Merchants' National Bank v. Abernathy

Ellison, J. — The respondent sued the appellants in the court below to recover damages for wrongfully seizing, on January 13, 1883, under a writ of attachment issued by a justice of the peace, in a suit in which .appellants were plaintiffs and one David Gfrauman was defendant, certain personal property consisting of saloon and restaurant fixtures and utensils, etc. This property, the respondent claims, it was entitled to possession of, as the holder of certain negotiable notes secured by chattel mortgage on said property, made by one A. J. Howell in favor of said Grauman, dated January 5, 1883, and duly endorsed before maturity by said Grauman, and delivered to the respondent as collateral security for a loan of eight hundred dollars made by respondent to Grauman. In their amended answer the appellants admitted the seizure on the day alleged by respondent, but denied that it was wrongful, and further alleged that on January 5, 1883, said Grauman was indebted to appellants and others, and in order to defraud his creditors, transferred the property ■ in controversy to said Howell a&d took back the notes and mortgage of Howell mentioned1 in the petition, to secure the “pretended purchase money;” that said sale and mortgage were made to cover up said property and to hinder, delay and defraud the creditors of said Grauman ; that prior to said seizure appellants had no notice that the bank held the notes mentioned in the mortgage, and also that afterwards, on January 24, 1883, appellants instructed the constable to release their attachment, which was done. It is not pretended that the plaintiff had any notice of Grauman’s fraudulent purposes or in any way participated therein. The mortgage securing these notes was conditioned ‘ ‘ that if I pay to the said David Grauman, his executors, administrators and assigns, my two notes each dated Kansas City, Mo., January 5, 1883, each payable for value received to the [222] order of David Grauman,” etc., etc., “then this conveyance shall be void, otherwise to remain in full force and effect.” It was stipulated in the mortgage that the mortgagor should retain possession of the property, but that in case of sale, disposal, removal or depreciation of the same, “the said David Grauman or his legal representative may take said property or any part thereof into his possession,” and that, upon taking possession, “the said David Grauman or his legal representative may proceed to sell the same,” etc. Plaintiffs recovered below and defendant appealed. I. It is contended that the mortgage and notes, known to the mortgagee, were a sham and executed for the purpose of defrauding the mortgageor’s creditors; and that though the notes in the hands of the plaintiff might, on account of their negotiability, be free from this vice, yet the mortgage pertaining only to the property might be defeated notwithstanding the assignment of the notes to plaintiff who had no knowledge of the fraud. I do not agree to this view. I think it is not supported by the cases of Linville v. Savage, 58 Mo. 248; Logan v. Smith, 62 Mo. 455, and Orriek v. Durham, 79 Mo. 174. The first-named case is not easily understood ; it was reviewed and explained in Logan v. Smith. Neither of the cases presents the question now before us, and the language used in those decisions must be construed with reference to the subject under discussion. In the recent case of Hagerman v. Sutton, 91 Mo. 519, our supreme court have disposed of the question by holding that the assignee or indorsee of a negotiable note, under-due, takes the mortgage precisely as he takes the notes, and as fully freed from all defenses. This is the view of the great weight of authority and has the endorsement of Daniell on Negotiable Instruments, sections 834, 834a, and of Jones on Mortgages, section 834. The matter is well stated in 16 Wall. 271, as follows : “ The contract as regards the note was, that the maker should pay it at maturity to any bona-fide endorsee without reference to any defenses to which it mieht have been liable in the hands of the [223] payee. The mortgage was conditioned to secure the fulfilment of that contract.” II. It is next insisted- that as the mortgage provides that in case of removal, depreciation, etc., of the property, the said Grauman, “ or his legal representative” may take said property and that said Grauman or “his legal representative” may proceed to sell the same, that plaintiff was not entitled to.the possession of the property and consequently ought not to maintain this suit; that no one was entitled to the possession but Grauman or his executor or administrator ; that the words, legal representative, necessarily mean an executor or administrator, and in no event can have reference to the assignees or indorsees of Grauman. Counsel, with commendable research, have collated a number of authorities on this branch of the case. There can be no doubt that primarily, the phrase, legal representatives, refers to one’s executors or administrators. This is well-nigh universally so, when applied in'connection with the decease of some one. It is not necessarily so when not so applied. The authorities cited are nearly, if not all, cases of this nature. Such as where one in a will, in referring to matters to occur after his death, speaks of his legal representatives. So where statutes authorize suits for the death of one to be brought by his legal representatives. But it is held that even in cases where the death of the party to be represented is in contemplation, that the context of the instrument may change the usual meaning of the words in the given case. This mortgage should be construed as a whole and in the light of its legal attributes. , The express condition of the mortgage is, that the notes must be paid to Grauman, his executors, administrators, or assigns. Then proceeding to provide a safety clause, it is stated that Grauman or his legal representative may take the property. Legal representative, as here used, unquestionably would include those who may represent him by assignment as well as those who would represent him after his decease. The law as we have-seen, gives to the mortgage, as being incident to the notes, the quality of [224] negotiability, ,and as such the parties would be held to contemplate their assignment and a full succession by the assignee to the rights -of the assignor. Besides, the safety clause in a chattel mortgage is for the benefit of the mortgagee and his assigns, and acts under such clause are within the discretion of the mortgagee to be exercised at his will, if done in good faith. Jones on Chat. Mort., secs. 431, 433. The exercise of the powers given under the safety clause are in their nature personal to the-mortgagee or holder of the notes secured. III. Though the notes in this case were only endorsed as collateral security, yet the endorsee holds them as for value and is entitled-to be protected as though an absolute bona-fide purchaser. IY. The objections to testimony were too general to be noticed. The judgment, with the concurrence of the other-judges, is affirmed.