Rice's Assignees v. Hulett

The opinion of the court was delivered by TYLER, J. The law has long been settled in this state [324] that to render a sale of personal chattels valid as against creditors, there must be a visible, substantial change of possession ; but as between the parties to the transaction the property in such chattels may pass by bargain and sale, for a sufficient consideration without a delivery. This rule, requiring a change of possession, is applicable to a mortgage of chattels ; yet an unrecorded mortgage is valid between the parties thereto. R. L. 1966 ; Gilbert v. Vail, 60 Vt. 261. So the giving of security upon chattels, without delivery, which is in effect a mortgage at common law, may be operative and valid between the mortgagor and the mortgagee, though not in writing. Jones Chat, hiort. Sec. 2. In this case we must construe the expression in the report of the referees, that they believed that the transaction of July 2d, 1888, was a loan by the defendant to Rice upon the security of this stock of goods, as a finding of that fact. In their supplemental report they expressly find that it was the understanding between the defendant and Rice that the former should hold the goods as security for his advance of two thousand dollars. There is no finding of fraud in fact nor of an intent by the defendant and Rice, or either of them, to defraud the latter’s creditors, while it is found that the defendant advanced two thousand dollars to Rice on the goods, which, by the agreement between them, the defendant was to hold as security. . The transaction of July 2d must be regarded as in the nature of a mortgage between the parties to it, subject of course to be defeated by attaching creditors or innocent purchasers at any time before the defendant took the actual manual possession. But no such third persons in fact intervened prior to October 25th, when the defendant took possession of the goods by virtue of his right under his lien. His taking actual possession related back to the right of possession which he acquired July 2d, and therefore the act was not in contravention of the provisions of the insolvent law. When Rice was adjudged a bankrupt, November 10th, the defendant had, with Rice’s consent, been in the actual possession of the goods fifteen days by virtue of the lien he acquired July 2d. [325] The case of Peabody v. London, 61 Vt. 318, is authority that the goods purchased and put into the store between the dates above named, passed to the defendant under his lien upon his taking possession thereof. Chase v. Denny, 130 Mass. 566. In Collender Co. v. Marshall, 57 Vt. 232, Rowell, J., makes the question, whether at the time of the filing of the petition in bankruptcy the property could have been taken on execution against the debtor, the test of the assignee’s right. If it could, it passed to Mm by the very terms of the statute. R. L. 1820. If it could not, the converse must be true, that it would not have passed to the assignee. Applying this rule, the goods in controversy, on November 10th, had passed beyond the reach of Rice’s assignee in insolvency and beyond the operation of the insolvent law. This holding is in consonance with the decisions of the Massachusetts court in cases arising under a similar statute, and with the decisions of this court above referred to. The assignee does not seek to recover an equitable interest which the estate may have in the goods, under section 1802 R. L., but brings this suit, claiming that the transfer of October 25th was fraudulent in law, and that the defendant acquired no property in the goods. This claim cannot be maintained. The other questions that have been discussed by counsel arise upon the defentant’s exceptions to the admission of evidence by the referees, and are immaterial in the view that we have taken of the main question. Judgment reversed, and judgment for the defendant.