Lewis v. Stevenson — 2 N.Y. Super. Ct. 63

Majority

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Gabriel L. Lewis and Horatio G. Lewis versus Walter Stevenson.

Headnote

Where personal property has been mortgaged, the possession may in some instances remain with the mortgagor; especially where such a course is rendered proper and expedient from the nature of the property, and the objects of the parties in making the mortgage.

But if the mortgagor, while in possession, sells or pledges the property to a iotia fide purchaser, or pledgee, who is ignorant of the mortgage, and has no cause' for suspicion or inquiry, and delivers the possession, the sale or pledge will be good, and the rights of such a purchaser or pledgee are paramount to those of the mortgagee.

The defendant, a pawn-broker, advanced certain sums of money to a son of the mortgagor, for the use of the family of the latter, and incautiously received plate, linen, &c. in pledge, which had been conveyed to the plaintiffs by way of mortgage, and neglected to make any inquiry as to the authority of the pawner, although there were circumstances to excite suspicion. Held, that the mortgagee had a right to reclaim the property out of the hands of the pawn-broker.

Where personal property is put into the hands of trustees, by a borrower of money, as security for a loan made to him, by a third person, an appropriation by the trustees of a part of the proceeds of the property, to an object not expressly mentioned in the deed of trust, made with the assent of the borrower and the lender, cannot be questioned by the parties to the loan.

This was an action of indebitatus assumpsit, brought to recover from the defendant, (who was a pawn-broker,) the sum of nine hundred and fifty-two dollars and eighteen cents, which

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had been paid to him by the plaintiffs, in order to redeem certain articles of plate, linen, &c., which had been pledged to the defenc[an£ ag secUHty for loans made by him thereon, but which the plaintiffs insisted belonged to them, and were not the property of the pawner.

The declaration contained the common counts for money, and a count for goods sold and delivered. Plea, the general issue.

The action was brought in this form in order to try the title to the property, and the defendant gave a receipt, wherein he acknowledged that the sum claimed by the plaintiffs, had been paid to him, by them, as the amount due on the goods pledged, which were surrendered up to the plaintiffs. The receipt further stated, that the defendant insisted that the property redeemed belonged to the person who pledged it, but that the plaintiffs claimed it as their own, and the parties, in order to avoid the necessity of an action of trover, had agreed to take this course without prejudice to the legal rights of either.

The cause was tried before the Chief Justice on the second of February, 1829; and the counsel for the plaintiffs, in stating then-case to the jury, observed, that they did not wish to impeach the conduct of the defendant in relation to this transaction in any way, it having been, so far as they knew, frank and fair; but that the claim which they interposed to the goods, was founded upon a legal right, which it was the object of this action to assert and maintain.

They then introduced a bill qf sale under seal, bearing date the 13th of November, 1826, executed by Samuel G. Ogden to the plaintiffs, together with an inventory or schedule of goods thereby assigned, which was annexed to the deed. This assignment purported to be for the consideration of the sum of $5000 paid by the plaintiffs to Ogden, and on its face conveyed to them absolutely the goods, chattels, and household furniture mentioned in the schedule. But in connexion with this instrument, the plaintiffs produced a declaration of trust made by them under seal, bearing even date with the bill of sale, and the due execution of both instruments was admitted.

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The declaration of trust recited, that Samuel Gf. Ogden was indebted to the United States of America for duties on certain goods before that time imported into the city of New-York by him, and for which he had given two bonds for the sum of $1644 each, which he was unable to pay. That Thomas W. Ludlow, of the said city, had agreed to advance and provide the funds and means for taking up and paying those bonds, and had further agreed to advance monies for the contingent and family expenses of the said Ogden from time to time, as might be required and that Ogden had conveyed all his household furniture) together with the furniture of his counting-house, in Wall-street, (as per schedule, &c.,) and a certain indenture of lease for an unexpired term of the house No. 41 Warren-street, in the city of New-York, to the plaintiffs. That although said bill of sale and assignment were in terms absolute and unconditional, yet they were in fact made in trust, to secure and pay to Ludlow, on or before the first day of May, 1827, the amount of the said two Custom-house bonds, which he had agreed to take up; and also such further and other sums as might be paid by him as aforesaid” together with interest on such payments. The plaintiffs in the declaration of trust, then further stipulated with Ludlow that they would hold the said property and premises for the purposes mentioned, and that if the money advanced by him to take up the Custom-house bonds, and for the contingent and family expenses of the said Ogden, together with interest thereon, should not be refunded to him on or before said first day of May, that then the plaintiffs would forthwith sell and dispose of the property assigned, either by public or private sale, as should be deemed best, and out of the proceeds, reimburse Ludlow all such sums as he might advance, together with interest, &c.

It was admitted by the defendant, that the goods pledged to him and surrendered up to the plaintiffs under said stipulation, were a part of the articles transferred to the plaintiffs by Ogden and mentioned in the schedule annexed to the bill of sale.

