Fraudulen T Mortgages - Forgotten Books

FRAUDULENT MORTGAGES

MERCHANDISE .

A COMMENTARY ON THE AMERICAN PHASES

TWYN E ’

S C A SE .

JA M ES O . PIER C E .

C rescit in O rbe D olus .

E nt ered ac c ording to A c t of C ongre ss , in t he year 1883, by

JAM E S o. PIE R CE ,

I n th e O ffi c e of the L ibrarian of C ongress at Washington.

PR E S S O F N IXO N -JO N E S PR I N T I N G C O 2 12 PI N E S T ., S T . L O U I S .

P R E F A C E .

This commentary is an outgrowth of the controversy

which has di stingui shed the inve stigation , in the Ameri can

courts , of the que stions of the l egal characteri sti cs of mort

gage s on stocks of goods in trade , with powe r of sale re

served to the mortgager , and of the legal sta tus and re lations

of the partie s to such transactions . It wi l l doubtle ss be

general ly understood that no treatment of the se que stions

could be of much value , which should attempt to pre sent

the law upon the subject without entering into the con

troversy . F or thi s reason , no apol ogy is de eme d ne ce ssary

for the controversial characte r of much of thi s c ommen

tary .

While entertaining de cided vi ews on the subj e ct treated ,the author has '

endeavored to pre sent fairly those v iews of

i t with which he i s not in accord , and to subject them to

such cri ti cism only as shou l d tend to te st the ir re lat ion to

the acknowl edge d fundamental s of our American jurispru

dence . T he difficultie s which have caused the particular

controversy are be l ieved to l ie de epe r than i ts immediate

subje ct . They have probably grown out of certain de fe o

tive and erroneous views concerning the qu e stion of fraud

as a que stion of juri sprudence , and more particularly fraud

in conveyance s considered in respect to the rights of those

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not partie s to such conveyance s ; V IOWS which characte rized

judicial decisions on the subj ect be fore mortgage s on stocks

of goods in trade be cause of frequent use . I n the absence

of we l l defined and cle arly understood ru le s on the gene ral

subje ct of fraud in conveyance s , i t i s not strange that there

should be want of accord in regard to the class of convey

anecs he re treated .

Was the statute of 13th E l izabeth , which made void as to

third partie s conveyance s into wh ich a fraudu lent intent

entered , creat ive of a new rul e of law , or only de claratory

of an old one ? If de claratory did it announce exhaustive ly

al l the principle s of the common law on the subje ct ? O r

we re there othe r fe ature s sometime s found in conveyance s ,be side s an intent to defraud , which ought to or might make

them fraudulent as to third part ie s ? Is the term frauda

lent t o be applied alone to the intent of the partie s , or is it

properly appli cable to the transaction i tse lf into which

the partie s have entered ? Doe s the law look with

more favor upon de ce it which is not intended by those

who fai l to stop and calculate the consequence s of

the ir acts , than upon de ce it which i s anticipated and

intended ? ‘Must jurisprudence place al l such case s upon

a Procrustean bed of “ intent , and fo l low the fiction of

imputing an intent where none exists ? What i s the characte r of the fraud which is adjudicate d by the court in any

such case , and i s the degre e of the fraud affected , l imited

or enlarged by the intent of the partie s ? In any such case ,

can the rule of jurisprudence be in any way affe cte d , e i the rin its scope or e ffect , or the manne r of its application to thefacts of the case , by the mode in which those facts are

ascertained ? M ay we use the te rms actual fraud ,”

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PR E FA C E

s tructive fraud , and pre sumptive fraud , in discussing

the se que stions ; and i f we do , should we apply the se ad

j ec tives to the subj e ct of fraud with any othe r than the ir

usual and strict s ignification ? H ow should we use the term

fraud in law ,

” i f used at al l ; and what do we mean by

fraud in fact

The se are some of the que stions which must be consid

e re d , and to which the legal sense of the profe ssion must ,by general accord , furni sh clear and satisfactory answers ,be fore the law upon the subje ct of fraud in conveyance s

can be said to be we l l se ttle d . In the meantime , much dl S

cussie n i s inev itable , and doubtle ss treatise s wil l be written

and re -written on the general subje ct of fraud as a legal

que stion , distinguishe d from fraud as a question of morals .

This commentary is offered as-

a tentative contribution to

the discuss ion .

l

M E MPH IS , January 1 1 884 .

C O N T E N T S .

S E C T I O N S

C HAPT E R I .

T H E C O NT R O VE R SY

C HAPT E R I I .

T H E DO C T R IN E O F T H E E NG L IS H C A S E S

C HAPT E R I II .

T H E DO C T R INE O F T H E AME R IC AN M AJO R I T Y 33—76

C HAPT E R IV .

T H E M AJO R I T Y DO C T R INE F AVO R E D 77—8 7

C HAPT E R V .

T H E VI EWS O F T H E AME R IC AN M INO R I T Y 88- 100

C HAPT E R VI .

T H E M INO R I T Y VIEWS F AVO R E D 101- 106

C HAPT E R VI I .

T H E -QUE S T I ON N O T VIT A L IN S O ME JUR IS D IC T I O N S 107- 113

C HAPT E R VI II .

C R I T IC ISM S UPON T H E DO C T R INE E XAM INE D 1 14- 132

C HAPT E R IX.

S UPPO S E D QUA L IF IC A T I ONS O F T H E D O C T R INE 133— 153

C HAPT E R X.

O T H E R F O RMS or F RAUD UL E N T R E S E RVA T IO N 154— 162

F R A U D U L E N T M O R T G A G E S

M E RC H AN D I SE .

C H A P T E R I .

T H E C ON TR OVE R SY .

S E C T ION 1 . T he controverted que st ions .

T he doctrine of R ob inson 11 . E l l iot t .

Dist inct ion be twe en actual fraud and construct ive fraud.

T he dissent ing doctrine of Bre t t C arter.

Twyne’S case the origin of the Ameri can doctrine .C

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1 . T he c on trove rt e d qu e s t ions .— T wo que stions in

juri sprudence , aris ing in a class of case s of fre quent occurrence , have be en extensive ly agitate d in the Uni te d State sduring the pre sent century , the discussion of which has deve loped much radica l difference O f opinion . They are

que stions of fundamental or substantive law , whose se ttlement upon a basis sati sfactory to all candid and inquiringminds is a matter of importance . If juri sprudence be toany extent a sc ience , i t is eminently de s irable that such substantive ru le s as it has should be accurate ly ascertained andcorre ctly formulated . It i s the re cogni tion of this truthwhich has led to and stimulate d the discussion re ferred to .

The se que stions may be state d as fol lows1 . Is a mortgage of a stock of goods in trade , unde r

which the mortgager i s permitted by the mortgage e to se l l

2 FRAUDUL ENT M O R T GAG E S or M E R C HANDI S E .

the goods at his d iscre tion in the usual course of h is busine ss , inhe rently and e ssent ially fraudulent as to creditors ofthe mortgage r?2. If i t be , i s i t sti l l so in case the agre ement or under

standing be twe e n mortgage e and mortgagor , pe rmittingsuch sale s , i s not shown upon the face of the mortgage , butis proven by evidence aliunde ?

G rowing out of the se fundamental que stions are otherincidental or subsidiary one s , which are me re ly que stions ofprocedure , but which have be en O ften but imprope rly treatedas que stions of substantive law , and the discuss ion of whichas such has some time s led to a confuse d unde rstanding of

the e xtent of the ru le s of substantive law on the subj e ct .

IVithout at pre sent stating the se incidental que stions , theymay be classed as : F irst , those concerning the manne r in

which the facts shal l be asce rtaine d in controve rte d case s ;and second , those concerning the source s , form , and quali tyof e v idence admitted . It may be assumed that both the seclasse s of que stions re late mere ly to procedure , and thatthey should not be confounded w ith fundamental que stions .

T he two inqu irie s above formulate d wi l l probably be ac

c ept ed as a fair pre sentation of al l the que stions of fundamental law , or juri sprudence , which are invo lved in the

controversy . T he fo l lowing page s have be en writtenin the b e l ief that a candid and impartial inve stigation findsboth the se que stions answe re d in the affirmative by the

great we ight of Ame ri can authori ty , cons idering the de cis ions not only as pre cedents , but as enunciations of princ ip l e .

2. T h e doct rine of R ob in son v . E l l iot t . In the caseof R obinson v . E l liott ,1 the Supreme Court of the Unite dState s was confronte d w ith the duty of de te rmining de cis ive ly for the first time , the first of the se que stions , upon

1 22Wall. 513

T H E C O NT R O VE R S Y . 2

di stinctive ly commonlaw principles .

1 T he que stion hav

ing be en already much controverted in Ame rica , would , i thad be en expected , be soone r or late r pre sented to the Snpreme Court for i ts consideration . Its answe r in the affirm

ative commits that court to a doctrine which originated inE ngland , but which , though exoti c , has be en so e ffe ctuallytransplanted , and has deve loped so extens ive a growth inthe so i l O f Ame rican j urisprudence , by reason of its adaptat ion to the pe culiar exigencie s of our comme rcial inte re sts ,that i t may now be w e l l characte rize d as Ame rican . Itstardy growth in E ngland , a misunderstanding of its originals cope and appli cation, and a confusion of v iews as to the

O ffice and e ffe ct of ce rtain e arly E nglish statute s , hadconspired to create many doubts in the minds of juri sts ,both as to the soundne ss of the E nglish doctrine and the

p roprie ty O f its c is-Atlant ic appl ication . T he se ttlement ofthe se doubts , it had be en suppose d , would be mate rial lypromoted by the enunciation of a ru le on the subje ct by our

highe st tribunal . Th is re su lt has been attaine d only in

part , although the court threw the we ight of i ts unanimousde ci s ion upon one s ide of the que st ion . T he controve rsycontinue s to such an extent as to sugge st , and perhaps tojustify , an attempt to explain and i llustrate the que stionmore fu l ly than has yet be en done , by examining close lythe doctrine in que stion , inspe ct ing its origin , tracing itsgrowth , and te st ing its soundne ss .

It was de cided in R obinson v . E ll iott that a chatte l mortgage upon a stock of goods in trade , which permits themortgagor to remain in posse ssion of the prope rty , and in

i ts di spos ition by sale in due course of trade at hi s diseret ion , unti l the maturity of the debt purporting to be se

cured by it , i s fraudulent as to othe r creditors , and isabsolute ly vo i d as to them , without reference to the bona

1 T he que st ion had b een presented, but not adequate ly considered, in theearl ier case of Bank Hunt , 11 Wal l . 391

3 FR AUDUL E NT M O R T GA GE S O F M E R C HAND IS E .

fides of the mortgage debt , or to the intentions of the

mortgage r as to fraud . T he leading fe ature s of the some

what compl ex doctrine embodie d in this de cision , are , thatfraud i s a legal que stion , or a que stion to be adjudicated bya court upon ev idence ; that whe the r fraud be e stablished inany case , depends not only upon the finding of the facts by ajury or by the court , but also upon the judgment of the

law on the facts so found ; that a ne ce ssary tendency tofraud , in a transaction such as that state d above , may be

re cognized by the courts , when the facts O f the case are

made known that when such a tendency i s re cognize d , thelaw characterize s such a transaction as inherently fraudulent ; and that thi s i s not a que stion for a jury to determinein any case , be cause i t i s not a que stion of fraudulent intent , nor i s i t in any other re spe ct a question of factWhenever, therefore , i t appears sati sfactori ly to the court ,that by an agre ement b e tween the partie s , the mortgage rhas be en permitted to remain in posse ss ion of the stock O f

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goods mortgaged , and to make sale s thereof in the usualcourse of trade , the case i s ready for an adjudication that .

the transaction i s e ssential ly fraudulent . T he fact of suchagre ement may appear to the court from an inspe ction Of

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the written contract or i t may be conceded by the parti e sas one of the facts O f the case or i t may be e stabl ishe d bythe verdict of a jury ; or be proven to the sati sfaction of

the court by ev idence , in case s where no jury inte rvene s .

But the manner in which the fact O f such an agre ementshal l be e stabl ished , i s a que stion of procedure only ; and

the adjudication of fraud by the court , afte r the factsare e stabli shed , i s a matter of substantive law . It i s in thissense that such mortgage s have often be en prope rly said bythe courts to be fraudulent in law .

3 . D ist in ct ion b e twe en a ct u a l fraud and c on st ru c

t ive frau d . If this rule shall be come we l l e stablished , i t4

T H E C O NT R O VE R SY . 5

will re sul t that our Ame ri can j uri sprudence must dispensewith the o ld di stinction be twe en fraud in law and

fraud in fact ,”

and must pre sent a cleare r and more ao

c urate distinction be twe en actual fraud and constructivefraud than the one here tofore employe d , and, in gene ral , amore philosophical class ification of the protean shape s inwhich fraud i s found lurking in fraudul ent conveyance s .

It i s p lain that the fraud which distingu i she s such case s as

R obinson v . E l l iott , i f i t be fraud at al l , i s in no sense c ons tructive or pre sumptive fraud it i s actual fraud , in as ful la sense as i f i t had be en ev idenced by the fraudu lentintent of the parti e s , and such intent were e stabli shed bythe verdict of a jury . By e xamining the O bje ctions whichhave be en interpose d to thi s doctrine , the student wi ll se et hat the obj e ctors ve ry gene ral ly denominate i t a doctrineo f construct ive fraud and thi s erroneous view i s probably re spons ible for the greate r part of the dissent from the

doctrine . Constructive fraud i s defined by Story 1as mean

ing simply that by reason of the p e culiar re lations be twe enthe partie s to a transaction , a suspicion or pre sumptionarise s that one party is taking or may se cure an unfair ad

vantage over anothe r, and that thi s pre sumption , i f not

rebutte d by proof , may re su l t in se tting as ide the transaction as fraudu lent ; but that proof of bona fides , or of

absence of fraudulent intent , or of actua l indebte dne s s notove rstated , may suffice to rebut the pre sumption and val idate the transaction . If it be true that , in the class of case sin que stion , courts which treat them as fraudu lent do S O

upon a theory of pre sumption or of constructive fraud , theni t logically fol lows that proof O f hone st intent , or of actualindebtedne ss , when O ffered , shou ld be cons ide re d in de te rmining the Case , and that i ssue s may O ften properly arise insuch case s , which shou ld be submitte d to a jury . But i f thelogician wrongly assume s as a premise that the que stion i s

1 E q. Jur. , sect . 258 , 311.

F R A U D L'

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one of constructive fraud , his logic wi l l lead him astrayIt w i l l appear on careful examination that such a premise isunwarranted . T he que stion i s not one of constructivefraud . The re i s nothing in such a case as R obinson v .

E l l iott which ne ce ssari ly raise s a suspicion of fraudulentintent , such as the suspecte d party shou ld disprove or suchas a j ury must cons ide r. The re i s no occasion for re sort topre sumption or construction . O n the facts of such a case ,

as stated in the pre ceding se ction , there i s an immediate andconclusive judgment of fraud . T he fraudulent tendenci e sand feature s of the transaction form the bas i s o f fac t on

which the j udgment of the court re sts ; just as in c ase s

turning on intent , the v e rdict or finding that such an intentexists , forms the basi s of fact for the judgme nt or conclus ion of the court . T he facts be ing made apparent , thejudgment of the law thereon i s inevitab le . T he truth is ,that constructive fraud ” i s simp ly a convenient rule of

practice , by which courts and j urie s are ass isted in se ttl ingthe facts in doubtful case s . In such case s , the law in e ffe ctsays to the suspe cted party , T he circumstance s are against

you , and rai se a pre sumption O f fraud , which wi l l cause a

de cis ion adve rse to you unle ss you succe ssful ly rebut thatpre sumption .

”N o one doubts this to be a salutary rule in

case s to which it applie s . But it shoul d be defini te ly and

accurate ly understood , and should not be confounde d w iththe ru le in R obinson v. E l l iott . Constructive fraudand fraud in. law are not synonymous or conve rtiblete rms .

“Actual fraud and fraud in fact are not sy

nonymous or conve rt ib le te rms .

“Actual fraud ”and “

c on

structive fraud are antithe tical terms , when properlyapplied . But the expre ss ions fraud in law and 5‘ fraudin fact are ambiguous , and when use d antithe ti cal ly ,

are misleading ; and they might we l l be di sused ; for

in eve ry case of fraud , as we l l as in all othe r l itigatedcase s , the e lements O f both law and fact are ne ce ssari ly involve d .

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T H E C O NT R O VE R SY 4

The se pre l iminary observations may serve to i l lustratethe controverted que stions to be now considered , and may

assist in exp laining, ,

in part at least , the occas ion for thecontroversy .

4 . T h e disse n t ing doct rine o f Bre t t v . C art e r .— In

the pre sent aspe ct of the controve rsy , Bre tt Carte r 1 may

be consi dered the leading case in opposition to the doctrineof R obinson 12. E l l iott . In thi s c ase , Lowe l l , J . , O f the

United State s D i stri ct Court for Massachuse tts , venture dto doubt both the generality and justice of the doctrine

announce d in R ob inson v. E l l iott , and di ssente d from it as

a new doctrine of only local application . Hi s opinion state sS O forcibly the leading obj e ctions offered to this rule of law ,

and i s so bo ldly critical as to the de cis ion O f hi s superiortribunal , as to make it pe rhaps the be st exponent of theviews which it supports , and the be st te st which c an be ap

p lied to the soundne ss O f the doctrine in que st ionBre tt Carte r was a b i l l in e qu ity by an aS S Igne e in

bankruptcy of the mortgage r, against the mortgage e of a

stock of statione ry . T he debt was for thel

purchase-money

of the stock of goods , so ld by the mortgage e on a credit ,the note s maturing at diffe rent t ime s during four years .

T he mortgage r was pe rmitte d by hi s creditor to se l l thegoods in the ordinary course of ‘ his trade . It did not ap

pear, however, that any provi sion to this e ffe ct was incor

porat ed into the writings . This feature of the case mustbe O bserved , in v iew of the distinction which

“some juri stshave taken , that in al l ‘ case s where the provi s ion al lowing thedebtor to se l l the goods doe s not appear on the face of the

instrument , but i s shown by evidence a tiunde , the courtwi l l not find fraud in law , but wi l l le ave i t to the jury t o

find fraud in fact . T he opinion of the court was , in part ,as fol lows .

T he Court of Appeal s of N ew York de cided , by a bench

1 2 L ow. 458 ; 3 C . L . J . 280

4 FR AUDUL E NT M O R T GA GE S or M E R C HAND IS E .

wh ich was e qual ly divided in opinion , that a mortgage of

chatte ls which pe rmits the mortgage r to continue in posse ssion and to se l l the goods in the ordinary course of bus ine ss , i s vo id on i ts face as m e re matte r of law .

1 Thisde cis ion has had a remarkable fo l lowing , and i ts doctrineappears to have be come the se ttl ed law of N ew York , O hio ,

and Il l inoi s . It i s not the law of E ngland , Maine , Massachuse t ts , Michigan , or Iowa ; in seve ra l State s i t has not

be en passed upon . But as this new doctrine , or rathe r,revival of an o ld one , has be en said by M r. Justi ce Davi s ,of the Supreme Court , to be so gene ral and just that it may

be pre sumed to be the law of Indiana ,in the absence of

expre ss and unambiguous de cisions of the courts O f thatState to the contrary , and as I venture to doubt both thegenerality and the justice of the doctrine , it be come s me ,

w ith al l the re spe ct I fe e l for that opinion , to state my rea

sons for not acceding t o it . If the ru le , whichever way i tmay be , we re a se ttle d ru le of property in Massachuse tts ,inquiry into its history or justice wou ld be unne ce ssary ; butalthough I have no doubt my de ci sion wi l l accord with the

law of Massachuse tts , I have not found a case in this Statein which the de cisions in N ew York we re revi ewe d , and i t i spossibly sti l l a que stion for discussion . I had suppose d i tto be we l l se ttled , after much debate and conflict of O pinion ,

certainly , but substantial ly se ttled , that when a vendor or

mortgage r was pe rmitted to re tain the posse ss ion and c on

tro l of his goods , and ac t as apparent owne r, the que stionwhe the r this was a fraud or not was one of fact‘

for the jury ,

excepting under a pe cul iar c lause O f‘ m

the bankrupt law of

E ngland . It is so pronounced by M r. M ay in h is valuabl etreatise on Vo luntary and Fraudu lent Conveyance s , page

and by the case s he cite s ; and by the learned edi

1 Griswold v. S heldon, 4 N . Y . 581.2 Query, p . 106 .

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and agent of the mortgage e , he might as we l l give poss e ss ion to the mortgage e at once and go out of bus ine ss . In

this case , he neve r cou ld have begun busine ss , for the who lestock was suppl ied by the de fendant .

I would re fe r in thi s conne ction t o the ve ry able opinionsof Judge D i l lon in Hughe s v . Cory ,

land of Judge Camp

be l l in Gray B idwe l l ,2 in which they re fuse t o fo l low the

de cisions in N ew York , and give reasons for that re fusal ,which , in my judgment , are unanswe rable .

If i t be said that this is one of those case s in whichfraud i s a ne ce ssary re sult of the de ed , al l I c an say is , thatthi s brings us to an ultimate fact of O bservation and e xpe

rienc e and I am unable to se e the ne ce ss ity . Inde ed , it ismuch more difficul t for m e to se e how creditors can be defrauded in such a case , when they are told in the de e d its e l fthat the debtor has no credit , and no prope rty that he c an

cal l h i s own , than that the mortgage e i s most outrageous lyde frauded by such a ru l e , which devote s his property to thepayment of anothe r person ’ s O ld debts , the ve ry instantthat he has parte d w ith the posse ss ion , taking back a se

carity which i s admitte d to be hone stly given . Take thi sve ry case as an i ll ustration . It i s admitted that the re wasno fraud in fact that the trader’ s whole stock was suppliedby the defendant that the mort gage shows that al l the

stock , pre sent and future , i s hypothe cated , not as a cove ror blind , for the re was none , but to the payment of a certaindebt by certain instalments . N O offer i s made to provethat any one was de ce ived , or even was ignorant of the

mortgage ; but I am as ked to find fraud in law , when Iknow , and i t is

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admit t ed, the re was none in fact .

”

The s e positive v i ews O f Judge Lowe l l are stated W ith al l

the earne stne s s of conv iction . T o ful ly i l lustrate the character of the i s sue pre sented betwe en h im and the appe l late

1 0 0 Iowa, 390.

2 7 M ich. 519 .

T H E C ONT R O VE R SY . 4

court , it i s only ne ce ssary to quote the e qual ly inci sivelanguage of M r. Justice Davis m R obinson v . E l l iott ,1 inwhich case the stipulation al lowing the debtor to remain inposse ssion , control , and disposition of the stock of goods ,appeare d on the face of the instrument .

If chatte l mortgage s were formerly , in most of the

State s , treated as inval id unle ss actual posse ssion was surrendered to the mortgagee , i t i s not so now , for mode rnlegislation has , as a gene ral thing ( the case s to the contraryb e ing exceptional ) , concede d the right to the mortgage r tore tain posse ss ion , i f the transaction i s on good consi derationand bonafide . This conce ssion i s in obedience to the wantsof trade , which de em it beneficial to the community thatthe owners of personal

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property shoul d be able to mak ebonafide mortgage s of i t , to se cure cre ditors , w ithout anyactual change of posse ssion .

But the creditor must take care , in making hi s contract ,that it doe s not contain prov i s ions of no advantage t O ‘

him ,

but which b enefit the debtor, and were de s igned to do so ,

and are inj urious to othe r creditors . T he law will not sanetion a proce eding

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of this kind . It wil l not al low the creditor to make use of his debt for any other purpose than hi sown indemnity . If he goe s beyond this , and puts into thecontract stipulations whi ch "have the e ffe ct to shie l d the

property of hi s debtor , so that creditors are de laye d in thecol le ction of the ir debts , a court of e qu ity wi l l not lend itsaid to enforce the contract . The se principle s are not di s

puted, but the courts of the country are not agre e d in the irappl ication to mortgage s wit-h somewhat analogous prov iSions to the one under conside ration . T he case s cannot be rec onc il ed by any proce ss of reasoning , or on any principle oflaw . As the que stion has neve r be fore be en pre sented to thi scourt , we are at l ibe rty to adopt that ru le on the subj e ctwhich se ems to us the safe st and wi se st . It i s not diffi cult

I 22Wall. 513.

4 FR AUDUL E NT M O R TGA GE S or M E R C HAND IS E .

to see that the mere re tention and use of personal prope rty ,

unti l de fau lt , i s altogethe r a diffe rent thing from the re tent ion of posse ssion accompani e d wi th a power to dispose of

i t for the benefit of the mortgage r alone . T he forme r i spermitte d by the laws of Indiana , i s consi stent with thei dea of se curity , and may be for the accommodation o f the

mortgage e ; but the latter i s inconsistent with the natureand character of a mortgage , i s no prote ction to the mortgage e , and of i tse lf furnishe s a pre tty e ffe ctual shi e ld to a

dishone st debtor. We are not prepare d to say that a mortgage under the Indiana statute wou ld not be sustained ,which al lows a stock of goods to be re tained by the mortgage r, and sold by him at re tai l for the expre ss purpos e of

applying the proce eds to the payment of the mortgagedebt . Inde e d , i t would se em that such an arrangement , i fhone stly carried out , would be for the mutual advantage of

the mortgage e and the unpre ferre d creditors . But there arefeature s engrafted on thi s mortgage which are not only tothe pre j udice of creditors , but which S how that other c on

s ide rations than the se curity of the mortgage e s , or the ir ac

commodation even , ente re d into the contract . Both theposses s ion and right of disposition remain with the mortgage rs . They are to deal with the prope rty as the ir own ,

s e l l i t at re tai l , and use the money thu s O btained to replenishthe ir stock . There i s no covenant to account with the mort

gage es , nor any re cognition that the property i s so ld forthe ir benefit . Instead of the mortgage be ing dire cted sole lyto the bona fi de se curi ty of the debts then existing , and

the ir payment at maturi ty , it IS ' base d on the idea that theymay be indefinite ly prolonged .

Mani fe stly it was exe cuted to enabl e the mortgagers tocontinue the ir busine ss , and appear to the world as the ah

so lute owne rs O f the goods , and enjoy a ll the advantage sre su lting there from . It is i dle to say that a re sort to the

re cord wou ld have shown the e xistence of the mortgage ;12


for men get credit by what they apparently own and pos

se ss , and this ownership and posse ssion had existe d withoutinte rruption for t en years . The re was nothing to put creditors on the ir guard . O n the contrary , thi s long- continuedposse ssion and apparent ownership we re we l l cal culated tocreate confidence and disarm suspicion . But apart fromthis , se curity was not the leading obj e ct . If so , why doe sM rs . Sloan ’ s note remain overdue for twenty-one months

,

and why doe s R obinson continue to indorse ? This conducti s the re su lt of trust and confidence , which , as Lord Cokete l ls us , are eve r found to constitute the appare l and cove rof fraud .

In truth , the mortgage , i f it c an be so called , i s but anexpre ssion of confidence , for there can be no real se curitywhe re there i s no certain l ien . Whateve r may have be enthe motive which actuated the partie s to thi s instrument , i ti s manife st that the ne ce ssary re sult of what they did dowas to al low the mortgagers , under cover of the mortgage ,

to se l l the goods as the ir own , and appropriate the proce e dsto the ir own purpose s , and this , too , for an indefinite lengthof time . A mortgage which in i ts ve ry te rms contemplate ssuch re sults , be side s be ing no se curi ty to the mortgage e s ,O perate s in the most e ffe ctual manne r to ward off othercreditors ; and whe re the instrume nt on i ts face shows thatthe legal e ffe ct of i t i s t o de lay creditors , the law impute sto it a fraudulent purpose . T he v iews we have taken of

thi s case harmonize with the E ngl ish commonlaw doctrine ,and are sustained by a numbe r of Ameri can de cis ions .

”

T he dive rsity of conclus ions drawn in the se two opinions ,as to what i s the E nglish law on thi s subje ct , i s no morestriking than i s the diffe rence they disclose as

i

to the dutyof judic ial opinion on the subje ct . T he Supreme Courtfinds itse lf impe lle d to the conclusion that the transactioni s inherently fraudu lent , which is accordingly adjudicated .

T he D i stri ct Court doe s not think it should have , or that13

5 PR A U D U L E N T M O R T GA GE S O F M E R C HA ND IS E .

the law doe s have , any opinion on the subject . Y e t the

only substantial difference in the aspe ct of the two case s , aspre sente d to the courts for adjudication , is in the characterof the evidence by which the re serve d privi lege of se ll ingthe goods was proven . In R obinson v . E l l iott , thi s re se rvation appe are d on the face of the instrument . In BrettCart e r, i t appeare d by ev i dence a liunde ,

‘ but that it didappear is manife st from the facts state d in the opinion of

the court . There was one entire transaction in each case .

What the transaction was , appeare d in one case partly bywritten and partly by paro l evi dence . In the other case ,it was sufficiently shown by the wri tten contract alone .

But that thi s di fference in procedure , as to the mode bywhich the agre ement is proven , c an furni sh no reason for a

difference in the application of the proper rule of law , wi l lbe clearly seen from the adjudicated case s .

5 . T wyn e’s C a se t h e origin of t h e A m e rican doc

trin e . T he controversy wi l l be b e st unde rstood , not onlyas to i ts m erits , bu t al so as to its occas ion , by a care fu le xamination of the E nglish cases , with a v i ew of observ ingthe origin and tracing the deve lopment of the doctrine inque stion . T he v i s ib le origin of thi s doctrine i s to be foundin T wyne

’

s Case .

1 It has come down to u s w ith as l ittleapparent variation from its original form as has any otherof the principle s announce d in that case , whi le i t i s pe rhaps the most important of them al l . T he exhibitions ofthi s doctrine , as an active force in the juri sprudence of thi scountry ,

have be en cal le d American phase s of that ce lebrat ed case , be cause the doctrine has be en adopted intoour juri sprudence in pre cise ly the form announce d in the

Star Chamber in 1601 , and finds a ready adaptation to

the various exigencie s of our juri sprudence . Singularly

1 3 C oke , 80.


e nough , i t i s virt ual ly outgrown and practical ly abandonedin E ngland .

Attention i s invited at the outse t to the fact that i t i s notthe mere que stion of the posse ss ion of the goods by thedebtor that i s now to be looked to as the leading que stionin that case .

It has too frequently be en supposed that the chie f and

most important , i f not the only , principle of law a djudic at ions in T wyne

’

s Case , was , that the re tention of posse ssionby the grantor of chatte ls conveyed by him , by mortgageo r otherwi se , as se curity for debt , would alone suffice to

rende r the transaction fraudu lent and void , as to his othe rc re ditors ; and the idea has often b e en advance d that theprincip le of law adopte d in that case was e stabl ishe d uponthe bas i s of a pre sumption of fraudulent intent , thu s pres enting a case unde r the statute 13 E l iz . , c . 5 . Both of

the se v iews , it i s now submitted , were e rroneou s . T wyne’

s

Case did not turn upon the que stion of re tention of pos

s e ss ion alone ; nor was i t ne ce ssary to the de te rminationof that case to impute a fraudulent intent to the grantorin the conveyance , or to re fer to the statute 13 E l iz . , c . 5 ,

for the rule of law which should gove rn the case .

It i s in the se misapprehens ions as to the scope and e ffe ctof T wyne

’

s Case , that the care ful student of the law of

fraud wil l find the occasion for al l the variou s contro.

vers ie s that have arisen in reference to chatte l mortgage s ,including the one now under cons ideration . Thus , in thee arl ier de cade s of the pre sent century , th ere was waged inthi s country an earne st and learne d controve rsy over the seque st ions 1st , whe ther re tention of posse ssion under sucha mortgage i s conclus ive ly fraudulent ; or , 2d, whethe r iti s only p rimaf ac z

’

e fraudulent ; and, 3d, i f the latte r, thenwhat explanation of such posse ss ion wil l suffic e to negat ive the suspicion of fraud . T he di sputants very general lytook the view of T wyne

’

s Case above stated . T he learned15

5 PR AU D U L E N T M O R T GA GE S or M E R C HA ND IS E .

American e ditors of Smith ’ s Leading Case s , in the ir note son T wyne

’

s Case ,1 have given the ir chie f attention to the

que stion of posse ssion , practi cal ly overlooking the one now

under cons ide ration . I n a re cent articl e in the A merican

L aw R egister ,2e ntitled Sale s and Conveyance s w ithout

De l ivery of Po sse ssion , the wri ter , taking up the subje ctwhe re the editors of Smith ’

s Leading Case s le ft it , l ike themtreats re tained posse ss ion alone as the important que stionin T wyne

’

s Cas e .

T he text-write rs have very general ly fal len into the

same misapprehension . M r . Cowen , in his note to B isse lv . Hopkins ,3 whe re the rule was disafiirni ed that re tent ion of posse ssion alone renders a mortgage of chatte l sfraudu lent , criticise s thi s rul e , enume rate s twenty- fourexceptions the re to which he finds then already e stablished by de cisions in E ngland and Ameri ca , and asksMbat doe s the ru le amount to ? What is i t worth ?

A nd doe s its pre servation merit a adding ,Some of the exceptions are almost as broad as the ru le

itse lf .

” This rule i s now abandoned in nearly all the

American State s , and the controversy ove r i t is he re re

ferred to m ere ly as an i l lustration of past m isapprehensionsconce rning the scope of T wyne

’

s Case for i t was that caseto which re ference was usual ly made for the origin of the

rule ; ye t i t cannot now be we l l supposed that that case wasove r an authority for such a rule . T he courts of a few

of the State s sti l l adhere to this rule , probably be cause i tbe came at an e arly day too we l l fixe d in the ir j urisprudenceto be disturbed , and not because it would now be advi sedlyadopted .

It i s obvious , too , from the language of the opinion in

Brett Carter, above quoted , that the court de l iv ering

1 Vol . 1, p . 47.

2 18 Am . L. R eg. 137

3 3 C owen, 15 Am. D e c . 259.

16


mained in posse ssion , and exerc ised ac ts of ownership over

the goods .

” Chance l lor Lans ing , in 1808 , criticised theremark of L ord Mansfie ld , that even be fore the statute , 1

i f a man had conveyed hi s own goods to a third person , and

had kept the posse ss ion, such posse ssion would have be envoid , as be ing fraudulent according to the doctrine in

T wyne’

s Case ,3 R ep . saying of i t , “ This opinion

rathe r narrows the doctrine in T wync’

s Case , as it requiredthe execution of the p ower to sell to constitute the posse ss ionfraudul ent .

" 3

T o asce rtain the doctrine properly to be drawn fromT wyne

’

s Case , a carefu l scrutiny wi ll , in the next chapte r,be made of that case and those suc c eding E nglish case swhi ch pre sented simi lar state s of facts .

1 21 Jac . 1 .

2 M ac e v. C ade ll , 1 C owp . 232

3 S ands v. C odwise, 4 Johns. 536 (at p . 4 Am. D ec . 305.

18

D O C T R INE O F T H E E NGL ISH C A SE S . 5 6

C HA P T E R II .

T HE D O C T R IN E O F T H E E N G L I SH C A SE S .

S E C T ION 6 .

7 .

8 . Worse ley 17. D e M at tos ; Lord M ansfie ld’sO p inion .

9 .

10 .

1 1 .

12.

13 .

14 .

15 .

1 6 .

17 .

18.

19 .

20 .

21 .

22.

23 .

24 .

25, 26 .

27 .

28 .

29 .

30 .

31 .

32.

R e tained power of d ispos i t ion the important e lement in

T wyne’s C ase .

Ryal l v. R owle s ; the same e lement present .

E dwards 17. Harben ; power of dispos it ion the fatal feature .

Lord Kenyon’s O p inion in Page t v . Pe rchard.

Wordal l v . Sm ith ; the same e lement pre sent .

R ee d B lade s ; v iews of C hie f Just i ce M ansfie ld .

Armstrong Baldock ; the same e lement present .

C ase s supposed to be antagonist i c ; Benton T hornh il l .Bucknal l c . R oiston of doubt ful authority .

T he e lement of a reserve d power of sale found in e ight cases .

M e re re t ent ion of posse ss ion unimportant .

R e tent ion of posse ss ion alone not conclus ive of fraud ; S toneG rubham .

Lord Holt ’s dic tum in M eggot v . M i l ls .

V iews of Lord M ansfie ld in C adogan c . Kenne tt .

Lord E ldon’s views ; Bu l ler’s synops is of T wyne ’

s C ase .

Lord E ldon’s further views of T wyne

’s C ase ; Arunde l c .

Phipps , and E x parte W i l l iams .

Lord E l l enborough ’s views .

V iews of C hie f Just i ce M ansfie ld in S te e l 11 . Brown.

Judicial doubts ; J e z eph v. Ingram,Wooderman v. Ba1dock ,and S teward v . Lombe .

Lord T enterden’s views ; Lat imer v . Bat son, and E astwood

8 . Brown .

T he que st ion of the e ffe ct of posse ss ion alone se t t led inM art indale v. Booth .

E dwards 27. Harben further explained in M acdona v . Swiney .

Late E ngl ish eases ; the que st ion of power of sale not con

sidered .

Late E ngl ish case s ; the que st ion not involved .

T he doctrine of T wyne ’s C ase supersede d in E ngland .

6 . R e t ain e d pow e r of d ispos it ion th e im portant e l em en t in T wyn e

’s C ase .

— T he rule of T wyne’

s Case which19

6 FR AUDUL E NT M O R T GAGE S O F M E RC HAND IS E .

i s applied in R obinson v . E l l iott , i s i l lustrated in the se condre so lution of the Star Chambe r, viz T he donor c on

tinned in posse ss ion , and used them as his own ; and byreason the re of he traded and trafficked w i th others , and defrauded and dece ive d them ; and in the fifth re so lution,

which i s al l ie d to , i f not drawn from and depending on , the

se cond , viz He re was a trust be twe en the partie s , forthe donor posse sse d all , and used them as his proper goods ,and fraud i s always appare l led and clad with a trust , andtrust i s the cove r of frauc If one be indebted to sev

e ral , and make s a gift of al l hi s goods to one creditor insati sfaction of hi s debt , says the l earned reporter, “ butthe re is a trust be twe en them that “ the done e shal l dealfavorably w ith h im in regard of his poor e state , e ither topermit the donor, or some othe r for him , or for his benefit ,to use or have posse ss ion of them , and is contented tha t he

shall p ay him his debt when he is able , thi s shall not becal led bona fide .

” This language , though appl ied to a suppose d case of a sale or a gift p erhaps se cre t , as in T wyne

’

s

Case ye t de scribe s very aptly the re su lt of al l case s unde rmortgage s , such as R obinson 27 . E l l iott , or Bre tt Carter .

Publ icity , notice , registration , actua l consideration , al l fadeinto immaterial ity in v iew of an agre ement under a mortgage that the mortgager shal l continue to use the goods as

his own proper goods ,”and practical ly shal l pay his se

cure d creditor when he i s able , or i s re ady , to do so ; for

that i s al l that i s in real i ty left of the arrangement miscal led a mortgage . Some of the later E nglish case s havenot announced thi s v i ciou s principle , in the most apt terms ,as the reason for the ir de ci sions . But , in the case s be lowre ferred to , the fact notably existe d of a re se rvation of

thi s kind by the debtor for hi s benefit . It has be en oftensai d that courts may , and frequently do , give most corre ctjudgments w ithout i l lustrating them by the logical reaSoning whi ch might have be en pre sented as the ir Inherent

20

D O C T R INE O F T H E E NGL I SH C A S E S . 7

strength and support . Doubtle ss , in E ngland as inAme rica ,

jurists have fe l t the fu l l force of the facts of the case , andthe ne ce ssari ly fraudulent tendency of a re se rvation of a

power of sale and dispos ition unde r such conveyance , without expre ssing the ir fe e l ings and convi ctions in ap t te rms .

E spe cial ly may we accept thi s as the fact when we find

them re ferring , without further explanation, to T wyne’

s

Case as authori ty , and find the prope r authority in the se c

ond and fifth i tems of the judgment of the Star Chamber,and the facts to which that judgment applied .

7 . R ya l l v . R ow l e s ; th e sam e e l em e n t pre se n t .

T he e arl ie st reported case , afte r T wyne’

s Case , i s Ryal l u .

R owl e s ,1 ari sing in 1 74 9 . ( It i s reported , also , as R yal l v .

R ol le d

) This was a case of a mortgage of utensi l s and

stock of goods in trade of a brewer , the mortgage r havingnot only re taine d posse ssion , but continued , as usual , withh is busine ss . T he goods conveyed we re utensi ls ,

"hops ,malt , fixture s to the fre ehold , and stock in trade ,

”as stated

by one of the judge s .

3

T he case was consi dere d unde r the statute 21 Jae . I . ,c .

19 , re lating to insolvencie s . But i t was argued on generalprinciple s , appl icable to every case ,

4and the principle unde r

discussion , which had i ts origin prior to that statute , wasfound to be invo lved , and was adjudicate d . Burnet , Jsaid : T he le ading case on thi s is T wyne

’

s Case , where iti s he ld that i t was upon a valuab le cons ide ration , but notbona fi de , from the continu ing in posse ss ion and trading

therewith . It i s difficult , unle ss in very spe cia l case s , toassign a re ason why an absolute or conditional vende eof goods should le ave them w ith the vendor, unless to

1 1 Y e s. sr. 348.

2 1 A tk . 165, and 1 W i lson, 260.

3 1 A tk . 175.

4 S e e M ay on F raud . C onv. 117.

7 FRAUDUL E NT M O R T GAGE S or M E R C HAND IS E .

procure a col lusive credit ; and i t i s the same , whether inabsolute or cond itional sale s .

” 1 Lord Har ,dwi cke dui ingthe argument of counse l , I epl ied to the ir sugge stions as

fo llows . T he chatte l s are stock and utensils in trade the

debts due and to be due ; and ye t , posse ssion of the wholeleft with the bankrupt , who had the order and dispositionof them as be fore , sold, a ltered and disp osed as owner ,

was I eput ed as such , and al l thi s with the expi e ss consentof the mortgage e , who m ight have prevente d this . N or

was he to account with the de spone e for what he shou ldse l l , nor foi any of the debts he shou l d r

'

e c ove i ; thatmight probably have al tere d the case .

” 2 Al l the fourj udges agre ed in exposing , in the ir opinions , the fraudulent and de lus ive characte r of such misname d mortgage s ;and i t was state d that the statute of 13 E liz . , on whichin part the de ci s ion was re sted , was “ only de claratoryof the common law .

” 3 T he case of Stephens v . Sole , inwhich fraud was adjudicated by Lord Chance l lor Talbot , in1 736 , was re ferred to approvingly by al l the judge s . T he

substance of that case was thus cited by Lord Hardwicke ,in Bourne v . Dodson .

4 The re a person , owner of thre eboys be longing to the river Thame s , mortgaged them , and

afte r he had so done , was suffe red by the mortgage e tomake use of them in the same manne r as be fore for thre eyears together, and app eared to a ll intents the visible owner ,

and persons lent him money upon the credit of his be ingthe owner, and the re fore a ve ry strong case .

”

R yal l R olls was reported by Wi lson in a bri e f and

conci se form , in language which shows clearly what wasthen unde rstood to be the doctrine of the case . T he ent irereport of the de cis ion i s as fol lows 5

Rya l l R ol lo . In C hance ry , be fore Lord Hardwicke ,assi sted by L e e , Chi e f Justi ce B . R . , Parker, Chie f Baron

1 1 Ves. sr. 360.

2 1 Ve s. sr. 353.

3 1 A tk. 178.

4 1 A tk . 157.

5 1 W i lson, 260.

DO C T R INE or T H E E NGL ISH C A S E S . 8

of the E xchequer, and Burne tt , one of the judges of theC . B ; who de l ivered the ir opinions seria tim upon the 27th

of January ,

1and unanimously gave judgment that if a man

mortgage s his goods and chatte l s and debts for a valuablecons ide ration , and the mortgage e pe rmits the mortgagor to

ke ep posse ssion , and to have the orde ring , se l ling , and dispos ing the reof , this give s the mortgage r a false credit , isfraudu lent against creditors , and the mortgage r afte rwardsbe coming bankrupt , the assignee s under the commi ssion are

entitled to have the se goods .

”

8 . L ord M an sfi e l d’

s opinion in W orse l ey v . D e

M a t tos . Worse ley D e Mattos2 was de te rmined in

1 758 . O ne Slader had mortgaged al l his goods , materials ,and stock in trade as a brewe r, as security for debt , andhad authorized the mortgage e to ente r and take posse ss ionupon default of payment . A fe igned i ssue was sent out of

C hance ry to de te rmine whe ther Slader , by this mortgage ,had committe d an ac t of bankruptcy . It was he ld that hehad, not by virtue of any provi s ion of the statute s of bankrupt cy , but be cause the transaction was fraudulent as to

creditors , unde r 13 E l iz . , though made by way of se curityand for a valuable cons ideration . Lord Mansfie ld c ited thesecond re solution In T wyne

’

s Case , emphas i z ing the wordsreferring to the powe r of dispos ition of the goods

, and

said : By the expre ss tenor of the de ed , Slade rwas to havethe absolute order and disp osition as b efore . In fact , hewas pe rmitte d to continue in posse ssion and a c t as owner

Th ey who deal t with him trusted to his v i sible trade and

stock . They truste d to the bankrupt law , that he couldne ithe r have sold nor mortgage d ; and in case of a m isfor

tune , that his e ffects must be e qual ly distributed . Theywe re im pose d upon by false appearance s .

1 1749. 2Burr. 467.

9 PR AU D U L E N T M O R T GA GE S or M E R C HANDIS E .

9 . E dwards v . H arb e n ; Pow e r o f d isp os ition t h e

fa t a l fe atu re . Next in orde r of time came the c e lebrat ed case of E dwards Harben ,

1 invo lving a b i l l of sal eof household furniture , m edicine s , and a stock in trade , ofwhich posse ssion was not to be de l ive red unti l afte r fourte en days from the date of the bi l l , which was in e ffe ct amortgage , be ing given to se cure a debt . Posse ssion was

not , in fact , taken unde r i t unti l afte r the death o f the

grantor . Bulle r, J . , said , in de ciding the case : “We are

al l of opinion that if the re i s nothing but the absolute c on

veyanc e wi thout the posse ssion , that , In po int of law , i sfraudulent .

”T he power ove r and dispos ition in trade of

the stock of goods we re urged upon the court , by the counse l attacking the conveyance , as mate rial to Show the

fraud . H e argued , first , that continued posse ssion of chatte lssold was p rima f a c ie ev idence only of an intent to defraud ;and se condly ,

that wheneve r the re i s a pos itive agre ementbe twe en the partie s that the vendor shal l be p ermitted afte rthe sale , to have for any Space of time , not only the meremanual occupation , but also the disp osition of the goodssold , to trade with them as his own , it is an ac tualf raud on

the creditors of the vendor .

”H e state d in the fo llowing

words the co l lus ive propos ition from the cre ditor to the

debtor, wh ich is , in fact , embodie d in such a transaction,

whe ther spoken or not . If you wi l l put me in a s i tuat ion to be safe against your othe r creditors , I w i l l leave youin that which S hal l induce them not t o attack you . You

Shal l pre se rve the creditors from having posse ss ion ; I w i llretain the se curity from the real owne rship . G ive m e the

command of the property , you Shal l have i t to hold out tothe world and your creditors as your own .

” 2

Though the se fe ature s of the case are not spe cifical lymentioned by the court , ye t it i s difficult to avoid the con

1 2 T erm R . 587 2 pp. 589, 590.

FR AUDUL E NT M O R T GAGE S O F M E R C HAND I S E .

of owne rship , after hav ing parted with al l he r property bythe b il l of sale , was incons istent w ith such situation , and a

sufficient ev idence of fraud as against bonafide exe cutionsand he the re fore d ire cte d a non—su it , thus ev idencing his

view of the judic ial duty to de clare a fraud .

1 1 . W orda l l v . S m ith ; th e sam e e l em e n t p re s en t .Wordall v . Smith ,1 tried be fore Lord E l lenborough in 1808 ,i s a case much l ike the pre ceding . Afte r a bi l l of sale of

the househo ld furniture and the stock in trade of a publiean ,

the grante e took a colorab le posse ssion by putting hi s se rvant into the house but the grantor continue d the busine ssas be fore and had contro l of the sale s of l iquor . LordE llenborough

’

s charge to the jury base d the fraudu lentcharacte r of the transaction upon the colorab le posse ssi on ;sti l l , i t is evident that , as in T wyne

’

s Case , the contro l ofthe prope rty by the grantor, rather than the me re posse ssion , was fe lt by the court as the v i tal feature of the case .

12. S ir J am e s M an sfi e l d ’s view s in R e e d v . Bl ade s .

R e ed B lade s ,2 in the Common P leas in 18 13 , i s an

Instructive case . Though it i s reporte d w ith the head-notethat a conveyance of chatte ls unaccompanie d with posse ssion is voi t i t is not an authority for S O

'

broad a proposition . T he case pre sented a conveyance to truste e s , intrust for certain purpose s , including the payment of debts ,of the goods , chatte ls and other movable property in an

opera house , toge the r w ith the rents , issue s , profits , subseript ions , door money , and othe r income of the bu i ld ingand the busine ss . T he truste e s neve r took posse ss ion of the

ope ra house , nor the chatte ls name d , nor assumed the c on

duct of the busine ss , nor did Sande l l , the pre sent claimant ,who claimed undera subsequent purchase . During the period

1 1 C amp . 332.2 5 T aunt. 212.

DO C T R INE O F T H E E NGL I SH C A S E S . 12

from 1808 to 18 11 , the report state s , Taylor, the grantor ,continue d to ac t as the ostensib le owne r of the prope rty ;

he made all contracts in h is own name , re ce ive d al l the pro

c e eds , paid them to his own account at the bankers , anddrewfor money from thence in his own name .

” Mansfie ld , C . Jwho pre sided at the trial , dire cte d the j ury , that Sande l l ,the claimant of the goods , neve r hav ing acted nor had any

concern in the management or posse ss ion of the operahouse , the supposed sale to h im in 1799 was who lly inO p erative , and that the goods we re l iable to se izure as the prope rty of

’Taylor andthis dire ction control le d the ve rdict . O n

a motion for a new trial before the fu l l bench , the judge s al lagre ed in re fus ing it , on the ground that Taylor had con

tinued in not only the posse ssion , but the vi sib le actua lownership , contro l and dispos ition of the prope rty and the

bu sine s s . Mansfie ld , C . J said : T he case , when e xamined, depends on v e ry simp le po ints . T he first que stion i s ,whe the r Taylor and Goold had, guoad the ir creditors, thelegal posse ssion of the goods in thi s opera hou se . T aylor

is the only p erson who has the management , orders the

dresses , p urchases the goods , is , to a ll the world , the visible

owner and p ossessor . In 1 792, a se cre t tru st de e d i s exe

cut ed to truste e s for ce rtain cre ditors , e t c . Wha t do the

trustees do? N othing. Wha t do those creditors ge t ?

N othing. Taylor continue s the acting and v i s ib le owne rand posse ssor i t i s neve rthe le ss contended , thi s legalprope rty all passed to the se truste e s . N ow , whe re the

subj e ct of the deed i s goods , and the posse ss ion never takenby the truste e s , and nothing done under i t , how c an i t besaid the se goods may not be taken in exe cution under a

judgment against Taylor ? I do not wonder that the truste e s shou ld be unwi l ling to ac t in such a trouble d bus ine ss ,but then they shou ld not undertake such trusts they mightappoint agents to make al l contracts and conduct al l man

agement , or they may le t Taylor make contracts with the ir27

14 FR AUDUL E NT M O R T GA GE S O F M E R C HA ND I S E .

expre ss assent ; but they do nothing of al l this ; as to al l

the world , then , the trust de ed is voi d , and I cannot at al l

fe e l that i t stands in the way of the right of creditors totake the se goods as the goods of Taylor . Though I w i shedto avo i d thi s que stion , and send it whe re al l the confl ictinginte re sts might be be tte r taken care of , I am oblige d to decide it by saying , that they who s e l l goods to Taylor may , so

far as the se tru ste e s are concerned , take the goods in exe

cut ion as the goods of Taylor .

”A nd he disposed in l ike

manner of the claim that Sande l l had acouired, under thecircumstance s , a val id title to the goods .

13 . A rm strong v . Ba l doc k ; t h e sam e e l em e n t pre se n t .

- Armstrong Baldock1 i s a case where the instru c

tions to the jury w ere place d on the ground alone thatposse ss ion remaining w ith the grantor i s fraudu lent in lawthe case be ing one of a conveyance which included a stockin trade

‘

toge the r wi th househo ld furniture . T he action wastrover for the furni ture only , not for the stock in trade . T he

case has , however, be en re cognize d by the E ngli sh bar as

real ly re sting on the same basi s as the case s above re ferre dto . T he language of Dal las , C . J plainly re fers to the

point that the grantor had re served and exe rcise d a powerof sale . He re N i cholas brought the furni ture from his

forme r re si dence , and he alone , from the time of the as

signm ent unti l the s e izure , e xercised acts of ownership ove ri t . Inde ed , i t cou ld not be predicte d from appearance sthat any othe r pe rson than himse lf was the propri e tor ofthe property .

14 . C as e s su p p ose d t o b e an tagon is t ic Be n t on v .

T h ornh il l .-The re are a f ew case s to be found in the E ng

li sh reports which have b e en some time s taken as authoriti e sagainst the propos ition supported by the pre ceding case s .

1 l Nie l G ow, 33

DO C T R INE O F T H E E NGL I SH C A SE S . 15

O ne of the se i s Benton Thornhil l . 1 But in thi s case ,the re was confli cting ev idence on the po int in que stion ,

which was l e ft to the jury they were to ld that an intent tore serve any benefit to the grantor wou l d avoi d the conveyance ; the re was not a compl e te and undisputed posse ssionby the debtor , the agent of the creditor having be en in at

least partial posse ssion ; and the verdict in favor of the

creditor was taken by the court (G ibbs , C . as su staining the posse ssion of the mortgage e , and negativing the ideathat he had assented to any acts of ownership on the partof the debtor, or that the re was any re se rvation for hisbenefit“. T he case i s , there fore , in harmony with ‘

ratherthan in O ppos ition to the doctrine in que stion .

15 . Bu ck n a l l v . R oist on of dou b t fu l au th ority

Bucknal l v. R oiston 2was a case of a cargo of goods , takenout on shipboard for the purpose of fore ign trade , whichwas pledged to a creditor , not only by a bil l of sale

_

of the

goods , and of “ the produce and advantage that shou ldbe made thereof , but also by a bottomry bond for thre eyears ; and the C hancery court , on the theory of a trust

for the faithfu l accounting of the goods and profits there of ,he ld the conveyance good as against a creditor by a priorjudgment ; and gave the bond—creditor an account of thegoods that were brought home ,

though the goods had re

peatedly change d form , the original stock having all disap

peared. In the l ight of more modern de ci sions , a contraryconclusion might we l l have be en reached . This case is re

ferred to by Bu lle r, J in E dwards Harben , as havingbe en de cided alone on the ground of the trust ; and i t may

be read be twe en the l ine s of the latter de cis ion , that Bucknal l v . R oiston is not to be regarded as an adverse authority . T he same may be O bserved in the opinions of thej udge s in Ryal l v . R owle s , Burne t , J saying of the Lord

1 7 T aunton, 1491 F re e. in C hancery, 285

5 16 PR AU D U L E N T M O RT GAGE S or M E R C HAND ISE .

Chance l lor’ s opinion in Bucknal l v . R oiston H is wordsare , That here was no posse ss ion calcu lated to acquire a

false credit ,’ which i s a p lain declarat ion that a posse ssion

so cal culated as to acqu ire a false credit , wou ld have madethe transaction vo id .

