Morgan's Assignees v. Shinn/Opinion of the Court

We think the averment of the answer that the bill of sale was intended by the parties to be only a security, is sufficiently proved. The testimony of Shinn himself is positive. It is confirmed by that of the scrivener, and the testimony of both is entirely uncontradicted. The fact that a power of attorney was given at the same time with the bill is also significant. Why empower Shinn to collect money which might become due to him in the District of Columbia, and to attend to his interests, if Kelly then parted with all his ownership in the vessel? There is no evidence that he had any other interests in the District, and he was a resident of Philadelphia. It is true the bill of sale was recorded at the instance of Shinn; but that was necessary, whether it was a security or an absolute transfer. It is true also that the vessel was re-enrolled on the 23d of October, 1865 (Morgan having sworn that Shinn was then the owner of one-quarter), but the new enrolment did not negative the fact that Shinn was only a mortgagee. So also, Shinn joined with Savage and Morgan in ratifying the act of Comstock in taking out a policy of insurance on the vessel, but that was not inconsistent with his present assertion that he held the property as a security for a debt. He took no note for the money advanced by him for Kelly. He could not have taken one when the bill was made, for it was then not known how much he might be required to advance. But when the money was advanced, he did take a receipt in Kelly's name. If in truth a debt was created, the fact that a bond or note was not taken does not make the bill of sale any the less a mortgage, though the absence of a bond or a note is to be considered in inquiring whether a debt was intended. Nothing in all this, we think, overcomes the positive evidence that the arrangement was a loan rather than a purchase, and that the bill of sale was intended only as a hypothecation to secure the loan.

It is not questioned that an instrument absolute in its terms may be shown by parol evidence to be only a mortgage. It is true that if trust and confidence have been reposed in it by third parties, with the honest belief that it was indefeasible, and such parties have been misled by its form, they have a right to insist that, as to them, it shall be what upon its face if purports to be. But there is not even an allegation in this case that Morgan, Rhinebart & Co. were misled. Much less is there any proof that Shinn held himself out to them as owner, or that he authorized the advances, or that they were made on his credit. On the contrary, the evidence, so far as it goes, tends strongly to show that the firm knew the real nature of the transaction, and that they believed Kelly remained an owner notwithstanding the bill of sale. There can, indeed, be no pretence that Morgan, Rhinehart & Co., did not know from the beginning that the bill of sale was a mere security for money advanced by Shinn.

If then Shinn was only a mortgagee of an undivided interest in the vessel, as we think he was, he is under no obligation to contribute for repairs which he did not order. A mortgagee out of possession is not liable for repairs. The benefit of repairs enures primarily to the mortgagor. A mortgagee out of possession does not appoint the master, or the ship's agents. They do not act under authority from him, and he is not entitled to the freight earned. Nor does it make any difference though the vessel be registered in his name.

It certainly cannot be maintained that Shinn was in possession, or that he ever authorized the expenditure that was made. And as this is a bill, not by third parties who furnished the supplies, but in right of some joint owners, the ship's husband, against a mortgagee of another joint owner, authority from the mortgagee to contract for the supplies is indispensable to any liability on his part.

DECREE AFFIRMED.