First National Bank v. Stewart

OPINION OF THE COURT. ABBOTT, J. 2 The appellant says that the mortgage from Clark Brothers to the appellee, under which it claims title and possession, is fraudulent and void as a matter of law, and on its face, as against the execution under which he seized the goods in controversy. This contention rests on his construction of this clause in the mortgage: “Provided, further, That until default be made by the said parties of the first part in the performance of the conditions aforesaid it shall and may be lawful- for them to retain possession of the said goods and chattels and to use and enjoy the same.” To “use 'and enjoy” he claims, as applied to a stock of general merchandise kept for retail trade, must mean the sale of it in the ordinary course of business. It is probable that the mortgage was prepared by filling out a blank form in which those words were printed, as they are commonly used in such blanks, and it is not unlikely that no special significance was attached to them. The same must be said of the clause in the mortgage forbiddiag the sale or removal of the mortgaged property without the written permission of the mortgagee. Nevertheless they must be taken as they stand and construed with the other paragraph named. The phrase “to use and enjoy” can not be held to have necessarily the meaning attributed to it by the appellant, especially as it appears that besides the stock of merchandise, three horses were included in the mortgage to which the phrase “to use and enjoy” would apply, without carrying even a suggestion that they must be sold in order to their use and enjoyment. The appellant further claims that even if the mortgage did not in terms provide that the mortgagors should retain possession of the stock of merchandise and make sales from it in the ordinary course of retail trade, as they would have done if no mortgage had been given, yet if such an arrangement between the parties was proven to the satisfaction of the court or jury trying the cause the mortgage is void as against the execution in question. The only evidence of such arrangement or actual 'selling by the mortgagors was that of the appellant, who testified that on the occasion when he took possession of the goods in question under the execution above named, Clark Brothers appeared to be making sales from their stock, in the ordinary course of trade. There was, however, no evidence that this was known to the appellee. It does not, therefore, appear from the evidence reported that the mortgage in qd'estion on its''face/ or'by the'constinctidii of the parties to4 it, permitted the sale of the mortgaged goods by'the mortgagors, without the consent in writing by the mortgagees, or that such a consent was given, and the court below was warranted in holding that the mortghjje was "not void as "¿gainst the execution on which the riiortgaged property was seized'.' The: record does not 'show whether the finding' of the district court'was one of 'fact or of law, and as the question of law involved i;; one of great importance' to' the business interests ! of the Territory, and was ably briefed and argued by'counsel, we treat it as essential to the disposition of the'case "at bar. Assuming for that purpose that the right' to make sales'in the ordinary course of business from the' stock of merchandise mortgaged was distinctly given, was' that in and of itself sufficient to render the mortgage' fraudulent and void, as a matter of law against attaching or execution creditors of the mortgagors? This question is 'one on which the courts of last resort in _ this ‘country are hopelessly divided, and there are accordingly decisions by courts of 'the highest standing on each 'side. It would be 'useless for us to attempt to reconcile the conflicting decisions on the subject. We can not hope to do more 'than adopt, for this jurisdiction that view of the law which is best supported by reason. The appellant insists that the question has already been settled for this court by Spiegelberg et al., v. Hersch, et al., 3 N. M. 135, following Robinson v. Elliott, 22 Wall. 513. It is true, of course, that previous decisions of this court are not to be disregarded, and that the decisions of the supreme court of the United States are of peculiar and most weighty significance to this court. But in each of the cases referred to, the court, while in effect declaring the mortgage then under consideration void in law, went far afield in search of facts on which to base the decision. There was abundant evidence in each case cited by the court, aside from the provisions under consideration to warrant a finding of fraud in fact, and indeed, except that the appellate court, in each instance, as the necessities of the situation required, called its conclusion one of law, there is little to distinguish the decision from the verdict which a, jury might properly have rendered on the evidence recited. But, even if it be granted that the rule of law contended for by the appellant was distinctly adopted in the two cases named, we think it has been so 'far worn away by. the current of later decisions as to leave little if any more than that such a provision as the one in question is admissible as evidence of fraud, to be considered in connection with all the other evidence bearing^ on .that point. To hold that such a provision of itself. renders void.the mortgage in which it occurs, no matter how fair and ample the consideration may have been would be to declare in effect that a stock of merchandise intended for retail trade, cannot .be used as security for a loan, or for the purchase of necessary additions to it, except by first making an end of the sale for which alone the- owner obtained it and on which its value chiefly depends. It is true that such a provision as we are considering may be and often is made the cover of fraud, but on the other ‘hand it may be used in perfect good faith and with beneficial results to all concerned. “The fact that fraudulent relations- are -possible is hardly a sufficient'reason for denouncing relations which are not fraudulent. So if the question were open, or a new one, unaffected by any settled iaw of the state, we incline to the opinion that, the question is not one of law, but one of fact and good faith,” “and that the decision of the supreme court of Iowa rests on sound principles.” Brewer, J., in Etheridge v. Sperry, 139, U. S., 266. This case is approved in Huntley v. Kingman, 152 U. S., 527, 535. These cases, with' Gay v. Bidwell 7 Mich. 519, Clark v. Hyman, 55 Iowa, 14, and numerous others which might be cited, well support the conclusion stated in Jones on Chattel Mortgages, Sec. 425, 435: “That the doctrine of absolute fraud arising in a mortgage of merchandise, from the mortgagors retaining possession, with the power of disposal in the usual course of trade, is not supported by any. preponderance of authority, that it is contrary to sound principles of jurisprudence, * * * that the qualifications of the doctrine made by leading courts, have, in a large measure destroyed its force, and axe indicative that these courts themselves, wish to be rid of the whole of it." Whether under a mortgage of a stock of merchandise, articles added to it by the mortgagor, after the mortgage went into effect, can be recovered by the mortgagee from a subsequent attaching creditor, actually in possession, we do not decide, as the question was not raised in the trial court, and was only casually referred to in one of the briefs submitted to this court. Judgment affirmed. William J. Mills, C. J., Edward A. Mann, A- J-> Frank W. Parker, A. J., John R. McFie, A. J., concur.