Kellogg v. Clyne

THAYER, District Judge, after stating tbe facts as above, delivered tbe opinion of tbe court. In view of tbe nature of tbe case, and tbe evidence offered to substantiate tbe allegations of fraud, we think that some of tbe exceptions to tbe charge are well founded. In tbe course of tbe charge tbe trial court made use of tbe following language: “A great deal has been said about brothers, and the conspiracy between them. I do not know of any testimony that tends to show any conspiracy between the brothers for the purpose of defrauding creditors, so far as 1 am able to see, and I think I ought to say to the jury that under no circumstances does the testimony justify [the inference] that there was a conspiracy entered into between the brothers for the purpose of defrauding these creditors of John Clyne.” We are unable to regard this portion of tbe charge as a mere opinion as to what tbe finding ought to be, such as a court is entitled to express, if, in its judgment, tbe case is one which warrants such action. It was a definite statement to tbe jury that there was no testimony, so far as tbe court could see, which tended to show tbe existence of such a conspiracy to defraud tbe creditors of John Clyne as tbe plaintiffs in error had alleged; and it was reinforced by tbe further remark, that under no circumstances would tbe testimony justify tbe conclusion or inference that such a scheme bad been formed. Tbe statement as made, even if it could be regarded as a mere expression of opinion on a question of fact, was not supplemented by tbe further statement that tbe jury were at liberty to disregard such opinion, if they thought proper. We are unable to see that there is any material difference between such a direction as was given, and a peremptory instruction to return a verdict in favor of tbe intervener. Tbe sole issue in tbe case was whether tbe mortgage of date January 3, 1891, bad been contrived by and between John and Louis C.- Clyne with a view of hindering, delaying, or defrauding tbe creditors of tbe former. While that [699] issue was ostensibly left to the determination of the jury, yet it seems to have been submitted to the triers of the fact under directions from the court which practically left them no freedom of action. We cannot presume in view of the very positive assertion that there was no evidence to support the charge of fraud and collusion, that the jurors took a contrary view, and that they fairly exercised their undoubted right to weigh the evidence bearing on that issue, and to determine it as they thought proper. We entertain no doubt that the facts and circumstances developed on the trial formed a sufficient basis for an inference that the chattel mortgage in controversy had been executed under an arrangement, express or implied, between the mortgagor and the mortgagee, with a view of withdrawing a portion of the mortgagor’s property from the reach of his creditors. Whether that was a justifiable inference, in view of the relationship of the parties, and all of the circumstances in evidence, was peculiarly a question for the jury, and the jury should have been left at full liberty to determine it. A peremptory instruction to return a verdict in favor of the intervener would have been erroneous, and the course actually pursued seems to us to have been equally prejudicial. The contention of the plaintiffs in error in the lower court appears to have been that the evidence justified an' inference that John dyne was not indebted to his brother Louis on January 3, 1891, when the chattel mortgage was executed, or, if he was indebted to Mm in any sum, that he was not then indebted to the amount of the mortgage, and that the amount of such indebtedness had been intentionally exaggerated to cover up the mortgagor’s property. With reference to that contention the trial court charged the jury as follows, and an exception was duly taken by the plaintiffs in error: ‘‘But there is another attitude in which that claim may be placed. I know there is a controversy, and of course you know that there is a controversy, between the parties, as to the existence o£ this indebtedness from John to Louis of $3,500, $3,200, or $3,600, or whatever sum it ia The testimony may satisfy you that at least a portion oC that indebtedness existed at the time that the mortgage was given; and, if it does, it will bo the duty of the jury to find that fact, and for the mortgagee to that extent, as I think, in any event. You may believe from the testimony, all taken and considered together, that the real indebtedness from John to Louis dyne did not equal $3,200, and that the mortgage was given for the purpose of covering up a part of the property on which the mortgage was given. If the testimony does not satisfy you that the whole of it was due, then yon ought to find from the testimony-just what amount was duo at the time oí the giving of the mortgage from John to Louis.” The same idea, to substance, was conveyed to another part of tlie charge, where the court gave directions as to