Case ID: mass_19/html/0644-01.html
Source: Caselaw Access Project
Author: {"author": "Wilde J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

James L. Homes et al. versus Elijah Crane, Sheriff, &c.
    A debtor made a bill of .sale to his creditor, of machines in a manufactory, on condition to be void on payment of a sum of money and the vendee took possession by putting his hands on each piece of machinery. The vendee then made a lease of the machines to the vendor and delivered them to him. Held, that this bill of sale was a mortgage, and that the possession of the vendor after the sale was only prima facie evidence of fraud, which might be rebutted by evidence showing the transaction to have been bond fide.
    
    Replevin for two carding machines and various other machinery. The defendant attached the articles replevied, as belonging to one Francis Andrew, and. he pleaded that they were the property of Andrew. The plaintiff replied that the property was in himself; and upon that the parties joined issue.
    
      file plaintiffs claimed in virtue of a bill of sale, under seal, dated the 9th of September, 1823, which was upon condition that it should be void upon the payment of 2000 dollars, according to the promissory note of Andrew to the plaintiffs of the same date. The plaintiffs went to the manufactory where the machines were, and received possession of them from Andrew. The workmen were called as witnesses to the delivery, the plaintiffs saying that it was according to the bill of sale which they then produced. The ceremony of the delivery was by putting the hands of one of the plaintiffs upon each piece of machinery, going from room to room, where the same was standing. After this delivery the plaintiffs made a lease of the machines to Andrew, for the use of which he was to pay 200 dollars a year, and delivered them to him in the presence of witnesses. In these transactions there was nothing like concealment, and the bill of sale and note were given as security for a debt of 2000 dollars honestly due from Andrew to the plaintiffs.
    The defendant objected, that as the machines were never removed from the actual possession of Andrew, but were left with him and were used by him, as well after as before the sale, and in the same buildings, the sale was not sufficient to pass the property to the plaintiffs as against creditors ; and he contended that the lease made no difference in the case, as it did not enlarge or in any way affect Andrew’s right to hold the property as against the plaintiffs or other creditors, inasmuch as by the terms of the lease the plaintiffs had a right to take back the property on demand, leaving Andrew a mere tenant at will in any event.
    A verdict was found for the plaintiffs, and if the Court should be of opinion that the sale to the plaintiffs was valid, sudgment was to be entered on the verdict ; but if not, a new trial was to be granted.
    B. Sumner and W. R. P. Washburn for the defendant.
    The transfer by Andrew to the plaintiffs was a pledge. In a pledge the lien is created by a delivery of the property, and a continued possession is requisite to preserve the lien. Cortelyou v. Lansing, 2 Caines’s Cas. in Err. 200 ; Stevens v. Bell, 6 Mass. R. 342 ; Portland Bank v. Stubbs, ibid. 425 ; Jewett v. Warren, 12 Mass. R. 302; Marshall v Bryant, ibid. 321 ; Metcalf’s Yelv. 179, note. The distinction between a pledge and a mortgage of personal chattels has never been taken by this Court, and it consists in words rather than in substance. The legal effects are the same in each case. Each is given for security and each is defeated in the same way, by payment of the sum secured. The division of property between the pledger and pledgee and that between the mortgager and mortgagee, are the same in their nature, and' the cases before cited show that a delivery is necessary as well in the case of a mortgage as in that of a pledge. See also Gale v. Ward, 14 Mass. R. 357. In Goodwin v. Richardson, 11 Mass. R. 475, the Court say that a mortgagee has only a lien.
    On the ground of public policy a transaction like this is not to be sustained. It would operate injuriously upon trade, by giving a man the appearance of owning what does not belong to him. In absolute sales it has often been held, that the want of possession may be explained, but the Court will not extend that doctrine to conditional sales. In the former case the risk of the vendee is so great as to prevent the mul tiplication of such transactions, so that the injury to trade in consequence of them is comparatively trifling ; but in the case of a mortgage the creditor runs no risk, for if the mortgage is avoided he still has his claim upon the mortgager. If therefore the plaintiffs are allowed to recover, mortgages of chattels, unaccompanied with delivery, will become very frequent, whereby false credits will be given. The lease in the present case, making Andrew a tenant at will, can have no bearing on the question before the Court.
    
