Robinson v. Elliott

APPEAL from the Circuit Court for the District of Indiana; the case, as appeared by bill and demurrer, being thus:

On the 7th of July, 1871, John and Seth Coolidge, brothers, were partners in the retail dry goods trade in Evansville, Indiana, having been thus in business there since the year 1863. On the day just named they owed to a Mrs. Sloan $3174, for money previously borrowed of her to aid them in their business.

They also owed the First National Bank of Evansville $7600, evidenced by seven promissory notes of the firm-all maturing between the 25th of July and the 6th of October of the year 1871 on which one Robinson was then an accommodation indorser; and to secure to Mrs. Sloan the payment of what was due to her and to indemnify Robinson as indorser, they made to them a chattel mortgage upon their stock of goods then in their rented store, including also the furniture and fixtures connected with the same.

The mortgage, after reciting the libaility of the firm to Robinson, on the notes indorsed by him, stated that it was contemplated, that in order to take up the notes, or some of them, it might become necessary to renew the same, or to discount other notes. The recital of the indebtedness to Mrs. Sloan, by note at four months, with interest, was also made with the statement that, if not convenient to the firm to pay it at maturity, it might be renewed from time to time, as the parties should agree.

After these recitals, and that of the mutual understanding of the parties concerning the continuance of the debts, the property was conveyed; the mortgage proceeding thus:'And it is hereby expressly agreed that until default shall be made in the payment of some one of said notes, or some paper in renewal thereof, the parties of the first part may remain in possession of said goods, wares, and merchandise, and may sell the same as heretofore and supply their places with other goods, and the goods substituted by purchase for those sold shall, upon being put into said store or any other store in said city where the same may be put for sale by said parties of the first part, be subjected to the lien of this mortgage.'

The instrument concluded with separate powers to the mortgagees, Robinson and Mrs. Sloan, on default in payment of their respective claims, to seize and sell sufficient goods to satisfy the same.

All the debts owing by the firm at the date of the mortgage, other than those secured by it, have been paid, except $3500 due to one Alfred Coolidge, father of the two partners Coolidge, for borrowed money.

The mortgagors remained in possession of the property, and bought and sold as they had been accustomed to do, from the date of the mortgage, to August 7th, 1873, when Seth Coolidge, one of the partners, died. During this interval of twenty-five months the interest and less than $100 of the principal of Mrs. Sloan's debt was paid, and the interest and about one-third of the principal of the bank debt. The note of Mrs. Sloan's was not renewed, but was overdue about twenty-one months. Robinson continued to indorse for the firm. Immediately after the death of Seth Coolidge the property of the firm, consisting of the old stock, goods subsequently purchased, and debts due the firm, was inventoried and appraised, and found to be very little in excess of the debts owing by the firm. This inventory and appraisement was completed on September 15th, and on the following day Robinson and Mrs. Sloan seized the goods and were about to sell them. However, on the 26th of September and before the ten days required by the terms of the mortgage for notice of sale had expired, proceedings in bankruptcy were begun against the surviving partner, Seth Coolidge, and an injunction was got to stay any sale. Coolidge having been decreed a bankrupt, one Elliott, on the 15th of November, 1873, was appointed his assignee, and demanded the goods from Robinson and Mrs. Sloan. They refused to deliver them to him. Hereupon Robinson and Mrs. Sloan filed a bill against Elliott, setting forth the facts as above given, and praying that an account might be taken of what was due to them, and that the goods might be sold to pay it. Elliott, the assignee, demurred, and the court below sustained the demurrer, and rendered a decree dismissing the bill. Robinson and Mrs. Sloan then brought the case here.

The Statute of Frauds of Indiana makes the following provisions:

'SECTION 10. No assignment of goods by way of mortgage shall be valid against any other person than the parties thereto, when such goods are not delivered to the mortgagee or assignee, and retained by him, unless such assignment or mortgage shall be acknowledged, as provided in cases of deeds of conveyance, and recorded in the recorder's office of the county where the mortgagor resides, within ten days after the execution thereof.

'SECTION 21. The question of fraudulent intent in all cases arising under the provisions of this act, shall be deemed a question of fact, nor shall any conveyance or charge be adjudged fraudulent as against creditors or purchasers solely upon the ground that it was not founded on a valuable consideration.'

Messrs. A. Inglehart and A. L. Robinson, for the appellants:

It is manifest from the tenth and twenty-first sections of the Statute of Frauds of Indiana, that the legislature of that State, while intending to guard against frauds, intended also to permit the use of personal property by way of chattel mortgages as a security for the payment of debts, in the same manner that real estate is used for that purpose, and that questions of fraud, which might arise under the law, should be questions of fact and not of law.

Previous to the enactment of this statute of registration, it was necessary to the validity of chattel mortgages that there should be a manual delivery of the mortgaged property to the mortgagee, who should continue to hold the same in his possession, but under this statute the record of the mortgage is substituted for such delivery, and is full and complete notice to all the world of the rights and interests of the parties.

The questions which present themselves in this case have not, it is true, been fully and clearly determined by the Supreme Court of Indiana. But we submit that the decisions which have been made are all in our favor, and settle these propositions:

1. Where the mortgage has been duly recorded in time, the same is prim a facie valid.

2. Where the mortgage is recorded and contains such a provision as the one in the mortgage here, it is still prim a facie valid, and the question of fraud is a question for the jury. In other words, that there is no such thing recognized in our courts in this class of cases as fraud per se.

3. Where a mortgage is made in terms to include afteracquired property, the mortgage will attach to the property when it is acquired, and will operate as a lien upon it in equity.

The case of Maple v. Burnside would, indeed, seem to have decided the question under consideration. The main question before the court was, whether Maple, the attachment defendant, had sold, conveyed, or otherwise disposed of his property with the intent to cheat, hinder, or delay any of his creditors. The fact of fraud relied on was the making of a chattel mortgage, permitting the mortgagor to remain in possession of the goods, and deal with them as his own.

The court below, among others, gave the following instruction:

'If, after the mortgage was given, the defendant remained in possession of the property mortgaged, after the time named in it, using and trading with the property as the owner, it is a fraud, and you must find for the plaintiff.'

In delivering the opinion of the court, Hanna, J., says: