Donohue v. Campbell
| Decision Date | 02 August 1900 |
| Docket Number | 12,206 - (255) |
| Citation | 83 N.W. 469,81 Minn. 107 |
| Parties | WILLIAM F. DONOHUE v. J. E. CAMPBELL and Another |
| Court | Minnesota Supreme Court |
Action in the district court for Stearns county by plaintiff as administrator of the estate of Reuben A. Richmond, deceased to have a chattel mortgage executed by decedent to defendant Campbell declared fraudulent as to creditors and for other relief. The case was tried before Searle, J., who found in favor of defendant Campbell. From an order denying a motion for a new trial, plaintiff appealed. Affirmed.
Chattel Mortgage for Purchase Price -- Possession by Mortgagor.
A chattel mortgage on a stock of merchandise and store fixtures given for the purchase price thereof provided that it should cover all future additions to the stock, and that the mortgagor should keep up the stock at all times to its then present value; that until default he might retain possession of the property, and use and enjoy the same, but if he made any attempt to sell any part of it without the written consent of the mortgagee he was authorized to take possession of it. Held:
Fraud -- Sale of Mortgaged Property.
1. That the mortgage did not expressly nor by necessary implication provide that the mortgagor might sell the mortgaged property as his own, without applying the proceeds to the payment of the mortgaged debt, and that it was not, as a matter of law fraudulent as to creditors.
Good Faith -- Findings.
2. The evidence sustains the findings of the trial court that the mortgage was made in good faith, and without any intention to defraud.
John B. Atwater and Welch, Hayne & Hubachek, for appellant.
Calhoun & Bennett, for respondents.
The defendant Campbell, on April 15, 1896, was the owner of a retail stock of merchandise and store fixtures, and on that day he sold the property to the plaintiff's intestate, Reuben A. Richmond. As security for the purchase price of the stock, he took a chattel mortgage on the stock and fixtures for $2,200 from the purchaser, which was duly filed. The mortgage, after a general description of the property mortgaged, contained these provisions:
"Being the stock of drugs and fixtures purchased this day by the said party of the first part from said party of the second part, together with all future additions to said stock, and all goods hereafter purchased to replenish said stock, the same being valued at $3,000; and said party of the first part hereby agrees to keep said stock at all times up to its present value, quality, and condition."
It was also stipulated in the mortgage that until default by the mortgagor in the conditions of the mortgage he was to retain possession of the property, "and to use and enjoy the same, during which time it shall be kept and maintained in as good order and condition as it is"; and, further, that if the mortgagor, without the written consent of the mortgagee, attempted to sell the mortgaged property, the mortgagee might take immediate possession thereof.
The mortgagor took possession, and retained the mortgaged property until December 27, 1896, at which time he died intestate, having paid nothing on the mortgage, except the sum of $93.95. Thereupon the defendant Campbell took possession of the property as mortgagee, and thereafter the defendant Edmond C. Richmond was appointed special administrator of the mortgagor's estate, and brought an action against the mortgagee to have the mortgage declared fraudulent as to creditors, and to recover the possession of the property. This action failed on the ground that the special administrator was not authorized to maintain it. See Richmond v. Campbell, 71 Minn. 453, 73 N.W. 1099.
The plaintiff was duly appointed by the probate court of the county of Stearns general administrator of the mortgagor's estate, against which claims have been presented and allowed by the probate court to an amount exceeding $500. There being a deficiency of assets in the hands of the plaintiff, as administrator, to pay such debts, he brought this action under the provisions of G.S. 1894, § 4506, to set aside the chattel mortgage as fraudulent as to creditors. The trial resulted in findings of fact and conclusions of law by the trial court to the effect that the mortgage was not fraudulent in law or fact, but was made in good faith, to secure an honest debt, without any intent by either party thereto to defraud creditors, and that judgment be entered for the mortgagee, the defendant Campbell, on the merits. The plaintiff appealed from an order denying his motion for a new trial.
1. The first and most serious question presented for our decision by the record is whether the chattel mortgage was void on its face.
The settled doctrine of this court, which has been rigidly enforced, is that a mortgage on a stock of merchandise, which on its face expressly or by necessary implication authorizes the mortgagor to dispose of the property as his own, is, as a matter of law, without reference to the actual intent of the parties, fraudulent and void as to the other creditors of the mortgagor. Chophard v. Bayard, 4 Minn. 418 (533); Horton v. Williams, 21 Minn. 187; Stein v Munch, 24 Minn. 390; Gallagher v. Rosenfield, 47 Minn. 507, 50 N.W. 696; Pierce v. Wagner, 64 Minn. 265, 66 N.W. 977, 67 N.W. 537; Pabst Brewing Co. v. Butchart, 67 Minn. 191, 69 N.W. 809. While none of the opinions in these cases expressly states that, where the mortgage contains an express agreement authorizing the mortgagor to sell in the usual course of business, the mortgage is void unless it also contains an agreement that the mortgagor shall apply the proceeds of the sales to the payment of the mortgage debt, yet such is the necessary and logical inference from the facts of the cases and the language used by the court. Bannon v. Bowler, 34 Minn. 416, 26 N.W. 237. The rule adopted by the courts of one-half of the states which have passed on the question is that such mortgages are not, as a matter of law, fraudulent as to creditors, but the question is one of fact, unless they show expressly on their face that the mortgagor is to retain the proceeds of the sales for his own use. It may be true, and probably is, as claimed by plaintiff, that this is a just and logical rule, and in accordance with the trend of modern authority. Jones, Chat. Mort. (4th Ed.) § 415; Brett v. Carter, 2 Low....
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