Cheatham v. Hawkins

• Citation: 80 N.C. 161
• Court: United States State Supreme Court of North Carolina
• Decision Date: 31 January 1879
• Parties: EDWIN G. CHEATHAM v. WILLIAM J. HAWKINS and others.

80 N.C. 161

EDWIN G. CHEATHAM

v.WILLIAM J. HAWKINS and others.

Supreme Court of North Carolina.

January Term, 1879.

CIVIL ACTION tried at Spring Term, 1876, of GRANVILLE Superior Court, before Seymour, J.

The statement in same case, 76 N. C., 335, and the facts set out by THE CHIEF JUSTICE in delivering the opinion of this court are deemed sufficient to an understanding of the points decided. Judgment for plaintiff, appeal by defendants.

Mr. W. H. Young, for plaintiff .

Messrs. Merrimon, Fuller & Ashe and Batchelor, for defendants .

SMITH, C. J.

When this case was before the court upon the former appeal, 76 N. C., 335, BYNUM, J., delivering the opinion of the court, thus comments on the mortgage deed:

“To secure a debt the bargainor conveys in mortgage an entire stock of miscellaneous merchandise and at the same time in the deed reserves the possession of them for at least nine months. The implication is irresistible, from the very nature of the business, that he was to continue in selling and trading as before, otherwise why retain possession of goods which would be a dead encumbrance on his hands without the power of disposition? There is no provision for his accounting for the proceeds of sale. He could apply the money in payment of debts other than the mortgage debt, he could apply it to family expenses, or even to the purposes of pleasure or waste. Substantially the proceeds belonged to him until the maturity of the Hawkins debt, to be expended as he pleased, and in the meantime the entire stock of goods was to be secure from the reach of his creditors. This case is unlike and stronger than the cases of Young v. Booe, 11 Ire., 347; Hardy v. Skinner, 9 Ire., 191; Gilmer v. Earnhardt, 1 Jones, 559; Lee v. Flannagan, 7 Ire., 471, and that class of cases.”

It may be added to what is so forcibly said by the court that the intention that Harris in retaining possession might use and dispose of the goods, after the making the mortgage as before, seems to be implied if not directly sanctioned by the following clause inserted in it: “But in case of removal or attempt to remove the same (the goods) from the town of Henderson, and an unreasonable depreciation in value, or if from any other cause the security shall become inadequate, the said Hawkins & Co. may take the said property or any part thereof into their own possession.” For, it may be asked, how otherwise than by the means specified or by a reduction of the stock itself could the security be rendered precarious, until which time or until the note matured Harris was to remain in undisturbed possession of the goods.

The court in the former opinion also declared “that the mortgage affords the strongest possible example of presumptive fraud, and one which can scarcely be rebutted by any existing facts outside of the deed.”

The case is now before us with the evidence offered on the one side to rebut, and on the other to strengthen and sustain the presumption. The judge who tried the cause and by consent of parties passed upon the facts held that it was not rebutted. We will examine the proof of the “facts outside of the deed” and see what is its force and effect.

When Harris executed his mortgage he was in hopeless insolvency, all of his other property also under mortgage, and his debts estimated to amount to fifteen thousand dollars. He continued in the same manner after as before his conveyance to the defendants to sell and dispose of the goods, furnishing his own family therefrom, and appropriating the fund to the improvement of his land and to the payment of other debts. During the time he bought and made fresh additions to the stock, which were intermingled with the goods on hand, and sold indiscriminately with them. The defendant's agent, Andrews, who negotiated the sale of the bacon and took the mortgage from Harris, testified that he expected when the transfer took place that Harris would go on as before.

The rebutting testimony proceeds from the mortgagor, the agent, and the acting member of the mortgagee firm, each of whom swears that in making and accepting the deed, he did not intend thereby to hinder, delay or defraud other creditors of Harris, or to secure any benefit to him or his family. The only rebutting evidence adduced against the fraudulent purpose inferred from the provisions of the deed itself and their obvious and necessary effect upon the rights of creditors, is found...