Case ID: tenn_15/html/0440-01.html
Source: Caselaw Access Project
Author: {"author": "Green, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Maney vs. Killough.
    The retention of personal property by a mortgagor before the time when the debts secured by it are to be paid, is not prima faeie evidence of fraud.
    Possession remaining with the vendor after an absolute sale, or with the grantor or mortgagar in deeds of trust and mortgages, after the time when the debts secured by the latter should be paid, is prima facie evidence of fraud; but the presumption of fraud may be repelled by proof of fairness in the transaction, and that the instruments were executed for an adequate consideration.
    The retention of personal property by the mortgagee, before the time when the mortgage debt is to be paid, amounts to a tacit agreement that the mortgagor shall hold possession until that time.
    On the 15th of August 1832, William Richardson ex-*, ecuted to the plaintiff aTleed of mortgage for a tract of land, several negroes, horses, cattle, and some furniture, to secure him against liability by reason of his surety-ship for said Richardson, for the payment to John R. Wilson, of four promisory notes, for the sum of six hundred dollars each, dated the 28th of August 1829, and due the 1st and the 28th of August 1831, the 2d and the 28th of August 1832, the 3d and the 28th of August 1833, and the 4th and the 28th of August 1834, and a note to William T. Chaistry for four hundred and seventy-five dollars and fifty cents, dated the 31st of January 1832, and payable the 31st of July thereafter. This mortgage did not contain any clause authorizing the mortgagor to retain possession; but Richardson remained in possession of the property, and in January 1833, the defendant levied on the negroes in controversy, by virtue of executions regularly issued on valid judgments against Richardson, and they were sold by virtue thereof. To recover them this suit is prosecuted.
    It appeared in evidence, that the property included in the mortgage was not of more value than to furnish Ma- - ney a reasonable security against loss by reason of his engagements for Richardson, and it was admitted that all the debts enumerated in the mortgage were Iona fide ex-isling as therein set forth.
    , «a. J. Hoover, ior the plaintiff m error.
    1st. The court erred in instructing the jury, that the mortgagors continuing in possession of any of the personal property, any length of time after the execution of the mortgage, would be prima facie evidence of fraud.
    Most of the notes recited in the mortgage were not due when it was executed. There was a condition in it to be void, in case the notes were paid as they should become due. The fact, therefore, of the mortgagors remaining in possession of a part of the personal property after the execution of the mortgage, would be consistent with the face of the deed. 5 John. Rep. 258: 8 Yerger’s Rep. 520: Í Ala. Rep. 286: 4 Cowen 467. This doctrine does not conflict with the judgment of this court in Darwin vs. Hanley, 3 Yerger’s Rep. 593, and in Somerville vs. Horton, 4 Yerger’s Rep. 550. The retaining possession in those cases was prima facie fraudulent, because a part of the property was necessarily consumed in the use, 4 Yerger’s Rep. 552. The mortgage executed by Richardson, includes no article that would necessarily be exhausted by his retaining possession of it. 4 Yerger’s Rep. 541, 548. If the clause in the deed, permitting Richardson to remain in possession of the land, had extended to the personal property, the circuit judge clearly intimated the opinion, that the retaining possession by Richardson in such case, would have been consistent with the deed, and not prima facie fraudulent. A clause in the deed allowing the possession to remain with the donor is, perhaps, as frequently a badge of fraud, as of fairness. The distinction taken by the court below has no foundation in reason or justice; we should look to the substance of things, not to their shadows. 4 Yerger’s Rep. 550, 551.
    
      
      2d. The circuit judge erred, because he charged the jury in effect, that the mortgagors retaining possession of any 0ne article of personal property included in the deed, would raise such a presumption of fraud as would bar the plaintiff’s recovering, unless he (the plaintiff) had proven “that he bona fide lent such property to the mortgagor, or otherwise honestly possessed him of it.”
    If the retaining of possession by the mortgagor was prima facie fraudulent, it would at most only devolve upon the plaintiff to prove a fair and valuable consideration moving to the execution of the deed, and that his intention was to secure himself, and not to assist the mortgagor in delaying, hindering or defrauding his creditors. But a much greater burthen is imposed upon the plaintiff. He is required to prove, “that after the execution of the mortgage, he bona fide lent the property to the mortgagor, or otherwise honestly possessed him of it.” The jury are led to forget the important question, whether or not there was an intention to hinder or delay creditors; and are made simply to enquire, whether or not there was an agreement of loan, or other agreement by which the mortgagor was honestly possessed of the property; and by the result of this enquiry, the jury are virtually directed to shape their virdict. Thus, a question of fraudulent intent, always involving more or less an extensive examination into the motives and actions of men, is narrowed down and confined to an immaterial issue. 21 Eng. Com. L. It. 447: 3 Term 620, (note a.)
    3d. The property mortgaged being more than sufficient to pay the debts for which plaintiff was security, does not render the conveyance fraudulent. 5 John. Rep. 343.
    
      C. Ready, for defendant in eiTor.
    The whole cause turned upon the fact as to whether the mortgage was made bona fide, for the purposes alone therein expressed, or whether it was made to delay, hinder'or defraud creditors, within the meaning of the statute of 1801, ch. 25 sec. 2.
    