the form and amount of the verdict. It ia evident, we think, that this portion of the charge was vicious, and prejudicial to the plaintiffs in error. It declared, in effect, that if a debtor executes a mortgage in favor g£ Ms creditor for a greater sum than is due to Mm, and with intent to cover up a part of Ms property, such mortgage may nevertheless be upheld as a" valid security for whatever sum is actually due to the creditor. This is not the law, if the creditor accepts the [700] mortgage with knowledge that Ms claim has thus been intentionally exaggerated. A mortgage executed by a debtor in failing circumstances, for a sum known to be in excess of what is actually due to a creditor, is presumptively fraudulent. From the fact that the jury found that the sum due, of principal and interest, on November 25, 1891, was only $3,265.50, it would seem that they must have concluded that the indebtedness of the mortgagor to the mortgagee on January 3, 1891, was considerably less than the face of the mortgage. Under these circumstances, we are not able to say that the misdirection last complained of was a harmless error. It is further assigned for error that the court gave the following direction: “A great deal has been said about the testimony that relates to the store buildings. Suppose that all that was claimed with reference to that is actually true; that It was originally conveyed by John Olyne to Joseph Olyne for the purpose of cheating and defrauding and hindering the bank in the effort of collecting its debt; that Joseph kept it, and after a while it was transferred from Joseph to Louis, without any consideration whatever; and that Louis held it as a pledge or security for the payment of his alleged debt. He would not be bound to rely on that at all. If he got other security, he could rely on the other security for the payment of his debt, and have a perfect right to receive a chattel mortgage for the payment of that debt.” In this instruction ttere is an evident assumption tbat Louis C. Clyne received the conveyance of the ’Maple Park property as security for the debt of John Olyne, which was subsequently further secured by the chattel mortgage in controversy, and upon that assumption the court proceeded to direct the jury that the inter-vener had a perfect right to take such additional security, and to rely upon it. The record shows, however, that there was no testimony* to support the assumption on which the instruction was predicated. The attaching creditors claimed that the conveyance of the Maple Park property to the intervener was but one step in a scheme whereby John Clyne had attempted to withdraw a portion of Ms property from the reach of Ms creditors, and that Louis C. Clyne held the Maple Park property in secret trust for Ms brother John. On the other hand, all of the evidence offered by the inter-vener tended to show, and such was his contention, that he had bought the Maple Park property outright from his brother Joseph Clyne, the real owner, for the sum of $3,000. We think, therefore, that the portion of the charge last quoted was misleading, and for that reason erroneous. An instruction ought not to be predicated upon a purely hypothetical state of facts, for wMch neither party contends. Instructions of that Mnd tend to divert the attention of a jury from those issues which are really in controversy. We are also of the opinion that the trial court erred in directing the jury, in substance, that they should ignore all of the evidence concerning “the alleged transfers of Joseph Clyne,” and “what he had said and done.” It was clearly competent for the attaching creditors to show, as they did show, that John Clyne had transferred all of Ms real estate at Stafford, Kan., to E. H. Landes, in November, 1890, with the understanding that’ the latter should convey it to Joseph Clyne, and that such conveyance was subse [701] quently made by Landes. It was also competent to show Joseph, dyne’s connection with the Maple Park property. All of this testimony had a direct bearing on the issue whether John dyne had acted in good faith in executing the chattel mortgage, or whether that was merely one step in a scheme to cover up his property, and to defraud his creditors. The direction given, to ignore all evidence of what Joseph Clyne had said and done, and all evidence of alleged transfers of property, seems to us to have had the effect of withdrawing from the jury much relevant and competent testimony, and that the action of the court in that, respect was erroneous. Some exceptions were also taken to the action of the trial court in excluding testimony. With.reference to such exceptions, it is sufficient to say, that in our judgment they are without merit. Such relevant and material facts as were at first excluded were eventually proven hy intervener’s own witnesses. Under these circumstances, we do not see that the plaintiffs in error have any just cause for complaint. For errors apparent in the charge, the cause is reversed and remanded, with directions to grant a new trial.