Horton v. Williams

Young. J. The plaintiff’s testimony as to the situation of the horses when his mortgage was made, was incompetent, being mere hearsay; but it was proved that Sleator, the mortgagor, resided on a farm at Bock Dell, in which town the plaintiff’s mortgage was filed. No attempt was made to prove that the horses were not at Bock Dell when the mortgage was executed, and in the absence of any evidence as to the precise situation of the horses, it is to be presumed that, being chattels personal, they were, as the mortgage says they were,- at the place of the owner’s residence. Had the plaintiff’s testimony not been received, or had the motion to strike it out been granted, the presumption from the proof of Sleator’s residence, and from the recital in the mortgage, would have been abundantly sufficient to warrant, and indeed to require, a finding that the property was, at the date of the execution of the mortgage, situated in the town where the mortgage was filed. As the objectionable evidence only went to establish a fact which, in the absence of any evidence on the subject, the jury were bound to presume, the denial of the motion to strike it out could have worked no possible injury to the defendant, and is no ground for a reversal of the judgment. The first instruction asked by the defendant was properly refused. A mortgage of chattels, coupled with an agreement that the mortgagor may retain possession of the mortgaged property, and sell or dispose of it as his own, without satisfaction of the mortgage debt, is of no effect as a security, and can only operate to hinder, delay and defraud the creditors of the mortgagor and subsequent purchasers and mortgagees. In the early case of Chophard v. Bayard, 4 Minn. 533, it was held by this court, in accordance with sound principle and the weight of authority, that such a mortgage was necessarily fraudulent as against the mortgagor’s creditors. And see Edgell v. Hart, 9 N. Y. 213 ; Place v. Langworthy, 13 Wis. 629 ; Stewart v. Deuster, 23 Wis. 136; Collins v. Myers, 16 Ohio, 547; Freeman v. Rawson, 5 Ohio St. 1 : Bank of Leavenworth v. Hunt, 11 [191] Wall. 391. If the intent that the mortgagor may retain possession, of the goods, and dispose of them as owner, is apparont in the mortgage itself, the existence of snch intent is to be determined by the court; otherwise the existence of the intent is a question for the jury upon the evidence ; but in every case, if the intent is found to exist, the law declares the mortgage to be fraudulent, Gere v. Murray, 6 Minn. 305 ; Gardner v. McEwen, 19 N. Y. 123 ; Russell v. Winne, 37 N. Y. 591, and cases supra. The law as held in Chophard v. Bayard and Gere v. Murray has not been changed by the act requiring chattel mortgages to be filed, unless accompanied by immediate delivery, and followed by an actual and continued change of possession of the things mortgaged. Laws 1860, ch. 23; Gen. Stat. ch. 39, § 1. Unlike the statutes of Massachusetts and Iowa on this subject, our statute does not make the filing of the mortgage legally equivalent to actual delivery and continued change of possession; but like the statute of New York, of which it is a copy, “it merely adds another to the grounds on which a mortgage of personal chattels shall be void.” Wood v. Lowry, 17 Wend. 492 ; Smith v. Acker, 23 Wend. 653 ; Bullock v. Williams, 16 Pick. 33 ; Forbes v. Parker, 16 Pick. 462 ; Hughes v. Cory, 20 Iowa, 399. The plaintiff’s mortgage by implication authorized the mortgagor to retain possession of the mortgaged property until default, or until he should deem himself insecure; (Hall v. Sampson, 35 N. Y. 274 ;) but it discloses no agreement or intent of the parties that the mortgagor should be allowed to sell or otherwise dispose of any of the property. It was, however, proved that between the execution of the mortgage to the plaintiff, and the execution of that to the defendant, the mortgagor sold and consumed, with the plaintiff’s knowledge and permission, a large amount of wheat, oats and hay, and a considerable number of cattle, all of which property was included in the mortgage to the plaintiff, but not in that to defendant, which covered only the [192] horses now in dispute. If on this account the mortgage-was void as to any of the property covered by it, it was void altogether. Russell v. Winne, 37 N. Y. 591, 596. But these subsequent sales are not of themselves sufficient to make the mortgage fraudulent. The character of the instrument depends on the intent with which it was made. If the mortgage was made without fraudulent intent, and the mortgagee subsequently consented to a sale of all or a part of the mortgaged property, such a sale would discharge the lien of the mortgage on the articles sold, but would not operate retrospectively so as to avoid the mortgage itself. Russell v. Winne, 37 N. Y. 591; Klapp’s Assignees v. Shirk, 13 Penn. St. 589. The conduct of the parties in dealing with the mortgaged property may, however, furnish evidence, in some cases amounting to a moral certainty, that the mortgage was executed with a fraudulent intent. Thus, in the case of a mortgage on the stock of goods in a retail shop, where the mortgagor continues in possession, making sales from day to day as owner, and dealing with the goods and the proceeds as his own, with the mortgagee’s knowledge and assent, it is extremely difficult to resist the conclusion that this course of conduct on the part of the mortgagor was contemplated and intended by the parties when the mortgage was made. See Griswold v. Sheldon, 4 N. Y. 581; Freeman v. Rawson, 5 Ohio St. 1; Russell v. Winne, 37 N. Y. 591. But upon the evidence in this case, it was proper that the question of the intent with which the mortgage was made, should be left to the jury. The second instruction asked by the defendant was entirely correct, and should have been given, if not in the very language of the request, (Dodge v. Rogers, 9 Minn. 223,) yet in substantial compliance with it. It was improper for the judge, after giving the instruction in the very terms asked by the defendant, to impair, and may be destroy its effect, by a sarcasm or a sneer, which must have left the jury in doubt whether the instruction was given or refused. Ya [193] rious other errors are alleged hi the charge as given. Perhaps no one of the instructions excepted to, would, of itself, be ground for reversing the judgment; but taking them together, and in connection with the disposition made of the defendant’s second request, we cannot resist the conclusion that the case was not given to the jury with that fairness and impartiality which the defendant had a right to require, and by the absence of which he could not have failed to be injured. He has good reason to complain that he has not had a fair trial of his case ; and to the end that he may have that fair trial of which he has been unjustly deprived by the action of the court below, the judgment must be reversed. It is only necessary to add, for the purpose of a second trial, that one who takes from the mortgagor a bill of sale of mortgaged chattels in payment of a precedent debt, and without notice of the mortgage, is a purchaser in good faith, with all the rights of such purchaser. Stevenson v. Heyland, 11 Minn. 198 ; Shufeldt v. Pease, 16 Wis. 659. Judgment reversed.