Syllabus by the Court.
1.
Where, at the time of the execution of a chattel mortgage, it
is understood and agreed between the parties that the
mortgagor shall be allowed to remain in possession of the
mortgaged property, and sell and dispose of the same in the
ordinary course of trade, and apply the proceeds to his own
use, the mortgage is absolutely void as to creditors of the
mortgagor.
2. It
does not matter whether such agreement is oral or in writing
contained within the mortgage or without; if such an
agreement was had, the mortgage is fraudulent and void as to
creditors.
Error
from district court, P county; before Justice A. G. C
Bierer.
Actions
by Nix, Halsell & Co. and others against Brogan & Jackson.
Certain chattel mortgagees interpleaded. From a judgment
holding a mortgage of The Bank of Perry appeals. Judgment
affirmed.
A
chattel mortgage which permits the mortgagor to sell the
property, and apply the proceeds to his own use without
accounting to the mortgagee, is void as to the other
creditors.
On the
9th day of February, 1894, Brogan & Jackson, a firm composed
of J. M. Brogan and Junius E. Jackson, at the city of Perry
in P county, executed a certain chattel mortgage to the bank
of Perry for the sum of $425, due in 10 days after date, and
secured the same on the entire stock of groceries, flour
feed, etc., of the said firm. Said mortgage was on the 20th
day of February, 1894, filed in the office of the register of
deeds in said county, at 4:30 o'clock p. m. On the 10th
day of February, 1894, J. E. Jackson made, executed, and
delivered to the Bank of Perry at Perry, Okl., a certain
chattel mortgage on all of the stock of groceries, tobacco,
etc., of the said Jackson, to secure the sum of $225, due in
30 days after date, said mortgage being filed for record on
the 20th day of February, 1894, at 4:30 p. m. On the 9th day
of February, 1894, Brogan & Jackson were partners doing a
general merchandise business. On the 10th day of February,
1894, the said firm dissolved partnership, J. E. Jackson
assuming control of the business. On the 20th day of
February, 1804, J. E. Jackson made, executed, and delivered
to E. H. Cooke a certain chattel mortgage on the entire stock
of goods of the said Jackson, to secure the sum of $700, due
on demand, said mortgage being filed for record in the office
of the register of deeds of said P county on the 20th day of
February, 1894, at 5 o'clock p. m.; said mortgage being
subject to said mortgages to the Bank of Perry. At 4
o'clock p. m. on the 20th day of February, 1894, the
plaintiff in error took possession of the stock of goods in
question, under the mortgages above set out. On the same day
Nix, Halsell & Co., Henry
Flock, and Reid, Murdock & Co. levied upon the stock of goods
in question, under an order of attachment, in the order
named. Following these attachment creditors, E. H. Cooke
filed his chattel mortgage on said stock, and Dale & Nessly,
Armour Packing Company, and Symns Grocery Company followed
with writs of attachment in the order named. On the 11th day
of June, 1894, a jury being waived, a trial was had before
the court, and the court made the following findings of fact
and conclusions of law:
"Findings
of Fact.
"(1)
On February 8, 1894, J. E. Jackson, being indebted to E. H.
Cooke, executed and delivered to Cooke his promissory note,
payable on demand, for the sum of $700, on which note
demand for payment was made on February 20, 1894, and which
remains unpaid. On February 20, 1804, J. E. Jackson
executed and delivered a chattel mortgage to E. H. Cooke on
a certain stock of groceries, with all fixtures, furniture,
and goods of every kind and character, in the storeroom in
Perry, P County, Oklahoma Territory, theretofore owned and
managed by Brogan & Jackson, the Jackson of said firm being
J. E. Jackson, who executed this mortgage. The mortgage
contained provisions authorizing the mortgagee to take
possession of the property at any time he should feel
unsafe and insecure. It also contained a provision:
'And said mortgagor hereby represents that he is the
sole and exclusive owner of the property above described,
and that there is no other mortgage or lien of any kind
thereon, except to the Bank of Perry.' This chattel
mortgage was executed in Oklahoma City, Oklahoma Territory,
and on the afternoon of the same day Jackson and Cooke both
came to Perry, arriving in Perry about 5 o'clock p. m.
E. H. Cooke went to the Bank of Perry, and from there to
the register of deeds' office, where he filed the
chattel mortgage at 5 o'clock p. m.
