Barton v. Sitlington

• Decision Date: 12 April 1895
• Parties: Barton et al. v. Sitlington, Appellant
• Court: Missouri Supreme Court

30 S.W. 514

128 Mo. 164

Barton et al. v. Sitlington, Appellant

Supreme Court of Missouri, Second Division

April 12, 1895

Appeal from Jackson Circuit Court. -- Hon. J. H. Slover, Judge.

Affirmed.

Stuart Carkener and Lathrop, Morrow, Fox & Moore for appellant.

(1) The court erred in giving a peremptory instruction to find for plaintiffs. Where the evidence tends to show fraud in fact as by permission to remain in possession and sell without accounting for and paying proceeds on debt secured, the question should be submitted to the jury. Hisey v Goodwin, 90 Mo. 368; Weber v. Armstrong, 70 Mo 221; State, etc., v. Mason, 112 Mo. 382; Van Raalte v. Harrington, 101 Mo. 608. (2) "It has been held by a long and unbroken line of appellate court decisions that, when it appears on the face of a mortgage conveying personal property that the mortgagor is to retain possession of the property and to sell and dispose of it for his own benefit, that such mortgage is void as to creditors, on the ground that such conveyance is deemed in law for the use of the mortgagor, and for that reason is void under the statute." Robinson v. Robards, 15 Mo. 459; Brooks v. Wimer, 20 Mo. 503. And numerous other cases. Smith v. Ham, 51 Mo.App. 436. (3) "If the mortgage was made in part -- not only to secure the mortgagees but to assist the debtor in hindering and delaying his other creditors in the collection of their debts -- it was void in toto under the well settled law of this state." Masse v. Algermissen, 25 Mo.App. 188; Strohm v. Hayes, 70 Ill. 41. (4) The mortgages were not good as to the future purchases. Plaintiffs could not replevin as to them. France v. Thomas, 86 Mo. 84; Wright v. Burcher, 72 Mo. 186; Petring v Chrisler, 90 Mo. 655. (5) The possession taken by Barton Brothers did not cure the fraudulent character of the mortgages. Wherever there is a question of actual fraud or fraud in fact, a possession taken does not cure the transaction. Boland v. Ross, 120 Mo. 217; McKinney v. Wade, 43 Mo.App. 157. (6) "It is not in the power of the mortgagee to remove the original taint of the mortgage, and make it good, by taking so much of the property as has not been sold, into his possession under and by virtue of the mortgage." Gallagher v. Rosenfield, 50 N.W. 697; Stein v. Munch, 24 Minn. 390; Wait on Fraud. Conv. [2 Ed.], sec. 357. (7) There was no legal process by which the creditors could reach the surplus and make it available for the payment of their debts and the mortgage was thereby rendered fraudulent. Bigelow v. Stringer, 40 Mo. 208; Hanna v. Finley, 33 Mo.App. 651. (8) The construction placed on Revised Statutes, 1889, section 4914, in Straus v. Rothan, is too narrow and should be reviewed.

Karnes, Holmes & Krauthoff for respondents.

(1) The rule is now established that it is the function and duty of a trial court to direct a verdict in all cases where it would have been warranted in setting aside a verdict for the adverse party. 2 Thompson on Trials, sec. 2250; Morgan v. Durfee, 69 Mo. 469; Powell v. Railroad, 76 Mo. 80; Lenix v. Railroad, 76 Mo. 86; Landis v. Hamilton, 77 Mo. 554; Jackson v. Hardin, 83 Mo. 175; Carroll v. Interstate, etc., Co., 107 Mo. 653; Reichenbach v. Ellerbe, 115 Mo. 588, 595; Wolff v. Campbell, 110 Mo. 114. (2) This rule having been applied in the present instance, the case is here, with a finding by the trial court that it is without any element of actual fraud. The rule with reference to such an issue is not peculiar; actual frand must be proved; it can not be conjectured; and when the trial court has ruled that there is no sufficient proof of it, a verdict was properly directed accordingly. Priest v. Way, 87 Mo. 16; Bent v. Lewis, 88 Mo. 462; Robinson v. Dryden, 118 Mo. 534; Ring v. Ring, 12 Mo.App. 88; 2 Thompson on Trials, sec. 1935. (3) The transaction was rendered free from the taint of fraud by Barton Brothers taking possession of the mortgaged property prior to the institution of any legal proceedings by any other creditor. Jones on Chat. Mort. [4 Ed.], secs. 178, 424; Nash v. Norment, 5 Mo.App. 545; Greeley v. Reading, 74 Mo. 309; Petring v. Chrisler, 90 Mo. 649; Dobyns v. Meyer, 95 Mo. 132; McIntosh v. Smiley, 107 Mo. 377; Boland v. Ross, 120 Mo. 208; Howell v. Caryl, 50 Mo.App. 440. (4) No one can object to a failure to record a mortgage unless he has been misled thereby into extending credit to the mortgagor. Waite v. Mathews, 50 Mich. 392; Kay v. Noll, 20 Neb. 380. (5) Having taken possession, the mortgagee completed his lien, and could recover the property by replevin proceedings from one subsequently seizing it. Keating v. Hannenkamp, 100 Mo. 161; Thompson v. Foerstel, 10 Mo.App. 290; Gregory v. Tavenner, 38 Mo.App. 627. (6) A clause reserving the surplus to the mortgagor, in no way affects the mortgage. Jones on Chat. Mort. [4 Ed.] 353; Douglas v. Cissna, 17 Mo.App. 44; Hargadine v. Henderson, 97 Mo. 375. (7) When an honest debt is secured and the mortgage recorded or possession taken (which is the equivalent) the tendency is to uphold the transaction. Etheridge v. Sperry, 139 U.S. 266; St. Louis, etc., v. Rubelman, 15 Mo.App. 280.

