Bedford v. Van Cott

Post, J. This is an appeal from a decree of the district court for Douglas county and involves the validity of a chattel mortgage executed by one David ~W. Van Cott to the-National Bank of Commerce of the city of Omaha. The mortgage in controversy was executed on the 14th day of August, 1890, to secure three several notes of the mortgagor, to-wit: One for $4,500, dated February 21, 1890; one for $250, dated August 6,1890; and one dated August 13,1890, for $457.42; all payable on demand and all bearing interest at the rate of ten per cent per annum. On the same day Van Cott executed a second mortgage covering the same property, in favor of Bedford, the plaintiff herein, to secure a note of $1,256.93, of the same date, payable on demand, with interest at ten per cent, and which contains a recital to the effect that it is subject to the mortgage herein first described. Upon the execution of the mortgages named Bedford and the bank, it appears, took immediate possession of the property conveyed, and gave notice of the sale thereof in-the manner provided by law; but previous to the day of sale named in said notice, Bedford commenced this action, in which he seeks to assert his mortgage subject to the lien of, the bank. Afterwards, on the application of the plaintiff, a receiver was appointed, who took possession of the mortgaged property and converted it into money. Subsequent to the appointment of the receiver, the appellants Simons Bros. & Co. and Samuel Eichberg, creditors of Van Cott, obtained leave to proceed against said property by attachment, and also to intervene in this action for the purpose of asserting their claims to the property as attaching creditors, adverse to those of the [231] plaintiff and the bank. In their petitions of intervention, which are substantially alike, they assail the mortgages on the ground that they were executed in fraud of the rights of the other creditors of Van Cott, and allege that both plaintiff and the bank had notice of and actively participated in such fraud. The allegation of fraud having been put in issue by proper pleadings, a final hearing was had, resulting in a decree in favor of the appellees, and from which the intervenors have prosecuted an appeal. In addition to the facts above stated, appellants rely upon the evidence given by Mr. Johnson, a former cashier of the defendant bank, who testified that on the 21st day of February, 1890, Van Cott and wife executed in favor of the bank a mortgage on certain real estate of the latter to secure the $4,500 indebtedness above mentioned. He also testified that it was then, in substance, agreed between "\ljpn Cott and the bank that in case the business of the former should prove unsuccessful and he should be unable to pay his creditors in full, the real estate mortgage above mentioned should be released by the bank and the indebtedness therein described secured by a mortgage upon the stock of jewelry in controversy; or, in the language of the witness, “If anything occurred so he could not pull through, he would give a chattel mortgage on the jewelry stock.” The purpose of that agreement, it is contended, was to enable Van Cott, who was then hopelessly insolvent, to place his property beyond the reach of creditors, and that the mortgage involved in this controversy, having been executed in pursuance of that agreement, must be adjudged fraudulent as against the intervenors. Another fact to which considerable emphasis is given in the brief of the appellants is that on the 20th day of January, 1891, six days after the confirmation of the sale of the mortgaged property by the receiver, Bedford, the plaintiff and purchaser at said sale, L. Van Cott, wife of the mortgagor, David "W. Van Cott, D. W. Haynes, H. D. Shull, and [232] Thomas W. Boyd executed articles of incorporation for “The Van Cott Jewelry Company;” said corporation was organized for the purpose of dealing in jewelry in the city of Omaha, with an authorized capital stock of $20,-000, and immediately proceeded to transact business, apparently as the successor of Van Cott, with the latter as general manager. On the part of the bank, Mr. Cornish, the president, testified positive!}' that the only inducement for the satisfying of the real estate mortgage was the securing of the two notes, for $457.42 and $250, respectively, and the better security for the $4,500 note. That about that time Van Cott applied for further accommodations, which were refused, the bank demanding to be protected on account of his unsecured indebtedness. He then offered to secure his entire indebtedness to the bank by mortgage upon his stock of jewelry, provided the bank would release the real estate mortgage, which proposition was accepted by the bank and the mortgage in controversy executed in accordance with that agreement. In view of that record the finding of the trial court should not be disturbed on the ground that it is not supported by the evidence. The facts relied on for reversal of the decree are consistent with the theory of good faith on the part of the bank, and the claim of the latter, if not sustained by a preponderance of the .evidence, has ample support therein for the purposes of this appeal. The theory of appellants with respect to the plaintiff’s rights is that the legal title to the property passed by the first mortgage to the defendant bank, that plaintiff acquired a mere equitable interest therein by his mortgage, and has no standing as against their claims as attaching creditors. To sustain that contention they rely upon the case of Adams v. Nebraska City Nat. Bank, 4 Neb., 373, and Marseilles Mfg. Co. v. Morgan, 12 Neb., 66; but those cases, in so far as they tend to sustain that proposition, cannot be regarded as the law of the state. According to recent cases the mort [233] gagee under a chattel mortgage acquires not the legal title to the property, but merely a lien thereon, the legal title remaining in the mortgagor. (See Musser v. King, 40 Neb., 892.) The decree of the district court is therefore Affirmed,