Court Opinion

ID: 6411899
Source: CourtListenerOpinion
Date Created: 2022-06-25 11:53:19.1993+00
Date Added: 2024-06-11T15:51:24.088096
License: Public Domain

Dewey, J.
The locomotive engines, the subject of the present controversy, were originally the property of the defendants, a manufacturing corporation, supplying such articles to those who had occasion for them. In the ordinary course of business, the Newburyport Railroad Company became the legal owners of them by a purchase from the defendants on the 14th of August 1854, giving their notes therefor, payable at a future day. The first of these notes had been duly paid at maturity. The others were outstanding, and some of them were overdue. On the 19th of March 1855 the relations of the parties were that the railroad company were the absolute owners of the locomotive engines, and the defendants were then bona fide creditors, as holders of certain notes taken in payment of the engines. At that date two instruments were executed by these parties; one by the railroad company, marked A in the documents appended to the bill of exceptions, and the other by the defendants, marked B. The effect of these two instruments was to *158convey the engines to the defendants as collateral security for the unpaid notes held by them. The form was not the more usual one, but one frequently adopted in making mortgages of real estate, a sale absolute in form by one instrument, and a defeasance by another, executed at the same time, and making part of the same transaction. It was a mere conveyance in mortgage, and as such, if properly recorded, would be good and effectual to secure the mortgagee. The effect, however, of such mortgage would be to leave the property subject to attachment for the surplus of its value above the debts for which it was mortgaged. But the defendants did not record this mortgage. They purposed to hold their security in another form, and the parties afterwards executed another instrument, marked C. At what precise time that paper was executed does not appear, but it was subsequently to the execution and delivery of the papers on the 19th of March, although apparently bearing that date. In this latter instrument, the parties assume the locomotive to be the absolute property of the defendants, and the agreements of the defendants, and all their stipulations, are based upon that hypothesis. This form of contract, as found in paper C, of a conditional sale and a lease of the engines, the defendants might weH have adopted as an original arrangement with the railroad company, while the defendants were the absolute owners, and before the property had become vested in the railroad company by an actual purchase from the defendants. But this was not the state of the property. It had been sold absolutely, and without reserving any lien thereon, to the railroad company in August 1854, and has since been in their possession and use, as their property. Such being the case, it was not competent to deal with the same as the property of the defendants in July 1855, unless, by some legal mode of conveyance, the title had passed from the railroad company to the defendants prior to that time. The only mode by which it had passed was by the instrument A, before referred to. But that was on its face an absolute sale of the engines by the railroad company to the defendants, and, as is conceded, was made without any consideration paid therefor by the defendants, and was therefore void
*159and inoperative as against the creditors of the railroad company. It became valid only by reason of the defeasance B then given back by the defendants, and thus constituting it a mortgage, and leaving the interest of the mortgagor attachable by his creditors. It will not sustain a legal right in the defendants to the property, to withdraw the instrument B, because instrument A would be ineffectual without B, as it would transfer the property of the railroad company without any consideration, property which had been paid for, partly in cash paid already in discharge of notes, and partly in notes of the railroad company which the defendants then held, and which they might enforce against them, and satisfy out of any other property of the railroad company. Nor does it change the legal aspect of the case, that the instrument C was executed and apparently designed as a substitute for paper B. The parties vtrere not in a situation to give effect to it as an original transaction. The debt or liability of the railroad company to pay the balance of their notes given for the engines remained, not only after execution of paper B, but also after the execution of paper C. Extended notes were given, but for the same liabilities as previously existed. The previous dealings of the parties, the actual payment of a part of the purchase money, and the retaining of the notes of the railroad company, are inconsistent with the hypothesis that at the time of the execution of the bill of sale A the property in the engines was to pass absolutely to the defendants. We do not see how paper C can aid in establishing a legal title in the defendants, if they were not the actual owl ers of the property stipulated to be conveyed and leased by that instrument. The railroad company might as well have executed such a paper as A, and received back such a paper as C from the defendants, embracing any other property of theirs, as these engines. The result ‘of sustaining this conveyance, upon the face of these papers and the evidence before us, would be to sanction a mode by which the provisions of the registry law as to personal property might easily be avoided. The debtor would only have to make an absolute bill of sale of his personal property, or any articles thereof, to his creditor, and take back a con *160tract to sell him the same upon payment of the same sum as the amount of his debt, stipulating for a lease until the sum should be paid, if such were held to be the law. The character of the transaction, as the case is developed in the bill of exceptions, was giving security for the notes given as the purchase money of these locomotive engines. The difficulty in the defendants’ case is, that the property had vested in the railroad company by sale to them in August 1854. It had passed by an absolute sale and upon a good consideration. It was not to be devested, as respects the rights of creditors, but by a valid reconveyance. It was not competent for the defendants, unless the property had previously been revested in them by a valid conveyance to that effect, to assume the relation of absolute owners of the property, and as such to make a conditional sale, reserving to themselves all the rights of an owner to stipulate to pass the legal title only upon payment of a sum stipulated to be paid therefor. As already stated, the execution of the paper A by the railroad company, without a surrender by the defendants of the notes given for the purchase of the engines, was of no avail against the creditors of the railroad company, and paper A only has legal force and effect as connected with some other instrument ; as connected with B, it constituted a mortgage; and the substitution of paper C did not change the character of A as a conveyance, which, if valid at all, must be so as passing the property for collateral security. The court are of opinion therefore that the instructions to the jury were erroneous.

Exceptions sustained.