OPINION

Burgess, J.

On the twelfth day of September, 1891, and for six or seven years next preceding that date, one Jesse Swim was a merchant engaged in the retail shoe business in Kansas City, Missouri, operating two stores, one at 1125, and the other at 521, Main street. At the same time plaintiffs, composing a copartnership and doing business under the name and style of Barton Brothers, were engaged in conducting in said city a wholesale shoe business. Swim was largely indebted on merchandise to various creditors in a sum total of about $ 26,000, a large portion of which was past due, and he was being hard pressed for payment by some of his creditors. He owed plaintiffs $ 13,500; Hathaway, Soule & Harrington, $ 8,000; the Bank of Commerce, $ 3,000; Kirkendall, Jones & Company, $ 500, and small amounts to other creditors. Swim also owned large real estate properties in Kansas City, but they were mortgaged for as much as they were worth.

Swim had executed to Barton Brothers a number of notes falling due at different times, and, they becoming uneasy with respect to his solvency, one of the firm called upon him and demanded that their claim should be secured by chattel mortgage on his stocks. To this, Swim assented, with the understanding and agreement, as he testified, that he was to have fifteen thousand dollars standing credit in the house, to secure which he was to execute to plaintiffs an additional chattel mortgage on his stocks. He also testified that he was to continue in the possession of the goods and sell them in the usual course of trade, and to account to Barton Brothers for proceeds of sale, less expense, and that by agreement the mortgages were not to be placed of record, unless other creditors of Swim proceeded against him to collect their debts, or took some steps which were likely to jeopardize the claim of plaintiffs. These statements were all denied by plaintiffs.

The mortgages were executed, and, on the thirtieth day of October, 1891, Barton Brothers demanded of Swim possession of the goods, which he refused, and they then at once had their mortgage, given to secure past indebtedness, placed of record, and obtained possession of the goods, including goods bought by Swim from Hathaway, Soule & Harrington of the value of about $ 8,000, which they knew had not been paid for, and obtained possession by action of replevin.

Swim's purpose in making the mortgage, and plaintiffs' in accepting the same, was that they, plaintiffs, should be preferred over other creditors of Swim.

After Barton Brothers had taken possession of the property and Swim had executed further chattel mortgages to Kirkendall, Jones & Company and the National Bank of Commerce of Kansas City, a conference between the parties interested was held, and an agreement was made by which Barton brothers should hold possession of the property to secure the debts due to themselves, Kirdendall, Jones & Company, and the Bank of Commerce, respectively, payment to be made, from the sale of the goods of the creditors, in the order named. Adkins, selected by the bank, was to act with Carr, selected by Barton Brothers, in selling and disposing of the property, and Swim was to be employed as a salesman at $ 80 per month.

Adkins was sent for, and, in the presence of all parties, was advised of the arrangement and intrusted with the property. On the next day the arrangement thus outlined was committed to writing. The plaintiffs' witnesses testified that Swim assented to the arrangement; Swim himself admits that he acquiesced therein. When asked to sign the agreement, on the following day, after the arrangement therein outlined was being carried out, he declined, for the reason that it did not provide that he should have the management of the property. At the time plaintiffs obtained possession of the goods they were estimated to be worth from $ 30,000 to $ 35,000.

While plaintiffs were in possession of the goods, Swim, on the sixth day of November, 1891, confessed judgment in favor of Hathaway, Soule & Harrington, for $ 7,833.65, being for the purchase price of a part of the goods in controversy, had an execution issued on the same day, directed and delivered to the defendant sheriff of Jackson county, Missouri, who, on the eleventh day of January, 1892, levied it upon the same goods, with some others. Plaintiffs then brought this action and replevied from defendant the goods levied upon by him under said execution.

At the close of the evidence the court instructed the jury to find for plaintiffs, and refused all instructions asked by defendant. From the judgment rendered in favor of plain...