Rathbun v. Berry

The opinion of the court was delivered by Valentine, J.: This was an action of replevin, brought in the district court of Osborne county on November 27, 1888, by E. B. Rathbun against W. A. Berry, The Beloit Milling Company, a corporation, George W. Bittman, O. B. Taylor, and W. N. Todd, copartners, doing business as Bittman, Taylor & Co., John Jackson and Andrew Jackson, copartners, doing business as Jackson Bros., to recover certain goods, wares and merchandise alleged to be unlawfully detained by the defendants from the plaintiff, and of the aggregate value of $563.98. The plaintiff claimed the property under a chattel mortgage executed to him on November [741] 21, 1888, by James E. Andrews, to secure a promissory note then given for $550. The defendants claimed the property by virtue of the levy of certain attachments upon the property as the property of Andrews. The defendant Berry was the officer that levied the attachments, and the other defendants were the attaching creditors. The mortgage was deposited in the office of the register of deeds on November 24, 1888; and, so far as it is necessary to quote it, it reads as follows : “This mortgage is hereby made to cover any and all goods that may be purchased from time to time to replace goods sold that are covered by this mortgage. “Provided, however, That if said debt and interest be paid as above specified, this sale and transfer shall be void; that the above-described property is now, and (except as hereinafter provided) shall remain in the possession of the said first party at Downs, township of Ross, Osborne county, Kansas, until default be made in the payment of the debt and interest as aforesaid, or some part of it. “Provided always, That in case of a sale or disposal of any of said property, or attempt to dispose of the same, or a removal or attempt to remove the same or any part thereof from said county, or an unreasonable depreciation in the value, or if for any other cause the said party of the second part shall deem itself unsafe or insecure, then the whole of said debt and interest thereon shall forthwith become due and payable, and the said party of the second part, or its authorized agents, may take said property, or any part thereof, into its own possession, and sell the same at public or private sale, and out of the proceeds of such sale retain the whole of such debt and interest thereon, and all necessary costs incurred in finding and caring for said property, and return the surplus to said party of the first part; and if from any cause said property shall fail to satisfy said debt and interest and costs incurred, said first party agrees to pay the deficiency. In case of conditions broken, said property or any part thereof may at the option of the mortgagee be taken to Downs, Osborne county, Kansas, or to any place in the county where the same may be at the time of taking’ possession thereof, and there be advertised and sold.” The case was tried before the court and a jury, and the [742] plaintiff, on his own behalf and as a witness, gave the following, among other testimony: “Q,ues. When you left the goods in Andrews’s possession, what did you intend that he should do with them? Ans. I supposed that he was going to sell out and put his money in the bank and meet this obligation; that was my intention; I do n’t know as there was anything said about it. I have no recollection of anything being said as to what he was to do with them at all. “Q,. You had no talk about it whatever? A. No. “Q,. You expected he would go on and sell them out at retail as he had been doing ? A. Yes, sir.” It also appears from the evidence that, prior to the execution of the mortgage, Andrews was engaged in a mercantile business in the city of Downs, in Osborne county. He with his family resided in the upper story of the building in which he did business, and his goods were kept in the lower story thereof. These goods constituted the property which Andrews mortgaged to the plaintiff. The plaintiff and Andrews were brothers-in-law, having married sisters. The note secured by the mortgage was given for $ 100 then loaned and for a preexisting debt. Andrews retained the possession of the goods. On November 24, 1888, Andrews left the country, and has never returned. On the next day, which was Sunday, the creditors of Andrews demanded of the plaintiff that he should execute to them a bill of sale for the goods, but he refused, and on the evening of that day he went to the residence (or late residence) of Andrews, for the purpose of obtaining the possession of the goods. Mrs. Andrews was at home, and in the story above the place where the goods were kept, which latter place was called the “store.” He procured a •key to the “store” from Mrs. Andrews, with the intention, as he informed her, of taking the possession of the goods. He then went down to the “store,” unlocked the front door thereof, stepped inside,, stayed there for a few minutes