Court Opinion

ID: 6632210
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:38:06.151208+00
Date Added: 2024-06-11T15:58:58.616577
License: Public Domain

Manning J.,
dissenting.
A reversal of the decree is asked on two grounds,; , First, that the chattel mortgage, in law, is void on its face as to creditors. -Second, that it is fraudulent in fact, and is therefore void as to them.
The mortgage purports on its face to be given by Bid-well c% Son, to secure complainant as indorser of two promisory notes for them — the notes being past due at the time. Bidwell & Son grant, bargain, and sell, unto complainant, all and singular their goods, wares and merchandise following, to wit: all and entire their stock of goods in the store now occupied by them, situate on the west side of Canal street, in the city of Grand Rapids. To have and to hold all and singular the said goods and chattels unto the said party of the second part forever; said goods and chattels now remaining and continuing in the possessioix of the said parties of the first part, in- the store aforesaid. Provided always, and these presents are uponjthis express. *527condition, that if the said parties of the first part shall and do well and truly pay, or cause to be paid, to the said party of the second part, the sum of $983 80-100, the amount of the said notes, or should otherwise cause said notes to be paid and satisfied, so that complainant should suffer no loss, expense, or costs, by reason of Bidwell & Son’s delay to pay them, then the mortgage to be null and void. “But in case of judgment rendered on said notes, and execution issued thereon, damages, interest and costs thereon shall not, during the life time of the execution or executions, be fully paid, or if the said parties of the first part shall sell and dispose of said goods and chattels, otherwise than in the ordinary coui'se of their usual business, or assign the same to secure the payment of their just debts, without preferring the said Gay before any and every other creditor or creditors, then and from thenceforth” it should be lawful for complainant to take possession of the goods, and advertise and sell them, as provided in the mortgage.
Complainant never took possession of the goods under the mortgage.
A mortgage, at law, is a conveyance of the legal title to real or personal property, as security for a debt, or for the performance of some act by the mortgagor or a third person. Whatever the form of the instrument, if the legal title does not pass by it, it is not á mortgage at law, whatever it may be in equity. Tested- by this definition of a mortgage, and the rule of construction that requires the whole of an instrument to be looked to for the intention of the parties, and such a construction to- be given to it as will give effect to that intention, and the instrument before us called a mortgage is not a mortgage. The most that can be claimed for it at law, or in equity, is that it is an agreement empowering complainant, in a given contingency, to take possession of, and sell certain property mentioned in it, for a specific purpose, if it should not previously have been sold by Bidwell & Son in the prosecution of their *528business: or perhaps that it is an agreement that it is to become a mortgage on the happening of the contingency.
The intention of the parties is too clear to be mistaken. It was not designed to vest the legal title of the property in complainant; but to authorize him, on the happening of either of the contingencies mentioned, to take possession of that part of it that had not been sold by Bidwell & Son, and advertise and sell it to indemnify complainant, or to pay the judgments on the notes indorsed by him. No other construction, I think, can be given to the instrument without doing violence to its terms, and defeating the intention of the parties. By declaring, as it does, that if Bidwell & Son shall sell and dispose of the goods and chattels, otherwise than in the ordinary course of their business, complainant might take possession, it shows the understanding and intention of the parties was that Bidwell & Son should go on selling the property in their own right, and applying the proceeds to their own use, the same afterwards as they had done before. There is nothing making them the agents of complainant, or requiring them to pay the proceeds to complainant, or to apply them' in payment of the debts complainant was holden for. If I am correct in this, on what principle can the agreement between them be called a mortgage? It is the legal effect of an instrument that gives it its character; and there is not any thing in the one before us, to prevent [Bidwell & Son selling the whole of the property, if they could, before complainant would be entitled to the possession.
To say the agreement [is a mortgage, and that complainant had a right to take possession under it at any time, is to mistake ’the form of the instrument for its legal effect, deprive’Bidwell & Son of their rights under it, and give ^complainant greater rights than he stipulated for.
It may be objected to the views I have expressed, that the parties use the words “grant, bargain and sell” *529in the present tense; ,but, as I have already said, these words must be so construed as to give effect to the intention of the parties, to be gathered from the whole instrument. — Jackson v. Myers, 3 Johns. 388; Ives v. Ives, 13 Johns. 235. In the first of these cases, Kent Ch. J". says, “The intent, when apparent, and not repugnant to any rule of law, will control technical terms; for the intent» and not the words, is the essence of every agreement.”
It may also be said, it is as clearly the intention of the parties the property should not be subject to attachment, or execution, against Bidwell & Son, as that it might be sold by them in the usual course of their business. This is true; but the law will not give effect to this part of the agreement, for it is in violation of the Statute of Frauds, which declares all conveyances and transfers of property, with intent to hinder, delay, or defraud creditors, void as to them. It may well be asked, whether the sole object of the parties was not to prevent the creditors of Bidwell & Son making their debts of the property in question? Was security the object? The fact that Bid-well & Son were to go on with their business, selling the property, and using the proceeds, the same thereafter as before, repels such an idea. Security on property implies a right in, or lien on, the property.