” 1

16 . R e se rve d p ow e r o f sa l e an e l em e n t in e igh t

c a s e s .- I t wi l l be observed , then , that there are e ight E ng

l ish case s , al l de cide d prior to the introduction of the doc

trine in que stion into thi s country , and inwhich the e lementexisted of a powe r of sale or dispos ition re served to thedebtor ; and that thi s e lement was , in e ach case , ac knowle dged as influent ial , to a gre ater or le ss extent , in dete rmining the decis ion of the court . Whethe r so acknowledge dat the time

‘

or not , i t i s p lain in the l ight of subsequentc omment on the se case s , to be hereafter referred to , thatthis e lement in them was the contro l l ing one . According towe l l se ttle d princip le s , it i s ne ce ssary , in considering que st ions of law as i llustrated by authority , to look particularlyto the facts of the case de cide d . In no other manner c an

proper distinctions be drawn , or prope r l imitat ions uponlegal ru le s be e stabl ished . N ow , that j urists are general lyagre ed that re tention of posse ssion by a mortgage r doe snot alone rende r a mortgage of chatte ls fraudu lent , i t i si dle to cite as an authority for such a propos i tion , or even

as a case which was formerly taken as an authority for i t ,any of the se E nglish case s which di d not re st upon re tentionof posse s sion alone , but which was distinguishe d by the e le

ment of a re served powe r of sale added to the posse ssion.

This e lem ent is p lainly found in T wyne’

s Case and the suc

c e eding case s above cite d . T he conclusion se ems inevitablethat the se case s are dire ct authoritie s in support of the

doctrine of R ob inson v . E l l iott , as a commonlaw doctrine ,and that its vi s ible origin i s to be found in T wyne

’

s Case .

1 1 A tk . 168 .


17 M e re re t e n t ion o f posse s sion u n im port an t .— I t

is not strange , however , that American courts and lawye rswe re at first inclined to treat Twyne

’

s Case , E dwardsHarben , and kindred case s , as authoritie s on the que stionof re tention of pos se ss ion alone . Ne ither T wyne

’

s Case ,

nor E dwards 11 . Harben , re ste d mere ly on posse ss ion ; ye tthe language of Bu l le r, J in the latter case , plainly leadsto a suppos ition that this was real ly the po int de cide d . S O ,

a lso , i t frequently occurred , that in cons ide ring case s whereretent ion of posse ss ion alone was the feature under discuss ion , T wyne

’

s Case , E dwards Harben , werere ferre d to as holding that such re tention of posse ss ionalone would suflic e to make a mortgage fraudul ent . Takingthe expre ssions of M r. Justice Bu l ler, in the last name d case ,as exact statements of the legal ru le , it was qu ite natural ,when the facts of any new case indicate d the nece ss ity of

distinguishing it from E dwards Harben , to re sort to the

expe dient of e stablishing e xceptions to the general rule , of

which exceptions , as be fore stated , M r . Cowen enume rate dtwenty- four . T he controve rsy thus arose , and was thuswaged , about E dwards Harben , in misapprehension of

what now se ems to be the true doctrine of that case .

The re appears , neverthe le ss , to be a continuous l ine of

E nglish de cis ions , running pari p assu w ith those abovec ited , in which the e lement of posse ssion alone unde r a

chatte l mortgage was invo lved and was distinctive ly con

s idered.

I n a number of the se case s , to which re ference wil l nowbe made , i t was distinctly he ld , as a commonlaw rule ,that re tention of posse ss ion alone did not rende r such a

conveyance fraudulent ; and thi s without e ithe r overru l ingor ignoring T wyne

’

s Case . Doubtle ss , i f in eve ry case thedistinction had be en care fully drawn be twe en re tention of

posse ssion alone , and re tention of posse ss ion w ith power of

sale and dispos ition , and if the court had explaine d in every31

18 FR AUDUL E NT M O R T GA GE S O P M E R C HAND IS E .

case , that in one of the se classe s of case s the conveyancewould be he ld conclus ive ly fraudu lent , whi le in the othe ri t would not be so he ld , ne ithe r misunderstanding nor con

t rove rsy upon thi s qu e stion wou ld e ve r have ari sen . But

courts are not u sual ly so astute as thi s in endeavorn to pre

vent misapprehens ions concerning the ir decisions . I t is

we l l unde rstood that the influence of eve ry de cis ion i s to bel imited by the fac ts of the cas e de cided . Students of thelaw should always observe this ru le in studying case s as

authoritie s andwhen mistake s or 111 isapprehensions prevail ,as frequently happens , it may be come ne ce ssary to correctthem by a care ful rev iew of the authori ti e s in the l ight of

this ru le . Turning , then , once more to the E ngl ish case s ,we shal l find ve ry considerable authority for the ru le thatre tention of posse ssion alone did not at common law rendera mortgage of chatte ls or othe r conveyance thereof as se

c urity fraudu lent or voi d .

18 . R e te n tion of p osse s sion a l on e n ot con c l u sive of

frau d ; S ton e v . G ru bh am .— T he earl i e st case to be re

ferre d to i s Stone v . G rubham ,

1 whi ch arose soon afterT wyne

’

s Case . Though hardly an authority , inasmuch asthe conveyance was of a lease for years , ye t the case indicate s the early V iew of the law . T he grantor had made a

gift to the grante e of al l h is goods and chatte ls , includingthe lease , by way of securi ty , but cont inued in posse ss ion of

the land , the lease be ing surrendered to the grante e . S ir

E dward Coke and hi s associate s he l d that the re tent ion of

posse ssion by the grantor wou ld not be considered fraudu lentexcept upon proof that i t was done to defraud and de ce ivecreditors . T he language of the court impl ie s that the leasewas treated as a chatte l intere st , and the ease , therefore , hasbe en some time s regarde d as an authority in case s involv ingchatte l s .

1 2Bul st . 225

20 FR AUDUL E NT M O R T GA GE S O F M E R C HA ND IS E .

20 . View s o f L ord M an sfie l d in C adogan v . Ken

n e tt . — In Cadogan v . Kenne tt ,1 de cided in 1 776, but not

involv ing the pre cise que stion , Lord Mansfie ld e xpre ssedhis vi ews on the general subj ect as fol lows The re are

many things which are cons ide re d as circumstance s of

fraud . T he statute says not a word about p ossession . But

the law says , i f after a sale of goods , the vende e continuein posse ss ion , and appe ar as the visible owner, it is ev idenceof fraud ; but i t is not so in the case of a lease , for thatdoe s not pass by de l ivery 2° T he que stion , the refore , in every case i s , whether the ac t done is a bona fidetransaction , or whe the r it i s a trick and contrivance to defeat creditors . If there be a conveyance to a truste e f orthe benefi t of the debtor , i t i s fraudu lent .

”

21 . L ord E l don ’s V iew s ; Bu l l e r ’

s synop sis of T wyn e ’s

C ase .— Kidd v . R awlinson 2 was a controve rsy ove r ce rtain

househo ld furniture , unde r the fol lowing circumstance s .

T he plaintiff advanced money to one Aburu w ith which topurchase the furniture , and took from him a bi l l of salethere for as se curity , but le ft A burn in posse ss ion . T he

de fendant , a cre ditor of A burn , procure d from him a

se cond bi l l of sale , and took posse ssion of the goods , thoughw ith noti ce of plainti ff ’

s prior title ; and the de fendanthaving sold the goods , plainti ff sued him for the ir valueand re covere d judgment . Lord E ldon , in sustaining theve rdict , sai d : It appears to m e that this doe s not fal lw ithin the principl e of T wyne

’

s Case . and the other cas eson the subje ct .

”H e al so cit-ed, w ith 11 18 sanction , the

fo l lowing passage from Bul le r’ s N i s i Prius , which i s thatauthor’ s brie f synops is of the e ntire doctrine of T wyne

’

s

Case :“A . , be ing indebte d to B . in £400 , and to C . in £200 ,

C . brings debt , and hanging the writ , A . make s a se cre t

1 2 C owper, 432.

2 2Bos. Pul . 59

DO C T R INE O F T H E E NGL ISH C A S E S . 22

c onveyance of al l his goods and chatte l s to B . in sati sfaction of his debt , but continue s in posse ssion , and se l lssome , and se ts hi s mark on other she ep ; and i t was holdento be fraudulent wi thin thi s ac t : ( 1 ) because the gift i s

general ; ( 2) the donor continue d in posse ss ion and usedt hem as his own ; ( 3) i t was made pending the writ , and i ti s not within the provi so , for though it i s made on a goodc onsideration , ye t i t i s not bonafide .

But ye t the donor continu ing in posse ssion , i s not in al l

c ase s a mark of fraud ; as whe re a done e lends hi s donormoney to buy goods , and at the same time take s a bi l lof sale of them for se curing the money .

” 1

22. L ord E l don ’s fu rt h e r view s of T wyn e

’s C ase .

I h Lady Arunde l v. Phipps ,2 Lord E ldon gave furthere xpre ssion to his v i ews , as fol lows : Upon thi s case , Ib e l ieve , my de cision in the Court of Common P leas wasdisputed .

3 My opinion upon the trial of that cause was ,that posse ssion i s only prima f a c ie ev i dence of fraud ; andas that prope rty could not be reache d by bankruptcy , and

the posse ssion was according to the de ed , which createdthe title , and the t itle was publicly created , that was not afraudulent posse ssion against the cre ditors in general ; and,

upon a motion for a new trial , the court agre ed w ith me .

Wi th great deference , i f Lord E l lenborough thinks otherwise , I am at pre sent of the same opinion . T he

me re circumstance of posse ssion of chatte l s , howeve r familiar i t may be to say that i t prove s fraud , amounts to 110

more than that i t i s p rima fa c ie evidence of property inthe man posse ss ing , unti l a title , not fraudulent , i s shown ,

unde r which that posse ssmn has fo l lowed . E very case ,

from T wyne’

s Case downward , supports that , and the re

1 Buller’

s Nisi Prius, 4th ed. , 1785.

2 10 Ve s. 1393 Kidd v. R awl inson, supra .

23 FR AUDUL E NT M O R T GA GE S or M E R C HA NDIS E .

was no occasion otherwi se for the statute of 21 Jae . 1 , c .

19 , s .

I n th i s language , Lord E ldon has be en by E ngl ish c om

Inentators understood ( and with e v ident corre ctne ss ) torefe r to hi s opinion in Kidd v . R awl inson . This is furth e rapparent from what thi s distingu ished juri st said , a yearlate r, in E x parte “fi l liam s ,

1 manife stly in continuationof the same line of thought , and with the View of aid ingin the removal of the prevale nt misunde rstandings and

clearing up the exi sting doubts on the subj e ct Hav inghad occas ion late ly to look into that doctrine from T wyne

’

s

Case , I th ink in modern t ime s a tendency has prevail ed to

give more ej e c t to the a c tua l manua l p ossession , as evidenceof fraud , titan T wyne

’

s (Jase was intended to sanc tion.

”

23 . L ord E l l e nb orou gh’s view s . I nDewey v . Bayn

tun ,

2 the same conveyance was under cons ide ration wh ichwas invo lve d inArunde l v . Phipps . A verdict for plainti ffhad be en found on the se circumstance s : ( 1 ) T he prev iousembarrassment of the husband (2) the want o f notorie tyof the conveyance at the time ( 3 ) the want of an inven

tory ; ( 4 ) the continuance of the husband ’ s posse ssion ,

though cons i stent with the de ed , ye t without noti ce of the

change of prope rty ; and ( 5 ) the appropriation by the husband of a part of the money rai sed by the truste e s to hisown use , without obje ction .

”In se tting as ide this ve rdi ct

andgrant inga new trial , Lord E l lenborough said Inde edif the seve ral facts upon which th i s al lege d inadequacy i sfounded had be en given in evidence to the jury , viz . , the

annual value of the e state s , the age of Lord Arunde l , thevalue of Lord

,

A runde l’

s l i fe inte re st there in , and the

value of the goods , i t wou ld have rai se d a most important que stion , whe ther an assignment , by the t e rms of

which the creditors of the party assigning such prope rty

1 11 Ve s. 3 6 E ast , 257

DO C T R INE O F T H E E NGL I SH C A SE S . 25

were to be so materially pre j udiced , was not a covinous ac tbe twe en the partie s there to , and on that account vo id as

against cre ditors , both at common law and w ithin the

statute 13 E l iz .

”

In Hoffman v . P i tt ,1 the que s tion was whe ther it wasfraudulent for the purchaser of househo ld furniture at

a sheri ff ’ s exe cution sale , who had le ft the same in

the debtor ’ s house subje ct to his use , to pay O ff a

se cond exe cution , and then take a se cond bil l of sale fromthe debtor , sti l l l eaving the goods in the house and LordE l lenborough sa id “ T he not taking posse ss ion was in

some measure indicative O f fraud , but was not conclus ive .

”

24 . V iew s o f C h ie f J u stic e M an sfie l d in S t e e l v .

Brown .— In 1808 , in the Common Ple as , the pre cise que s

t ion came be fore S ir Jame s Mansfie l d , ch ie f justice , in

!Stee l Brown .

2 This case involve d a bi ll of sale O f “(

fix

ture s and goods in a publi c house , the grantor re tainingpossess ion , but not re serv ing a powe r O f sale or dispositiT he chie f justice , in su staining the conveyance , said : N O

c ase has de cided that a bil l O f sale unaccompanied by theposse ssion may not under certain circumstance s be fair andval id .

”

25 . J u d icia l doub t s ; J e z e p h v . I ngram , and W oode

m an v . Ba l do c k .— Je z eph v . Ingram 3 was a conveyance

of farm stock , u tensi ls , produce , e t c . T he grantormained in posse ssion and continued to conduct the bus ine ssof the farm , but for

-

the benefit O f the grante e . T he c on

veyanc e be ing attacked ,was sustaine d by the court , but withthe expre ss ion of some doubts as to whe ther they we re

not ripping up old case s and remov ing the landmarks .

”

1 5 E sp. 22

2 1 T aunt . 38 1.3 8 T aunt . 838 ; 1 M oore , 189

27 FRAUDUL E NT M O R T GA G E S O F M E R C HAND IS E .

In IVO Oderman v . Baldock 1 the sole ev idence of fraud ,outside of the fact of the use O f the goods by the grantor,was that the truste e s had advertised the goods for sale as

the goods of the grantor ; but as the j udge s were of opinion that there was nothing in the se circumstance s inconsistent w ith the trust de e d , the verdict O f a jury in favor of

the transaction was sustained .

26 . J u dicia l doub ts ; S teward v . L omb e .— Steward

v. Lombe 9 was a case of a mortgage on land on which wasa windmi ll , specifically conveyed in the mortgage . T he

windmil l having remaine d in the mortgage r’ s posse ssion ,

was levied on at the instance of hi s exe cution creditor.

T he mortgager hav ing the right to remove the mil l from the

land at pleasure , i t was he ld that the mi l l was under the secircumstance s a chatte l . But the posse ss ion of the mortgage rwas he ld not to inval idate the mortgage as to the millactual change of posse ssion was he l d unne ce ssary under thecircumstance s of the case , even had i t been more feasib lethe court did not consider an actual change of posse ssionrequ i s ite in all case s of conveyance of chatte l s as se curity ,

and expre sse d doubts whe ther such was to be consideredthe prope r doctrine to be drawn from E dwards Harbenwhich was pre ssed upon the court as an authority for thatView

27 . L ord T e nt e rden ’s view s .

— Latimer v Batson 3

was a conveyance of household furniture , farming stock ,and other property ,

including wine , made by a she ri ff on

exe cution sale . T he purchaser from the she riff put hi sown man- servant in nominal posse ss ion of the

.

property ,

but left it v irtual ly in the hands of the Duke of Marlborough ,the exe cution debtor, who was al lowed to use the goods at

1 8 T aunt . 676

2 1 Brod. B ing. 5063 4 B. C . 652

38

DO C T R INE O F T H E E NGL ISH C A S E S . 28

pleasure . T he transaction was sustained by the court ; thecase be ing distingu ished from Wordall v . Smith

,

1 which wasdistinct ly approve d . Abbott , C . J . , said : I p e rfe ctlyagre e that posse ssion i s to be much regarded ; but that i swith a v iew to asce rtain the good or bad faith of the transaction N O re ference was made by the court to the winewhich was included in the purchase a consp icuous s i lence ,which the impart ial student of the law i s inclined to ascribeto the influence of the great name of Marlborough .

But the Views of thi s eminent judge on the que stion ofposse ss ion alone we re again unequivocal ly expre ssed , duringthe same year, in E astwood v . Brown .

2 In th is case , a debtorhad so ld and transfe rred to one of hi s creditors hi s househo ld furniture , re taining the occupation and posse ssion of

his house and the furniture as be fore ; and Abbott , LordC . J he ld that this did not furni sh conclus ive evi dence offraud , and left it to the jury to determine the que stion offraudulent intent .

28 . T h e qu e st ion of th e e ffe c t of posse s sion a l one

se t t l e d in M art inda l e v . Booth ; E dwards v. H arb en dis

t ingu ish e d .— In Mart indale v . Booth ,3 the re are evi dence s

that the judicia l m ind in E ngland had at last sett le d downupon the proposition that re tention of posse ssion alonewas not sufficient to inval idate a mortgage or conveyanceO f chatte l s . T he case was a bil l of sale of furniture and

fixture s in a tavern, as se curity , with a re servation of the

posse ss ion and use , which , of course , unde r the circumstance s , did not imply a power O f sale or dispos ition, or

any other re servation by the grantor incons istent with theconveyance as a se curity . Lord Tenterden and his associate j udge s agre ed that the conveyance was val id . Lord

1 1 C amp. 332; sect . 11, supra.

2 1 Ryan M . 312

3 3 B. A d. 498

28 FR AUDUL E NT M O R T GA G E S o r M E R C HAND IS E .

T ente rden’

s opinion was substantial ly the same as that givenby him in Latime r v . Batson and E astwood v . Brown ; al l

the othe r judge s d iscusse d the pre ceding authori tie s w iththe ev ident v iew of drawing suc h distinctions as to deducefrom them a harmoniou s gene ral ru le . Attention was part icularly dire cted to the circumstance that the e ase of

E dwards Harben had be en frequently misunderstood .

R eference was made t o the denial of Dal las , J . , in Je z eph

v . Ingram , that E dwards Harben lays down any gene ralrule that want of posse ssion alone w i l l rende r a mortgageof chatte l s fraudule nt . Parke , J . , for himse lf , re fe rre d tothe statement of Bu l ler, J . , in the last name d case , that ,“ i f the re i s nothing bu t the abso lute conveyance w i thoutposse ss ion , that , in point of law , is fraudu lent ,

”as a mere

dic tum . Thi s plainly impl ie s that the que stion of posse ssion alone was not the one involved in E dwards Harben ,

and that the real po int in that case was whe ther posse ssion,

with a power of dispos ition re serve d , would be conside redfraudu lent . It thu s appears that E dwards Harben i sunde rstood in E ngland as an authori ty for the doctrineof R obinson v . E l l iott , name ly , that the re tention of pos

se ss ion under such conveyance s , when combine d w ith an

unre stricte d powe r O f sale or dispos ition , i s who lly inc onsi stent with the conveyance as a s e curity , and i s fraudu lentand inval id . But , on the other hand , E dwards Harbenshould neve r have be en taken as an authority for the

proposition that re tention of posse ssion alone w i l l ne c e ssarily inval idate su ch a conveyance .

Accordingly , in Hunter v. Corbe tt ,1 wh ich was a ce ntreve rsy ove r a bil l of sale O f furniture in an inn , given as a

mortgage , the vendor remaining in posse ssion , but withoutany powe r of sale or dispos ition , the case was tre ate d as

turning on fraudulent intent ; and i t was said , as to the

1 7 U p . C an. Q . B. 75

30 FR AUDUL E NT M O R T GA GE S O F M E R C H AND I S E .

ton 1and H ase linton v . G i ll } each of which c ases involved

and sustained an ante -nuptial se tt lement of a wife ’ s stockin trade , e t c . , which was attacke d in each case by creditorsof the husband , on the ground of the posse ss ion of the lat

t er ; Bu l le r, J . , who sat In both c ase s , saying in one , that,posse ss ion alone is not evidence of fraud the transaction

must be S hown to be fraudulent from othe r circumstance sif the posse ssion be inconsistent w ith the conveyance , thati s e vidence of fraud ; and in the othe r, i t i s sufficient tosay that the husband had not the order and disp osition of

thi s prope rty with the consent 0f the rea l owner the truste ewas the legal owner .

”

30 . L a t e E ngl ish c a se s t h e qu e st ion of p ow e r of

sa l e n ot con side re d . N O contrary v iew i s di sclosed in thelate E ngli sh case s . T he pre cise que stion has not S ince be enconsidere d by the courts in any reporte d case , though occasional ly such facts have be en pre sent ed as wou l d have warranted a discuss ion of it . Gale v . Burne l l 3 was a case of a

conveyance of furniture and farming stock , given as se cur

ity for debt , which was attacke d by an exe cution cre ditorof the grantor . T he de ed was he l d val i d and O perative as

to the property on hand when i t was exe cuted , but not as toafter acquire d prope rty . T he principal que stion consi deredwas , whethe r the de e d O perated as a pre sent conveyance of

the property . T he stipu lat ion in i t that the grantor mightmake use of the property , was he ld e qu ivalent to a

l icense to consume such article s as were peri shabl e , i f anybut this l icense was passe d by as not de feat ing the original

grant , or implying any powe r of disposition for the benefi tO f the grantor S O the que stion O f a re servation to hi s use ,or of any other fraudulent aspe ct of the transaction , was

1 3 T erm R. 618

2 I d. 620.

3 7 Q . B. 850

4 2

DO C T R INE O F T H E E NGL ISH CAS E S . 30

not mooted . Graham Chapman 1 was a conveyance by atrade r of al l hi s tangible property , including his stock intrade , to se cure one creditor and it be ing a swe eping con

veyanc e , the exe cution O f it was he ld an ac t of bankruptcy ,

which was the que stion at i ssue . T he minor que stion O f a

re served power of sale , which might possibly have ari sen inView of the trader’ s re tained posse ss ion and contro l unde rthe circumstance s O f the case , for seve ral months , re ce ivedno attention . Upon the more general que stion i t was sai dE very pe rson mu st be taken t o intend that which i s the

ne ce ssary conse quence of hi s own ac t and i f a trader makea de e d which ne ce ssari ly has the e ffe ct of de feating or de

laying his creditors , he must be taken to have made thedee d with that intent . A nd so in Spencer Slater ,2wherean Inso lvent trader made a general assignment for cre ditors ,to truste e s who were to carry on the bus ine ss , but no

creditors were to re ce ive div i dends who did not affirmative lyassent to the conveyance , thi s was he ld to hinde r and de laycreditors , and there fore , to be fraudu lent and voi d underthe common law , without re ference to the rule s in bankrupt cy case s . In E x parte Game s ,3 where a farmer had as

signe d to one creditor, by way of mortgage , al l his househo l d furniture , stock in trade ,

”and crops and implements

on his farm , the mortgager to remain in posse ss ion unti ldemand of payment , and the mortgage to cover su ch goodsas might be substi tute d in l ieu ”

of those conveye d , i twas charged that thi s mortgage was fraudulent as to othercreditors under the statute of E l i zabe th and the chie fjudge in bankruptcy he ld it to be so , be cause it ne ce ssari lyhindere d and de laye d creditors . In the chancery divi s ion of

the High Court , on appeal , the contrary view was taken thatthe transaction was mere ly an ordinary and lawful prefer

12 C . B. (74 E . C . L . ) 854 Q . B. D. 13

12 C h. D . 314t‘

t“

. R

. R

30 FR AUDUL E NT M O R T GA GE S O F M E R C HA NDIS E .

ene e of a particu lar creditor ; and without any cons iderationo f the powe r of sa le in the mortgage r as a re se rvation forhi s own benefit inconsistent w ith the se curity , the po int wasd ismisse d with the remark , that this prov is ion was but a

mode by which the mortgage e se cured the substitution o f

new chatte ls in the place of O ld one s . T he H igh Courtcou ld not se e any fraud in that ,

”nor did it th ink the

conveyance was in any manner a cloak for re taining a

benefit to the grantor, be cause the re did not appe ar to beany fraudu lent intent in the case . Fraud in the transactionwas conside red so le ly as turning on intent , and the que stionof the O pe ration O f the powe r O f sale , as invo lv ing a ne ce ssar~

i ly fraudu lent te nde ncy , was not argue d or cons ide re d . ItS hou ld be obse rve d that the mortgage e in th is case hadtaken posse ssion of the prope rty be fore the controve rsyarose .

In the two re cent case s O f E x parte Popplewe l l 1 and E x

parte Bol land ,2 the que stion may pe rhaps have be en fairlyinvo lved , though the meagre report of the facts leave s thisdoubtfu l . In e ach case the debtor had made a conveyanceO f goods and chatte ls , including what i s style d stock intrade .

”In the first name d case , the debtor had be en c ar

rying on the bu s ine ss O f manufacturing mant le s , and in thelast case that of brewe r ; and in e ach case be re tained posse ssion unt i l he be came bankrupt . Such a conveyance by a

brewe r wou ld se em by implicat ion to re se rve to him the

right of se l l ing the prope rty ; though in the cas e of a man

t le manufacturer , this implication wou ld not be S O cle ar,and i t might we l l be that no powe r of sale was contemplated . But the que stion se ems not to have be en raised or

cons idered . In e ach c ase , the truste e in l iqu idation appl iedfor an order de c laring the conveyance void as against him ,

but urging as the principal ground that the cons ideration

1 21 C h. D . 73 2 21 C h. D . 543

D O C T R INE O F T H E E NGL ISH C AS E S . 31

had not be en tru ly stated there in , and making no mentionof any powe r O f sale re serve d to the grantor, i f such the rewe re . T he case s are conside re d in much the sam e manne r

as i f the conte st had be en be twe en the part ie s themse lves ,or as i f the truste e me re ly stood in the S hoe s of the grantorin the conve yance .

31 . L at e E ngl ish ca se s ; t h e qu e s t ion no t invo l ve d .

Thre e case s we re he ard and de cide d in 1880 , invo lv ingconveyance s s imi lar in the ir nature , and which have be ensome time s suppose d to pre sent a variation O f thi s que stion .

In National Mercanti le Bank Hampson ,

1 the judge s ofthe Que en

’

s Bench D iv is ion he ld that whe re , unde r a bi l lof sale of growing crops on farming lands , the grantor i sallowed to ho ld h imse lf forth as hav ing not only the posse ss ion , but the property in the same ,

”he has an impl ied

li cense to se l l the crops , and a sale of wheat by him to a

third party passe s the t it le , so that the grante e s in such bi llO f s a le c an susta in no action against the purchase rs forconvers ion O f the wheat . A simi lar qu e stion arose in

Walke r Clay ,

2 in the Common P leas D iv is ion of the

H igh Court , where the grantor in a s imilar b i l l of sale ,cove ring , among othe r things , a stock in trade ,

” sol d a

pony which was included in’

the conveyance , and it washe ld that h is vende e acqu ire d title as against the grante ein the b il l O f sale , and that the case was undistingu ishable from Bank Hampson . The se case s proce e d on the

fami liar princip le that eve ry such conveyance , though itmight have b e en in a prope r case de clare d fraudule nt as tocreditors , i s good betwe en the partie s . T he only que stioncons idere d in e ithe r is the prope r construction O f the

instrument , from which i t appeared that the grante e hadl icense d the ac t of the grantor of which he was c om

1 L. R . 5 Q . B . D iv. 177 (F eb.

3 42 L. T . (N . s . ) 369 (M ar.

3 1 FRAUDUL E NT M O R T GAG E S O F M E R C HAND IS E .

plaining . But in Taylor v . M cKeand,

1a careful construe

tion of the bi l l of sale l ed to a diffe rent conclus ion . Here

the grantor, retaining posse ss ion , had the privi lege of se l ling the goods O f his stock in trade

“ in the O rdinary wayof busine ss .

”H e hav ing , however, so ld part of the goods

in a manne r which the j ury de scribe d as fraudulently ,

and not in the ordinary course O f his bus ine ss ” ( that i s ,fraudu lently as to the grante e in the bil l ) , i t was he ld thatthe purchaser from the grantor acquire d no title as againstthe grante e , though he made hi s purchase in good faithand w ithout knowledge O f the fraud . This de ci sion was

made w ithout confl i ct ing with the case of Bank Hampson,

from which i t i s plainly distinguishable . Payne Fe rn “2

i s a S imi lar case to Taylor v. M cKeand, and i s de cidedS imilarly . As none O f the se case s exhibited the e lementO f a complaint by a creditor of the grantor, the que stionO f fraud upon cre ditors was not involve d in any of them ;

and they al l stand in perfe ct harmony with E dwardsHarben and R obinson v . E ll iott , so far as concerns thatque stion .

Somewhat S imi lar to Bank Hampson was the later caseof E x parte A l lard ,3 in which the truste e s under a compos it ion in bankruptcy had allowed the debtor to go on withthe busine ss , and h is transfe r O f certain book debts to a

third party as se curity , be ing que stioned , was sustained asbe ing within the implied authority conferred by the truste e s .

In E x parte Symmons ,4 the conveyance had re serve d a

power of sale to the grantor, but be fore his bankruptcy hehad de l ivered the remaining goods to his creditor in sati sfaction of the debt , and thi s was he ld to give him a val id

L. R . 5 C . P. D iv. 358 (M ay,

L . R . 6 Q . B. D iv. 620 (F eb.

16 C h. D iv. 505

4 14 C h. D iv. 693.

4 6


t i tle to them .

1 In E x parte Bayly ,

2 where the same e l e

ment e xisted , the creditor had before the bankruptcytaken posse ssion O f the remaining goods , claiming themunder his conveyance , and i t was he ld that an injunctionagainst hi s e xe rcise of ownership , pending further pro

c e edings , could not properly be granted . T he principleunde r consideration was not , there fore , involved in e ithe rO f the se case s . N or did it ente r into C rawc our v . Salte r,3

the de cis ion inwhich mere ly sustaine d a conditional transfer,

or le tting to hire , of hote l furniture , as re taining tit le in thevendor.

32. T h e doc trine of T wyne’s C a se supe rseded in

E ngl an d .— T he de suetude into which this once vigorous

doctrine of T wyne’

s Case has fal len in E ngland , i s doubtle ss to be attribute d to the fact that it has be en so supplement ed by the E ngli sh statute s as to be come superseded .

But for this fact , the citations made from the E ngl ish c ase sshow that thi s doctrine might we l l have remained as sti l l ana ctive force in'

the E ngl ish j uri sprudence . But the continued and general ope ration O f the ir e stablishe d bankrupt syst em draws into the bankruptcy courts al l case s involv ingthis que stion , in which insolvency has occurred and has be ende clare d and the bankrupt laws render voi d al l such c on

veyanc e s whe re the goods remain in the orde r and dispos ition

”of the bankrupt ; which is , pro tanto, a statutory

ade ption of the pre cise principle . Since 1854 , nearly all

such case s , not with in the rule s pertaining to bankruptcy ,fal l under the statute of that year , or the subsequent statute of 1878 , which requ ire the registration of al l b i lls O f

s ale and conveyance s of chatte l s within twenty-one days

1 S ee sect . 144, post, for a reference to the American c ases, inwhich a formalde l ivery of goods, under similar circumstances, was advisedly sustained.

2 15 C h. D iv. 223.

3 18 C h. D iv. 30.

32 FR AUDUL E NT M O R T GAGE S O F M E R C HAND IS E .

afte r the ir execution in de fault of which, the conveyance

i s to be vo id as to all goods found the reafte r in the apparent posse ssion of the grantor. S O many of the case swhich arise , the re fore , fal l unde r the se statutory prov i s ions ,that i t i s of rare occurrence that a case i s pre sented in E ngland , depending for its deci sion upon the ancient commonlaw

doctrine . It i s poss ible that a case may arise , where a trade rnot de clare d a bankrupt has mortgaged hi s goods by a regi st ered conveyance , and he continuing in apparent posse ss ion ,

”and in the disposition of the goods by sale , the

que stion O f inherent fraud wou ld be pre sented , to be de te rmined , not by an appeal to the reg istration acts , but by a

re fe rence to the ru le s of the common law , irre spe ctive as we l lof the se acts as O f the bankrupt statute s . T he E ngl ish courts .

inve stigate even registe re d conveyance s to se e i f they are

fraudulent ; 1 and they de clare the fraud when asce rtaine d .

2

T he O bj e ct O f the registration acts not be ing to make gooda conveyance fraudul ent as to creditors , even “ the mostfraudul e nt de e d w i l l be w e l l registe red ,

” if the provi s ionsof the ac t are compl ie d w ith .

3 But the indications are ,

from such c ase s as Gale v . Burne l l and E x parte Game s ,

that the que stion wou ld not now be cons idered in E nglandas of v ital importance .

1 D arvil l T erry, 6 H . S: N. 812 M ercer Pe terson, L. R . 2 E xch .304

2 O riental Banking C o. C oleman, 3 G ifi‘

. 11

3 D arvil l T erry, sup ra . S e e M ay on F raud. C onv. 120.

FRAUDUL E NT M O R T GA G E S O I"

M E R C HAND IS E .

G3 . E arl ier re cogni t ions O f the proprie ty O f the rule .

T he doctrine e s tabl ishe d in M iss iss ipp i .65 . T he doctrine we l l se t t led in C olorado .

O regon adopts the doctrine ; regis trat ion of ins trument immat e rial .

R e se rved power O i sale proven by impl icat ion inWe st V ir

ginia .

68 . T he doctrine enforce d in the Uni ted S tat e s C ircu i t and D ist rie t court s .

69 . T he fraud i l lustrat ed in the O p inions of the court s .

70 . O the r case s in the low e r Un ite d S tate s court s ; the doc

trine re cognized .

An earl ie r de cis ion by the S upreme C ourt .

Antagonist i c case s in the Uni ted S tat e s court s .

M i tche l l W inslow e xamine d .

T he state O f the law in Indiana prior to R obinson v. E l l iot t .

T he doctrine of R obinson 71 . E l l iot t adopt e d in Indiana .

Doubt ful case s in Indiana .

‘I

0!

33 . T h e doct rin e of T wyn e’s C ase vit a l in A m e rica .

In Ameri ca we have not , as in E ngland , a uni form system ,

unde r which a commonlaw principle may be comple te lysupplanted by statute s , so as to lose i ts vi tal force and

cease to influence the course and deve lopment of juri sprudence throughout the whole land . N ot only have we a

compli cate d system , unde r which various independent t ribunals may e ssay to admini ste r much O f the common law ,

e ach in i ts own way , so that e ven an e stabl ished bankruptsystem could not whol ly deprive the doctrine unde r discussion of i ts commonlaw intere st , but i t se ems doubtfu lwhe ther our attempts at a bankrupt system

\

are eve r to

ri se above the leve l of experiments . The se are reasonswhich have given the commonlaw que stions growing out

O f Twyne ’

s Case a practical inte re st in Ame ri ca , exce edingthat which they have had or c an acqu ire in the mothe rcountry .

T he American phase s of the doctrine wil l be be st i llustrat ed by a cai efu l rev iew of the leading case s de cided ine ach of the State s which uphold it ; and the be st expos ition

50

DO C T R INE O E T H E AM E R IC A N M A JO R IT Y 34

of the doctrine wi l l doubtle ss be found in the languageof the j udge s themse lve s .

VIR G INIA .

34 . T h e doct rin e first annou n ce d in V irgin ia . In

thi s rev iew of the Ame ri can case s , the se from V irginiawi ll be first examine d , for the double reason that the doctrine was first appl ied in that State , and that the O pinionin which it was announced has not s ince be en exce l le d inthe te rsene ss and perspicuity w ith which the fraudu lentt endencie s , inhe rent in the se transact ions , are exposed .

This i s the case of Lang L e e , de cide d inT he de e d in trust conveye d a stock of goods , stipulating

that the goods are to remain in the posse ss ion of the said

L e e , and he is empowere d to make sale s of them , alwaysaccounting w i th the truste e he re in named , i f requ ired to doso Carr, J use d the fo l lowing language 2

N OW , I ask , what poss ib le se curity cou ld the de ed furnish , encumbe re d with a stipulation l ike thi s ? Is i t notcomple te ly a f e lo de se ? A se curity i s taken on goods ,and they are le ft in the posse ss ion of the debtor for t en

months , w ith a power to se l l and dispose of them as he

may th ink prope r ; no che ck whatever ; for the clauseabout accounting re late s only to the money for which hehas sold the goods . Doe s not thi s re solve the whole matterinto pe rsonal se curity ? A nd i s the debtor more bound toaccount for the money than he was before for the debt ?

Suppose he had sold every arti cle in the store thenext day , cou ld Lang cal l back the goods ? Ce rtainly not ,

for he had given L ee expre ss powe r t o se l l . As a se curity ,

then , thi s de e d was naught . What other poss ib le purposecou ld it have than to de lay , hinder , or defraud the creditors of L e e ? T he reason of E dwards Harben , H am

i lton R usse l l , e t c . , applie s strongly to thi s case .

”

1 3 R and. 410 2p. 423.

34 FR AUDU L E NT M O R T GA GE S O F M E R C HAND ISE .

Again ,

1 “ Al l the cas e s concur in the pos ition , that i fthe power re tained enab le the grantor to de feat the prov i s ions in the de ed , i t i s nu l l and void ; and thi s , uponthe known principle s of the common law , of which the

statute s on the subj e ct of fraud are me re ly declaratory .

N ow , can we imagine a powe r more comple te ly adequateto the de struction of the avowe d purpose of the de e dthan that re taine d by the grantor in thi s case ? T he

goods , the i dentical arti cle s of me rchandise , const itute dthe so le se curity prov ided by the de e d for the pay

ment of the debts ; and ye t the debtor, whi le affe ctingto devote the goods to that purpose , re tains the pos

se ss ion , the use , the powe r of se l l ing eve ry art icle to whom ,

in what manner , and on what terms , he please s . H e i s to.

account , though , if cal led on . But i s th i s more than a

personal accountabi lity ? T he goods are gone . You c an

not fol low them . T he money re ce ived for them has no ear

mark . You cannot fo llow it though the grantor pay i taway the moment afte r he re ce ive s it , in sat isfaction of hisown debt . What are you then , after al l , but a generalcreditor ? T o th i s purpose the case of Ryal l v . R ol le 2 i svery strong . That , it i s true , was a case unde r the bankrupt acts , and they are particu larly strong and high-tone don the se subje cts , e spe cial ly 21 Jame s I . Y e t the quotat ions I Shal l make do not se em S O much founded on them as

deduce d from the princip le s of the common law H e

then quote s from the language of Burne t , J and LordHardwicke and says in a note to the same case : I wouldnot be understood to impugn the doctrine so we l l e stablished, and appl icable to the common case of mortgagesand de eds of trust , that posse ssion i s no ev i dence of fraud ,where i t fol lows the de ed , and is consistent with its p urp oses .

My remarks , inde ed , have be en made to l ittle purpose , i f

1 p. 425. 2 1 A tk . 165.

DO C T R INE O F T H E AM E R IC A N M AJO R IT Y . 35

they have not shown the w ide diffe rence betwe en such case sand that at bar.

”

35 . T h e d oct rin e adh e re d t o in Virgin ia .— Janney v .

Barne s 1 was a case whe re an e ntire stock of goods in tradewas conveyed to se cure al l the debts of the grantors , and

the latte r we re to remain in posse ssion for the purpose of

c onve rting the property into money and paying the debts,

but this only as agents of the grante e . T he conveyancewas sustaine d as a val id se curity . T he fai lure

O

of the ap

p e l late court to give in an opinion the reasons for the irj udgm ent de tracts from the value of the case , and leave s there al basis of the de cis ion inde terminate . But i t has beent reate d as re st ing on the que stion of the grantor’ s agencyfor the grante e , in the later case of Sheppards v . Turpin,

2

whe re the O p inion of Danie l , J re cognize s it as not c on

flic t ing with or de tract ing from the authority of LangL e e , an authority which stands unshaken by any de cis ionof this court . H i s O pinion procee ds as fol lows : I t ( thede ed unde r e xamination ) conveys the who le of his e state ,real and p ersonal , including al l his choses in ac tion , avowe dly with the purpose of se curing al l his cre ditors ye t re

s erve s to the debtor the right to re tain posse ssion of the

who le subj e ct-matter conveye d , as against al l hav ing debtsagainst h im at the date O f the de ed , for thre e ye ars alsothe right to carry on his bus ine ss of a brickmaker to any

ext ent that he and hi s tru ste e s may think prope r ; and em

powers hzim to borrow from the truste e s , and the truste e s toadvance him , any sums they in the ir judgment shal l de emsufficient for the prose cut ion of hi s bus ine ss authorize s thetruste e s to be come h is se curit ie s in all contracts for the hireof labore rs he may make ; and i f , at any t ime afte r suchloans or advancements are made , the truste e s shal l de em hisconduct injudicious or unthrifty , they have ful l powe r to

1 11 Le igh, 100 2 3 Gratt . 357 (1847)


se ll the whole of the trust prope rty,i f ne ce ssary ,

"

to pay

such loans and advancem ents , and discharge the se contractsfor the labore rs , to which theymay have be come sure tie s . A l lthe cre ditors who do not as sent to the terms of the de e don or be fore the l st day of Apri l ensu ing its date , are to bepostponed to those who do ; and powe r i s given to a majori ty in numbe r O f those who do assent , to e xtend the time of

clos ing the d e e d to a period undefined , and unl imited exceptby the ir own discre tion . N o power i s expre ssly re taine d tothe grantor to se l l his stock in trade on hand , which i s em

brace d in the de ed , but i t i s ne ce ssari ly implied in the rightre serve d to carry on hi s busine s s during the thre e years .

M ay we not properly ask , as Judge Carr did , in the case ofLang L e e : C an w e imagine powe rs more comple te lyadequate to the de struction of the avowed purpose s of the

de ed than those re taine d by the grantor in this case ? T he

debtor, whilst profe ss ing to dedicate hi s whole property to

the payment of his debts then due , re se rve s to himse lf a

power by which he may , without any v io lation whateve r of

the e xpre ss stipulat ions of the de ed , divert the who le of theproperty to use s and purpose s wholly fore ign to the leadingobject avowed .

”

In Spence v . Bagwe l l 1 a de e d was he l d bad which gavethe grantor posse ss ion from its date , Novembe r 1 , 184 1 , tothe maturity of the debt se cure d , March 1 , 1843 , w ith powe rduring that period to se l l and dispose of the prope rty c on

véyed, consisting of land , s lave s , bacon , tobacco , and a

tobacco factory w ith its fixture s , and to give and make titlethere to , and to col le ct proce eds of sale s ; but on conditionthat he pay ove r the moneys colle cte d to the truste e name din the de e d . Though he re , as in a former case , we have nowritten opinion of the court , ye t i t may be obse rve d thatwhile counse l de fending the de e d demurre d to Lang L e e

as an authority , that case and Sheppards v . Turpin were

1 6 Gratt. 444

DO C T R INE O F T IIE A ME R IC A N M A JO R IT Y 37

pre ssed upon the attention of the court by the counse l at ,tacking the de ed ; so the de ci sion may be taken as an ad

herenc e to the doctrine of those case s .

It i s cle ar that that doctrine was already we l l e stabli shed ,from the late r case of Addington v . E the ri dge .

1 In thi scase , the trust de e d prov i ded that Harri son , the grantor,shou l d ke ep possess ion of and se l l the stock of goods in theu sual l ine of his trade , and occupy the store , unti l de fau ltin the payment of any of the debts se cured , or unti l thetruste e shou ld be re que ste d by any of the creditors to closethe de e d by a sale .

“Dani e l , J . , he ld that thi s power i sone incompatible with the avowe d purpose of the grantor tofurnish an indemnity to his creditors ; i s e qu ivalent , in itse ffe cts , to a powe r of revocation ; and fully adequate tothe de fe at of the" prov i sions of the de e d . A nd,

there fore ,that thi s de ed i s , according to the pri nciple s adjudicatedby thi s court in the case s of Lang L e e and Sheppards v .

Turpin , fraudulent p er se , null and void .

”

0

36 . D ist in c t ion a s t o t h e pu rp ose of t h e re s e rve d

pow e r ; ag e n cy f or th e t ru s t e e .— T he last-name d case ,

and the two others which it su stained , are re cogni ze d as au

thoritie s inMarks H i l l ,2where the conveyance to a truste eof a stock of goods in trade was sustaine d so le ly on the

ground that the re tention of the grantor as a sale sman Of

the goods was but as an agent of the truste e Lang L e e,

Sheppards v . Turpin , and Addington v . E t-heridge ,be ing

e spe cial ly distingu i she d by reason O f the damaging fact of

the potential contro l re serve d to the grantor ove r the goodsconveye d . This case enunciate s clearly the ru le which , infact , governed Janney v . Barne s .

37 . T h e.

re se rve d pow e r of sa l e a sce r t a in e d by im

p l ic at ion . Sti l l late r is the case of Perry Shenandoah

1 12Gratt . 436 2 15 Gratt . 400 (1859)

37 FR AUDUL E NT M O RT GAG E S or M E R C HANDIS E .

N at . Bank , 1 in which the grantor in a trust de e d conveyed ,w ith othe r prope rty ,

“al l of his stock in trade , w ith all

accre tions to and repleni shments of said stock ,

”and c on

tinned in posse ssion and in the conduct of his busine s s as

form e rly . T he court adhered to the doctrine of LangL e e and the othe r case s above cite d , furni shing the fo l lowing reasons for i ts ruling . N ow i t is true that in the de edunde r conside ration , there i s no exp ress p rovision that thegrantor shou ld re tain posse ss io n of the goods ( the stock intrade ) and carry on the bu sine ss , se l l ing and re ce iving theproce eds as be fore ; but the power to do so , though not

conferred in expre ss terms , arise s by clear and irre s istib leimplication . T he truste e , by the terms of the de e d , c anonly se l l upon the written dire ction of e ither of the par

tie s s e cure d ; and it i s provi ded that the truste e shallnot be he ld re spons ible for any of the property conveyeduntil he i s ordered to s e l l the same .

’ If the written dire ction i s never given , the prope rty i s never to be sol d by thetruste e . T he truste e has no contro l of it , and no accountabi l ity with re spe ct to it . Where , then , doe s the posse ss ion remain ? Who alone has the contro l ove r, and

dispos ition of , the se goods ? Plainly , the grantor, unti l asal e i s dire cted in writing by one of the partie s secured .

Unde r th i s de e d the grantor might , for an unl imited time ,go on and se l l , and buy , and conduct hi s trade just as before , without accounting to the truste e or any one e l se , i fthe parti e s to the de e d did not choose to give wri tten dircetions to the truste e to se l l . By c lear imp lica tion from the

face of the de ed , thi s powe r i s confe rre d upon the grantor .

A nd the re cord shows that he acte d unde r thi s impliedauthori ty f or two years and but for the action o f the ap

pe l lant s in l evying the ir ex e cution , might have gone on for

ye ars longer . Up to the date of the levy of the exe cution ,

the grantor carrie d on his busine ss just as he did be fore the

1 27 Grat t. 755

F R A U D L'

L E N T M O R T GAGE S O F M E R C HAND ISE .

of goods then in the store , be ing nominal ly the same stockmortgaged , but real ly different goods .

T he court de cided , among othe r things , that the re tentionof posse ssion and the actual se l l ing of goods by the debtor,without accounting to the creditor, rendered the mortgagefraudulent in law , and vo i d as to the fixture s and standingcasks no le ss than as to the goods . It was he ld that on a

conceded or settled state of the facts , fraud i s a que stionof law ; It was said T o sanct ion a transaction like thiswould open a door to frauds innumerable , and to an extentincalculabl e .

”

M cL achlan v . “Tright 1 re sembled the pre ceding case , thestipu lations be ing s imi lar , and the property conveyed be inga brewe r’ s stock of be e r , mal t and hops , with utens i l s ,furniture , e t c . T he debtor remaine d in charge , and soldgoods wi thout accounting to his creditor , or be ing require dto do so . T he v e rdict of a jury that thi s transaction was .

fraudu lent was sustained , as a matter of law , on the groundthat the de btor not only re tained posse ssion of the property , but used and disposed of it as his own .

”

39 . T h e l e ading ca se of W ood v . L owry ; views of

Bron son , J . Wood Lowry ?occupie s a leading pos i

t ion on this qu e stion . T he debtor , a m e rchant , remainedin posse ss ion , ant

“ proce eded t o se l l the goods in the

usual course of bus ine ss O f a country m erchant , and in

othe r re sp ects u se d them as hi s own .

”T he jury was

instructe d that if the e ffe ct of th i s arrangem ent wou l d beto hinder , de lay , and de fraud creditors , they we re

'

author

iz ed to inf er , and ought to infe r , that such was hi s intent .

”

Bronson , J . , pronouncing the opinion of the court , saidKe l logg was not the agent or se rvant O f the plaintiffs to )

se l l the goods and account to them for the proce eds , butwas avowedly in busine ss for himse lf . H e had the posses

1 3Wend . 348 2 17 Wend. 492

DO C T R INE O F TH E AM E R IC AN M A JO R IT Y . 39

me n of the property , w ith ful l , authority , by the expre ssassent of the plaintiffs , to se l l and dispose of it at hi sp leasure , and to dea l with i t in al l re spe cts as othe r m er

chants did with the ir me rchandise . I t i s true that Ke lloggsai d he wou l d remit to the plaintiffs the avai ls of suchprope rty as he should se l l be fore the 1st of June ; butthi s was me re matter of confidence be twe en the partie s ; i twas no part of the contract unde r which plaintiffs maketitle . T he property was not le ft with Ke l logg to be k eptunti l the debt was pai d or the plaintiffs should cal l for i t ,but he had i t for the purpose of trading with it , andmakingprofits from the sale of i t . When sold , the fru its we re hisown , e xcept that , l ike eve ry other debtor he was under anobl igation to sati sfy the demands of his own creditors . H e

tre ate d the prope rty as hi s own . It i s imposs ib le to ‘

say

that the plaint iffs had any l egal'

c laim to i t as against thecreditors of Ke l logg or purchase rs under him .

” Insteadof leav ing the matter to the jury , as a que stion of fact forthe ir de termination , the judge wou l d have be en we l l warrante d in instructing th em that the transaction was fraudul ent and vo i d in law , and that the de fendants we re entit ledto a ve rdict in the ir favor .

T he que stion was moote d again , though it did not fairlyarise and was not de cided , in Stoddard v . Butle r .

l This wasa case of an assignment of a stock in trade by way of

mortgage , the assignor be ing le ft in poss e ss ion , to se l l asagent only , for the benefit of the grante e s . Chance l lorVValworth

’

s de ci sion , holding this assignment fraudulentand void , was reported sub nom . Butle r Stoddard .

2 Uponappeal , th is de cre e was affirme d in the Court of Appe alsby a divided court . Though no principle was t hus se tt led ,

ye t the fu l l and exhaustive opinions of seve ral of the senators on both side s are inte re sting and valuable contributionsto the l iterature of this subj ect .

1 20 “Tend . 507. 2 7 Paige , 163.

4 0 FR AUDUL E NT M O RT GA GE S O E M E R C HAND IS E .

T he decis ion of Wood Lowry corre cted the aberration induce d by the contrary case O f Levy r . We lsh , 1 inwhich Vice -Chance l lor M c C oun he ld a mortgage of a c er

tain stock of goods , w ith all the grantor might acqu ire , tobe only p rimafa c ie fraudulent , and O pen to e xplanation .

Smith v . Acke r 2 cannot be considered a di scordant case .

The re i t was not peri shable or trading property , but a

print ing pre s s , that was mortgaged . Though the mortgager was to remain in “ the fu l l and fre e enjoymentof i t ,

” thi s cou ld scarce ly intend a sale of the pre ss . T he

que st ion of fraudu lent intent in such a case would properly be submitte d to a jury .

40 . G risw o l d v . S h e l don e xp l icit and n ot dou b t fu lu p on t h is qu e st ion . In Gri swo ld v . She ldon ,

3 which hassome time s be en conside red a doubtfu l case , the e ight judge sof the Court of Appe als were , inde ed , div ided as to the

re asons for the ir deci sion , though concurring as to the re

su l t . But this difference O f O pinion , so far from suffic ingto weaken the authority of Wood v . Lowry , did not reachthe que st ion O f a re se rved power of sale . S O far as the

judge s diffe re d in any re spe ct upon thi s subj e ct , the ir difference re ferre d mere ly t o an incidental feature of i t ,name ly : the proper construction of the instrum ent be forethe court , and did not involve the main qu estion in any re

Spe ct . Bronson , C . J . , who had de l ivered the O pinion inthe forme r case , drew from the language of the mortgagein thi s case the plain impl ication that the mortgage r was to

continue busine ss w ith the goods as be fore ; upon which hewou ld have adjudge d the transaction fraudu lent , without thene ce ss ity of leav ing any qu e stion of fact to the jury ; and

in thi s v i ew he had{3

the c oncu1 renc e O f thre e judge s , one of

whom (M cC oun , was the Vi ce C hanc e l lO I who had de cided

I 2E dw. C h. 438 2 23Wend. 653.

3 4 N . Y . 58 1 (A pril ,

DO C T R INE O F T H E A M E R I C A N M AJO R IT Y . 4 1

Levy We lsh . T he other four j udge s insisted that thelanguage of the mortgage did not warrant such implication ,

and, there fore , de cl ine d to entertain i t ; but admitte d thatif such we re the proper construction of the instrument , i twou ld be vo id unde r the authority of Wood Lowry .

Thus , though they were agre e d as to the law on the pointnow under cons ideration , there was no adjudication upon i tby the court , be cause they disagre ed as to that primarymatte r ; and the case was de cide d on other grounds . T he

criti cism made in Bre tt Carter 1 i s , the re fore , inaccurate ,that the court de cide d by a bench equal ly d iv i ded in opinion , that the mortgage was “

vo id on its face as merematte r of law .

” As the difference of opinion in thi s casehad no re fe rence to the ru le of substantive law ,

Gri swoldv . She ldon cannot be prope rly cited , e i ther as an authorityopposed to the doctrine pf R obinson v . E ll iott , or as weakening the support to that doctrine found in the other N ew

York case s .

4 1 . T h e doct rin e e stab l ish e d in N ew Y ork .— E dge l l

v. Hart soon fol lowed . It was de cided in the Supreme

Court in June , without re ference to Gri swold v .

She ldon . T he de cis ion of the Court of Appeal s in 1853 3

se ttled the que stion which was supposed to have be en leftdoubtful in Gri swold v . She ldon . T he l icense to se l l in thi scase was inferre d from a written schedule attache d to the

instrument . Denio , C . J he ld , w ith the concurrence of

a majori ty of the court , that the existence of su ch a pro

vi sion , out of the mortgage or in it , would inval idate i t asmatter of law , and that , where the facts are undisputed , thecourt should so de clare .

”

In 1859 was pre sente d the case of Gardner v . M cEwen ,

4

in which no re treat i s manifest from the pos ition taken in

1 2 L ow. 458.3 9 N . Y . 213.

2 13 Barb . 380.

4 19 N . Y . 123.

4 1 FR AUDUL E NT M O R T GA GE S or M E R C HAND IS E .

E dge l l v . Hart . Here the agre ement to al low sale s in courseof trade did not appear on the face of the mortgage , nor

was i t proved . Denio , C . J . , adhe ring to the doctrine of

the last name d case , he ld , that whi le the facts proved madea pre tty strong case for the jury ,

” sti l l i t was one for themse lve s to de te rmine . It i s p lain that he re the que st ion of

doubt was as to the w e ight of proof and the facts proved . Ifthe fatal fact shou l d be final ly admitte d or ascertained ,the rule in E dge ll v . Hart would apply , of fraud in law . Itwou ld se em that , upon clear proof , the court might direct ave rdict of fraud in those State s where such dire ctions are

al lowed when the ev idence i s cle ar ; substantially as was

done in Page t v . Pe rchard by Lord Kenyon . This i s donein N ew York .

1

T he two later case s of M ittnacht Ke l ly 2and R usse l l

VVinne 3 pre sent the que stion in both phase s of the facts asto the re servation of a powe r of sale . In the forme r casethe re servation appeared on the face of the mortgage ; inthe latte r i t was S hown by facts a liunde . In both case s them ortgage was rule d to be fraudulent in law , fol lowingE dge ll v . Hart andWood LowryIn M ittnacht Ke l ly , Parke r , J said T he mortgaging

the who le stock in trade , with the increase and decrease

thereof , and the provi ding for the continued possess ion of

the mortgage r, c an have no othe r meaning than that themortgage e should al l the time retain a l ien on the wholestock , by way of mortgage , the mortgage r making pur

chase s from time to t ime , and se l l ing off in the ordinarymanner, the intent be ing not to create an abso lute l i en on

any prope rty , but a fluctuating one , which should open to

re lease that which shoul d be sold , and take in what S houldbe newly purchased . This is just such an arrangement aswas he ld in E dge l l v . Hart to render the mortgage voi d .

