Court Opinion

ID: 6621054
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:29:56.351119+00
Date Added: 2024-06-11T15:58:42.872294
License: Public Domain

Opinion on Motion for Rehearing.
BROADDUS, J.
It is still insisted by respondents that the court misapprehends the effect of the decision in Dunham v. Stevens, 160, Mo. 95. In the original opinion we held that the ruling in Rubber Mfg. Co. v. Supply Co., 149 Mo. 538, had not been modified by that in Dunham v. Stevens, supra. The contention of the respondents therefore is to the effect that in the latter case the holding is that, where a mortgagor by the terms of the mortgage is permitted to remain in possession of the mortgaged goods and to sell at retail and apply the proceeds on the debt, his failure, by the permission of the mortgagee, to make such application does not render the mortgage void as to creditors. It is not conceivable that the court intended to enunciate a conclusion so radically opposed to the well-established rule that the permission of the mortgagee to the mortgagor to sell and divert the proceeds of mortgaged property from the payment of the debt is void as to creditors. The object of the provision in the mortgage to allow the mortgagor *35to remain in possession and to sell is that the proceeds shall go to the extinguishment of the debt; otherwise, such a provision would afford the most effective method that could be devised to defeat creditors in the collection of their claims.
In Dunham v. Stevens the mortgagee acted in good faith. For eighteen months the mortgagor returned to him each month a statement showing the amount of purchases and sales of goods and profits after deducting expenses. Not much was paid on the debt as the profits were small. The mortgagor kept up the stock to about its original value and the business was continued until the mortgagee became dissatisfied because his debt was not being paid as the mortgage provided, when he asserted his right to take possession.
Not so in this case. The mortgagee made no inquiries whatever as to what the mortgagor was doing in the business and the mortgagor made no reports to them, and they never at any time took notice-of what the mortgagor was doing but supposed he was conducting the business as he had been before the giving of the mortgage — that is, in the usual and ordinary course for his own benefit. When it was shown that the mortgagor had not applied the proceeds of the sale of the goods upon the debt it made a prima facie case against the mortgagees at least which they did not attempt to meet.
The motion for rehearing is overruled.