First National Bank of Chicago v. Caperton

Decision Date22 March 1897
Citation74 Miss. 857,22 So. 60
CourtMississippi Supreme Court
PartiesFIRST NATIONAL BANK OF CHICAGO v. E. M. CAPERTON ET AL

March 1897

FROM the chancery court of Coahoma county, first district HON. A H. LONGINO, Chancellor.

The American Cooperage Company, a corporation doing business at Friar's Point, in this state, borrowed $ 10, 000 from Cyrus H. McCormick, and among other securities given for the loan, was a list of personal property, which was agreed to be pawned; whether this property was delivered so as to render the pledge valid was a controverted question in the case.

Afterwards the American Cooperage Company, being indebted to the First National Bank of Chicago, in the sum of $ 35, 000, and contemplating further indebtedness to it, executed and delivered to the bank two mortgages, the two, in the opinion of the court, constituting or evidencing but one transaction upon substantially all of the property of the cooperage company, the mortgagor, embracing the product of its manufacturing plant. One of the mortgages contained the following provisions:

(1) "To have and to hold, all and singular the said goods and chattels unto the said mortgagee, its successors and assigns, to its and their sole use forever, and the mortgagor, as for itself and for its successors or assigns does hereby covenant to and with the said mortgagee, its successors and assigns, that said mortgagor is lawfully possessed of said goods and chattels as of its own property, that the same are free from all incumbrance; that it will, and its successors and assigns shall, warrant and defend the same to it, said mortgagee, its successors and assigns, against the lawful claims and demands of all persons; provided, nevertheless, that if the said mortgagor, its successors or assigns, shall well and truly pay unto said mortgagee, its successors or assigns, any and all indebtedness now or hereafter existing, of any and every nature, of the party of the first part to the party of the second part; and, provided also, that it shall be lawful for the said mortgagor, its successors or assigns, to retain possession of the goods and chattels, and at its own expense to keep and use the same until its successors or assigns shall make default in the payment of the said sum of money above specified, either in principal or interest, at the date or times and in the manner hereinbefore stated.

(2) "And the said mortgagor hereby covenants and agrees that in case the mortgagee, its successors or assigns, shall feel insecure or unsafe or shall fear diminution, removal or waste of said property, or if the mortgagor shall sell or assign, or attempt to sell or assign, the said goods and chattels, or any interest therein, or if any writ or any distress warrant shall be levied on said goods and chattels, or any part thereof, then, and in any or either of the aforesaid cases, said mortgagee, its successors or assigns, or any of them, shall thereupon have the right to take immediate possession of said property, and for that purpose may pursue the same wherever it may be found, and immediately enter on the premises of the mortgagor, with or without force or process of law wherever the said goods and chattels may be or be supposed to be, and search for the same, and, if found, to take possession of and remove and sell and dispose of the said property, or any part thereof, at public auction to the highest bidder, after giving three days' notice of the time, place, and terms of sale, together with a description of the property to be sold, by notices posted up in three public places in the vicinity of such sale, or at private sale, with or without notice, for cash or on credit as the said mortgagee, its successors or assigns, agents or attorneys, or any of them, may elect; and out of the money arising from said sale to retain all costs and charges for pursuing, searching for, taking, removing, keeping, storing, advertising, and selling the said goods and chattels, and all prior liens thereon, together with the amount due and unpaid, rendering the overplus, if any remains, unto said mortgagor or its legal representatives."

E. M. Caperton and divers others, creditors, began suits upon their debts against the cooperage company, most of them suing in the circuit court, some in various justices' courts, and a few in the chancery court of the county. Judgments were obtained by several of the creditors who had sued in justices' courts, and they had levies made under executions on the property, or a part of it, which was embraced in the mortgages. This being the condition of affairs, the First National Bank of Chicago filed the bill in this cause, primarily to enforce its mortgages, but in aid thereof sought an injunction, and obtained a preliminary one, restraining levies on the property, and asked and obtained the appointment of a receiver to take charge of all the property and affairs of the cooperage company. Cyrus H. McCormick was, pending the cause, admitted as a party complainant to the suit, and he asserted, by an amended bill, a prior claim on that part of the effects in the hands of the receiver, which he claimed as having been pledged to him as a security for his debt. Caperton and the other creditors, defendants to the suit, jointly answered the bill and the amended bill, and made their answer a cross bill, insisting that the mortgages were executed to defraud creditors and void, and that McCormick never took possession of the property which he claimed in pledge, and had no superior right, and prayed that the receiver be required first to pay them out of the proceeds of the property. The court below decreed the mortgages void, but adjudged McCormick's pledge valid. The First National Bank of Chicago, the original complainant, appealed, and Caperton and other creditors and original defendants, also appealed, complaining of the decree in so far as it was favorable to McCormick.

Decree reversed and cause remanded.

D. A. Scott, for appellant, the First National Bank of Chicago.

Upon a state of facts much stronger than the state of facts developed by the evidence in this record, the supreme court of this state has, on more than one occasion, refused to declare as fraudulent and void, either in law or in fact mortgages conveying property consumable in its use. This, for the manifest reason (as we maintain in the case here), because the instruments did not, in express and unequivocal language, reserve the right in the mortgagor to sell the property; they did, however, convey property consumable in its use, and expressly provided in the face of the instruments that the mortgagor should have the right to retain possession of the property and use it. In one of the cases the property conveyed was logs and lumber. And, in the instrument of writing under which these logs and lumber were conveyed, there was a stipulation to the effect that the mortgagor should retain possession of the property, and, in his discretion, to use it, to convert it into lumber, and, yet; our court very properly held that this instrument was not fraudulent and void upon its face, because, as above stated, it did not, in express and unequivocal language, reserve the right that the mortgagor should have the authority to sell the property in the usual course of trade. Such being the law of this state upon the subject as to whether a mortgage upon property consumable in its use is fraudulent and void upon its face, it follows, as a natural and legal sequence, that in order to condemn such an instrument as fraudulent and void in fact, there must be clear and undisputable proof that there was an express agreement between the mortgagor and the mortgagee, dehors the mortgage, by which the mortgagor was authorized not only to use the property, but to sell it, convert it into money, and use it in the usual course of his business.

The reason assigned by our court for not condemning the instrument considered in Hitchler v. Bank, 63 Miss. 403, was because of the absence of an express agreement or authority contained in the face of the mortgage, to sell or dispose of the property therein described and conveyed. Manifestly, the property conveyed in that mortgage was as consumable in its use as the property involved in this suit. Chief Justice Cooper says: "The mortgage executed to secure the debt of Black is not void merely because it includes the saw logs, which, from time to time might be brought on the mortgaged premises. There is no authority reserved by the mortgagor to sell these logs, or the lumber into which they might be converted. It would not be a violent presumption to indulge that such was the understanding of the parties, but it does not unmistakably appear that it was, and it is only where the reservation of such right is expressly reserved that the conveyance is to be declared void on its face. It does not appear by the evidence that any of the mortgaged property was, in fact, sold by the mortgagor, nor that there was any agreement in reference to it, other than that appearing in the deed."

Chief Justice Cooper, in commenting upon the validity of another mortgage, says: "The mortgage executed by Nalty, to secure the debt due to Britton & Mason, was not fraudulent on its face, for though it is strongly suggestive that it was contemplated by all parties to it that Nalty should continue to dispose of the goods mortgaged in the usual course of trade, there is no express reservation of that right. We cannot say that the power is so clearly reserved to sell the goods that no evidence negativing that right could be introduced. It is only where the conveyance so unmistakably reserves the right to the mortgagor to deal with the property mortgaged as his own that all evidence to the contrary should be excluded, as...

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