It appeared at the trial that Samuel G. Ogden was a merchant, resident in the city of New-York, who had been engaged in extensive transactions of business in France, and that having become

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embarrassed in his affairs, it became necessary for him to visit * that country, in order to bring his business to a close. To accompijgh this purpose, he obtained a letter of license from most of his creditors, but wishing to make provision for the payment of the bonds mentioned in the bill of sale, and also to furnish funds for the support of his family during his absence, (which, it was supposed, would not be extended beyond the first of May, 1827,) he made application to Ludlow for assistance; and that Ludlow, in order to befriend Ogden, agreed to furnish the means of paying the two bonds mentioned in the bill of sale, together with other funds for the family of Ogden; but his advances were not to exceed the sum of four thousand seven hundred and fifty dollars. For the purpose of making Ludlow secure, the furniture and lease mentioned in the bill of sale and declaration of trust, were transferred to the plaintiffs ; but the expectation then was, that Ludlow would borrow the money upon his own notes, and that Ogden would be able to provide the means of taking them up as they fell due, and of reimbursing Ludlow before the first day of May, 1827, whereby there would be no necessity of enforcing the trust, or of selling the property transferred.

Owing to various embarrassments, the absence of Ogden was prolonged in France far beyond the period contemplated, and Ludlow was consequently compelled to pay his own notes when they fell due. Ludlow, on the 15th of January, 1827, had advanced to the plaintiffs as trustees the sum of $474012 : viz., on the 13th of November, 1826, $2350; on the 6lh of January, 1827, $1669 48; and on the 15th of January, $720 64.

It appeared that Ogden, previously to his departure for France, had been arrested for a debt due to Brainerd & Kimberly, and that the plaintiffs became his bail. This debt (amounting to $415 18) was paid by the plaintiffs out of the money received of Ludlow, after Ogden’s departure for France. His attorney had stated to him the necessity of providing for this debt before his departure, and he answered, that the plaintiffs would be protected by the assignment.

Ogden, at the date of the bill of sale, was indebted at the Custom-house on other bonds besides those mentioned therein;

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and on one of them, (which was for the sum of $134 13) one of the plaintiffs, (G. L. Lewis,) was surety. This bond, together with another for $1,644, and one for $1,814 93, the plaintiffs paid, when they fell due, out of the money received of Ludlow.

This last bond, it appeared by the testimony of Ogden himself, was one of the bonds which the parties intended to describe in the bill of sale, and which was to have been protected by it; but the defendant contended, that the plaintiffs were not justified in paying either this bond, or that for $134 13, or the debt upon which Ogden was arrested; because they were not embraced in the bill of sale and declaration of trust. The plaintiffs also paid to the family of Ogden the sum of $706 during his absence, and no more; but the defendant alleged, that the whole sum received of Ludlow, beyond the amount of the two bonds mentioned in the bill of sale, ought to have gone to Ogden’s family.

Under these circumstances, the family of Ogden, during his absence, became distressed for the want of the means of support. They applied to the plaintiffs for money, but received nothing beyond the sum of $706 before mentioned. They were therefore under the necessity of pledging to the defendant various articles of plate, linen, &c., embraced in the bill of sale, in order to raise money for their support, and the defendant advanced upon specific articles at various times, between the 5th of May, 1827, and the 7th of March, 1828, the sum for which this action was brought, and received the goods into his possession.

Ogden, before his departure for Europe, had given to one of his sons (S. G. Ogden, Jr.) a full power of attorney to act in his behalf upon all necessary occasions; and for the purpose of procuring money of the defendant, another of Ogden’s sons (Morgan L. Ogden) pledged the property in question with the approbation of S. G. Ogden, Jr., and of his mother, who resided with the family during her husband’s absence.

Morgan L. Ogden, it appeared, when he went to the defendant for money, acted openly and without disguise. Upon obtaining the first loan, (which was on the 27th of April, 1827,) he himself carried the articles pledged to the defendant, and the

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pledges were all made in the day time, but the defendant’s clerk went to the house of Mr. Ogden for many or most of the articles -n 0j ¿/lg evm{ngt The goods pledged were all marked with the initials S. G. O., and Ogden’s name was on the door of his house at full length. The defendant did not however ask Morgan L. Ogden any questions as to his right to pledge the articles, nor did the latter ever communicate to the defendant any thing relative to the mortgage. The defendant’s clerk saw some of the members.of Mr. Ogden’s family when he went for the articles pledged, but no inquiry was ever made after Ogden himself. When the defendant sent for the goods in the evening, he selected that time for his own convenience merely, and the business appeared to have been conducted in the usual manner.

The defendant, • it appeared from the testimony, took it for granted that Morgan L. Ogden had a right to pledge the articles upon which the loans were made, and he never made any inquiry as to that right, either at the house of Ogden or elsewhere.

When Ogden departed for Europe, the furniture was all left in the hands of his family for their use and convenience in his house in Warren-street, and it remained there until the 26th of April, 1828, (except such articles as were pledged to the defendant,) when the plaintiffs were compelled to sell the same in order to discharge their trust and repay Ludlow. At the time of the execution of the bill of sale, however, there was a symbolical delivery of the furniture to the plaintiffs, in the presence of witnesses, by delivering one article in the name of the whole; but they never took actual possession until the time of the sale.