with the intention of taking the possession of the goods, and then went out and locked the door behind him. A few hours later, and after midnight, the aforesaid orders of attachment [743] were levied upon the goods, and the officers took the possession of them, and on the next day the plaintiff commenced this action. These are substantially all the facts of the case that are of any importance.. The defendants demurred to the plaintiff’s evidence, upon the ground that it did not prove any cause of action, and the court below sustained the demurrer and rendered judgment accordingly; and the plaintiff, as plaintiff in error, brings the ease to this court for review. The only question presented to this court is, whether the aforesaid chattel mortgage is void as against the mortgagor’s attaching creditors. Under section 2 of the statute of frauds, every transfer of property, real or personal, made with the intent to hinder, delay or defraud creditors, is void. It is also true that a chattel mortgage generally has a tendency to hinder and delay the creditors of the mortgagor in the collection of their claims; and it is also a general rule of law that every person is presumed to intend the natural and probable consequences of his own voluntary acts. But where a chattel mortgage is executed in good faith and for the purpose of securing a real debt, and the terms are reasonable, it will be held to be valid, although it may have a tendency to hinder or delay the creditors of the mortgagor in the collection of their claims. The present mortgage contains the following stipulation: “This mortgage is hereby made to cover any and all goods that may be purchased from time to time to replace goods sold that are covered by this mortgage.” This stipulation, it is said in the brief of defendants in error, was in writing, while very nearly all the remainder of the mortgage was in print, a blank printed chattel mortgage having been used in drawing up the mortgage executed. This statement of counsel has not been denied, and it is probbly true, although there is no direct evidence in the record tending to show whether the stipulation was in writing or not, or what portion of the mortgage was in writing and what not. The stipulation, however, as found in the record brought to this court, is underscored, and, as we understand, the court [744] below held that the mortgage was void upon the ground that this stipulation rendered it void. Of course the court below had the mortgage before it and knew what part of it was in writing and what was not. Now, for the purpose of upholding and sustaining the decision of the court below, we think that it should be held that this stipulation was in writing, and that the other stipulations in the mortgage which might tend to contradict it or modify it should be held to be in print. And further, this stipulation is an extraordinary one, while the other stipulations in the mortgage are common and ordinary stipulations, such as are generally found in chattel mortgages. And if we should hold that this stipulation was written in the mortgage by the parties, then we must consider that it expressed their exact intention, and that any other stipulations in the mortgage only in print, and which might not be in harmony with it, did not express their true intention. And construing the stipulations in this manner, it would seem to require that the mortgage should be held to be void. We think that by unavoidable implication this stipulation authorized the mortgagor to sell and dispose of the goods — not merely at retail, or in the ordinary course of trade or in the ordinary course of business, which would simply be an authority to release from the incumbrance of the mortgage only a small portion of the goods from time to time — but it gave to the mortgagor an authority to sell and dispose of the whole of the property at once, or in the lump, or in any sized lots, as he might choose. There is in fact no limitation of any kind or amount upon the sale. Besides, the mortgage does not in fact provide what should be done with the proceeds of the sale when the goods are sold. There is no stipulation that the mortgagee should have the proceeds, or that they should be kept or deposited for his benefit. All was left with the mortgagor, and he had the power to do as he chose. It is true the stipulation contemplates- that other goods might be purchased to replace the goods sold, but the purchase of other goods was not obligatory. Of course any sale [745] of any portion of the mortgaged goods would destroy the mortgage incumbrance to that extent, and a sale of all the mortgaged property would completely destroy the mortgage. A power given to the mortgagor to sell the whole of the mortgaged property would really render the mortgage nugatory, and the mortgagor would still remain substantially the owner of the property. Such a power in any mortgage would be inconsistent with any supposed incumbrance granted by the mortgage, and