Barnet v. Fergus

Mr. Justice Lawrence delivered the opinion of the Court: It was held by this court, in Davis v. Ransom, 18 Ill. 402, and in Read v. Wilson, 22 ib. 380, that a mortgage of a stock of goods, containing a provision authorizing the mortgagor to •retain possession for the purpose of selling in the usual course of trade, was fraudulent and void as to creditors. This was held to be fraud in law. It is a necessary consequence of •these decisions, that where the mortgage contains no such provision, but the mortgagee nevertheless knowingly permits the mortgagor to make sale of the property in the ordinary course of trade, and in the same way as before the mortgage was made, .this would be such a perversion of the mortgage from its legitimate purposes as to withdraw from its protection, and place within the reach of other creditors, all of the property which the mortgagee had permitted the mortgagor to hold for sale in the ordinary course of his business. This principle has been recognized in Griswold v. Sheldon, 4 Comst. 580, and Delavan v. Ensign, 21 Barb. 88. The case of Ogden v. Stewart, 29 Ill. 124, quoted by counsel for appellee, is hardly in point, as .that was decided on the ground that the mortgagee, having .knowingly permitted the mortgagor to make previous sales, must be considered, in a contest with a purchaser of the remnant of the goods, to have waived the provision in the mortgage authorizing him to take possession in case the mortgagor should attempt to sell. The court simply held there was an implied authority from the mortgagee to make the sale, and therefore he could not object tó it. But it does not follow, from the principle above laid down, that where a mortgage covers different kinds of property, as, for example, a stock of goods in a store, held for the purposes of trade, and a parcel of horses upon a farm, because the mortgagee loses his right to enforce his mortgage as against creditors or purchasers in regard to the goods, he has therefore lost it in regard to the horses. It is to be remembered that the mortgage, in the case supposed, as in the case at bar, is a valid instrument upon its face and at its inception. But the mortgagee may lose his right to enforce it by subsequent acts, and he does so in regard to so much of the property as he permits the mortgagor to keep for the purposes of sale. But such subsequent acts in regard to a portion of the property do not necessarily render the mortgage void in toto. If may become invalid as to a part of the mortgaged property, and remain valid as to the residue. In the case above supposed, because the mortgagee has consented that the mortgagor shall sell his stock of goods, it would be extremely unreasonable to tell him he could not enforce his lien against the horses. The utmost that could be said to his injury, would be, that where the Iona fides of the mortgage comes in question, the fact that he has permitted the mortgagor to use the goods in a manner inconsistent with his own rights as mortgagee, is a circumstance which a jury would have a right to consider in determining the question whether the mortgage was originally made to defraud creditors, and is, therefore, equally void as to both goods and horses. The degree of weight to be given to this cirenmstance, would, of course, greatly depend upon the other evidence in each case. Taken by itself, and with no other circumstances to throw discredit upon the mortgage, it would merely show that the mortgagee had consented to release the goods from the lien of his mortgage, thereby impairing his own security to that extent, but would by no means justify the inference that he intended to abandon his lien upon the horses. Applying these principles to the case at bar, we do not find it difficult of decision. The mortgage covered a printing press and its appurtenances, and certain books and blanks which had been printed by the mortgagor, and which were held by him for sale. The evidence shows he continued, with the knowledge of the mortgagee, to sell these books and blanks in the same way after as before the mortgage was made. As to these, the other creditors had a right to insist the hen of the mortgage, as against themselves, was lost. But not so as to the printing press and its appurtenances. The mortgagee had consented to nothing, in regard to that portion of the property, inconsistent with his position and rights as mortgagee. He had a right to relinquish his lien upon the books without losing that upon the press, and such relinquishment is, of itself, but very slight evidence of a fraudulent intent in making the mortgage. It is not claimed that the debt was not honestly due the mortgagee, and the court should have found for the plaintiff as to all the property except the books and blanks. For this reason, the judgment must be reversed and the cause remanded. Judgment reversed.