Red River Val. Nat. Bank v. Barnes
| Decision Date | 06 June 1899 |
| Docket Number | 6731 |
| Court | North Dakota Supreme Court |
Appeal from District Court, Cass County; Pollock, J.
Action by the Red River Valley National Bank against O. G. Barnes as sheriff of Cass county, N. D., and the North Star Boot & Shoe Company. Judgment for plaintiff. Defendants appeal.
Affirmed.
Newman Spalding & Stambaugh, for appellant.
The collateral note was without consideration and void. Turle v. Sargent, 65 N.W. 349; Wipperman v. Hardy, 46 N.E. 537; Vehon v. Vehon, 70 Ill.App. 40; Taylor v. Slater, 12 A. 727. The principal note of $ 9,000 was given upon the consideration of an extension of a pre-existing debt. Lundburg v. N. W. Elev. Co., 43 N.W. 685. The mortgage was purposely given for an amount largely in excess of the debt from Robinson to respondent and is void in law. Buttz v. Peacock, 23 Wis. 359. If the transaction between respondent and Robinson was fraudulent, respondent should be held to a strict accounting for the property. Collingsworth v. Bell, 43 P. 252; Mannen v. Bailey, 32 P. 1085. The mortgage permitting the mortgagor to retain possession of property and sell and dispose of the same in the ordinary course of trade for cash, the mortgagor to account for the proceeds of sales and the same to be applied to the payment of the debt secured does not render the mortgage void before maturity. Lane v. Starr, 1 S.D. 107, 45 N.W. 212. But the parole agreement permitting Robinson to continue the business replenish the stock, and from the proceeds of sales pay for the same, and pay running expenses, retaining one hundred dollars per month for the support of his family, then to pay any balance upon the mortgage debt, rendered the mortgage void. So held where similar agreements are written in the mortgage. Robison v. Elliott, 22 Wall. 520; Chophard v. Bayard, 4 Minn. 418; Griswold v. Sheldon, 4 N.Y. 581 Edgall v. Hart, 9 N.Y. 213; Barrett v. Fergus, 99 Am. Dec. 547; Stewart v. Duster, 23 Wis. 136; Collins v. Meyers, 16 Ohio 447; Freeman v. Rawson, 5 Ohio St. 1; Wilson v. Voigt, 13 P. 726; Leopold v. Silverman, 16 N.W. 580; Bannon v. Bawler, 26 N.W. 236; Sanford v. Jensen, 69 N.W. 108; Greely v. Winsor, 1 S.D. 117; First Nat. Bank v. Comfort, 4 Dak. 167, 28 N.W. 855; Robbins v. Parker, 3 Metc. 117; Shurtleff v. Willard, 19 Pick. 202; Anderson v. Patterson, 25 N.W. 541; Fisher v. Kelly, 46 P. 146; Little v. Burnham, 49 P. 604; Pierce v. Wagner, 66 N.W. 977; Birmingham Dry Goods Co. v. Kelso, 18 So. Rep. 135; Bank v. Goodbear, 19 So. Rep. 204; Mandeville v. Avery, 124 N.Y. 376; Pabst Brewing Co. v. Butchart, 69 N.W. 809; Wile v. Butler, 34 P. 1110; Black Hills Mer. Co. v. Gardner, 58 N.W. 557; Smith v. Ham, 51 Mo.App. 433; Rathbun v. Perry, 31 P. 679; Deering & Co. v. Worthy, 29 N.E. 55; Huschle v. Morris, 23 N.E. 643. Cases holding such a transaction valid proceed on the principle that title passes under the mortgage, and the mortgagee as owner can employ the mortgagor as his agent to conduct the business. Blakeley v. Hummerel, 64 N.W. 821; Etherridge v. Sperry, 139 U.S. 266; Ephraim v. Kellaher, 13 L. R. A. 604. The existence of the parole modification of the written agreement contained in the mortgage is equally fatal as if written in the mortgage. Barnet v. Fergus, 99 Am. Dec. 547; Griswold v. Sheldon, 4 N.Y. 581; Adgell v. Hart, 9 N.Y. 213; Wood v. Lowry, 17 Wend. 492; Wilson v. Voigt, 13 P. 726. The mortgages being fraudulent both in law and fact, the court will not be a party to it and assist in perpetrating a fraud, but will construe the transaction in favor of creditors and against the mortgagee. Anderson v. Brenneman, 6 N.W. 222. Plaintiff must account for the property taken at its value and no expenses of sale or foreclosure can be allowed. Mandeville v. Avery, 124 N.Y. 381; Merry v. Wilcox, 36 N.Y.S. 1050; Miller v. McElvain, 34 P. 396; Blue Valley Bank v. Clement, 26 N.W. 583; Stormbey v. Lindberg, 25 Minn. 515; Cobbey, Chat. Mtgs., 985, 1030.
Mills, Greene & Resser, for respondent.