1 S ee p ost , sect - 42.

‘

2 3 Keyes, 407 3 37 N. Y . 591

62

DO C T R INE O F T H E A M E R IC A N M A JO R IT Y .

T he case cannot be di stinguished from that , and the law , as

propounded in that case , must be he ld appli cable to thi s .

” 1

A nd in R usse l l Winne , Grove r, J said T he que stion i s whethe r an agre ement by the mortgage e made withthe mortgage r that the latte r may se l l , for hi s own benefitand as his own , port ions of the property covered by themortgage , renders the mortgage fraudulent and vo id as to

such portions . It would se em that the bare statement of

the propos ition wou ld be sufficient to warrant an aflirma

t ive answer .

“ If there i s an agre ement by the mortgage e that themortgage r may se l l or dispose Of any of the property forhis own benefit , i t i s e stab li she d conclusive ly that the mortgage was given for some purpose other than that of se cur

ing a debt to the mortgage e , or of giving him any réalintere st in such property . It i s ev i dent that , as to such

property , the mortgage e not having any real e state there in,

such real inte re st remains in the mortgager . Why , then ,

is the mortgage given upon such prope rty ? E vi dently , the

better to enable the mortgager to enjoy the benefit the reof ,at the expense of creditors . Were the re no cre ditors of

the mortgage r, there wou ld be no object in giving or takingmortgage s accompanie d with such an agre ement . It i s , Ithink , clear that such an agre ement shows that the mortgage was not made in good faith , and wi thout a de sign tohinder creditors .

‘

T here is no question. of intention to be

submitted to a j ury . It alre ady appears that , as to suchprop erty , the mortgage was not de signe d by the part ie s ‘

as

an operat ive instrument between them and its only operation must be to the pre j udice of others . T he court shou ld ,

’

as to such prope rty , pronounce i t vo i d , for the reason thatthe evidence conc lus ive ly shows it fraudulent .

”

Ford v . W i ll iams} Conkl ing v. She l ly ,

3and Mille r v .

1p . 408.

2 24 N . Y . 359.3 28 N. Y . 360.

63

4 1 FR AUDUL E NT M O R T GA GE S O F M E R C HAND IS E .

Lockwood 1 cannot be regarded as exceptional case s . In

the se case s i t was a part of the agre ement for sale s by themortgage r that he shou ld remit the proce eds to the mortgage e , which was he ld sufficient to sustain the arrangement ,though not actual ly carried out by the mortgage r. In the

latter case , howeve r , Potte r, J . , dissente d on the groundthat the case real ly fe l l -within the ru le of Wood v. Lowryand E dge l l v . Hart , so that there was no ce rtain se curity .

N or i s i t cl ear that the late case of Yate s v . O lmste d ‘1 i s

be regarded as an exceptional case . T he Supreme Court 3

fo llowed the case s above re fe rred to , and conclude d that i twas intended in this case to al low sale s by the mortgager indue course of trade , although the re fe re e had found that themortgage e had made no such agre ement , and did not knowthat such sale s were made . T he dissenting opinion 4 state sthat the mortgage e was not in the store during the existenceof the mortgage , and re l ie s on thi s fact as dist inguishing thecase . T he Court O f Appeals put the ir de ci sion sustainingthe mortgage upon the finding of the re fe re e , as a de te rmi

nation of the facts , treat ing it as of e qual we ight with theverdict of a jury ; from which i t re su lted that no agre ement for sale s was made , and no fraudulent intent existed .

This i s the only case , i f th i s be one , showing any sub

stantial defle ction from the rule e stabli shed in WoodLowry and E

'dge l l v . Hart , and which was succinctly statedas fo l lows in R usse l l VVinne : I t may , the re fore , be re

garded as settled that an agre ement betwe en mortgage r and

mortgagee , that the former may dispose of the mortgagedprope rty to h is own use , rende rs the mortgage fraudulentas to creditors , whe the r the agre ement be contained in the

mortgage or not .

”In Frost 71 . Warren ,

5 the majority of

the court sustaine d the ve rdict of the jury in favor of theconveyance , in view of the s light and unsatisfactory char

4 5 Barb. 462.

5 2 N . Y. 204.

4 3 FR A UDUL E NT M O R T GA GE S O E M E R C HAND IS E .

which was apparently intended to close the controversy inN ew York . He re the evidence outs ide the mortgage Showedthat the mortgage r had cont inued to make sale s of the

mortgaged property as u sual the re tofore , and tended to

prove that thi s was done by pe rmission of the mortgage e .

T he j ury found that the re was an arrangement to that e ffe ctbe twe en the partie s . T he Court of A ppeals , without dissent he ld that the fraud in thi s case was to be ru le d on judic ial ly , as a que stion O f law , and that E dge l l v . Hart ,Frost Warren , Gardner v. M cE wen , and R usse l l Winnewere concurrent witne sse s to the existence of thi s rule as

fundamental in the jurisprudence of N ew York . SaidAl len , J . , in pronouncing the opinion of the majori tyWhe ther the agre ement i s in or out of the mortgage

,

wh e the r verbal or in writ ing , c an make no difference inprincip le . Its e ffe ct as characterizing the transactionwouldbe the same . T he difference in the mode s of prov ing theagre ement cannot take the sting out of the fact and render itharmle ss . If it is sati sfactori ly e stabl ished , the re sul t uponthe se curity must be the same . It i s the fact that such an

agre ement has be en made and acted upon that in law c on

demns the se curity , and not the fact that it i s proved by theinstrument of sure tyship , instead of by parol or in some

other way .

” 1

This clear statement of the distinctions betwe en rule s of

substantive law and ru le s of m e re procedure , inherent inthis class of case s , was ev idently de signe d to me e t the erit ic ism s of those who have supposed a judgment , base d on

facts apparent on the face of a written conv eyance , to be a

j udgment o f m ere construct ive or pre sumptive fraud . Itis actual fraud that is adjudged in such case s fraud imbe rent in the transaction to which the partie s have agre ed and

a class of fraud which i s no more or le ss vi cious and reprehen

1 T he case digested under the name of S outhard v. P inckney, in 6 N . Y .

W. D. 328, is evident ly the same case as S outhard v. Benner.

66

DO C T R INE O F T IIE A M E R I C A N M AJO R IT Y . 43

s ible , whateve r be the character of the ev idence by whichthe facts of the transaction are proven .

Sti l l more re cently , in Bracke tt Harvey} the Courtof Appe al s has be en cal le d upon to give an e qual ly clearexplanat ion of the distinguishing feature s of those case s inwhich the powe r of sale i s not re se rve d t o the mortgage r’ suse , but inure s to the benefit of the mortgage e . T he

g round upon which Ford Wi l l iams} Conk l ing v . She l ly,

3

and Mil le r v . Lockwood 4 corre ctly re st i s c learly pointedout . It i s that a sale of the goods , and the applicationo f the proce e ds upon the mortgage debt , “ i s the normaland proper purpose of a chatte l mortgage , and within theprecis e boundarie s of i ts lawfu l ope ration and e ffe ct ; i tdoe s no more than to substitute the mortgager as the agento f the mortgage e , to do exactly what the latter had the

right to do , and what it was h is privi lege and du ty to

a ccomplish .

” This i s shown to be an independent doctrine of law , of e qual force and dignity w ith the doctrineof Southard v . Benner , w ith which i t in no manne r c on

flic ts . In the case under consideration , an agre ement thatt he mortgage e should accept , as a payment on his debt

, the

note s taken by the mortgage r for goods sold on credit , andan agreement that the proce e ds of sale s might in part beuse d to purchase new stock , which should then be cove redby new mortgage for the same debt , were shown to be butmode s of paying the mortgage debt , or ho lding the pro

c e eds of sale s subj e ct to the l ien . T he val idating featureof the transaction was that “ in no re spe ct did it pe rmitanyth ing mortgage d to e scape the mortgage ; if i t did notturn into cash or pape r , which reduce d the mortgage debt ,it turned into othe r prope rty which b e came i tse lf the sub

j e c t of the mortgage l ien .

”

1 9 1 N . Y . 214 ; 17 C ent . L . J . 112

3 28 Id. 360.

5 44 FR AUDUL E NT M O R T GAG E S or M E R C HAND IS E .

The se distinctions were care ful ly made in reve rsing thede cision of the lowe r court , which had been adverse to themortgage on the ground that in other re spe cts the transaction indicated a re se rved powe r of sale for the be nefitof the mortgage rs } T he Court of Appeal s disagre e d withthe lowe r court in its opinion that the proof sustained thisview , and reve rsed the case so le ly on the ground of the

we ight of evidence , saying , we se e no evidence of an agre ement for such diversion ( of the proce eds of sale s ) , or of

such d iversion in fact .

”

T he two case s name d thus furnish an admirable v iew of

the doctrine under conside ration , both as appl ied on the

one hand , or found to be inapplicable on the other .

N EW HAM PSH IR E .

4 4 . T h e doctrin e re ce ive d w ith favor in N ew H am psh ire .

— In N ew Hampshire , the e arly case of CoburnPi cke ring 2 he ld that posse ss ion re tained by the mortgager,under a mortgage , w ith the right to the fu l l use of the

property , rendered the mortgage fraudulent and void .

This case went , probably , farthe r than ne ce ssary , inasmuch as the property mortgage d consi ste d of householdgoods , and i t d id not appe ar that the ir use was tantamountto the ir de struction . But the case i s an instructive one ,

by reason not only of the ve ry e laborate and we l l- considered O pinion of the court , in which the ru le we are

cons ide ring is drawn from T wyne’

s Case , but also of the

close and intere st ing argument of Counse l se eking to up

hold the mortgage .

Thi s and subsequent case s have be en taken as placingN ew Hampshire in the l i st of those State s which adopt therule that re tention of posse ss ion alone suffice s to inval idate such conveyance s . H er variation O f the rule was

2 3 N . H. 4 15 ; 14 Am . D ec . 375

DO C T R INE O F T H E AME R I CAN MAJO R IT Y . 4 5

applied , in Lang Stockwe l l ,1 to a sal e of a horse and

wagon , an agre ement be ing proven that the vendor shouldretain the property , pay taxe s on it , and use i t in al l

re spects as his own ; which use the courts he ld to constitute the very e ssence of the i dea of property , and to be

incons istent with the ide a of a lawful sale . It was al soapplie d , in Cutting Jackson} to a sale O f certain l ivestock and some hay , in which case the agre ement al lowedeven a more extended use of the property for the con

venienc e of the grantor, for the hay was to be e aten bythe stock . T he te st applied in T wyne

’

s Case was taken as

plainly i l lustrating th is case also , i .e . , the vendor re tainedthe prope rty and u sed i t as hi s own . It wi l l be se en thatthis applic at iono f the rule covers more than mere re tent ionof posse ssion . It i s a truSt of any kind , re serve d for thebenefit of the mortgager, that avoids such a transaction ;and, whi le the jury finds the facts in al l case s , the fraud ispredicated O f those facts by the court , as matter of law ,

in al l case s . T he same ru le i s appl ie d inWinkley H i l l 3

and Coo li dge v . Me lvin ,

4 to conveyance s of land with trustsre serv ing a

“benefit to the grantor. T he que stion of the

debtor’ s intent i s cons i dered immaterial “ It i s be cau sesuch trusts are cal culated to de ce ive and embarrass cre ditors , be cause they are not things to which hone st debtorsc an have occasion to re sort insale s of the ir property , and

because they are the means which dishone st debtors c ommonly and ordinari ly use to cheat the ir creditors , that thelaw doe s not permit a debtor to say that he used them fora n hone st purpose in any case .

” 5

§ 45 . T h e doct rine adopt e d and app l ie d .— O n the

authority of Coburn P ickering , a l ike rule was appliedto mortgage s on stocks of goods in trade with power of

1 55 N . H. 561.1 42 Id. 510.

2 56N . H. 353 5 Id. 520.

3 9 N. H. 31 ; 31 Arri . D ec . 215.

4 5 FR AUDULENT M O R T GAGE S O F M E R C HANDI S E .

sale re se rved , in R anl e tt v . Blodge t tland Putnam v . 0 8

good .

2 I II the e arl ie r cas e , Parke r, C . J . , re fe rring to the

provi sion that the mortgage Should cove r future acqu iredgoods as additions t o the stock ,

thus aptly supplemente dthe criti cisms of othe r courts upon the unce rtain and shiftingcharacte r of such transactions : If thi s doctrine we re ad

m itted, a mortgage of pe rsonal property woul d be l ike a

kale i doscope , in that the forms repre sented would changeat every turn , but unl ike that instrument in that the materials would not remain the same T he re su l t of the ar

rangement , the court conce ived to be that the grantor was .

the owner , by the agre ement, for al l purpose s except therights of creditors ; a de scription which at once characte rize d the transaction as fraudulent .In Putnam v . O sgood , which was twice reported} i t ap- o

peared that the mortgage was given and re ce ive d in goodfai th , and that the re was no contemporaneou s agre ementthat the mortgage r shou ld continue se l l ing ; neve rthe le ss ,he did so continue , and with the knowledge of the mortga

ge e ; and the se facts , when proven , were he ld to e stab lishfraud in law . This case as last reporte d holds , that whereve r, by any such arrangement , there re su lts , as here , ase cre t trust for the benefit of the grantor , it i s we l l se ttle din N ew Hampshire that the fraud i s a conclusion of law ,

”

and thi s , without stopping to inqu ire what we re the realmotive s and intentions of the partie s .

” 4 This last of thetwo de cis ions in thi s case , though le ss fu l l , i s in completeaccord with the first , whe re Chie f Justice Be l lows thussummed up the v ital feature s of th is class of conveyance s .

5

T he avowe d obje ct of a mortgage i s to se cure a debt .

If the se cre t purpose be to prote ct the mortgager in the en

joyment of the property , and enable h im to set his other

1 17 N . H . 298 ; 43 Am . D e c . 603‘1 52 I d. at p. 154 .

2 51 Id. 192 52 I d. 148.5 51 Id. at p . 202.

3 51 Id. 192, and 52 Id. 148.

70

DO C T R INE O F T H E AM E R I C AN M A JO R I T Y . 4 6

creditors at defiance , then the mortgage i s de emed to befraudulent and vo id as to those creditors and of th is t herei s no controversy . If a trust , inconsi stent with the l egitimate purpose of a mortgage , i s re se rved for the b enefit ofthe mortgager, and that i s proved , then a fraudulent intentis , with us and in many othe r juri sdictions , a conclusion of

law . A se cre t unde rstanding that the mortgager shal l re tainthe posse ssion of the goods , and continue to se l l them as

be fore for his own b enefit , i s clearly such a trust . As betwe en the partie s , the mortgager remains the owner O f the

goods , and the mortgage is pract ical ly e ffe ctive only to

ward off the claims of other creditors . If such a mortgageshou l d be he ld to be val id , i t would furni sh the readie stmeans of affording she lte r to an embarrasse d debtor, underwhich he cou ld carry on his bus ine ss and de fy h i s creditors .T he practi cal e ffe ct of such a mortgage i s to de lay and de

feat cre ditors , and i t i s to be pre sume d that the parti e s ihtended to do what the ir acts were natural ly calcu lated toaccomplish .

T he right of other creditors to attach the mortgaged property could afford but l ittle re l ie f against the se mischie fs .It cou ld only be done by paying the mortgage debt , which ,in many instance s , would leave l ittle or nothing for thecreditor . In the meantime , the mortgage r would disposeof the goods for hi s own benefit and without paying themortgage debt , and then mortgage the goods , obtaine d torepleni sh hi s stock , to the same fri end for the same debt ,and so continu e hi s bus ine ss and be enabled to snap hisfinge rs at hi s other creditors .

“A doctrine which should hold such a transaction to beval i d would be most disastrou s in i ts consequence s , and

finds no countenance in the e stablishe d doctrines on the

subje ct , e ither here or e lsewhere .

”

4 6 . D ist inc t ion in c a se of agen cy for t h e m ortga

ge e .- T he rul e i s re cognized in its appl ication to mort

71

4 7 FR AUDUL E NT M O R T GAGE S O F M E R C HANDIS E .

gage s 0 11 stocks of goods in trade , as the existing rule inN ew Hampshire , in the re cent c ase of W i lson Su l l ivan ; 1

but in this case , the sale s of goods having be en made bythe mortgager as the agent and for the benefit of the mortgage e , and for the purpose of extinguishing the mortgagedebt , i t was natural ly he ld , in accordance W ith the rul ing inothe r State s , that such a transaction i s val id in law , i f fre efrom fraudulent intent .T he doctrine i s also re cognized in a different aspe ct , in

anothe r case in the same volume .

2

O HIO .

4 7 . C o l l in s v . M ye rs ; th e doct rin e il l u st rat e d in

O h io .— T he Supreme Court of O hio , though later in point

of time , was in no re spe ct le ss incisive in its judgmentupon such transactions , and no le ss fe l ic itous in i llustratingthe ir pe rni cious character , than those of the other State salready re fe rred to . T he case of Coll ins Mye rs 3 hasjustly be en ass igne d a leading position among those treatingof the subj e ct . It was a conte st in e qu ity be twe en the

assigne e s under a mortgage and judgment cre ditors of the

mortgage r , who had continue d to t raflic with the stock of

goods mortgaged though the agre ement permitting thisappeare d , not on the face of the instrument , but by proofa liunde . That the que stion ari s ing out O f the se facts fartranscends that of me re posse s sion , i s c learly S hown . T he

language of the opinion has de servedly b e come proverbial .T he obj e ct of a mortgage i s to obtain a s e curity beyond a

simple re l iance upon the hone sty and abil ity of the debtor to

pay , and t o guard against the ri sk of al l the prope rty of the

debtor be ing swept off by othe r creditors , by fastening a

specific li en upon that covered by the mortgage . But a

1 58 N . H. 260 ; 9 R eporter, 6 142 Pe ttee v. Dust in, p . 309 ; se e p ost, sect . 144.

3 16 O hio, 547

4 8 F R AU D L'

L E N T M O R T GAGE S O F M E R C HAND I S E .

propriate the mortgaged prope rty to the payment of his

debts or ‘not , and not upon the mortgage . N o re asonn

w i l l change thi s re sul t i f a mortgage r re tains posse ss ion and

the ful l powe r of di spos ition over t li c mortgaged prope rty .

”

“A mortgage upon a spe cific arti cl e , with posse ssion and

powe r O f disposition le ft in the mortgage r, i s in truth no

mortgage at al l ; i t i s no ce rtain l ien . T he powe r to holdposse ssion and dispose Of the prope rty i s incons istent w iththe ve rv nature of a mortgage . It , indeed , wou ld not , p e rhaps , be go ing too far to say that such an instrument was anu l lity .

”

As to al l the world except the partie s themse lve s , such amortgage wi l l be he ld voi d as against the pol i cy O f the law .

”

T he court d issented expl icitly from the doctrine enunciated by M r. Justice Story , in Mitche l l Winslow} and, re

ferring to hi s sugge stion , that though part of the goodsshou ld be lost to the creditor by sale s , othe rs might be sub

stituted by consent , repl ied ° This i s no answe r, for it may

be that others w i l l not be substitu ted , and, i f we look to ex

p e rienc e , in al l case s where a trade r has fe lt h imse lf boundto mortgag e his whol e stock , it i s not the usual re su lt .

”

T he fal lacy adopted by a class of logicians repre sented byStory and Lowe l l i s then po inted out T he whole e rror

appears to be in regarding the word stock as a fixed thingwhich must always remain , the same as a horse which preserve s hi s identity , although in proce ss of time eve ry partic l e composing him may be thrown off and renewer T he

e rror i s in treating a word as a thing, mortgaging a wordinstead of a substance , and pe rmitting the substance to be

sold , whi le the mortgage attache s and remains fixed to the

word .

”

48 . T h e doc trin e adh e re d t o .- T he doctrine thus

comprehens ive ly stated remains the law in O hio . Fre eman

1 2 S tory, 630.

DO C T R INE O F T H E A M E R IC AN M A JO R IT Y . 4 8

v. R awson 1 was anothe r c ase where the agre ement that themortgage r shou ld continue to se l l the merchandise mortgaged , appeared dehors the instrument ; but the lower courtis sustaine d in its ru l ing that the instrument was equal lyfraudu lent andvoi d as i f this arra ngement had appeare d onits face . T he ru l ing in Coburn P i cke ring , as to a se cre ttrust , i s refe rred to and approved , and it i s said : “ T he

mortgage must be pre ci se ly what it purports and profe sse sto be , and must ope rate an absolute surrender of the property for the security of the mortgage e .

” What poss iblearrangement could be more dire ctly inconsi stent with thenature and purpose s of the conveyance , or

'

c ould more pal

pably se cure to the mortgage r al l the beneficial use s of the

property , than the powe r to use and dispose of it for his ownbenefit ? It i s S imply and plainly saying that , as be twe enthe partie s , the mortgager ’ s enjoyment of and dominionover i t shal l be no le ss than be fore , whi le i t i s put beyondthe reach of other creditors .

”

In Harman v . Abbey 2 the mortgage prov ided nom inal lythat the mortgage e should have posse ss ion , but only as

against al l other persons than the mortgage r, and the latte rwas t o cont inu e the bus ine ss at re tai l ; while no prov is ionwas made as to the proce eds O f sale s , except as to payingexpense s . This arrangement , which me re ly expre ssed moreplainly in terms what the court discovere d lurking underthe surface of the two last name d case s , was , in accordance .

with the previous rul ing , de clare d abso lute ly void in law .

Goodenough u . Harri s 3 and Morri s Devon 4are case s

in which the same ruling was appl ied in the inferior courts .

It i s to be obse rve d part icu larly that be fore Co l linsMyers , the rul e was already we l l e stabl ished in O hio thatretention of posse ssion alone , after a bi l l of sale of chat

1 5 O hio S t. 1. 3 1 Disney, 53.

2 7 O hio S t. 218. 1 2 I d. 218.

50 FR AUDUL E NT M O R T GAGE S or M E R C HAND IS E .

te ls , whether absolute or conditional , would furnish onlypre sumptive e vidence of fraud , and might be consistentw ith an hone st intent , or open to explanat ion .

1 This rulewas adopted at a t ime when ,

whi le i t was approve d in N ew

York , i t had been re j ected by Pennsylvania , Connecticut ,and Ve rmont , which State s had applied the contrary ruleof conclusive fraud to such cases .

4 9 . D istin ct ion in c a s e o f ag e n c y f or t h e m ort

gage e .— Brown v . lVebb 2

and Kle ine v . Katz enbergc r3

do not vary the ru le adopted in Co l l ins Myers . In the

forme r case , the mortgage provided that the mortgage rshou ld make sale s for the purpose of paying the mortgagedebt , but the mortgage e s took immediate posse ss ion, and

themse lve s carried out thi s provi sion, which was he ld a

val i d transaction . In K le ine u . Katzenbe rger, the prov is ion of the mortgage was that the mortgage r might se l lbut only in order to raise money to pay over to the mort

gage e s on the ir debt , and the court fo l lowed the N ew Yorkcourts in distingu ish ing this as a val id transact ion , the powe rof sale be ing al lowed only for the benefit of the mortga

ge e s , and be ing entire ly consi stent w ith the idea of a l ienupon the goods for the se curity of the mortgage e s , whenthe arrangement is made in good faith .

MINNE S O T A .

50 . T h e doc t rine adopt e d in M inn e sot a ; re gis trat iono f in s t rum e n t imm at e ria l . InMinne sota , a s imi lar ru l ingwas made as to a mortgage on a stock O f goods in trade , inthe first reporte d case of C hophard v . Bayard .

4 T he doc

trine of t he N ew York case s was approved , and it was he ldthat permission to the mortgager to se l l the goods i s whol lyinconsi stent w ith the idea of a security , and leads the j udi

1 H ombe ck v. Vanme tre , 9 O hio, 153 2 20 O hio, 389 .

2 20 O h io S t . 110 ; 5 Am . R ep. 630‘1 4 M inn. 533.

76

DO C T R INE O F T H E A M E R I C AN M A JO R IT Y . 51

cis l mind irre si stibly to the conclusi on that the instrumentwas made for some othe r purpose .

This doctrine was fol lowed in Horton v. Wi l liams} acase of a mortgage on stock and farm produce , some of

which the mortgage e had al lowe d the mortgager to se ll .T he rule was laid down in thi s case , ( and also in Ge re v .

Murray2, ) that the prov ince O f the jury i s to find only thefacts as to the acts or intent of the partie s , and that thecourt i s to declare whe ther such acts or intent are fraudulent , as a que st ion of law . In case the intent of the parti e sbe incons istent with the i dea of an hone st security , the law

de clare s such intent fraudu lent .

”T he case of C hophard

v. Bayard was said to be “ in accordance with sound princ ip le and the we ight of authority ,

”in ho l ding that such

a mortgage was ne ce ssari ly fraudu lent , as against the mortgager’ s creditors .

”In re fe rence to the que stion of regis

trat ion , as affe cting this doctrine , the court sai d , further :“ T he law , as he l d in C hO phard v . Bayard and Gere u.

Murray , has not be en change d by the ac t requ iring chatte lmortgage s to be fi led , unle ss accompanied by immediatede l ive ry , and fo l lowed by an actual and continued changeof posse ss ion of the things mortgage d . Unl ike the statute s of Massachuse tts and Iowa on this subje ct , our statutedoe s not make the fi l ing of the mortgage legal ly equ ivalentto actual de l ivery and continue d change of posse ss ion ; butl ike the statute of N ew York , of which it i s a copy ,

‘ i tmere ly adds another to the grounds on which a mortgageof pe rsonal chatte ls shall be vo id .

’ 3

51 . T ran sact ion no t va l idat e d by a c t of m ort gage e in

tak ing posse ssion o f goods .— T he rule was furthe r af

firmed in Ste in v. Munch} as to a mortgage on a re tai l

1 21 M inn. 187.

2 6 I d. 305.

3 C it ing Wood 47. Lowry, 17 Wend. 492, and Smith v. Acker, 23 Id. 653.1 24 M inn. 390

52 FR AUDUL E NT M O R T GA G E S O F M E R C HAND IS E .

stock of drugs with power of sale re served . In thi s case ,i t was he ld that the transaction was not validated by the

mortgage e taking posse s s ion of the goods unde r and byv irtue of the mortgage for which important principle thec ase s of R obinson v . E l liott} De laware E nsign} B lake sl e e v . R ossman} andJanvrin v . Fogg 4 we re cited , al l whichsave the last we re s imilar case s of mortgage s on stocks ofgoods in trade .

But in another case of a simi lar mortgage , heard at the

same -term} in which the mortgage r had, by a new ac t , vol

untarily turned the property over to the mortgage e , for thepurpose of paying in part the mortgage debt , th i s was sustained as a val i d and l egal transaction , it appearing to bebona fide .

T he rule was reaffirme d as the settled law of Minne sota,in Mann Flower} where a s im i lar mortgage on goods int rade was he ld fraudulent ; the same mortgage having be en,

in Flowe r v . Corni sh ,7 he ld val id as be twe en the part ie s .

In this as in the pre ceding case s , the adjudication proce edson the theory of the fraudu lent intent of the partie s , as cone lusive ly proven by the ir deal ings .

WI S C O NS IN .

52. T h e doct rine ap pl ie d in W is consin ; in t en t of

p art ie s imm a te ria l .- T he Minne sota court , in Horton v .

Wi l l iams , re fe rs approvingly to P lace Langworthy 8and

Ste inart v . D euster,9 two case s in W isconsin , involving

mortgage s of thi s character. P lace Langworthy , in i tst urn , i s profe ssedly base d on Co ll ins Myers}° the lan

guage of which is quoted and adopted . In thi s case the

1 22Wal l . 513.6 25 M inn. 500

2 21 Barb . 85.7 25 I d. 473.

3 43W is. 116.5 13Wis. 629

4 49 N. H. 340.9 23 Id. 136 .

5 Bank“ v. Anderson, 24 M inn. 435.

1° 16 O hio, 547.

78

DO C T R INE O F T H E AM E R I C A N M A JO R IT Y . 52

provision for sale s was exhibited on the face of the mort

gage . In Ste inart v . D euster, i t appeare d to have be enagre ed on ve rbal ly be twe en the partie s . But the two case swe re he ld to be not distinguishable in thi s particular. T he

duty of the court was re cognize d , so soon as the fact is c onc ede d or e stablished in the case , to e xpose the inhere ntly

.

vi cious tendencie s of such a transaction , and to ru le uponi t as fraudulent in law . Allowing sale s of the mortgagedgoods by the mortgager i s sai d to be a provi sion dire ctlyc al cu lated , in our judgment , to hinder, de lay and de fraudcreditors 1 A ve rbal agre ement to this e ffect i s no le ssvic ic us than a written one .

The se case s e stablishe d the doct rine in Wi sconsin . In‘O live r Town} the trial court charge d the jury in con

formity to the rul ing s in the two earl ie r case s and on ap

p eal , the j udgme nt re sult ing the re from was sustainedwithout discussing the proprie ty of such a charge .

T he Supreme Court of W i sconsin has late ly be en invitedt o rev i se the se rulings , but i t has by a fu l l bench adhe re dto them in the most de cided manner, in B lake sl e e R ossm an ;

3announcing that the val idity of such a mortgage is

not an open que stion in this State ,”

and expre ssing the belie f that the rul e e l sewhere i s very gene rally , if not uni

versal ly , the same as here .

”T he te rse and incisive

language of Ryan , C . J . , is calculated to give this case a

leading position on the subject . H e sai d : “ Intent doe snot e nte r into the que stion . Fraud in fact goe s to avoidan instrument otherwise val i d . But intent , bona fide or

mala j ide , i s immate rial to an instrument p er se fraudu

lent and voi d in law . T he fraud which the law impute s toit i s conclusive .

2“ Fraud in fact imputed to a c on

tract (valid on i ts face ) i s a que stion of e vi dence ; not fraudin law . A nd no agre ement of the partie s in paro l c an aid

3. written instrument , fraudulent and voi d in law .

”

1 13Wis. 629.2 28Wis . 328.

2 43W is. 116

79

53 FR AUDUL E NT M O R T GA GE S O F M E R C I IA N D I S E .

It be ing urged upon the court that a se izure of the goodsin this case by the mortgage e , c laiming unde r the mortgage s , had given h im a val id posse ssion ,

this claim was

ove rrule d in de ci sive language , i t be ing considered imposs ible for the mortgage e to acquire any legal rights unde r a

transaction so fraudulent .

53 . D istinction in ca se of agen cy f or th e m or tgage e ;

re cen t ca se s — T he sti l l late r case of Fisk v . H arsliaw l

exhibited the fact of sale s of the mortgaged goods by themortgage r ; but i t turne d upon the que stion of the we ightof e v idence , as to whe ther the mortgage e had al lowed themortgage r to apply any of the proce eds of the sale s to hi sown u se ; i t was claimed that the proce eds were al l to be

remitte d to the mortgage e ; and the finding in the lowe rcourt in favor of the mortgage e on the se points was sus

tained, upon the we ight of evi dence , by the majority of the

court , without wi thdrawing or de tracting from the authorityof Blake sle e v . R ossman or the pre ceding case s . Cotton 21 .

Marsh 2 was cited and approved , wh e re the mortgage e of a

stock of goods , by hi s agent , put the mortgager in posse ss ion , with instructions to s e l l and remit the proce e ds and

this was he ld to be an arrangement not ne ce ssari ly fraudalent , but val id i f fre e from fraudulent intent .

O n s imi lar principle s , sale s of mortgaged chatte l s by themortgagor, W ithout the knowledge or consent O f the mort

gage e , wi l l not have the e ffe ct to avoi d the mortgage .

3

T he re cent case of David B irchard 4 involved a chatte lmortgage on a stock of goods , but the report doe s not disclose any re se rvation by the mortgage r of a powe r of saleof the goods , and the case was l itigated on the que stion O f

fraudulent inte nt .

In R ice Je renson ,

5 though the mortgage was one of a

1 45 W is . 665

2 3 Id. 221

3 Barkow v. S anger, 47 Id. 500.

80

54 FR AUDUL E N T M O R T GAGE S O F M E R C HAND I S E .

In Davi s R ansom a stipulation on the face of the mortgage al lowed the mortgage r to se l l the goods in the usualcourse of trade , with a prov i so that the proce eds shou ld bepaid ove r to the se cure d creditors . T he mortgage r hadpaid ove r certain of the proce eds to one of sai d creditors ,and thus farhadmanife ste d an intent not fraudulent . N ot

withstanding this , the inhe rent v i ce O f the arrangem ent wasre lentle ssly exposed by the court . Thi s instrument doe snot prov ide for posse ssion remaining with the mortgage rw ith in the me aning of the S tatute , but se eks , unde r cove rof a m e i tgage , to enable the me i tgage i , in defiance of hi sC l

‘

C dltt O l S , t o i e tail goods ac c 0 1ding to the course of m er

chants , and i s against the ev i dent pol icy of the statute . In

e ffe ct , thi s inst i ument i s no l e ss than an assignment O i bi llof sale of a stock O f goods , re se rv ing to the assignor theabsolute dominion 1and powe r of disposition for the p e i iodof fifte en months , during which time i t contemplate s thatthe assignO I shal l , with the goods , carry on his busine ss of

storeke eping as by him here tof0 1 e fol lowe d , that what heshould add to the stock shou ld enure to , and be come a pai tof , the assigned or mortgaged property ; and that , for thi speriod , the creditors O f the ass ignor should be hinde red insubj e cting the property to the satisfaction of the ir legal demands .

2‘ T he law give s no sanction to such ar

rangements , and, howeve r we l l intended in f ac t , wil l holdthem vo id as against creditors , as tending to encourage and

su stain frauds , and to hinder creditors in the col le ction of

the ir just demands .

R e ad Wi l son 1 was a l ike case , with a l ike clause in themortgage but here the mortgage e s had, in fact , taken poss e ss ion under the mortgage be fore the conte st arose , evenbe fore the exe cution creditor had taken out his exe cution ,

and they had commence d and continue d for some time thesale of the goods for the satisfaction of the ir debt ; and the

1 2 " 77.

DO C T R INE O F T H E A M E R I C AN M A JO R I T Y . 55

court he ld that they were prote cte d by the ir possess ion un

der the circumstance s of the case , without abandoning theprincip le s settle d in the forme r case .

In Barne t v ; Fergus 1 the mortgage cove red a stock intrade among othe r things , but did not on its face grantpermission to the mortgager to se l l the goods ; th is permiss ion appeared by ev idence to have be en given a liunde .

T he court re -affirmed i t de cisions that such an agre ementon the face of the instrument amounted to fraud in law ;and, as to the particular case , he ld that such permissiongranted would be such a pe rvers ion of the mortgage fromits l egitimate purpose s as to withdraw from its prote ction ,

and place within the reach of othe r cre ditors , all the prope rty which the mortgage e had permitt ed the mortgager toholdf or sa le in the ordinary cours e of his busine ss .

”

This court had previously decided , in O gden v . Stewart ,2

that in a case l ike Barne t v . Fergus , all l ien of the mortgage i s lost by a sale of the goods , and that the vendee

/

from the mortgage r acquire s a t it le “

to them . I II the lastnamed case , the di stinction i s taken that as the mortgagewas on its face

'

free from any imputation of a fraudu lentagre ement , the p erm1ss10 n by the mortgage e that sale s bemade by the mortgager affecte d his l ien only as to that portion of the goods al lowed to be so ld , and i t was unaffe ctedas to those goods which were not , dire ctly or by impl ication ,

covered by the permission to se l l .55 . T h e doc t rine adh e re d t o in I l l inois . Cleave s

Herbert“might poss ibly induce doubts as to the intentionof the Ill ino i s Supreme Court to adhere to thi s rule . T he

case was a chatte l mortgage on a stock of l iquors and saloonfurniture and fixture s , containe d in a saloon ,

”the grantor

to retain posse ss ion of sai d property , and at hi s own

e xpense to ke ep , and to use and enjoy the same unti l de

1 51 I II. 352.2 29 Id. 122.

55 E R A D U L E N T M O R T GA GE S or M E R C HAND ISE .

fault , e t c . T he Appe llate Court could not se e that to“ ke ep , use and enjoy thi s property was de s ignedly to

al low the grantor to se l l i t , but thought i t poss ib le the juryhad conside re d the ke eping of the l iquors intact for thepurpose of improvement by age , the use of . i t meantin the conveyance . Hence the ve rdict of the jury in favorof the transaction ,

upon confl icting evidence , was allowedto stand . But doubtle ss , this case , l ike Fisk v . Harshaw 1

and Yate s 11 . O lmstead ,2 i s to be taken only as an adjudication upon the province of the jury to se ttle disputed que stions of evi dence ; inasmuch as we find thi s court , le ss thanfour ye ars late r , ho lding , in Simmons Jenk ins ,

3 that anysuch arrangement be twe en mortgage r and mortgage e ,whe the r expre s s 0 1

2 implied , even i f proven by circumstance s , to al low sale s at re tai l by the mortgage r, wil l render the conveyance unavai l ing as against creditors . Therei s also a plain adherence to the rule of Barne t v . Fe rgus , inthe later case of Goodhe art C . Johnson} whe re the samecourt sustain the conveyance then in dispute ; carefully dist inguishing the case from Barne t v . Fe rgus by the fact thatthe sale made in thi s case was for the expre ss account of ,

and under the dire ction of the mortgage e , except in thre einstance s whe re inconside rable portions of the propertywere so ld by the mortgage e for hi s own benefit , which werethought not sufficient to inval idate the otherwise legal trans'

action .

But the que stion i s place d beyond doubt by the more re

cent case s of Gre enebaum Whe e ler 5 and Dunning v .

Mead ,6 both de cide d at the Septembe r term , 1878 . In

Greenebaum v . Whe e ler the chatte l mortgage was on the

mate rial s and stock in busine ss of acarriage factory , the

mortgager continu ing the busine ss andmaking sale s , and re

taining a certain sum p er month for the use of himse lf and

1 A nte, sect. 53.

3 76 Il l . 479 .

5 90 Id. 296.

3 A nte, sect . 4 1. 88 Id. 58 .

6 90 Id. 376.

DO C T R INE O F T H E A ME R IC A N M A JO R IT Y 56

family . T he court sai d : If th is was not intended to defraud othe r creditors , i t certainly was we l l calculated to doso , as i t place d al l of Keach ’

s prope rty beyond the ir reachfor fifte en months , and enab led him to carry 0 11 hi s busine ssw ith the property pre cise ly as though it was not incum

be re d . Such a transaction must be he l d to beagainst the po l icy of the law , as t ending to de lay and

de fraud cre ditors . If such mortgage s or pledge s we resanctioned , i t would form one of the most convenientand e ffe ctual means of hindering and de laying creditors in col lecting the ir debts that cou ld be dev ised .

”In

Dunning v . Mead , the mortgage covering a stock in tradewas val id on its face , inasmuch as i t did not stipulate forsale s by the mortgage rs . But on the day after its exe cu

tion , the mortgage e s , by le tter, authorized the mortgage rsto continue to se l l the mortgaged property at re tai l , and re

tain the proce e ds subje ct to the ir orde r. It appeare d inproof that thi s was used as a cove r to enable the mortgagersto appropriate the procee ds to the ir own u se . T he courtsustained the instruction to the jury that this mortgage wasvo id as to cre ditors , saying t hat it had be en repeatedlyhe ld by th is court that such a transaction was fraudulent ,and referring to the case s above cited .

MIS S O UR I .

56 . T h e doc t rine a s ap p l ie d in M issouri. — T he S u

preme Court of Missouri at first he ld that sale s unac c ompanied by posse ss ion , whe ther absolute or conditional in the irterms , we re in law fraudu lent and vo i d p er 36 , independentof statute s re spe cting fraudulent conveyance s , and independent of the intentions of the partie s . S e e R ocheblave v.

Potte r,1 Foste r v . Wal lace ,

2 S ibly Hood , 3 and King v .

Bai ley ; 4 the se decisions extending over the period from

1 1 M o. 561 ; 14 Am . D ec . 405.

2 2 Id. 231 .

3 3 1d. 9 .

4 6 Id. 7GI

N)

Ol

o

56 rR A U D U L E N T M O R T GA GE S O F M E R C HANDI S E .

1825 to 1840 . But. in 184 1 thi s rule was compl e te ly abandoued , and in Shepherd Trigg ,1 R os s and

King Bai ley ,

3 the contrary rule was e stablished that posse ssion left with the vendor rai se s no que stion of fraud inlaw, but mere ly a que stion of fraud in fact , to be submittedto the j ury . It i s somewhat remarkable that King Bai

l ey , in 6 Mo . , appears to be the same case which i s de cidedin a p recise ly opposite manner in 8 M o . “T hen th is court ,in 1848 , was confronte d with a case of a trust dee d on a

stock of goods in trade , i t was at first ev idently embarrassedby the prominence given in its e arl ier de ci sions above cite dto the que stion of posse ssion alone and was l ed to sustainthe transaction in qu e stion on the ground that no provi s ionfor sale s by the grantor appeared on the face of the de ed ,notwithstanding the fact appeared that sale s at re tai l we reregularly made with the as sent of the cre ditor .

4 But in

subsequent case s in which the power of sale was re se rve dto the grantor on the face of the instrument , thi s was he ldfraudulent and voi d in law, there be ing no que stion of factto go to the jury ;

5even in case the instrument bound the

grantors to apply the proce eds of sale s to the repl eni shmentof the stock ; 6 and, also , where the v ic ious provi s ion doe snot appear in te rms on the face of the de ed , but i s ne c e ssarily impl ied from othe r provi sions , as in Stanley Bunce 7

and B i ll ingsley v . Bunce ,8 wh ere the de eds cove re d all the

merchandise , which the grantor might at any t ime withintwe lve months purchase for the purpose of renewing or re

pleni shing said stock .

” This c lause , i t was he l d , ne c e s

sarily implied that the grantor S hould re tain posse ssion of

1 7 M o. 151.

5 Wal ter v. W imer, 24 Id. 63.

2 7 Id. 245.

7 27 I d. 269.

3 8 Id. 332. 8 28 I d. 547.

4 M i lburn v. Waugh, 11 Id. 369.

5 Brooks 2

0 . W imer, 20 I d. 503 ; M art in v. M addox, 24 Id. 475 ; M art inR ice , 24 I d. 581.

86

DO C T R INE O F T H E A M E R I C A N M A JO R IT Y . 56

his goods and proce e d with h is busine ss as a merchant .The se principle s are reaffirmed in Armstrong v . Tuttle 1 andLodge Samue ls ,? and so stands the law in Missouri . Itis true the Supreme Court of thi s State found itse lf , inState v . Taske r 3 and Voorhi s v . Langsdorf ,4 embarrassedin construing de eds that covere d goods “ wh ich may be

added from time to t ime to sai d stock , and “al l t hings

what soeve r now , 0 12 that may be hereafter, use d , bought , or

be long to the sai d party of the first part in the course of

hi s usual trade or busine ss ; and was uInable to find in

the se prov is ions an intent , ne ce ssari ly implied , to re servethe power of sal e in the usua l course of busine ss . S o the

instruments in the se case s were uphe ld , whi le the principlegoverning the earl ier case s was sti l l re cognized . But the

court had, in R e ed 11 . Pe l le tier ,5 applie d the rule that an

agre ement of the grante e to al low the grantor to continuese l ling the goods , could be e stablished by ve ry slight evi

dence , so as to de feat the conveyance ; and in Hal l C .Webb ,6

Napton , J . , who prepare d the opinions in the two case s in31 M o . , had expre ss ly disavowed the authority of JudgeStory ’ s O pinion in Mitche l l “Tinslow ,

7and antagonized

his views . Lodge Samue l s , in its turn , had tended to a

renunciation of the exceptions adopte d in State v . Taske rand Voorhis v. Langsdorf . There the mortgage conveyed“ the entire stock in the broom-making busine ss late lyowned by the grantors , cons isting of al l the broomcorn on hand , and all the brooms and machinery ,

”and le ft

the grantors in posse ss ion . From the se re citals the plainmeaning was inferred that the grantors were to continue tomanufacture and se l l brooms ; and the de ed was declaredfraudulent and vo i d upon its face .

1 34 M o. 432.

2 50 Id. 2043 31 Id. 445.

31 Id. 451.

56 FR A UDUL E NT M O R T GA GE S or M E R C HANDI S E .

But in the later case s of lVebe r 11 . Armstrong 1 and

Hewson v . Tootle ,2 this court d isregarded Lodge S am

ue ls on this po int , and re turned to the e xceptions ah

nounc ed in State v . Taske r and Voorhis v . Langsdorf .

It i s p lain , howeve r, that the dist inct ions introduced bythe se de cis ions into the jurisprudence of Missouri are

te chnical , and re late to the que stions of ev idence and

procedure , and in no way affe ct the substantial lawof the subj e ct . T he substantive rule adopted in the

earl ie r case s is expre ss ly re cognized and approved . But

it i s cons idere d that the court should draw no conclusions from ce rtain e quivocal language in the de ed , because it i s so e asy to introduce ev idence as to the extentto which sale s we re actual ly made by the mortgage r, andthen l e t the jury find the facts . In Voorhis v . Langsdorf 3

it was said : T he court i s not cal led upon or warranted inpronouncing a de e d vo i d upon a mere conj e cture . It i seasy to S how , a liunde , how the truth i s , and go to the juryon the facts . If they are sati sfie d that thi s was the understanding and intention of the partie s , where the de e d may

be S i lent on the subj e ct , the same re sult fol lows as thoughthere was an e xpre ss 0 1

2 impl ied stipulation in the instru

m ent . T he jury w i l l pronounce i t vo id , under instructionsfrom the court , if the ev i dence warrants such a conclus ion .

”

A nd thi s was the purport of the distinctions taken in the

later case s abov e re fe rre d to . In Webe r Armstrong ,where there was no ev idence , outside the instrument , of anagre ement to al low sale s , the court found not a syllable inthe instrument from which it c an be fairly impl ied , much le s sfrom which it must ne ce ssari ly be impl ied , that the grantorswere to have the power to se l l In Hewson v . Tootle , thecourt found considerable evi dence to support the v iew thatthe sale s were al lowed only to rai se money to be appl ied on

1 70 M o. 217 2 72M o. 632 8 31 M O . 451.

88

59 FR A UDUL E NT M O R T GA GE S O F M E R C HAND IS E .

Thompson v . F oe rste l 1 was distingu i sh ed from the case sabove re fe rred to , by the circumstance that the power of

sale of the prope rty ( cons isting of horse s , cattle , wagons ,1nd farm utens i ls ) was to be exercise d only by consentof the mortgage e , and the proce eds thereof we re al l st i l l toremain unde r the l ien ; which arrangement was sustained asval id . InNash v . Norment ,2whe re the mortgage i tse l f wasde clare d inval id as a se curity , the new transaction of the

de l ive ry of the prope rty was he l d to give the mortgage e a

title there to .

58 . L im ita t ion s u p on t h e app l ica tion o f th e ru l e

If i t be stipu lated that al l the proce eds of sale s made by thegrantor whi le he remains in posse ss ion , shal l be applie d tothe payment of the debts se cure d , pre sumptions wi l l in M issouri be in favor of the transaction , and i t wi l l be sustaine din the absence of ev idence tending to S how that the p roc e eds of sale s we re not so appl ied .

3

T he application of the ru le in Missouri , i s in practicesubj e ct to the l imitat ion that the fraudu lent mortgage willbe voi d only as to thos e goods which are subj e ct t o such a

power O f sale , and w i ll be val id as to the re s idue ; 4 a doc

trine which i s d isal lowe d in some of the State s .

TE NNE S S E E .

§ 59 . E ar l y case s in T e nn e sse e .— C onfl ic t-ing de ci

sion s .— I h Tenne sse e , e arly case s had applied a s imilar

rule to mortgage s upon prope rty consumable in the use ,

holding that the re se rvation of posse ssion and use in suchcase s was ne ce ssari ly a re servation for the benefit of thedebtor, and the refore fraudu lent ; 5 and those de cisions

1 10 M o. App. 290 .

2 5 M o. App . 545 .

3 M e tzner Graham , 57 M o . 404 : Hewson v. T ootle , s upra .

4 S tate v. D’

O ench, 31 M o. 453 ; Donne l l v. Byern, 69 M o. 468.

5 S ommervi lle v. Horton, 4 Y erg. 540 ; 26 Am. D ec. 242 ; S impson 17.

M itche l l, 8 Y erg. 416.

DO C T R INE O F T H E A M E R I C A N M A JO R IT Y . 59

were fol lowed as authority in Alabama , Massachuse tts ,Missouri , Miss i ss ippi , and othe r State s in some of thembe ing re l ied on as applying in princip le to the case s of

mortgage s on stocks of goods . It , there fore , appears singular that , in re spe ct to the latte r class of case s , the reShou ld have be en any doubt or vaci llation exhibited in the

Tenne sse e de ci s ions . But the re servat ion to the use of the

grantor by way of sale of the mortgage d goods has not always appeare d as clear to the Supreme Court of thi s Stateas has the re se rvation, intrinsi cal ly no plainer, by way of

use and consumption . In the first case which arose , Galtv . D ibre l l ,1 it took but few words to de te rmine , withoutre fe rence to authorit ie s , that a re se rve d power of sale madesuch a mortgage fraudu lent and vo i d in law , though therewas no fraud in fact , and nothing more was intended thanan hone st de s ign to se cure a ju st debt be cause such a re s

e rvat ion “ i s total ly inconsistent w ith the rights of othe rcreditors , and of ne ce ss ity vitiate s the transaction . In

Peacock v . Tompkins ,2 the de e d of trust se cured , be s ide scertain bona fide debts , an indebtedne ss which was create donly to repre sent a sum t o be advance d to the grantor forthe support of h imse lf and family , and for the further con

duct of his bus ine ss ; and it was de clare d to be for thi sreason fraudu lent by ope rat ion of law , without refe renceto the intention of the partie s .

3

Saunde rs v . Turbevi l le 4 tended to a contrary rule ,

though not de cisive . The re a sort of qual ified jo int-posse ssion b etwe en the grantor and truste e was provided for but ,

in fact , the grantor had posse ssion and contro l for his ownpurpose s and benefit , w ithout regard to the de ed of tru st .T he arrangement was sustained as a valid se curity , on the

1 10 Yerg. 145

2 M e igs, 3173 S e e a s imilar case in C onn. , cited in sect. 80.

4 2 H um . 272.


ground that the debtor’ s offence in using the property forhis own benefit was a sl ight one , and was committed w ithout the know ledge or assent of the creditors secured by thede e d of trust .But in Doyle v . Smith , l where the terms and c ircum

stance s of a gene ral assignment for cre ditors , to a truste ewho took posse ss ion , showe d that the main obj ect of the

transact ion was the cont inuance of the debtor’ s busine ss ,the plain intent to re se rve a benefi t to the latte r was he ldsufficient to v it iate the entire transact ion . T he pendulumosci l lated to the othe r extreme inH i ckman v . Pe rrin ,

2 wherethe obj e c tions to a re se rv e d powe r of sal e w e re abandoned ,and a mortgage on a stock of goods was sustained on the

two grounds , drawn from the Michigan case of G ay 27 . B idw e ll ,3 first , that no cre ditors appeare d with claims o lderthan the mortgage , and that subsequent cre ditors could notcomplain of the transaction , ( as i f i t we re l ike a vo luntaryconveyance ) , and se cond , to ho ld that a m erchant could not

make such a mortgage w i thout closing his doors would beto hol d that no merchant could mortgage his stock .

60 . T h e qu e stion se t t l e d Bank v . E bbe rt , and l ate rca se s .

— But al l the se aberrations have be en corrected inthe case of Tenne sse e National Bank E bbert ,4 where a

trust de e d upon a stock of goods al lowe d the grantors tocontinue the ir bu sine ss , making sal e s as before , and to re

plen ish the ir stock from time to time , but profe ssed to makethi s subje ct to all the provisions of the trust .

”In a fu l l

and logical opinion , the characteri stics of such mortgage sare fre e ly and thoroughly examined , and the corre ct ru le i slaid down w ith such perspicu i ty as to give to th i s case a

le ading pos ition on the subj ect . T he pecul iar v iews ad

1 1 C old. 15.

2 6 Gold. 135.

3 7 M ich. 5 19.

9 He is. 153 ; 2 S o. L aw R ev. (l st series) 175,92

6 1 FR AUDUL E NT M O RT GAGE S O F M E R C HAND IS E .

have , not the prope rty , but only the profits derived from itsu se , subje cted to the ir demands . Unde r the principle s se tt l ed in Doyle v. Smith and Bank v . E bbert , this trust-de edwas de clared void on i ts face .

T he rule was again expre ssly appl ied in the later case of

M c C rasly v . H ass loc k ,

l where , after stating the nature and

c haracte r of the transaction be twe en the partie s , the caseof Bank v . E bbe rt is re fe rred to as an authority conclus ivet o stamp the transaction as a fraud .

In the re cent case of Nai ler v . Young} the same authority i s c ite d as contro l l ing the case then before the court ,whe re the vendor of a stock of goods attempted to reclaimthem by v irtue of a re cital in the note g iven for the pur

chase price , as fo l lows : “A l ien i s re tained on said stock orstocks of goods at Crowde r’

s mi ll unti l the purchase moneyis paid .

”T he proof showe d that the goods were so ld for

the expre ss purpose of be ing dispose d of at re tai l by -the

vende e , in h is own busine ss , and for h is own benefit , andwere in part so disposed of .

61 . F rau du l en t t ende n cy a viciou s fe atu r

e in su ch

t ran sa ct ion s . T he opinion in the last name d case was del ive red by Cooper, J who had, as Chance l lor, prev iouslyde cide d the case of Phe lps v . Murray ,

3 in which the princip le s appl icab le to thi s c lass of case s had be en examinedw ith care and minutene ss . A stock of goods had in thi sc ase be en cove re d by a trust de ed , which on its face was des igned to include accre tions of after-acquired goods , andal lowe d sale s , the profits thereof to be applied to the pay

ment of the se cured debt . It was claime d that this conveyance shou ld be de cre ed val id by a chancery court , be causeenforceab le in e qu ity . T he learne d judge , howeve r, dist inguished the case from those whe re a contract to mortgageafte r-acqu ired property i s enforceable in equ ity , by the c ir~

2 7 L ea, 7353 2 T erm. C h. 746.

DO C T R INE O F T H E A M E R IC A N M AJO R IT Y . 62

cumstanc e that it was an attempt to create a l ien on chatte ls , whose only profitable use i s as article s of comm e rce ,

and as to which an unl imite d powe r of dispos ition was re

se rved . H e furthe r explaine d that such conveyance s are

not de eme d fraudulent by reason of any p resump tion of

fraud which is in confl ict w ith the genera l ru le that the i11tent to de fraud i s a fact to be proven in every case ; butthat they are condemne d be cau se they are against publicpo l icy , in that they throw open toow i de a door for possible fraud they are contracts “ inval id at law , and not

enforceable in equ ity .

”

A dic tum in the re cent case of M cC ombs v . Gui ld} theO pinion be ing by the same judge , shows that the two case slast named , and that of Bank v . E bbe rt , are cons ide red as

toge the r evi dencing the ru le on th i s subje ct in Tenne s se e .

It was the re stated furthe r that , in analogy to this doctrine ,

the court would probably tre at a sale of chatte ls , re se rvingtitle to the vendor, but al low ing the vende e to se l l them as

as his own , as tending to hinder and de lay creditors ,”

or

as contrary to pub lic po l icy and void ,”in accordance

with the N ew York case s above cited} and the Conne cti cutcase of Lewi s v . M c C abe .

3

M IS S IS S IPPI .

62. T h e doctrine advis e d ly adop t e d in M iss issip pi .

In Harman v . Hoskins 4 the Supreme Court of Miss iss ippifol lows the

“

ru l ing in R obinson v . E ll iott and Co l l ins v .

