Braley v. Byrnes

Gilfillan, C. J. This is the only question of law in the., ■case: Does retaining possession by the mortgagor of the property in a chattel mortgage, duly filed, render the mortgage conclusively fraudulent and void, or does it merely raise such a presumption of fraudulent intent as imposes upon the mortgagee the onus of establishing actual good faith, and the absence of a purpose to defraud creditors? The old [298] supreme court in New York held that continued possession in-, the mortgagor was conclusive evidence of a fraudulent intent,, unless it was made to appear that a change of possession was physically impossible, or at least extremely difficult. But such has not been generally supposed to be the rule in this state, and, although until now the question has not been directly raised here, the court has made several decisions which assume a different rule, for it would not have been necessary to make them, had the rule been as formerly held in New York. See Edson v. Newell, 14 Minn. 228; Marsh v. Armstrong, 20 Minn. 81; Horton v. Williams, 21 Minn. 187; McCarthy v. Grace, 23 Minn. 182. And that where the mortgage is duly filed, retaining possession by the mortgagor merely ■ raises a presumption of' fraudulent intent, which may be rebutted by the mortgagee, seems to follow necessarily from the provisions of the statute.. Gen. St. c. 39, § 1, has no application to a case where there-is a continued change of possession. It„provides only for a-case in which the mortgagor is in posses don. It reads: “Every mortgage on personal property which is not accompanied by an immediate delivery, and followed by an actual and continued change of possession, of the things mortgaged,. shall be absolutely void as against the creditors of the mortgagor, and as against subsequent purchasers and mortgagees. in good faith, unless it appears that such mortgage was executed in good faith, and not for the purpose of defrauding any ■ creditor, and unless the mortgage, or a true copy thereof, is ■ filed as hereinafter provided.” Section 3 makes the mortgage ■ so filed “full and sufficient notice to all parties interested of' the existence and conditions thereof.” Had the legislature intended to make or retain the rule that possession by the-mortgagor should of itself render the mortgage void, the provisions we have quoted could have had no place in the statute;. and had it been the intention that nothing should avoid the effect of possession retained by the mortgagor, but proof that change of possession was impossible or extremely difficult, we [299] think the mortgage would have been declared void unless such impossibility or difficulty appears, instead of, “unless it appears that such mortgage was executed in good faith, and not for the purpose of defrauding any creditor.” The effect which the statute gives to want' of continued change in possession is to make the mortgage prima facie fraudulent, but to permit-the mortgagee to sustain his mortgage by proof of good faith. The statute does not regard the want of change in the possession as of itself necessarily working a fraud, and the court cannot so regard it. Upon the evidence in the ease we see no reason to disturb-the verdict; were the evidence as to the Hildreth mortgage out of the case, there would be barely occasion to question the-good faith of plaintiff’s mortgage. The evidence of bad faith in executing the former is strong; but it does not appear beyond fair controversy- on the evidence that the two mortgages were connected as parts of the same scheme, or were-made with the same intent, nor even that plaintiff knew with what intent the Hildreth mortgage was executed. Order affirmed.