Allen v. Goodnow

LiBBEr, J. The plaintiffs claim the property replevied by mortgage from the defendants to them, dated November 15,1875. The defendants claim a portion of the property, on the ground that it is not embraced in the mortgage. The clauses in the mortgage to be considered in determining the rights of the parties are as follows : It conveys " the building and appurtenances owned and occupied by us as a furniture store . . . being the same lately owned and occupied by said Allen & Maxwell; and all the stock in trade, fixtures and property of every name and nature now in said store, with the right and privilege of selling the furniture and stock in trade now in said store, and with the proceeds to buy other furniture and stock, and so on forever, all of which shall be subject to this Ren. And it is hereby agreed and made a part of this instrument that said stock in trade shall not be reduced in value to a less amount, at any time, than $6,500.” . . . . "Provided also that if the said stock shall at any time be reduced in value to a less amount than $6,500, the said Allen & Maxwell may enter and take possession of the same without notice. Provided also, that it shall and may be lawful for said Freeman F. and Frank” (the defendants) " to continue in possession of said property, without denial or interruption by said Allen & Maxwell, until condition broken.” The case as presented to us raises two questions which it is necessary to decide to determine the rights of the parties. 1. If the defendants, from time to time, in their business, sold portions of the goods on hand when the mortgage was given, — 424 — and with tbe proceeds purchased other goods, to take their place so that the value of the stock should not be reduced below $6,500, as they agreed to do; was the title to the goods thus purchased and put into the store vested in the plaintiffs by the mortgage ? 2. If the goods claimed by the defendants were not purchased with the proceeds of goods sold, but by them on credit, are they estopped by the facts not controverted, and those which the plaintiffs offered to prove, from setting up that fact in defence ? In determining the fii’st question it is unnecessary to consider the much controverted question, upon which there is so much disagreement among the courts, whether in a mortgage of all the goods then in a certain store, and all that,the mortgagor might afterwards purchase and put into it, the title to goods afterwards purchased and put into the store would pass by the mortgage. It was fully considered by this court in Morrill v. Noyes, 56 Maine, 466, and settled in the negative. But in the case before us a different question is presented. It is not a question of title between the mortgagees and an attaching creditor or subsequent purchaser for value, but between the parties to the mortgage, and it must depend upon the conditions and stipulations contained in the mortgage. By these conditions and stipulations the defendants had the light to sell, from time to time in the ordinary course of their business; but their duty to use the proceeds of sales in purchasing other goods to take the place of those sold, and to be subject to the mortgage, so that the stock at no time should be reduced in value below $6,500, was co-extensive with their right to sell. The mortgagees were not to lose their lien on the proceeds of sales, but the mortgagors agreed to use such proceeds for them in purchasing other goods to take the place of those sold, so that the security might not be lessened. By those stipulations the mortgagors were made the agents or trustees of the mortgagees, with power of sale, and charged with the duty of using the proceeds of sales for their benefit. We know no principle of law which prevents the parties from making such a contract; and if honestly executed by the mortgagors by using the proceeds of sales in purchasing other goods which were put into the store to take the place of those sold, the title to such — 425 — goods is in the mortgagees, precisely the same as if tbey had made the sales and purchases themselves by the consent of the mortgagors. Abbott v. Goodwin, 20 Maine, 408. But if the defendants may deny that the goods claimed by them were purchased with the proceeds of sales and put into the store to take the place of those sold, as it was their duty to do ; and prove that they were purchased on credit, then it would seem that those goods are not embraced in the mortgage; because it is only goods afterwards purchased by such proceeds that were to be subject to the mortgage lien. We have seen that by the terms of the mortgage the defendants were to act as the agents or trustees of the plaintiffs, charged with the duty to use the proceeds of sales, in purchasing-other goods to be subject to the mortgage. They had the proceeds of the sales made by them in their hands. They purchased the goods and put them into the stock in the store. It is a general rule in equity that, when a trustee has in his hands trust funds, charged with the duty of investing them in certain property, and lie purchases the property, it shall be presumed that he purchased it with the trust funds in the performance of his duty. But this is an action at law, and we prefer to place our decision on well established rules recognized by courts of law. When one by his words or conduct, willfully causes another to believe the existence of a certain state of facts-, and induces him to act on that belief, so as to alter his own previous position, or to omit to assert some right wdiich he otherwise would have asserted, he shall not afterwards be' permitted to set up a different state of facts to the injury of. him thus deceived. We think that, from the terms of the mortgage, the facts not controverted by the defendants, and those which the plaintiffs offered to prove, the jury would be authorized to find that, for the purpose of retaining possession of the goods and selling them for their own benefit, the defendants induced the plaintiffs to believe that they were acting in good faith, as it was their duty to do, in purchasing and putting into the store, from time to time, new goods, -with the proceeds of the old; and were keep — 426 — ing the stock up to the value required by their covenant; and thereby induced them to delay taking possession of the stock as they had a right to do, and would have done if they had known the facts, till the goods covered by the mortgage, according to the defendants’ theory, were reduced in value from $7,822 to $2,400. Under such a finding the law will not permit the defendants to set up and prove in defence, that, while they had received from sales of the goods on hand at the time the mortgage was made, more than $5000, they had not used it to buy the new goods put into the store, as it was their duty to do, but had appropriated it to their own use and bought the goods on credit so that they would not be subject to the mortgage. The law will not sustain a defence so manifestly unjust. Verdict set aside. New trial granted. Appleton, C. J., Walton, Virgin, Peters and Stjionds, JJ., concurred.