Myers , and holds that a conveyance in trust of a stock of

goods in trade , with a prov ision al lowing the grantor tocarry on his usual bus ine ss , i s fraudulent and void . Likesome othe r courts , thi s court infers from the v i cious character of such an instrument that the partie s there to intend

1 9 L ea, 81.3 S e e p ost, sect. 79.

2 A nte, sect. 42.

4 56 M iss. 142 (1878)

62 FR AUDUL E NT M O R T GAGE S or M E R C HAND IS E .

to commit the fraud that re su lts . It is said in thi s case“ T he e ffe ct and ope ration of a written instrument is a

que stion of law , and where the natural and ne ce ssary c on

sequence of its provi s ions i s to de lay ,hinde r , or de fraud

creditors , the court w i l l so de clare . T he intent is gathe redfrom the instrument , and 110 exte rnal aid is nece ssary to deve lop i t . A party wil l be he ld as intending the naturaland inevitable e ffe cts of his acts . If his de ed ne ce ssari lyoperate s to inte rpose unreasonable hindrance and de lay to

creditors , or to defeat them altogethe r , the intent w i l l be a

conclus ion of law . Though thi s view of the se case s se emsbased on the i de a that a fraudu lent intent must always ap

pear, it doe s not in substance differ from the v iew that thetransact ion i s actual ly fraudulent , irre spe ctive of intent .T he intent here imputed to the grantor i s found alone in theinstrument and in the circumstance s of the case , not in hi smotive ; and the view of the que stion above pre sented i se qu ivalent to saying that the transaction i s inherently fraudul ent . In the same case , i t was furthe r said Though theac t , in a moral v iew , was entire ly fair, sugge ste d by affe c

tion , and though the real purpose was to pay al l debts , ye tif the conveyance be of the character and operation justde scribed , i t w i l l not stand against creditors That characte r and operation we re furthermore portraye d in the sesuccinct te rms 9 If the de ed shou ld be val id , the e ffe ctwoul d be that White he ld a shifting lien , which took ho ldof the goods on hand , and as the se were so ld off, i t separate d i tse lf from the e ffe cts in the hands of Harman ’ s custom e rs , but at once fastened upon the note or book-accountowing by the buye rs andwhen the me rchandise was broughtinto the store ,

i t at once be came impre sse d W I th the l ien ;from the me rchandise i t passed to the debts of the cu stome rs who bought it . A nd thu s , the plan was that the bus i

1 p. 145. p. 147.


time . It i s thus very manife st that the obje ct was not toapply the se things to the payment of the debts , but to se

cure the debtor ih the ir posse ssion and enjoyment . T he

re se rvation in the conveyance , of so much of the se articl e sas was ne ce ssary for the support of the property ,

puts an

impre ss of'

fraud upon i t , from which the re i s no e scape .

It was a direct benefit se cure d to the debtor at the expenseof h is creditors , which the law doe s not sanction .

”

I n Summe rs v . R oos 1 a cas e was pre sente d of a trustde ed conveying , among othe r property , a stock of goods intrade , to se cure a debt due in nine ty days . T he de e d wassustained as val id , and the case was distingu i she d from C o ll ins v . Myers and simi lar case s , by the circumstance s thathe re was no power of sale containe d in the de ed , and thatthe truste e had taken posse ss ion unde r the de e d be fore ad

verse cre ditors had asserte d the ir claims . It appeare d inthe de ed that the grantor was to re tain posse ssion unti l defaul t , and i f he fai le d to pay at maturi ty , he was then to

de l ive r posse ssion of the re al e state and of so much of sai dpersonal property as may then be on hand .

” This was notconstrued as be ing e qu ivalent to a powe r of sale . E v idencethat the beneficiarie s had permitte d the grantor to makesale s of the goods was he ld to be only a circumstance to goto the j ury . T he case , i t shou ld be observed , was a suit atlaw to try the right of property in the goods . But in the

case of Hi l liard v . Cagl e } the same conveyance came againbefore the court for examination , in a chancery suit broughtby creditors of the grantor to se t asi de the conveyance ;and on the whole case as then pre sented , the de ed was dec lared fraudu lent and voi d as to othe r creditors . In part ,the conduct of one of the beneficiarie s unde r that de ed , ininducing othe rs to se l l goods to the grantor on credit , infiuenc ed the court to its conclusions . But in the careful

1 42M iss. 749 ; 2Am . R ep . 653 2 46 M iss. 309

9 8

DO C T R INE O F T H E A M E R I C A N M AJO R IT Y . 64

review by the court of al l the facts of the case , it appearsthat the circumstance of the grantor’ s continu ing to tradew ith the goods made a de ci ded impre ssion . Among otherthings , i t was said T he arrangement b e twe en Bagge ttand Summe rs was antagonisti c to the regular and usualcourse of bus ine ss , tende d to bre ak down comme rcial confidenc e and credit , and to entai l losse s upon those who trustedthe ir goods and prope rty to the re tai l merchant .

”T he ih

tent O f the parti e s was he l d immate rial ; the court did not

think the arrangement was made with a fraudu lent schemeand purpose , to de feat e xisting or future creditors but

s ti l l considered the whole scheme fraudulent as to subse

quent creditors , as much so as i f i t had be en contrive d withthat motive and for that

'

obje c t . T he de cis ion in Summe rs v. R oos was interpre te d as meaning simply that thec onveyance was not vo id upon i ts face .

5 64 . T h e doc trine e st ab l ish e d in M ississippi . In the

re cent case of Joseph v. Levi ,1 the doctrine of Harman v .

Hoskins i s reaffirmed , briefly and unqualifiedly . T he

grounds for thi s O pinion as t o such conveyance s are state dto be , be cause of the ir susceptibi l i ty of abuse , by reasonof the e ase with which they may be employed for wrongpurpose s , to the injury of creditors A nd t his i s state das the se ttle d doctrine in Missi ssippi , in Baldwin v. Flash}where i t was he l d that the claim of the beneficiary to the

goods conveyed by a similar instrument might be sustained ,on the ground that prior to the intervention of adversecreditors , and by a new , independent ac t , he had taken , and

the grantor had surrende re d to him the goods on hand ; and asto thi s , the case was to be submitte d to a jury under properinstructions as to the good fai th and hone st intent of suchsurrende r. This , i f fre e from fraudul ent intent , would

1 58 M iss. 8 43 2 58 M iss. 593 ; 59 Id. 61.

99

66 FR AUDUL E NT M O R T GAG E S O F M E R C HAND IS E .

pre sent only the ordinary occurrence of a pre ference of one

creditor by an embarrasse d debtor.

CO L O R ADO .

65 . T h e doctrine w e l l se t t l e d in C o l orado . In thisState , in the case of Bank v . Goodrich ,1 a mortgage on a

stock of goods in trade , whi ch al lowe d the mortgage r toretain posse ssion of the mortgage d prope rty , and use and

enjoy the same , unti l de fau lt made , was he ld to be fraudu l ent and vo id ; the ru le be ing regarded by the court as

too we l l settled to requ ire argument ,” though the Il linoi s

and some other case s we re re ferred to as authoritie s . T he

evidence furnishe d by the mortgage i tse lf was supplemente dby proof that the mortgagers not only continued in posse ss ion of the goods , but carried on the ir bus ine ss in i ts ordinary course , manufacturing and se l l ing goods as usual , tothe knowledge of the mortgage e .

O RE GO N .

66 . O re gon adopt s t h e doc trin e ; re gistrat ion of ln

strum e n t Imm a t e ria l . In O regon , the earl ie st case wasO rton v . O rton} which pre sente d the que stion fairly , the

prope rty mortgaged be ing a stock of goods , the mortgagerof which re taine d posse ss ion and the powe r of sale , andapplie d the proce eds of sale s to his own use with the pe rmission of the mortgage e but the mortgage was du ly fi ledfor record , and i t was claime d that the statut e s , provid

2ing for the registration of such mortgage s , removed all

pre sumptions of fraud which cou ld arise in any such case .

It was , howeve r, he ld that thi s statute did not in any man

ne r apply to the case , but the que stion st il l remaine d to beconsidered , as to the legal e ffect of such an agre ement , inview of the rights of the mortgage r’ s creditors . T he mort

1 3 2 7 O regon, 478100

68 FR AUDUL E NT M O R T GA GE S O F M E R C HAND I SE .

“agre e s and obligate s h imse lf to ke ep always on hand a

stock of goods e qual in qual ity , de script ion and value , tothe pe rsonal prope rty he re in above mentioned , unti l thedebt which thi s de e d i s drawn to se cure , i s paid in ful l .

”

Deducing from thi s clause the infe rence that the grantorthereby re tained not only posse ssion , but an absolute powe rof sale , the court he ld the de e d fraudulent , though the rewas no othe r proof of fraudulent intent . A nd in Gardne rv . Johnston} whe re a mille r had conveyed al l hi s mill ingstock and prope rty to se cure debts due in about a year andfive months , the c ircumstance that a large portion of the prope rty conveye d was grain , purchased for mil l ing , was takenas conclusive of an understanding that the grantor shoulduse and dispose of the prope rty ; and the case was he l d tocal l for an app l ication of the rul e in Lang v . L e e and othe rsimi lar case s , to wit : that whe re there are provi s ions in thede ed which wi l l enab le the grantor to defeat its expre sse dobj e ct as a se curi ty , the de e d i s fraudu lent p er S e . N e c e s

sary implication was he ld as e ffe ctive , for such a const ruc

tion , as an expre ss provi sion In the de ed .

T H E FE DE R AL CO UR T S

68 . T h e doctrin e e nforc e d in th e C ircu it and D is

t rie t C ou rts .— The re are nume rous case s in the Uni te d

State s Circu i t and D istri ct Courts , many of which arose inbankruptcy , in which mortgage s of th is class have be enhe ld fraudu lent and void , not with re fe rence to the pre v is ions of the bankrupt law, but independently of that 0 1

2

othe r statute s , and under the general ru le s of the commonlaw . Decis ions to thi s e ffe ct have be en given in such case s ,in the federal courts of nine different State s ; and severalof the se were rende re d prior to R obinson v . E l l iott . In

Smith v . M cL ean} R e Forbe s} and R e Bloom ,

4 the powe r

I 9 w . Va. 408 .

3 5 B iss. 510 (His )2 10 N . B. R . 260 (M iss ) . 4 17 N . B. R . 425 (N ew Jersey).102

DO C T R INE O F T H E AM E R IC A N M A JO R IT Y . 68

of sale and dispos ition appeare d upon the face of the instrument . In M cL ean v . Bank} Bowen v . Clark} R e Kahley}R e Cantre l l} R e Morri l l ,5 R e Burrows ,6 Smith v . E ly,7

Catl in v . Currier,s and R e Kirkbride ,

9 i t was shown by e vi

dence aliunde . In Crooks v . Stuart ,10 there we re two

mortgage s , one of which exhibite d such a powe r upon its

face , i t be ing shown as to the othe r by evi dence a liunde .

It appeared to the court by clear impl ication from the stipu lat ions of the instrument , in R e Manly ; 11 and, infe ren

t ial ly , in the same manne r al so in R e Pe rrin .

12 T wo latecase s in the Supreme Court for the D istri ct of Co lumbia ,Smith v . Kenney 13

and F ox v . Dav idson ,

14 di spose of the

general que stion in l ike manne r ; though in the first name dcase , the po int was not under de cis ion , the case turning on

anothe r que stion . In F ox v . Davi dson , the powe r of saleappeared by cle ar impl ication .

In R e Kirkbride ,

15a case aris ing inMissouri , D i l lon , C . J . ,

re spe cte d and applie d the ru le adopted in that State as to

such conveyance s , and he l d the mortgage in que stionf raudu lent and vo i d as to the goods in trade , though val id as to

the fixture s , which were not include d in the re servation of a

powe r of sale . In this case the re servation appeare d , noton the face of the instrument , but from ev idence a liunde .

1 3 M cL ean, 623 (O h io,2 1 B iss. 128 ; 5 Am. L . R eg. 203 (W is.

3 2B iss. 383 ; 4 N. B. R . 124 , 378 (Wis ).4 6 Ben. 482 (N ew Y ork).5 2 S aw. 356 ; 8 N . B . R . 117 (N evada) .6 7 B iss. 526 ; 5 C . L. J. 241 (Indiana).1 10 N. B . R . 553 (N ew Y ork).3 1 S awyer, 7 (O regon).9 5 Dillon, 116 (M o . )1 2M c C rary, 13 ; 7 F ed. R ep. 800 (Iowa,1 2 Bond, 261 ; 3 N . B. R . 75, 291 (O hio).12 7 N. B . R . 283 (N ew Y ork).13 1 M ackey, 12; 9 Wash . L aw R ep. 69.

14 1 I d. 102; 9 Id. 263.

15 5 Dillon, 116

u—H

69 FR AUDUL E NT M O R T GAGE S O F M E R C HANDI SE .

D i llon , C . J . , stated the Missouri rule as fo l lows : “A c on

veyanc e of pe rsonal prope rty to se cure cre ditors , when thegrantor, by the understanding of the partie s , expre ssed orimplied , i s to remain in posse ss ion of the property , wi th a

powe r of sale , i s voi d upon a principle of public po l i cy em

bodied in the State , irre spe ctive of any que stion of actualand intended fraud .

”

6 9 . T h e frau d il l u s tra te d in th e op in ions o f t h e

cou rts .- In R e Kahley ,

1 the court sai d : “A mortgageaccompanied by such an agre ement or consent i s no prot e ction to the mortgage e . Such an arrangement de feats itse ssential nature and quality as a mortgage , so that i t can

not in a legal sense be cal led a se curity . It i s nothingmore than the expre ssion of a confidence by the mortgage ein the mortgage r .

”In Cat lin v . Currie r} i t was sai d

“ T he law al lows the prope rty pledged to remain in the

posse ss ion of the mortgager, if the mortgage i s put on recordas notice to the worl d . But i f the mortgage be also coupledw ith a condition or agre ement that the mortgager may treatthe goods as i f he we re the owne r of them , may se l l them at

his option and re ce ive the proce eds to hi s own use , suchcondition or agre ement avo ids the mortgage . T he two can

not stand toge ther . Such use of_the mortgaged property

by the mortgage r i s utte rly inconsistent wi th the idea of

giving a pledge or se curi ty to the mortgage e . In l egale ffe ct i t i s a sham ; a nu l l ity ; a me re shadow of a mortgage , only calcu late d to ward off othe r creditors ; a conveyance in trust for the benefit of the pe rson making it , andthe re fore vo id as against cre ditors .

”T he law assume s

absolute ly , and, beyond doubt correctly , that in no circumstance s c an such a transaction be uphe ld in j usti ce to creditors . That i s this case , and whatever may have b e en theintention of the parti e s , the law, for the prote ction of the gen

1 2 B iss. at p . 387 2 1 S aw. 12- 14 (1870)l

104


the se case s , the mortgage rs be ing allowed to make sale s onlyas agents for the mortgage e who was to contro l the proc e eds , the transaction was he l d val id . In Harvey v . Crane 1

and R e E ldridge } the que stion , though poss ib ly involved ,was not rai sed or considered . T he forme r of the se case swas conside red only as to the statutory val idity of chatte lmortgage s , and the latte r only as to the matte r of afte racqu ired prope rty . In Bank v . Smal l} the powe r of saleappeared by implication , but the que stion was not conside red and the main qu e stion di scusse d was that of a de layin re cording the mortgage , which was considere d and de

cided w ith re ference to the intent of the partie s , the courtreferring afterward to Mitche l l v . \Vinslow 4

as an authority .

Fie ld v. Bake r 5 in l i ke manner ignore s the que stion whichmight have b e en rai se d upon the re cord , and the case i sconsidered sole ly with re fe rence to other oue stions as to theval idity of chatte l mortgage s .

In Johnson v . Patterson} i t wi l l be observed that the ru l eunde r the Georgia statute , which i s re cognized and appliedin the de cision , i s taken as a ru le of prope rty , which shouldbe local ly binding upon the federal courts . T he same ideaevidently contro l led the de cision in R e Kirkbri de .

7 P er

contra , in Crooks v . Stuart} the doctrine of R obinson v .

E l l iott was he l d conclus ive upon the court , for the reasonthat no Iowa statute made any contrary prov i sion ; and the

we l l settled doctrine of the Iowa courts on thi s subje ct wasdisregarded , M c C rary ,

C . J . , saying : This is a doctrineof general juri sprudence , not depending for i ts supportupon any provi sion of State law ; and we are , there fore ,bound by the decis ion of the Supreme Court of the UnitedState s .

1 2 B iss. 496 ; 5 N . B. R . 218 5 12 B1atch . 438.

2 2 B iss. 362 (W is ). 5 2Woods, 443.

3 7 F ed. R ep . 837 (M e .

7 5 Dillon, 116.

4 2 S tory, 630.

8 7 F ed. R ep. 800 ; 2M cC rary, 13.

106

DO C T R INE O F T H E AM E R IC A N M A JO R IT Y . {5 71

71 . A n e ar l ie r d e cision by t h e S u p rem e C ou rt .

This principle of law was not wholly devoid of support inthe expre sse d v i ews of the Supreme Court , even be foreR obinson v . E ll iott , though

‘ i t was in that case considere dand discussed as a new proposition in that forum . T he

que stion arose incidental ly in Bank of Leavenworth v .

Hunt .

1 I n that case i t appeared by ev idence outside themortgage that the mortgagers of a stock of goods in traderemaine d in posse ss ion and continu ed to se l l the goods , w iththe assent of the mortgage e , unti l a certain time , when thebalance remaining was transfe rre d to the mortgage e underthe mortgage . T he question at i s su e was , whe ther thi stransfe r , be ing made in v i ew of and j ust prior to the bankrupt cy of the mortgager , was val i d and e ffe ctual unde r thebankrupt law . The Supreme Court de cl ined to assume itto be so in the face of the te st imony , which showed it tobe invalid s in se ve ral re spe cts ; one

.of which was that , i f

the facts had be en found by the jury which the te stimonytended to e stabli sh , as to the powe r of sale , the mortgagewou l d have be en fraudulent and voi d as against creditors ,under the commonlaw ru le announce d in Wood v . Lowry .

2

T he re cent case of Wood v . We imar} which arose inMichigan , may

—be here noti ce d , though me re ly be cau se i texhibits an ent ire disregard of the que stion . It pre senteda mortgage on a stock of goods , under which the mortgage rwas suffe re d to continue busine ss and to se l l goods as u sual ,and creditors attache d the remaining goods be fore the ma

turity of the preferre d debt , complaining as to the statement made of the amount the re of . T he case was

.

heard inthe Supreme Court on the errors assigned , and ne i ther bythe counse l or the court was the que stion of the re se rved

pow er of sale pre sented , discussed , or considered . Apparently th is que stion was treate d by counse l as one not fairlyari sing in a Michigan case }

1 11 Wal l. 391 2 17Wend. 492.

3 104 U. S . 786.

4 S ee the M ichigan l aw on this subj ect stated, post, sects. 88, 89.


72. A n t agon ist ic c ase s in t h e U n ite d S ta te s cou rt s .

In addition to Bre tt v . Carter} the re are in the reporte dde cis ions of the Unite d State s Circu it Courts , two case swhi ch ho l d the same v iew of the law , and anothe r in whichthat view is ve ry strongly favore d al though not expre ss lyadopted . T he case last re ferred to i s Mil le r v . Jone s} inwhich Associate Justice Strong heard on appeal a ce ntreversy involving a mortgage 0 11 a stock of o

goods . T he onlypoint de cided , wi th re fe rence to the que stion of a powe r of

sal e , is one of pract ice . T he trial court had thought theimplication of a powe r of sale so strong upon the face of

the mortgage , that the case wou l d fal l w ith in R obinson v.

E l l iott , and he accordingly dire cted a verdict adverse to theconveyance . This was , on the appeal , he l d e rroneous .

T he case was distinguishe d from R obinson v . E ll iott , bythe circumstance that no powe r of sale was given in the instrument , but that i ts re cital s expre sse d by impl ication a

denial of any such power . Though the proof showe dthat such powe r had be en e xe rcised , i t Was neve r

the le ss e rrone ou s to dire ct a verdict . T he existence or

non- existence of an agre ement or understanding to al lowsale s i s a fact to be found by the jury , unde r prope r ihstru c t ions . In reve rsing the de cision of the D istri ct Courton th is ground , M r. Justice Strong re fe rred to the diversity of opinion on the main que stion conce rning the re servation of a powe r of sale unde r such mortgage s ; and whilehe did not in any manne r dissent from the conclus ionsreached in R obinson v . E l l iott , h e spoke with apparent approval of the contrary authoritie s in Maine , Massachuse tts ,Iowa , and Michigan , and sai d It has in many case s be ende cided that a mortgage of chatte l s which permits the mortgager to remain in posse ss ion , and to dispose of the goodsin the ordinary course of his bu sine ss , i s not of course

2 15 N. B . R . 150 (N ew Jersey,

73 FR AUDUL E NT M O R T GA GE S O F M E R C I IA N D I SE .

hol d and enjoy al l and s ingular the premise s hereby granted ,and to se cure and tak e the rents and profits there for, to and

for the ir own use and benefit . ” T he grantors continuedthe ir bus ine ss in the usual way for two and one -half years ,when they be came bankrupt ; and the su i t was brought bythe ir ass igne e to re cove r prope rty remaining on hand fromthe mortgage e who had taken posse ssion of i t . F or the as

signe e , i t was argued that the re served powe r and dominionove r the mortgaged property , w i th the right to se l l for the irown u se , re se rved by the mortgagers , was incons istent withthe nature and obj e cts of such a mortgage , and made thetransaction inval id , as against the pol icy of the law . T he

learned judge conceded that the re serve d power of sale wasfairly deducible from the language of the instrument , butthought thi s not inconsi stent with the valid ity of the mortgage . Sai d he : I am not aware of any pol icy of the law , or

of any principle of law , which make s any conveyance of thissort inval id as to creditors , i f they have ful l notice , or may

have full notice of i t by the exercise of reasonable dil igence .

’

I n h i s v i ew , the material que stions to be conside red were , theregistration of the mortgage , the posse ss ion retained by themortgager , and the mortgagee

’ s l ien on the newly acquire d0 1

2 manufacture d goods by substi tution . T he m ere re tention of posse ss ion by the mortgage r was not fraudulent p erse , and registration operate d as constructive and sufficientnotice to creditors . T he que stion of the re serve d powe r ofsale was treated as a que stion of the e fficacy of a l ien bysubstitution . As authoritie s in support of the val id ityof such conveyance s , the case s of Abbott v . Goodwin 1

and

Macomber v . Parke r 2 were cited . E ach of the se case s ,however, has feature s of marked di stinction from Mitche l lv . Winslow . In Abbott v . Goodwin , whe re the re was a

conveyance of a stock of goods , the sale s we re to be made

1 20 .M aine, 408 2 14 P ick. 4971 10

DO C T R INE O F T H E AM E R I C A N M A JO R IT Y . 74

by the grantor sole ly as agent of the grante e s , who se curedto themse lve s the contro l of the entire proce eds of sale s ;and the goods in dispute had be en purchased with the se proc e eds , through hi s agency , unde r the ir authority so the

e lement of the grantor’ s control of the sale s , or of the pro

c e eds thereof , for his own u se , or at his own discretion , did

not exist in the case . Macombe r v . Parke r pre sented a caseof the manufacture of bri cks , in the brickyard of H . L . ,

by E . as the ir agent and jo int- contractor ; the manufacturedbri cks to be divided , H . L . re taining a l ien on E .

’

s sharethereof unti l payment of the ir advance s . This arrangementbe ing attacke d by a cre ditor of E . as fraudu lent , was sustained by the court on the theory of an agre ement for thepledging of the bri cks as they shou ld be made .

’

N o e lementexisted in the case of a dis cre t ionary power of sale by E .

H e had be en al lowed to se l l only as agent for H . 85 L .

The se case s , toge ther with an E ngl i sh case cite d by M r .

Justice Story , pre sente d only thi s que stion of e quitab le l ienby substitution , without any feature of a re serve d power ofSale , such as the learne d

.

court re cognize d in Mitche l l v .

W inslow . Whi le , the re fore , the de ci s ion in thi s case , l ikethat in Barron v . Morri s , i s distinctly in favor of the

val i dity of such a conveyance , it se ems to have be en givenwithout ful l consideration of the re al difficu lti e s inhe rent insuch transactions , and in de ference to the supposed authori ty of case s which are , in fact , irre levant .

IND IANA .

74 . T h e st at e of th e l aw in I nd iana prior t o R ob in

s on v . E l l iot t .— I t i s fortunate , in some re spe cts , that when

the Supreme Court of the Unite d State s was again cal le don to examine and pass upon thi s que st ion in R obinsonv . E lliott , the case be fore it was one originating in Indiana ;for in that State the law upon the subj e ct of fraudulent ihtent was in so pe cul iar a condi tion as to ne ce ssitate a c lOse

1 11

74 FR AUDUL E NT M O RT GAGE S or M E R C HAND IS E .

analysi s of the pre cise province of the court in deal ing withthe subje ct . Jordan v . Turne r 1 he ld a mortgage of cattleand horse s fraudulent whe re the grantor had re tained posse ss ion , and traded and trafficked wi th the stock ,

muchafte r the manne r of T wyne

’

s Case . T he posse ssion of the

grantor was he re he l d to be conclusive ly fraudu lent as a

matte r of law . But in the case of Wat son v. W i ll iams }which pre sented a que stion of posse ss ion m ere ly , and wherethere was no ev idence that the mortgage r used , trade don, or treated the mortgaged goods as his own ,

”the ru le

was deduced from al l the E ngl ish and Ame ri can de ci sionsthat fraud , in al l case s of me re posse ss ion , was a que stionof fact for the jury . T he same ru le was appl ied in the su c

c e eding case of Hankins v . Ingol s} and i t remains the doctrine of Indiana on the que stion of posse ss ion alone . T he

distinguishing feature of Jordan v . Turne r was the powe r ofsale . In that case , the same judge who soon after pronounce dthe op inion in Watson v . Wi l l iams , said : T he mortgagernot only kept posse ss ion of the goods , but he al so use d and

treate d them as hi s own converte d them to his own use ;

traded and trafficked on them as his own ; so ld them as hi sown , and converted the proce e ds to hi s own use . The seproce edings are not only contrary to the face of the mortgage , but are inconsi stent w ith , and in dire ct oppos ition tothe intention , spirit and me aning of it , and render it whol lyfraudu lent and void as to creditors .

”

N ew A lbany Ins . C o . v . W i lcoxson ‘1 had gone far towardapprov ing the doctrine of the N ew York , W i sconsin , O hio ,

and Minne sota case s . It sustaine d the finding of the lowe rcourt , t hat a prov i s ion in a mortgage upon a stock of goodsin a manufacturing e stablishment , al lowing the grantor tocontinue his busine ss , was ne ce ssari ly fraudulent and voi das against creditors , and cited the advanced case of Fre e

1 3Black f. 309 a 4 Id. 35.

2 4 Id. 26 ; 28 Am . D e c . 36 . 21 Ind. 355

1 12

75 FR AUDUL E NT M O R T GA GE S or M E R C HANDI S E .

fraudulent intent , which i t referred to the j ury , was onlythe f a c t of such intent in case s hinging upon the actual intent of the partie s . It was we l l sai d in that case : If thecourt de termine s that the l egal e ff e ct of the instrument i s tode lay creditors , the instrument i s re j e cted . The re i s nooccasion to go into the que stion of intent , for that could notaid a voi d instrument . Intent wi l l not contro l the plainlegal e ffe ct of the terms of an instrument and if that e ffe ctwould be to de lay creditors , any intent that the party mighthave had to the contrary wou ld not he lp the matter. T he

United State s Supreme Court take s the same v iew , and,

re cognizing its duty to de clare the law in al l case s of fraud ,supplements the foregoing v iews w ith a clear i l lustration of

that fe ature of fraudu lent tendency in the transaction, and

of that conduct to which the law conclusive ly impute s afraudulent e ffe ct , which are totally independent of any of

the intentions of the actors .

T he same distinction had be en early taken in N ew Yorkin Goodri ch v . Downs 1 and Cunningham v . Fre eborn} vizthat the que st ion of fraudulent intent to be le ft to a j urywas a wholly different que stion from that of fraud in law ,

which the courts are impe l led to de clare existing in any

conveyance which re serve s a benefit to the assignor .

3

75 . T h e doct rin e of R ob inson v . E l l iott adopt e d in

I ndiana .— Thi s de cision of the highe st court in America

has not be en without influence even in Indiana . T he que st ion has be en again pre sented the re , in M obley v . Le tts }

Perhaps it was impossible that the i ssue s could be moresharply pre sented , with a v iew of e l ic iting a conclus ive adjudicat ion of the que stion , in re spe ct to not only

1 6 H i ll , 438.

2 11 Wend. 240.

2 S e e a further considerat ion of this quest ion, post, sect. 151.

4 61 I nd. 11

114

DO C T R INE O F T H E A M E R I C AN M A JO R IT Y . 75

the Indiana statute before re ferre d to , bu t the common lawdoctrine also . In the Circui t Court , a jury had found a

general verdict in favor of the mortgage e , and against hisantagoni sts who were execution cre ditors of the mortgagerand had also found by a spe cial verdict , at the instance of

the mortgage e , that there was in the transaction no fraudu

lent intent . But at the instance of the exe cution creditors ,the j ury had al so found , by spe cial verdict , an understanding be twe en the partie s that the mortgager was to cont inuein posse ssion of the stock of goods with the right to c on

tinu s busine ss and t o make sale s as usual ; though theyfound also that the mortgage e did not consent to have theproce eds of sale s applie d to the payment of any debt be side shis own . T he Circu i t Court , de clining to give j udgment forthe exe cution creditors on the spe cial ve rdict they re l ie d e n ,

gave j udgment for the mortgage e on the genera l ve rdict inhis favor. Thus it was imperative upon the appe l late courtto determine whe ther the statute as to fraudu lent intentcontrol led the case , and al so whe ther the que st ion of intentwas at all involved . N or did the court he s itate , as in N ewAl bany Ins . C o . v . Wi lcoxson , to de cide the case uponprinciple . T he stipu lation in the mortgage , which al lowe dthe mortgager the priv i lege of using the stock of goods ,was he ld to imply ne ce ssari ly the sale the reof by h im inthe ordinary course of his busine ss ,

’

andnothing e lse . T he

propos ition advanced argumentative ly in N ew Albany Ins .

C o . v . Wi lcoxson , that “ i f a mortgage i s exe cuted mere lyas a cloak to prote ct property in the hands of a mortgagerfrom creditors other than the mortgage e , the mortgagerst i l l re taining posse ss ion , and the right of dispos ition , and

the se facts appearing upon the face of the instrument , theywou ld , as a legal p rop osition , v it iate i t , and a court shouldS O de clare ,

”was adopte d as the lawof the case ; and this ,

and the further propos ition that “ if , as in thi s case , themortgage doe s not contain any stipulation or covenant , on

1 15

76 FR A UDUL E NT M O R T GAGE S O F M E R C HAND I SE .

the part of the mortgager, that he w i l l apply the proce edsof the sale s of the mortgage d stock , so u se d by him , to the

payment of the mortgage debt , 0 12 the debt of any othercreditor, in our opinion , such mortgage i s , and ought to bede clared to be , vo id on i ts face , as against the other creditors of the mortgager,

” we re announced as the law of

Indiana . R obinson v . E l l iott was cited w ith expre ss ap

proval . Thus early was real ized the confident expe ctationof M r . Justi ce Davi s , expre ssed in the latter case ,1 that whena s imi lar case shoul d again ari se in the Suprem e Court of

Indiana , i t wou ld be de cided in accordance with the viewswe have pre sented .

This de ci s ion was advisedly adhered to in Davenport v.

Fou lke } in which case , again , no difficulty was experience din construing the re taine d posse ss ion and use of the stock '

of goods , under the circumstance s of the case , as ne ce ssari lyimplying a powe r of sal e , which wou ld be “ the only rea

sonable use the mortgage r cou l d make of i t . M r . H e r

man’ s condensed statement of the doctrine was cited w ithapproval “ It i s not the simple fact of posse ss ion by a

mortgage r that wi l l avoi d the mortgage , but it i s the posse ss ion w ith the power of sale which defeats the instrument .

’ 3

T he same ru le will not apply ,however , i f the stipulation

be that the proce e ds of sal e s , afte r paying expense s , are tobe pai d to the mortgagee s ; th is arrangement wi l l be sus

tained unle ss shown by extrinsi c facts to be otherwi se ob

jec tionabl e .

4

76 . D oub tfu l case s in I ndiana .— In Morri s v. Stern}

where the mortgage had no stipu lation on the subje ct , an

1 22Wall . at p . 526 .

2 68 Ind. 382; 34 Am. R ep. 265

3 Herman on C hat . M orts. 236 .

4 M cL aughl in v. Ward, 77 I nd. 383 ; Lockwood v. Harding, 79 Ind. 129.5 80 Ind. 227.

1 16

76 F RAUDUL E NT M O R T GA GE S O F M E R C HAND ISE .

doubts as to the pre sent pos ition of the Supreme Court ofthis State upon the que stion . As in Mobley v. Le tts , whilethe mortgage e had a gene ral verdict in his favor, hi s adversarie s had a sp ecial ve rdi ct finding the fact of an agre edpowe r of sale . T he court , whi le reve rs ing the judgmenton another and diffe rent ground , de cl ine d to de clare thetransaction fraudulent by reason of the re serve d powe r ofsale , and said that the que stion of fraud in th is case wasone o f fact for the jury , not one o f law to be de cided bythe court . M ob ley v . Le tts was overlooked , and no k indredcase was refe rred to ; the authori tie s cited be ing Morri s v .

Stern , M cL aughlin v . Ward , Lockwood v . Harding , and

R ose v . Col ter ; 1 in which last named case a reserved powerof sale was not involved .

1 76 Ind. 590.

T H E MAJO R I TY DO C T R INE F A VO RE D . 77

C H A P T E R IV .

T H E M A JO R IT Y D O C T R IN E F A VO RE D .

S ec T I O N 77 R e served power of sale recognized in Pennsylvania as a vic

ious feature .

78 . F raud not re st ing in int ent , dist ingu ished .

79 . R e serve d power of sale re cognized in C onnne c t icut as a vic

ious feature .

80 . F raudulent t endency a fatal feature of such conveyance s .

81 . T he North C arol ina v iew of fraud in conveyance s ; a legalque st ion pure ly, but re st ing on int ent .

82. C onfus ion re su lt ing from supposed dist inct ion be tween fraudin law and actual fraud .

83 . At tempt to solve the difficulty by treat ing fraud in conveyauce s as a que st ion of proce dure .

84 . R enewe d difficulty in case s involving a reserved power of

sale .

85 . T he doctrine in que st ion enforce d as a ru le of pre sumpt iveevidence .

86 . Arkansas approve s the doctrine unqual ifiedly.

87 . Nebraska adopt s the doctrine w ith l imitat ions .

PE NNSYL VA N I A .

77 R e s e rve d p ow e r o f sa l e re cogniz e d a s a viciou sfe a tu re . Pennsylvania i s one of those State s which ad

he re s to the rule , early adopted , that retention of posse ssion by the grantor in a sale or mortgage of chatte l s i sfraudulent p er se .

1 Posse ssion i s in th is State de emed tobe the matter of principal cons ideration in thi s class of

case s . This feature of he r juri sprudence al lows her courtsbut l ittle opportunity for considering the pre cise que stionnow under discussion . But the case s which invo lve the

1 C arpenter v. M ayer, 5 Watts, 483 G erman v. C ooper, 72 Penn.

S t. 32

77 FR AUDUL E N T M O R T GA GE S or M E R C HAND IS E .

e lement of a power of disposition of the goods are in accordw ith those from other State s already refe rred to . In

lVe lsh v . R ekey} a mortgage of crops , unde r which themortgager was to re tain po sse ss ion and make sale s , themortgage e to have noth ing but the proceeds of the sales ,was he ld fraudul ent . It was stipulated in the instrumentthat Hayden shal l take care of the crop whi l e grow ing , cut ,thre sh and carry it away , under the dire ction and contro l ofWe lsh , who i s to have hi s money ou t of t/ze p rice of i t .

”T he

court sai d : Taking care of grain , grow ing , reaping , thre shing and setting it , include al l the notorious acts of ownershipthat are ordinari ly e xerci sed in re lation to this spe cie s of

property ; whi le the ac t of giv ing dire ctions i s a matterusual ly known only to the parti e s .

”S o , notwithstanding

the admitted puri ty of the ir intentions ,” thi s transaction

be twe en the parties was de clared fraudu lent as to creditors ,upon the authority of R yal l v . R olle } on the subj e ct of retaining posse ss ion wi th powe r of disposition of the goods .In Clow v . Woods } a somewhat s imilar case , invo lving a

tannery and the tanning bus ine ss , including hide s in vats ,the posse ss ion of the mortgager was he ld fraudulent unde rthe authori ty of the E ngli sh case s . G ibson , C . J . , did notobj e ct to the transaction altoge ther on the ground of the

posse ss ion not having be en immediate ly de l ivered ,”

and

thought , i f thi s we re the only que stion , a good reasonmight be assigned for the mortgager continu ing in posse ss ion as the agent of the mortgage e But the difficu l ty inthe case was that afte r a ge neral conveyance , without a

schedule , the grantor continued in posse ssion , and went onw ith the tanning bus ine ss as be fore , so that he might havecontinued to carry on bus ine ss , and to purchase hide s , barkand tools as usual and whe ther he Should be able to she l ter

1 1 Penn. 57 2 1W i lson, 260.

3 5 S erg . R . 275 ; 9 Am . D e c . 346

120

78 FRAUDUL E N T M O R T GA GE S or M E R C HAN D I SE .

embraced in the bill of sale was se cre tly re served for the useand advantage of R ol ler.

”

78 . F rau d n ot re s ting in inte n t , d ist ingu ish e d .

Throughout the Pennsylvania de ci sions upon the subj e ct ofconveyance s in fraud of credi tors , the distinction i s tak enand carefu l ly pre served , be twe en fraud proven by a fraudulent intent , and fraud not re sting in intent . In W i lt ‘

v .

Frankl in} the distinction was thus state d by Tilghman , C .

J “Although the statute 13 E l iz . i s bottomed on the

supposition of an immoral intention , ye t it has be en judgedne ce ssary to de termine that certain circumstance s , which inthe ir nature tend to de ce ive and injure creditors , shal l beconsidere d as sufficient ev idence of fraud .

”In numerous

case s , i t is de clare d that the rule as to mere re tent ion of

posse ssion , above referred to , i s a rule of law for the courtsto ac t on , andwhich cannot properly be submitted to a jurythe fraud in such case s i s a sort of constructive fraud , orfraud in law } T he infe rior courts are som etime s criti ci se dfor fai l ing to observe thi s distinction . Fraudulent intenti s in certain case s the vital que stion to be submitted to a

jury ; but when the facts are found , whe ther they e stabl ish fraud re sting in intent , or fraud of some othe r kind , i ti s for the court to render judgment as to the fraud . T he

case of M cKibbin v . Martin 3exhibits the very pronounced

vi ews of the Supreme Court of this State upon thi s que stion . It i s with manife st re luctance that a transfer of a

hote l bu sine ss under doubtfu l and suspiciou s circumstance si s there al lowed to stand , after a verdict of the jury thatthere was an actual and sufficient c hange and de l ivery of

posse ssion to the grante e ; but thi s verdict i s taken as

1 l B inn. 502; 2 Am . D ec . 474

2 S ee Worman v. Kramer, 73 Penn. S t. 378 ; C raver v. M i l ler, 65 Id. 456,

Shattuck v. Haworth, 9 1 Id. 449 ; Boud v. Bronson, 80 Id. 360.

3 64 Penn. S t. 352 ; 3 Am . R ep. 588.

122

T H E MA JO R IT Y DO C T R INE FA VO R E D . 79

removing the case out of the category of those where posse ssion was re taine d by the vendor. T he occasion was

deemed opportune for a full and explic it statement of thedistinction obse rved in thi s State . Clow v . Woods wasde clared to be the Magna Charta of Pennsylvania law on

the subj e ct ; and after defining actual fraud as be ing identic al with fraud re sting in the intent of the partie s , the courtgave thi s definit ion of legal or imputable fraud : Fraud inlaw consi sts in acts which , though not fraudu lently intended , yet as the ir tendency i s to de fraud creditors , if theyve st the property of the debtor in his grante e , are vo i d forlegal fraud , which i s de emed tantamount to actual fraud , areful l evidence of fraud , and are fraudu lent in themse lve s ,the pol icy of the law making the acts il legal . ” This S tatement of the rule s of law was approved in E vans v . Scott . 1

In the l ight of this distinction , the case s of Clow v . Woods ,Hower v . Ge e saman , and Bentz v. R ockey may be more

clearly understood , in re ference to the ir adjudications of

fraud as conclusive ly shown by the re tention of the goodswith discre tionary powe r of disposition , and entire ly irrespe c tive of all qu e stions of intent .

T he Pennsylvania case s cited not only Show that the doctrine of R obinson v . E l l iott , Col lins v . Myers and kindredcase s me e ts with favor in thi s State , but they indicatefurther that even if the doctrine of fraud as re sulting fromposse ss ion alone we re to be abandoned , the courts wou ldadhere to the view that posse ss ion accompanied by a discret ionary power of dispos ition must be considered fraudalent p er se .

CO NNE C T IC UT .

79 . R e se rve d pow e r o f sa l e re c ogn iz e d a s a vic iou s

fe at u re .- T he Supreme Court of E rrors of Conne cticut

reached a similar conclusion in B ishop v . Warner} but with

1 89 Penn. S t. 136 2 19 C onn. 460

123

79 FRAUDUL E NT M O R T GA GE S or M E R C HAND IS E .

out giving s imilar reasons for it s judgment . Mortgage s hadbe en given upon the stock in trade of a carriage manufac

tory ; the re was a formal de l ive ry of posse ssion to the

mortgage e s , after which the mortgage rs cont inued bus ine sswi th the goods as usual . T he court found that that “ upto the time of the attachment , the mortgagers were carryingon an extens ive manufacturing busine ss with the mortgagedprope rty supplying the ir customers from day to day se l ling the carriage s as they were finished , and as they wereable to find purchase rs ; “ general ly , we are aware , profe ss ing to ac t as agents for those in whom it was claimed ,for the time be ing , was the paper title to the property but

ye t , in fact , acting wi thout accountabi l ity t o any one ; pay

ing the ir debts to other creditors with the mortgaged prope rty , as i f they we re the undispute d owners .

”T he vivi d

picture thus afforde d of the ne ce ssary re su l ts of the transaction satisfied th is inte ll igent court O f the v i ce inherent init

, w i thout the ne ce ss ity of re fe rence t o case s adjudicatede lsewhe re , T he principle announce d by the court as the

ostens ible basis of i ts de cision , was s imply that the posse ss ion of the mortgage e s was co lorable and not real ; and i ti s intimate d that the parti e s must have intended , be causethey must have known , the fraudulent consequence s of the irtransaction . It is p lain that the court fe lt and appre ciatedthe ne ce ssary e ffe ct and tendency of the transaction , as in

itse l f sufficient to make i t fraudu lent ; but the case wastreated as turning on intent , doubtle ss in de ference to thetraditional practice of te sting all such case s by the statute of13 E liz . This court has , howeve r , clearly se en that actualfraud ne e d not always re st on intent . It had alre ady be enannounce d in Pe ttibone v . Stevens 1 and Be ers v. Botsford}as the doctrine in this State , that when the facts of a caseare asce rtained , fraud then b e come s a que st ion of law from

2 15 C onn. 19 ; 38 Am . D ec . 57.

2 13 Id. 146 .

124

8 1 FR AUDUL E NT M O R T GA GE S O F M E R C HANDIS E .

have led to a di ffe rent re sult . It was conceded that therewas much force in the doctrine that pos se s s ion , with the j usdisp onendi, renders such transactions fraudulent , withoutregard to the re al intent of the partie s ; and i t was said ,

If , howeve r, the contract in que stion must be construe dto m ean that the plaintiff authorize d M cA voy t o se l l theproperty as h is own , we shou ld be constraine d to ho ld it soabsolute ly incons i stent w ith the re tention of t itle in the

plaintiff , as to waive or make voi d the condition .

” 1

80 . F rau du l e n t t e nd en cy a fat a l fe atu re . T he

principle of the case of B i shop v . Warner was involved inPe ttibone v . Stevens} where the fai l ing debtor, instead of

re taining posse ss ion and power of sale of hi s stock of

goods , took a note from a third party , the payments on

which he was to use for the support of h imse lf and family ,

giving to the same third party his own note for an e qualsum

,which was to be se cured by the conveyance of the

goods . This , as a re servation to the use of the debtor, wasc ondemne d . T he court sai d the que stionwas whe the r thetransaction i s not one of the kind ca lcula ted to hinder , de layand de fraud creditors , and. ru le d on i t accordingly as a

que stion of law , adding , we have no he s itation in sayingthat , i f tolerated , i t wou ld b e come an inlet to fraud, and

lead to al l imaginable abuse .

” 3 The se citat ions Show thatf raudu lent tendency i s plainly re cognize d in Connecticut assufficient to inval idate such conveyance s }

NO R T H CAR O L INA .

8 1 . T h e N orth C aro l in a view of frau d in c onve y

a u c e s A l e ga l qu e s t ion pu re l y , bu t re sting on in t en t .

A mong the State s which are now to be re cognized as ap

1 F or N ew York cases to the same e ffect, see ante, sect . 42.

2 15 C onn. 19 .

2 p . 26 .

4 S e e a s im ilar. case in T ennessee , cited sect. 59.

T H E M A JO R IT Y DO C T R INE FAVO R E D . 8 1

proving this ru le of law , i s North Carol ina . T he deci s ionsin this State , in the first case s pre sente d which invo lve d a

conveyance of a stock of goods in trade , w ith powe r of disposition , are somewhat pe cu l iar but the ir dive rgence fromthe general authoritie s 0 11 the subje ct pertains to procedurerather than to substantive law . This wi l l appear from an

examination of the current of earl ier adjudications in thi sState on the subje ct of fraudulent conveyance s in gene ral .O n qu e stions of fraud , the Supreme Court of this State hadalready made some pe cul iar dist inctions , which re latedmainly to procedure , as they have be en interpreted in the

later de cis ions .

It was we l l e stablished that re servations of whatever kind ,to the use of the grantor, would in North Caro l ina s e rve toinval idate a conveyance such as

.a paro l agre ement for

redemption ; 1 an agre ement that part of the property betransfe rre d to the debtor’ s wife and children ; 2 an agre ement to ke ep the transaction se cre t for a time ;

3or a pre f

e rence given to such creditors as will re lease in full }

O n the qu e stion of posse s s ion alone , under conveyance sof property , i t was se ttle d , afte r some discuss ion , that thiscircumstance furnished only pre sumptive evi dence of fraud ,which might be rebutte d .

5

In two case s , R uffin , C . J for the Supreme Court , hadc are fu lly explained and i l lustrate d the re spe ctive prov ince sof court and j ury in cases invo lving fraud in conveyance s ,in which it was clearly shown that al l such case s pre sent thee lements of both law and fact . In Le adman v . Harri s}whe re i t was claime d that the entire secre t purpose of a

1 Gregory v. Perkins, 4 D ev. L aw, 50

2 K issam v. E dmundson, 1 I red. E q. 180

3 H efner v. I rwin, 1 I red. L aw, 490

1 Palmer v. Giles, 5 Jones E q. 75

5 C ox v. Jackson, 1 Bay. 423 Ingle s v. Donalson, 2 H ay. 57

T rotter v. Howard, 1 Hawks, 320 R ea v. Alexander, 5 I red.

L aw,644

0 3 D ev. L aw, 144

8 1 PR A U D U L E N T M O R T GA GE S or M E RCHANDIS E .

conveyance was to se cure the property conveyed to the

benefit of the debtor , and the case thus pre sente d the que st ion o f fraudu lent intent , the learne d judge sa id : “ I donot que stion the powe r, nor the so le powe r, of the jury , to

find the intent , when i t i s to be made to appear by matterextrins ic of the de ed . But what intent i s in law fraudu

lent , the court must inform the jury ; e lse the law can have

no ru le up on the doc trine of fraud , and every case mus t

crea te its own law .

”A nd again , If , therefore , as i s men

tioned in T wyne’

s Case , a conveyance be take n for a truedebt , upon the understanding that the debtor i s to have theuse of the property , that although it i s apparently conveye din sati sfact ion or se curity for i t , yet the benefi c ia l e wner

ship is to be ivith the debtor , it i s vo id . Why ? Be cause i ti s taken , that in truth , it was not taken for the very purpose of sati sfying the debt , but unde r the cover thereof ,for the e ase and favor of the debtor , e ithe r general ly or for

some definite time . What temptations wou ld it not hold outto dishone st m en to run up score s , w ithout the small e st intention of making paym ent

,i f , by finding a fri e nd amongst

the ir creditors , they cou l d enjoy the ir property all the irl ive s against the other cre ditors ? ”

S o i t was he ld that thetrial court Shou ld have plainly to ld the jury that the imputedintent in th is case wou ld have rende re d the conveyancevoid , leav ing them simply to find the facts as to such intent .

A nd in Gregory v . Pe rkins} whe re the trial court hadrefused to instruct the jury that a se cre t agreement for re

demption wou ld render void a conveyance absolute on itsface , and had ru led that the que st ion of fraud was for thejury alone ,

”the appe l late court conce ived that its de ci sions

on the que stion of posse ss ion alone , as evi dence of fraud ,had be en misunderstood ; and R uffin , C . J furthe r ex

plained the law of al l such case s as fol lows 2 “ Fraud i smatt er of law . It is state d in the books to be a conclusion

1 4 D ev. L aw, 50.

2 p. 53.

8 1 FR AUDUL E NT M O R T GAG E S or M E R C HANDIS E .

tained posse ssion of a s lave . They are in e ntire harmonywith the nume rous case s in which mortgage s on stocks of

goods , w ith power of sale re serve d , have be en de claredfraudu lent p er se , w ith the s ingle exception that R uflin , C .

J . , did not make an: expl ici t re cogni tion of fraudulenttendency as a bas is of fraud , distinct from fraudulentintent . In the op inion of that learned judge and hisassociate s , fraud in disputed conveyance s always dependson intent ; i t i s ne ce s sary always that the intent to de

fraud be ascertained or admitted ; in case s where suchintent doe s not distinct ly appe ar, i t i s by a proce ss of

imputation of such intent that the law de clare s the transaction fraudu lent and where the rea l characte r of the agre ement i s invo lve d in doubt , a ve rdict of a jury on the factsi s requ ired , and i s always to be sought with reference tothe que stion of intent . The se opinions may be re ad betwe en the l ine s in the case s above named . They appearmore clearly in Moore v . Col l ins} Cannon v . Pe eble s 2

and Hafne r v . Irwin 3 in which last named case it was sai dby Gaston , J E very contrivance to the intent t o hindercreditors , dire cte d to that end, i s mal i cious , that i s to say ,

wicke d . Where such hindrance i s but an incidental conse

quenc e of an ac t not dire cte d to that end, and bona fide donewith anothe r and rightfu l intent , i t may be regre tted as an

unfortunate re sul t , but cannot be he ld to impart to the ac t a

wicke d 0 12 mal i c ious intent .

”E ven the se ni ce dist inctions

do not of ne ce s s ity confl ict w ith the i dea that a fraudu lenttendency i s inhe rently fraudul ent ; for i f i t be said t hat an

agre eme nt which has such a tendency cannot in law be c on

side red as done with a rightfu l intent ,” there wou ld be '

room for the exerci se of the North Carol ina imputation ofa fraudulent intent .

1 3 D ev. L aw, 1261 4 I red. L aw, 204

1 1 I red. L aw, 490

T H E MAJO R I T Y DO C T R INE FAVO R E D . 82

82. C onfu sion re su l t ing from su pp ose d dist in ct ionb e tw e e n frau d in l aw and a c tu a l frau d .

— But the princ ipal e lement of confusion in the se distinctions i s there su lt ing one as to 2 ‘ fraud in law and fraud in fact ,

”

involv ing , as i t doe s , the attempt to place fraud in lawand actual fraud in antithe si s , and to make the latte rterm synonymous with fraudulent intent . If fraud inlaw c an be only such fraud as the court c an de clare fromthe face of a c onveyanc e , 0 1

2 from facts which are susceptiblealone of a construction adverse to the transaction, and i factual fraud always has a fraudulent intent as i ts bas is , howc an the court find and de clare the fraud in any doubtful orcomplicate d case , when a j ury has rendere d a verdict infavor of the conveyance , no matte r how thoroughly the

court may be conv inced that its own v iew , primari ly , wouldhave be en otherwise ? This was the problem which waspre sented to the learne d court in Hardy v . Skinner 1 andYoung v . Booe .

2 In each of the se case s , there was a de edof trust upon property , including grain and prov i s ions ona farm , the use of which was re serve d to the grantor . I n

each case , the party attacking the conveyance claime d thatthis re servation of the use of consumable prope rty madethe

transaction fraudu lent in law, and aske d the j udgment ofthe court accordingly ; but i t was expre ssly admitted thatthe re was no intent to defraud creditors , and a ve rdict wasthereupon taken in favor of the conveyance . Thus theque stion was Sharply pre sente d of fraud as a conclusion of

law ,upon the facts of the case , irre spe ctive of the ve rdict

of a j ury . In Hardy v . Skinner, the re servation of the

use was for the period of thre e years ; and the SupremeCourt thought it was a singular and extreme ly suspicioustransaction , and that i t denoted a part of the purposeto have be en to secure a benefit to the insolvent debtor,

”

1 9 Ired. L aw, 1912 11 I red. L aw, 347

131

82 FR AUDUL E NT M O R T GA GE S or M E R C HAND ISE .

and intimated that the jury , as men of common sense ,should have so found . But even the inclination of the

court to re st the se curi ty of the creditors upon the fixe dprinciple s of the law , and not on the uncertain j udgmentof jurors ,

” did not avai l the creditors in this case . T he

verdict of the jury was base d , in part , on the admiss ionthat there was no fraud in fact , that i s , no fraudulentintent ; and the Supreme Court conside re d that the attacking party gave up his case by this admission ; and thatinasmuch as there might have b een othe r favorabl e circumstance s , not inde ed appearing in the case , but which mighthave be en assumed hy

‘

t he jury , the ve rdict cou ld not bese t aside the fraud could not be inferred abso lute ly , as

a dry matter of law , by the court .

”I n Young v . Booe ,

the re servation of the u se was for e leven months only , and

there we re othe r circumstance s in the case , favorable tothe se cure d creditor , among them be ing the fact that theposse ssion of the grantor was virtual ly as agent of the

creditor ; so that there was cons ide rable evidence in sup

port of the ve rdict . Sti ll , the c ircumstance s were so

suspicious in many re spe cts , that R uflin, C . J . , in hisopinion , sai d that without the admiss ion on the part ofthe defendant , that the re was 110 actual fraud intended inthe exe cution of the de ed , the court wou ld hol d the judgment to be e rroneous .

” Hardy v . Skinne r was referredto as an authori tyon thi s point , and as in that case , i t wasthe admission that the re was no fraudu lent intent in thecase , which sustained the ve rdict . It appears from the secase s that the distinction taken was not one of substantivelaw . But for the verdict of the jury , e ach of the se case swould have be en de cided otherwi se . Inde ed , in Dewey v .

Little john} where the same que stion arose in equ ity ,though the ultimate de cis ion was in favor of the convey

2 2 I red. E q. 4 95


by evidence and i t was he ld to be e rror in the trial courtto de cl ine to te l l the jury that the re was no such ev idence ,and to le ave the case w ith the jury upon a general chargeas to the matter of fraud .

”T he ru le s of law in such case s

were further state d as fo llows 2 t at const itute s fraud isa que stion of law . In some case s the fraud is se lf-evident ,when i t i s the province of the court to so adjudge , and thej ury has nothing to do w ith it . In othe r cases , i t dependsupon a varie ty of c ircumstance s , aris ing from the motiveand intent ; then it must be left as an open que stion of factto the jury , w ith instructions as to what , in law , constitute sfraud . A nd in other case s , there i s a pre sumption of fraudwhich may be rebutte d . Then , i f there i s any ev idencetending to rebut it , that must be submitted to the jury ; butif there i s no such ev idence , i t i s the duty of the court so toadjudge , and -to ac t upon the pre sumption . Fraud is ve rysubtle , and frequently e lude s the grasp , both of the courtand jury . When , therefore , the court has ho ld of it , therei s no reason for pass ing it ove r to the jury , unle ss there i ssome evidence that w i l l just ify them in coming to the c on

e lus ion that the pre sumption i s rebutted .