According to the plaintiffs’ statement, the amount advanced by Ludlow under the trust, and to the defendant, including interest, was $6175 29, and the amount received from the sale of the furniture and lease, was $5213 60, leaving a balance of $961 69 due to Ludlow.

The defendant contested the right of the plaintiff to receive in any event under the trust, any sums beyond the amount of the two bonds specified in the bill of sale, and the money advanced for family expenses, together with interest thereon, amounting in the whole to the sum of $4400 77, which would leave a balance of only $55 98 due to them.

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After the evidence was all disclosed at the trial, the parties agreed that a verdict should be taken for the sum of $ 1200 in favour of the plaintiffs, subject to the opinion of the Court upon a case to be made; and that, in case judgment should be given for the plaintiffs, it should be entered up for such a sum as should be due to them, according to principles to be laid down by the Court; not, however, to exceed the said sum of $953 18 with interest thereon. A verdict for the sum of $1800 was accordingly returned by the jury.

The above is an abstract of the facts as they appear upon the case. There were some objections made to some evidence introduced by the plaintiffs, especially to a certain correspondence between Ludlow and Ogden, and to a receipt given to the latter by the plaintiffs for money advanced. But as the whole body of the evidence was voluminous, and many of the facts not material to a correct understanding of the principles established by the decision, every thing but the above abstract (which is believed to be substantially correct,) is omitted.

The cause was argued by Mr. Ogden Hoffman and Mr. Staples for the plaintiffs, and by Mr. Barnes and Mr. Jlnthm for the defendant.

Mr. Hoffman contended—

I. That the assignment vested the property in the plaintiffs and hy the terms of it, being a mortgage, the possession was to remain in the assignor. The assignment was not therefore fraudulent per se, and if there was actual fraud, the defendant was bound to prove it, there being nothing in the case as disclosed by the evidence, to cast any imputation upon the plaintiffs.

The mere possession of property, by itself, (as he contended,) proved nothing as such a possession might be perfectly consistent with the title of another person who was out of possession. Various attempts have been made, so far to change the law, as to protect the rights of those who obtain property fairly and innocently of the possessor and apparent owner; but these attempts have never been successful, as the law is always anxious to guard the rights

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of the red owner. The reason is obvious; the possession of a chattel is easily obtained, and if possession alone were sufficient to ena^e party in possession, to pass the title for a valuable and bona fide consideration, the rights of property could not easily be protected. The statute of frauds applies to the case of creditors not purchasers, and the first section which speaks of creditors only is confined to real estate.

Our statute is a transcript from that of Elizabeth, and the decisions upon the latter are applicable to the former. The statute of James refers to nothing but cases of bankruptcy, and the decisions under that statute cannot be invoked to the aid of the statute of Elizabeth. No person can take advantage of this statute but creditors, and the defendant is not a creditor. But if he were a creditor, he could not destroy this assignment unless he could shew actual fraud, and that would be impossible in this case. The instrument of conveyance here is a mortgage for the bill of sale is to be coupled with the declaration of trust. The possession was left with Ogden, the grantor, for his benefit for a certain season, and was no evidence of any thing but of a disposition to befriend him. The goods were to be left with him as a matter of necessity, in some measure, as there was a confident expectation that he would be able to pay the amount for which his furniture was mortgaged and thus save the necessity of any change of possession. The transfer then was a mortgage, and the possession of Ogden consistent with the declaration of trust. It was not void, but voidable only, and even if the plaintiffs were bound to shew good faith and to account for Ogden’s possession, they have done both. [Mr. Hoffman, on this branch of the cause cited and commented at length upon the following cases, viz: Hartop v. Hoare, Bull, N. P. 32-33. Craig v. Ward, 9 John. R. 197. Bull, N. P. 257-8. Barrow v. Paxton, 5 J. R. 261. Kidd v. Rawlinson, 2 B. & P. 59. Arundel v. Phipps and Taunton, 10 v. 145. Sturtevant v. Ballard, 9 J. R. 339. 8 Ib. 452. 3 Cow. R. 194. Bissell v. Hopkins. 4 Ib. 461. Marsh v. Lawrence, 7 Cow. 304 . Jackson v. Mather, 3 Pick. R. 255. Wheeler v. Train, 1 Cranch. Hamilton v. Russell, 1 Peters, S. C. Rep. 448. Conrad v. The Atlantic Ins. Co.]

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II. There was sufficient to put the defendant on inquiry, and he was bound to ascertain, or take some steps to ascertain whether the person offering to pledge the property had a right to do so, before he made advances upon it,

Mr. Ogden’s son had no right to pledge property which had been transferred to the plaintiffs, and his father would neither have done it nor approved of it, had he been in this country, because it ivas in violation of his agreement with LudloAv. True it is, S. G. Ogden, Jun. had a general power to attend to his father’s business, but he had no power under it to pledge these goods—for his father, himself had no such power or right.