      J. G. Rogers, contrà,
    
    contended that there is a difference between a pledge and a mortgage of personal chattels, and that the principle that the vendor’s continuing in possession may be explained, applies as well to conditional as to abso lute sales. He cited Brooks v. Powers, 15 Mass. R. 244 , N. E. Mar. Ins. Co. v. Chandler & Tr., 16 Mass. R. 279 ; Bartlett v. Williams, 1 Pick. 288; Badlam v. Tucker, ibid. 397 ; Cleverly v. Brackett, 8 Mass. R. 150 ; Kidd v. Rawlinson, 2 Bos. & Pul. 59 ; Watkins v. Birch, 4 Taunt. 823 . 
      Edwards v. Harben, 2 T. R. 596 ; Hamilton v. Russel, 1 Cranch, 310 ; Muller v. Moss, 1 Maulé & Sel. 335 ; Patch on Mortg. 319, 326 ; Barrow v. Paxton, 5 Johns. R. 258 ; Putnam v. Dutch, 8 Mass. R. 287 ; Portland Bank v. Stacey, 4 Mass. R. 661 ; Meggot v. Mills, 1 Ld. Raym. 286 ; Bucknal v. Roiston, Prec. Chan. 285 ; Sturtevant v. Ballard, 9 Johns. R. 341 ; Ludlow v. Hurd, 19 Johns. R. 222.
    The opinion of the Court was afterwards delivered in Sulfolk, by
   Wilde J.

The plaintiffs claim title to the machines and other articles replevied, by virtue of a mortgage, for a debt due to the plaintiffs, from one Andrew, the former owner ; and it has been argued for the defendant, that as the possession did not continue in the mortgagees, the transfer is void as against the other creditors of Andrew ; and this argument must prevail, if it be true, as the defendant contends, that there is no distinction in law between a pledge and a mortgage of goods. A pawnee has only a lien on goods deposited as a pledge, which cannot be maintained but upon the basis of possession. If therefore he relinquishes the possession, although the debt remains unpaid, the lien is ipso facto extinguished. But there is an obvious and material distinction, in this respect, between a pledge and a mortgage. By the latter the right of property passes to the mortgagee, and he may dispose of it as he sees fit, subject only to the condition or right of redemption. Possession is not essential to his title. This distinction seems to have been disregarded or even overlooked in some cases ; it is nevertheless perfectly well established. Powell on Mortg. 3 ; Barrow v. Paxton, 5 Johns. R. 258 ; Jones v. Smith, 2 Ves. jun. 378 ; Bro. Abr. Pledges, 20 ; 15 Mass. R. 244 ; 1 Ld. Raym. 286 ; Cadogan v. Kennett, Cowp. 432 ; Prec. Chan. 285 ; 2 Bos. 6 Pul. 59 ; 1 Pick. 397.

The possession of the vendor after the sale, even if it is absolute, is only prima facie evidence of fraud. It is not conclusive, but may be rebutted by evidence showing the transaction to be bona fide.

