New v. Sailors
| Decision Date | 25 April 1888 |
| Docket Number | 13,188 |
| Citation | 16 N.E. 609,114 Ind. 407 |
| Parties | New et al. v. Sailors |
| Court | Indiana Supreme Court |
From the Boone Circuit Court.
Judgment reversed, with costs.
W. R Stokes, for appellants.
G. W Stubbs, for appellee.
On the 21st day of April, 1884, James L. Sailors, being the owner of a stock of dry goods, boots, shoes, hats, caps, etc., in Thorntown, Boone county, Indiana, executed a chattel mortgage, covering the stock above described, to his brother Hamilton M. Sailors, of Kokomo, Indiana. It was recited in the mortgage that the mortgagor was indebted to the mortgagee in the sum of $ 1,700, evidenced by a promissory note dated January 1st, 1883, for $ 1,200, and by standing guaranty of $ 1,200 to Byram, Cornelius & Co., of the city of Indianapolis, and that if the mortgagor should well and truly pay the note at maturity and save the mortgagee harmless from the guaranty, then the mortgage was to be void. The mortgage contained a further stipulation to the effect that the mortgagor should retain possession of the property mortgaged until the note and guaranty became due, and that he would not remove the property from the place where it then was, "except the necessary sales to be made in carrying on said business of selling goods." The mortgage was duly recorded.
On the 4th day of May following, the mortgagor, finding himself in failing circumstances, made a voluntary assignment for the benefit of his creditors. Pending the administration of the matter of the assignment, the mortgagee filed an intervening petition in the Boone Circuit Court, in which he set forth that there was due him from the assignor the sum of $ 1,451.96, for which amount he claimed priority over the general creditors on account of the chattel mortgage above mentioned, a copy of which was filed with his petition. The petitioner alleged in his petition that $ 900.62 of the amount for which he claimed a preference had been paid by him in taking up nine promissory notes, which he had theretofore signed as the surety of the assignor, to Byram, Cornelius & Co., and that he had paid $ 292.35 to the same parties on an account due from the assignor, for the payment of which he had become bound by a written guaranty. It was further alleged that the petitioner had paid $ 258.98 to Butterworth & Co., of Cincinnati, Ohio, as surety for the assignor.
The petitioner alleged that the mortgage was a valid lien on the goods assigned to secure the repayment to him of the several sums above mentioned, and he asked an order of the court directing payment by the assignee accordingly.
The appellants were admitted, upon their own application as creditors of the assignor, to defend against the claim for preference.
Issue was taken upon the petition of the intervenor by a general denial filed by the appellants.
The court allowed the petitioner's claim in full, and ordered it paid out of the general fund, substantially as prayed in the petition.
The evidence shows without dispute that the mortgagee, as surety for the mortgagor, paid nine notes of one hundred dollars each to Byram, Cornelius & Co. It shows with equal certainty that he paid $ 258.98, as surety, to Butterworth & Co.; and, also, a debt of $ 292.35 due to Byram, Cornelius & Co., for which he was liable on the written guaranty mentioned in the petition.
The infirmity in the appellee's case is, that neither in the petition nor in the evidence do any of the above mentioned debts, except the one last described, appear to have any relation to, or connection with, the debt or guaranty described in the mortgage.
The purpose of a mortgage, ordinarily, is to secure some debt owing by the mortgagor to the mortgagee, or to indemnify the latter against liability or loss on account of some engagement of the former for which the latter may have become bound.
While literal accuracy in describing the debt secured or the condition upon which the mortgage is to become void is not required, it is essential that the character of the debt and the extent of the encumbrance should be defined with such reasonable certainty as to preclude the parties from substituting other debts than those described, thereby making the mortgage a mere cover for the perpetration of fraud upon creditors. Pettibone v. Griswold, 4 Conn. 158; 1 Jones Mortgages, section 70.
As has been seen, the condition of the mortgage in the present case was that the mortgagor would pay a promissory note of twelve hundred dollars due the mortgagee in one year from January 1st, 1883, and save him harmless from a standing guaranty for twelve hundred dollars to Byram, Cornelius & Co. Conceding that the description as found on the face of the mortgage is abundantly sufficient, it is not perceived how, without extraneous evidence, it can be deemed to embrace the notes paid to Byram, Cornelius & Co., or the other debt to Butterworth & Co.
For anything that appears, either in the petition or evidence the debts paid may have no relation whatever to, or connection with, the guaranty or note described in the mortgage. It may be true, as the appellee asserts the fact to be in his brief, that the consideration of the $ 1,200 note is in some way related to the debts paid by the mortgagee, but until the fact is made to appear in some legitimate way, it can not be assumed. There is no doubt, in case proper averments to that end have been made in a complaint, but that extraneous evidence is admissible to explain the consideration of the debt or condition in a mortgage, or in case of ambiguity to identify and apply the condition to the subjectmatter; but in the absence of explanatory averments and proof, the court may not assume that debts...
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