Wood v. Lowry — 17 Wend. 492

Majority

p. 277

Wood and others vs. Lowry and Douglass.

Headnote

Where a merchant in town, a creditor to a merchant in the country, maizes further advances of goods to his debtor, to enable him to carry on his business and pay his debts, and takes a bill of sale and mortgage of such goods by way of security, and the debtor takes the goods and proceeds to sell the same in the usual course of business, they are liable to execution in favor of any other creditor, notwithstanding such bill of sale and mortgage,^[1]

The act of 1833, requiring a mortgage of goods and chattels to be filed, does not repeal the statute concerning fraudulent conveyances; its only effect is, in case the mortgage is not filed to add another to the grounds which, previous to that act, might be urged in avoidance of such instrument.

This was an action of replevin, tried at the Chautauque circuit in September, 1835, before the Hon. Charles H. Boggles, one of the circuit judges.

The plaintiffs claimed to be the owners of the property in question under the following circumstances: early in May, 1834, one Titus Kellogg, who resided at Jamestown, in the county of Chautauque, and had there transacted business as a merchant, came to Albany, where the plaintiffs resided, and to whom he was indebted for merchandise to a considerable amount, and represented to them that he wanted an extension for payment of the debt he owed them, and that the only way in which he could be able to pay them,

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would be for them to let him have some more goods, so as to enable him to carry on his business. They accordingly furnished him with goods, some from their own stock, and procured goods for him from other merchants, on their own credit, amounting in the whole to about §500, which they delivered to him. A bill of the goods thus furnished was made out, and underneath it was written an instrument whereby, after acknowledging that he was indebted to the plaintiffs §1900, Kellogg transferred to the plaintiffs the goods specified in the bill, and also a bill of goods amounting to $317-87, recently shipped to him from New York: this transfer was executed on the 8th May, 1834. On the same day Kellogg executed a mortgage of “all his personal estate, consisting of leather, hides, dry goods, groceries, [493] crockery, boots and shoes,” as expressed in a schedule annexed to the mortgage. The property was specified in the schedule as follows: “ Leather and hides worth about §1100, subject to a lien of Horace Allen of $700; dry goods, §700; groceries, §250; crockery, §100; boots and shoes, §100. The condition set forth in the mortgage was, that if Kellogg should pay to the plaintiffs §1900, between the first of June, and the first of October then next, the mortgage should be void. It was further stipulated, that until default in the payment, Kellogg was to remain in possession of the goods. The mortgage was filed in the office of the town clerk of Jamestown on the 19th May, 1834. The goods thus obtained were shipped to Jamestown, received by Kellogg, and he proceeded to sell them in the usual course of business of a country merchant, arid in other respects used them as his own. He had' promised to transmit to the plaintiffs the proceeds of sales made previous to the first day of June, and he accordingly remitted the sum of $200. On the 19th July, 1834, ail the property in the store of Kellogg was levied upon by virtue of an execution on a judgment against Kellogg, belonging to Messrs. Corning & I-Iorner of Albany, by a deputy of Douglass, one of the defendants, who was then sheriff of Chautauque, by the direction of Lowry, the other defendant, the agent of Corning & Horner, and subsequently sold; and for which levy and sale this action was brought. The defendants produced exemplifications of the judgment and execution under which the property was sold; the judgment was obtained in 1832, and the execution directed the levy of about §1200. The amount of property sold under the execution, claimed by the plaintiffs was about §600. The debt of the plaintiffs was proved to be bom fide, amounting to §1900, including the advances made by them to Kellogg in May, 1834. There was evidence that Horner, one of the owners of the judgment under which the goods were sold, had promised not to molest Kellogg; but there was also proof to the contrary. Before any evidence was given on the part of the defendants, a motion was made for a nonsuit, which was denied by the judge, who after the parties rested, charged the jury that, as the law stood previous to [494] the revised statutes, it would have been his duty to have declared the bill of sale and mortgage fraudulent in law, and to have instructed them to find a verdict for the defendant; but that now, by the revised statutes, the question of fraudulent intent, was to be decided by the jury and not by the court. ' He however instructed the jury, that actual and express intent to defraud was not the only ground upon which a sale or transfer of property might be found fraudulent; that the rules by which the courts were formerly governed, in deciding questions of this kind, although not obligatory upon juriesj were entitled to great weight and respect; that in this case it was proper for them to look at the general nature and tendency of the transaction disclosed by the evidence, and if they should be satisfied that its effect would be to hinder, delay and defraud creditors, they were authorized to infer, and ought to infer, that such was its intent. He further charged the jury, that if Horner, with a knowledge of the advance of goods, to be

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made by the plaintiffs, promised not to interfere with his execution, he ought not to be regarded as a bona fide creditor, and the plaintiffs, in such case would be entitled to their verdict. The jury found for the defendants. The plaintiffs having excepted to the charge of the judge, moved for a new trial,

B. R. Wood, for the plaintiffs.

M. T. Reynolds, for the defendants.

By the Court,

The point raised on the argument by the counsel for the plaintiffs, that the judgment under which the property was sold had been previously satisfied, was not made on the trial, and can not therefore be considered on this motion.

The question whether Horner promised to give time to Kellogg and not to issue execution, was submitted to the jury under instructions from the judge, of which the plaintiffs do not complain. It is alleged that their verdict on this point is against the weight of evidence.

Kellogg was not the agent or servant of the plaintiffs to sell the goods and account to1,them for the proceeds, but was avowedly in busi- [495] ness for himself. He had the possession of the property, with full authority, by the express assent of the plaintiffs, to sell and dispose of it at his pleasure, and to deal with it in all respects as other merchants did with their merchandise. It is true that Kellogg said he would remit to the plaintiffs the avails of such property as he should sell before the first of June; but this was mere matter of confidence between the parties—it was no part of the contract under which the plaintiffs make title. The property was not left with Kellogg, to be kept until the debt was paid or the plaintiffs should call for it, but he had it for the purpose of trading with it, and making profits from the sale of it. When sold, the fruits were his own, except that, like every other debtor, he was under an obligation to satisfy the demands of his creditors. He treated the property as his own. It is impossible to say that the plaintiffs had any legal claim to it as against the creditors of Kellogg or purchasers under him. No mortgage or bill of sale was ever upheld under such circumstances. No one will pretend for a moment that the plaintiffs could maintain a claim to those goods which Kellogg sold to his customers, and yet an execution creditor has the same right as a bona fide purchaser. The statute places both on the same footing (1 R. S. 136, §5). The rule was the same under the former statute (Divver v. McLaughlin, 2 Wendell, 596). Instead of leaving the matter to the jury, as a question of fact for their determination, the judge would have been well warranted in instructing them that the transaction was fraudulent and void in law, and that the defendants were entitled to a verdict in their favor.

y/ If there had been no objection to this bill of sale and mortgage but continued possession in the vendor, that alone would have rendered the transaction fraudulent and void as against creditors and purchasers (Doane v. Eddy, 16 Wendell, 523; Randall v. Cook, ante, 53).

The act of 1833, Laws of 1833, p. 402, can not aid the plaintiffs. The first section provides, that every mortgage of goods and chattels, which shall not be followed by a continued change of possession, “ shall be absolutely void” as against creditors and purchasers, “Unless the [496] mortgage or a true copy thereof shall be filed as directed in the succeeding section.” This does not repeal the statute concerning fraudulent conveyances. It only adds another to the grounds on which a mortgage of personal chattels shall be void. If the plaintiffs had omitted to file their mortgage, it would for that cause have been “ absolutely void.” If it was before void on another ground, filing it could not make it valid.

New trial denied.