The intention of the parties and the circumstances attend ing the sale may be always shown, in order to repel a presumption of fraud, and the question of fraud is to be decid ed on the whole evidence. In cases of conditional sales or mortgages the possession of the mortgager is not inconsist ent with the terms of the contract and the nature of the transaction ; for before condition broken it is uncertain whether the property will vest absolutely in the mortgagee or not, and nothing is more common than to suffer the mortgager to retain possession until this may be ascertained. Stipulations to this effect are often inserted in mortgage deeds, and no one ever imagined, I believe, that they could be deemed fraudulent. The possession, being consistent with the deed, cannot be considered as the ground of constructive fraud. “ If,” says Butter J. in the case of Edwards v. Harben, 2 T. R. 596, “ the conveyance be conditional, there the vendor’s continuing in possession does not avoid it, because by the terms of the conveyance the vendee is not to have the possession till he has performed the condition ; . . . and such possession comes within the rule, as accompanying and following the deed.” It makes no difference, we think, whether this agreement of the parties in respect to the possession appear on the face of the conveyance, or, as in the present instance, in a lease made at the same time, or be otherwise proved, unless indeed it were omitted in the conveyance for the purpose of concealment, or with some other fraudulent design. 16 Mass. R. 279 ; 1 Maule & Sel. 335. In this case the transaction was public, and there is not the slightest suspicion, that in suffering the mortgager to remain in possession, there was any intention to give him a false credit ; nor does it appear that such has been the effect. If there had been any ground for such an imputation, the fact should have been found, and in such case, no doubt, it would vitiate the sale ; for conditional, as well as absolute sales, made for the purpose of dece’ving creditors and giving a false credit to the vendor, are equally fraudulent and void. But in the case under consideration, as the transfer was notorious, as it was made on a good and valuable consideration, and was bond fide, and as the possession was consistent with the terms of the contract, the intention of the parties, and the nature of the transaction, we can see no reason why the plaintiffs are not entitled to iudgment.

Judgment according to the verdict. 
      
       See also Brown v. Bement, 8 Johns. R. 96 ; M‘Lean v. Walker, 10 id. 471, Garlick v. James, 12 id. 146 ; Haven v. Low, 2 N. Hamp. R. 13 ; De Lisle v. Priestman, 1 Brown's (Penn.) R. 176 ; Ward v. Sumner, 5 Pick. 59 ; Story on Bailments, 197, 198 ; Langdon v Buel, 9 Wendell. 80 ; 4 Kent’s Comm. 133.
     
      
       The same doctrine as to possession under a mortgage has been maintained in the cases which follow. Ash v. Savage, 5 N. Hamp. R. 545 ; Lewis v. Stevenson, 2 Hall’s (N. Y.) R. 63 ; Bissell v. Hopkins, 3 Cowen, 166 ; Barrow v. Paxton, 5 Johns. R. 258 ; Cortelyou v. Lansing, 2 Caines’s Cas. in Err. 206 ; Baylor v. Smithers, 1 Littell, 111; Adams v. Wheeler, 10 Pick. 199 ; Ward v. Sumner, 5 Pick. 59 ; Glover v. Austin, 6 Pick. 220, 221 ; Flagg v. Dryden, 7 Pick. 52 ; Holbrook v. Baker, 5 Greenl. R. 309 ; Haskell v. Greely, 3 Greenl. R. 425 ; Haven v. Low, 2 N. Hamp. R. 13 ; Dawes v. Cope, 4 Binn. 258 D’Wolf v. Harris, 4 Mason, 515 ; Patten v. Smith, 4 Connect. R. 450 ; Clayborne v. Hill, 1 Wash. R. 177 ; Croft v. Townsend, 3 Desaus. R. 229. But see Clow v. Woods, 5 Serg. & Rawle, 278.
      It is now provided by statute in Massachusetts, that no mortgage of personal property shall be valid against any other person than the parties thereto, unless possession of the mortgaged property be taken and kept by the mortgagee, or unless the mortgage be recorded by the clerk of the town, where the mortgager shall reside at the time of making the same. St. 1832, c. 157, § 1; Revised Stat. c. 74, § 5. A similar provision was made in North Carolina in 1830. The legislature of New York also has taken this subject into consideration and made provisions concerning it. 2 Rev. Laws, 136, § 5, 6, 7; ibid. 137, §4 5.
     
      
      
         Wheeler v. Train, 3 Pick. (2d ed.) 257, note 1.