equity to subject her separate statutory property to the payment of obligations or debts contracted by a married woman (p. 602). The right of a married woman at her own instance to dispose of her separate statutory personal property by sale, transfer and conveyance under the authority of the statute (section 2070 R. S. 1892) is recognized as existing in Walling v. Christian & Craft Grocery Co., 41 Fla. 479, 27 South. Rep. 46, decided several years after the case of Halle v. Einstein, and this doctrine has been recognized by this court even since the case of Tunno v. Robert, 16 Fla. 738, was decided. It is held in these cases that the statute should be liberally construed in giving effect to the trans — 488 — fers of the wife. It was applied as embracing a pledge of the wife’s stock in a corporation as security for her husband’s debts in the case of Springfield Company v. Ely, 44 Fla. 319, 32 South. Rep. 892. If a married woman may lawfully under the terms of the statute (Sec. 2070 R. S. of 1892) pledge her stock in a corporation to secure her husband’s debt, we can perceive no reason why she may not lawfully mortgage her separate statutory personal property to secure the payment of money which she declares in- the mortgage itself was used for the benefit of her separate property and which the husband by his covenant in the mortgage binds himself personally to pay. The notes given by Mrs. MacDonald could not be made the basis of a personal judgment against her, and because of this fact we understand the appellee to contend that the mortgage was without a present consideration and void. But it seems to us there are several objections to this contention. First, the husband’s obligation to pay the debt contained in the mortgage is secured by the mortgage, and, secondly, the mortgaged property was delivered to the mortgagee bank which took possession of it and was proceeding to execute and carry out the provisions of the mortgage when its possession was interrupted by the receivership. These were present considerations for the mortgage. Jones on Chattel Mortgages (3rd ed.) Sec. 80. In addition there was the equitable consideration that the money represented by the notes was actually used by Mrs. MacDonald for the benefit of her separate statutory property. First National Bank of Pensacola v. Hirschkowitz, 46 Fla. 588, 35 South. Rep. 22. We are therefore of opinion that the mortgage executed by Mrs. MacDonald and her husband m favor of the Mercantile Exchange Bank upon her personal statutory property, which mortgage was., properly — 489 — recorded, was authorized by section 2070 of the Revised Statutes of 1892, and was founded upon a good, valuable and sufficient consideration, and the mortgaged property having been delivered into the possession of the mortgagee as provided by section 1983 of the Revised Statutes of 1892, a valid lien was thereby created on said property, by the lawful act of the parties themselves. We will now consider the second contention that this mortgage was not bona fide and that it hindered, delayed and defrauded other creditors of Mrs. MacDonald. To sustain this contention the appellees quote in fiheir brief at some length the testimony of the Cashier of the Bank with the view of showing that the bank in lending money to Mrs. MacDonald did not rely for security on her separate statutory property, but upon her personal integrity and ability. This, even if it were satisfactorily shown, about which there is doubt does not seem to be material. It is also contended that there is such a discrepancy between the amount secured $4400, and the value of the property mortgaged, which was inventoried at $18,000, as shows it to be fraudulent. Such a discrepancy is sometimes said to be a badge of fraud as in section 58 Bump on Fraudulent Conveyances (4th ed.) We have however examined all the cases referred to by Bump in this contention (note 5) and in no one of them is it held that such a discrepancy is of itself conclusive evidence of fraud. In each of these cases there were other circumstances tending to establish fraud independent of the question of the excessive security. In the case of Downs v. Kissman, 10 Howard 102, the Supreme Court of the United States held that “it is no badge of fraud for a mortgage, which is a mere security, to cover more property than- will secure the debt due. Any creditor may — 490 — pay the mortgage debt and proceed against the property; or he may subject it to the payment of his debt by other modes of proceeding.” This doctrine was applied in the case of Davis v. Schwartz, 155 U. S. 631, text 641, 15 Sup. Ct. Rep. 237, and also in the cases of First Nat. Bank v. North, 2 South Dak. 480, text 494, 51 N. W. Rep. 96; Black Hills Mercantile Co. v. Gardiner, 5 South Dak. 246, text 247, 58 N. W. Rep. 557; Clements v. Hartzell, 57 Kan. 482, 46 Pac. Rep. 961. In the case of Black Hills Mercantile Co. v. Gardiner’, supra, a debt of $1700 was secured by a mortgage on a stock of goods worth $10,000, and it was held that this circumstance alone was not any evidence of a fraudulent intent; that defendants had a right to give a mortgage to reasonably secure their indebtedness to the bank, and that it would have been impracticable to give it on an undivided portion of the stock, and equally so on certain enumerated articles. If the facts of this case required it we might be expected to extend this investigation to the question whether the giving of the mortgage to the bank was not such a preference of the bank as would make the mortgage void under the assignment laws of this State (Sec. 2307 et seq. R. S. 1892) and in such an investigation the first proposition involved would be whether these laws apply to a married woman at all, who is not sui juris and who can make no transfer, conveyance or encumbrance of her separate statutory property without the consent and joinder of her husband in such transfer or conveyance. But we do not think the facts of this case require such an inquiry. There is no proof here that when the mortgage was executed to the bank Mrs. MacDonald was insolvent. The fact of her insolvency was alleged in the bill and denied in the answer. It was, therefore, necessary for the complainant to show by — 491 — some evidence the fact of the insolvency. On the contrary there is some proof that at the time she was not insolvent. We are not informed as to Ihow much property Mrs. MacDonald then owed or of its value, nor are we informed as to the extent of her indebtedness, nor as to how much of such indebtedness could, under the constitution, be made a charge upon her separate property involved herein. The transaction between herself and husband and the bank appears to have been absolutely bona fide upon a valuable consideration, and free from fraud. Under these circumstances we are of opinion that the Chancellor erred in his orders enjoining the foreclosure suit of the Mercantile Exchange Bank and appointing the Receiver of the mortgaged property, and also in his final decree wherein the equities are found to be with the complainants Aitken, Son & Company. Of course the Mercantile Exchange bank, having taken possession of the mortgaged property under the terms of the mortgage, and having proceeded to sell and dispose of the same, would be liable to account to Mrs. MacDonald and such of her creditors as have liens on ,said property adjudged to be such by a court of equity in the exercise of the power conferred on it by the second section of Article 11 of the Constitution of 1885, for the proceeds of the mortgaged property over and above the debt due the bank which has priority, and the reasonable costs, expenses and attorneys and solicitors fees incurred by it, in disposing of the property and in defending and foreclosing the mortgage. What particular items or how much should be allowed the bank for such costs and attorneys’ fees are matters which cannot be adjudicated in this suit, but fall properly to be settled in the foreclosure suit of the Mercantile Exchange Bank. The decree and order — 492 — appealed from are reversed at the cost of the appellees with directions that such further proceedings be had as may be consistent with the law and this opinion. Taylor and Parkhill, JJ., concur. Shackleford, C. J., Cockrell and Whitfield, JJ., concur in the opinion.