Court Opinion

ID: 6689323
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:36:15.241376+00
Date Added: 2024-06-11T16:01:03.869703
License: Public Domain

McCOY, J.
This action was brought by respondent, as plaintiff, against one Badker, seeking to recover a judgment upon certain accounts. The First National Bank of Gary and others were made garnishee defendants. H. E. Jones, the appellant, -became a party to this action by intervention, claiming to be entitled to certain moneys then in the hands of said garnishee First National Bank of Gary under and by virtue of an alleged chattel mortgage upon certain personal property securing the payment of a debt of $2,000 from said defendant Badker to the said intervener; the said moneys in the hands of -said garnishee bank being the proceeds of a sale of said mortgaged personal property. It is the contention of the respondent that the said- intervener waived his lien under said chattel mortgage, if any he had, by consenting to a sale of said property by said mortgagor Badker, and also that the said mortgage of the intervener is fraudulent and void- on-the ground that the same was made and entered into for the purpose and with the intent of hindering and delaying the creditors *111of said Badker in the collection of their debts. Upon the trial of said action it appeared that the defendant Badker was indebted to plaintiff, the respondent, in the sum of $279.97, and upon verdict being rendered in favor of plaintiff upon all the issues judgment was rendered in favor of plaintiff for the said sum of $279.97, an'd that the said garnishee pay said amount to plaintiff,- and that the said intervener take nothing by this action, and that plaintiff have and recover of said intervener his costs and disbursements. From this judgment and an order overruling the intervener’s motion for a new trial, appeal has been taken by the intervener to this -court.
On the trial of the case the appellant excepted to the following instruction upon the ground that there is no evidence in the case to support such instruction or to entitle the jury to determine whether or not the intervener waived his said mortgage:
“If you do not find that Mr. Jones waived his mortgage, that ■is, consented to a sale, and that the money after the sale be the ■money of Badker, if you should find that he had a mortgage, and you find that he consented to the sale without any reservation whatever, or any agreement that the money should be paid to this bank for him, then he would waive his mortgage.”
[1] The appellant also specifies that there is no testimony in this case tending to show that said intervener did not act openly and honestly in the matter of -the sale of the personal property of Badker and 'having the money placed in the bank at Gary for his benefit in lieu of his mortgage. It appears from the undisputed testimony in this case that the mortgagor Badker was contemplating removing from the state of South Dakota and desired to have a public sale of his personal property covered by the said mortgage of the intervener; and that prior to the said sale the intervener, as said mortgagee, and the said mortgagor entered into an arrangement or agreement by which it was stipulated that said mortgaged property should be sold at public auction, and that the proceeds of such sale should be received and taken'possession of by the said First National Bank -of Gary to be applied upon intervener’s mortgage, that the said bank should, act as the clerk of sale and should receive the proceeds of the sale of said mortgaged property to be applied on the payment of the $2,000 mortgage, and that in pursuance of such agreement the -said *112Badker in writing- directed' said garnishee bank to turn over to said intervener the proceeds derived from the sale of said property. We are of the opinion that this arrangement and consent to* sale 'by the intervener did not in any manner waive or defeat his mortgage lien or 'his right to the proceeds of the sale of said mortgaged property. In the case of Minneapolis Threshing Machine Co. v. Calhoun, 37 S. D. 542, 159 N. W. 127, this court held that, where the mortgagee under a chattel mortgage consented that the mortgagor might sell- the ¡property at public sale on condition that the proceeds of sale 'be collected by another party and by him applied to the payment of the mortgage debt, the agreement amounted to the creation of an express trust in the proceeds in the hand's of such third party, who could not legally apply it to* any purpose other than the satisfaction of the mortgage and the mortgagor could not revoke his authority or control the proceeds of the sale, except as to any surplus over the indebtedness secured by the mortgage. In that case the mortgaged property was sold at public auction under an arrangement in principle the same in effect as the arrangement for sale in this case.
[2,3] The appellant also contends that the evidence is insufficient to show or sustain the finding that the mortgage under which the intervener claimed was fraudulently .made with intent to hinder and delay the creditors of said* mortgagor in the collection of their debts. We are of the opinion that the appellant is right in this contention, and that there is nothing in this case, so far as the mortgage under which the appellant claims is concerned, which in any manner is inconsistent with honest and perfectly legitimate intention's. Upon the issue as to. whether or not the said $2,000 mortgage under which the intervener claimed was fraudulent, the burden of proof was upon the respondent. From the evidence-it appears that the $2,000 mortgage was made and executed on the 2d clay of February, 19*14, securing a note of that date for $2,000 due March 1, 1914, ¡with interest at the rate of 10 per cent, per annum. It appears that intervener is an attorney at law, and is also engaged in store and banking business. He testified that for some two* years prior -to February 2, 19*14, he had been making personal loans-to Badker, and then held his notes to -the amount ¡of about $500; that Badker then was indebted-*113to the bank of Gary in the sum of about $700, which indebtedness to said-’ bank the intervener paid; that he -then let Badker have about $800 in cash; that these three items constituted the consideration for the $2,000 note and mortgage; that he desired a first mortgage on the Badker property; and that he took the $800 cash he gave Badker from the store drawer, and kept no other account thereof thán as represented by the note. There is nothing-in the evidence tending to show but what Badker then had a perfect right to give said mortgage or that” intervener did not then have the perfect right to take the same. Intervener- testified that he knew Badker contemplated going to Wyoming, and 'had in view a sale of the mortgaged' property, but at that time he did not know what debts, if any, Badker was owing; that he subsequently, on February 13th, learned- -that Badker intended having a public sale of said property on February 16, 1914, and on that occasion the intervener entered into the agreement with Badker that the sale might he made if the -bank of Gary clerked said sale and received the proceeds and- applied the same on the $2,000 mortgage of February 2, 1914. The respondent offered no testimony whatever tending to discredit or impeach this testimony of intervener. Conceding that the jury had the right to disbelieve the testimony of the intervener, still there was no other testimony in the case that tended to establish fraud in the making of this mortgage. The burden of proof was upon respondent to affirmatively establish the fraud, if any existed. There is nothing in connection with the giving or making of this $2,000 note and mortgage inconsistent with honest motives on the part of the intervener.
Intervener also testified that on the 14th day of February, 1914, Badker gave him a second mortgage covering the same property securing $2,500, but with no new consideration, the agreement between intervener and Badker being that after the sale was over intervener would advance him $500; that after the sale was made and trouble arose, said $500 note, mentioned in said second mortgage, was canceled by intervener. The giving of tire last-mentioned mortgage was a matter independent of the first mortgage, and to the extent of the $500 note - would have been a fraud against the rights of creditors of Badker, but in *114this case' intervener is claiming no rights under the second mortgage. There is no testimony tending to show that the first mortgage was made with intent on the part of intervener to. defraud any of the creditors of said- mortgagor.
The judgment and order appealed from are reversed, and the cause remanded for further procedure.