Wilcox v. Jackson

• Decision Date: 17 October 1884
• Parties: WILCOX and others v. JACKSON.
• Court: Colorado Supreme Court

4 P. 966

7 Colo. 521

WILCOX and others v. JACKSON.

Supreme Court of Colorado

October 17, 1884

Error to the district court of El Paso county.

Decker & Yonley, for plaintiffs in error.

Wm. Harrison, for defendant in error.

BECK C.J.

This is a contest between creditors who are striving to obtain satisfaction of demands due and owing to them, respectively from the late firm of Tribe & Jefferay, dealers in books stationery, etc., at Colorado Springs and Leadville. The goods and effects of the firm in the store at Colorado Springs were seized by the United States marshal, April 6 1881, upon an attachment against said firm issued out of the United States circuit court for the district of Colorado at the suit of Jansen, McClurg & Co. The present action was instituted by W. S. Jackson, another creditor, against the marshal and his deputy, to recover possession of the goods attached, his right to possession being based upon a chattel mortgage, bearing date October 1, 1880, and upon an order for possession, assignment, or transfer, of date March 18, 1881; also upon actual possession under said instruments previous to and at the time of the levy of the attachment. There was a verdict and a judgment below in favor of Jackson, to reverse which judgment this writ of error is prosecuted in the interest of the attaching creditors. Both the chattel mortgage and the order for possession were executed by the partner George H. Jefferay, in the firm name, without the knowledge or consent of his copartner, Tribe, and the latter persistently refused to ratify either of these transactions up to the time that the rights of the attaching creditors are alleged to have accrued.

Plaintiffs in error contend that the chattel mortgage was fraudulent and void in law as to creditors, upon several grounds, some of which are the following: No memorandum of the acknowledgment was made by the officer taking the same in his docket, as required by statute; the mortgage was not recorded; the goods mortgaged were left in the possession of the mortgagors, who continued to retail the same in the usual course of trade as before, for their own benefit, with the knowledge and consent of the mortgagee, up to the eighteenth of March, 1881, a period of five and a half months.

Under our statute, as interpreted by the decisions of this court, either one of the above defects would necessarily have proved fatal to the validity of the mortgage, if the question had been raised while the goods and merchandise continued in the possession of Tribe & Jefferay. Gen. St. 1883, pp. 159, 161,§§ 1, 10; Crane v. Chandler, 5 Colo. 21; Horner v. Stout, Id. 166; City N. B. v. Goodrich, 3 Colo. 139.

Section 10 of the chattel mortgage act (Gen. St. supra) contains a saving clause as to the failure to record the mortgage, when an adverse right to the property is acquired with actual notice of the existence of the mortgage. This saving clause does not cure a defective acknowledgment.

The failure to properly acknowledge a chattel mortgage is therefore fatal to its validity while the property remains with the mortgagor. Grane v. Chandler, supra. The authorities also recognize an exception in favor of the mortgagee where the mortgagor continues to sell the mortgaged goods in the usual course of trade, viz.: where the possession in fact is in the mortgagee, and the mortgagor in good faith, and as agent for the mortgagee, continues to sell, and appropriates the proceeds to the payment of the mortgage debt. But any understanding or arrangement by which the proceeds of sales should go to the mortgagor or for his benefit, or for any other purpose than the liquidation of this debt, would render the whole transaction fraudulent and void as against creditors of the mortgagor. Jones, Mortg. § 399, and authorities cited.

In the present case, Jackson did not attempt to assume possession or control of the mortgaged property until the eighteenth day of March, 1881. He admitted upon the trial that he permitted the mortgagors to continue their retail trade after the execution of the mortgage, and that they made additions to the stock. He did not pretend that the sales were made for his benefit, or that the proceeds were applied in liquidation of his demands against the firm. This arrangement was wholly inconsistent with the purposes of the chattel mortgage act. The act was designed to give a creditor security for his claim by a conditional sale of specific property. To permit a debtor to dispose of the property during the continuance of the lien for any other purpose than in satisfaction of the mortgage debt would enable him to perpetrate a fraud upon his other creditors. If such a transaction was to be held valid, debtors would have an easy method of protecting their chattel property against the claims of creditors, leaving to themselves all the benefits of an unincumbered title. It is sufficient to say the law is otherwise. Had the property in controversy been seized upon attachment prior to the eighteenth day of March, the jury must have been told that the mortgage was void as to creditors.

