Bannon v. Bowler

• Decision Date: 15 January 1886
• Citation: 26 N.W. 237,34 Minn. 416
• Parties: BANNON v BOWLER.
• Court: Minnesota Supreme Court

34 Minn. 416

26 N.W. 237

BANNONvBOWLER.

Supreme Court of Minnesota.

Filed January 15, 1886.

Appeal from a judgment of the district court, Scott county.

E. Southworth, for appellant, Stewart Bannon.

R. A. Irwin, for respondent, Samuel Bowler.

VANDERBURGH, J.

Anderson & Melquist, merchants, were, on the thirtieth 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. 190, 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. 363;Brackett v. Harvey, 91 N. Y. 214;Robinson v. Elliott, 22 Wall. 523, 524; S. C. 17 Amer. Law Rev. 354. This distinction is suggested in Horton v. Williams, 21 Minn. 190; and in Chophard v. Bayard, 4 Minn. 538, (Gil. 418,) 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. Whether it was fraudulent in fact remains open for inquiry.

2. There was no change of possession; hence the burden rested upon the plaintiff to establish the good faith of the transaction, and this we think sufficiently appeared. There was no conflict in the evidence. The mortgagors, Anderson & Melquist, had previously borrowed this money of him, without security, to enable them to satisfy the pressing claims of their creditors. Information as to their financial condition caused him to feel insecure. He applied for security, and obtained this mortgage. The evidence discloses no other purpose than to secure him. The next day they were sued, and immediately made a general assignment under Gen. St. 1878, c. 41, § 43. No judgments had been recovered or attachments issued against them. It is true, the effect of the mortgage was to give him a preference, but it appears to have been an honest one. The transaction was a lawful one, and no attempt appears to have been made to avoid such preference under the insolvency act. In the absence of proceedings under that act, the mortgage is not to be deemed fraudulent or void simply because it was thereby intended to prefer the plaintiff to other creditors. Berry v....