”T hi s case was

placed by the court , not in the first named class , where thefraud i s s e lf- ev ident , and i s so de clared by the court , but inthe third class , where pre sumptions are indulged . T he casethus turns upon thi s que stion of procedure , with re spe ct topre sumptive evidence .

84 . R enewe d d ifficu l t y in case s invol ving a re se rve d

powe r o f sa l e . S o when , in the re cent case of Cheathamv . Hawkins} a mortgage de ed was pre sented , conveying a

stock of goods , the mortgager re serv ing posse ssion of themfor nine months , the implication b e ing irre s i stible , fromthe very nature of the bus ine ss , that he was to continue inse l l ing and trading as be fore ;

”the case be ing recognized

1 76 N . C . 335

T H E M A JO R IT Y DO C T R INE FA VO R E D . 84

as unl ike and stronge r than the case s of Young v . Booe

andHardy v . Skinne r andye t the case was to be tried as a

jury case by the court , w ithout the aid of a jury ,new

que stions arose . H ow was the case to be tre ate d ? A nd

if such a conveyance were de eme d fraudulent , howS hould the

' fraud be de clared ? A nd again , i f the trialjudge Shou ld de cide , as was done in thi s case , that the de edwas not fraudu lent , how S hould an appe l late court , holdingthe contrary v i ew ,

proce ed in reversing the de cision ? In

analogy to the doctrine of the e arl ie r case s above cited , thecase was treated w i th re ference to the rule s concerningpre sumptive evidence . T he fatal feature s of such a transaction we re clearly unde rstood and v ivi dly portrayed .

Said the appe l late court : T he me rchandi se re tai led lostthe power of i dentity as soon as sold . T he corp us itse lfwas lost and de stroye d beyond pursu i t 0 12 re covery . T he

power to .se l l was the power to de stroy , and the sale wasthe de struction and e xtinction of the prope rty . If therewere othe r unse cured cre ditors at the t ime of this assignment , and no othe r prope rty of the debtor than that c onveyed in the mortgage , out of which cre ditors could makethe ir debts , the fraudulent intent would se em to be irrebuttable .

” But al l thi s was he ld to be only pre sumptiveevidence . This de e d approach e s the verge of be ingfraudulent in law , but i s not so . T o find fraud , as a mat

t er of law , i t must so expre ss ly and plainly appear in thede e d itse lf as to be incapab le of explanation by ev idencede/zors .

” If al l the other facts of the case had appeare din the de ed , the court could have pronounced it fraudulentin law . But as they appeare d a liunde , the case as pre

sente d did not cal l for a final j udgment , but for rebuttingev i dence . A nd inasmuch as there was no evidence to rebutthe pre sumption of fraud , the trial judge , as a court , e rredin instructing himse lf as a jury , that the re was ev idence tosustain his judgment ; and the case was remanded in order

135


that evidence to rebut the pre sumption might be introduc ed. O n the same princip le proce eded the case of Ho lme sv . Marshal l} whe re the re was a trust de e d upon a stock of

goods , the powe r of dispos ition appearing simply from the

re cital giving the grantors the privi lege of continuingthe ir busine ss for one ye ar . T he trial court had appli edto the case the rule of procedure approved inHardy v . Simpson , and had charge d the jury that the de e d was pre sumpt ive ly fraudu lent , and that there was no evidence to rebutthe pre sumption . T he appe l late court sustaine d the ver

dict , holding that the m e re ignorance of the grante e c on

cerning othe r debts owing by the grantor was no evi denceat al l in rebuttal of the pre sumption and thus the conveyance was de clare d fraudu lent . In t he succe e ding ye ar,again arose the pre ce ding case of Cheatham v . Hawkins}and this time with evidence offe red on both s ide s in re spe ctto the pre sumption of fraud ; and the trial court and theappe l late court we re both of the opinion that on the wholecase the pre sumption was not rebutted . T he mortgagede ed was accordingly adjudicate d fraudulent . T he case sof Col l ins v . Myers} Gri swol d v . She ldon} and Bank v .

E bbert 5 we re refe rre d to , with approval of the ir de clarations that such conveyance s we re fraudulent p er se ; and

i t was said : Acts fraudu lent in v iew of the law , be causeof the ir ne ce ssary tendency to de lay or obstruct the cre ditor in pursu it of his legal remedy , do not cease to be suchbe cau se the fraud as an independent fact was not then inmind . If a person doe s and intends to do that which , fromits conse quence s , the law pronounce s fraudulent , he i s h e ldto intend the fraud inseparable from the ac t . T o leave a

s tock of goods , afte r they have be en conveye d by mortgage ,in the debtor’

s posse ss ion , and subje ct to hi s exclusive con

1 78 N. C . 262 4 4 N. Y . 581.

2 80 N . C . 161.

5 9 He is. 153.

3 16 O hio, 547.

8 7 FRAUDUL E NT M O R T GAGE S or M E R CH AND ISE .

way , so as to pre se rve the harmony of the State j urisprudence on the subj ect of procedure . T he re se rvation of a

powe r of sale in the usual course of bu sine ss doe s not c onstitute se lf- evi dent fraud , or inak e the conveyance fraudulent p er se ; but i t cre ate s a pre sumption of fraud so strong ,that theore tical ly i t i s almost impossible to rebut i t

, and in

practice i t i s quite so . T he trial court i s not allowe d to declare such a conveyance fraudulent p er se ; but on the otherhand , i t must te l l a jury to accomplish the same re su lt byapt appli cat ion of the rule s of pre sumptive evidence ; and

shou ld a jury fai l to do this , there must be a new trial tothe same end be fore another j ury . Such conveyance s donot , therefore , fare be tter in the courts of thi s State thanin those of Virginia , N ew York 0 1

2 O hio .

ARKANS A S .

86 . A rk an sas approve s t h e doct rin e u nqua l ifi e d ly .

In the case of Sparks v. Mack} the Supreme Court of

Arkansas was not cal led upon to de te rmine the pre ci seque stion , the substantial controversy be ing over the matterof a general re se rvation to the u se of a grantor in an abso

lute conveyance ; but incidental ly the que stion was c onsid

e red in connection with a stipulation similar to thatdi scusse d in R obinson v . E ll iott , and the court said plainlythat if the ab solute conveyance were to be construed as

be ing in e ffe ct only a mortgage se curi ty , the case wou l dcome dire ctly w ithin the ru l ing in R obinson v . E l l iott .

Thi s i s an evident concurrence in the general doctrine of

that case .

NE BRA SKA .

8 7 . N e brask a adop t s t h e doct rin e w ith l im itat ion s .

T he Supreme Court of Nebraska in Tallon v . E l l i son 2 h e l da mortgage 0 11 a stock of goods , w ith a powe r of sal e re

1 31 A rk . 666 2 3 N eb. 68

T H E M A JO R I TY DO C T R INE FA VO R E D . 7

served by the mortgager, to be fraudulent andvo id , referringfor authority to the N ew York and O hio case s , and quotingfrom the language used in Col l ins v . Myers .

1

This rul ing was afte rwards l imite d in i ts appl ication toase s where the powe r of sale i s expre sse d on the face of the

instrument ; 2 and i t was sugge ste d that a provi s ion that themortgager might re tain the use could not be torture dinto a powe r of

_

sale .

”In all such case s it was he ld that

the que stion of fraudulent intent i s a que stion of fact whichmust be submitte d to a jury .

” Accordingly , in anothe rcase at the same term , the court de cline d to take the v iewthat an agre ement be twe en mortgage r and mortgage e allowing sale s by the former wou ld be fraudu lent , irre spe ctive of

intent . T he trial court had be en asked to so instruct thej ury , but had refused , and the Supreme Court approve d thisaction , he ld the case to be one turning on intent , and sus

tained the ve rdict of the jury in favor of the transaction ,

on the ground that the que stion of intent had be en submitte dunde r a proper charge .

3

Where , however , the agreement al lowing sale s appears onthe face of the mortgage , i t was intimate d that the ru le of

Tal lon v . E ll ison would be adhere d to , though the que stionin the particular case was as to the val i dity of the transac

tion be tween the partie s } This view that the fraudu lentagre ement must appear on the face of the instrument , inorde r that the court should ru le upon i t as a que stion of law ,

evidently control led the de cision in the late case of BookC o . v . Sutherland} whe re the mortgager remained in pos

se ss ion and continued his busine ss , and the controversy ,

between the mortgage e s and one who purchased from the

1 16 O hio, at p . 554 .

2 W i l l iams v. E vans, 6 Neb. 216

5 Hedman v. Anderson, 6 N eb. 392.

4 Gregory v. Whedon, 8 N eb. 373

5 10 N eb. 334 ; 6 N. W. R ep . 367

8 7 FR AUDUL E NT M O R T GA GE S O F M E R C HANDI SE .

mortgager in payment of an old debt , was settled with reference to the que stion of notice to such purchaser of the

mortgage ; and the que stion of fraud inhe rent in the transaction was not re fe rred to by the court , and apparently wasnot argue d by counse l .In this State , the statute s make all mortgage s of chatte l s ,

unaccompanied by de l ive ry the reof , pre sumptive ly fraudulent as to creditors , and requ ire , in orde r to avoi d thepre sumption ,

proof of good faith and of the absence of

fraudulent intent . The se prov i s ionswere he ld , in Turner v.

Ki l l ian} to apply to a mortgage upon a stock of goods ,under which the mortgage r re tained posse ssion in order tose l l the goods and remit al l the proce eds to the mortgage e sprovi sions which would be he ld not fraudu lent in many juri sdictions ; and it was he ld that thi s mortgage , when attacked ,cou ld be sustained only by proof that it was real ly madein good faith and without any intent to defraud .

”

In Marsh v . Burley} i t was he ld that recording such a

mortgage wou ld not re l ieve i t from this difficu lty , and thatthe I egistration acts we re not intended to make the re cording of

o

the mortgage an e qu ivalent for change of posse ss ion ,

as had be en inadvertently state d in an .e arl ie r case ; and

for thi s conclus ion Horton v .Williams3andWood v . Lowry 4

we re cite d as authoritie s .

Thus i t appears that on the whole , the doctrine in que st ion i s favored in Nebraska , though somewhat embarrassedw ith l imitations and statutory prov i s ions .

1 12N eb. 580.

3 21 M inn. 187.

2 13 N eb. 261.

4 17Wend. 492.


the que stion fairly for consideration . In the former casethe que stion was re serve d whe ther powe r allowe d to the

mortgage r of a stock of goods , to se l l in the usual course oftrade and contro l the proce e ds , renders the mortgage voidas to creditors , irre spe ctive of intent which was answe redin the negative , sustaining the ve rdict of a jury in favor ofthe conveyance . T he burden of the case i s that the statutein this State , (as in Indiana) , make s the que stion of fraudu lent intent a que stion of fact for the jury , which provi sionthe court cordial ly approve s , as undoubtedly introducedto create 0 1

2 se ttle a ru le of law . T he court agre e s thatthe law , where an instrument contains i l legal provi s ions ,

and such as are not re conci labl e , on any possib le hypothe sis , with an hone st or legal intent , de clare s it void uponi ts face , be cause no evidence cou ld change its character ;but the case at bar is he ld not to be within that rul e . Iti s apparently assumed that fraud cannot be declare d topertain to such conveyance s unle ss the intent to de fraud c an

be clearly impute d to the partie s .

In an e arl ier case , the Supreme Court of this State hadtaken broader ground than this , and had given a morere stri cte d construction to the statute re ferred to . P ierson v .

Manning 1 was a case of a gene ral ass ignment for cre ditors ,attacke d in a court of law for al leged fraud ; and upon a

que stion re served as to its val idity , the Supreme Court dec lared i t void by reason of a re su lting trust for the grantor,appearing by legal implication from the provi s ions of theassignment . T he statute was urged upon the court , as requiring that the que st ion of fraud be submitte d to the j ury .

But the court sai d that thi s would be carrying thatprovi s ion of the statute entire ly b eyond what the Legislatureeve r intended, or i t wil l legally bear i t i s not to be pre sumedthat the Legislature intended , by this s imple provis i on, to

1 2 M ich . 445

VIE WS O F T H E AME R I C AN M INO R IT Y . 88

make such a radical re form as to turn princip le s of law intoque stions of fact , nor doe s i t in fact or infe rential ly do so .

”

This de c isIon I s not re ferred to in the O pinion in O l iver v .

E aton .

G ay v. B idwe l l arose in chancery ; the power of sale bythe mortgagers appeare d by plain implication on the face ofthe mortgage , the provi s ion be ing that they should not se l land dispose of sai d goods and chatte ls otherwi se than in theordinary course of the ir u sual bus ine ss ; and the court , inits own View , was placed face t o face with the que stion ,

Were , then , the facts such as to create a legal fraud , notwithstanding the actual good faith of the partie s ?” It wasthought not , be cause i t i s a cardinal rule , never to infe r adishone st meaning , i f an hone st one i s poss ible . T he statute ,as its de sign was explained in O l ive r v . E aton , was he l d toapply to the case as fu l ly as i f i t were b e fore a j ury , the casebe ing cons idered an exce l lent one for i ll ustrating the statute .

H ow canany one ,”asked the court , from the face of this

mortgage , and without reference to extraneou s facts,drawany conclusion whateve r , concerning e i ther i ts intent or itsbearing upon cre ditors ? It wou ld ce rtainly be val i d underany circumstance s if there we re no creditors . It doe s notappear from the mortgage that the re were any . It wouldnot inj ure othe r creditors if they were abundantly se cured .

I t doe s not show they we re not . It wou l d not be voi d ifthey had authorize d i t . A nd many othe r case s might besugge sted , showing that , without proof of external facts ,there cou ld be no conclusive pre sumption at al l . A nd of

a ll those outside facts , the j ury are sole arbite rs under any

theory T he court further said T o hold that a merchantcannot mortgage hi s goods w ithout closing his doors , wou ldbe to held that no mortgage of a me rchant ’s stock c an be

made at al l . We cannot so hold unti l the statute s de clare a

new rul e T he case of P i e rson v .Manning was not re ferredto as at all apposite to the case , except by one di ssenting

143

89 FR AUDUL E NT M O RT GA GE S O F M E R C HANDIS E .

judge , who wou ld have decided the case othe rwi se and in ac

c ordanc e with the N ewYork andO hio authoritie s . This j udgedrew the distinction be twe en fraud re sting in intent and fraudshown by the tendency o f the transaction , in the se wordsThe re are two kinds of fraud ; fraud in law and fraud in

fact . W'

hen courts say an instrument i s fraudulent on its

face , or in law , I do not understand them to mean i t is madew ith a c orrupt intent , but that i t is an instrument the laww i l l not sanction or give e ffe ct to , as to th ird pe rsons , onaccount of its susceptibi l ity of abuse , and the great dangerof such contracts be ingused for dishone st purpose s . Hence ,in many case s , the law has S haped and given form to c ontracts , on which form the ir e ffe ct 0 1

2 l egal ity i s madeto depend .

” It is in accordance with the se Views that , inothe r juri sdictions , similar conveyance s have be en he ld todisclose a tendency so potent for fraud , as to furnish al l the

facts ne ce ssary for an adjudication of fraud , and to dispense wi th any inquiry by the jury as to the inte nt of thepartie s . It was , howeve r , the opinion of the majority of

the court in this case , that no court has given any sati sfactory reason why such a prov i s ion shou l d ne ce ssari lyv itiate a chatte l mortgage , although it i s undoubtedly liableto abuse .

”

89 . S u c h conve yan ce s u n iform l y su s t a in e d in M ich igan . This qu e stion has several time s S ince be en re -argue

‘

dbe fore the Supreme Court of Mich igan , but the ru l ings inthe se case s are adhe re d to . In Peopl e v. Bri stol} i t wassaid that the que stion of the authority left in the mortgager t o dispose of his goods in the u sual way was se ttledand not open to controve rsy ; in VVingl er v . Sibley}such conveyance s were said to be uniformly h '

e ld val id ;and to the same e ffe ct is Cadwe l l v . Pray .

3 O the r and fre

quent case s show the exe cution of the se mortgage s to be a

2 35 M ich . 28 2 35 M ich. 231. 2 41 Id. 307.

144

90 FR AUDUL ENT M O R T G A G E S or M E R C HANDI S E .

spe c t s , the power of sale appe aring on the face of themortgage ; and the trial court he ld the instrument fraudal ent and vo id , and excluded it as evidence . T he Supreme

Court reversed both the se case s , and in each instance gavee laborate reasons for i ts action . It was sai d that the v iewsof the trial court harmonize with the E nglish commonlaw doctrine , and have for the ir authority qu i te a numbe rof Ameri can de cis ions ; 1

and that such an instrumentwould , by the E nglish courts , be de emed fraudulent at common law and under 18 E l izabeth , be cause the mortgagerwas al lowe d to re tain posse ss ion and to make sale s from the

goods .

” 2

But the Iowa statute was he ld to change the rule s of law ,

and to lead to a different conclusion . Thi s statute declare s that posse ssion re taine d unde r a chatte l mortgageshall not invalidat e it , i f the mortgage Shall be du ly exe cuted ,acknowl edged and re corded ; the legal e ffe ct of which isde clare d to be e qu ivalent to actual de l ive ry of the property .

This statute i s s imi lar to those of Il l ino is , Minne sota , and

other State s but the j udic ial construction of i t in Iowa i sfar diffe rent . It i s there suppose d that thi s prov is ion of

law remove s all the difficu lt ies which attend upon posse ssion in e very case , so that even posse ssion with power of

disposit ion lose s al l its pernicious fe ature s . T he O hio case swhi ch take the contrary v i ew are distinguishe d by the c ir

c um stanc e that the O hio statute doe s not go so far as to

make registration of the mortgage e qu ivalent to an actualde l ivery of the property ; hence the legal e ffect of posse ss ion by the mortgage r there , so far as the rights of thirdpersons are concerned , must be somewhat different fromwhat it i s here .

” 3 T he O hio case s are commended as

probably corre ct e xpositions of the re su l ts flow ing fromsuch conveyance s in O hio ; but l ike re su lts could not fol low

1 Lowe , C . J 11 Iowa, at p . 439 .

2 Dillon, J 20 Iowa, at p. 401.

3 11 Iowa, at p. 442.

VIE WS O F T H E A M E R I C AN M INO R I TY . 90

in Iowa . Lowe , C . J . , said : It i s true that i f the mortgager i s permitted to deal with the property as his own , the

mortgage se curity i s not al together safe or certain ; muchi s ne ce ssari ly le ft to the hone sty and good faith O f the

debtor ; but i f thi s confidence i s abused , i t i s the misfortuneO f the mortgage e , and furnishe s no ground of complaint too ther creditors . Th ey are no worse O ff than they wouldhave be en i f no mortgage had eve r be en exe cuted . T O

them it c an make no difference whe the r the mortgage dproperty i s in the posse ssion O f the mortgager or mortgage e . In ne ither event i s the prope rty al toge ther beyondthe ir reach or control , as it i s stated to be unde r the O hiOlaws . It sure ly would be compe tent for the creditor , be foreforfe iture , to pay the mortgage debt , and then se ize .

” 1

D i l lon , J in stating the doctrine of Torbe rt v . Hayden tobe the se ttled law in Iowa , e laborate d the se arguments ,w ith a v iew O f showing what remedie s creditors might have ,

de sp ite the dispute d mortgage .

2 H e furthermore drew thedistinction be twe en fraud in law and fraud in fact , andwhile he he ld that fraud i s always , after the facts are proved ,an inference of law , and that the jury is , under the direct ion of the court , bound to find it , he treate d the mortgageunder cons ide ration as not poss ib ly fraudu lent in fact , andsu stained it as val i d under the Iowa statute .

3 It i s intimated , however, that a fraudulent intent , or a re servationto the use O f the debtor , might stil l suffice to inval idatesuch a conveyance , even though We l l registered . But thecontrol of the mortgager of his goods , in the usual courseO f trade , doe s not appe ar to the learne d court , in any re

spe ct , in the l ight O f a re se rvation to his own use .

T he ru le thus adopte d has be en adhere d to in Iowa , and thecase s announcing i t have be en cite d as authoritie s indisc riminate ly in case s of re tained posse ss ion under various c ir

1 p. 443.

2 20 Iowa, p. 407-8 .3 20 Iowa, at p. 405.

14 7

9 1 F R A U D L'

L E N T M O R T GAGE S O F M E R C HAND IS E .

c umstanc e s . Torbert v . Haydenwas de clared to furni sh thelaw for the case s O f Campbe l l Leonard 1 and VVilhe lmi v .

Leonard ,2which apparently involved the que stion O f re ta ine dposse ssion only , without powe r O f dispos it ion for the c ase

O f Je ssup v . Bridge ,

3 which was a mortgage upon a rai lroadw ith its rol l ing stock and accretions , as to which the ne c e ss i tie s O f commerce have e stabli she d a p e cul iar doctrineand al so for the case O f Adle r v . C laflin ,

4 which was a mortgage upon a stock O f goods , al l the proce eds O f sale s , afterpaying expense s , to be paid ove r to the mortgage e s .

9 1 . S u ch conve yan ce s comm on in I owa , and b eyond

crit icism ; S t are d e cisis .— From the case s O f D e ane v .

Grarret son ,

5 A l len M c C al la ,

6 Stephens v . Pence ,

7 Phi ll ipsBoth ,

8and Clark Hyman ,

9 it appears that mortgage supon stocks O f goods in trade are of frequ ent occurrence inIowa . In the last name d case , D ay , J . , re curre d to the

discuss ion and de cis ion O f the e arl ier case s , in the fol lowingwords

It i s claimed , however , that Hughe s Cory is not onlyO pposed to the we ight O f authority , but wrong in principle ,andwe are asked to ove rru le i t . That case was determine d in1866 . It rece ive d the most care fu l and de l iberate c onsid

'

eration . It di scusse s the ru le at common law , and in manyO f the State s O f our Union , and Shows it s inapplicabil ityto the pe cu l iar provis ions of our statute . F or fourte enyears , thi s de cis ion has b e en regarded as an authori tativese ttlement O f the que stions involved in i t . We ought notnow to be expe cte d to enter upon a re -examination and re

consideration O f the se que stions .

1 11 I owa, 489 .5 "4 Id. 331.

2 13 Id. 330.6 25 I d. 465.

3 11 I d. 572.7 56 Id. 257.

4 17 I d. 89 .3 58 Id. 499.

9 55 I d. 14 ; 39 Am . R ep . 160


92. T h e re ason s f or t h e I ow a ru l e e xam in e d

E laborate as are the explanations made in Hughe s v . Coryand Torbe rt v . Hayden ,

O f the reasons for sustaining suchconveyance s , they are ye t disappo inting in several re spects .

First , no ade quate attention i s given to the circumstancethat the contro l O f the mortgager ove r the mortgaged prope rty i s practi cal ly unl imite d whi le i t continue s , so as to en

abl e him , if he choose s , to se cre te or di spose of i t or to the

circumstance that in eve ry such case , whe re the proce eds arenot t o be pai d over to the mortgage e , the continuance O f

the bu sine ss is in real ity a continuance for the benefitand in the intere st O f the debtor himse lf . Se cond , the

abi li ty O f anothe r creditor to levy on the surplus O f thethe goods , outs ide of the portion covere d by the mortgage ,

which the learne d court cons ide re d conclusive as to his complaint , is in real ity the abi l ity only to levy on S O much of

the portion not covere d as the hone sty O f the debtor wi llal low to remain on hand , and not se cre tly dispose d of ; and

the O pinions of the l earned court do not appear to consi derthe possible conveni ence for dishonesty thu s afforde d .

T he re ady opportunity which the Iowa practice O ffers forthe appo intment O f a re ce ive r wil l se cure t o the complaining creditor only such portion as i s left , afte r the debtorhas worked his pleasure w ith the goods . It i s under coverof amortgage which is uphe ld as val id , that a dishone st debtormay thu s work ; though the se possible consequence s wereinvolve d in the transact ion from the beginning . Third , theprovi s ion of the Iowa statute , that registration O f a mortgage shal l have the same e ffe ct as though it had be enaccompanied by the actual de live ry O f the property ,

” whileit

,

may we ll e stabl ish a statutory p rima fa c ie val id ity ,

can scarce ly be supposed to have the e ffe ct O f e l iminatingal l possibi l itie s O f fraudu l ent conduct . If i t we re S O in

tended , thi s woul d be a me re fict ion , which a court mightreadi ly expose . E ven in case O f an actua l manual de l ive ry ,

150

VIE WS O F T H E A M E R IC A N M INO R IT Y . 93

the e fficacy O f such de l ive ry wou ld be compl e te ly nul l ifiedby allowing the mortgage r to re sume the pote ntial controland dispos it ion of the prope rty ; and it wou ld se em that anycourt might we l l te l l a jury that such a subterfuge wou l d bee ssential ly fraudu lent , whe the r S O intended or not .

93 . T h e I ow a v iew of o th e r frau ds in c onve yan ce s .

In i ts treatme nt O f the question O f fraud as pre sented insome othe r aspe cts in conveyance s , the jurisprudence of

Iowa doe s not se em pe cu l iar . In Macomb e r v . Pe ck ,

1 i t i she ld that if a vendor O f land , by a se cre t arrangement w iththe vende e , re serve to himse lf the u se of the land for a timew ithout rent , such agre ement rende rs the conveyancefraudu lent in law , irre spe ctive O f the intention with which

it was exe cuted Lukins v . A ird 2 i s c ited as a dire ct authority for thi s ru l ing in which case the Supreme Court O fthe United State s he ld the fraud to be inhe rent in the arrangement , as a conclusion O f law , which the court was as muchbound to pronounce as i f a fraudu lent intent we re proved .

But when , in Jordan Lendrum ,

3a case was pre sente d of a

conveyance O f chatte ls , w ith the use al lowed to the grantorO f property consumable in the use , and Lukins v . Aird wascite d as an authority in po int on the subj e ct O f fraudu lentre servation , i t be came pertinent to O ffe r explanations as

to the distinction be twe en Macomber v . Pe ck and the classO f case s repre sente d by H ughe s Cory , which explanations furthe r i l lustrate the pe cul iarit i e s O f the Iowa law .

R eferring again to the prov i sions of the Iowa statute whichgive t o the registration O f any b il l O f sale or mortgage of

personal property the sam e e ffe ct as though it had b e enaccompani e d by the actual de l ivery of the property so ld or

mortgaged , the court sa id It cou ld not have be en the

purpose O f the se se ctions to s imply authorize the vendor tore tain the nake d posse ss ion O f the prope rty without any

i 39 I owa, 351 2 c wan. 7s.

3 55 I owa, 473

151

93 FR AUDUL E NT M O R T GA GE S O F M E R C I IA N D I S E .

enjoyment O f i t . It is not the pol i cy O f the law to placeprope rty in such a S ituation that it cannot be beneficial oru se ful . If the vendor has re ce ive d an actual cons ide rationfor the prope rty sold , i t c an be no disadvantage to creditorsthat he i s al lowed to remain in posse ss ion O f the prope rty ,

exerci se acts O f owne rship and contro l ove r i t , and t o use

and dispose O f i t , or conve rt i t to his own use . Such c on

trol and use only be tte r the financial condition of the ven

dor, rende r him more abl e to pay his debts , and thus benefitrathe r than injure his creditors . If i t Shou ld be made

p ar t of the conside ra tion of t/re sa le that the vendor shou ldre tain the posse ssion and use O f the property sold , thismight enable the vendor to place part of the cons ide rationre ce ived beyond the re ach O f his cre ditors , and thus pe rpetrate a fraud upon them , i f the transaction shou ld be sustained . This i s the doctrine O f Macombe r v . Pe ck .

T wo fe ature s are noticeable in th e se explanations . O ne

i s the distinction that is taken be twe en an agre ement toal low the vendor the use and contro l O f the prope rty , whichi s made as a part of the consideration O f the transaction ,

and a simi lar agre em ent , which is'

made e ithe r e xpre ssly or

tacitly , after the main transaction , but in conne ction withit ; as to which , i t se ems som ewhat puzzl ing to unde rstandwhy the subsequent agre ement shou l d be sustained in Jordan v . Lendrum , and the contemporaneou s agre ement shou ldbe condemne d inMacomber v . Pe ck , when the re su lt ine ach case i s substantialIy the same as to the rights O f thecomplaining creditor. T he other feature i s , the vi ew thatthe u se and contro l O f property by a vendor or mortgage rcannot po ss ibly re su l t in any injury or disadvantage to

creditors . It has not general ly be en suppose d that the ihjury t o creditors was inherent in the simple contro l of theprope rty O f the debtor. Undoubtedly , an increase O f assetsin the debtor may e nure to the benefit O f the cre ditor ; butthi s benefit c an be se cured to him only by al lowing him to

152

95 FR AUDUL E NT M O R T GA GE S O F M E R C HANDI SE .

Fletche r v . Powe rs ,1 whe re the que stion i s sharply pre sentedby the powe r to the mortgage r , re serve d in the mortgage , tose l l the goods in the regular course O f hi s trade , i t was said bythe Supreme Judicial Court to be no longe r an O pen que stion ,

“ it having be en repeatedly he ld that such a powe rg iven to the mortgager doe s not p er se avo i d the mortgage ,but i s at most only evi dence of a fraudu le nt purpose , to be

submitted to the jury .

” Thi s v iew se ems to have be e nadvi sedly adopted , though w ithout as ful l an expre ssion of

the reasons for its adoption as has'

be en made by othe rcourts .

95 . E ar l ie r c a se s inh arm on iou s .— T he e arl i er case s

in this State on the subje ct O f fraud in conveyance s werenot ent ire ly harmoniou s . In Harri s Sumne r,2 whe re a

re se rvation for the benefit O f a grantor appeare d on the

face O f an instrum ent , and counse l contended that it shou l dhave be en le ft to the jury to decide upon the wholematte r whe the r the conveyance we re fraudu lent or not ,

”

the court dissented , saying , Where the de fe ct i s apparentupon the de ed itse lf , the e ffe ct of i t be come s a que stion O f

law ; i t wou l d be worse than use le ss to submit it to the juryto say , upon such e vi dence , whe ther i t shou l d be vo idagainst creditors or not , when if they shou ld happen tode cide against the legal e ffe ct O f the instrument , i t wou l dbe the duty O f the court to se t aside the verdict .

”In

Johnson v . IVhitwe l l ,3a power O f revocation agre ed upon

in conne ction w ith a de e d O f land , was he l d to vit iate i t ;and i t was sai d , although no moral fraud was intended ,yet i t was a legal fraud .

”In Foster Manufacturing C O . ,

4

where the mortgage stipu late d that the grantors shou l dremain in posse ss ion O f al l the prope rty , and se l l and

dispose O f al l the personal property except machine ry , ac

131 Mass. 333 3 7 P ic k. 712 2P ick. 129 4 12 Id. 451

154

VIE WS O F T H E AM E R IC A N M INO R IT Y . 95

cording to the u sua l course of the ir busine ss , Shaw ,C . J . ,

said T he first O bvious remark is , that thi s assignment , asto the personal e state , was inope rative and vo id , againstany creditor who shoul d have attached be fore the truste e stook posse ss ion . T he st ipulation that the vendors S hou ldremain in posse ss ion and have the use O f the prope rtywou ld have rendere d it void as against creditors T he

case was , howeve r , save d to the mortgage e s by the ir havingtaken posse s sion O f the prope rty be fore the adverse proce e dings we re commenced .

In the case s O f A llen Smith 1 and Macomber v . Parker ,2

which involve d bri cks divided be twe en joint owners , the make rO f them be ingl eft in posse ssionwith powe r to se l l , i t appe aredthat he acte d mere ly as the agent O f the othe r party , who wasto have all the benefit O f sale s made ; and thi s circumstancecontro ll ed the de ci sion in each case . Shutle ff v .Willard 3 andR obbins Parker 4 involve d mortgage s upon hay , grainand farming produce , consumable in use , and part O f whichwas consumed by the mortgager in each case . In R obb insParker , thi s was he ld to make the transaction fraudu lent

as to creditors , in accordance with the Tenne sse e c ase'

of

Somme rv i lle v . Horton ; 5 the court care fu l ly making thedistinction , that it was not the re tention O f pos se ss ion alone ,e ven O f arti cl e s consumable in the u se , but i t was thatposse ssion and u se which inp lied the consumption of

peri shab le article s , which was the'

vi cious feature O f the

t ransaction . In Shurtle ff v . “T i llard , this principle was

assented to , but not applie d dire ctly by the court the factsre ferre d to

‘

w e re s imply ev idence to go to a jury . Codmanv . Fre eman ,

6 which is O ften re fe rre d to as an authorityin thi s conne ction , invo lve d a mortgage on househo ldfurniture , which was certainly not peri shable property

1 10 M ass. 308 4 3 M e te . 1172 14 P ick . 497 5 4 Y erg. 540 ; 26 Am. D e c . 242.

3 19 P ick. 202 6 3 C ash. 806.


and the only sal e s al lowed under i t we re by way of exchangeof furni ture , the new to be substituted for the O ld underthe mortgage ; and thi s was he ld val i d as to the propertyactually cove re d by the mortgage at i ts date , which was theonly prope rty involved .

In two case s , involving a gene ral assignment of re al andpe rsonal property , which was le ft in the posse ssion of the

assignor with the stipulat ion that he shou l d commit nowaste the reon , i t was he l d that posse ss ion under the se c irc umstanc e s did not inval idate the assignment .

1

96 . T h e doct rin e and t h e pra ct ice s e tt l e d in M assa

c h u se t t s .-T he qu e stion as to stocks of me rchandise

first came fairly be fore the court in Briggs v . Parkman ,

2 in

which it was he l d that an agre ement under a chatte l mortgageon a stock O f goods in trade , that the mortgage r Shou l d ke epposse ss ion and continu e to make sale s in the ordinary courseof bus ine ss , applying the proce eds to his own use , was not

fraudul ent in law ; that whi le i t tended to prove a fraudu lentintent , i t might be e xplaine d consistently w ith fair deal ing ;and that if explanations of good intent we re offered , theyshou ld be re ce ived and credited . Though a chancery case , inwhich al l qu e stions involved were to be trie d by the court ,and in which partie s agre ed that the court might draw any

infe rence s from the facts which a j ury might draw , the

ru le was applied that posse ssion in such case s i s onlypre sumptive ev idence . of fraud , which S hou ld be sub

mitt ed to a jury . Then cons ide ring the case as a jurywou ld do , in the l ight of the intent of the partie s , the court ,in Vi ew of the fact that the mortgage r had agre e d thathe wou l d not make any large sale s ,

” found that there wasno intent to defraud . Thu s the de ci s ion was re ste d whol lyupon the que st ion of a fraudu l ent intent . It S hou ld be

1 Baxter v. Whe e ler, 9 P ick . 21 ; R usse l l Woodward, 10 I d. 408.

2 2M e t . 258 ; 37 Am . D e c . 89 .

156

9 7 FR AUDU L E NT M O R T GA GE S O F M E R C HAND IS E .

val idity of the mortgage as cove ring the afte r acquiredprope rty ; the re se rvation of a powe r of sale was not c on

sidered, nor was the distingu ishing circumstance that themortgage e had taken posse ssion of the goods be fore the c ontrove rsy aros e .

From the freque ncy of case s in the Massachuse tts courts ,in which mortgage s have be en given on stocks O f goods intrade , the practice of making such contracts se ems to be

qu ite common . I II seve ral of the case s , the feature O f the

mortgage r’ s power O f sale re ce ive d no attention .

1 In one

c ase the mortgage stipu latedagainst the exe rcise of such a

power by the mortgager . T he mortgage e te stified : Isaid he might go 0 11 and do bus ine ss as usual for all -me .

Thi s was S imply ev idence for the jury , under the M assachu

s etts ru le . T he trial court properly de cl ined to dire ct ave rdict .

2

It is made by statute , inMassachuse tts , a criminal O ffencefor a mortgage r of personal prope rty to se l l it w ithout thewritten consent O f the mortgage e .

3

A nd as to a pledge of pe rsonal property in thi s State , itmay be note d that a pledge e leaving the prope rty in thehands of the pledger wou l d lose his se curi ty .

4

MA INE .

9 7 . T h e M a in e view ; th e qu e stion on e a s t o e v iden c e

m e re ly .— In Maine the qu e stion has not be en thoroughly

discu sse d . T he e arl ie r case s of Me lody Chandle r 5 andAbbott v . Goodwin 6

are not in point , though mortgage s on

1 F lood C lemence , 106 M ass. 299 ; F ol som v. C lemenc e , 111 Id. 273 ;

Pratt v. M avnard, 1 16 Id. 388 .

2 S le eper I) . C hapman, 121 Id. 404 .

3 C ommonwealth v. Damon, 105 I d. 580 ; C ommonweal th v. S trangford,112 Id. 289.

4 T hompson v. Dol l iver, 132M ass. 103.

5 12M e . 282.

6 20 M e . 408 .

158

VI EWS O F T H E A M E R I C A N M INO R IT Y . 9 7

s tocks O f goods in trade , because in the se case s , the mortgage r, though le ft in posse ssion , was the re only as the agentof the mortgage e s , t o whose u se and benefit al l the proce edsof sale swere e xpre ssly to be applied . I II Me lody v . Chandl er, i t was said H e is to be cons idered as the agent ors e rvant O f the plaintiff , employe d for a spe cific purpose ,

and inve sted with no other power than what i s re qu i s i te toe nable him to exe cute his agency . H is posse ssion of the

c hatte ls entrusted to him is the posse ss ion of hi s principal . ”

A nd in Abbott v . Goodwin , i t was said They se cure d tothemse lve s the powe r to Contro l the proce eds for the same

purpose s for which the goods we re mortgage d .

”T O the

same e ffe ct was Cutter Cope land .

1 It i s , there fore , in

accura te to cite,the se case s as authoritie s on the que stion of

a power O f sal e re se rve d to the mortgager in hi s own right ,or in ‘his discre tion . Abbott v . Goodw in i s re cognized as

authority for case s where the mortgagers unde r such a c on

voyance are made the agents of the mortgage e s , to se l l forthe ir benefit alone , in the re cent case of Allen Goodnow 2

which case , be ing a controve rsy be twe en the parti e s thems e lve s , did not pre sent the que stion unde r discuss ion in any

form . N or c an Stedman I) . Vi ckery 3 be properly cite d as

an authority in th is conne ction , for the reason that it was acase ari sing undera truste e ’ s disclosure , in which the que stion of fraud wou l d be pre te rmitted by the principle thatthe contract was good betwe en the partie s .

Googinsv . G i lmore 4 pre sents the point , though not at al l dec isive of it as a que stion of substantive law , for i t de cide smere ly that the courts of Maine w i ll not de clare any such conveyanc e fraudulent in itse lf , or tre at it is as conclus ive ly so ,

but will , on the theory O f a me re pre sumption,leave the

que stion of fraud to the jury . There the mortgage whichal lowed the mortgage r to remain in posse ssion ,

with an

1 18 M e . 127.a 42M e . 132.

2 71 M e . 420 4 47 M e . 9 (1859)

9 7 FR AUDUL E NT M O R T GA GE S O F M E R CHAND ISE .

unde rstanding that he was to go on as be fore in contro l of thegoods and his bus ine s s , was supported , the jury having su s

tained i t on the que stion O f fraud in fact . T he courts followe d the uni form practice in that State of submitting theque stion of fraud to the jury , a practi ce which the e arl ie stc ase s show was adopted implicitly from the parent State O f

Mas sachuse tts . H ow S l igh t atte ntion has be en given in

Maine to the v ital que st ion in the se case s is evident fromthe curiou s case s O f Chapin v . Cram 1

andPartridge v . “Ihite .

2

T he first nam e d case was a conte st b e twe en two succe ss ivemortgage e s of a trade r’

s stock O f goods , ove r goods value dat $25 , added to th e stock b e twe e n the date s O f the two

mortgage s , and as to which the late r mortgage e prevai ledover the prior . In the last name d case , in which also thepartie s were succe ssive mortgage e s of a stock of goods ,the de fendant , who was the prior mortgage e by seve ralyears , lost his case be cause he fai led to identify any of the

goods then on hand , as in the stock when it was mortgage dto h im .

Sawyer v . Pe nne l l 3 was a controversy be twe en a mortgage e unde r a mortgage upon a stock . O f goods , and an

attaching creditor ; and the latte r prevai led , the que stioninvo lved b e ing one of notice to him of the mortgage , the rebe ing no fraud al leged on e ither s ide . T he report doe snot di sclose the facts as to the mortgager’ s power of sal e .

In Brown v . Thompson ,

4 which was a s imi lar controversy ,and in which a discre tionary powe r of sale m ight be fairlyinferred , the val idity O f the mortgage i s ev idently taken forgranted , though the que stion i s not discussed in any manner .

IVO l fe v . Dorr 5 invo lved a s imilar controversy , in which itappeared the mortgager had made sale s of the goods ; butthe que stion O f fraud in this re spe ct was not cons idered ,

4 59 M e . 372

5 24 M e . 104.

98 FR AUDUL E NT M O RT GA G E S O F M E R C HAND IS E .

ing the que stion , in which the Court of Appeal s seems ad

visedly to have adopted the doctrine that the only e ffe ct ofsuch an agre ement or re se rvation i s that of a badge of

fraud . In R oss Wi lson} a chance ry case , the mortgagewas on a stock O f goods in trade , and by plain impl icationfrom the re cital that i t Should cove r goods “ purchased inthe usual course O f busine ss , the mortgager was to c on

t inue to se l l the goods in the ordinary way , as he did do .

It was he ld that the mortgage e acquire d no right to the sub

sequently purchase d goods . But ne ither the circumstancethat the mortgage r had unde rtaken to give him such right ,nor the discre tionary powe r to se l l the goods in the ordinarycourse of bus ine s s , was conside red to render the transactionfraudulent as to creditors , as had be en he ld by the chance llor be low . T he court decl ined to adopt the v i ews of the

courts of N ew York , Ill inoi s , and N ew Hampshire , thinking the case s from those State s not exactly analogous .

T he mortgage e ’ s acqui e scence in the sal e s by the mort gage rwas taken as a badge of fraud mere ly ; but the court didnot perce ive in it any such ev idence of meditated fraud

on the part O f Se ibert , as was requi s ite to e stabl i sh theal legation of a sale O f his property with the fraudulent intention of hindering and de laying hi s cre ditors .

” Fromthis language it i s ev ident that the court conside red theque stion of fraud in such a conveyance as re sting in intent .

It appears , also , that no distinction was made be twe en poss e ssion alone and posse ss ion with power of disposition .

T he e stabl ished rule in Kentucky was re fe rre d to as applicable to the case , that whi le absolute sale s of personal prope rty not accompanied by posse ss ion are fraudu lent p erthis rul e doe s not embrace mortgage s or de eds of trust ,given as se curity me re ly , in which class of case s the c ir

1 7 Bush, 292 S ee Woodrow Davis, 2B. M on. 298 Jarvis Dav is, 14 Id. 529

(1854)

VI E WS O F T H E A M E R IC A N M INO R IT Y .

c umstanc e O f posse ss ion i s but a matter of evidence .

Ve rnon v . Morton 1and Lyons Fie ld 2 were cited on this

point , in which case s , however,l

the re was no discretionarypowe r of sale re served , and posse ss ion alone furnished thee vidence of fraud .

99 . T h e qu e s t ion of frau d in c onveyan ce s as sh own

by m e re po sse ssion n ot w e l l s e t t l e d in Ke n t u ck y.— T he

law w ith regard to fraud in conveyance s cannot , however,be sai d to be se ttled in Kentucky , even to the satisfactionof the courts . As e arly as 1838 , the Court of Appe alsO bserved

’

that the distinction be twe en absolute and condit ional conveyance s of chatte l s , so far as concerned the

que stion of posse ss ion , was pure ly arb itrary and not foundedon reason , and that whatever might be the true distinctionas to the e ffe ct of posse ssion in such case s , i t was not

consi stent with e ither sound pol icy or the harmony of

legal science to ho ld that posse ssion alone , when re tainedunder an absolute conveyance , would be fraudu lent to . any

gre ater extent than posse ssion alone wou l d be under a c on

veyanc e given m e re ly by way of se curity .

3 This dissat isfaction was re - e choed in the re cent case of Vanme ter v .

E sti l l ,4 in which the practi ce was approve d of re l iev ing therule as to absolute conveyance s of it s harshne ss , by e stablishing in particu lar case s exceptions to the ru le . Accordingly , in that case , where the vendor of personal prope rtyhad remained in posse ssion , the distinct ion was taken thatthe cre ditor who complaine d had g iven credit afte r th e saleof the property and with noti ce of it , which circumstancere li eved the case O f al l fraud as to him .

Probably no reason can be urged against this de cis ion ;and i t simply i l lustrate s the power of sound principle s O fj urisprudence when dire cted advi sedly against musty pre ce

1 8 Dana, 247. 3 Danie l I) . M orrison, 6 Dana, 182.

2 17 B . M en. 543.

4 78 Ky . 455

100 M O R T GA GE S O F M E R C HAND IS E .

dents . In truth , the re neve r was any good reason why

posse ssion alone Should have be en regarded , in any jurisdiction , as more than e v idence to be considered , by e ithe rcourt or j ury , in de termining the que stion of fraud ; and

there was neve r any sound reason for a distinction in th isre spe ct be twe en absolute and conditional sale s . M ore

posse ssion , the re fore , should always be taken as but a c ir

c um stanc e , .and not always a badge of fraud ; S hou l d be c onside red by the jury as but a circumstance , under any i ssue swhatsoeve r that may be pre sente d to them ; and S hou ld bewe ighe d in l ike manne r by a court upon which may be de

volved the duty of finding the facts . But posse ssioncoupled w i th a discretionary power of sale in the grantorhas a broade r e ffe ct , and pre sents new considerations , andthe se have l ed many courts to de clare a rule for such case s ,far diffe rent from that which p ertains to case s involvingmere posse ss ion . In the l ight of the se distinct ions , i t wou ldbe e asy to re lieve the juri sprudence of any State of al l rule son the subj ect of possess ion that are mere ly arbitrary and

not founded in sound reason , and to make that jurisprudence i l lustrative of both sound pol icy and the bar

mony of legal science ,

” by adopting the rule s announce din R obinson v . E l l iott , B lake s le e v . R ossman, Col l insMyers , and Lang L e e .

KANSA S .

100 . T h e Kan sas view ; t h e qu e st ion o f t h e frau du

l en t ch ara cte r of su c h c onveyan ce s on e o f good fa ith .

In the case of Frankhouse r v . E l le tt} the Supreme Courtof Kansas was , by the O pinion of a majority of its threejudge s , committed to the doctrine that such conveyance sare not e ssential ly fraudu lent . T he case pre sente d was achatte l mortgage upon a stock of goods , the mortgageecontinuing in posse s s ion , and control ling and disposing of

1 22Kas. 127 ; 31 Am. R ep. 171.


and in all case s to be adjudged voi d as matte r of law .

A nd as authori tie s for the se v iews , the case s prev ious lycited we re refe rred to general ly , some O f which do inde e dinvo lve the same que st ion ,

'

but many of which are case sturning on e ithe r the que stion of posse ss ion alone

,or that

of a li en in equ ity by substitution . Horton ,C . J . , dis

sented in a brie f but e arne st O pinion , ho lding a chatte lmortgage with such arrangement engrafted upon i t , whe the ron it s face or by outs ide agre ement , to be a me re personalse curity ,

a so- cal led mortgage de stroyed in e ffe ct by i ts ownprovis ions , an arrangement not advantage ou s to the mortgage e , but beneficial to the mortgage r and injurious to othe rcreditors , and therefore fraudulent and void in support ofwhich conclus ions numerous authori tie s were cite d . Pe r

haps by reason of this prote st from the chie f justice , there fe rence made to thi s de ci sion in a late r case i s such as to

be calculated to de tract somewhat from its value as an

authority .

T he case of Cameron Marv in 1 pre sented one chatte lmortgage on me rchandise which on i ts face al lowe d the

mortgager to continue his regu lar bus ine s s , and others wi thout such stipu lation ,

much of the property in which he hadalso sold . T he mortgage s were de clared vo i d for anothe rreason , and the case was cons ide re d and dec ided with re f

e rence to the que stions of a pledge of chatte l s , and a race of

dil igence be twe en creditors . Counse l had howeve r argue dthat the mortgage s were void by reason of the re se rved powe rof sale in course O f bu sine ss , in re fe rence to which the O pinionpronounced by one of the two judges who concurred in themajori ty op inion in the pre ceding c ase , said : “ It i s at

l east doubtfu l whethe r sai d mortgage s we re vo i d me re lybe cause the plaintiffs pe rmitted the mortgage r to se l l some

of the mortgaged prope rty ; c iting as an authority for thi sdoubt , Frankhouse r v . E l lett .

1 26 Kas. 612.

TH E M INO R IT Y VI E WS FAVO R E D . 101

C H A P T E R VI .

T H E M IN O R I T Y VIE IVS F A VO RE D .

S E C T ION S uch conveyance s cri t ic ised in Alabama, but quest ions of

fraud le ft to the jury .

T he Alabama v iew as to other frauds in conveyance s .

T he general doctrine in T exas ; the fact of fraud e s tabl ished only by proof of intent .

R e served powe r of sale a fatal feature be fore a court .

R e serve d power of sale not conclus ive of fraud when be forea jury .

T he T exas v iews of such conveyance s summarized .

AL ABA M A .

10 1 . S u ch conveyan ce s crit icise d in A l abam a , bu t

qu e st ions of frau d l e ft t o t h e j u ry .— T he Supreme

Court of Alabama , afte r apparently assenting most c or

dially to thi s ru le inWi swal l v . Ticknor} has subse quentlygiven e ffe ct to i t in a more qual ified manner , surrounding itwith certain te chnical que stions such as , that inso lvency of

the debtor must inte rvene to make the transaction fraudalent ; 2 and that the instrument cannot be de clare d fraudulent upon its face as against cre ditors , when i t doe s not

Show upon i ts face that the re are other cre ditors .

3 But

the facts cal l ing for the application of the ru le are givenmuch cons ideration ( in conne ction wi th oth er circumstance s ) in

'

Johnson v . Thweatt .

4 In Price Mazange ,

5

affirming Constantine v . Twe lve s , the court animadverts

1 6 A la. 178.

2 T icknor v. W iswal l, 9 A la. 305 ; C onstant ine v. T welve s, 29 A la. 607 ;King I) . Kenan, 38 A la. 63.

3 29 A la. at p . 614.4 18 A la. 741.

5 31 A la. 701.

FR AUDUL E NT M O R T GA GE S O F M E R C HAND IS E .

w ith j ust seve rity upon the vi cious feature s O f such transactions among me rchants , saying of the one in que stionthat i t has not even the dubious m eri t O f prov iding thatthe proce eds of sale s to be made by Bostwick Shal l be pai dover to the mortgage e .

” But the idea advanced in Johnsonv . Thweatt is , that i f the v i cious fe ature s do not appear onthe face O f the instrument , the case i s to turn upon the

question of intent , which must be submitted to the j ury .

T O thi s class O f case s i s thus appli ed the same gene ral ru lethat in Alabama i s a llowe d to govern al l case s of fraudin conveyance s , name ly, that fraud is a matter re sting inintent , and is the re fore always to be left to the de termination O f a jury .

In Smith v . Leav itts} the re servation by the grantorunder a trust assignment O f a stock of goods , O f the powe rof control l ing and se ll ing the goods in the same manneras before the assignment , and h is actual contro l of the

property accordingly , were said to clearly e stablish thewant of good faith in th is entire transaction , and S how thatthe assignment was a dev ice to de fraud creditors , and

through that medium to give the debtor the control andenjoyment of his property .

” But the se ne ce ssary inferenc e s from the facts , i t was he ld the jury could alone drawas they alone cou ld de termine the existence of the facts .

”

102. T h e A l abam a view as t o o th e r frau ds in c onve y

an e c s — I t was sai d in one e arly case that fraud i s a

qu e st ion of law when the facts are ascertained ; 2and in

another, a re se rvation by the ass ignor under an ass ignmentfor the benefit of creditors , for the support O f himse lf and

family , was he l d to rende r the assignment fraudulent and

vo i d as to creditors ; and i t was sai d that whe re the c on

e lus ion of fraud natural ly flows from the facts of the case ,the court is clearly competent , and i s bound to pronounce

2 Ayre s M oore , 2 S tew. 336


T he greate st means O f control which courts have in re lation to thi s subj e ct , are to be found in the ir power of

granting a new trial , i f the ve rdict Shou ld not properly re

spond to the fact s of the case .

” 1 S o , whe re the Supreme

Court was satisfied , from an examination of the facts of thecase , that a gene ral assignment was made in fraud of

creditors , and should c ertainly have b e en so found by the

jury ,

”a new trial was granted for thi s reason ; the court

applying principle s of e qu ity in considering the case in thismanne r? A nd in anothe r case , heard at the same term ,

and involving the same gene ral assignment , i t was said thata court of e quity , hav ing a right to find the facts from

the evidence , might we l l infer , from the se e stabl ished and

patent facts , the additional and important fact of fraudulentintent ; and having thus found it , de clare the legal c o

quenc e , by se tting aside the de e d as void , just the same as

though the fraudulent intent was confe sse d in the pe tition .

”

But thi s powe r of ordinary courts O f equity , of finding a

mate rial fact , was disavowed as not pertaining to the courtsof Texas , in cause s involving principle s O f e qu ity , any more

than in those involv ing que stions O f law .

3 T he same princ iple was applied in a late r case , whe re the evi dence whichmight have sustained a jury in declaring fraud was considered insufficient to authorize the court in so doing ; forwhile the court undoubtedly had powe r to declare a conveyance fraudulent , i t was a powe r to be exercised with greatcaution , and only in a ve ry clear case .

4 T o thi s extent hadthe action of the courts in refe rence to fraud in conveyance sbe en embarrassed by thi s que stion of procedure , cons ide redin the suppos ition that fraud c an neverbe shown as a matterof fact except by proof O f inte nt .

1 Howe rton v. Holt, supra, at p . 62.

2 C arlton 0 . Baldwin, 22 T ex . 724 .

3 Baldwin Pe e t, 22 Id. 708 .

4 Bai ley 9 . M i lls, 27 1d. 434 .

T H E M INO R IT Y V IE WS FAVO R E D . 104

104 . R e se rve d pow e r of sa l e a fa t a l fe atu re b e fore a

c ourt . Pe i se r v . Pe tic olas 1 pre sented the que stion of a discre tionary powe r of sale under a mortgage upon a stock of

goods , not appearing upon the face of the instrument , butshown clearly by the facts in evidence . T he case be ing trie dby the court without the intervention of a jury , the mortgage was he ld val id . Upon appeal , the Supreme Court considered the que stion pre sented as one O f legal fraud . T he

practice above refe rred to O f leav ing al l such que stions tothe jury was not now an O bstacle in the way of the courtnorwas it embarrassed , as was anothe r court in Cheathamv . Hawkins ,2 by the fear that the trial judge as a courtmight have e rred in instructing himse lf as a j ury . It wasadopted as a legal conclusion , that a di scre tionary power ofsale under such a mortgage i s incons istent with its true p

pose s , i s a rese rvation for the use and the benefit O f the debtor ,and make s the instrument a mere expre ss ion of confidence ;and the fraud in such a case i s characterized as we l l-defined legal fraud .

”R obinson v . E ll iott and Col l ins v . Myers

were i c it ed with e xpre ss approval ; and i t was sai d that thisprinciple of law shou ld be de clare d by the court , i f theintent and purpose of the partie s to make such a mortgageare manife st from the te rms of the instrument itse lf , or bythe jury if not so manife st , but clearly shown by unc ontra

dicted'

te stimony ; the principle i s the same , the only difference be ing as to the character of the evi dence and the

mode by which it i s e stabli she d .

’ 3 T he judgment be low wasreversed , and i t was said the verdict of the j ury to the samee ffe ct as that judgment shou ld have be en se t as ide .

