Court Opinion

ID: 9866428
Source: CourtListenerOpinion
Date Created: 2023-09-26 11:45:09.283564+00
Date Added: 2024-06-11T14:22:30.874903
License: Public Domain

ON PETITION EOK REHEARING.
By the Court,
Massey, J.:
The petition for rehearing contains much that was fully considered by the court on the hearing of the action. Counsel has evidently a misconception of the scope of the original opinion, hence very little that is urged in support of the application is pertinent. We held, in effect, that a mortgage that expressly stipulated that the mortgagor, his executors, administrators and assigns, should remain and continue in the quiet and peaceable possession of the mortgaged property and in the free and full use and enjoyment of the same until default, conferred upon the mortgagor the right and authority to sell and dispose of the mortgaged property for his own benefit, and that such mortgage was therefore void per se. The reasons for such holding are fully set out in the opinion.
Counsel assumes in his argument that no matter what stipulation may be contained in the mortgage, that the court can not declare a mortgage void of itself. Herein the court and counsel must differ. Ordinarily under our statute a question of fraud is one of fact and not of law, but there are cases where the question is so mixed that it becomes difficult to distinguish between law and fact. Such is the case at bar. We are of the opinion that the court is warranted in holding a mortgage void per se as a matter of law, without regard to extrinsic facts, where the facts of fraud are affirmatively shown in the stipulations of the mortgage. It is not necessary to seek for facts outside of the stipulation of the mortgage. The mortgage is proof of the facts, and the fact being established by the mortgage that it operates to defraud creditors, the reasonable conclusion is that it was intended to defraud creditors, and is therefore void.
Counsel cites McFadden, Administrator v. Fritz et al., 90 Ind. 590, as overruling the doctrine laid down in Davenport v. Foulks, 68 Ind. 382, yet that case is entirely different from *52the case last cited, and approves Lockwood v. Harding, 79 Ind. 129, as an authority, wherein it is held that cases may arise in which a mortgage should be declared void per se without regard to extrinsic facts. Mobley et al. v. Letts, 61 Ind. 11, is overruled in so far as it held that a mortgage was void because it contained no stipulation that the mortgagor should apply the proceeds arising from the sale of the mortgaged stock to the discharge of the mortgage debt. The same ruling was made by that court in New et al. v. Sailors, 114 Ind. 412, cited in the opinion of this court, and it was therein held that when the mortgagor is permitted to retain possession and sell the mortgaged goods, it will be presumed that he does so under an agreement to account for such sales as the agent of the mortgagee, and the proceeds will be regarded as applied to the discharge of the mortgage debt whether they have been actually paid over or not, unless it affirmatively appears to the contrary.
We are of the opinion that the mortgage in the case at bar affirmatively shows that the money arising from the sale of the mortgaged goods should be appropriated by the mortgagor for his own benefit, without regard to extrinsic facts, and that any showing of a private arrangement of which the appellant had no notice or knowledge is not sufficient to overcome the affirmative statement shown by the stipulations in the mortgage. Counsel is equally unfortunate in citing Jaffary v. Greenbaum, 64 Iowa, 492, as analogous to the case at bar. It appears in that case that the mortgage stipulated that the mortgagor should have the right to retain possession of the mortgaged goods and carry on the business in the usual retail way for one year, paying cost and expense of running the business and keeping the stock to what it was when the mortgage was given. The mere statement of this stipulation is sufficient to distinguish that case from the case at bar, and the Supreme Court of Iowa in the above case, in discussing the question as to whether a mortgage should be declared void on its face, say: “ That a mortgage upon a stock of goods which should provide for sales that would exhaust the stock without any provision for an application of the proceeds on the. mortgage debt might well be declared fraudulent.”
*53We are somewhat surprised that counsel should contend that this mortgage was an indemnity to the mortgagee for whatever of the goods should be left at the end of the year for the payment of whatever should be due, and if there were none of the goods left which were originally mortgaged, it would be Lutz’s loss and nobody’s business. We are of the opinion that it is the business of the law to see that debtors pay their debts, and in the enforcement of the rights to collect debts it is the business of the law to see that debtors do not encumber their property in such a manner as to defraud bona fide creditors, without giving indemnity to the holder of the encumbrance.
We see no reason for granting a rehearing herein, and the same is therefore denied.