Paxton v. Smith

• Decision Date: 06 June 1894
• Citation: 59 N.W. 690,41 Neb. 56
• Parties: PAXTON ET AL. v. SMITH ET AL.
• Court: Nebraska Supreme Court

41 Neb. 56

59 N.W. 690

PAXTON ET AL.

v.SMITH ET AL.

Supreme Court of Nebraska.

June 6, 1894.

Syllabus by the Court.

1. Where the parties to a contract have, with a knowledge of its terms, given it a particular construction, such construction will generally be adopted by the courts, in giving effect to its provisions.

2. A mortgage of personal property, with possession and power of sale in the mortgagor for his own benefit, is void as to his creditors and subsequent purchasers in good faith.

3. A chattel mortgage, where the mortgagor retains possession of the property conveyed, is, under section 11, c. 32, Comp. St., entitled “Frauds,” presumptively fraudulent as to creditors of the mortgagor and subsequent purchasers in good faith.

4. In all such cases the burden is upon the mortgagee, or those claiming through him, to overcome the presumption of fraud by proof that the mortgage was executed in good faith.

Error to district court, Dundy county; Cochran, Judge.

Action by M. E. Smith against McClain & Sons. Paxton & Gallagher intervene. From a judgment for plaintiff, the interveners appeal. Affirmed.J. W. James and Howard B. Smith, for plaintiffs in error.

J. W. West and Chas. B. Keller, for defendant in error.

POST, J.

This is a petition in error from the district court of Dundy county, and presents the following material facts: On the 26th day of August, 1889, one John R. King was the owner of a stock of general merchandise in Benkleman, in said county, of the invoiced value of $5,964.47; and the firm of McClain & Sons, also engaged as general merchants in Benkleman, owned a stock invoiced at $6,600. On the day above named a deal was consummated, whereby said stocks were consolidated. As a consideration therefor, McClain & Sons executed in favor of King their promissory notes for $5,964.47, in amounts of $300 each, one of which matured each month. At the same time a written agreement was executed, in which it was stipulated that McClain & Sons “shall, as a part of this agreement, make, execute, and deliver to party of the first part promissory notes for the sum of $5,964.47, as follows: One note for $300, due on the 26th day of September, A. D. 1889, and one note for a similar amount, due and payable on the corresponding day of each succeeding month, until the gross amount of said notes so paid shall be equal to said sum of $5,964.47. Said notes to bear interest from date at the rate of ten per cent. per annum. Party of the first part shall at all times have free access to said store, and free opportunity to inspect all books, bills, invoices, and all stock in said store, so far as the same may be necessary to inform himself of, and to protect, his interest. He shall also be permitted at all times to keep in said store one representative, who may look after and protect the rights and interests of party of the first part. Said representative shall, when not employed, assist in the said store, as a clerk, during the first two months, and shall therefor be paid by party of the second part such wages monthly as his services are reasonably worth, for two months and no longer, and, as such clerk, shall be under the supervision and direction of said party of the second part, as if employed by party of the second part.” In carrying on the business in accordance with the foregoing stipulation, McClain & Sons became indebted to various persons, including the plaintiffs in error, to whom, on the 18th day of August, 1890, they owed $641.94 for merchandise. On the day last named they executed in favor of plaintiffs in error a chattel mortgage for the amount of said bill, upon the entire stock of goods, which mortgage was filed in due form the next day. On the same day, to wit, August 20th, King took possession of the goods, in order to realize the balance due under the contract with McClain & Sons; and, on the same day, defendan...