Bannon v. Bowler

• Decision Date: 15 January 1886
• Citation: 34 Minn. 416
• Parties: STEWART BANNON <I>vs.</I> SAMUEL BOWLER.
• Court: Minnesota Supreme Court

34 Minn. 416

STEWART BANNONvs.

SAMUEL BOWLER.

Supreme Court of Minnesota.

January 15, 1886.

Plaintiff brought this action in the district court for Scott county to recover the value of goods alleged to have been converted by the defendant. The action was tried before Macdonald, J., without a jury, and the following facts were found by the court: On June 30, 1884, the firm of Anderson & Melquist were indebted to plaintiff in the sum of $275, and to secure the payment thereof executed

and delivered to plaintiff a chattel mortgage upon the property claimed to have been converted by defendant. This mortgage was duly filed on the same day in the office of the town clerk of the township of Belle Plaine. When plaintiff took this chattel mortgage, he knew that Anderson & Melquist were insolvent, and took and accepted the same for the express purpose of securing a preference over the other creditors of the firm, and to prevent and delay such creditors in the collection of their claims until said firm had paid said mortgage. On July 1, 1884, the firm of Anderson & Melquist made an assignment to defendant for the benefit of their creditors without preference, and defendant immediately took possession of the goods and merchandise mortgaged to plaintiff. The defendant had no actual notice of plaintiff's mortgage when he took possession of the goods. Prior to the commencement of this action, the plaintiff duly demanded of defendant all the goods covered by his mortgage, which demand was refused. By plaintiff's mortgage it was provided that the mortgagors should remain in possession of the goods mortgaged, and "that all moneys arising from the sale of said goods while in possession thereof shall be paid to the said party of the second part, to apply on this mortgage." The court further found "that it has not been made to appear that said mortgage was made in good faith and not to defraud any creditor," and upon these facts directed judgment for defendant, from which judgment plaintiff appeals.

E. Southworth, for appellant.

R. A. Irwin, for respondent.

VANDERBURGH, J.

Anderson and Melquist, merchants, were, on the 30th day of June, 1884, indebted to the plaintiff in the sum of $275, which they had previously borrowed of him, and for which he had no security. All the parties resided in the borough of Belle Plaine, in the county of Scott. On that day they executed to him a chattel mortgage upon a stock of goods then owned and possessed by them, conditioned for the payment of such debt. It was provided therein that until condition broken the mortgagors should remain in possession, and also that the proceeds of sales of the goods while in their possession should be paid to the mortgagee, to be applied on his mortgage. It contained no other provision in respect to sales.

1. It is well settled that a mortgage of chattels, as a stock in trade, left in possession of the mortgagor, and which by its terms authorizes him to dispose of the mortgaged property as his own, without satisfaction of the mortgage debt, is to be deemed fraudulent in law as against the creditors of the mortgagor. Horton v. Williams, 21 Minn. 187, and cases cited. Such a provision would allow the mortgagor to apply the property to his own use and benefit, leaving the amount of the mortgage undiminished. Meanwhile the lien of the same would remain a cover for the protection of the debtor against the claims of creditors. On the other hand, a stipulation in the mortgage providing for the application of the proceeds of sales directly to the mortgage debt is liable to no such objection. The debt is diminished as sales are made, the proceeds of which go to the mortgagee, and not to the mortgagor; and it is immaterial whether the mortgage debt be so satisfied through sales made by the mortgagee, or for him through the agency of the mortgagor. Conkling v. Shelley, 28 N. Y. 360; Brackett v. Harvey, 91 N. Y. 214; Robinson v. Elliott, 22 Wall. 513, 524. This distinction is suggested in Horton v. Williams, 21 Minn. 187; and in Chophard v. Bayard, 4 Minn. 418, (533,) stress is laid on the fact that the mortgage did not provide in that case for the payment to the mortgagee of the proceeds received from the sales of the goods. The mortgage in this case was not fraudulent on its face....