Gallagher v. Rosenfield

Decision Date16 December 1891
Citation47 Minn. 507,50 N.W. 696
PartiesGALLAGHER v ROSENFIELD.
CourtMinnesota Supreme Court

OPINION TEXT STARTS HERE

(Syllabus by the Court.)

1. Where a mortgage of personal property, as a stock of goods, expressly authorizes the mortgagor to retain the possession and to sell the some at retail as his own in the ordinary course of business, the mortgage will be adjudged fraudulent in law as to creditors existing or subsequent of the mortgagor while in possession.

2. Where the mortgage confers the power to sell, a provision requiring the mortgagor in possession to replenish the stock will not render it valid.

3. The question of the actual intent of the parties to the mortgage is not material; the law imputes to the mortgagor the intention necessarily implied from the character of the instrument.

4. Taking possession of the property by the mortgagee under proceedings to foreclose a mortgage voidable for fraud will not impair the rights of creditors to reach the same or to compel him to account for it.

5. The receiver of an insolvent representing creditors may bring an action in their behalf to reach assets belonging to him, in the hands of a mortgagee in a mortgage invalid as to them.

6. A chattel mortgage must be given in good faith, and, when it appears that one object was to defraud creditors, the instrument is in judgment of law wholly void. Such a mortgage, containing a fraudulent provision as to part of the mortgaged property, is void as to the whole.

Appeal from district court, Hennepin county; LOCHREN, Judge. Affirmed.

Action by Matt Gallagher, receiver, etc., against Isaac Rosenfield, to have a chattel mortgage declared fraudulent as against the mortgagor's creditors, and to reach the proceeds obtained by defendant under a foreclosure of the same. Judgment for plaintiff. Defendant appeals.

Rea & Hubashek and Ell Torrance, for appellant.

Freeman P. Lane and Wm. H. Briggs, for respondent.

VANDERBURGH, J.

In January, 1890, the defendant sold to one Berwin certain personal property, being certain furniture, fixtures, liquors, cigars, and other paraphernalia of a saloon in the city of Minneapolis, then in the possession of the defendant, for the consideration of $11,000, payable within two years, according to the conditions of installment notes, and which at the same date were secured by the purchaser by his chattel mortgage on the property sold. The chattel mortgage, which was duly filed, contained the following stipulation: “It is agreed that the party of the first part [mortgagor] shall have the right to sell from said stock of liquors and cigars in the regular course of retail trade in his business of running a saloon; but said first party agrees that he will keep said stock up to the value of fifteen hundred dollars, at all times, and this mortgage shall cover all additions to said stock that may be made from time to time by first party.” It also contained the usual provisions authorizing the taking of possession and foreclosure by the mortgagee in case of default in the conditions thereof; and provided, further, that “as long as the conditions of this mortgage are fulfilled, the said first party is to remain in peaceful possession of said property, and in consideration thereof he agrees to keep said property in as good condition as it now is, at said first party's cost and expense.” It is found that at the date of the mortgage the value of all the property mortgaged was $11,000, and of the liquors and cigars constituting the stock in the saloon, and covered by the mortgage, was $1,500. And on the 30th of April, 1890, the mortgagor had made default in the conditions of the mortgage, which, as between the parties, was made in good faith to secure purchase money, and had failed to keep up the stock of liquor and cigars as provided in the mortgage; and thereupon, in pursuance of the terms of the mortgage, the defendant mortgagee proceeded to take possession of the mortgaged property left in the hands of the mortgagor, without objection from him, and thereafter caused the same to be duly sold under foreclosure, May 12, 1890. The value of the mortgaged property was then $6,000, and the value of the stock of liquors and cigars had been reduced, by sales at that date, to the sum of $400. At the time of the execution of the mortgage the stock of liquors, etc., was being sold in the saloon at retail, in the usual course of business; and the purchaser continued the business thereafter in the same way, until the stock and saloon fixtures were taken possession of by the defendant under his mortgage. When he executed the mortgage, Berwin, the mortgagor, owed no debts, but at the time defendant took possession in April he was and still is indebted to divers persons besides the defendant, and was insolvent; and thereafter such proceedings were had that on the 5th day of July, 1890, the plaintiff was duly appointed receiver in insolvency of his property and effects, and brings this action, as such receiver, to have the chattel mortgage in question declared fraudulent and void as to the creditors represented by him, and to reach the proceeds of the foreclosure sale in defendant's hands as assets of the insolvent, and asks that they be turned over and applied to the payment of his debts. The court, upon the facts above stated, ordered judgment for the plaintiff receiver.

1. It will be observed that the mortgage on its face expressly authorized Berwin to sell at retail the stock of goods mortgaged as his own property, in the ordinary course of business. It is the doctrine of this court that such provision made the mortgage fraudulent in law as to the creditors of the mortgagor. Chophard v. Bayard, 4 Minn. 533, (Gil. 418;)Williams v. Horton, 21 Minn. 187;Stein v. Munch, 24 Minn. 390; Bank v. Anderson, Id. 435; Mann v. Flower, 25 Minn. 507. In this we have adopted the doctrine of the New York courts. In Southard v. Benner, 72 N. Y. 432, the court uses this language: “Such an arrangement, included in and making a part of the written instrument of mortgage, would clearly invalidate it as fraudulent in law, as that term is understood; that is, it would be conclusive evidence of fraud in fact, and...

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35 cases
  • Hasbrouck v. LaFebre
    • United States
    • Wyoming Supreme Court
    • October 13, 1915
    ...Kan. 52, 25 P. 625; Brown v. Barber, 47 Kan. 527, 28 P. 184; Humphrey v. Mayfield, 63 Kan. 208, 65 P. 234.) Minnesota; (Gallagher v. Rosenfield, 47 Minn. 507, 50 N.W. 696; Citizens State Bank of Tracey v. Brown, 110 276, 124 N.W. 990; Pabst Brewing Co. v. Butchard, 67 Minn. 191, 69 N.W. 809......
  • Madson v. Rutten
    • United States
    • North Dakota Supreme Court
    • October 23, 1907
    ...39 N.E. 11; Rathbun v. Berry, 49 Kan. 735, 31 P. 679, 33 Am. St. Rep. 389; Wilson v. Voight, 9 Colo. 614, 13 P. 726; Gallagher v. Rosenfield, 47 Minn. 507, 50 N.W. 696; Stein v. Munch, 24 Minn. 390; Durr Wildish, 108 Wis. 401, 84 N.W. 437; Baumbach Co. v. Hobkirk, 104 Wis. 488, 80 N.W. 740;......
  • Clark v. B. B. Richards Lumber Company
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    • May 19, 1897
    ...as an open question. Merrill v. Ressler, 37 Minn. 82, 33 N.W. 117; Thomas v. Foote, 46 Minn. 240, 48 N.W. 1019; Gallagher v. Rosenfield, 47 Minn. 507, 50 N.W. 696; Baker v. Pottle, supra. If there are any creditors in case entitled to have the plaintiff's title to or lien on the property su......
  • Madson v. Rutten
    • United States
    • North Dakota Supreme Court
    • October 23, 1907
    ...E. 11;Rathbun v. Berry, 49 Kan. 735, 31 Pac. 679, 33 Am. St. Rep. 389;Wilson v. Voight, 9 Colo. 614, 13 Pac. 726;Gallagher v. Rosenfield, 47 Minn. 507, 50 N. W. 696;Stein v. Munch, 24 Minn. 390;Durr v. Wildish, 108 Wis. 401, 84 N. W. 437;Baumbach Co. v. Hobkirk, 104 Wis. 488, 80 N. W. 740;W......
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