The defendant, in order to propitiate the favor of the court, must shoAV that he has been injured without the means of avoiding the injury. This he cannot show, for although it was evident that Mr. M. L. Ogden was pledging the furniture of his father’s house, yet he never inquired into his authority to do so. The name of S. G. Ogden was marked upon the articles pledged and yet the defendant is satisfied to receive property from a youth without the least precaution. The defendant’s clerk went to the house of S. G. Ogden in the dusk of evening to receive the goods. He saw there various members of the family. Why did he not inquire who Samuel G. Ogden was, and why his son was acting in this matter alone ? He had the means of coming at the truth, but he neglected them, and must therefore abide by the consequences of his negligence. The advances made by Ludlow were greater than the amount of the sales, including the goods redeemed from the defendant, and he is entitled to recover the whole sum paid to the defendant. [Mr. H. also cited and commented on the acts of the corporation of the city of New-York, passed in March, 1828, and January, 1829, relative to pawnbrokers, and the receiving of goods by them from minors and servants, and also in the evening. He insisted that the defendant had violated these ordinances, and was not entitled to any favor.]

The defendant relied upon the following points :

I. That the bill of sale from Ogden to the plaintiffs not having been made to secure any pre-existing debt, but on the contrary,

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being expressly declared to be 'a security for such prospective advanees as should be due and unpaid on the 1st day of May, 1827, cou]c] have no legal binding operation against third persons, without notice, until that day.

II. Therefore all bona fide sales and pledges accompanied by actual delivery of the articles, made prior to the 1st of May, would be good and available, notwithstanding the bill of sale. The pledge made to the defendant on the 27th of April, 1827, was of this description, and therefore available against the claims of the plaintiffs.

III. After the 1st of May, 1827, the plaintiffs having allowed the grantor to continue in actual possession, his successive acts of pledging to the defendant, without due notice of the transfer, were equally protected. Whatever might be the legal character of the transaction between the plaintiffs and Ogden, the instruments .of conveyance being unaccompanied by actual possession, were void as to third persons, who advanced money upon the ownership inferable from such possession.

IV. One of the objects of the prospective pledge to the plaintiffs being the advance of funds for the contingent family expenses of the grantor, upon the refusal of the trustees to make such advances, a third party making them innocently on the authority of the grantor, and without notice is protected, for he claims, not against the assignment, but conduct; the advances made by him being applied to the purposes of the trust.

V. The pledging to the defendant was all of this character, and after the trustees had refused to make any advances to the family of Ogden.

VI. The possession and apparent ownership of the property by the family of Ogden, render the instruments of transfer to the plaintiffs fraudulent and void against bona fide purchasers and pawnees without no tice,

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VII. The defendant has at all events, a right to insist on a strict execution of the trust to its letter, and in that event the whole amount to be allowed against the property assigned, would be the sum of $3283, the amount of the two bonds, and $706 paid to the family for expenses; and these sums have been fully reimbursed to the plaintiffs from the proceeds of the sale of Ogden’s property.

Mr. Barnes, in support of these propositions, observed that he had not expected that any attack would be made upon the conduct of the defendant in relation to this transaction. The whole evidence upon which the plaintiffs grounded their charge of negligence, was to be found in the fact that the articles pledged were marked with the initials of the assignor, and the fault of the defendant consisted in his neglect to pry into the secrets of a most respectable family while in distress !

The plaintiffs had endeavored to fix upon the defendant the character of a purchaser, but he was in fact a creditor, who had lent and advanced money to Ogden upon the faith of a pledge. That the pledgor had power to make the pledge was evident from the fact that all the acts of Morgan L. Ogden were approved by his brother, who held his father’s power of attorney, That power authorized him to do all needful acts, and what could be more necessary than his interposition to save the family from want 1 And could S. G. Ogden himself, have gainsayed this exercise of discretion on the part of his sons 1

This claim may be disposed of without interfering with the course of authorities. The cases cited by the opposing counsel, are those where some general creditor of the assignor has come in to claim the property ; but the defendant here stands upon different ground. He has lent his money upon a deposit of goods which were found by him in the hands of the pledger under such circumstances, as that it could hardly be suspected that they were in the possession of any other than the true owner. The furniture was in the house of Mr. Ogden where his family dwelt. That family exercised the exclusive right of ownership over it; and how Could the defendant imagine that a third had advanced a

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large sum of money upon a mortgage of the very property which he permitted the mortgagor to control freely and absolutely 1 If any person deserved to suffer, it was Mr. Ludlow, for he, by his negligent conduct, had enabled the family of Ogden to work a wrong upon an innocent person. By the terms of the trust the goods were to have been sold on the 1st of May, 1827, and yet they were suffered, to remain in their original situation until April, 1828, and during all that time the mortgagor was using the property as his own. In the cases cited for the plaintiffs not one of the claimants was injured by any credit given upon the faith of the specific properly. But in a case like the present, the bare possession of the vendor is evidence of fraud.