I agree with Judge Mullet (see his opinion in Griswold v. Sheldon, 4 Comst. 580) in holding such an instrument is not a mortgage, and with Judge Read, in Collins v. Myers, 16 Ohio, 555, who says, “ A mortgage upon a specific article, with possession and power of disposition left in the mortgagor, is in truth no mortgage at all; it is no certain lien. The power to hold possession and dispose of the property, is inconsistent with the very nature of a mortgage.”
If we call it a mortgage, the intent to hinder and delay creditors, and not security, in the proper sense of that word, is none the less manifest. Hence, such a mort*530gage has been held fraudulent and void as to creditors, by the Supreme Court of New York, in Edgell v. Hart, 13 Barb. 380, and by the Court of Appeals of that state in the same case, 5 Seld. 213, and in the case of Griswold v. Sheldon, 4 Comst. 580. And in Brooks v. Wimer, 20 Mo. 503, a deed of a stock of goods to a trustee, for the benefit of creditors, which on Its face reserved to the grantor the right to sell the goods in the usual course of his business, until default made in the payment of the debts intended to’ be secured, was held, as a matter of law, void against creditors.
In New York, as in this state, the fraudulent intent is made by statute a question of fact. And it has been held there, as well as by this court in Pierson v. Manning, 2 Mich. 445, that when the fraudulent intent appears on the face of the instrument, it is a question of law for the court to decide, and not of fact for a jury. In Brooks v. Wimer the court say, “fraud is a question of fact for a jury, except in [those cases in which, from the very face of the instrument, the conveyance is fraudulent under the statute.
Pierson v. Manning was an assignment for the benefit of creditors. But there is no difference between such assignments, and chattel mortgages, or other conveyances. The statute applies to all conveyances to hinder or defraud creditors.
The construction and legal effect of written instruments have always been regarded as questions of law. The books are full of cases in which they have been declared void in toto, or as to creditors, for matter appearing on their face, and the statute was not intended to take such questions from the court and refer them to a jury.
In Oliver v. Eaton [ante p. 108] and Bagg v. Jerome [ante p. 145] this question was not before us, but we were asked to declare the chattel mortgage, in each of those cases, void for matters appearing outside of the mortgage. *531This we held we could not do under the statute. In the last case the following language is used, in speaking of the statute: “ When ■ the instrument on its face is one the law will not sanction, against creditors, it is the duty of the court to pronounce it fraudulent as to them; but the court will not look to matters dehors the instrument for that purpose. In such case the fraud, if any, does not consist in the instrument itself, but in the abuse of it, or in using it for purposes at variance with what it declares on its face.
There are two kinds of fraud- — fraud in law, and fraud in fact. When courts say an instrument is fraudulent on its face, or in law, I do not understand them rto mean it is made with a corrupt intent, but that it is an instrument the law will not sanction, or give effect to, as to third persons, on account of its susceptibility of abuse, and the great danger of such contracts being used for dishonest purposes. Hence, in many cases, the law has shaped and given form to contracts; on which form their effect or legality is made to depend.
The law of this court as to chattel mortgages, is, that the mortgagee may take possession at any time, unless there be an express stipulation to the contrary; and that the mortgagor has no right in the mortgaged property that can be taken and sold on an execution. — 3 Mich. 110; 4 Mich. 295. Before going further, it seems to me the court should inquire into' thejprobable consequences of permitting a new feature to be engrafted on such mortgages, by which the mortgagor may sell and dispose of the property in his own right, and for his own benefit, the same after he has given such mortgage as before. Will not one of these consequences be, that a merchant with a stock of six thousand dollars, by mortgaging it for two or three thousand dollars, may go on selling it, putting the money in his pocket, while the sheriff with an execution against him stands at the door, in defiance of the officer?
*532The courts in Massachusetts and Maine have probably gone further than any others, but I doubt whether a case can be found in either of those states, going the length it is necessary to go to sustain the mortgage before us.
In Jones v. Huggeford, 3 Metc. 515, the mortgagor was authorized to sell some, not all, of the goods, provided he purchased like goods of like value, to be put into the store, and there to be kept, and the sale thereof to be faithfully [applied to the payment of the mortgage debt; showing clearly the intention of the parties was that the title to the property should pass at once, and not on a contingency thereafter to happen.
In Mitchel v. Winslow, 2 Story, 630, which in other respects differs from the case before us, the instrument had become a mortgage in fact by the party having taken possession of the property under it, and it was an assignee in bankruptcy -of the grantor Avho was contesting it, who, Judge Story, held, had no greater rights than his assignor.
Other cases cited on the argument, for reasons appear, ing in them, seem to me as inapjMcable as those I have mentioned.
The branch of the case I have been considering presents two questions. First, was it the intention of the parties the title should pass on the execution of the instrument? Second, will the court sustain such an instrument, as a mortgage? Either of these questions answered in the negative disposes of the comjdainant’s case ; and I think both should be answered in the negative.
I think the decree should be reversed, and the bill be dismissed.

JDeeree affirmed.