T his'

doc trine was re affirme d in C rew Bank ,

4 by thecourt ; but that case was distingu ished by the circumstancethat the evi dence tende d to prove that the sale s made of the

goods by the mortgagers were made as agents of the mort

1 50 T ex. 638.3 50 T ex. at p. 639.

2 76 N . C . 335.

4 52 Id. 362.


gage e s , and the proce eds we re applied to the ir debt in vi ewof which the transaction was sustained as val id .

105 . R e se rve d p ow e r o f sa l e not c on c l u s ive of frau dwh e n b e fore a j u ry . But in Scott I) . Alford} where thecase was pre sented to a j ury , qu ite a different View was

taken of the functions of the court . T he conveyance inthis case was a de e d of trust upon a stock of goods in trade ,with an expre ss re cognition 0 11 its face of the power of saleby the grantors in the conduct of the ir busine ss . T he ver

dict hav ing be en in favor of the conveyance , the case wascons idered by the appe l late court in reference to a reque stto the trial court to charge the j ury that the feature O f the

de e d above mentioned made i t fraudu lent and void . This,

it was he ld , was corre ctly re fused . There would be no

legal deduction of fraud in such a conveyance . T he fea

ture re ferre d to was an obv ious badge O f fraud , and it may

be wou ld'

have justified the jury , or even have required themto re turn a ve rdict of fraud , but it wou ld not warrant a c one lus ive deduction of fraud by the court , and therefore therewas no e rror in decl ining the instruction aske d . Pe i ser v.

Pe t icolas was not in expre s s terms overruled , but i t wasdistingu ished . T he court was in both case s composed of thesame membe rs , but the opinions we re rende re d by differentjudge s , though without dissent in e ither case . T he distinc

tion taken as t o Pe ise r v . Pe ticolas was , that i t was tried bya court exerci s ing the b lended functions of court and jury ,

so that it cou l d only be in a case wh ere no jury shou ld int e rvene , that such a conveyance would pre sent a case O f

we l l define d legal fraud .

”S o upon the se S l ight distinc

tions , that the instruction asked , as to which e rror was

ass igned , was i tse lf technical ly e rroneous , and that no c om

plaint was made as to the instructions actually given , or to

the finding of the j ury on the evidence submitted to them ,

1 53 T ex.

107 FR AUDUL E NT M O R T GA G E S O F M E R C HAND IS E .

C H A P T E R VI I .

T H E QUE ST I O N N O T A VIT A L O N E I N SOM E JUR I S

D I C T IO N S .

S E C T ION R hode I sland ; the que st ion not cons idered .

M aryland ; the que st ion not discussed .

N ew Jersey ; general ru le s re spe ct ing fraud in conveyance s .

Ve rmont ; the que st ion not a pract i cal one .

Georgia ; the que st ion e l iminated by s tatute .

C al ifornia and Nevada ; mortgage s of chatte ls l imited bystatut e .

Lou is iana ; mortgage s of chat te ls unknown.

107 . R h ode I s l and ; th e qu e s t ion n ot c onside re d .

T he que stion of the fraudulent characte r of a re servedpower O f sale in th i s class of case s has not addre ssed itse l fto the attention of the Supreme Court of R hode Island .

Thre e case s were pre sented to that court in 1877 , in whichit was fairly involved , but was not considered . Wi l l iamsv . Briggs 1 was a case O f a mortgage on the tools , fixture s ,and stock in trade of a carriage manufactory , unde r whichthe grantor continued to conduct busine ss on hi s own ao

count for five ye ars ; afte r which he made a voluntaryassignment for the benefit O f hi s creditors general ly . T he

controve rsy was betwe en the mortgage e and the generalassigne e , over the claim of the former to hol d the propertyacquired by the mortgager pending the mortgage , whichwas the larger portion of that on hand at the time of the

assignment . T he case was considered sole ly as pre sentingthe que stion of substituted l i en . T he court sai d : “ T he

c ase

'

raise s the que stion whe the r a mortgage of property to

1 11 R . I . 476.

QUE ST ION N O T V IT A L IN S O M E JUR ISD I C T IO NS . 107

be subsequently acquired conveys to the mortgage e a ti tleto such prope rty when acquired , which is val i d at law as

against the mortgager or leis voluntary assignee . T he ac

tion be ing trover, by the admini strator o f the mortgage e ,

for the convers ion of the after-acquire d goods , the courthe ld that the mortgagee had no legal t itle in them , and that.

he could not ré cover the ir value in trover. Cook C or

the l l 1 was a case O f a mortgage on a trade r’ s stock of goods ,the grantor remaining in .posse ssion , and conducting bus ine ss for more than a year , afte r which the mortgage e tookposse ss ion . T he suit was attachment of the goods by a

creditor of the mortgager . T he que stions considered , bothby the majority O f the court and the dissenting judge , relate d to the rights of the mortgage e under hi s posse ss ion .

Wi l l iams v . Briggs was referred to as an analogous case .

In ne ithe r of the se case s was the characte r of the transac

tion , in v iew O f the mortgage r’ s re taine d posse ssion and

power of dispos ition , argue d by counse l or conside red bythe court .

T he plaintiff in IVilliams v . Briggs , hav ing fai led in hisaction at law , fi led hi s bi l l in e qu ity to enforce the e quitable l ien which he claimed under the mortgage , upon the

afte r- acqu ire d prope rty , and thi s case was pre sente d as

Wi l l iams v . VVinsor ? T he l ien , which was O f no force at‘

law , was cons idered val id in e qu ity , and the plaintiff now

prevai led . This case has be en cite d as placing R hodeIsland inthe same category w ith Iowa and Michigan , on the

subj e ct of the fraudulent characte r of such conveyance s .

It wil l be'

se en, however , upon e xamination , to be confinedto the que stion of l ien by substitution . Counse l for re

spondents submitte d S imply the fol lowing proposition on

the subje ct of fraud T he prov ision in thi s mortgage re

lating to after-acquired property does not be long to the

1 11 R . I . 482; 23 Am . R ep. 518.

108 F R A U D L’

L E N T M O R T GAG E S O F M E R C HANDI S E .

class of contracts of which an equ i ty court wi l l decre e a

spe cific performance , be cause such a transaction i s againstpublic pol icy , throwing open a wide door t o possible fraud .

”

I II re sponse t o which sugge stion the court said While insome State s a mortgage containing a p ower to sell and re

pla ce , or whe re the mortgager re tains posse ss ion , has be enhe ld to be the re fore voi d , such has not be en

’

the doctrine O f

the courts in thi s State . He re , the que stion Whethe r such amortgage i s fraudulent or not i s a fact for the de cis ion of

the jury , upon the circumstance s and evidence in the part icu lar case .

”S O far,then , as the que stion of fraud was

conside red at al l by the court in this case , i t was cons idered ,l ike the who le case , as turning upon a covenant to sell and

rep lace . T he reporte r of the court , in a note } re fe rs to c omments upon thi s case in the Albany L aw Journal ,

2 in whichthe same View is taken O f the case , viz as pre senting theque stions O f powe r to mortgage prope rty in f u lnro , and O f

a he n by subst itution . It c an scarce ly be supposed that thecourt , in the language above quoted , intende d to deny thepowe r of a court of e qu ity to pass upon such a que stion of

fraud for itse lf , upon independent examination of the facts ,or to say that an i ssue of fact mu st of ne ce ss ity be sent toa jury in every such case . It may se em plainly infe rablefrom the attitude O f the Supreme Court toward such qu e stions that R hode Island w i l l in time adopt the View thatsuch conveyance s are not inherently fraudu le nt ; but i t i splain, a lso , that the que stion has not ye t be en fu l ly c on

sidered.

108 . M aryl and ; t h e qu e s t ion n ot“

d isc u ss e d — T he

que stion has not be en conside re d by the Court of AppealsO f Maryland , though O pportuni tie s have be en afforded .

Hudson C . Warne r8 was a conte st in e qu ity be twe en the

mortgage e s under a mortgage O f a stock of goods in trade ,

. at ar. 11 12R I p 13 2 17 A L J 359 3 2 H & G°

l l 415 1828

1 76

109 FR AUDUL E NT M O R T GA GE S O E M E R C HAND IS E .

arise . Pre ston Le ighton 1 was a conte st be twe en two succ e ssive mortgage e s of a stock O f goods , the earlie rmortgage

be ing su stained and the que stion of powe r of sale by themortgage r was not discusse d othe rwise than to re fer to the

fact that no agre ement had be en made to al low such a

powe r.

T he case of Pri ce P itzer 2 indicate s a disposition to

regard the doctrine O f R obinson 21 . E ll iott with favor. Atrade r conveyed al l hi s stock in trade , w i th othe r property ,

to trustee s , for the ostensible benefit O f creditors , but re

served the right to carry i on h is busine ss , paying to thetruste e s a portion of the proce eds . T he Court of Appealshe l d the de ed fraudu lent and void , characterizing it as follows T he practi cal arrangement contemplate d by the

prov i sions of the de ed i s , by v irtue of i ts authority , to

enable Bloomenour to continue hi s bus ine ss of m e rchandis

ing, w ithout interference on the part of his creditors , unti lthe debts are al l pai d in the manner indicate d by him in thede ed . If a bo ld scheme l i ke th is , to binder and de lay hi screditors , and to make the ir rights O f enforcing payment ofthe ir claims subordinate to the mode and proce ss of pay

ment prov ided by the debtor and grantor in the de ed , i snot in palpabl e and unque stionable Violation of the prev isions O f the statute of E l izabe th , and absolute ly vo i d as to

his cre ditors , i t i s difficu l t to define what would be .

”

109 . N ew-

J e rse y ; gen e ra l ru l e s re sp e c t ing fraud in

c onve yan c e s .— N O de cis ions on the subj ect are found in

the reports of the State of N ew Jersey , and apparently a

conte st has never be en made the re e v er the vali dity of a

mortgage of goods in trade with a powe r of dispos itionre served . A dietam in the case of Mille r ads . Pancoast 8

has some time s be en taken as ev idence of an inclination of the

Supreme Court toward the doctrine that such a re servation

2 6 M d. 88.

2 44 Id. 521 2 29 N . J. L aw, 5 Dutch. 250178

QUE S T I O N N O T VI T A L I N S O M E JUR I SDI C T IONS . 109

would me re ly furnish evidence of fraud to go to a jury . Itis doubtfu l , howeve r , i f the court intended to expre s s any

View on the subject in re ference to the legal e ffe ct of such a

transaction upon the rights of creditors ; the language of

the opinion i s l imite d to the que st ion of the rights of purc hasers . T he case pre sente d was a mortgage of chatte ls ,with a re se rvation to the mortgager of posse ss ion only the

e lement of a re served power of disposition did not appearnor i s i t state d that the chatte ls were me rchandise . T he

Supreme Court b e ing appe aled to , for advice to the inferiorcourts as to the val i dity O f the conveyance , it was he ld thatin al l such case s , whe ther the re servation of posse ss ion befraudulent or not “ i s a qu e stion of intent to be se ttledas a que stion O f fact by a jury .

” After thus de ciding theease , the court further expre ssed its opinion as to othe r que stions which might possib ly arise in re ference to fraudu lentc onveyance s , as fo l lows

“Although the mortgage may not be inval i d against creditors orsubse quent purchasers for want of posse ssion in themortgage e , i t by no means follows that it may not be voi dagainst subsequent purchasers by re ason of the mortgage e ssuffering the

'

mortgage r to use and manage themortgagedchatte ls in such a way as to de ce ive bonafide purchase rs as tothe right O f the mortgager to se l l and dispose of the Chatte l s ;as in case O f the stock of a merchant or manufacturer, i f themortgage e of such a stock should pe rmit the mortgage r toremain in posse ss ion , se l l ing and dispos ing of his stock without re striction in the ordinary course of trade , such conductwould be ev i dence O f fraud to go to a jury , ev idence thatthe mortgage was kept on foot for fraudulent purpose s and

the mortgage would be he ld voi d , at least S O far as propertysold in the ordinary course of the trade permitted , was c oncerne d . This is a statement of the re sults of the famil iardoctrine of e stoppe l , by which the mouth of the mortgage e

would be closed against any complaint conce rning sale s to179

109 FR AUDUL E NT M O R T G AGE S O F M E R C HAND ISE .

bonaj ide purchasers . Such sal e s would clearly pass the titl eto the goods , e ven as against the mortgage e ; and case sapp lyingthe ru le to such sale s are numerou s , both inE ngland 1

and Ame rica . It by no means fo l lows , from the propos itionthat the que stion of fraud as to purchase rs must go to a

jury , that the Courts of N ew Je rsey wou ld be debarred fromapplying a legal rule to the que stion of fraud as to creditors , when the facts are plain and undisputed .

T he prev ious course of adjudication in thi s State doe snot appear to furni sh any rule for thi s particular class of

case s , should one ari se . T he gene ral rule i s that que stions of fraud , be ing mixe d qu e stions , partly of law and

partly of fac t ,'

must always be de termine d by the jury and

not by the judge s .

” 2 But what i s ev idence of fraud , i sa que stion of law 3

and i f a jury fai l s to i find fraud whenthe ev idence warrants it , the ir ve rdict wi l l be set aside as a

verdict against law .

4 It i s for the jury mere ly to find the

facts , and the law w i l l pronounce its judgment on the transaction .

5 A nd in the courts of e qu ity , the existence of

fraud i s O ften a pre sumption of law from admitte d or e s

tabl ished facts , irre spective of mot ive , and too strong to berebutte d 6 which i s the princip le that makes a voluntarysettlement on a wife by an embarrasse d husband , fraudu

lent as against creditors , no matter how pure the motivewhich induce d it .

” 7

Looker v . Pe ckwe l l 6 i s inconclusive . It was a mortgageon a stock of goods in trade , with an Implied power of sale in

1 S e e ante, sect . 31 .

2 O liver v. Applegate , 5 N . J. L aw,2 S outh . Hendricks M ount,

Id. 738.

3 Vanpe lt v. Veghte , 14 Id. , 2Green, 204 O l iver Applegate , supra5 Watkins v. Pintard, 1 N . J . L aw, C oxe , 378.6 Be lford C rane , 16 N. J. E q. 265

7 I d. p . 270.

2 38 N . J . L aw, 9 Vroom, 253

180

1 11 F R A L‘

D L'

L E N T M O R T GA GE S O E M E R C HAND I S E .

and attache s on the purchase s made to supply the ir place .

This statutory provi s ion has be en seve ral t ime s sustaine d bythe Supreme Court? Thus i s re al ize d the ve ry idea of a

float ing mortgage , which attache s , swe l ls and contracts , asthe stock in trade change s , increase s or dimini she s ,

”

which has in othe r juri sdictions be en characte rized as

Vicious .

3 But this floating li en i s not al lowe d by the S upreme Court to extend to any such portion of the stock ,

when se ized for fore closure , as may be in exce ss of the

amount of the stock on hand at the time the mortgage wasgiven . T o al low the mortgage as a l ien on any greateramount of goods would be , in the O pinion of the court , toopen the door to unl imited fraud .

” 4 This shows thatthe j udicial mind in Georgia i s not wholly insensible to thedifficultie s attending such conveyances . T he same factappears in a later case , in which thi s ruling i s adhe red to .

T he permission to give such a mortgage , though a veryconvenient privi lege , i s one Ve ry e asi ly use d to commitfraud ; and we think the spiri t of the code , as we l l as publ ic pol icy , require s it to be l imited as we have l imited it .

We have known of several case s where mortgage s of thischaracte r have be en given , with a smal l stock at the time ,

and large purchase s made on credit soon afte rwards . T he

temptation to do thi s , i f possible , would lead to fraud , andwe think the obje ct O f the law - i s be st attained by ke epingthe partie s w i thin the amount of stock on hand at the

time .

” 5 This recognition of the tendency of such transactions may perhaps indicate the commonlaw View whichwou ld be ente rtained in Georgia i f the courts were at

l iberty to apply it . In general , in thi s State , a re servation

1 C ode of Georgia, 1873, sect . 1954.

2 C hisolm v. C hi t tenden, 45 G a. 213 ; Anderson Howard, 49 G a. 313

Goodrich v. W i ll iams, 50 G a. 425.

3 C ol l ins M yers, 16 O hio, 547.

4 C hisolm v. C hi t tenden, 45 G a. , at p . 219 .

6 Goodrich v. W ill iams, 50 G a. , at p. 435.

182

QUE ST I O N N O T VI TAL IN S O M E JUR ISD IC T IO NS . 1 12

of any kind , for the benefit of the debtor, at the time hemake s a conveyance , de stroys its validity as to creditors .

1

Courts are not , however, cal led upon to instruct jurie s as tobadge s of fraud in such case s , or the ir e ffe ct , unless e spec ial ly re qu e sted ?

It re sul ts that so far as the j uri sprudence of Georgiafail s to re cognize the re se rvat ion by a mortgager of the

power of se ll ing the goods mortgaged at his discretion , as a

re servation to hi s use , i t i s due to the action of the Legislature rathe r than t o the ru l ings of the courts , and that theGeorgia case s fal l far short of be ing authoritie s upon thecommon-law que stion .

112. C a l iforn ia and N evada ; m ortgage s of ch at t e l sl im it e d by s t a tu t e . T he que st ion under discuss ion cannotarise in Cal ifornia , al l controversy over i t be ing e l iminatedfrom the j urisprudence of that State by the adoption of

pecu l iar statutory prov i s ions concerning mortgage s of

personal property . T he character of goods which may be

made the subj e ct of such a mortgage i s indicated in expre ssterms . Twe lve . classe s of chatte l s are name d , In none of

which cou ld a stock of merchandise in trade , or other prope rty which must be sold or consume d to be used , be ine luded .

3 T he posse ssion of mortgage d chatte l s i s regulatedin de tai l by statute . The se statute s undoubtedly preventmuch vexatious l itigation . Th ey are to be commended as

prudent appl ications in the advance of the principle s of thewhole some commonlaw ru le which , as has be en seen , i sadopted so general ly by the Ameri can courts . Prior tothe se statute s , i t was he ld in Cal ifornia , under the pre v isions of the law then in force , that re tention of posse ssion

1 E dwards 12. S t inson, 59 G a. 443 ; M itche l l S te tson, 64 G a. 442.

2 Nicol v. C rit t enden, 55 G a. 497, head-not es 10 and 11 .

3 C ivi l C ode of C al . , sect . 2955 ; C odes and S tatute s, sect . 7955 ; amendmentof 1878, 3H ittel l

'

s C odes, p. 239 .

1 13 FR AUDUL E NT M O RT GA GE S O F M E R C HAND IS E .

by a mortgager of chatte l s would be conclusive ly fraudulentas to creditors , and that a stipu lation for such re tention ofposse ss ion would have that e ffect , although the mortgage eactual ly took posse ss ion , for i t wou ld be a posse ssion in

Violat ion of the stipulation in the mortgage .

1

A S imi lar re sult i s attained in Nevada , as to the class ofcase s under consi deration , by the statute which inval idate sal l mortgage s of pe rsonal prope rty , unle ss posse ssion be del ive red to and re tained by the mortgage e ; the S ingle exc ep

t ion be ing made of growing crops , mortgage s of which are

to be acknowledged and re corded ?

113 . L ou isiana ; m ort gage s of Ch at t e l s u nk nown .

Chatte l mortgage s are unknown to the law of Lou i s iana .

Movable s are not susceptib le of be ing mortgaged . E ven ifmade in anothe r State , and val i d there , a chatte l mortgagewould not be re cogni zed in that State .

3 T he que stion wil lnot , there fore , be l ike ly to be pre sented to the courts ofthat State .

In the other State s not refe rre d to by name , the que stionseems neve r to have fairly ari sen for consideration in thecourts of last re sort .

1 M eyer 9 . Gorham , 5 C al . 322

2 C ompiled Laws of Nevada, 1873, sect . 294 ; (ch . 26, sec t .3 D elop W indsor, 26 L a. A n. 185

184

1 14 FR AUDUL E NT M O R T GA GE S O F M E R C H AND IS E .

and i s re ce ive d w ith favor in seve ral othe rs . It is furtheradopted as a ru le of law in Nebraska to th is l imited extent

,

that it w i l l be appl ied by the courts whe re the powe r O f

sale i s re se rved to the mortgager on the face of the instru

ment , but case s Whe re the power doe s not S O appe ar w i l lturn upon the que stion of a fraudu lent intent , and must besubmitt ed to a jury . In North Caro l ina the doctrine i sstrongly favored , but i s appl ie d only as a matte r of pre

sumpt ive ev idence , jurie s be ing re commended , if not re

qu ired , to reach the conclus ion that such transactions arefraudulent , through a proce ss of pre sumptions .

A contrary view is entertained in e ight State s , where forvarious reasons i t has be en he ld that jurisprudence has nosubstantive rule on the subj e ct .

In Michigan , frau d in thi s c lass of case s i s to be c onsid

ere d only as re sting in intent , and thu s as pre senting an

i ssu e of fact in all case s . This arbitrary classification isadopted in de ference to a statute which make s fraudulentintent a que stion of fact for the jury ; which statute i s not ,however, in other case s al lowe d to turn principle s O f law

into que stions of fact .

” 1 In Iowa , fraud in such case s isin l ike manne r left to the j ury as a que stion of fact ; butthis i s in de fe rence to a statute which prov ide s that theme re retention of posse ss ion unde r a chatte l mortgage doesnot inval idate the mortgage , provide d it i s acknowledgedand re corded ; to which acts the statute ascribe s a legale ffe ct equivalent to actual manual de l ivery .

In Massachuse tts , fraud in such case s always turns uponthe que stion of fraudu lent intent , proof of a re se rve d powerof sale furni shing only pre sumptive e vi dence for the juryalthough in other case s of re se rvations by the grantor, suchas a powe r O f revocation , or the u se of property consumablein the use , intent i s immaterial , and the law pronounce s itsjudgment of fraud .

1 P ierson v. M anning, 2M ich . 445.

C R IT I C ISM S UPO N T H E DO C T R INE E XAM IN E D .

In Maine , in l ike manner, the case furni she s pre sumptions only , which are to go to the jury in i l lustration of the

que stion of fraud in fact , by which i s meant fraud re sting inintent ; and the courts have practi cal ly no opinion on the

subj e ct of the fraud in the se case s . In Kentucky , the re

served power of sale i s tre ated as only a badge of fraud, to

be cons idered by the jury in conne ction with the que st ionof intent . In thi s State as we l l as in Maine , no distinctionse ems to be O bse rved be twe en re taine d posse ss ion alone , andposse ss ion wi th a re se rve d powe r of disposition . Pe rhapsthe ru le is to be cons ide re d as not we l l settle d e ither way inKentucky , in View of the fact that the old distinction be

twe en absolute and conditional transfers , as to the inher

ently fraudu lent characte r of re taine d posse ss ion alone , i scons idered to be inconsi stent w ith the harmony of legalscience .

” 1

In Kansas , the rule i s adopte d that the que stion of

fraud in the re se rvation of a discre tionary power of

sal e i s a que stion of good faith or of intent to de fraud ;but this rule was announced by a div i ded court , in but onecase , the de ci sion in which has s ince be en cons idere d of

doubtful propriety . In Alabama , i t i s thought that suchtransactions have a bad appearance , but it must be left to thej ury to condemn them , be cause there i s in th is State no

actual fraud without intent . ” In Texas,here tofore , i f the

mortgage bore the re se rvation of a power O f sale on itsface , and was pre sented to a court alone , i t would be dec lared fraudu lent p e r se ; though if pre sented to a jury , the

que stion of fraud would be le ft to them , subj e ct to rev iewby the court , and probably it wou ld be the duty of the juryto find such a re servation fraudu lent ; but al l the se dis

t inct ions are now abo l ishe d by 21 statute which de clare s allsuch transactions fraudu lent .

1 Danie l M orrison, 6 Dana, 182.

1 16 FR AUDUL E NT M O R T GA G E S or M E R C HA ND IS E .

1 15 O b j e ct ion s t o t h e m a j orit y doct rin e s tate d . T he

dissenting v iews , which find support in the adjudications ofthe e ight State s above named , have be en pre ssed upon theconside ration of the courts w ith p ersistency , and have be ensupporte d by ingenious arguments . A re cent treatise presents an e laborate di scussion of the que stion , from whichthe fol low ing conclus ions are th ere deduced First , thatthe doctrine of abso lute fraud arising in a mortgage of

me rchandise from the mortgage r’ s re taining posse ssion witha powe r of disposal in the u sual course of trade ‘1‘

i s contrary to sound principles of jurisprudence ; se cond ,that “ it i s contrary to sound po licy and third , that “ it hasno reason for i ts existence , de rive d from genera l obse rvation and experi ence .

” 1 This concise statement summarize sthe obj e ctions urged to the doctrine of R obinson v . E l liott , andfurni she s a View upon which the de cis ions in the e ight dissenting State s may be harmonized . It is a View no doubtentertained , in the terms stated , in some of those State s ;and it would perhaps be favored in some other States wherethe que stion has not be en dire ctly passed upon .

If the se v iews are corre ct , i t i s of prime importance tothe profe ssion that they be so understood , and be general lyadopted . T he concurrence of the adjudications of the court sof fourte en of the State s with those of the Unite d State s , i fat war with e stabl ishe d principle s of juri sprudence , shouldnot be al lowed to have influence or we ight outside the se

courts ; but if e rroneous , the ir errors should be fearle ssly exposed , and by legislation or otherw i se , corre cted . It i sproper , there fore , to examine upon reason and principle theobj ections pre sented .

1 16 . I S t h e doctrin e on e of con st ru ct ive or p re sum p

t iv e frau d ? — Fi rst , it i s suppose d that the doctrine of

R obinson v . E ll iott , Col l ins Myers and kindred case s i s

1 Jones on C hat te l M ortgages, sect . 425.

1 1 7 PR AU D U L E N T M O R T GAGE S O F M E R C HA NDISE .

the practice of se tting up a man of straw in order to strikehim down . Frauds of the class in que stion are not supposed , by those who expose and condemn them ,

to be c on

structive , artificial or pre sumptive frauds . T he courts , inde claring the fraud in such case s , do not proce ed upon any

theory of e ithe r construction or pre sumption . In R obinsonv . E l l iott and analogous case s , the fraud is ne i ther pre sumednor infe rred ; i t i s di scove re d to exi st , i t i s exposed , and iti s then adjudged . T he fraud thus adjudged i s sai d to beactual .M r . B ige low says , in hi s work on Fraud , Constructive

or pre sumptive fraud i s an infe rence of law , not to

the e ffe ct that an actual fraud has , in the absenceof explanation , be en cl early proved , but e ither thatit i s p robable that fraud was committed , or that the existenceof certain things in the re lation or conduct of partie s bege tsa probabi l ity of actual knowledge of fraud , orwhat wi l l le adt o fraud , on the part of the person complained of . T he

fraud thus fixed is pre sumptive only , and in reali ty may

not have existed .

” 1 Thi s i s one of the late st of manydefinitions , in which no diffe rence i s observe d be twe enconstructive fraud and pre sumptive fraud , the expre ss ionsbe ing u se d interchangeably . T he terms there employe d areapt to de scribe fraudwhich is prove d by a re sort to pre sumpt ive evidence . The re i s a constructive fraud which i sadjudge d by an arb itrary proce ss of jurisprudence , in case swhere the re lations be twe en partie s are S O intimate that ,for reasons of publi c pol i cy , no explanation or proof of

good faith wou ld be al lowed to val idate the transactioninter p artes ; and in the se case s , i t i s scarce ly exact to stylethe fraud pre sumptive . But w ithout ente ring into the sedi stinctions , and using the terms constructive and

pre sumptive for the pre sent as interchangeable , i t suffice s

1 B ige low on F raud, lvi i i.

C R IT IC I SM S UPO N T IIE DO C T R INE E xA M IN E D . 1 18

t o say that the fraud in the class of case s unde r cons iderat iondoe s not fal l w ithin the definit ion cited . It is rather of the

c lass re ferred to by the same author e lsewhere , in the se wordsIn SOme case s , fraud is self-evident ; and when so , i t i s

the proper province of the court to adj udge up on it .

’ ’ 1 A ny

c riti cism in the premise s , based on cons ide rations appl icableto pre sumptive fraud or constructive fraud must , the refore ,in the nature of the case , be mis leading .

118 . F rau d a s a qu e st ion of l aw .— I t i s frequently

suppose d that the term fraud in law , and the termconstruct ive or pre sumptive fraud ,

”are e quivalent ex

pre ss ions ; and that the terms fraud in fact and actualfraud are also synonymous . This use of terms distinguishe sthe dissent from -the doctrine in que stion , both in the opinions of the dissenting courts and the arguments of the dissenting controvers iali sts . It i s base d on the supposition thatactual fraud ”

always implie s a fraudulent intent on the

part of the person complained of , or, in other words , thatthe re c an be no actual ” fraud without such an intentand furthe r, that as such intent i s always a que stion of factto be de te rmine d by a jury , therefore , actual fraud isa lways a que stion for a j ury . Hence i t i s re asone d thatactual fraud i s neve r, and c an neve r be , the e qu ivalent

of fraud in law ,

”but that the latte r i s always the e qu iv

ale ut of pre sumptive fraud .

” It fol lows from the sev iews , by easy tra nsit ion , in regular logical proce sse s , thatwheneve r a court , without the aid of a jury , has adjudicatedthat fraud exist s ,

'

it c an be no other than pre sumptive or

constructive fraud .

” The se i deas colored the views of thec ourt in Brett Carter,2whe re i t was suppose d to be we l ls ettled that , in the class of case s unde r cons ideration ,

the que stion whethe r thi s was a fraud or not was one of

fact for the j ury , excepting under a pe cu l iar clause in the

1 B ig. on F raud, p . 468 .

2 2 L ow. 458.

1

1 19 F R A U D L’

L E N T M O R T GAG E S O F M E R C HAND IS E .

bankrupt law of E ngland and where i t was thoughtstrange that afte r our Leg i slature s have met the difficul

tie s of T wyne’

s Case , by requ iring registration , and pro

viding that fraud Shal l be a que st ion of fact for the jury ,

”

the Supreme Court of the Unite d State s and othe r courtsshou l d ho ld such transactions to be fraudulent and vo i d inlaw . S o i t has be en thought that an arbitrary rule , de c laring voi d al l mortgage s of pe rsonal prope rty containing prov i s ions that the mortgage r may re tain posse ssion and se l l inthe u sual course of bus ine ss , must have the e ffe ct of an

nul l ing ve ry many transactions which are withou t fraud infact .

” 1 Those courts , the re fore , which adopt this rule ,

have , in S O doing , rev ived the O ld re j ected doctrine of

constructive fraud while those which dissent from ithave adhe red to the safe and just ru le that fraudulent in

tent i s in al l case s a que stion of fact .

” 2

1 19 . D istin ction b e tw e e n a ctu a l frau d an d frau du

l en t in te n t .— T he diflicu lty in al l of the se v i ews of such

transactions ari se s from a misconception of the nature and

characte r of fraud as a legal que st ion . T he classificationof fraud into. fraud in law and fraud in fact i s notahappy one . T he classification into actual fraud and

constructive fraud ” i s logical and expl icab le . But ac

tual fraud and fraudulent intent are far from synon

ymous , and he who fai ls to distinguish be twe en them wi llerr . T he te rm fraud has prime re ference , not to the

intent or motive of the party to the transaction , but to theinhe rent characteristi cs and qual ity of the transaction i tse lf .

If e ssentially unre al or de ceptive , i t has in i tse lf fra udulentfeature s , and may be characte rized as a fraud ; but theintent to de fraud , that is , the intent to give the transac

tion a de ceptive charac t er,'

in orde r thereby to accomplishdeception , may or may not have been pre sent .

“Actual

1 Jones on C hat. M ort , sect . 4 18.

2 Id., sect. 415.192

1 19 F RAUDULE NT M O R T GA GE S O E M E R C HA ND IS E .

fact of such intent i s to be de te rmined by the j ury ; and ifthe j ury find such an intent , the judgment of fraud i s thenpronounced by the court . In many juri sdictions , a courtof e quity may de termine the fact of a fraudulent intentw ithout the aid O f a jury ; or in some j uri sdi ctions , suchaid may be invoked at the discre tion of the court , or at the

option of a party to the cause . In sti l l anothe r class of

case s , the facts of the case are apparent to the court ; i tmay be upon the face of a mortgage , or i t may be by theadmission of the partie s to the cause ; and w i thout re fe rence to the intent O f any of the partie s , the court se e s thefraudulent characte r of the transaction as plainly as i f an

intent to de fraud had be en proven or admitte d . Here the

duty of the court se ems plain and unavo idab le , to adjudgethe fraud as a conclusion of law . R obinson v . E ll iott ,Brett Carter, and kindred case s fal l within thi s class . Iti s only the se classe s of case s whi ch must turn upon a fraudul ent intent , to which statute s c an apply , l ike those in Indiana and Michigan , which prov ide that the que stion of

fraudu lent intent shal l in all cas e s be a que stion of fact .

1

It wou ld be impract icable , i f i t we re de sirable , to put all

case s involving fraud upon a Procrustean bed of fraudulentintent . Some time s , the re fore , actual fraud is adjudicatedby the court upon the intent of the parti e s , irre spective of

othe r facts , ( as , for instance , the bona fides of the indebtedne ss in the case ) ; and some time s , also , actua l fraud isadjudi cated by the court upon the facts of the case , irre spe ctive of the intent of the partie s . Al l the se classe s of case shave be en comprehended in the frequent de clarations of thecourts that fraud i s the judgment of the law upon fac tsand intents .

” 2

1 R ob inson v. E l l iott, 22Wal l . 5 13.

2 D e e dem . O t ley v. M ann ing, 9 E ast , 64 ; Pe tt ibone v. S tevens, 15 C onn

19 ; 38 Am . D ec . 57 ; Beers v. Botsford, 13 C onn. 146 ; S turtevant v. Bal lard,9 Johns. 337 ; 6 Am. D e c . 281 ; M organ 9 . E lam ,

4 Yerg. 438 ; Worseley

D e M attos, 1 Burr. 467 ; R ea Al exander, 5 I red. L . 644 .

194

C R I T I C I SM S UPO N T H E DO C T R INE E XAM INE D .

120 . T h e l aw and t h e fa ct s in c ase s o f a l l e ge d frau d .

A very ful l e xplanation of the re lative office s of the courtand the jury in the se case s i s given in Hughe s Cory} byJudge D i llon , who , it would se em , might have applied hisown rule s to the case of the mortgage on a stock of goods ,then under examination , but for the controll ing influenceof the Iowa statute s . H e says “A mortgage may be

fraudulent in fact be cause the re i s no real debt or i f one ,

be cause it i s knowingly and purpose ly ove rstated , to de ce iveand ke ep off other creditors . When the se fac ts are proved ,fraud i s an inference of law , and the jury i s , under thedire ction of the court , bound to find it ; or though there bea real debt , ye t if i t c an be S hown that the control l ingmotive and O bje ct in making and taking the mortgage werenot to se cure the debt , but to hold the instrument as a S hie ldto prote ct the debtor from hi s othe r creditors , th is wouldmake the mortgage fraudulent . T he court Should so in

struct and the j ury so find. The se are mere ly instance s ofactual fraud , and other case s may easi ly be imagine d . A ny

instrument i s fraudu lent which is a m ere tri ck or sham c on

trivanc e , or which originate s in badmotive s or intentions ,that i s , made and re ce ived for the purpose of warding off

other creditors .

” Here the learne d judge refers to shamcontrivance s as one class of case s indicating actual fraud ,and transactions originating in fraudu lent intent as S implyanother class of s imi lar case s , in which the judicial duty isthe same .

T he proce ss in the j udicial mind , therefore , in those caseswhere putat ive mortgage s of merchandise are de clare dfraudulent , i s a familiar one , corre sponding to that adopte din al l case s where se lf- evi dent or actual fraud i s de clared bya court . If the agre ement that the mortgager shal l re tainthe posse ssion , potential contro l , and right of dispos ition of

the goods appe ar on the face of the mortgage , the court , in

1 20 Iowa, 399.

121 FR AUDUL E NT M O R TGA GE S O F M E R C HANDIS E .

exerci sing the duty of constru ing that instrument , asce rtainsthe fraud ; and no furthe r duty cou ld in such a case beass igned to a jury than to find the fact of the exe cution of

the instrument , i f that were disputed . If such an agre ement appears by ev idence a liunde , the re su lt i s the sam e

when the fact is found ; and no furthe r duty can prope rlybe assigned to a jury than to de termine the fact of the

agreement ; when that fact i s found , by ve rdict of a jury or

otherwise , the judicial proce ss i s the sam e as i f the factappeared on the face of the mortgage . In e ach of the secase s the fraud is adjudicate d by the court as actual , notpre sumptive fraud .

121 . F rau d pre dica t e d of t h e t ran sa ct ion it se l f, rat h e rth an o f t h e m o tive s of t h e part ie s . But are the courtsright who ho ld such a transaction to be actual ly fraudu lentInasmuch as there is no universal and common definition of

fraud , and i t se ems difficu l t to se cure one , it may be thatthi s i s a que stion to be de termined simply by the preponderance of authority and if , as has b e en S hown , the logicalproce sse s of juri sprudence have b e en properly employed inreaching the re su lt that such a transact ion i s actual ly fraudul ent , the We ight of authority , i f on that side , ought tobe al lowe d to close the discussion . But the reasoningemployed and the e lucidation afforded by the courts in ad

judic at ing that there i s fraud in the se transactions , se em suf

fic ient t o bring them wi thin the original definition of fraudas de ce it or covin . T he que stion is , i s it an actual fraudfor A . to exe cute a so- calle d mortgage on his stock of goodsto B.

, ostensibly to se cure a debt , but re serv ing to himse lf ,by an arrangement in which B . participate s , the powe r todispose of the goods in the usual course of trade at hi s discre tion ? First , inqu iring in what sense the word fraud i sused , we find it appl i cabl e to the transaction be twe en thepartie s , rather than t o the ir intent . Cov in , in the old

196

122 FR AUDUL E NT M O R T GA GE S O F M E R C HAN D I S E .

but facts have be en found with certainty , to which a definiterule has be en appl ied .

122. T h e c ou rt s te s t su ch m ort gage s by t h e ir ch ara c t e r ist ic s . This ru le of te sting the transaction by itscharacte ri sti cs , i s the one appl i ed in both the E ngl ish and

American case s already cite d . It i s appl i ed as a ru le of substant ive law , base d on the unreal and de ceptive character ofthe transaction , which is he ld to render the transaction fraudul ent . Its practical appl ication in this class of case s beginswith T wyne

’

s Case } where one reason given for the judgment of fraud was , the donor continued in posse ssion and

used them a s his own , and by re ason thereof , he trade d and

trafficke d w ith others , and de frauded and de ce ive d them .

”

Said Lord Mansfie ld , in a case of thi s sort '2 They who

dealt wi th him truste d to his v i s ibl e trade and stock ; theywe re impos e d on by fal se appearance s .

” It was inc on

si stent ,” sai d Lord Kenyon ,

3 that the grantor shou ld exe

cute acts of ownership ,”

after hav ing ostensib ly partedwith he r prope rty to anothe r . Such a transaction was inVirginia he ld to be “felo de se ;

”as a se curity , naught ,

”

but re su lting in mere ly a personal se curi ty ; a re servationto the grantor of a fu l l power of revocation , and thereforefraudu lent p er

4 Such a transaction be ing de s igne dby the parti e s to be not O perative be twe en themse lve s ,and be ing ne ce ssari ly pre judicial to the rights of otherparties , the N ew York courts pronounce i t conclusive lyfraudu lent .

” 5 T he O hio courts find it s only and ne ce ssaryeffe ct to be that of a ward to ke ep O ff othe r creditors .

” 6

T he Supreme Court of the Unite d State s take s the same

1 3 C oke , 80.

2 W orse l ey v. D eM attos, 1 Burr. 467.

3 Page t v. Perchard, 1 E sp . 205 .

4 Lang L e e , 3 R and. 4 10.

5 R usse l l v. Winne , 37 N . Y. 591 ; S outhard v. Benner, 72N . Y .

6 C ol l ins v. M yers, 16 O hio , 547.

198

C R IT I C ISM S UPO N T H E DO C T R INE E XAM INE D . 123

View ,and says that such a mortgage is inconsi stent with

the nature and characte r of a mortgage , i s no prote ction tothe mortgage e , and of itse lf furnishe s a pre tty e ffe ctualShie ld to a dishone st debtor and that at last it i s but an.

expre ss ion of confidence , for the re c an be no re al se curitywhere there i s no ce rtain l ien .

” 1 InWi scons in , such an

instrument is thought to be p er se fraudulent and vo id inlaw ,

”and the fraud which the law impute s to i t i s c on

clus ive .

” 2 In Tenne sse e , it l

is considere d that in such a

transaction there are such faci l itie s for fraud that i t mustbe he ld as wanting in legal good faith , on the plain princi

p le that eve ry re asonab le man i s pre sum ed to intend theprobable consequence s of his own acts and the re isclearly a benefit contracte d for to the grantors , and a prejudice to the rights of other creditors .

” 3

In short , to sum up the whole argument , a mortgage or

conveyance of th i s kind pre sents a false appearance , i s onlya pre tence as a mortgage , i s cal culate d to de ce ive , cannotfai l to de ce ive i f i t be operative , furni she s unusual faci l itie sfor fraud , re serve s benefits to the grantor , and pre judice sothe r creditors . When i t thus appears that the transactioni s , in i ts re su lts , S O fraudu lent , and so injuriou s to creditors ,t hat few transactions coul d be more so , even where an intentto de fraud exi sts so as to bring them within the statute of

13 E liz . , the courts are as ready to adjudge the transactionfraudulent as they wou l d be if a fraudu lent intent appeared .

123 . R e gistrat ion do e s n ot va l idat e a frau du l en tt ran sa ct ion — I t has be en some time s urge d that al l the

fraudu lent characteri sti cs of such a transaction are cl iminated as soon as the contract is registe red . This argumentproce eds on the e rrone ou s suppos ition that constructivenotice of a fraud renders the fraud inoperative and i t in

1 Rob inson 11. E ll iott, 22Wal l . 513.

2 B lakeslee v. Rossman, 43Wis. 116.3 Bank 11. E bbert, 9 He is. 153.

123 F IIA U D U L E N T M O R T GA GE S O F M E R C HA ND I S E .

volve s an e rroneous unde rstanding of the office of regi stration of chatte l conveyance s . It i s hardly to be be l ievedthat any court would conside r constructive notice of an

intentional fraud as sufficient to purge the transaction .

Suppose A . and B . to enter into a written contract , onestipulation of which provi de s that B . shal l cheat C . , and

then the contract is registe red ; would constructive notice toC . by m eans of the registration suffice to val idate the transaction be twe en B . and C . , so that C . cou ld not avoi d i t forthe fraud ? O r suppose D . to convey all his

‘

real e state intrust to E . for the benefit of D .

’

s wife and children , ex

pre ssing upon the face O f the de ed that it is to prevent F .

from l evying hi s exe cution upon i t ; wou l d registration of

that de ed O pe rate to prevent F . from hav ing the vo luntaryconveyance se t asi de ? Y e t the se are s imply case s of fraud ,evidence d by di ffe rent facts . T he fraud i s sti l l fraud , andi t i s adjudged to be such , in case s where a mortgagerof goods re se rve s the posse ss ion w ith powe r of sale inthe u sual course O f trade . T he truth i s that the construetive notice given by registration of chatte l conveyance s i sde signe d to and do e s operate only upon the que stion of

posse ss ion of the prope rty . T he distinction has be en frequently pointed out by the courts , among them the Supreme

Court of the Unite d State s in R obinson v . E ll iott .

1 T he

rule i s the same in E ngland , unde r the B i l ls of Sale R egistration Act .

”M r. M ay says , in his work on Fraudu lent

Conveyance s O f course the m ere fact of due registrationof a bil l of sale under th is ac t doe s not ne ce ssari ly make i tgood against creditors ; though i t give s publicity to thetransaction , and in that way remove s one great e lem ent offraud ,

”name ly ,

that ari s ing from re tention of po sse ssionalone .

M r . May ’ s tre atise sheds st i l l further l ight on the subj e ct .

Judge Lowe l l , in Bre tt Carter} referred to this valuable

2p . 120.

3 2L ow. 458.

FR AUDUL E NT M O R T G AGE S O F M E R C HAND I S E .

disregard entire ly the distinguishing e l ement of such a

powe r of sale . This feature O f such conveyance s i s c ont rary to “

sound pol i cy ,

”no le ss than to “ sound princi

ple s of juri sprudence ,”

and for the same reasons alreadyre fe rred to ; jurisprudence and pol i cy concurring in thisre spe ct . Again , i t cannot be said of a discretionary powerof sale , that it i s a use such that the property i s not c on

sumed by the Ve ry ac t of u sing i t , for the re su l t under theexe rci se of such a powe r i s an e ffectual consumption of the

property so far i t conce rns al l creditors and the ir l iens ,e ithe r pre sent or prospe ct ive ; so that a u se which impl ie s anunl imited powe r of sale i s pre cise ly e qu ivalent to a use whichinvo lve s consumption of the property . E ven in M assachu

se ttS, i t i s he ld that i f a mortgage r u se s and consume s theproperty in the sam e manneras he would have done if nomortgage hadbe enmade ,

’ 1 the transaction i s fraudu lent as againstcreditors . In both classe s of case s , whe the r the grantorhas consumed the prop e rty or has sol d it , he has continued touse i t as his own in e ithe r case , the property fl i e s out fromunder the supposed li en , and i s gone ; the debtor has appro

priat ed i t t o hi s own u se ; i t i s out O f the reach , not only of

other creditors , but of the ve ry creditor who , i t was pretended , was se cured ; th i s creditor has , e ither dire ctly or

tacitly , san ctioned the arrangement by which the re su lt wasaccompl ished ; and the pretended se curity has in every suchcase op erated for the benefit of the debtor alone . C an

the re be any v i ew of sound pol i cy which w i l l al low suchre su lts to flow from a conventional arrangement betwe endebtor and creditor ? O r cou l d any sound pol icy do otherwise than to condemn in advance al l conventional arrangements under which such re su lts are probable ?

125 . A rgum en ts in favor o f su ch a p o l icy an sw e re d .

T he argument has be en frequently pre sse d with earne stne ss

1.R obb ins Parker, 3 M e t . 117.

C R IT I C I SM S UPO N T H E DO C T R INE E XAM INE D .

in detai l ; but in every instance , the answer to the argumentse ems plain and irre fragable . A good reason why the

mortgager of a stock of goods shou l d remain In posse ss ion ,

and continue tomake sal e s in the u sual course of h is trade ,

has be en assumed to be thi s , that “ he can manage thembetter than the mortgage e c an .

” 1 T he answer to th is sug

ge stion is : It i s be cau se i t is be tter , but be tter only for themortgager h imse lf , that jurisprudence and po l icy interposean obj e ction . But , Nei the r c an a trade r or manufacturerstop his bus ine ss in order to give se curi ty to a mortgage e ofhis stock .

” 2 Answe r : Then he should not p retend t o

give se curity ; sound po l icy , as we ll as the law , demandsfrankne ss and hone sty , and reprobate s pre tence s ; as the

trader or manufacturer cannot in good faith give se cur

ity ,

”it i s fraudu lent to pre tend that he c an . But , It i s

plain that such a doctrine virtual ly prevents a trader frommortgaging his stock at any t ime for any use fu l purpose .

” 3

Answer : This i s a non sequitur ; the right to mortgage a

stock of goods for a use fu l purpose can scarce ly be impaired by a ru l e which prohibits a mortgage of such goodsfor a vicious purpose . But , If he cannot se ll in the or

dinary course of trade , or only as the truste e and agent ofthe mortgage e , he might as we l l give posse ss ion to the mortgage e at once and go out of business .

” 4 Answer : That i swhat the law m eans by security and mortgage ; i fthe mortgage be not a real se curi ty , i t i s but a sham .

T o attempt to fasten a val id and certain l ien upon goodswhich may at any moment , at the wi ll of the debtor , flyout from under the l ien , i s to attempt a legal and moral impossibi li ty . T o pre tend seriously that such a thing i s possible , i s fraudu lent . But , T o hol d that a merchant cannotmortgage hi s goods without clos ing his doors , would be tohold that no mortgage of a merchant ’ s stock can be made

1 Jone s on C hat. M ort. , sect . 381.

3 Bre tt v. C arter, 2L ow. 458.

2 Ibid.

4 I bid.

126 FR AUDUL E NT M O R T G A G E S O F M E R C HAND IS E .

at al l .” 1 Answe r : T o thi s objection i t may be repl ied that ,

if what i s impl ied be added , viz . : that no mortgage of a

stock c an be made which shal l continue it as a stock in u sualtrade , i t then state s and i l lustrate s the case exactly , and

thus it i s no obj e ction at all . N o mortgage c an be made of

a merchant ’ s stock , which ke eps his doors open for the purpose s of the me rchant ’ s bus ine ss , be cause such a transactionwou ld be incons istent w ith the very charact er of a mortgage .

126 . D e fe ctive views of t h e sub j e ct il lu strated .— A

good i llustrat ion of the de fe ctive view of the real que stionwhich distingu ishe s all the se obje ctions to the

'

doc trine , i sfound in the argument whi ch was pre ssed upon the court inHedman v . Anderson .

2 T he trial court had be en aske d tocharge the jury that a mortgage on a stock of goods intrade would be vitiate d by an agreement , in or out of the

mortgage , al lowing sale s by the mortgage r in the usualcourse of trade ; and that the j ury might consider, in det erm ining the que st ion , the fact

“ that such sale s we re madewith the knowledge of the mortgage e , and without obje ction by him . Counse l for the de fendant in e rror, argu ingto sustain the action of the court in re fus ing such instruotion , sai d :

T he substance of the al leged e rror in the rulings of thedistrict court i s thi s that the me re fact that the mortgagerdisposed of some part of the property for his own use , w iththe knowledge and w ithout the di ss ent of the mortgage e ,did not of i tse lf render the mortgage void as to the plaint iff , prov ided there was no agre em ent in or out of the mortgage that the property might be so dispose d of . This wasnot error . T he case s do not say so ; and the propos itionthat such an acquie scence by the mortgage e ne ce ssari ly ren

1 G ay v. B idwel l, 7 M ich. 519 ; H ickman v. Perrin, 6 C old. 135.

2 6 N eb. 392.

204

is me re ly a que st ion or ev id ence . T h e important que st ioni s , suppos ing it to be we l l proven , what ru le of substant ivelaw or of sound pol i cy appl ie s ? T he argument abovequoted , in common with al l the others on the same s ide of

the que stion , exhib its a conspicuous inattention to the e ssential requisite of a mortgage of pe rsonalty , that it must bea ce rtain se curity upon spe cific prope rty ; and i t furtherignore s the manife st incons i stency of al low ing the mortgager a discre tionary power of sale over the property .

127 . C h ara cte rist ics of a C h a tt e l M ortgage . What i sa mortgage ? T he definition given by the learned author ofthe tre atise on the L aw of Mortgage s of R eal Prope rty”

i s so succinct and clear that it will doubtle ss me e t universalapproval , viz . A mortgage i s a qual ified conveyance ofproperty , whereby the owner p arts with it sof ar as to make

it a security to his creditor , and hi s cre ditor holds i t in sucha way that the owner may , by equitably f ulfi lling his obliga

tion , have his own again .

” 1 Further : It must clearlyindicate the creation of a lien , spe cify the debt to securewhich i t i s given , and the p rop erty up on which it is

"

to take

ej ec t .

” 2 M uta tis mu tandis , the same de scription and c on

ditions wi ll apply to and characterize a mortgage of chatte ls .

T he same author says of this class of conveyance s : “Aformal mortgage of personal property i s a conditional saleof i t a s security for the payment of a debt or the p e rformance of some othe r obligation . If the condition be not

perform e d according to i ts term s , the thing mortgage d isirrede emab le at law , though there may be a redemption ine quity , or by force of statute . Such a mortgage i s something more than a m e re s e curity . It ope rate sto transf er the lega l title to the mortgagee , to be de feate d onlyby a fu l l performance of the condition .

” 3 Su ch a conveyance differs from a mortgage of real e state in re spe ct of the

1 Jone s on M ortgages, se ct . 8 .

2 Id. sect. 60.

3 Jone s on C hatte l M ort., sect . 1.

C R IT I C I SM S U PO N T H E DO C T R INE E XAM INE D .

character of the e state ve ste d in the mortgagee . But in themain e lements of a mortgage , i t bears so close a re semblance to a mortgage of re al e state , as fu l ly to justify theuse of. the term mortgage in de scribing it . Among the see lements are , a certain and unambiguous de scription of

specific prope rty , and a certainty of l ien ; and the se are

e ssentials . T o apply the term to an instrument unde r whichthe owner of the property give s h is creditor no real se curity ,

no certain l ien , which take s no e ffe ct upon the property described if the grantor so wills , and under which he may at

his pleasure re cover the property as hi s own , by se l l ing itand pocke ting the proce e ds , without fulfil l ing his obligationis to disregard all the forego ing exce l lent definitions of a

mortgage , and to make a sham the e qu ivalent of a real ity .

If a chatte l mortgage hav ing the e ssential feature s of c er

tainty of“prope rty and l ien were suddenly to lose by any

means the e lement of certainty of l ien , i t may not be a veryvio lent figure of spe e ch to say that the mortgage e

’ s securityi s blown away w ith al l the suddenne ss and e ffe ctivene ss

of a dynamite explosion But thi s is only saying in an

other form that the e lement of certainty of se curity. is

e ssential to a mortgage .

128 . E ffe ct of a pow e r of sa l e re se rve d t o th e

M ort gage r .— O ne other obj e ct ion to the doctrine of R obin

son v . E l l iott is said to be that it assume s a powe r of dispos ition in the mortgager such as i s neve r given , nam e ly , a

powe r to dispose of the who le prope rty at once ; whe reasthe powe r of disposal in such mortgage s i s mere ly that themortgage r may se l l in the ordinary course of trade .

” Apower to se l l the who le might we l l be regarded as rendering the instrum ent void ;

” but pe rmiss ion to se l l at re tai l i sonly pe rmission to fre e smal l portions of the goods , fromtime to time , from the incumbrance of the mortgage .

” 1

1 Jones on C hat . M ort ., sect. 420.

129 FR AUDUL E NT M O R T GAGE S or M E R C HAND I SE .

This would se em to be a distinction without a difference .

Pe rmiss ion to se l l portions , from time to time ,i s exactly

equ ivalent to pe rmiss ion to s e l l , during the entire lapse of

time , the who le . Courts would take judic ial knowledge of

the fact that m e rchants buy goods only to se ll , and that thesucce ss of the ir bus ine ss as a whole depends upon the saleof al l the ir goods . Unde r the usual provi sions of suchmortgage s , it i s intended that as fast as smal l portions ofthe goods are fre ed from the incumbrance of the

mortgage by sale , other goods are to be purchased , whichshal l pas s under the incumbrance .

In Phe lps Murray ,

1 it was he l d by a learned judge thatsuch a contract i s against pub li c pol i cy , throwing open toowide a door for poss ible fraud . This Vi ew is , even bythose who ins ist that the doctrine is contrary to sound po l icy ,

admitte d to be enti tled to candid consideration .

”2 Mustnot candor admit furthe r that the possibi l itie s of fraud undersuch a transact ion are e xce edingly numerous , and that nosound po l icy can tolerate them for thi s re ason ?

129 R e a son s for th e e xisten ce of th e doct rin e .— Third

T he forego ing conside rations se rve to show , to some extent ,that the doctrine in que stion has reasons for its existencederive d from general observat ion and experie nce . Variouscourts , both E ngl ish andAmerican , when cal l ed upon to dealwith such conveyance s , have put upon record the ir judgmentsas to the operation of the se conv eyance s in actual practi ce .

As obse rve rs , the ir reports of what they have obse rve dare entitle d to consideration . It has be en assume d that as

a matte r of e xperience and obse rvation , the courts must havese en that such mortgage s are no more l ike ly to be fraudulentin fact than any other ; and they must have se en that , in a

mercanti le or manufacturing community , if not e lsewhere ,

1 2 T enn. C h. 746, per C ooper, C hance l lor.2 Jones on C hat. M ort. , sect . 423.