The general rule is, that the possession by the assignor of the goods assigned, is such evidence of fraud against general creditors, as will throw upon the assignee out of possession, the whole burden of showing the bona fides of the transaction ; and he must account satisfactorily for his conduct in leaving his property in the hands of the assignor. If the assignee can show all this to the satisfaction of the court and jury, he may then sustain his claim against the attacks of general creditors. But no case can be found where his claim Would be sustained against the rights of a person who had innocently and in good faith purchased tlie property of the assignor, finding it in his posses sion,-or who had advanced his money upon tlie faith of the goods under like circumstances, the advance being at the same time accompanied by a delivery of the property pledged.

We are willing to subscribe to the law as laid down in Bissell v. Hopkins, and refer to the third position assumed by the counsel of Hopkins in that case. Chief Justice Savage expressly says, that one reason for protecting the mortgage there, was, that no person would be injured by that course. The mortgagor in that case obtained no new credit by his possession, and there the rights of no innocent claimant were injured. [Mr. Barnes here cited and commented on the following cases, viz: Edwards v. Harben, 2 T. R. 596. Sturtevant v. Ballard, 9 J. R. 338. Meggott v. Mills, L. Ray. 286. Ryall v. Rolle, 1 Wilson, 260. Lempriere v. Paisley, 2. T. R. 485. 1 Cranch. 309 . Hamilton v. Russell, 1 Pow. on Mort. 2 chap.]

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The plaintiffs at all events are bound to a strict observance of the terms of the mortgage. It was given for a specific purpose, viz: to provide a security for the sums necessary to take up the Customhouse bonds, and for money advanced to the family. Beyond these, the plaintiffs cannot claim, for they had no right to appropriate the money received of Ludlow to any other purpose. The mortgage was given for the protection of Ludlow, not for the benefit of the plaintiffs, and he had no right to incumber the property for any purpose but that expressed in the declaration of trust. If the plaintiffs be confined within these bounds, they have been paid already, and the defendant may retain in his hands all the money which he advanced for the wants of the family, for that was in furtherance of the trust.

After all, the question may come down to the simple fact as to negligence on the part of the defendant. And here we insist that there was nothing to put him upon inquiry. What was the property pledged 1 Household furniture consisting of plate and linen. In whose possession was it found 1 In the possession of a family of honorable standing, who would not be presumed to pledge the property of another person. By whom were they pledged ? By the sons of the head of the family, whose good faith and authority were made evident from the fact that the defendant went to the house of Mr. Ogden to receive the goods. If the sons of the pledgor had acted surreptitiously, they would never have permitted the pawnbroker to come into the house, but would have carried the goods to him. Every thing was done openly, and with apparent good faith. There was nothing to excite suspicion, and the defendant acted not only with sufficient caution, but with the greatest delicacy and good feeling. The Court therefore are bound to protect his rights upon every principle of justice and of law.

Mr. Aatlvon on the same side:

I. When the mortgage was made, there was no debt due to the mortgagees; either to the plaintiffs or to Ludlow. The objects of the trust were prospective entirely, and all for the benefit of the

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grantor. Such a deed we contend is not to be favored, as it opens a door to fraud and deception.

In the case of Atkinson v. Maling, [2 T. R. 462,] there was a prospective mortgage of a ship, and its evils were there pointed out. The Court were averse to the principles asserted by the mortgagee in that case, although they protected his rights, owing to peculiar circumstances attending his claim. So in Badlam v. Tucker, [1 Pick. R. 398,] the rights of the mortgagee were recognized for the same reasons ; but such deeds are subversive of the claims of honest creditors and against the spirit of the statute of frauds. [1 R. L. 75.] Our act is a transcript from that of Henry VII., and in my judgment renders this deed void per se.

Here there was a continued possession in the grantor, not only to the period when the deed became absolute, but down to the times when the various pledges were given. The motives of the parties to the assignment might have been pure and morally right, but all the consequences of a fraudulent intent on their part have been visited on the defendant.

In the first place there is no provision in the deed whereby the grantor was to retain possession, but on the contrary, the instrument itself made it the duty of the plaintiffs to take the possession. They were to protect the rights of Ludlow, and how could they be protected without possession ? Are not the plaintiffs in fact liable to him for the safe keeping of the goods Í And if they are, that proves that they were bound to take and maintain possession of the property assigned. But here the pledging commenced before the deed became absolute, and was continued down to the time when the plaintiffs vindicated their rights by actual possession.

Is then a mortgage, prospective in its terms, and entirely for the benefit of the grantor, to be favored or even countenanced by the Court ? If good in the outset, it may be continued for any length of time. It may be entirely secret while the mortgagor has all the appearance of Wealth which the possession of property can give.