a mortgage granting such a power should be held to be at least prima facie if not absolutely void. There is nothing to this case, either in the mortgage or as shown by the extrinsic evidence, that tends to explain how the parties intended that the sale or sales of the mortgaged property should be made, or what should be done with the proceeds. The plaintiff, by his own parol testimony, showed that he understood that the mortgagor would “sell out” the goods, or sell them at retail, as he had been doing, “and put his money in the bank and meet this obligation;” but, so far as is shown, there was no agreement or understanding betxoeen the parties or on the part of the mortgagor, other than that shown by the mortgage, as to how the sale or sales should be made or what should be done with the proceeds. Hence, under the stipulations of the mortgage and the parol testimony, we must assume that the mortgagor, while in the possession of the mortgaged property, had the absolute control over the same, and the absolute right to sell it as he chose, and the absolute control over the proceeds. [746] gage, void as against creditgagormort' [745] But it is claimed that the plaintiff as mortgagee obtained the possession of the goods before any of the same were sold, and that such possession cured all irregularities and rendered the mortgage valid. The possession, however, was not procured by any delivery of the goods by the mortgagor or with his consent. The plaintiff took the possession of the property without the mortgagor’s consent and only by virtue of the authority given by his void mortgage — not void because it had not been deposited with the register of deeds; not void because of a want of notice to the mortgagor’s creditors or [746] subsequent purchasers or incumbrancers; not void because of an insufficient description of the mortgaged property; not void because of a want of a renewal affidavit, and not for any other mere irregularity which was not in contravention of good morals or public policy, but void because of a stipulation contained in the mortgage which must be considered as against public policy, if not in contravention of good morals, and as tending to hinder and delay creditors in the collection of their just claims, and thus hindering and delaying of creditors without any good reason therefor, and providing: for such a disposal of the property as must necessarily render the mortgage itself substantially nugatory. What the effect of the delivery of the possession of the mortgaged property by the mortgagor to the mortgagee or a taking of the possession of the property by the mortgagee with the consent of the* mortgagor would be, it is wholly unnecessary in this case to decide, for nothing of that kind took place in this case. It was not shown that the mortgagor ever gave his consent otherwise than by the mortgage. There is no evidence tending to show that the mortgagor’s wife had any authority from the mortgagor to deliver the property to the mortgagee, and it cannot be supposed that she had any such authority merely because she was his wife. A taking of the possession of mortgaged property by the mortgagee, to be sufficient to cure all irregularities and to make the mortgage valid, must be either under the authority of a written instrument valid and sufficient for that purpose, or under some valid parol consent of the mortgagor. Such was not this case. •• We have given this case a great deal of attention, and carefully considered it in all its aspects. We have also examined many authorities, with a hope that our minds might become thoroughly satisfied, but still we have .great doubts. Among the decisions of our own court which we have examined are the following: Savings Bank v. Sargent, 20 Kas. 576; Frankhouser v. Ellett, 22 id. 127; Dayton v. Savings Bank, 23 id. 421; Cameron v. Marvin, 26 id. 612; Muse v. [747] Lehman, 30 id. 514; Leser v. Glaser, 32 id. 546; Dolan v. Van Demark, 35 id. 304; Howard v. Rohlfing, 36 id. 357; Gagnon v. Brown, 47 id. 83. See also, 3 Am. and Eng. Encyc. of Law, 196, 197; Jones, Chat. Mortg., §§164, 178, and the whole of chapter 9, including §§379 to 425. •We think the conclusions which we have reached in this case are in harmony with the spirit of all the decisions heretofore rendered by this court, and are also in harmony with the most of the decisions rendered by other courts. Many decisions of other courts, however, may be found with which the foregoing conclusions are not in harmony. Therefore, while we have very grave doubts as to the correctness of the decision rendered by us in this case, yet, taking into consideration the peculiar facts of this case, with all the reasons for and against the present decision, and taking into consideration all the decisions of other courts sustaining or opposing this decision, we are inclined to think that the decision is correct, and therefore the judgment of the court below will be affirmed. All the Justices concurring.