Edgell v. Hart

Full title: EDGELL against HART

Court: Court of Appeals of the State of New York

Date published: Dec 1, 1853

9 N.Y. 213 (N.Y. 1853)

Opinion

December Term, 1853

E. Darwin Smith for the appellant.

J.L. Angle for the respondent.

DENIO, J.

The schedule annexed to the mortgage and referred to in it, was a part of that instrument; and both papers are to be construed together. ( Roberts v. The Chenango Mut. Ins. Co., 3 Hill, 501; Hills v. Miller, 3 Paige, 254, 256, and cases cited; Cow. Hill's Notes, 1420, note 958.)

The inhibition to sell on credit contained in the writing at the foot of the schedule, by a necessary implication authorized Bostwick to sell the goods for cash, and all the circumstances connected with the transaction, as well as the admission in the pleadings, show that the intention of the instrument was that Bostwick should continue to retail the mortgaged property and receive the proceeds to his own use, as he had done with the plaintiff's knowledge and assent from the time of the original purchase, and the giving of the first mortgage.

Interpreting the instrument in this manner, the scope of the written arrangement between the parties was that Bostwick should carry on a retail store, making purchases from time to time and selling off in the ordinary manner, the plaintiff all the time retaining a lien on the whole stock by way of mortgage; under which he could upon a default take possession of the remaining goods, whether they were those owned by Bostwick at the giving of the mortgage or purchased subsequently, and sell them for the payment of his debt. I have said that this was the written arrangement between the parties, and not merely their supposed intention deduced from circumstantial proof. They made this precise bargain in writing, and the question is whether by law such an arrangement is void as against creditors. The appellant's counsel strenuously contends that inasmuch as the statute has declared that the question of fraudulent intent shall be deemed a question of fact and not of law (2 R.S. 137, § 4), the effect of the mortgage should have been left to the jury. It should be remembered that there is no question respecting the meaning of the language. The doubt, if there be one, is whether the law tolerates such an arrangement where the rights of creditors are concerned. There was no traversable question either respecting the intention of the parties. The law adjudges that they intended what the writing expresses; and it would be incompetent for either party to show, if they were possessed of the most persuasive evidence, that they designed the instrument to have a different operation from the one the law assigns to it. As it is the duty of the court to respond as to the law, and as this was a pure question of law, it belonged to the judge at the circuit to determine whether an action could be sustained on this mortgage. If by law it was void as to creditors, the court would be obliged to set aside a verdict affirming its validity as often as one should be rendered. The true question then is whether a person engaged in traffic and indebted can make a valid contract or conveyance in favor of one creditor, by which he shall possess a lien upon all the chattels which the debtor shall from time to time have on hand, allowing the latter to sell and purchase like an unqualified owner, the lien attaching only to what may be on hand at the time it is sought to be enforced. The proposition requires only to be stated to be refuted. The branch of it which professes to subject after-purchased property is void upon the most common principles. A mortgage is an executed conveyance subject to a condition, and has all the elements of a sale. Like a sale, it requires a subject in esse and in the power of the mortgagor. (2 Bouvier's Law Dic., 485, pl. 1, 2, 3, 6; Blackburne on Sales, 122; Rapelye v. Mackie, 6 Cow., 250; Outwater v. Dodge, 7 Cow., 85.) The appellant's counsel concedes that the instrument was inoperative upon after-acquired property; but he argues that this consideration does not affect it in respect to that which was on hand when it was executed. But it seems to me that its prospective operation was an essential part of the entire arrangement. It was not intended to create an absolute lien upon any property, but a fluctuating one which should open to release that which should be sold, and to take in what should be newly purchased. It may be safely assumed that the liberty to sell would not have been given, but for the right supposed to be acquired over subsequent purchases. But I am of opinion that the right to sell, if it stood alone, would vitiate the mortgage. In Griswold v. Sheldon (4 Comst., 581, 594), five judges of this court concurred in holding that such a provision would render the instrument void, and four were of opinion that where the mortgagor was allowed by the mortgagee to sell the mortgaged chattels, though not in pursuance of a provision in the instrument, the mortgage would be invalid in law, whatever a jury might think of it. The invalidity of such a transaction had been affirmed in the supreme court in Wood v. Lowry (17 Wend., 492), and no case or dictum has been found to uphold it. I not only agree that the case of Smith v. Acker (23 Wend., 658) is an authoritative exposition of the statute respecting fraudulent sales, but I assent to it ex animo as asserting the true sense of the legislature. The effect of that decision I understand to be that where the objection to a sale or mortgage of chattels is that the vendor or mortgagor continues in possession, the transfer, though prima facie fraudulent, is susceptible of explanation by proof that it was intrinsically honest and made without a view to defraud creditors. This explanation relates to the consideration and motives of the transfer, and is not limited to accounting for the want of change of possession; and it is moreover to be submitted to a jury in all cases where it arises upon the trial of an issue of fact. But this falls far short of proving that no transfer of chattels can be fraudulent and void in law as against creditors, and still farther from showing that a jury is in such cases to take the place of the court in determining the effect of written instruments. A deed of gift by a person indebted would, I presume, be void as against creditors as a matter of law, as well since as before the statute; and so also of a conveyance of chattels which like the mortgage should leave the owner the right of selling them as his own. These considerations are sufficient to enable us to decide the case in favor of the respondent; and it is unnecessary to determine whether a nonsuit would be proper, if the right of the mortgagor to sell had been made out by the conduct of the parties or their declarations out of the mortgage. My own opinion is that the existence of such a provision out of the mortgage or in it would invalidate it as matter of law, and that where the facts are undisputed this court should so declare. The manifest tendency of such arrangements to defraud creditors by giving to the mortgagor a false credit, and their incongruity with the just and legal idea of a mortgage are in my mind sufficient to condemn them; but as before remarked it is only necessary now to decide that in this case the objectionable provision being contained in the mortgage the nonsuit was proper.

The judgment of the court below should be affirmed.

Judges GARDINER, MASON and JOHNSON dissented.

Judgment affirmed.