II. By the common law, a sale without possession is void as against creditors, and they are not bound to invoke the aid of any

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statute. [Dawes v. Cope, 4 Bin. R. 255. 1 B. and P. 87.] In this case the defendant is a creditor, not a purchaser. He is a creditor with surety, for he has the means of security in his hands. The property does not pass to the pawnee by delivery, and he cannot sell until condition broken or demand made upon the pawner. The pawner has a right to redeem, and may resume possession of his property at any time, by paying his debt. This clearly proves the pawnee to be a creditor, and not a purchaser, and he can avail himself of all the laws which have been made for the benefit of creditors.

The case of Clow v. Woods, [5 Sarg. and Rawle’s Rep. 283,] points out the distinction between a pawn and a mortgage, and shows that the pawnee is merely a creditor with collateral security in his hands.

III. The next question is, whether this creditor has been guilty of any negligence in taking his pledge. The acts of the Corporation of the city of New-York, relative to minors and servants, may be laid out of the question, because there is no proof that M. L. Ogden was a minor. And even if he were, he acted under the authority of his mother, (to say nothing of his brother’s power,) who was the lawful agent of the husband for this purpose. If the brother had no authority to pledge, the mother had, and she exercised her discretion to save the family from distress. What more could the defendant do than he actually did do 1 Suppose he had asked Morgan L. Ogden, or even Mrs. Ogden, as to their authority to pledge the furniture, would their words have been higher evidence of their authority than their acts 1 Or would they probably have offered to pledge this property, and at the same time have admitted to the defendant that they were acting without authority, and contrary to right I The defendant acted in a discreet, prudent, and decent manner, and it is not for these plaintiffs to throw upon him the imputation of negligence 1

IV. The funds advanced by the defendant went to accomplish the objects of the trust which the trustees refused to fulfil. If the deed was valid, the trustees were bound to fulfil it. They,

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however, took the liberty to make advances for objects not contemplated in the deed. Could they do this, and defeat the objects of the grantor, in making a' provision for his family during his absence 1

It must be remembered that this action is brought by the trustees, and not by Ludlow. The trustees here must account for their actions, and if they have perverted the fund, they cannot make up any deficiency out of the defendant. They were not authorized to hold or sell the furniture for any thing but the payment of the two bonds mentioned in the bill of sale, and to repay Ludlow such sums as he might advance to the family. If Ludlow had in fact advanced the surplus beyond the bonds for the aid of Mr. Ogden’s family, then his claims would have been at least equitable, if not legal. But here, both himself and the trustees refused to advance any thing beyond the $706 for the family, and thus in fact disappointed, the grantor, disobeyed the trust, and made payments in their own wrong. They cannot recover here, because they have received from the sale of the property assigned the whole amount which they have paid out on account of the trust,

Mr. Staples for the plaintiffs,

in reply :

It is now well settled by authorities in our own Courts, as well as by the decisions of the Supreme Court of the United States, and those of the various States, that in a sale of chattels there is no such thing as fraud per se. Whether there has been a fraud or not, is a question of fact to be shown by such evidence as may point it out. The possession of chattels by the vendor, after they have been sold, may be an indicium of fraud, because it is not usual for the buyer to leave his goods in the hands of the seller. But he may leave them there without fraud, and circumstances often occur to render it highly proper that they should be so left. And if the buyer or mortgagee can show good reasons to the Court why possession did not accompany or immediately follow the transfer, he may by such proof take away every presumption of fraud, and leave the transaction fair and legal. It is true that

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there may be cases where the law will presume a conveyance to be fraudulent, and fraud is a mixed question of fact and law. When the facts are ascertained, the law in some cases declares the existence of fraud as an inference of law. But where a conveyance has been made to trustees of household furniture by way of a mortgage, to secure the repayment of a loan made for the benefit of the mortgagor, in pmsenti, or where the mortgage is made prospectively to secure the repayment of a loan to be made in futuro, if the transaction be fair, honest, and bona fide, and without a design to withdraw the property from the reach of executions, then the law will protect the rights of the mortgagee. But every attempt to place the property of the assignor out of the reach of creditors for his benefit, is an actual fraud, by the statute, and the Court will frown upon every such dishonest transaction. [Mackie v. Cairnes, 5 Cow, R. 547. 1 Hopkins’ R .] The cases cited by the defendant’s counsel from the reports of Sargeant and Rawle, and from Pickering, do not apply to this case, which is an assignment, not for the benefit of the assignor, nor to screen his property, but to protect the rights of the assignee.