Another point fatal to a recovery under the mortgage upon this record is that, while the testimony shows that new goods were purchased and mixed with the original stock from time to time after the giving of the mortgage, there is no testimony establishing the identity of any portion of the goods attached as the same goods mentioned in the mortgage. The mortgage makes no provision for goods to be afterwards acquired, but is a grant of property owned at the time of its execution. Mr. Jackson himself declined to swear that the goods attached were the same goods mentioned in his mortgage. He could only swear that they were turned over to him as the same goods. There could be no recovery under the mortgage upon such a state of facts. Farmers' L. & T. Co. v. Com. Bank, 11 Wis. 207; Same v. Same, 15 Wis. 425; Brainerd v. Peck, 34 Vt. 496; Cameron v. Marvin, 26 Kan. 612; Jones, Mortg. §§ 167, 168. It is contended, however, that Mr. Jackson was in possession of the property at the time of the levy of the attachment under the mortgage, and under the written order of March 18, 1881, referred to in the record as Exhibit B, and that his possession gave him a prior lien upon the stock. It appears to be true that Jackson took possession of the store and goods on March 18th; but it is equally true that the character of that possession was such as gave no notice that any change had taken place in the ownership. Such notice was essential to a right of recovery under the peculiar circumstances of this case. If anything was done to afford notice, actual or constructive, the fact was not proven.

Section 14 of the statute of frauds and perjuries provides that 'every sale made by a vendor of goods and chattels in his possession, or under his control, and every assignment of goods and chattels, unless the same be accompanied by an immediate delivery, and be followed by an actual and continued change of possession of the things sold or assigned, shall presumed to be fraudulent and void as against the creditors of the vendor, or the creditors of the person making such assignment, or subsequent purchasers in good faith, and this presumption shall be conclusive.' Gen. St. 509. Interpreting this statute, this court has said that 'the vendee must take the actual possession, and the possession must be open, notorious, and unequivocal,--such as to apprise the community, or those who are accustomed to deal with the party, that the goods have changed hands, and that the title has passed out of the seller into the purchaser. This must be determined by the vendee's using the usual marks or indicia of ownership, and occupying that relation to the thing sold which owners of property generally sustain to their own property.' Cook v. Mann, 6 Colo. 21. Chief Justice ELBERT, who wrote the opinion in the above case, adds that the possession must be exclusive of the vendor, and that a concurrent or joint possession is not admissible.

The evidence in the record does not come within the rule announced. While it shows an actual change in possession, it fails to show that the usual indicia of ownership were used by the plaintiff; or that there was a visible change of possession, such as to apprise the community or creditors of the firm of such change. There was, in fact nothing done, so far as appears, to pur persons accustomed to deal with the former firm upon inquiry. The business was continued in the same building, the goods being sold at retail as before. The sign of Tribe & Jefferay was not removed, nor was there a new sign put up to indicate a change of proprietors. Jackson did not devote his time to the business, but Charles Jefferay, a brother of the partner, George H. Jefferay, was placed in charge. He was a clerk of the former firm, and, being accustomed to clerk there, his appearance indicated no change. George H. Jefferay continued to be in the store for a considerable time after the transfer, writing up his books and at times selling goods. The only visible change that appears to have been made was the employment of another clerk, one Curtis. It cannot be said that the mere employment of an additional clerk in a mercantile establishment is sufficient notice of a change of ownership to put creditors and purchasers upon the inquiry. No notice was even given to Cantril, the deputy United States marshal, who levied the attachment, that Jackson had any claim upon the stock. He says he went into the store and inquired of Charles Jefferay if the proprietors were in. The reply was that they were not in; that Tribe was in Leadville and the other partner was expected that evening. He went out to look up Deputy United States Marshal Dana, and...