Court Opinion

ID: 6634785
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:39:24.284897+00
Date Added: 2024-06-11T15:59:02.761617
License: Public Domain

Campbell, Ch. J.
The parties, who were discharged under the habeas corpus proceedings removed into this Court, were arrested on a capias ad respondendum, sued out for an alleged injury, for which redress is sought by an action on the case in the nature of an action of trover. The validity of the arrest depends on the affidavit, which sets out in substance these facts.
On the 24th day of March, 1869, the Fulton Iron and Engine Works, of Detroit sold to the Hicks brothers, who were doing business at Saranac, in Ionia County, certain machinery adapted to the purposes of a saw mill, and at the time of sale the purchasers paid eight hundred dollars in cash, and gave their notes and chattel mortgage of the same date for the balance. This mortgage was sent by the Fulton Works, with the property, to the agent of the Detroit and Milwaukee Railroad Company, at Saranac, with directions to deliver the property to Hicks brothers, upon their obtaining from the owners of the land upon which they proposed to erect a steam saw mill, in which the machinery was to be placed, a recognition of the rights of the Fulton Works to the property. On March 31, the Fulton Works *287received the mortgage back from the agent, with the recognition endorsed, and sent it at once to the Town Clerk of the town where the Hicks brothers lived, and where the property was situated, and ho filed it in his office on the next day — which was April 1, 1869.
On the 30th of March, while a portion, if not all, of the mortgaged property was in the possession of the railroad, in the depot, Hicks brothers purchased a lot of logs of one Charles Macomber, representing that the property was free from liens and incumbrances, and induced Macomber to give them credit, and on the same day gave him a second chattel mortgage upon it, with some logs, to secure 19,859, which they delivered to him and caused to be filed with the Town Clerk, at 7 o’clock in the evening of the 30th, thereby, as was alleged, giving that mortgage a priority. It is stated that the Hicks knew the first mortgage was not on file, and did all these acts to get credit from Macomber, and secure him a priority, and that the property mortgaged to him is not worth more than his mortgage, and the first one is rendered worthless.
The objections made'to the affidavit are two: First, that if the second mortgage was by these acts given priority, they would not give any cause of action for the injury; and second, that it does not appear that any such priority was gained.
A mortgage not recorded or followed by continued possession is void as against subsequent rights, and property which is taken out from its operation by a fraudulent contrivance of the mortgagor is to all intents and purposes wrongfully converted. The mortgagee loses it as effectually as if it had been destroyed or stolen. — Fenn v. Bittleston, 8 L. Eq. 483; Forbes v. Parker, 16 Pick., R. 462; Manning v. Monaghan, 23 N. Y., 539.
The execution of a second mortgage is not necessarily fraudulent, and if the mortgagor does not have reason to suppose the prior one is not on file, his omission to give *288notice of its existence may be free from fault. But when he knows the first is nod on file, and makes the second with the actual design of supplanting the first, instead of leaving it subject to the first, he is guilty of such a wrong as directly destroys the security, and must be held legally responsible as a wrong-doer.
It is claimed, however, that no title passed to Hicks brothers until the property was given up by the railroad agent, upon obtaining the approval of the land owner, and that, for anything appearing the mortgage to Macomber was made when they had no title, and was inoperative to affect the other mortgage, which attached instantly on that delivery. How far this result would follow, upon such facts, we need not consider, because the case is different. It is a familiar principle that a deed cannot be delivered in escrow to the grantee.— Dawson v. Hall, 2 Mich., R., 390. — The affidavit states positively that the property was sold on March 24th, that there was a part payment in money made, and that the chattel mortgage was given the same day: That this mortgage was sent by the mortgagees, with the property, to the railroad agent, with authority to deliver the property upon obtaining a recognition of the mortgage rights by the owner of the real estate, on which it was to be placed. There is nothing to favor the idea that the sale was incomplete, or that the mortgage was to be given up, and the sale abandoned and the property taken back, if no such recognition was given. The only thing it was to affect was the delivery up of the property. If possession by the mortgagee were inconsistent with the security, then a question might arise as to its effect here. But so far from this being so, it was — as against creditors and others — until recently, held that a want of possession raised a presumption of fraud. And under the allegations in the affidavit, the possession can only be referred to the mortgage, and the title was vested in Hicks brothers on the 24th of March.
*289If this is so, then the subsequent 'mortgagee, by his security, obtained advantages against the prior mortgagees which would make the Hicks brothers responsible as wrong doers, in dishonestly creating them, and the affidavit justified the arrest.
The judgment of discharge must be reversed, with costs.
The other Justices concurred.