The collateral note and mortgage represented a part of the transaction, adjusting Robinson's indebtedness to the plaintiff. The whole transaction must be construed together. § 3900, Rev. Codes. The chattel mortgage of merchandise is admitted to have been valid on its face. The subsequent parole agreement did not invalidate it. Whitson v. Griffs, 17 P. 801; Ephraim v. Kelleher, 18 L. R. A. 604, n.; Frankhouser v. Ellett, 22 Kan. 127; 31 Am. Rep. 171; Etheridge v. Sperry, 139 U.S. 171. There was no fraud in fact. The law then permitted preferences among creditors. § 4654 Comp. Laws; Cutler v. Pollock, 4 N.D. 205, 59 N.W. 1062.
This action was tried to the Court, and resulted in a judgment in favor of the plaintiff. The action was brought to recover damages for an alleged unlawful seizure and sale of personal property upon which the plaintiff had a chattel mortgage. The defendant O. G. Barnes seeks to justify as sheriff, and it is conceded that he made the seizure and sale of the property in his official capacity as sheriff of Cass county. The sheriff levied under an execution issued upon a judgment in favor of his co-defendant, the North Star Boot & Shoe Company, which judgment was entered in May, 1895. Said levy was made on or about September 18, 1895, and thereafter the goods were sold, and the proceeds of the sale were applied upon said execution. The controlling facts may be stated as follows:
On the 28th day of February, 1895, one E. M. Robinson was engaged in mercantile business, and then had a stock of merchandise at Fargo, N. D. Said Robinson was also the owner of a large farm in Cass county, which he then was, and long had been, operating. On said 28th day of February Robinson was indebted to the plaintiff in the sum of $ 9,000, and no more, which indebtedness had then been for some time accumulating. On said date Robinson executed and delivered to the plaintiff his promissory note for $ 9,000, falling due on September 28, 1895. On said date Robinson also executed and delivered to plaintiff his certain other promissory note, for the sum of $ 2,000, falling due September 1, 1895. To secure said $ 2,000 note said Robinson and his wife executed and delivered to plaintiff their chattel mortgage upon all crops to be grown and raised on his said farm in the year 1895. Said mortgage also embraced certain personal property on said farm, consisting of farm machinery, implements, and domestic animals, which said farm machinery, implements, and domestic animals were the property seized and sold by the sheriff, and the same was the only property so seized or taken under said execution. In addition to the usual stipulation found in chattel mortgages, said mortgage contained the following agreement: "It is further agreed that, in case said mortgagee shall deem that the said crops are not properly sown, planted, cultivated, harvested, and threshed, or cared for, the said mortgagee has the right to enter on said land, and do all that is necessary to properly put in, harvest, thresh, and market said crops, and reimburse himself for all labor and expense out of the proceeds thereof; the portion remaining to be applied on the debt hereby secured." It is conceded that said $ 2,000 note and the mortgage was given and received as collateral, to secure said indebtedness evidenced by the $ 9,000 note, and that the collateral paper had no independent consideration.
It further appears that on April 15, 1895, said Robinson was indebted to plaintiff in the sum of $ 378.13 for advances made to him by the plaintiff subsequent to February 28, 1895 and said Robinson gave plaintiff his promissory note for said additional advances for $ 378.13, dated April 15, 1895, and falling due 90 days after its date. Said last-mentioned note, together with the said note for $ 9,000, evidenced an actual indebtedness then due from Robinson to the plaintiff in the sum of $ 9,378.13, exclusive of interest. To secure said total indebtedness, said Robinson executed and delivered to plaintiff another chattel mortgage, bearing date April 15, 1895. Said last-mentioned mortgage covered said stock of merchandise at Fargo, consisting of boots, shoes, trunks, etc., and also the fixtures and safe in said store. In addition to the usual conditions contained in chattel mortgages, said last-mentioned mortgage embraced the following stipulation: "It is further agreed that, so long as the terms and conditions of this mortgage are kept and performed, the undersigned may retain possession of said property, and sell and dispose of the same in the ordinary course of trade, for cash; but of all such sales the undersigned shall keep a detailed and accurate account, and at the end of each day shall render to the said Red River Valley National Bank an accurate account of such sales, and shall, at the time of so rendering such accounts, pay over to said Red River Valley National Bank, its successors and assigns, the entire proceeds of all such sales, to be credited and applied, as fast as paid, to the payment of the debt hereby secured, until the same shall have been fully paid and satisfied." Both chattel mortgages were filed for record on April 16, 1895. On said last-mentioned date Robinson and the plaintiff entered into an oral agreement, substantially as follows: It was agreed (as a means of supporting said Robinson and his family, and as a means of defraying the expenses incident to carrying on said mercantile business) that said Robinson should retain out of the proceeds of sales made of the goods in said store the sum of $ 100 per month, and also retain sufficient of said proceeds of sales to defray the incidental expenses of operating said store business. It was further...
To continue reading
Request your trial