The case of Atkinson v. Maling turned principally upon the statute of James, not Elizabeth, from which our’s is derived, and at all events cannot be pressed in to aid this defence. The principles of law upon which we rely, are laid down by our own Courts, and there can be no propriety in looking into nice distinctions, since we have established rules which must guide us in coming to a decision. It is perfectly clear, that unless the Court can persuade themselves that there has been actual fraud; unless they can believe that Mr. Ludlow has been guilty of gross imposition for the sake of benefitting Mr. Ogden, there can be no such thing in this case as fraud. Now the defendant does not assert this, but, on the contrary, he brings Ogden in as a witness to injure the claims of Ludlow, if that were practicable. We must assume, then, that Ludlow advanced his money bona fide upon the faith of the goods assigned to the plaintiffs, and that he has been guilty of nothing but the leaving of the furniture in the possession of the family of Mr. Ogden for their comfort and con

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venience. Was there not a good reason for this % Ogden hoped when he made the assignment, to avoid the necessity of parting wjtii his furniture at all. He hoped to be able to redeem his property, and there was no object between the parties but to furnish a security to Ludlow. And for what purpose was this assignment made 1 Was it to defraud creditors, and put. property beyond the reach of executions 1 The very reverse was the fact. The furniture was pledged for the express purpose of raising a sum to pay the debts of the assignor, and the property was appropriated to the express object of satisfying bonds given to the government. The furniture has in fact been appropriated to the payment of Custom-house bonds, and it is of no consequence whether the sale of the goods preceded the payment or was made subsequently to it. The consequence is the same, "the furniture has paid the debt.

But it is said that this is a case where a subsequent purchaser or pledgee has been injured by our misconduct. It cannot have escaped the observation of the Court, that this is .a case rather between Ludlow and Ogden, than between the nominal plaintiffs and the defendant. Mr. Ludlow was certainly imprudent in making a large loan upon a pledge of household, furniture, for he might have been sure, that the very act of enforcing the trust would have been considered an act of persecution by the party benefited. His kindness is forgotten, and these efforts are made to deprive him of his security. You might as well take a pledge of a man’s wife and children as of his furniture, for it would in either case be considered by the pledgor as merely nominal.

If the defendant has given credit to Ogden upon the faith of property not his own, it is his misfortune. The law cannot relieve him unless there has been fraud on the part of the plaintiffs, or rather of Ludlow, who is here the actual party in interest. The question comes up at once as to the title of the property at the time of the pledge. In whom was it; in Ogden or in the plaintiffs 1 If in the former, then there is an end of the question, and if in the latter, the case is equally disposed of.

No man can impart any greater title to property than that which he himself has. Now it is evident that Ogden had im

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parted his title to the plaintiffs, and when he or his son attempted to convey this property to the defendant, they attempted to sell what was not their own. There is no way of protecting the defendant in such a case but by a due observance of the maxim made for him and others in his situation—caveat emptor. The Court cannot escape from the conclusion that the defendant received no interest in the property, except by deciding that the title to it remained in Ogden. Now this could not be, if the transaction between Ludlow and Ogden was honest, and of this there can be no doubt, for the defendant concedes this point.

III. But if this were not so, there was enough to put the defendant on his guard. He need not have been injured if he had acted with due caution, or even with common prudence. If then the principle be correct, that the sale to the plaintiffs was void, quoad third persons who might innocently purchase of Ogden, no man can be deemed an innocent purchaser in the legal meaning of that term, who has the means placed before him of avoiding the injury which falls upon him. If the defendant, who could not but see that there was something uncommon in this transaction, had taken the ordinary precaution to make inquiry as to who, what, and where Mr. Ogden was, he would have avoided the taking of a pledge, which the party making it had no right to make. His misfortune is the consequence of his own imprudence, and this Court will not aid a negligent person who claims against another man’s rights.

IV. There is another question remaining as to the extent of the trust, and that is a matter between the plaintiffs and the defendant. The plaintiffs were justified, at all events, in paying the bond for $1814 13, as well as that for $1644, because it has been proved that that was the bond which Ogden intended to pay. Ogden, therefore, could not question the conduct of the plaintiffs in this particular, and the defendant stands in his place as to this matter. Neither can the defendant question the amount paid to Brainerd and Kimberly, because Ogden declared that the assign

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ment would protect that debt. At all events, the amount advanced by Ludlow is protected, and the plaintiffs are entitled to judgment for the difference between the amount received by him and that paid out, to the extent of the sum received by the defendant.

It is too late to contend, that in a mortgage of personal property, the possession must, in all cases, be transferred to the mortgagee. It has been settled by repeated decisions of the Supreme Court of this State, and by other tribunals, entitled to the highest consideration, especially the Supreme Court of the U. S., that where there is a mortgage of chattels, the possession may, in manyiustanoes, remain with the mortgagor; especially in those cases where the possession must necessarily so remain, from the nature of the property mortgaged, and from the objects of the parties in making the transfer. If those objects be fair and proper, and for a full consideration, then there is no fraud in the transaction, and without fraud "the mortgage is not" void. Neither is the position to be sustained that the transfer is ipso/ctcio void per se, because the possession has been left with the mortgagor. If this were true, then there could be no such thing as a mortgage of chattels, —for the very idea of a mortgage, ex vi termini, implies that the possession is to remain with the mortgagor. Still it is too strong to say that possession by itself implies nothing, for it is prima facie evidence of ownership. It will throw upon a party who claims against it, or in spite of the possession, the necessity of showing the bomfides, of the transaction, and will compel him to show why the possession was so left, and moreover to prove a proper consideration and an actual transfer.