131 F RA U D I'

L E N T M O R T GAG E S O F M E R C HA ND I S E .

by the law , re se rve s an inte re st in or se cure s a benefit tothe mortgage r at the e xpense of his othe r creditors .

The se are trained obse rve rs , who have not , howeve r, be ena ble , as they de clare , to se e the fraudulent or v i cious e ffe ctof such transactions .

131 . T e st im on y of affirmat ive w itn e ss e s . O n the

othe r hand , the trained observe rs are nume rous who pro

fe ss to have learne d by the ir own obse rvation the re asons

for the existence and the appl i cation of this doctrine . M r.

Justi ce Dav i s sai d of the mortgage inve stigated in R obinsonv . E l l iott ,1 Manife stly it was exe cuted to enab le the mortgagers to continue the ir busine ss , and appe ar to the worldas the abso lute owne rs of the goods , and enjoy al l the

advantage s re su lt ing there from . The re was nothing to putcreditors on the ir guard . This long- continued pos s e ss ionand apparent “

ownership w ere we l l cal cu late d to disarm sus

pic ion .

”I II T wyne

’

s Case , the judge s of the Star Chambe robse rve d that the donor continu e d in po sse ss ion of the goods ,and used them as his own , and by reason thereof he trade d

and trafficked w ith othe rs , and de frauded and de ce ivedthem .

” Lord Hardwi cke and hi s as sociate judge s saw

that such an arrangement unde r a mortgage give s the

mortgage r a fal se credit ” ? Lord Mansfie ld thought thosewho deal t w ith the grantor under such circumstance s were

imposed on by false appe arance s .

” 3 M r . Just ice Bu l ler ’ ssuppos itive col loquy b e twe en mortgage r and mortgage eimpute s to the latte r the propos i t ion , Give m e the c om

mand of the prope rty , and you shal l have i t to hold out to

the world and your creditors as your own .

” 4 In Lang v .

L e e ,

5 the court cou ld not “ imagine a power more c om

p le te ly ade quate to the de struction of the avowe d purpose

1 22Wal l. 513.

4 E dwards Harben, 2 T erm, 587.

2 R yal l v. R olle , 1 W i ls. 260 .

5 3 R and. 410.

3 Worse l ey D e M at tos, 1 Burr. 467 .

210

C R IT IC I SM S UPO N T H E DO C T R INE E XA M INE D .

of the de ed which power was de scribed in Sheppards v .

Turpin1 as one by which the grantor might , “ w ithout any

v iolation whateve r of the expre ss stipu lations of the de ed ,dive rt the who le of the prope rty to u se S ~ and purpose swho l ly ‘ fore ign to the le ading obj e ct avowed E xe rci s ingsuch a powe r in anothe r case , up to the date of the l evyo f the e xe cution , the grantor carried on his bu s ine s s just ashe did be fore the exe cution of the de ed , se l l ing the goods ,re ce iv ing the money , buying other goods , rende ring no

account , but conducting his bus ine ss as i f no de e d had be ene xe cuted .

” 2 T he N ew York courts de clare that to sanct ion a transaction l ike this wou ld open a door to frauds innumerable , and to an extent incal culable ” 3 its e ffe ctwou ld be not to create an absolute l ien on any prope rty ,

but a fluctuating one ,

‘

which sho u ld open to re lease thatwhich shou ld be so ld , and take in what shou l d be newlypurchased ; 4

and its only operation must be to the pre

j udice of others .

” 5 Such a mortgage i s in N ew Hamps hire obse rve d to be “ l ike a kale idoscope ;

” 6and to be

pract ical ly e ffe ctive only to ward off the claims of otherc reditors .

” 7 If it were maintained , the mortgager woulddispose of the goods for his own benefit and w ithout payingthe mortgage debt , and then mortgage the goods , obtaine dto replenish his stock , to the same fri end for the samedebt , and so continue hi s bus ine ss and be enabled to snaphis finge rs at his othe r creditors .

” 8 T he consequence s ofmaintaining such transactions as val id wou ld be most disastrous .

” 9 In O hio , such a mortgage was se en to be no

spe cific l ien , but a floating mortgage , which attache s , swe l ls

3 Grat. 357.

2 Pe rry Bank,D ivver v. M cL aughl in, 2 Wend. 596, 20 Am . D e c . 655.

M ittnacht v . 1i e l ly, 3 Keyes, 407.

R usse l l v. W inne , 37 N . Y . 591 .

R anlett rv. B lodge tt, 17 N . H . 298, 43 Am. D e c . 603.

Putnam v. O sgood, 51 N . H . 192.

Ibid.9 I bid.

,

131 F R A U D L'

L E N T M O R T GA GE S O F M E R CHAND IS E .

and contracts , as the stock in trade change s , increase s anddiminishe s , or may whol ly e xpire by sale at the

.wi l l of the

mortgage r .

” 1 It was said of such a mortgage in Ill inoi s °

If this was not inte nde d to de fraud othe r creditors , i t c ertainly

'

was we l l calcu late d to do so, as i t place d al l of K.

’

s

property beyond the ir re ach for fifte en months , and e nabledhim to carry on his busine ss with the prope rty ,

pre cise lyas though it was not incumbe red .

” 2 According to the

observations of the Te nne sse e courts , the re se rvation of the

power of sale in such a mortgage “ i s total ly incons istentw ith the rights of othe r cre ditors , and of ne ce ss i ty v it iate s the transaction 3 in i t there are such facil itie s forfraud , that it must be he ld want ing in legal good faith ; 4"

such stipulations “ tend inevitably to give a fraudu lent,advantage to the debtor ove r his Othe r creditors ;

” 5and.

the mortgage “ doe s hinde r and de lay creditors in the

enforcement of the ir claims ,” 6 '

while at the same time i topens too w ide a door for poss ib le fraud .

” 7 In Mississippi , as in N ew York and O hio , such a mortgage was

looked upon as a shifting lien , which took ho ld of the

goods on hand ; and as the se we re so ld off, i t separate ditse lf , but at once fastene d upon the note or book accountowing by the buyers ; and in the me ant ime , as the transaction appe ared to the court , “ the othe r cre ditors muststand the varying fortune s of the venture , w ithout poweror right to move against the goods from which i t wasmanife st that the obj e ct was not to apply the se th ings to

the payment of the debts , but to se cure the debtor inthe ir posse ss ion and enjoyment .

” 9 T he characte rist ics of

another such arrangement were se en to be that i t “ was

1 C ol l ins M yers, 16 O hio, 547.

5 I bid.

2 Gre enebaum 17.Whe e ler, 90 I l l . 296.

6 I bid.

3 Gal t v. Dibre ll , 10 Y erg. at p. 155.

7 Phe lps M urray, 2T enn. Oh._746.

Bank v. E bbert , 9 H e isk . 153.

8 Harman v. Hoskins, 56 M iss. 142.9 Bank v. Douglas, 11 S . M . , at p . 541.

132 FR AUDUL E NT M O R T GA G E S or M E R C HAND IS E .

served to be devo id of even the dubious merit of provi dingthat the proce eds of sale s to be made shal l be paid ove r to themortgage e 1

and anothe r was se en to be a devi ce to defraud creditors , and through that medium to give the debtorthe control and enjoyment of his prope rty .

” 2 It i s be l ievedin Georgia that the permission to give such a mortgage ,though a ve ry convenient privi lege , i s one ve ry easi ly u sedto commit fraud .

” 3 In Kansas , it i s conce de d that doubtl e ss such arrangements are l iable to abu se , and shou ldalways be close ly scanne d .

” 4 E ven in Iowa , it i s understood that i f the mortgager i s permitte d to deal w ith theprope rty as hi s own , the mortgage se curity is not altogethersafe or certain much i s nece ssari ly left to the hone sty and

good faith of the debtor .

”

The se deceptive , mis le ading , injuriou s , and v iciou s charac t erist ic s , as se en in. such transactions by the s e numerous

and carefu l obse rve rs , according to the ir own statements,

furni sh the suffici ent reasons for the existence of the doc

trine of R obinson v . E ll iott .

1 Price M azange , 31 A la. 701.

2 Smi th v. Leavi t ts, 10 A l a. 92.

3 Goodrich v. W i l l iams, 50 G a. 425.

F rankhouser v. E l le t t, 22Kas. 127, 31 Am. R ep. 171.

T orbert Hayden, 11 Iowa, 435 .

214

SUPPO SE D QUAL IFI CAT IO NS O F T H E DO C T R INE . 133

C H A P T E R IX.

SUPPO SE D QUA L I F I C AT I O N S O F T H E D O C T R IN E .

S E C T ION 133134 .

135 .

136 .

137 .

138 .

139 .

140 .

14 1 .

142.

143.

144 .

145 .

146 .

147 .

148 .

149 .

150 .

151 .

152.

153 .

Supposed qual ificat ions stated .

Importance of the sup pose d qual ificat ions .

S ubstant ive law and adje ct ive law .

T he law and the fact s .

S e cond supposed qual ificat ion .

A misappl ie d crit i cism .

A fundamental d ist inct ion .

F urther example s of t his dist inct ion.

Ass igne e must ac t in good fa ith .

S ale by mortgager passe s t i t le .

Grante e in fraudulent conveyance acqu ires no rights thereunder.

N ew transact ion be twe en part ie s may be val id .

F irst suppose d qual ificat ion .

T he qual ificat ion examine d .

T he mode of proof immat erial .Legal intent , and int ent to de fraud , dist inguished.

Legal int ent at common law .

T he dist inct ion overlooke d .

General doctrine as to legal intent .

T hird supposed qual ificat ion .

C onclus ions .

133 . S u ppose d qu a l ific at ion s s tat e d . N otwithstand

ing the clearne ss w i th which thi s doctrine has b e en enunciate d in America , the numerous case s which i llustrate i tsfundamental position in our j uri sprudence , and the abundant reasons furnishe d by the courts for i ts e xi stence ,

i t hasbe en grave ly argue d that thi s doctrine has be en so qual ifiedby leading courts as greatly to weaken it s force and l e sseni ts value ,

i f inde ed it has not be en the reby emascu lated . In

the treati se m entioned in the pre ceding chapt e r, the fol low215

134 FRAUDULE NT M O R T GAG E S O F M E R C HAND I S E .

ing have be en stated as substantial qual ificat ions of the doct rine F irst . I f the agre ement that the mortgagermay dispose of the mortgage d goods at discre tion) be notc ontaine d in the mortgage itse lf , the que stion whe the r therei s any such agre ement , andwhat are the indications of fraudaris ing from it , i s one for the jury . S econd . If the agre em ent be to se l l for cash for the benefit of the mortgage e ,the mortgage is no longer conclus ive ly fraudulent , but rai se sonly a q ue stion of good faith for the jury . T hird . T he

mere fact that the mortgager continue s t o se l l the mortgagedgoods , w ith the knowl edge of the mortgage e , is not proof ofan agre ement be twe en the partie s for such sale s , and doe snot render the mortgage fraudul ent in law .

” 1

134 . Im p ortan ce of th e su ppose d qu a l ificat ion s . Iti s manife st that the se , i f in fact qual ifications of the doct rine , are serious one s , and that , whereve r admitted or

recognized , they must tend to embarrass both the'

c ohrt

adjudicating and the attorneys conte sting any controve rtedc ase ; for the ir e ffe ct wou ld be to rob the doctrine of al l i tsinherent v ital ity as a ru le of law , and v irtual ly to emascu

late it . Counse l cannot safe ly advise cl ients as to the app l i

c ation to the ir case s of any ru le of law , with the contingencyin v i ew that the court may abandon i ts function of adjudication and re legate the who le case to the jury . T he accordant adoption by the courts of the Unite d State s and thoseof fourteen of the S tate s , of such a rule of law , i f we lladv i sed , and on clearly understood grounds , would give thedoctrine strength and tend t o insure its pe rmanence . But

if the doctrine in i ts integrity shou ld re ce ive only a nominalor partial assent , in any or all of the courts named , andw ere , in fact , fri ttered away by qual ifications in this or thatc ourt , i t would , to a corre sponding e xtent , lose re spe ct aswe ll as force . Both courts and lawye rs are thu s inte re sted

1 Jones on C hat . M ort . , sect . 424.

5 137 FR AUDUL E NT M O R T GA GE S or M E R C HANDI S E .

separate ly examined , nam e ly , the law and the facts . F or

the se purpo se s two distinct p roce sse s are employed . Byone , the state of facts existing in the particular caseis to be ascertaine d ; by the oth e r , the proper rul e of

substantive law is to be sought for and applie d . First inorde r of t ime is the asce rtainment of the facts of the case ;then fo l lows the application of the ru le of law . The re su ltof the se two proce ss e s is an adjudication . Such i s the re c

ogniz ed mode adopted by the judicial tribunals of E nglishspeaking pe ople s the R oman me thod not b e ing in use , bywhich authori tative adjudications were made upon hypothe tical case s . T he ru le s of law newly deduce d by this proce ssadd to the body of our jurisprudence . As it was expre ssedby a distingu ishe d juri st T he law doe s not cons is t of

case s , but of the principle s adjudicated in tho se case s ;”

and by anothe r : It cons ists of l egal principle s , lyingabove , and beneath , and around , and amid the de cisions .

”

But al l qu e stions as to the mode by which the facts shal lthu s be asce rtained , are que st ions , not of j uri sprudence , orof substantive law , but of proce dure only .

Thus , in al l forensi’c controvers ie s , different state s of

facts u sual ly cal l for the appl ication of different rul e s of

law and this w i l l always fo llow when the difference in thefacts is substantial . It i s , the re fore , no di sparagement of

’

any legal doctrine , nor i s i t , in a prope r sense , a qual ific ation of it , to say that it has no application to othe r state s offacts substantial ly different from those in which it s appli

cation has b e come fami l iar .

S e cond su p p ose d qu a l ificat ion . In the case of

the se cond supposed qualification of the doctrine of R obinsonv . E l l iott, to wit : that requ iring the proce eds of sale s to be

pai d to the mortgage e take s the poi son out of the infe cte dtransaction , i t shou ld be remembered that in addition to thestate of facts to which that doctrine has be en so often ap

218

S UPPO S E D QUAL IFI C A T IO NS O R T H E DO C T R INE . 138

plied , there has now been introduceda new and substantiallydifferent fact , name ly , that the sale s to be made by the

mortgager, whe the r in hi s own name , or as agent for thetrustee name d in the conveyance , are to be for the so lebenefit of the se cured creditor . Upon thi s state of facts ,the new and different legal propos ition i s announced , thatthe stipu lation that al l sal e s shal l be

.

for the benefit of the

mortgage e renders the mortgage no longe r conclus ive lyfraudulent , though it may pre sent a new que stion of fact forthe jury . T he e lement of a di scre tionary powe r of sale , re

serve d to the mortgage r , has be en e l iminated , and in its placei s found the substantially diffe rent e l ement of a powe r of saleas the mere agent and for the benefit of the se cure d creditor .

T he appl ication to this state of facts of the diffe rent ru leabove stated , su stains the conveyance . Both ru le s standwe l l toge the r, and jurisprudence shows no want of harmonyiii adopting both . T he new state of facts suppose d pre sentsthe familiar case of a contract which infringe s no ru le of

law , and which i s accordingly sustaine d . But i t i s al sofamiliar law , that the most innocently appearing cont ractmay be a cove r for fraud . S O the new state of facts sup

pose d may , p erhaps , pre sent a case cal l ing for an inqu iry asto fraudu lent intent . If so , i t th en pre sents a que stion of

good faith for the jury , for the que stion of a fraudulentintent i s one always to be submitte d t o them . But i t wou ldbe misleading to c al l this a qualification ”

of the doctrinefirst re fe rre d to ; and i t wou ld be e rrone ous to suppo se thatthe submiss ion of thi s new que stion to the jury involve s anabandonment of the legal O pinion of the court as to the

substantial ly different case first stated .

138 . A m isap p l ie d c r it icism . It has be en urge d : Isthe re any the le ss a tru st be twe en the parti e s , when the

mortgage prov i de s that the mortgagershal l apply the proc e eds of al l sale s to the mortgage debt , than the re i s when

219

138 FR AUDULE NT M O RT G A G E S or M E R C HAND IS E .

it says nothing about such appl ication ? T he proce eds ofthe sale s are in the mortgage r’ s hands , and the mortgagel ien doe s not cove r them . If a mortgage r’

s re tention of a

powe r of disposal of the mortgage d goods is incons i stent withthe i de a of a s e curity , is the incons istency any the le s swhen the mortgagor agre e s to use the proce eds , not fo r hisown benefit , but for the benefit of the mortgage e ? I s not

the distinction a m e re shadow ? 1

This subtle criticism ignore s the substantial fact whichleads the courts to sustain the case s re fe rred to , as we ll asone of the most substantial facts of those case s where thetransaction i s declare d fraudulent . I t i s the u se of the pro

c e eds of sale s by the mortgager on his own account thatstamps such a mortgage as a fraud . It is a tru st be twe enthe partie s which re se rve s some thing for the benefit of thegrantor, which is condemned by the law . A trust b e twe enthe parti e s , which in good faith give s all the proce eds of theproperty to the creditor, i s not obj e ctionable . In such acase , the proce eds of the sale s are not “ in the mortgage r’ s hands ,

”— that is , in his h ands alone . They are in

his hands only as agent for the mortgage e , and are thu sre al ly in the hands of the latter, and the mortgage l ien doe scove r them . T he proce eds of the sale s of the goods be ingfaithful ly devote d to the payment of the mortgage debt ,there i s no incons istency with the idea of a se curity , but , onthe contrary , an entire cons istency . O f course , in al l case sof th is class , an entire and unimpeachable good faith In c on

st itut ing the mortgage r an agent for the mortgage e shou l dbe shown ; and the re may frequently be pre sente d que stionsin thi s conne ction for a jury to pass upon . But wh en thesubstantial fac t appears that the proce eds of the sale s ofthe goods have be en fully and unequ ivocal ly applied to thepayment of the debt se cured , then the fact that the mortgage

1 Jone s on C hat . M orts., sect . 424 .

14 1 FRAUDUL E NT M O R T GAGE S O F M E R C HAND IS E .

W iscons in ,

1 I llinoisf’ Missouri ,3 Indiana ,

4 Conne cticut ,5

Nebra ska ,

6and in the Unite d State s Circu it Court .

7 I II

e ach of the se j uri sdictions , the contrary doctrine of R ob

inson v . E ll iott i s e nforce d in a l l case s whe re the re servat ion to the grantor of a discre tionary powe r of sale cal lsfor the application of that doctrine .

140 . F u rth e r e xam p l e s of t h is d ist inct ion .- N or is

the re any real d iffe rence be twe en those case s , so far as

concerns the sal ient facts which shou ld contro l the ir de cision , and ce rtain o the r case s in Maine ,8 Massachuse tts ,9 andIowa ,

10 in which the conveyance was sustained ; for in the sei t appeared that the posse ss ion and management of the

busine ss were , in one way or anothe r , for the actual benefitof the se cured cre ditor. T he crucial te st of a

' fai thfulappl ication of the proce eds to the se cure d debt wou l d havesustained the se transactions , even in case the courts of

Maine , Mas sachuse tts and Iowa had favore d the doctrineof R obinson v . E l l iott . Substantial ly identical in princ ipl e are case s in the E ngli sh courts , involving gene ralassignments for the benefit of creditors , in which it was

prov ide d that the assigne e s might employ the debtor as

the ir agent in disposing of the goods , and which were on

t his ground sustaine d as val id .

11

14 1 . A s sign e e m u st a c t in good faith — A S a con

ve rse to this proposition , i t has be en he ld that , under

1 F isk v. Harshaw, 45 W is. 665 ; C otton M arsh , 3 W is. 221.2 Goodheart v. Johnson, 88 I l l . 58.

1 Hewson v. T ootle , 72 M e . 632 ; M etzner Graham , 57 M e . 404.4 Lockwood v. Harding, 79 I nd. 129 .

5 Kendal l C arpe t C o. , 13 C onn. 383.

6 Book C o . v. S utherland , 10 N eb. 334 .

7 Hawkins Bank, 1 Dill . 4 62 ; O ve rman Quick,8 B iss. 134.

3 Abbot t v. Goodwin, 20 M e . 408 ; M e lody C handler, 12M e . 282.

9 Jone s v. t ge ford, 3 M e tc . 515.

1° Adler v. C lafiin, 17 I owa, 89 .

1 1 Jane s v Whi tbread, 5 E ng. L. E . 431 ; C oate v.Wi l l iams, 9 Id.

SUPPO S E D QUA L IFI C A T IO NS O F T H E DO C T R INE . 142

general assignments , the action of ' the assigne e s must be ,in fact , as we l l as in name , for the benefit of the creditors ;and i f in any re spe ct it is not such , but i s re al ly for thebenefit of the grantor, — as , by continu ing his bus ine ssgeneral ly and undu ly in the o ld way ,

— the assignmentw il l be he ld vo id , even al though the ass igne e s have p e rsonal ly unde rtake n to exe cute it .

1 It w i l l be regarded ,in conscience and law , as a fraud .

” 2 O n a l ike principleit i s he ld in Massachu se tts that if a ple dge e permit theproperty to remain in posse ss ion of the pledger, he lose sall benefit of the pledge .

3

142. S a l e by m ort gage r pa sse s t it l e .- Te sting al l

such case s by thi s fundamental que stion of the discre t ionarycontro l of the mOrtgage r over the mortgaged property , the

courts fre quently find othe r consequence s logical ly re su ltingfrom the application of thi s doctrine . O ne of the se I s , thatunde r a l l sale s made by the mortgager, the title to the prope rty w i l l be passed , as was sugge ste d by theVirginia Courtof Appe als , in the earl i e st Ame ri can case ,

4and the mort

gacre e wi l l be e stoppe d to deny the title of the purchase r .

This ne ce ssary re su l t fromthe application of the ru le hasbe en frequently adjudicate d .

5 E ven in Massachusetts and

Maine , thi s i s re cognized as a ne ce ssary cons equence of

a l lowing the mortgager to make sale s of the goods .

6

1 A m . E x . Bank v. Inloe s, 7 M d. 380 ; O wen Body, 5 Ad. E . 28 ; Whalion S cot t, 10 Watts, 237 ; Doyle o. Smi th , 1 C oldw. 15 ; Woodward v. Goodm an

,3 C ent. L . J. 43 ; R ichardson v. M arque z e , 59 M iss. 80, 42Am . R ep.

353 ; M at t ison v. Judd, 59 Id. 99 .

2 Bank I nloe s, 7 M d. at p . 391.3 T hompson Dol l iver, 132 M ass. 103.

4 Lang v. L ee , 3 R and. 4 10.

5 O gden S tewart, 29 111. 122 ; M i l ler ads . Pancoast , 29 N. J. L. 250 ; BankHampson, L. R . 5 Q . B . D iv. 177 ; Walke r C lay, 42 L. T . (N . S . ) 369 .

6 S hearer v. Babson, 1 Al len, 486 ; S tafford v.Whitcomb, 8 Id. 518 ; H ub

bard v. Lyman, 8 Id. 520 ; Bank West, 46 M e . 15.

144 FR AUDUL E NT M O RT GAGE S O F M E R C HAND I S E .

143 . G ran te e in frau du l e n t c onve yan ce a cqu ire s nor igh t s t h e re u nde r . Ano the r logical consequence fromthi s doctrine is , that inasmuch as the mortgage transactioni s tainte d w ith fraud by the agre ement al lowing discre tionary sale s by the mortgage r , the mortgage e c an ,

unde r sucha conveyance , acqu ire no rights in or to the goods pre tendedto be conveye d ; so that hi s attempt to take posse ss ion of

the goods unde r the mortgage 8 0 tainte d , W il l in no re spe ctenlarge his rights or his remedie s in the premise s . T he

goods w i l l remain subj e ct to l evy at the su it of the othercreditors of the mortgagor, though in the posse ssion of the

m ortgage e , i f it be a po sse ss ion so o btaine d . De ci sions tothis e ffe ct are nume rous .

1 T he same rul e was appl ie d inone State to a case not invo lv ing a stock of goods in trade ,but in which a conveyance had be en de clare d vo id by rea

son of fraudu lent inte nt , clearly proved .

2

144 . N ew t ran sa ction b e tw e e n partie s m ay b e va l id .

As a conve rse to this propo s ition , it is to be observed thatif, instead of acting upon the

.

inval i d mortgage , and asse rting rights unde r it , the mortgage e pract ical ly abandons themortgage , and enters into a new contract w ith the mortgage r, by which he purchase s the stock of goods , even

though he do not pay for them othe rw i se than by creditingthe ir value on his debt , an entire ly new and d istinct state of

facts i s again pre se nted, cal l ing for the inte rpos ition of

diffe rent ru le s of law . D i stingu i shing this class of case sfrom those in wh ich the principal doctrine i s applied , may

be cons ide re d by adve rse critics anothe r qual ification of the

1 Robinson v: E l l iott , 22 Wal l . 513 ; B lake sle e v. R ossman, 43W is. 116

De laware E nsign, 21 Barb. 85 ; Dutc'her v. Swartwood, 15 H un, 31 C at l in v.

C urrie r, 1 S awyer, 7 ; S te in v. M unch , 24 M inn. 390 ; R e M anly, 2Bond, 261R e F orbe s, 5 B iss. 510 ; R e M e rril l , 2 S aw. 356, 8 N . B. R . 117 ; Smith v. E ly,

10 Id. 553.

2 Janvrin v. F ogg, 49 N . H . 340.

224

144 F RAUDULE NT M O R T GAGE S O F M E R C HAND IS E .

third of the se case s has be en twice b e fore the Supreme Courtof Mis s iss ippi , by whom the que st ion was care ful ly con

side red.

1 A de e d in trust hav ing b e en give n , conveying a

stock of goods , and containing prov i s ions which woul d haverende red the de ed fraudu lent unde r the se ttled jurisprudenceof that State ,2 the grantor, by a new ac t of ass ignment ,transfe rred the remaining goods to the truste e , for thebenefit o f the same creditor ; and this transaction was he ldnot fraudu le nt p er se as to othe r creditors who proce ededsubsequently against the goods . Though the inducingcause t o the surrender of the goods was probably the inval idtrust de ed , ye t as the transaction was not a se izure by thecreditor , unde r the prov i sions of the de e d , but was me re lythe very frequent occu rrence of a transfe r of goods by a

debtor to pay hi s cre ditor whom he pre fers ,” 3 it was he ld

to be a case de te rminable w ith re fe rence to the actual intent of the partie s as to the pre ference . A n instructionhav ing be en given to the jury which ignore d this sal ientfeature of the case , the ve rdict against the pre ferred creditor was se t as ide , and a new trial was orde red , to de termine the que stion of the bona fi des of the pre fe rence , by

inquiring into the actual motive s of the partie s . O n a

se cond appeal , the court re -aflirmed and emphas ized the Viewfirst taken of the case , saying of the surrender of the goodsby the debtor to the truste e If that posse ss ion was sur

rende red on the one S ide , and re ce ive d on the other, w ith thehone st intention of paying a just debt , i t was not madefraudul ent by the unre corded trust de ed of the year be foreit cou ld be made fraudulent only by reason of some im

proper circumstance connecte d w ith the transfer i tse l f , orbe cause it "

was , in the O pinion of the jury , but the c onsum

mation of a scheme devi sed and carried out for the purpose

1 Baldwin v. F lash , 58 M iss. 593 ; 59 Id. 61.

2 Harman v. Hoskins, 56 M iss. 142; Joseph v. Levi, 58 M iss. 843.

3 58 M iss. 599 .

226

SUPPO SE D QUAL IFI CAT I O NS O F,T HE DO C T R INE .

of entrapping third pe rsons .

” 1 There fore , it was forthe jury to say , unde r proper instructions from the court ,whe the r I II so do ing the parti e s we re then paying a justdebt , or we re consummating a scheme of fraud , concoctedin the beginning or then de signe d .

” 2 T he court v e ry p ert inent ly re fe rred to the case s of R owley v . R ice ,

3 Cook v .

Corthe l l“and Morrow v . R e ed ,

5as authoritie s for the c on

e lus ion reached . In the first two case s , the mortgage wasthought ineffe ctive to cover after- acquired goods , and inthe last named case , the re were formal de fe cts in the mortgage ; but in each case the de l ivery of the goods by themortgage r to the mortgage e was he l d ample to ve st in himthe title , irre spe ctive of difficu ltie s as to the mortgage , so

whi le the facts were diffe rent from those in the Miss iss ippicase , the principle of law involve d was substantially the

same .

In the N ew Hampshire case ,6 where , after such a mortgage ,the mortgagers , by a transaction in the nature of a pledge ,

turne d ove r the remaining goods , with others , to the mort

gage e s , and the goods we re then so ld for the benefit of thelatter, the transaction was sustaine d as against a complaining creditor ; but i t was he l d that i f the mortgage e s hadme re ly taken posse ssion under the mortgage itse lf , thedoctrine of Janvrin v . Fogg

7 woul d have appli ed .

The se case s pre sent a nove l phase of facts , in connectionwith fraudulent mortgage s of me rchandise ; but the c on

e lusions reached in them are thus se en to harmonize ful lyw i th those pre sented in R obinson v . E l l iott and kindredcase s .

T he Missouri case of Gre e ley v. R eading 8 indicate s an

inclination to favor the same doctrine . T he mortgage inthis case re se rved on its face a power of sale to the mort

1 59 M iss. 67.2 Id. 66.

3 11 M et . 333.

2 11 R . I . 482; 23 Am . R ep . 518 .

14 5 FR AUDUL E NT M O R T GA GE S O F M E R C II AN D I SE .

gager , and the case was re cognized as one which wouldordinari ly fal l w ithin the ru le announced in Weber v . A rm

strong .

1 But the new transaction be twe en the partie s , bywhich the mortgage e had obtained posse ss ion of the goods ,was sustained . Though without a fu l l cons ide rat ion of the

que stion , thi s was in approval of the conclus ion reached inNash v . Norment .

2 I II thi s case , the mortgage e at reque stof the mortgage r took the goods and so ld them . T he

court thought the mortgager had a perfe ct right to paya creditor, and to prote ct S impson , who had l ent hermoney onthe faith of thi s mortgage , by turning over to him actualposse ssion of the prope rty and that , though the law

de clared the mortgage invali d as a security ,

”ye t as a

transfer of posses s ion took place be fore any creditor ac

qu ired rights to thi s property , the inval id ity of the mortgage before posse ss ion by the mortgage e i s unimportant .

145 . F irs t S u ppose d Q u a l ification .- T he suppose d

qual ification first above named ,3 which i s impute d to severalof the State s in which the doctrine of R obinson v . E ll iott ‘

has be en adopted , pre sents a partially but not entire lycorre ct statem ent of the rul e of law on the subj e ct in thoseState s . But when corre ctly stated , i t wi ll be se en that thisleave s the doctrine sti l l whol ly unqual ifie d as a ru le of sub

stantive law . T he e rror l ie s in introducing the words ,what are the indications of fraud ari s ing from it”

the agre ement ) , in stating the que stion for the jury .

O mitting the se words , the proposition would be If theagre ement be not contained in the mortgage i tse lf , theque stion whethe r there i s any such agre ement is one for thejury and thi s corre ctly repre sents the law in all the fourteen State s whe re the doctrine obtains ,4 as we l l as in the

1 70 M e . 217.

2 5 M o. App. 545.

3 A nte, sect. 133.4 Virginia, N ew Y ork, N ew Hampshire , O hio, I l l inois, W isconsin, M inne

sota, M issouri , T enne ssee , M ississippi , Indiana, We st Virginia, O regon and

C olorado .

228

14 6 F R AUDUL E NT M O R T GAGE S O F M E R C HAND IS E .

execution of that instrument by the party charged i s a matt e r in i ssue , the fac t of such exe cution is to be de te rminedby the trie r of the facts ; by the j ury ,

i f the re be one

sitting in the case as such tri e r, otherwi se by the court .But nothing i s more common than to dispense with the formality of making proof of facts not really in di spute ; afam il iar instance of which often occurs in the case of a

written instrument . If , then , the exe cution of the sup

pose d instrument be an admitted fact ( as it frequently is ) ,there i s no que stion for the jury to pass upon , and al l the

facts appear which are ne ce ssary for the application of the

rule of law . In the se case s , that is , case s in which thefraudulent agre ement appears on the face of the instru

ment , i t i s often adjudged that the instrument i s fraudu lent

p er se , or upon its face ; language not de scriptive o f

any di st inct or nove l rul e of law , but qu ite pe rtinent whenthe instrument itse lf furnishe s all the ne ce ssary ev i denceof the fraudulent agre ement . But if such agre ement doe snot appear upon the face of the instrument , but i s disclosedby_ evidence a liunde , the fact of its existence must be foundby the jury , whenever i t i s the jury that i s the trier of the

facts . If it be so found by the jury , then again , al l the

facts appear which are ne ce ssary for the appl ication of the

ru le of law ; and the duty again devolve s upon the court ofdeclaring the fraud . In the se c ase s , whi le the court c an

not pronounce the instrument fraudu lent p er se , i t c an and

doe s pronounce the who le transaction fraudulent p er se .

”

In both classe s of case s , the proce ss i s the same first , thefacts are e stabli shed , unde r the exigencie s of the parti cu larcase , according to the usual ru le s of procedure and thenby the appl ication to those facts of the prope r ru l e of law

an adjudication is re ached . In the one case , the instrumentalone furnishe s al l the facts ne ce ssary for the judgment of

the court . In the othe r, i t requ ire s all the e vidence , including the instrument , to furnish the ne ce ssary facts . T o

230

SUPPO SE D QUAL IFIC A T I ONS O F T H E DO C T R INE .

suppose , as the courts in G ay v . Bidwe l l l and Bre tt v .

Carter 2 supposed , that this judicial proce ss is in part a re

sort to vio lent pre sumptions , i s to mi sunde rstand the proce ss . Some single fact or facts may , of course , as in any

controverted case , be ascertained by pre sumptive ev idence .

F or instance , if the mortgage r, be ing examined as a w itne ss ,doe s not deny that he exe cute d the instrument , whi le themain contention i s as to othe r matte rs , i t may fairly be presumed that he did exe cute i t ; or if the mortgage e doe s notprove sati sfactori ly that the sale s made by the mortgagerwere w ithout hi s know ledge and against his wi l l , i t may

p erhaps be pre sumed , as it fre quently has be en , that heknew and assente d to such sale s . In such case s , the appe llate court might be cal le d on to determine whe ther the ve r

dict was who l ly unsupported by the ev idence ; but thiswou ld be a que stion of procedure only , the de ci s ion of

which could , of ne ce ss ity , have no e ffe ct upon the ru le of

substantive law , by qual ification or otherwi se ; nor in casethe ve rdict be sustained , wou ld the crit ici sm be e ither justor pertinent , that facts not appearing upon the face of

the instrument are pre sumed , in orde r to help ou t this p re

sump tion of f raud .

” 3 A S before sugge sted , the judicialproce ss in such case s is not a proce ss of e i the r pre sumptionor construction ; it i s rathe r that of adjudication ,

by theappl ication of a ru le of substantive law to proven facts .

14 7 . T h e m ode of proof imm a t e ria l . It wi l l be immaterial , then , to the que stion of law , whe the r the fraudulent agre ement appear upon the face of the ins trum ent , orbe proven by other sufficient ev i dence . Such has in

gene ral be en the v iew entertained by those courts in

which the subj e ct has be en discussed . It i s tru e thatthe leading case s in Virginia , We st Virginia , Co lorado

1 7 M ich. 519.2 2L ow. 458.

3 Per Lowe ll , J Brett v. C arter, 2 L ow. 458.

14 7 FR AUDUL E NT M O R T GA G E S O F M E R C HAND I S E .

and Mississ ippi , in which the doctrine has be en appl ied ,exhib ited the fact of such an agre ement on the face of

the instrument ; 1 while in the leading c ase s in O h io and

O regon , the agi e em cnt was prove d a liunde .

2 But in N ew

Y o i k ,

3 N ew Hampshir ‘1e , Ill ino i s ,5 Tenne ss e e ,

6 “r

isc onsin ,

7

Minne sota,

8and Indiana ,

9and in the c om ts of the United

State s,

10 case s of both Classe s have arisen , and the adjudicationof fraud , as a ru le of substantive law , has be en made indiffe rently in both . Frequently , the agre ement has be en foundon the face of the de ed , by impl ication .

11 It is difficu lt tose e any reason for a distinct ion in thi s re spe ct , or for thesuppos it ion that such distinction could be admitted othe rw i se than as a que stion of procedure . Inde ed , the matte rhas be en frequently re ferre d to by the courts as one in no

way affe cting the que stion of substantive law .

12

T he ru l ing in Southard v . Benner 13 may be he re repeated

1 Lang v . L e e , 3 R and. 4 10 ; S heppards v. T urp in, 3 Gratt . 357 ; Kuhn v.

M ack,4 W; Va. 186 ; Bank v. Goodrich, 3 C olo. 139 ; Harman v. Hoskins, 56

M iss. 142.

2 C ol l ins v. M yers, 16 O hio, 547 ; O rton v. O rton, 7 O reg. 478 .

3 E dge l l v. Hart, 9 N . Y . 213 ; S outhard v. Benner, 72 I d. 424 .

4 R anl e tt v. B lodge tt , 17 N . H . 298 , 43 Am. D e c . 603 ; Putnam v. O sgood,51 N . H. 192, 52 Id. 148 .

5 Davis v. R ansom , 18 I l l . 396 ; Barne t v. F ergus, 51 Id. 352.

5 Bank v. E bbert , 9 H e isk . 153 ; Nai ler v. Y oung, 7 L ea, 735.

7 Place v. Langworthy, 13Wis. 629 ; S te inart v. Beuster, 23 Id. 136.

3 S te in v. M unch, 24 M inn. 390 ; Horton v. Wi l l iams, 21 I d. 187.

9 I ns. C o. v.W i l coxson, 21 I nd. 355 ; M ob ley v. Le tts, 61 Id. 1 1.

10 S mith v. M cL e an, 10 N . B . R . 260 (M iss) ; R e F orbes, 5 B iss. 510

R e Kahley, 2 Id. 383 (Wis ) ; R e M erril l , 2 S awyer, 356 C at l in v.

C urrier, 1 S awyer, 711 Perry v. Bank, 27 Gratt . 755 ; Harman v. Abbey, 7 O hio S t . 218 ; S tan

ley v. Bunce , 27 M e . 269 ; Lodge v . S amue ls, 50 Id. 204 ; Garden v. Bod

wing, 9 W. Va. 121 ; Gardner v. Johnston, 9 Id. 403 ; Davenport v. F oulke ,68 I nd. 382, 34 Am. R ep. 265 ; R e M anly, 2 Bond, 261 (O hio) ; F ox v. D a

v idson, 1 M ackey, 102, 9 Wash . L . R ep . 263 (D .

‘2 E dge l l v.Hart, 9 N . Y . 213 ; S outhard v. B enner, 72 Id. 424 ; Gardner v.

J ohnston,9 W . Va., 403 ; Perry v. Bank, 27 Gratt. 755.

13 72N . Y . 424 .

232

14 8 FR AUDUL E NT M O R T GA GE S O F M E R C HAND I S E .

fraud . But i t se ems plain from a care ful consideration of

the expre ss ions of the se courts , in conne ction w ith the facts ,that the intent imputed to the partie s in the se case s i s byno m e ans ide nt ical wi th the dolus or the intent to decoivo or de fraud , which i s the foundation of fraudulentinte nt when submitte d as a que stion of fact to a jury .

It is a legal intent ,”in the sense of a conclusion of law .

A party wi l l be he l d as intending the natural and inevitabl e e ffe cts of his acts ; i f hi s de e d ne ce ssarily ope rate s tointe rpose unreasonable h indrance and de lay to creditors , orto de fe at them altoge the r , the intent will be a conc lusion oflaw .

” 1 It must be he l d as wanting in lega l goodf aith ,

on the plain principle that eve ry reasonable man i s presume d to intend the probable consequence s of his own

acts .

” 2 The se are but variations in the mode of stating a

rul e of substantive law . T he intent here re ferred to , if considered mere ly as a qu e stion of fact , i s simply the intentto exe cute the instrument , or to engage in the transactionwhich i s found to posse ss such perni cious feature s . If thisintent be found as a fact of the case , the imputations abovestated fo l low as conclus ions of law , as was expre ssly dec lared by the Supreme Court of N ew Hampshire , in the sewords If a tru st , incons i stent w ith the legitimate purpose of a mortgage , i s re serve d for the benefit of the

mortgager, and tha t i s proved , then a f raudulent intent is ,with u s , and in many othe r j uri sdi ctions , a conc lusion oflaw .

” 3 But that such expre ss ions of the courts have no

reference t o that fraudu lent intent which is always a

que stion of fact for the jury ,

”and which re sts on the actual

motive s of the party charged , i s plain from the frequentde clarations of the same courts , that the re was no spe cificintent to de fraud ; 4 that “

nothing more was intende d

1 Harman v. Hoskins, 56 M iss. 142.3 Putnam v. O sgood, 5 1 N .H. at p.202.

2 Bank v. E bbert, 9 H eisk . 153.

4 Bank v. E bbert, 9 H e isk . 153.

234

SUPPO SE D QU AL IF I CA T I O N S O F T HE D O C T R IN E .

than an hone st de sign to secure a just debt ; 1 that the

ac t , in a moral View , was entire ly fair ;” 2

and that the ar

rangement was not made with a fraudul ent scheme and

purpose to de feat existing or future creditors .

” 3 T o the

same e ffe ct that the actual intent or motive of the partie s i simmate rial to the inqu iry , and that there i s no qu e stion of

intent in such a case to be submitted to a jury , are fre

quent case s in Pennsylvania ,

4 N ew York 5 and Missouri ,6

and others in Wi sconsin ,

7 N ew Hampshire 8 and Indiana .

9

14 9 . L e ga l in t en t a t comm on l aw .- T he legal

intent thus observe d as frequ ently an e lement in mo d e rnfraud , i s the same intent which was se en at an early dayto be invo lved in the ancient cov in ,

”the prototype of

our mode rn fraud . E ach of the se te rm s , covin and

fraud ,” i s primari ly app li cable to and de scriptive of , not

the intent or motive of the partie s to the transaction , butthe inherent charac te rist ic s and qual ity of the transactionitse lf . If e ssential ly unreal or de ceptive , or having in i tse lffraudu lent feature s , i t may be characterized as a fraud ; and

there may or may not have be en an intent on the part of thepart ie s to give i t that de ceptive character, or to accomplishde ception by means of it . Cov in , according to the defini t ionprev ious ly re fe rred to ,

10 given in 1550 , was a se cre t agre ement de te rmined in the hearts of two or more m en , to the

1 Galt v. Dibre l l , 10 Y erg. at p . 155.

2 Harman v. Hoskins, 56 M iss. l 42.

3 H i l l iard v. C agle , 46'

M iss. 309 ( at p4 We lsh v. R ekey, 1 Penn. 57 ; C low v. Woods, 5 S . R . 275, 9 Am. D ec .

346 ; M cKibbin v. M art in, 64 Pa. S t . 352, 3 Am . R ep . 588.

5 R usse l l v. Winne , 37 N . Y . 591 ; Wood Lowry, 17 Wend. 492; M ars

ton v. Vul te e , 8 Bosw. 129 .

6 S tate v. T asker,31 M o. 445 ; Brooks 17.W imer, 20 M o. 503.

l

7 Blake sle e v. R ossman,43Wis. 116 .

3 Putnam v. O sgood, 52N . H. 148.

9 M obley v. Le t ts, 61 Ind. l l .0 Ant e. sect . 121.

14 9 F RAUDULE N T M O R T GAGE S or ME R C HAND I SE .

pre judice of another . But th is , as before sugge sted , didnot ne ce ssari ly imply an agre em ent to commit intentionalde ception , or an agre ement to attempt pre judice to another .

T he agre ement to do the ac t in que st ion was the fact to bede termined , and the circumstance that i t wou ld operate tothe pre judice of anothe r was What made i t covinou s . Thisappears from othe r v iews expre ssed by the same judge inthe same case ; for in answer to the contention that thecomplaining party must prove the intent to de ce ive and

de fraud , he said : “ Inasmuch as cov in i s a se cre t thing ,where of by intendment of law a strange r

'

c annot haveknowl edge , for thi s re ason the law wi ll not force a

stranger to S how the cause thereof .

” It was he ld , also ,that there might be both cov in apparent ,

”and cov in

not apparent ; and that if the cov in re l ied on we recovin apparent ,

” i t might we l l , as a matte r of procedure ,be proven unde r a gene ral averment of cov in in the pleadings . S o , in a note by Lord Hale to Cokeupon Littleton ,

it is said : “ T he cov in i s apparent , though i t was not

found .

” 2 That i s to say , the facts of the case be ingapparent , or be ing found , the cov in was apparent , thoughno intent to defraud or de ce ive was proved . T he characterof the transaction be ing apparent , no othe r intent ne ed beproven than the intent to engage in the transaction ; thelaw wou ld then impute to thi s intent al l i ts ne ce ssary c on

se quence s , and the re su lt wou ld be covin apparent .It i s in pre ci se analogy to this l ine of thought that theAme ri can courts , in the case s above ci ted , have spokenof the intent to e ngage in the transaction complained of as

a“ legal intent ,

”in which al l the possible consequence s

of that ac t were ne ce ssari ly invo lved . A nd so , in a recenttreatise on Chatte l Mortgage s , the doctrine i s taught ingeneral terms , that the intent to do an ac t which w i ll have

1 Wimb ish v. T ailbois, Plowd. 38 (at p . 2 C o. L it . 59a, note 4 .

236

151 FR AUDUL ENT M O RT G A GE S O F M E R C HANDI SE

rule of j uri sprudence i s appl ied . A few instance s maysuffice to i l lustrate the general i ty of the ru le and the praetice ; and M i chigan herse lf , whose courts demur to the

doctrine of R obinson 11 . E l l iott , furni she s one of the mostc lear and succinct statements of the rule . Said Chance l lorFarnsworth : “ By the term fraud , i t should be remembere d that the legal intent and efi ec t of the ac ts comp lained

of i s meant . T he law has a standard for me asuring the

intent of partie s , and de clare s an i l legal ac t , pre judicial tothe rights of others , a fraud upon such rights , althoughthe parti e s deny all intention of committing a fraud .

” 1

A nd this v iew was re -afiirmed, on appeal , by the Supreme

Court , which found the transaction fraudulent , withoutimputing to the highly re spe ctable partie s in th is case

a premeditate d or w i cked intention to de stroy or injure theintere st of the complainant .

” 2 In Maine , also , thi s doctrinei s distinctly announce d inWhe e lden u . VVilson ,

3a case of a

mortgage on goods in trade , the , val idity of which was

que stioned by an attaching creditor , but in which the qu e stion of a re serve d power of sale i s not cons ide re d . Saidthe court It may not have be en the intention of e ithe rthe mortgage e or mortgage r to perpe trate a moral fraud ;they may have intend e d to ac t for the benefit of al l the

creditors O f the mortgager ; but that they‘

both intended toplace the prope rty mortgage d b eyond the reach of l egalproce ss , and thereby to de lay , if not t o de fe at creditors ,we think the case cl early shows . This constitute s a l egalfraud .

”M uta tis mutandis , thi s pre cise criti ci sm might

have be en appl ied to the same case by othe r courts , whowould lay stre ss on the fact that the parti e s both intendedto re se rv e to the mortgager the potential contro l of thegoods , and thereby to de lay creditors .

1 K irby v. I ngersol l. 1 Harr. C h. 172 (p.2 1 Doug. (M ich. ) 477 3 44 M e . 11.

238

SUPPO S E D QUA L IFI C AT IO NS O F T H E DO C T R INE . 151

In N ew York , the rule was announce d as fol lows T he

Statute of Frauds 13th E l iz . ) re fe rs to a l egal , andnot a moral intent ; that i s , not a mora l intent as contra

distinguished from a lega l intent . It suppose s that everyone i s capable O f perce iv ing what i s wrong , and there fore ,i f he do what i s forbidden ,

intending to do it , he wil l notbe al lowe d to say that he did not intend to do a forbiddenac t . A man

’ s moral perceptions may be S O perverte d as to

imagine an ac t to be fair and hone st , which the law j ustlypronounce s fraudul ent and corrupt but he is not the re foreto e scape from the consequence s O f it .

1 This doctrine , itwi ll be observed , was announce d in v iew of the N ew Yorkstatute , which , l i ke those of Mich igan , Indiana , and otherState s , made the que stion of fraudu lent intent , in al l case s ,a que stion of fact and not of law . T he distinction was

again taken in Goodrich v . Do’

wns ,2 that the que stion of

intent to be le ft to the j ury unde r such a statute , was a

whol ly different que stion from that of fraud which the courtwou ld find inherent in any trust conveyance re se rving a

benefit to the grantor . A nd to the sam e e ffe ct are the e arl ierc ase of Cunningham u . Fre eborn 3

and the later one of

Dunham v . Wate rman .

4 In Pennsylvania , where the e stabl ished rule i s that re tained posse ss ion alone suffice s to makea conveyance fraudulent , i t was sugge ste d as e arly as 1809 ,that a legal intent was imputed in such case s , though

-

the

actual intent might be entire ly wanting .

5 T he same Viewis apparent throughout the long line of Pennsylvania case son the subj ect , having be en in 1872 de clare d to be e l e

mentary law in the Commonwealth , and a ru le of uni

versal appl i cation 6 In Il l inoi s , i t was said of a conveyanceof real e state , impe ached for fraud : It is not important

1 Grover v.Wakeman, 11 Wend. 187 (at p.2 6 Hi l l, 438 .

3 1 1 Wend . 240. 17 N. Y. 9 .

5 W i lt F ranklin, 1 B inn. 502, 2 Am . D ec . 474.

6 G erman v. C ooper, 72Pa. S t . 32.

151 FRAUDULE NT M O R T GAGE S O F M E R C HAN DI SE .

what furthe r may have been intended by Thomson and

Powe r, i f they intended Thomson should re tain a se cre t usein the prope rty . They may not have intended that thisShou ld hinder or de lay creditors . Its legal e ffect , howeve r,is to hinder and de lay them , and, there fore , the conveyane cs are , under the statute , fraudulent and vo id as tocreditors .

” 1 In other case s , it was again said that “ it is

not important what motives may have animated the partie s ,if they have so disposed O f the property that the necessary

ej ec t i s to hinder and de lay creditors .

” 2 S O , in Tennesse e ,in a case of a voluntary conveyance of land , i t wassaid : It wi ll be pre sume d that a party intends the probabl e consequence s of h is own ac t .

” 3 A nd in Missouri , in a

case of an ass ignment of goods to pre ferred creditors , i twas sai d : “ E very man must be pre sumed to intend thene ce ssary consequence s of his ac t .

” 4

T he same vi ews are entertaine d in E ngland , Where a clasS ification of fraud i s adopted , which divide s it into : F irstlegal fraud , inwhich the re may be a false repre sentation , butwit hout any dishone st intention ; and second, mora l fraud ,which re sts in knowle dge of the fals ity , and in dishone st intention .

5 In Graham Chapman6 i t was said : E ve ry

person must be taken to intend that which i s the nece ssaryconsequence of hi s own ac t ; and if a trade r make a de edwhich ne ce ssari ly has the e ffect of de feating or de laying hiscreditors , he must be taken to have made the de ed withthat intent .

”In Mining C O . v . .G

'

rrant ,7 Je sse l , M . R . said

“A man may commit a fraud without be l ieving i t to be a

fraud , that i s , without be li ev ing it to be a fraud for whichhe c an be he ld re spons ible in law ; but the question i s , whathas his be l ief to do with it ?

1 Power v. Alston, 93 I l l . 587.

3 M oore Wood, 100 I l l . Phe lps C urts, 80 111. 109 .

3 Spence v. Dunlap, 6 L ea, 457.

4 B ige low v. S tringer, 40 M o. 195.

5 Indermaur, Principles of the C ommon L aw, 217.

12C . B. 85.7 17 C h. D . 122.

240

153 FR AUDUL E NT M O R T GAG E S O F M E R C HA ND IS E .

e ral proce ss employed in adjudication , in most courts , itwou ld be re asonabl e t o suppose that , ordinarily ,

proof o f aknowledge by the mortgage e of the fact of sale s wou ldafford pre sumptive ev id ence of an agre ement , and throwupon the mortgage e the burden of prov ing the contrary ;and the ultimate fact as to such agre ement would thus bede termined , affirmative ly or negative ly , j ust as any othe rmate rial fact wou ld be . This proce ss the student w i l l findto have be e n employe d in the class of case s in que stion inthe fourte en State s be fore name d .

1 If the fact of the

agre ement be proved , the rule of law , w ithout qual ification ,

i s applied , and the re sult is an adjudication of fraud in thetransaction .

153 . C on cl u sion s .—As a re sult of thi s examination of

the que stions pe rtaining to this’

branch of the law , the following general propos it ions may be advance d .

1 . Fraudu lent intent , i . e . , an intent to de fraud , i s always ,ea: necessita te rei , a que stion of fact , whe ther made so bystatute or not .

2. That intent which courts sometime s cal l a legal intenti s not i dent ical with the former . By this is me ant only theintent to do the ac t which is re cognized as hav ing a ne c e s

sarily pre judicial e ffe ct .

3 . Whatever may be the facts material to the d e ci sionof the case , they are to be ascertaine d according to the

practice of the court ; and this S hou l d be done by the juryin al l jury

.case s . In the first named class of case s , the

intent to de ce ive is a material fact . I n the se cond , the c or

re sponding “material fact i s the intent to do the ac t c om

plaine d O f .

4 . T he fact b e ing ascertained in e ither of the two classe sof case s above mentioned , the only proper concern of j urisprudence i s to apply a definite and just rul e O f law to the

1 A nte , sects . 114, 145.

S UPPO S E D QUAL IFIC A T IO NS O F T H E DO C T R INE .

c ase . This ru le , when formulated , may be cal led a doctrineof substantive law .

5 . T he mode of ascertaining the facts cannot de tractfrom , or affe ct by e ithe r enlargement or l imitation , the ru leof law . Que stions as to the mode of ascertaining the factscan be no other than que stions O f procedure .

6 . Jurisprudence , be ing absolute ly impart ial in its v iewO f al l such case s , is ready to cons ide r every important ormate rial fac t , and, by re ference there to , to determine whichrule of substantive law is applicable ; and thus to excludethe application of the ru le which governs case s O f fraudor fraudulent tendency , whenever the facts make that ruleinappl icable .

7 . In entire harmony with al l we l l considered case s inwhich e ither of the forego ing propos itions is adopted and

fol lowed , R obinson 71 . E l l iott and kindred case s apply thesubstantive rule of law , that a re servat ion to the mortgagerof a discre tionary power of sale of the goods renders themortgage fraudulent .

154 FRA UDUL E NT M O R T GA GE S or M E R C HAND I SE .

C H A P T E R X.

O T H E R F O R M S O F F R AU D U L E N T RE SE R VA T I O N .

S E C T ION 154 . General principle s of law appl icab le to several classe s of

cas e s .

155 . T he abstract rule involved in R obinson 17. E l l iot t .

156 . D ifferent mode s of re se rving control of property.157 . R e s ervat ions of powe r of revocat ion .

158 . R e servat ions of int ere st in real e stat e .

1 59 . R e servat ions of the use O f property consumable in the use .

160 . R e servat ions of rights or privi lege s under ass ignment s for

cre ditors .

161 . R e servat ions of power of appo intment .

162. S ummary .

154 . G en e ra l prin cip l e s of l aw app l icab l e to s e ve ra l

c l asse s of c a se s . Be fore the student O f this subj e ct close sh i s inve stigations , hi s attention shop ld be dire cte d to ce rtainclasse s of case s , which do not fal l w i th in the category of

'

conveyance s invo lv ing a re served power of sale , bu t in

which there are re servations Of othe r incidents of owne r

ship , and which are so close ly analogou s that the principleof substantive law which gove rns them may be considere didentical . If it shal l appear that in the classe s of case snow to be noticed , a given principle of law is appli e d as

fundamental , and to so universal an extent that it s proprie ty and its salutary characte r are practical ly unque stioned ,i t w i l l logically fol low that the same principle shoul d be ap

plied whereve r i t properly may be , in orde r to pre se rve theharmony of juri sprudence . The se case s are al l be l i eved tore st upon a fundamental gene ral principle , which is com

m only regarded as an e ssential O f mode rn juri sprudence .

