Welsh v. Bekey

The opinion of the court was delivered by Gibson, C. J. This transaction was evidently intended tó be a mortgage of personal property, which, when the mortgagor retains the possession, or the other indicia of ownership, was declared in Clow v. Woods, to be fraudulent, as in the case of an absolute sale. That the rule which was recognized in that case, rather than established, for the first time, ought not to be relaxed on grounds of policy, is proved by the fact, that a sham sale, to elude creditors, has become the common and successful instrument of fraud; so much so, indeed, as to have nearly superceded in practice, the old abuse of the remedy under the insolvent laws.' That rule is, however, founded, not merely in policy, but early established authority. In a leading case, which is frequently appealed to, (Ryall v. Rolle, 1 Wils. Rep. 260.) a partner in a brewery mortgaged his share in the brewhouse, utensils and' debts, but continued to carry on the business as before; and it was held that a mortgagee of goods or choses in action, being the] true owner, ought to take actual possession, as far as he can, of the goods, or the .key of the warehouse, and of the muniments by which the choses in action may be recovered. How closely that case resembles this, will be perceived.. Hayden assigns to Welsh the moiety of a crop growing on the farm where he resides, and the moiety of another crop on the farm where his tenant resides, to remain bound for the re-payment of two hundred dollars; and it is stipulated “ that Hayden shall take care of the crop while growing, cut, thrash and carry it away, under the [61] direction and control of Welsh, who is to have his money- out of the price of it.” The argument that the assignment is of a rent in the nature of chose in action, is without force, granting the fact to be so; because the assignment of a chose in action itself, is subject to the rule which requires a transfer of the possession. Did the parties leave undone that which might serve to indicate the actual owner? Instead of substituting the mortgaged for the mortgagor, and providing for a transfer of the possession as soon as it might be delivered, consistently with the bargain with the cropper, it was expressly stipulated that the mortgagor should retain the crop till it should be sold by the direction of the mortgagee, who was to have possession of nothing but the proceeds of it. Taking care of grain, growing, reaping, thrashing and selling it, include all the notorious acts of ownership that are ordinarily exercised in relation to this species of property; while the act of giving directions, is a matter usually known only to the parties. There was not one open and notorious act to be done by Welsh, that would indicate him to be the owner, or that would be inconsistent with the apparent title of Hayden. The fact is, the parties undertook to mortgage the property, just as if it were a tract of laud; and, notwithstanding the admitted purity'of their intentions, we are bound to say, the transaction cannot be supported. In reply to the argument that the contract, although fraudulent as to third persons, is good between the parties, it is proper to remark that the contest with the executor is virtually a contest with the creditors, it being expressly made a part of the case that the estate is insolvent. Judgment affirmed.