First Nat. Bank of Pierre v. Comfort

• Decision Date: 28 February 1886
• Parties: First Nat. Bank of Pierre v. Comfort.
• Court: South Dakota Supreme Court

28 N.W. 855

4 Dak. 167

First Nat. Bank of Pierre

v.Comfort.

Supreme Court of the Territory of Dakota.

February Term, 1886.

Appeal from a judgment in favor of the defendant upon a verdict returned pursuant to the direction of the judge, at Hughes county term of district court, Fifth district.

Action by chattel-mortgage creditor to recover damages for conversion of goods taken by defendant, as sheriff, representing attachment creditors. Verdict for defendant by direction of trial judge, and appeal therefrom by plaintiff.

Francis, J., dissenting.Walter C. Fawcett, for appellant, First Nat. Bank of Pierre. Bartlett Tripp and Wakefield & Horner, for respondent, Patrick W. Comfort.

L. K. CHURCH, J.

This action was brought to recover damages for the alleged conversion of certain personal property claimed by the plaintiff, and which the defendant, as sheriff of Hughes county, seized under sundry warrants of attachment against the property of MacMahon & Co. The firm of MacMahon & Co., doing business at Pierre, consisted of John MacMahon and Kate MacMahon, his wife; and the firm of Young, MacMahon & Co., of Blunt, and Gotlieb, MacMahon & Co., of Fort Pierre, were branch establishments of MacMahon & Co. On the tenth day of July, 1883, MacMahon & Co., then being financially embarrassed, and threatened by creditors with legal proceedings, mortgaged to W. G. Nixon, cashier of the plaintiff, all goods, wares, and merchandise in their store in Pierre; all goods stored in their warehouse or shed in the rear of said store; and all other goods belonging to said firm, wherever situated, in the city of Pierre; also one horse and delivery wagon and carriage, together with ponies belonging to said firm; all sheds, warehouses, etc., of the firm in the rear of said store; all notes, claims, and evidences of indebtedness, of any kind whatever, due to said firm; and all interest of said firm in the business of Young, MacMahon & Co., and Gotlieb, MacMahon & Co.,-to secure the payment of $6,000, with interest thereon, according to the terms of four promissory notes, as follows: One for $1,000, payable August 1, 1883; one for $3,500, payable September 1, 1883; and one for $1,000, payable October 1, 1883. The mortgage provided that in case of the mortgagor's attempting to dispose of or remove from the county of Hughes the goods and chattels, or any part thereof, or in case the mortgagee should at any time deem himself insecure, then it should be lawful for him to take possession, and sell at public auction. It was agreed, however, outside of the mortgage, that the mortgagors should continue business as before, disposing of the mortgaged property by retail, at private sale, in the usual course of trade. On the following day the mortgagors gave to Nixon a bill of sale of the same property, and included, in addition, all goods then in transit, or that should thereafter be in transit, or in any way come into their possession; also all goods in transit, or thereafter to be in transit, to Young, MacMahon & Co., or Gotlieb, MacMahon & Co.; and all the interest of the grantors in any indebtedness which might become due to either of said firms; the intention evidently being to include MacMahon & Co.'s entire property.

It is claimed that this bill of sale was intended as a mere security, and to cure possible defects in the mortgage. The next day (July 12th) it is claimed that there was a meeting of plaintiff's board of directors upon the subject of the security which had been taken from MacMahon & Co., at which time it was concluded that the security was unsafe; and thereupon, on the same day, plaintiff took MacMahon & Co.'s stock of merchandise under a parol agreement by which, after selling by retail at private sale enough goods to satisfy its claim, it was to account to MacMahon & Co. for the surplus.

MacMahon continued in the store; the clerks were to go on and sell the goods in the usual way; nothing was said about reducing prices; no minority of the goods was taken; MacMahon's sign was not taken down,-in fact, nothing was done in any way to change the outward or inward appearance of the manner of conducting the business, except that the cashier, as agent for the bank, was quietly put in charge, and he was to remain in charge only until the bank was paid, and then, according to the parol agreement, the bank's interest ceased. The anxiety of the bank people, and their diligence in looking after the interest of the bank, and the acknowledgment that they did not deem the bank sufficiently secured by the chattel mortgage, and the manner and circumstances under which the bill of sale was procured, and all the admitted facts, show they were aware of the failing or embarrassed circumstances of MacMahon & Co. The defendant attached said property on July 13th, and it is admitted said attachment proceedings are regular.

The only error assigned is the action of the court in directing the verdict. We are of the opinion that the entire transaction was an assignment by MacMahon & Co. to the bank; and, whether in name a “mortgage” or “bill of sale,” there was no delivery of the property,-there was a secret trust for the benefit of MacMahon & Co. If considered as a mortgage, it was fraudulent and void in law as against creditors. When the mortgagor, by an arrangement, express or...