In this case I can discover no fraud in the transaction as between the mortgagor and mortgagee. The transfer, in form, consists of a bill of sale and a declaration of trust, simultaneously executed, being in its legal effect a mortgage. Upon the face of the papers the object of the parties is apparent; a legal consideration has been shewn, and every imputation of improper intention is removed. As between the mortgagor and mortgagee, therefore, this transfer is valid and cannot be impeached. Indeed, as between, the mortgagee and the general creditors of the mortgagor, it

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would not be obnoxious to the statute of frauds and would be upheld, unless the creditor could show fraud in fact.

But notwithstanding these general admissions it does not follow, that the mortgagor in possession, is so entirely devoid of title as that he can impart none to an innocent bona fide purchaser, ignorant of the mortgage,—there being no circumstance to put him on" his guard, or excite inquiry. To carry the doctrine of the mortgage of chattels to this extent, would be opening a wide door to frauds, and might enable the reputed owner of covered property to cheat the innocent. The law in such cases will guard the rights of bona fide purchasers, and if there must be loss, will throw it upon the party who ought in justice to bear it. The mortgagee is under no necessity of talcing such a security, and if he does take it, upon him lies the peril of fraud in the mortgagor, because he is the party who has reposed the trust and given the mortgagor the opportunity of injuring an innocent third person. And I wish it to be explicitly understood, that in the case of a sale of chattels by a mortgagor in possession, to an innocent purchaser, who conducts himself honestly in the transaction and has nothing to put him upon his guard,—in such cases, the rights of the innocent purchaser are superior to those of the mortgagee, and will be protected.

The general rule of law as to purchasers and pledgees does not differ widely, although we do not consider the latter entitled to equal favour with the former. The pawnbroker, especially, is not entitled to any particular favour, not because there is any thing objectionable in his occupation, but because he deals in a hazardous business which ought to put him on inquiry and produce caution.

In the principal case, the pawnbroker, the defendant, received the goods pledged from the mortgagor’s son, who was a yotith, even if he bad attained his majority. The articles pledged were plate and linen, marked with the name of the mortgagor : the name of the pledgor was known to the pawnbroker, and it differed from that marked upon the goods. A clerk was sent to the house of Mr. Ogden after dusk in the evening, whose name was written upon the door, on a brass plate. At the house a number of young persons were seen, but the head of the family did not pre

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sent himself. The sums borrowed were considerable and the articles pledged were valuable. Every thing in the transaction was unCommon, and yet no inquiry was made by the pawnbroker and no questions were asked. He relied implicitly upon his faith in Mr. Ogden’s son, and never inquired as to his authority, his age, his situation or condition. Was there not enough here to put a man of ordinary prudence on his guard 1 Would not a person of common caution have at least asked Morgan L. Ogden whether he acted in his own behalf or in behalf of another; and when by inquiry he had found that the head of the family was absent, would he not have looked further into the matter before he would have parted with his money 1 Nothing of the kind was done, and I consider the defendant’s misfortune as the result of his own imprudence and want of caution.

If the defendant had received the articles from the mortgagor himself, then I should have been inclined to protect his rights to their fullest extent; but he received them from a young man who was not the real owner, as he must have known and did know, and he is not entitled to favor against a person who has in good faith advanced his money upon the same goods. The title to the goods was vested in the plaintiffs by the bill of sale, and it was perfect as against Ogden and his general creditors. The title of the plaintiffs, in short, was paramount to the rights of all persons but an innocent and bona fide purchaser.

There is another question as to the amount of the recovery which remains to be settled, and that relates to the extent of the plaintiffs’ claim. After the goods were sold, it is evident that the proceeds might be applied to any objects to which Ludlow and Ogden gave their consent: and they might also by an agreement anticipate dhe sale and appropriate Ludlow’s advance in the same manner. Now, it is clearly proved by the testimony of Mr. Ogden himsp.lf! that the bonds which were in fact paid, were satisfied in accordance -with his wishes and the assent of Ludlow. The same remark is applicable to the debt of Brainerd and Kimberly, and neither party has any right to complain of that, to which they have expressly ' given their assent. The lien of Stevenson, therefore, was subject to all the equities of Ludlow’s claim, and that must he settled upon

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the principle of allowing him all his advances made with Ogden’s assent. If Ogden consented that Ludlow should advance to the plaintiffs the amount which was actually paid by him, then that amount was covered by the mortgage. It is clearly proved that Ludlow did not exceed the sum authorized by Ogden himself, and the plaintiffs are entitled to recover, subject to an adjustment to be made upon these principles by a Judge at Chambers.

Judgment for the plaintiffs.

[W. H. Harrison, Att’y for the pl’ffs.]

Note. “If the real owner suffers another to have possession of his property and of those documents which are the indicia of property, semble, a sale by such a person would bind the true owner,” Dyer v. Pearson, 3. B. & C. 2. 4th D. & R. 38. See also Mowry et al. v. Walsh, 8. Cowen’s R. 238.

Cases cited

Hamilton v. Russell 1 Cranch. 309 SCOTUS 1803-02-28 p. 74