      The court below, charged the jury, that the mortgagee in the deed had the right to immediate possession of the personal property, unless the deed contained some provision for the possession remaining with the mortgagor; and if it contained no such provision, the personalty remaining with him for a length of time after the execution of the deed, was prima facie evidence of fraud; and that it lay upon the plaintiff to prove, that the mortgage deed was made in good faith; and also, that all presumption of fact might be rebutted by other equal presumptions, or proof doing them away.
    In this charge there was no error. Darwin vs. Han-ley, 3 Yerg. Rep. 403: Callen vs. Thompson, 3 Yerg. Rep.: Crutcher vs. Horton and Sommerville, 4 Yerg. Rep.: Bissell vs. Hopkins, 3 Cowen 166.
    The finding of the jury under the charge of the court is in accordance with the proof in the cause, and the court did right in not granting a new trial.
   Green, J.

delivered the opinion of the court.

The court, among other things, told the jury that “the mortgage vested in the plaintiff the right to immediate possession to the property in the mortgage deed, except the land; and that the mortgagor’s continuing in possession of any of the personal property any length of time after the execution of the mortgage, of the nature of this, including all his property of every description, would be prima facie evidence of fraud; and that such possession being inconsistent with the mortgage deed, would render it prima facie fraudulent; and that presumption must remain, unless the plaintiff has proven, that after the execution of the mortgage, he bona fide lent such property to the mortgagor or otherwise honestly possessed him of it.”

In that part of the above opinion of the circuit court, in which it is said, that if the mortgagor remained in possession of the personal property after the execution of x a «/ the mortgage, such possession would be inconsistent with the mortgage deed, and would be prima facie evidence of fraud, we think there is error. It is true, as stated by the court, that the mortgagee has a right to the possion$-but if he does not take such possession, it amounts to a tacit agreement that the mortgagor shall retain it.

Chancellor Kent, (4 Com. 154, 2 Ed.) says, that there is usually in English mortgages a clause inserted in the mortgage, that until default in payment, the mortgagor shall retain possession. This, he says, was a very ancient practice, as early as the time of James I.; and if there be no such express agreement in the deed, it is the general understanding of the parties, and at this day, almost the universal practice, founded on a presumed or tacit assent. This practice has prevailed very extensively, if not universally, in this State. This court, on account of this general understanding of the country, in the case of Overton vs. Bigelow, (6 Yerger, 520) made the retaining possession by a bargainor, one of the reasons for construing a conveyance which was absolute on its face, to be a mortgage. The mortgagor in such case; is the tenant of the mortgagee, and holds the possession for him, (4 Kent’s Com. 156). As, therefore, the possession of the property by the mortgagor is held by the presumed assent of the mortgagee, it is the same thing as though there had been a clause in the mortgage deed, that until default of payment, the morgagor shall retain possession. It follows, therefore, that the possession so retained is not inconsistent with the deed, and consequently is no evidence of fraud. This view of the question is not inconsistent with the principles settled by this court in the case of Darwin vs. Handley (3 Yer. 502). In that case, Faris executed to Darwin the deed of trust in question, by which Darwin was authorized to sell any of the property mentioned in the deed to meet any of the demands embraced in it. It was necessary for the trustee to have possession of tlie property in or-i i^ii i i i i ^ n • der to make the sale; and the court held, that as Jb aris continued in possession, it was prima facie fraudulent. Had the demands, to secure the payment of which the deed was made, been payable at some time subsequent to the date of the deed, and the power to sell had been given only on failure on the part of Faris to satisfy them when due, there is no reason, from any thing the court there say, to infer, that a possession between the date of the deed, and the failure of payment, would have been evidence of fraud. In the part of that case applicable to this question, the court only determine this principle: that where personal property is conveyed to secure the payment of debts, either by deed of trust or mortgage, if the party making the deed retain.possession after default in payment, it is evidence of fraud, as though the deed had been absolution its face. That principle is unaffected by the grounds assumed in the present case, and is undoubtedly correct.

The other ground of objection to the deed in the case of Darwin vs. Handley, and the ground upon which the court held the deed of the 26th July, 1820, in the case of Sommerville vs. Horton, (4 Yer. 549,) to be fraudulent, cannot apply to this case. Those deeds contained property, which, from the nature of things, would be consumed by the possessor, and which property consisted of provisions of daily use in the family. This fact of itself was evidence that each of those deeds vyas made, either in whole or in part, with a view to cover the property for the party’s own use, and thus hinder and delay creditors. That being the case, the statute of frauds pronounced them void; and it was in relation to this feature principally, in the deed of Faris, that the court, in Darwin vs. Handley, held that deed to be fraudulent.

This is not such a case. It is true, there are many small articles of but little value in this deed; but they are of a character that might have been preserved and applied to the payment of the debts; and therefore, from its face, it cannot be pronounced to be fraudulent. The circuit court also told the jury in substance, that where possession remained with the mortgagor, thereby raising the presumption of fraud, “that such presumption must remain, unless the plaintiff has proven that, after the execution of the mortgage, he bona fide lent such property to the mortgagor, or otherwise honestly possessed him of it.”

In Callen vs. Thompson, (3 Yer. 478,) the court say as to absolute deeds, “If the possession continue with the vendor, the presumption of fraud arises from this strong evidence of it; but it is a presumption which may be repelled by proof of fairness in the transaction, and a full and adequate consideration paid.” This, we think, is the view in which this question ought to be presented to a jury in cases of absolute sales, and in cases of mortgage after default of payment, that they may be'left to decide, from all the proof, whether the presumption of fraud is repelled by evidence of fairness and adequate consideration.

Let the judgment be reversed, and the cause be remanded, to be again tried upon the principles contained in this opinion.

Judgment reversed.