Gibson v. Warden

• Decision Date: 01 December 1871
• Citation: 20 L.Ed. 797,14 Wall. 244,81 U.S. 244
• Parties: GIBSON v. WARDEN
• Court: U.S. Supreme Court

81 U.S. 244

20 L.Ed. 797

14 Wall. 244

GIBSON v. WARDEN.

December Term, 1871

APPEAL from a decree of the Circuit Court for the Southern District of Ohio, in a bill in equity filed by Warden & Ludlow, assignees of Moore & Co., against David Gibson, and against Gaylord, Son & Co., and other defendants. The matter in issue was the validity, in view of the bankrupt law, of two chattel mortgages, given by the bankrupt, one to the said Gibson, and the other to the said Gaylord, Son & Co. The mortgages were asserted to be frauds on the bankrupt law, as coming within either the first clause or the second of the 35th section of the Bankrupt Act. The first clause reads thus:

'If any person being insolvent, or in contemplation of insolvency, within four months before the filing of the petition by or against him, with a view to give a preference to any creditor or person having a claim against him, or who is under any liability for him, procures any part of his property to be attached, sequestered, or seized on execution, or makes any payment, pledge, assignment, transfer, or conveyance of any part of his property, either directly or indirectly, absolutely or conditionally, the person receiving such payment, assignment, transfer, or conveyance, or to be benefited thereby or by such attachment having reasonable cause to believe such person is insolvent, and that such attachment, payment, pledge, assignment, or conveyance is made in fraud of the provisions of this act, the same shall be void, and the assignee may recover the property, or the value of it, from the person so receiving it, or so to be benefited.'

The second clause read thus:

'And if any person being insolvent, or in contemplation of insolvency or bankruptcy, within six months before the filing of the petition by or against him, makes any payment, sale, assignment, transfer, conveyance, or other disposition of any part of his property to any person who then has reasonable cause to believe him to be insolvent, or to be acting in contemplation of insolvency, and that such payment, sale, assignment, transfer, or other conveyance is made with a view to prevent his property from coming to his assignee in bankruptcy, or to prevent the same from being distributed under this act, or defeat the object of, or in any way impair, hinder, impede, or delay the operation and effect of, or to evade any of the provisions of the act, the sale, assignment, transfer, or conveyance shall be void, and the assignee may recover the property, or the value thereof, as assets of the bankrupt. And if such sale, assignment, transfer, or conveyance is not made in the usual and ordinary course of business of the debtor, the fact shall be prim a facie evidence of fraud.'

The court below decreed that the mortgages were invalid, and secured no priority, and that the defendants stood on the footing of general creditors. Gibson appealed, as did Gaylord & Sons; the other defendants did not appeal.

Mr. Aaron F. Perry, for the appellant, Gibson; Mr. E. M. Johnson, for the appellants, Gaylord & Son; no counsel for the appellees.

Mr. Justice SWAYNE stated the case more particularly, and delivered the opinion of the court.

This is an appeal from the decree of the Circuit Court for the Southern District of Ohio.

The appellees are the assignees in bankruptcy of Robert Moore & Sons, and filed this bill to compel such of the defendants as claimed to have liens upon certain effects of the bankrupt firm to have their respective rights touching the property in question ascertained and adjusted by the decree of the court. The decree rendered, disposed of the several cases litigated under the bill. All the defendants acquiesced in the decisions made, except David Gibson and Gaylord, Son & Co. They have brought the decree of the Circuit Court, so far as it affects them, here for review by this appeal. Our examination of the case will be confined to their respective claims.

On the 8th of March, 1868, Moore & Sons executed to Gibson a chattel mortgage. It was conditioned that if the mortgagors should pay to Gibson their promissory note to him of the same date with the mortgage, for $6000, payable sixty days from date at the Central National Bank of Cincinnati, the instrument should be void. The testatum clause set forth that Robert Moore & Sons, by Robert Moore, one of the firm, had thereto set their hands and seals. Robert Moore alone affixed his name and seal to the document. The amount claimed by Gibson under the mortgage was indorsed and sworn to by him, and the instrument was filed with the proper officer on the 18th of the same month. On the 21st of that month Moore & Co. failed in business, and made a general assignment of all their effects for the benefit of their creditors. On the 15th of September, 1868, a petition in bankruptcy was filed against them, under which they were subsequently adjudged bankrupts, and the appellees were appointed their assignees in that proceeding.

The note mentioned in the mortgage was indorsed by Gibson for the accommodation of the makers. They procured it to be discounted, and the proceeds went to their benefit. Gibson was compelled to pay it. The amount thus paid, with interest, constitutes his claim under the mortgage.

No statute of Ohio directs how a chattel mortgage shall be executed. The statutes regulating such instruments are silent upon the subject. Our attention has been called to no local adjudication touching the point. In an elementary work prepared by an eminent jurist of that State the form given purports a sealed instrument, and has a seal affixed to it.¹

Such instruments in Ohio are usually under seal. But the term mortgage used in the statutes does not import or imply that a seal is necessary. In regard to chattels, it is a mortgage, and not a deed of mortgage, that is required. The distinction between real and personal property and between the means which are necessary to affect them is well settled. Personal property, according to the common law, could always be transferred or incumbered without the use of a deed for that purpose. A seal has never been held necessary to the validity of a bill of sale. A chattel mortgage is only a bill of sale with a defeasance incorporated in it. The presence or absence of that formality is wholly immaterial. In the case before us it may be regarded as surplusage.²

There is another view of the subject that must not be overlooked. There is proof in the record that the partners, other than Robert Moore, authorized him in advance to execute the mortgage, and after its execution, with full knowledge, acquiesced in what he had done. If the law had required a seal these circumstances would have made the instrument the deed of the firm as much so as if all the members had been personally present and assented to its execution in that form.³ This is not inconsistent with the principle, which seems to be too deeprooted in the law to be wholly eradicated by judicial authority, that a sealed instrument executed in the name of a firm by one of its members, without the proper authority, where a seal is necessary, is the deed of such member only, and that he alone is bound by it.

The statute provides that every mortgage of goods and chattels, where there is no change in the possession of the things mortgaged, 'shall be absolutely void,' as against subsequent purchasers and mortgagees in good faith, 'unless the mortgage, or a true copy thereof, shall be forthwith deposited' with the proper officer. The Supreme Court of the State has held that the omission to deposit forthwith, as directed, does not avoid the mortgage in toto, but that, whenever deposited, it becomes effective from that time.⁴ That court has also held that actual notice to a subsequent mortgagee, before...