"(2)
On February 9, 1894, J. M. Brogan and J. E. Jackson were
partners engaged in the mercantile business in the city of
Perry, having a stock of groceries, flour, feed, etc., and
were largely indebted to numerous wholesale merchants for
goods bought on credit. On the same day, February 9, 1894,
J. E. Jackson went to the Bank of Perry, in Perry, O. T.,
said bank being a banking institution, of which T. K.
Robinson was president, and F. W. Farrar was cashier, and
borrowed of said bank the sum of $425, and gave therefor
his note, payable 10 days after date, and to secure the
same gave a chattel mortgage signed by 'Brogan & Jackson, per J. E. Jackson, Partner.' This mortgage
contained provisions authorizing the mortgagor to remain in
possession of the goods and property mortgaged. Also
contained a provision that in case of default in payment of
the note at maturity, or in case the mortgagee should at
any time feel unsafe or insecure, 'It shall be entitled
to and may take and hold possession of said mortgaged
property, at the expense of the mortgagors, until the
payment of the note or performance of the act for the
performance of which the mortgage is security'. On the
10th day of February, 1894, the firm of Brogan & Jackson
having dissolved partnership on that day, J. E. Jackson
succeeding said firm, said J. E. Jackson again went to the
Bank of Perry, and borrowed, in his own name, the sum of
$250, and gave therefor his note, payable 30 days after
date, and another chattel mortgage on the same stock of
merchandise as the first; said chattel mortgage being in
the same form and containing the same conditions as the
mortgage made on the 9th day of February by Brogan & Jackson. These mortgages were signed in the presence of T.
K. Robinson, the president of the said bank, but not in the
presence of any other person, and were not signed by
attesting witness in the presence of Jackson; but
afterwards T. K. Robinson and V. C. Talbert signed the
mortgages as attesting witnesses, Jackson not being
informed or knowing that said parties signed the mortgage
as attesting witnesses. By agreement between the Bank of
Perry, through T. K. Robinson, as president, and J. E.
Jackson, these mortgages were retained by the bank, and not
filed of record until the 20th day of February, 1894, at
4:30 o'clock p. m., for the reason that if said
mortgages were so filed they would injure and ruin the
commercial credit of J. E. Jackson.
"(3)
J. E. Jackson continued to run his mercantile business and
buy and sell goods and merchandise in the usual course of
trade, after said mortgages were given, the same exactly as
before, no notice of any kind being given to any person of
said chattel mortgages until the 20th day of February,
1894, the goods being sold from said stock, and new goods
bought and placed therein daily, some of the purchases
being made during that time from Nix, Halsell & Co., and
some from the Armour Packing Company, and during the time
from the 10th of February, 1894, to and including the 20th
day of February, 1894, before these mortgages were filed
for record, more than $700 worth of goods, and more than
the amount of the notes and interest given to the Bank of
Perry, was sold from this stock of goods by J. E. Jackson;
no account being kept of the same excepting of the amount
of the proceeds of such sales, which were deposited by J.
E. Jackson in the Bank of Perry, $465 of such amount being
deposited in the Bank of Perry $100 of the amount of such
sales was retained by J. E. Jackson), and the balance of
the proceeds of such sales being expended in the purchase
of goods for said store and in running expenses of said
store and other expenses of said J. E. Jackson. From
February 10, 1894, to February 17, 1894, inclusive, J. E.
Jackson deposited in the Bank of Perry
the sum of $1,001.50, of which sum there remained in the
Bank of Perry to the credit of J. E. Jackson on the 20th
day of February, 1894, the sum of $155.74.
"(4)
On the 19th day of February, 1894, J. E. Jackson went to
Oklahoma City, Oklahoma Territory, leaving in charge of
said store W. G. Shapland, as clerk in said store. Said
Shapland was given no authority whatever to turn the
possession of said store over to the Bank of Perry or to
any other person.
"(5)
Shortly after 4 o'clock on the 20th day of February,
1894, F. W. Farrar, cashier of the Bank of Perry, deeming
the bank insecure in its claim of a chattel-mortgage lien
on said stock of goods under the said two mortgages of
February 9 and 10, 1894, went to the store and place of
business of J. E. Jackson, and found W. G. Shapland in
charge and possession thereof, and demanded possession of
the store under said chattel mortgages; and said Shapland,
believing that said Farrar had or would have an officer
with him to enforce his demand, delivered the key to the
front door of the store to said Farrar, but refused to
deliver the possession of the store to said Farrar, and
said Shapland, together with Miss Harbalds, another clerk
in said store, remained in the store building, and in
possession of said store, together
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