Apparently it i s qu ite applicable to case s of mortgage s on

244

156 FR AUDUL E NT M O R T GAGE S O E M E R C HAND I S E .

case s may be re- stated as fol lows : that a mortgage upon a

stock O f goods in trade , unde r which the mortgage r is perm it t ed by the mortgage e to se l l the goods at his discre tion inthe usual course O f busine ss , is inhe rently and e ssential lyfraudulent as to creditors of the mortgage r . T he reasonsfor th is .ru le have be en se en to be , that such a transactionfalse ly pre tends to be a mortgage , while in re al ity i t i s inconsistent with the i dea O f a se curity , and amounts m e re lyto a cloak for an exe rcise by the mortgage r of the mostpractical and substantia l power incident to ownership ,name ly , the power of uncontro l led disposition . R educedto its S imple st analysis , the abstract ru le may be stated thu sthat a reserva tion by the grantor in a p retended conveyance

of p rop erty , of a p ower of controlling or disposing of it , is

u tterly inconsis tent with the idea of a conveyance , and ren

ders the p retended c onveyance fraudulent and void . A S

thu s stated , thi s i s a doctrine appl i cable to the othe r classe sof conveyance s now to be noticed , in which other incidentsor attribute s of ownership are re served , and which i s frequently so appl ied as to avo i d them , with little dissent fromcourts , practitioners , or text-writers .

156 . D iffe re n t m ode s of re se rving c on t ro l of prope rty .

— The re is no variation b e twe en the sal ient factsof the se case s and those of such case s as Robinson v.

E ll iott , which cal l s for any variation in the statement ofthis general doctrine . T he variations in the facts of theseveral classe s of case s grow out of difference s be twe enclasse s of conveyance s , or diffe rence s in the incidents of

ownership which are re served . Conveyance s of land differ ,as to the ir form , obj e cts and purpose s , and some time s as.

to partie s and solemni tie s , from conveyance s of chatte l sand the variations in conveyance s of diffe rent classe s ofchatte l s are num e rou s . S o ,

the re w i l l be O bse rved , first ,different mode s of re se rv ing contro l to the grantor ; s e cond ,

24 6

O T H F R FO RM S O F FR AUDUL E NT R E S E RVA T IO N . 157

difference s in the character O f contro l re se rved and,third ,

diffe re nt te sts of the incons istency of such re se rvations ,varying according to the forms , subje cts , obj e cts and rcqui

site s of diffe rent conveyance s . But unde r a rul e state d inS O genera l te rms as those employed above , al l such differenc e s are minor and immate rial . T he abstract e s sentials ofthe doctrine of R obinson v . E ll iott , name ly , a pre tende dconveyance by the owne r of property , and an incons istentre se rvation by him of contro l ove r i t , are found in the

c lasse s of case s now to be observe d .

The se case s may , for convenience , be class ifie d accordingto the character of contro l re serve d , as fol lows1 . R e servations of powe r of revocation .

2. R e se rvations of inte re st in real e state .

3 . R e servations of use of prope rty consumable in the use .

4 . R e servations of rights or privi lege s unde r ass ignmentsfor benefit of creditors .

157 . R e se rvat ion s of p ow e r of re voc at ion . In E ng

land , the doctrine was e stabli she d at an early day t hat a

re se rvation in a conveyance , of a power of revocation ,

would render the conveyance fraudu lent ; and the rule wasappli e d in favor of both creditors and purchase rs , and toconveyance s of both lands and chatte ls . A somewhatcommon form O f such conveyance s was to inse rt a condition that , on tende r of a smal l sum of money , the conveyance shou l d be vo id ; which was re cognized as equ ivalent toan unconditional powe r O f revocation . T he statute of 27thE liz . , in favor of purchasers , contained a spe cial re ferenceto powers of revocation , the re servation of whi ch was thenS O common .

In Tyre r v . Little ton ,

1 in 16 12, in the Common PleasCoke , C . J . , re fe rre d to a case in the King ’

s Bench , in the28th E l iz . , in which it had be en adjudged that the re se rva

2Brownlow, 187.

1 57 FRAUDUL E NT M O RT GAGE S O F M E R C HAN D IS E .

t ion of a powe r of revocation made a conveyance fraudulent as to a purchase r ; and VVyneh , J . , remarke d that i fa conveyance contain a powe r of revocation ,

— which i sde clare d to be apparent fraud by the statute ( 27ththe court may take not i ce of that w ithout any averment .

T he law was thus frequently de clared by the courts incase s whe re purchase rs complained .

1

Dye r c ite s suc h a case , which arose j ust prior to the

passage of the statute 13th E l iz . , in which the re was a

proviso that the conveyance shou l d be voi d on the paymentof t en shill ings , and the grantor be ing then indebted , butc ontinu ing after j udgment to s e cure the profits of the landsc onveyed , his creditors , after the passage O f that ac t , reachedand subj e cted the land upon an elegit .

2 In a note to thi sc ase , Dyer cite s seve ral e arl ie r case s , some ari sing in the

re ign of E dward III . , whe re conveyance s of land , unde rwh ich the grantor re se rve d the profits , had be en adjudgedfraudulent as to creditors , thus ev idencing the antiquityof thi s principle of law .

It wou l d se em from thi s that the expre ss prov i sion of the

statute 27th E l iz . , making vo i d as to purchase rs any c on

veyanc e of lands containing a power of revocat ion , was butdeclaratory of a gene ral principle of law , already re cogn ized , that such a re se rvation i s fraudulent . S O the law

se ems to be unde rstood by the learne d author of Chanceon Powe rs .

3

Bethe l v . Stanhope4 was a case of a voluntary gift of

goods , with a condition for re conveyance on paymentof twenty shi ll ings , which was complained O f by a creditor .

“Al l the court h e l d that thi s gift of the goods i s ini tse lf fraudu lent , as appears by the condition .

”

1 S tanden v. Bul lock, 3 C oke , 82 b Anon. , Lane , 22 Garthv. E rsfe ild, J . Bridgman, 22 Lavender v. B lackstone , 2 L ev. 146, 3

Keble , 5262 Anon.

, Dye r, 295 a .

3 S ect. 1843.4 C roke E l iz . 810 (43

24 8

15 7 FR AUDUL E NT M O R T GAGE S O F M E R CHANDI SE .

u lent and vo i d against the creditors . T o the same efi ect

is Je nkyn v . Vaughan .

1

T he authoritie s inAmeri ca on the que stion of the e ffe ct ofa powe r of revocation are few . T he leading case i s R iggsv . Murray ,

2 in which the re w e re five sev e ral conveyance sby way of gene ral assignment for creditors . T he firstcontaine d a power of revocati on ; the se cond made new

appointments and re servations ; the third revoke d all the

grants of the se cond, and prepared the way for the fourth ,

which gave new instructions to the truste e s as to the irdutie s ; the fifth made a new prov is ion for creditors , and

provided for the support of the grantors themse lve s for a

pe riod of time . Chance l lor Kent hold al l the se conveyanc e s vo id , saying that the grantors had be en sportingw ith the property as the ir own ;

” that the re was a ne c e s

sary inference of a purpose to hinder , de lay or de fraudcreditors ; that “ the only e ffe ct of such an assignmenti s to mask the property ; and sai d further, that suchpowers O f revocation are fatal to the instrument , and

po ison i t throughout , appears to have be en we l l e stabli shedby authority .

”

T he reversal of this deci s ion by the Court of E rrors 3

doe s not s e em to have re ce ive d the endorsement of j uri stsgene rally , i f inde ed , i t is to be understood as de tracting fromthe authority of the ru le s of law announced , which , pe rhaps ,was not intende d by the appe l late court ; 4 and citations aremost commonly made , both by courts and text-writers . fromthe opinion of the chance l lor.

In Shannon v . Commonwe alth 5 andWe st v . Snodgrass ,‘

a sale of personal property , with a re se rvation to the vende eof the right to re scind the contract , was in each case he ld

3 Drewry, 419.

2 2Johns. C h. 565.3 M urray v. R iggs, 15 Johns. 571.

4 S ee Lang v. L ee , 3Rand., at p. 425.

5 8 S . R . 444 .4 17 A la. 549.

250

O T HE R FO RM S O F FR AUDUL E NT R E S E R VA T IO N .

fraudulent and voi d as to the creditors of the vendor, onthe ground that this arrangement was in e ffe ct a powe r of

revocation re se rved to the latter, and there fore within thegene ral ru le above re fe rre d to .

In Cannon v . Pe eble s 1 thi s gene ral rule was approved ,though not appl i ed to the case be cause the facts did not cal lfor its appl ication .

158 . R e se rva t ions of in t e re s t in re al e st at e .— F re

quent attempts have be en made by grantors of real e stateto re serve benefits to themse lve s , e ither by way of contro lof the e state , orre ce ipts of its profits , or othe rwise ; and thecourts as a rule have condemne d such transactions whencal led on to e xamine them . A few instance s wi l l suffice toi l lustrate the subj e ct .In G ibbs v . Thompson ,

2 the grantor of the land by a

subsequent conveyance re served t o himse lf the powe r tose l l the land , make de eds of the same and re ce iv e the c on

s ideration t herefor ; wh ich transaction the court se t as ide ,saying Thi s power enable d Denton , i f he saw prope r, tomake the conveyance to Thompson nugatory e ven as a

se curity for the al lege d debt .

”In Smith v . Conkwright

,

3

the land was conveye d abso lute ly to a truste e , ostens iblyto provi de funds for the payment of the grantor’ s debts

,

but the proce eds we re to be so appl ie d by the latter and'

at

hi s disc re tion ,which feature was he l d to make him virtuallyand potential ly the beneficiary of the trust ,

”and thu s to

render the transact ion fraudu lent .

In Fisher v . Henderson ,

4 where , under a deed of se ttlem ent of land and personal property on a wife , the grantorre se rve d the right to se l l and dispose of the property , thiswas he ld fraudulent and void as to creditors .

1 4 I red. L aw, 204 .

3 28 M inn. 23.i

3 7 H um . 179. 4 8 N. B . R . 175 ; (U. S . C ourt, M iss ,

251

159 FR AUDUL E NT M O R T GA GE S O F M E R CHANDIS E .

In Donovan v . Dunning ,1 the re se rvation was of the use O fthe land for the entire l i fe of the grantor ; and in Cool idgev . Me lv in 2 the re was the same re se rvation , w ith the addit ion of a conditional de fe asance to the children of

the grantors afte r the ir death . In M ac kason’

s Appe al 3

the re was the re se rvation of the use of the landfor l ife , with powe r of appointment as to the remainde rintere st ; and in Brinton v . Hook ,

4 the se ttlement by the

husband , for the w ife’ s benefit , was unde r the trusts , first ,

for the use of husband and w ife for l ife , with powe r O f ab

so lute disposal ; s e cond , for abso lute disposal by the husband , ia case he surv ive d his w ife ; and third , for suchpersons as he might by h is wi l l appo int .

In Hungerford v . E arl e 5 the re was , under a vo luntaryse ttl ement , a re servation of fifty pounds sterl ing p er annumto the grantor . In Mackie v. Cairns ,6 Jackson v . Parker 7

and Henderson v . Downing ,

8 the re se rvation was for t hesupport of the grantor or his family for al imited pe riod .

In Lukins v . A ird 9 and Macombe r v . Pe ck ,

10 it was forthe use of the land for a l imited period , fre e of rent .

In Ki ssam v . E dmundson ,

11 the re servation was O f one

half of the entire prope rty conveye d to a creditor, in trustfor the use of the grantor’ s w ife and childre n . In Palmerv . G i le s ,12 where the conveyance was a general ass ignmentfor creditors , the re se rvation was by way O f excluding all

those creditors who refused to re ce ive fifty cents on the

dol lar in se ttlement .

159 . R e s e rva t ion s of t h e u s e of p rope rty c onsum ab l e

in t h e u se .— Whi le there i s not an entire accord in the

1 69 M o. 436.7 9 C ow. 73.

2 42N . H. 510.3 24 M iss . 106 .

3 42Penn. S t . 330 9 6 Wal l . 78.

4 3 M d. C h. 477.

1° 39 I owa, 351.

5 2Vernon, 261.11 l I red . E q. 180 .

6 5 C ow. 547, 15 A m .

12 5 Jones E q. 75.

252

159 FR AUDULE NT M O R T GAGE S O F M E R C HAND IS E .

In R ichmond v . Crudup 1an attempt was made to distin

guish be twe e n an agre ement for the u se of such property ,

made as one of the te rms of an absolute sale , which wou ldrende r i t void p er se , and a s imi lar agre ement made subse

quently and in addition to a de e d in trust , which i t wasthought would be only p rima f ac ie fraudu lent ; as in

Darwin v . Handley . T he case of Charlton v . L ay2enforce s

and appl ie s th is distinction . T he de ed in that case not c ontaining such a re servation on its face , the que stion of fraudwas one for the jury .

In Massachuse tts , th is principle appeare d in a dic tum in

Shurtle ff v . Wi l lard ,3 to the e ffe ct that there may be

chatte l s so trans ient in the ir existence , or of such a nature ,

the ir only u se cons isting in the ir consumption , that theycannot be mortgaged ; for which Somme rvi l le v . Hortonwas cited as an authority . T he point was de cided in R obbins v . Parke r ,4 where there was a mortgage of hay , grain ,

and produce on a farm , w ith proof that the mortgager usedand consume d the property w ith the knowledge of the

mortgage e ; which was he ld to be co l lusive and fraudulentagainst creditors , again citing as authori ty Sommerv i l le v .

Horton .

It w i ll be observed that while in Tenne sse e , the courtsplace upon the same bas i s the re se rvation of the right tose ll and dispo se of property mortgage d and the re se rvationof the use of the property to exhaustion , M assachusetts sustains one class of case s and condemns the other. But in

N ewHampshire , where the appe l late court had to cons ider acase of a re serve d power of sale of mortgaged goods , inPutnam v . O sgood ,

5 the Massachuse tts case of R obbins v.

Parke r was cons idered an authority in po int .

1 M e igs, 581, 33 Am . D ec . 161.

4 3 M e te . 117.

2 5 H um. 495.5 51 N. H . 192 (at p.

3 19 Pick . 202.

254

O T HE R FO RM S O F FR AUDUL E NT R E S E R VAT I O N . 159

Cutting v . Jackson 1 was a case of a sale of cattle and

hay , the prope rty remaining wi th the vendor for his use ,

and the cattle consuming the hay , and the transaction was

adjudged fraudulent .In Farmers ’ Bank v . Douglas 2 the court , hav ing such a

mortgage be fore i t , said T he mortgaging of prope rty ,

the u se of which involve s its consumption , is an ev idenceof fraud , not inde e d conclusive , but of much we ight . U n

le ss it be explaine d satisfactorily , i t must cause the c on

demnation of the instrument and it impose s the burthen of

proof upon those claiming under such instrument ; and

when the right to use i t i s al so re se rved in the mortgageitse l f , i t i s fraudu lent upon i ts face .

” 3 Proce eding then tocons ide r the facts of the case at bar , the court found itmanife st that the obje ct was not to apply the se things to

the payment of the debts , but to se cure the debtor in the irposse ssion and enjoyment , and thus adjudicated T he

re se rvation in the conveyance of so much of the se article sas was ne ce ssary for the support of the prope rty put s an

impre ss of fraud upon it , from which there i s no e scape .

It was a dire ct benefit se cure d to the debtor at the expenseof his creditors , which the law does not sanction .

” 4

T he case s in Virginia are not entire ly harmonious . T he

general doctrine was state d in a late case 5 to be , that there servation of the use of prope rty consumable in the use ,

such as the crops and prov isions on a plantation , furnishe sonly an indication of fraud , but doe s not conclus ive ly e stabl ish it . In that case and another ,3 it was thought the grainconveye d might have ass iste d in maintaining the stock , andthus have indire ct ly benefited the creditor and not the

1 56 N . H. 253.

3 p. 540.

2 11 S . M . 469 .4 p . 541.

5 Brockenbrough v. Brockenbrough, 31 Gratt . 580.

3 S ipe v. E arman, 26 Gratt. 563.

160 FR AUDULE NT M O R T GA GE S O F M E R C HAND I SE .

debtor : and in st il l another,1 stre s s was lai d on the circumstance s that the prope rty conveyed in the particu lar casewas not ne ce ssari ly consumable , and al so that the amountof consumable property was inconsiderable . But in one

case ,

2 the court , while re cognizing the binding authorityof such case s , he ld the conveyance in que stion to be fraudu lent , laying stre ss on the fact that i t embrace d “ largequantitie s of prop erty consumable in the use , and whichmust be used w ithin the two years to be of any value ,as sufficient to condemn the transact ion . Thus the re appearsto be in thi s State a disposit ion to tole rate re servations ofthi s kind , prov ided the grantor i s care fu l not to re serve toomuch ; though the re servation may be urged upon the attention of a jury as a badge of fraud.

Similarly , i t was thought in North Carol ina, in Dewey v .

Little john ,

3 that where the use of the crop s was such thatthereby the stock conveyed could be kept toge the r, thede ed was not fraudulent in law.

In A labama , such a mortgage was in W i ley v . Knight 4

he ld fraudu lent as to creditors , irre spective of the que stionof intent , and

" Farme r’ s Bank v . Douglas was e xpre ss lyapprove d as an authority . But in two earl ier case s 3 i t wasthought otherwise , be cause the use and consumption of the

produce on the farm might , by the cultivation of the landass ist in producing additional asse ts .

160 . R e se rvat ion s of righ ts or privil ege s u nde r as

s ignm e n t s f or b e n efit of cre ditors .— T he general subje ct

of re se rvations by ass ignors under ass ignm ents for creditors is a pro l ific one ; and it has be en so ful ly treated bythe text-write rs ,3 that a few only of the multitude of case s

1 C ochran v. Paris, 11 Grat t. 348.

2 Quarles v. Kerr, 14 Grat t . 48 .

2 2 ired . E q. 495.

4 27 A la. 336 .

5 R avisie s v. Alston, 5 A la. 297 ; E lmes v. S utherland, 7 Id. 262.

6 F or a ful l exposit ion of the subject , se e B ishop ’s Burri l l on A ssts. , ch. 11

Bump. on F raud . C onveyance s, ch. 14, 15.

160 F R AUDUL E NT M O RT G AGE S O F ME R C HANDI S E .

certain time , which was characterized as be ing to the

assignor’ s pe rsonal advantage , by hindering and de laying hiscreditors , i f not othe rwi se . S o i t was he ld al so in Lenti lhon v . M offat ,1 of a re se rvation to the ass ignor of powe r,in case ce rtain creditors shou ld not accept and re lease the irdebtor wi thin s ixty days , to appoint the proce eds not thusaccepted to such of the creditors as he saw fit . In Austinv . Be l l ,2 the re was a broad re servation that the share s ofsuch creditors as might refuse to exe cute re lease s shouldrevert to the ass ignors ; which , the court said , placed theprop e rty of the ass ignors at the ir absolute disposal , toapply to the ir own use , or to pay to the ir creditors , as theypleased ; a re se rvation of contro l which made the ideaof a se curity for creditors ridicu lous . In R iggs v . Murray ,

3

the re servation was of a powe r to appo int new truste e s .I n Hyslop v . Clarke ,

4 it was not m ere ly a pre fe rence to

certain creditors which proved fatal ; i t was a re servationby the assignors of the right to make and de clare futurepreference s , which amounted to re taining potential controlov er the property .

In P i erson v . Manning ,5 the ass ignment , preferring'

c red

itors , provide d that al l the pe rsonalty ass igned must first beexhausted and appl ie d to payment of debts , b e fore there al e state shou ld be re sorte d to , unle ss by consent of theassignor . Thi s was he l d to be the re servation of a rightto control the truste e s in re lat ion to a sale of the realty ,and the re fore fraudulent and vo i d as to creditors not preferred . In Atkinson v . Jordan ,

3 the assignment excludedcreditors not re l eas ing the ass ignor within nine ty days .

I n S angston v . Gai the r ,7 there was a re se rvation of the

surplus afte r paying the preferred creditors . In Green v .

1 l E dw. C h. 451.5 2M ich . 445.

2 20 Johns. 442, 11 A m. D e c . 297.

5 5 O hio, 293, 24 Am. D e c . 281.2 2 Johns. C h. 565.

7 3 M d. 40 .

4 14 Johns . 458.

258

O T HE R FO RM S O F F R AUDUL E NT R E S E RVA T ION . 160

Tri che r,1 the fatal feature was an unnece ssary de lay , for

perhaps an indefinite time , the grantor re taining in the

meantime ful l use of the property . In Grimshaw v.

VValk er ,2re lease s we re exacted as a condition of participa

t ion, and the surplus was re se rved to the ass ignor . In thi sc ase , as in many others of those cite d , the court in itsop inion i l lustrate d clearly the v i ce inherent in such a

re se rvation , by an insolvent debtor, of the power “ to

place his property beyond the legal pursuit of h is creditors , and at the same time to impose conditions upont he ir Sharing in i ts proceeds .

One Of the cleare st expositions of this class of fraudwas given in an early Pennsylvania case ,3 by Brackenridge ,J who , speaking of the feature s of such conveyance s abovere ferred to , said

It has been le ft to the astutia A mericana of debtors , todevise such awarehousing of effe cts out of the hands of thelaw for a t ime , for the benefit of particular creditors . Ith ink it to the l e t and hindrance of creditors , and that suchdisposit ion i s vo id both at common law and by statute ;though not fraudulent in fact in the particular case , ye tfraudulent in law , and there fore vo id . It i s not S imply thesurrender of his property as sati sfaction p ro rata of hi sdebts , that the insolvent here has in View. H e couple s anintere st for h imse l f in obtaining a discharge from that proportion of the re spe ctive debts which may remain unsatisfied .

It i s taking an undue advantage of the S ituation of a cre ditor,to impose thi s condition . It i s immoral to exact it .

Volenti non fi t inj uria if the creditor accepts , but i t is mak

ing a vo lunte e r by compul s ion , and i s in fact a robbe ry .

O ne enl ightened on the principle s of moral hone sty wouldnever think o f it .

” This opinionwas cited and approved byChance l lorWalworth in IVakeman v . Grove r .

4

1 3 M d. 11.2 12A la. 101.

3 Lippincott v. Barker, 2Bin. 174 (at p . 4 A m . D ec . 433.

4 4 Paige , 23

161 FR AUDULE NT M O R T GAGE S O F M E R CHAND I SE .

Somewhat l ike the foregoing case s are those of re servations unde r conveyance s to a favored creditor ; as inW i l sonandWormal

’

s case ,

1 which was an assignment of goods toone creditor, re serving an intere st in the surplus over thatcreditor’ s debt , of which i t was said , thi s assignment i sal toge ther void , because i t i s fraudulent in part .

”In

Passmore v . E ldridge ,

2 under a conveyance of personalproperty , the jury were instructed that if there was a

re servation of a part of the property to the benefit of the

grantor, thi s wou ld be fraudu lent and voi d . In Lang v.

Stockwe l l ,3 the re servation , under a conveyance of a horseand wagon , of the use for an unl imited time , was de claredto be a legal fraud . In Sparks v . Mack ,4 under a sale of a

stock of goods to a favored creditor , the grantor re serve dan intere st , which made the tra nsaction fraudulent .

16 1 . R e se rvat ion s of pow e r of ap p oin tm e n t . Stil lanothe r class of case s , name ly , those involving the exerciseof a gene ral powe r of appo intment , as to e ither re al or

personal property , wi l l be found on examination to re semblevery close ly those above re ferred to . They are to be dis

t inguished by this feature , that the rule i s applie d al ike ,whe the r the de nce of the power has be en made such byanother person , or by a re se rvation original ly made in a

conveyance or s e tt lement by himse lf ; or, in other words , i ti s immate rial whe th er the property over which he exe rcise sthe power was original ly owned by himse l f , or by another .

There fore , as the e lement of original owne rship i s not alwayspre sent , the grant of such a power i s not to be classe d so l e lyamong re servations by grantors . But the e ssential featureof the se case s be ing that the powe r granted , as to the

ve stiture or the use of property , i s equ ivalent to that right orcontro l over propertywhich appertains to absolute ownership ,

1 Godbolt , 161, 3 55 N. H. 561.2 12 S . R . 198.

4 31 A rk . 666.

161 FR AUDUL ENT M O R T GAG E S O F M E R CHANDI S E .

A powe r i s not property 3 i f , however, thedonee se e fit to exe cute his power, thus assuming a dominionove r the prope rty , i t may be thence forth regarded as a partof his e state , and as such subj e ct , at least in equity , to theclaims of his creditors .

”

T he v iews of Lord Chance l lor Hardwicke we re expre ssedas fo llows in Bainton v . Ward : 1 IVhe re the re i s a gene ral powe r given or re serve d to a pe rson , for such use s ,intents and purpose s as he shal l appo int , this make s i t hi sabsolute e stat e ,

:

and give s h im such a dominion ove r i t asw i l l subje ct it to his debts In thi s case Ward , hav ing a

powe r to charge hi s w ife ’ s e state with a sum not exce edingtwo thou sand pounds , by hi s wi ll dev i sed the same , and

died in d ebt to the plaintiffs and the lord chance llor he ldthe sum dev ised to be subj e ct to the debts of the te statoras his pe rsonal asse ts . T he same ru le was applie d by LordHardwi cke to S imi lar state s of facts , in Pack v . Bathurst ,2

Troughton v . Troughton 3and Townshend v. Windham ;

4

in which last named case the power of appo intment hadbe en exe cuted in favor of the te stator ’ s daughte rs , whichLord Hardwi cke he ld to be a voluntary conveyance , saying ,A man actually indebted , and conv eying vo luntari ly ,

always me ans to be in fraud of his creditors as I take i t .

” 3

The se de ci sions follow the e arl ier case s of Thompson v .

Towne ,3 Lasse l ls v . Cornwalli s 7 and H inton v . Toye ,3 ineach of which , property so place d at the disposal of a party ,

who assume d control of i t , was he ld to be his prope rty . In

A shfie ld v . A shfie ld,

9a party had se ttled property upon

truste e s , in trust for such persons or u se s as he S hould bydeed or will appo int , and in de fault of appointment , in

1 2 A tk . 172 6 2Vernon, 3192 3 A tk . 269 .

7 2Vernon, 465

3 3 A tk . 656 .

3 l A tk . 465 (1739 )4 2Ve s. er. 1 9 2Vernon, 287.5 p . 11.262

O T HE R F O RM S O F F RAUDUL E NT R E SE R VAT I O N . 161

trust for himse l f or his repre sentative s whic h was he ldt oleave him in e quity sti l l the owne r of the property , so i twas subj e ct to his debts . This doctrine i s stated in al l

the se case s as a ru le of positive law . It was re cognize d as

such , by Lord E ldon , in George v . Milbanke .

1 It was ap

pli ed and e nforce d inAttorney General v .

'

S taff,2 in the E x

cheque r , by charging with probate duty prope rty which hadbe en conveye d by the te stamentary exe rcise of such a

powe r. S o in G oodtit l e v . O tway ,

3 it was he ld that a powerof disposition by wil l give s an abso lute fe e in real e state .

This rul e was enforced in Johnson v . Cu’ shing 4 and Tal lmadge v . Sill ,5 where the powe r of appo intment cou ld beexe rcised only by wi l l , but i t having be en so exe rci sed , theprincip le applied the court saying in the forme r case ,We se e no reason to gainsay the soundne ss and justice of

it ; and stating it in the latte r case in the se words , thatthe abso lute powe r of conveying or di sposing of prope rty ,

for one’ s own benefit , make s the pe rson to whom it i s given

the owne r ; the powe r of absolute and bene ficial contro lcannot and ought not to be separate d from the ownership .

”

In the late case in N ew York ,3 the ru le , re ce iv ing assentas a commonlaw rule , was he ld to have be en abol i she d bythe R evi sed Statute s .

The se cases have not , as a rule , be en based upon eon

s iderations applicable to fraud in conveyance s . Ge ne ral lyoriginating in e quity , i t has be en. found sufficient t o applyto them the equity rule s usual ly invoke d in favor of creditors who se ek to reach asse ts of the ir debtors . It i s plain ,

however, that the attempt to exe rcise such a powe r in defiance of creditors wou ld ope rate a fraud upon them’

, in

the same manner as would any of the re servations tre ate dof in th is chapte r . As has already be en se en , Lord Hard

1 9 Ves. jr. 1904 15 N . H. 298, 41 Am. D e c . 694.

2 2 C romp . dz M ees. 124.5 21 Barb . 34 .

3 2W i lson, 6 .41 C ut t ing v. C ut ting, 86 N . Y . 522.

263


wicke in one such case adverted to the matter of fraudupon creditors as an e lem ent prope rly to be considered .

In one American case 1 i t was sai d by the court Unde rtaking to exe rcise a powe r which authorized him to appro

priat e the property to the payment of his creditors , by a

me re gift or legacy w ithout making prov i s ion for them , is

a fraud upon them .

”

162. S umm ary .- I h al l the case s of re servations by

grantors , discusse d in th i s chapter , the courts have foundthe e lement pre sent of an attempte d contro l by the grantorove r the prope rty conveyed , inconsistent with the conveyance , and cons i stent only with the i dea of a continue d own

e rship , to some extent i f not abso lute ly , by the grantor.

T he harmony of jurisprudence can be pre se rved , in suchcase s , only by tre at ing the property thus dealt w ith as the

property of him who thus'

re serve s contro l ove r its disposition . This ru le of substantive law has be en admirablycondense d by M r . Bump , in the se words “Absolute power

of dispos ition i s substantial ownership ; but l iabil ity fordebts i s an inseparable incident of ownership .

” 2

This is an accurate statement , from one point of View ,

of the sal ient feature of such case s as R obinson v . E l l iott ,and the principle s of law applicable there to . T he re se rva

tion , by a mortgager , of the discre tionary powe r of sale or

dispos ition of the goods mortgaged , i s a re servation of one

of the most e ssential and potential feature s of ownership .

A power of revocation , a power t o consum e by use , or a

power to exercise any other spe cie s of control ove r the

prope rty ,c an scarce ly be a greater interfe rence w ith the

rights of creditors than a power to se l l ; inde ed , any reasonwhich condemns any of the se re servations of othe r powers

1 Johnson v. C ushing, 15 N . H . 298 , 4 1 Am. D ec . 694 .

2 Art icle , 4 C ent. L aw. Jour. 219.

264

I N D E X.

!R eferences are to sections .!

S E C T IONAbsolute and condit ional sale s , no real d ist inct ion be tween, as tofraud there in

A c t of de l ivery of goods to mortgagee , though after a fraudulentconveyance , may be val i d 31 , 51 , 64 , 144

but must be fre e from fraudu lent int ent . 144

of assumpt ion of posse ss ion by mortgage e does not val idatea fraudu lent mortgage 51 , 52, 143

Act s and agre ements , int ent to de fraud inferre d from 30, 39 , 45 , 51 , 62

of ownersh ip are evidence of fraud 155 , 156

are incons istent w ith idea of se curity,10, 12, 44 , 77, 79 , 156

effe ct to be given to 7 , 8 , 13

Actual fraud , reservat ion of power of sale is9 , 43, 52, 60 , 78 , 84 , 117 , 120, 121 ,

fraud in conveyance s is one form of

was exhib ited in T wyne ’s C ase

and fraud in law not ant ithe t i cal t ermsand fraud in fact , not synonymous t ermsand intent

'

t o de fraud , dist inct ion be tweenand construct ive fraud , dist ingu ishe d

defined and dist ingu ishedt erms misunderstood

Adje ct ive law . S ee PR O C E D UR E .

Adjudicat ion, proce sse s of, i l lustrate d 136, 146

Agent for mortgage e , power of sale as , not fraudu lent p er se,35, 36, 41 , 43, 46, 49 , 53, 57, 58 , 75 , 97, 104 , 137 , 138, 139 , 140

but must be free from int ent to defraudpre sent s an ent ire ly newcase 137- 140

cal ls for a different doctrine

the dist inct ion clearlys tated

268 I N D E x .

Agent for mortgagee , power of sale as , substant ial feature s ofa que st ion of law, afterfacts are proven

mortgager se l ls as quas i, in KansasAgre ement , fraudulent , asce rta inment of fact of, a mat ter of pro

c edure onlymode of proof of, immat erial

for power of sale is a que st ion o f factfor a jury in dispute dcase s 56 , 72, 145, 146

to account for sale s is not alone sufficient to val idatetransact ion

Alabama, de cis ions in, as to reserved power of salethe ru le in, re spe ct ing re serve d power of sale , left indoubt 101

jury alone c an draw inference s of fraud in 101

de cis ions in, as to u se of consumable property 102, 159

Appo intment , reservat ion of powe r of, fraudulent 161

e qu ivalent to assert ion of ownership , 1 61

incons ist ent w i th any other theory 161, 1 62

Arkansas approve s the majority doctrine 86

Ass igne e or truste e must not col lude w i th mortgager 141

must ac t for h imse lf 12, 35, 141

mus t contro l proce eds of sales 4 , 35, 60

Ass ignment for credi tors, st ipu lat ion under, t hat creditors mustassent , fraudu lent 30, 160

reservat ion of rights or privi lege sunder, fraudu lenta legal fraudimmoral and dishone st

trust e e s under, must ac t of themse lve s ,

and control proceeds of sale s 4 , 35 , 60

must not take a colorable possess ion 59 , 60

nor col lude w ith ass ignor 14 1

Bankrupt cy statute s, e ffe ct of, in E nglandeffe ct of, in Americathe que st ion of fraud in such conveyances isindependent of

Benefit to mortgager, re served power of sale is a,4 , 37 , 4 1 , 45, 48 , 60, 62, 63, 69 , 77

u se of consumable property is a 159

of mortgage e , sale s made sole ly for, dist inct ion in case of, 137—140

270 I N D E x .

S E C T IO NC onstruct ion not resorted to in such case s as R ob inson v . E l liot t , 3 , 1 17

C onstruct ive fraud, define d 3, 119

explained 3

S tory ’ s de finit ion of 3

B ige low ’s definit ion of 117

and actual fraud , t erms misunders tood 3, 1 18

define d and dist inguished

and fraud in law ,not synonymous t erms

and pre sumpt ive fraud , cons idere ddis t ingu ishedt erms defineds om e t i m e s e o n

founde d 117

re serve d power of sale doe s not pre sent , 3, 43, 117

T wyne’s C ase did not pre sent 5

fraud in mortgage s of merchandise is not , 3, 43, 1 17

is a convenient rule of p i ac t ie e 3

statute as t o fraudu lent intent is not a statuteas to

in conveyance s , doctrine as to , in VermontC onsumab le property , reservat ion of use of, is fraudu lent ,

44 , 59 , 63, 95 , 102, 159

se cure s a benefit todebtor

actual int ent immat erial

t est of is , whe ther itis ne ce ssari ly consumablefurnishe s a ru le forcase s of re served

power of sale 44 , 159

doubtfu l v iews con

cerning, in Va .

in Al a .

C ontroversy over effe ct of mere re tent ion of posse ss ionover effe ct of posse ss ion w ith re served power of

saleC onveyance s . S e e F R A UD IN CONVEYANC E S .

C ourt , bound to adjudge fraud when fact s are prove d 102, 146 , 151

power of , not l imit e d by s tatute as to fraudulent int ent 74 , 75 , 153may dire ct ve rdict of fraud in some S tate s 41 , 42

but not when fact is in dispu te 72

and jury, diffe rent prov ince s of 50, 82, 84 , 85 , 103, 109 , 120, 146

INDE X . 271

S E C T IONC ourts, opinions of, i l lustrat ing fraudulent charact er of reserved

power of salethe language used by , does not de t ermine the importanceof the que st ion involved

discla im au thority to adjudicate fraud aris ing from a re

served power of sale , in Iowain M ainein M assachuse tts

C ovin, definedapp a and not apparentident ical w ith modern doctrine of fraud in conveyance sfraud show nby a reserve d powe r of sale isre fers to the transact ion rather than the mot ive s of thepart ie s

C reditors , right s of, fixed by ru les of law , not by op inion of jury ,power of revocat ion is fraudu lent as t oS e e AS S IGNME NT , DE LAY ; HIND R AN C E ; POWER O F

S A L E ; T R US T E E S .

C rit ic isms, of Lowe l l , J . , upon R obinson v. E l l iott'

upon reservat ion of power of sale , in Alabamain M arylandin Georgia

upon the doctrine of Rob inson v. E l l iot t , examined

Dav is , J O pinion of, in R ob inson v . E l l iot tDe fraud . S e e INT E NT T O DE F R A UD .

De lay of creditors , ne ce ssary , make s conveyance fraudulentis an actual re sult of a re se rve d power of

sale 52, 54 , 55, 60, 62, 69 , 93

but not in Iowa 90

De livery of Goods , by new ac t subse quent to mortgage , may be

val i d 31 , 5 1 , 64, 144

i f fre e from fraudu lent intent 144

D isposal , power of, equ ivalent to substant ial ownership ,39 , 54 , 77, 79 , 162

compared w ith other forms of re servat ion to

use of grantor 154 , 155, 156, 162

Doc trine of Robinson v. E l l iott , state d 2, 155

op inion of Davis , J . 4

is of E nglish origin 2, 5

T wyne’s C ase the origin of 5

no t now v ital in E ngland 30, 31 , 32

adopt e d in Indiana 75

in fourte en S tat e s 1 14

re ce ive d w i th favor in o the rs 114

not favored in e ight S tate s 114

272 INDE X .

Doctrine of R obinson v. E l l iot t , summary of views concerningabs t ract form of, s tate dharmonize s w i th legal doctrine sas to othe r frauds

reasons for it s ex ist ence ,

t e st imony of O bservers in its support 4

,69 , 73 , 84 , 122, 131 , 132

erroneously taken to be a doc

trine of construct ive fraudnot a doctrine of presumpt ivefraud 3, 43, 61 , 117

crit i c ised by Lowe l l , J . 4

cri t ici sms upon, e xamined 125, 138

obj e ct ions to , stat e d 4 , 115 , 124

examine d 116- 128

de fe ct ive v iews of, i l lustrat ed 126

supposed qual ificat ions of, stat ed

supposed qual ificat ions of, c on

sidered 134 , 137, 138, 145, 152

Doctrine of Bre t t v . C arter, state d 4

Doctrine of T wyne’s C ase , v ital in Ameri ca 33

superseded in E ngland 5 , 32

Doctrine s , Legal , cons idered 136 , 137, 153

new , cal le d for, when substant ial ly new factsappe arcal le d for, when power to se l l is re serve donly as agent for mortgage e 137 138 , 139

Doubt ful cases, in Unit ed S tat e s court s 72, 73

in Indiana 76

in E ngland 14 , 15

G ris old v. S he ldon, not 40

Views of T wyne ’S C ase and E dwards v . Harben 25, 26

as t o que st ion of re serve d power of sale ,in Kansas 100, 114

in T exas 106

in Alabama 101

in various S tat e s 114

E dwards v. Harben, fact s of, stat ed 9

view s of Bul ler, J . , in 9

explaine d 28, 29

how understood in G reat Britain 28 , 29

how misunderstood 17 , 28

doubt fu l view s of 25, 26

que st ion of possess ion alone not involved in 28, 29

274 INDE X .

S E C T I O N

F acts , jury to find al l,in case s involving fraud 145, 146, 153

mode or me ans of asce rtaining , immaterial 2, 4 , 153, 154

of case s control the ir de cis ion,though not so stated by the

cou l tand law, di fferent e lement s of 3

, 74 , 81, 120, 136 , 137 , 146 , 153and intent s , fraud I S the judgment of the law 0 11

, 79 , 8 1, 83, 119

F 670 cle se , a conveyance be come s , w ith a 1 e se 1 ved power of ssale , 34

F raud , legal , defined 78, 149

power of revocat ion is 95

re serve d power of sale is 104

re servat ion of p 1 ivil ege s under ass ignment is 160

111t ent as to moral f1and is immat e rial in cons idering 97

what is ev idence of, is a que s t ion of law 82, 109

are indicat ions of, is not a que st ion for jury , 50, 81 , 82, 145

is always an inference of law after the fact s are proved,2,90, 102, 1 19 , 120, 126 , 151

is to be adjudicat ed by the court when se lf- ev ident 1 17

is the judgment of the law on fact s and int ent s , 79 , 81 , 83, 1 19

as shown by a reserve d power of a sale , is a que st ion of

law 34 , 39 , 40 , 4 1 , 44 , 52, 54 , 56 , 59 , 62, 69 , 74 , 75, 77, 78, 81

jury shou ld find, when ev idence warrant s it, 81 , 85, 90, 109 , 123

re served power of sale is an inle t to 80

is an e asy means of 1 1 1

opens a door to 38, 60r 61

at common law ,re served powe r of sale was 90

and e stoppe l often used as convert ible t e rms 93

at t empt at class ificat ion of, in North C arol ina 83, 84

S e e A C T U AL F R AUD ; C ONS T R UC T IVE F R A UD ; PR E SU M PT IVE F R A UD .

F raud in C onveyance s , class ifiedis one form of actual fraudis a rule of jurisprudence

of the common laws imi lar to the ancient covin

is not a ru le of proce dureis a que st ion of law aft er the facts are se t

t l ed 2,

45, 50, 56, 62, 79 , 90 , 102,

is always a que st ion of law , 146, 151

is , in a certain sense , a que st ion of factalso 1 19 , 120

is not a que st ion of pre sumpt ive evidence ,

e xcept in North C arol ina 82— 85

is a quest ion of legal intent 39 , 9 7, 151

INDE X . 275

S E C T IONF raud in C onveyance s is the judgment of the law on fact s and

int ent soffice of court , when the facts are found,

102 146 , 151

mode or means of ascertaining facts immaterial 120, 147, 153

may be prove d by impl icat ion 147

duty of jury to find, when evidence warrant s it 81 , 109

what is evidence of, is a que st ion of law ,

82, 109 , 145

charact erist i cs of transact ion to be asc er

tained

how t e ste dre fers to the transact ion i t se lf,

79 , 149

not to the mot ive s of t he part ie s , 1 19 , 121 , 149actual int ent immaterial , in de terminingthe que st ion of 52, 95, 97, 109 , 148 , 151 , 159

mot ive s of part ie s immat erial 109 , 148 , 149 , 1 51

even though pure, 59, 62, 77, 84, 109 , 148

registrat ion doe s not re l ieve from 32, 123

is a que st ion independent of bankrupt cy ~statut e s

make s no dist inct ion be twe en absolut e andcondit ional sale s

is an immat erial que s t ion, i f there be a

val id subsequent transact ion be twe enthe part ie s

is a que st ion of intent in Kentuckyin T exas

unle ss appearing on faceof de e d

is fatal in Iowa, in conveyance s other thanthose invo lving re serve d power of salegeneral v iews concerning, in I owa

Fraud in fact an ambiguous expre ss ionand actual fraud , not synonymous t ermsand frau d in law, confus ion of the t erms

F raud in law an ambiguous e xpre ss ionand actual fraud no t ant ithe t ical t ermsand construct ive fraud not synonymous t ermsand fraud in fact , the t e rms confuseda que st ion of pre sumpt ive ev idence in North C arol ina 82- 85

276 INDE X .

S E C T IONFraud in law , difficulty as to re spe ct ive province s of court and

jury 82, 84 , 85

at tempt t o solve the difficul ty in North C arol ina 83, 84

F raud inM ortgage s ofM erchandise , the que st ion concerning, stated 1

a que st ion of law 2

is not pre sumpt ive fraud 3, 43, 61 , 117is not construct ive fraud 3, 43, 117

i l lustrat ed in the O p inions of

the courts 69 , 122, 131 , 132

deprive s mortgage e of al l rightsunder the conveyance

is always he ld in M i chigan tore st in int ent

,

S e e DO C T R INE O F R O BINS ON v . E L L IO T T ; M O R T G A G E E ; POWE RO F S A L E .

Fraudulent Agre ement . S e e AG R E E ME NT .

F raudulent Int ent , d ist ingu ishe d from actual fraud 119 , 120

from legal int ent 148, 149 , 150, 151 , 153

from fraudulent t endency 2, 78

not a ne ce ssary e lement of T wyne ’s C ase 5

in Nebraska, a que st ion of fact in some case s 87

a que st ion of law in othe rs 87

the statute says , shal l be a que st ion of fact ,in Indiana.in M i ch iganin N ew York

the statut e as to, is not a statut e as to c on

struct ive frauddoe s not affe ct the que st ionof legal fraud

except in M i ch igan 88

and there in but one class O fcase s

is the important que st ion, in cons idering a re

serve d power of sale , in M assachuse t t sin Kentuckyin Kansas

is some t ime s imput ed as a ne ce ssary feature of

a re serve d powe r of sale 4 , 39 , 51, 151

is a proper mat te r of inqu iry in case s of s implepre ference of a credi tor

may be infe rre d from act s , agre ement s , and c ircumstanc e s 30 , 39 , 45, 51 , 62

the existence O f,a que s t ion for the jury ,53 , 74 , 87 , 109 , 119 , 137, 144 , 148, 153

278 INDE X .

S E C T IONInt ere st in R eal E stat e . S e e R E A L E S T A T E .

Iowa, statute in, make s registrat ion e qu ivalent to actual de l ivery ,change s commonlaw ru le se ffe ct of, explained by the court sfraud In convcyanee s a que st ion of law in

, afterfact s a1 e p i oved

mortgage s with re served powe 1 of sale he ld val idin

v iews in, as to re serve d powe r of sale , examinedas to o ther frauds in conveyance s

rule in, not taken as a rule of prope rty in U . S .

court

Juri sprudence , fraud in conveyance s is a mat ter pertaining to , 121 , 122, 154deals primari ly w ith ru le s of substant ive law,

135 , 136 , 153

que st ions of proce dure are subordinate t o 135 , 136 , 154

the doctrine of R ob inson v. E ll iot t a ru le of 121, 154

Jury and court , different province s of 50, 82, 84 , 85 , 103, 109 , 120 , 146

t o try al l que st ions of fact 50 , 56 , 8 1 , 82, 120, 146 , 153

que st ion of e xistence of a fraudu lent int ent ,74 , 1 19 , 137 , 144 , 148 , 153

que st ion of int ent as shown by mere posse ss ion 109

que st ion of e xist ence of agre ement for re served powerof sale . 145, 146

but not que st ion of indicat ions of fraud aris ing therefrom 50, 81 , 82, 145

shou ld find verdict of fraud , when evidence warrant s it ,

are urge d t o do so, in North C arol ina 84 , 85

opinions o f, not to de t ermine the right s of creditors 81

e xcept ion to this rule , inAlabama 101

in M aine 97

no que st ion for, when re served power of saleclearly appears 39 , 41 , 42, 56, 74

are t o draw al l inference s of fraud,

Kale idoscope , mortgage on stock of goods in trade compare d to,Kansas , views in, re spe ct ing re served power of sale

the ru le in, le ft in doubtKent , C hance l lor, op in ion of, as to power of revocat ionKentucky, reserved power of sale as cons ide red in

only a badge of fraud inque st ions of fraud in, as shown by me re posse ss ion

Kenyon, Lord , op inion of, as to re se rve d power of sale

INDE X . 279

S E C T IO NL aw cons ists of principle s , not cases 136

and fact , dist inguishe d 3, 43, 81

different e lements O f 3, 74, 8 1 , 120,

office s of .

See C O MMO N L AW ; F R A UD ; F R A UD I N C ONVE YANC E S ;F R A UD I N L AW ; PR O C E D UR E ; S UBS T ANT IVE L AW .

Legal Doctrine s . S e e DO C T R INE S .

Legal F raud , define d 78 , 149

S e e AS S IGNME NT ; F R A UD ; F RA UD IN L AW ; F RAUDI N C ONVE YANC E S .

Legal Intent , explaine dil lustrate dat common lawgeneral lyis the intent to accomplish the natural e ffe ct of one ’

s

act s 30, 81 , 151

and intent to def1aud, dist ingu ished , 148, 149 , 150, 151 , 153

the dist inct ion ove i look ed 150

fraud in conveyance s he ld to pre sent a que st ion of, 39 , 97 151

is the int ent re ferre d to in the stat ut e 13 E l i z . 15 1

Lien, re served power of sale create s fluctuat ing, not absolute ,41 , 47, 62, 131

certainty of, e ssent ial to a mortgage 69 , 126 , 127

mortgage e lose s , i f he l icense sale s 31 , 34

lose s only his 144

may pre se 1ve , by control l ing proc e eds of al l sale s 4 , 38, 60, 138

Lou is iana, chatt e l‘ mortgage s unknown in 1 13

Lowe ll , Judge , crit i cisms of, upon doctrine of R obinson v . E l l iot t , 4

same examined 125

M aine , mortgage s w ith reserved power of sale in common use in

pre sent c ase s of pre sumpt ion, incase s , S tory’ S v iew of, examine d

M ansfie ld , Lord, views of, as to re serve d power of saleas to re servat ions for benefit of debtor,

S ir Jame s, v iews of, as to re servat ion of contro l bydebtor

as tomere re t ent ion of posse ss ion,M aryland, the que st ion of re serve d power of sale not discusse d in,

such mortgage s of occas ional occurrence inM assachuse t ts , mortgage s w ith re served power of sale in common

use in

reserve d power of sale only a badge of fraud inpre sent s a que st ion of

fraudulent intent , in 96, 114

280 IN D E X .

S E C T IONM assachuset ts, reserved power of sale may raise a s tronger pre

sumpt ion of fraud , ininharmonious de cis ions incase s , S tory s v iew of, examine dthe 1 ul e in, taken as a rule of property in the U . S .

courtM erchandise . S ee C H A T T E L M O R T G A G E ; M OR T G A G E E ; F R AUD

I N M O R T G A G E S ; POWE R O F S A L E .

M ichigan,mortgagesw ith reserve d power of sale in common use inuniformly he ldval i d in

though l iable to

abuse infraud there in, always rests in

intent , infraud an inference of law in, after fact s are proveds tatute of, says fraudulent int ent shal l be a que st ion of

factappl ie s t o such mortgage s

but not to other case s of fraud inconveyance s 88

M inne sota, de cis ions in 50, 51

M iss iss ipp i , de cis ions in 62- 64

M issouri , de cis ions in 56— 58

the ru le in, taken as a rule of property in the U . S . C ourt 68 , 70

M itche l l v . W ins low , v iews of S tory, J in 73

M ortgage , e ssent ials of a 69 , 127

may be rendere d fraudu lent by its fraudulent tendency, 2, 5 , 78S ee C H A T T E L M O R T G A G E .

M ortgage e has no right s under a conveyance adjudged fraudulent .

cannot se ize goods under mortgage w ith reservedpower of sale 51, 52, 143

loses l ien i f he l i cense sales 31 34

suffers only loss of his l ien thereby 144

may preserve l ien by control l ing proce e ds of al l sale smade 4 , 35, 60, 138

truste e must ac t sole ly for benefit of 12, 141

sales made by mortgage l me re ly as agent of, and forbenefit of, sus taine d , 35 , 36 , 4 1 , 43, 4 6 , 49 , 53, 57,

58 , 75 , 97 , 138, 139 , 140

i f fre e from fraudulent intent 53, 87

th is a fundamental d ist inct ion 139

may acqu ire right to goods by new ac t of de l ivery frommortgage r 31 , 51 , 64 , 144

i f it be f1 c e fro n f: audul ent int ent 144

282 INDE X .

Pol icy of al low ing reserved power of sale , cons iderede ffe ct of, s tatedarguments for

examinedanswered

defect ive views con

cerningjudi cial views against

Posse ss ion, mere , dist ingu ished from posse ss ion w ith power of

sale 4 , 5 , 20, 29 , 54 , 124

not fraudulent p er 3 6 17—24 , 27

unimp0 1 tant as ev idence of fraud 17, 20, 28

controversy over e ffe ct of 5

errone ous v iews conce rn ing 5

e ffe ct of, a que st ion for a jury 109

E ngl ish case s invo lving 17—28

que st ion of, se t t le d in E ngland 28

not involve d in E dwards v. H ar

ben 28

dic tum of Lord Holt concerning 19

T wyne’s C ase did not turn on

views of Bul le r, J as to 29

only a circumstance 22, 23, 27, 29 , 34 , 79 , 99 , 109

an unse t t le d que st ion in Kentucky 99

no real d ist inct ion be twe en absolute and con

dit ional sale s , as to 7 , 99

de l ivery of, by mort ager, val idate s transact ion . 31 , 51 , 64 , 144

but must not be

colorably for

grantor’s b e n

efi t

nor w ith int ent t ode fraud 79 , 144

se izure of, by mortgagee who has al lowed mortgagera powe r of sale , confe rs no t i t le 51 , 52, 143

Power of Appo intment . S e e APPO INT ME NT .

Powe r of D isposal . S e e DIS PO S A L .

Power of R evocat ion . S e e R E VO C A T IO N .

Power of S ale , Re served , controve rsy ove r effe ct ofdist ingu ishe d from mere re tent ion of

posse ss ion 4 , 5 , 20, 29 , 54 , 124

e ffe ct of, state d 4,6,34

, 93, 122, 128 , 131

was a feature of T wyne’s C ase 5, 6 , 7, 16

an e lement in several E ngl ish eases 5- 13

INDE X . 283

S E C T IONPower of Sale , R e served , is inval id in E ngland , i f tantamount to

owne rshipcharac terist ics of, as se en by the court s ,

34 , 47 , 69 , 73, 84 , 122, 130, 131 , 132

is fraudulent p er se,

35 , 37, 40, 52, 67 , 84 , 155

is conclus ive ly fraudulentwas fraudulent at common law

the common - law ru le change d bystatut e in Iowa

exh ib it s actual fraud ,9 , 43 , 52, 60, 78 , 84 , 117, 120, 121 , 129 , 131

is we l l - defined legal fraud 104

is not pre sumpt ive fraud 3, 43, 61 , 117

except inM ass . 96

M e . 9 7

N . C . 82— 85

is condemned by pub l i c pol i cy 61 68 , 128

by the pol icy of the law ,

44 , 47, 54 , 55, 6 1

pol i cy of, cons idered 124

judicial ly condemne d 130 , 131 , 132

opens a door t o fraud 38, 60, 61

is an inle t to fraud 80

furn ishe s an easy means of fraud 111 , 132

has a fraudulent t endency,44 , 54 , 55, 57, 60, 63, 64 , 77, 78, 79 , 80, 131

has a de cept ive character 8 , 131

is l iable to abuse 88, 90, 100, 101 , 132

is col lus ive and covinous 9

give s de lus ive cre dit 4 , 7 , 8

make s conveyance fe lo de sea kale idoscope

is incons istent w ith the idea of se curity,4 , 10, 34 , 35 , 37, 41 , 45, 47 , 48 , 50, 59 , 60, 67,

69 , 74 , 84 , 127 , 131

is no real security 4 , 7, 8, 34 , 47 , 69 , 127

is not a mortgage in fact , 34 , 4 1 , 127

creat e s fluctuat ing or sh ift ing, not absolut e , l ien 41 , 47, 62, 131

is equ ivalent to a power of revocat ion 34 , 35

is equ ivalent to absolute owne rsh ip39 , 45 , 47, 54 , 162

is only a personal se curi ty 34 , 47

is a mere expre ss ion of trust and c on

fidenc e 4 ,

284

Power R eserved, i

I NDE X .

5 , 9 , 126

does not depend on language used by courts

vit iat e s a condit ional salesale under, passe s t it le to vende e ,

31 , 34 , 54 , 60, 109 , 142

registrat ion does not val idate ,4, 5 , 32, 50, 54 , 66 , 87, 123

mortgagee ’s assumpt ion of posse ss ion

doe s not val idat e 51 , 52, 143

colorab le posse ss ion by mortgage edoe s not val idat e

is val id , if it be only as agent for mortgagee , 35, 43, 46 , 49 , 53, 57 , 58, 75 , 97,

this dist inct ion is fundamental 139

is not val id , i f there be only an agree

ment to account for sale sor t o pay debt out of proce e ds ,

rule s for, are furnishe d by case s of reservat ion of use of consumable prope t ty

is a ward to ke e p off creditorsactual ly injure s credi tors ,

4 , 52, 54 , 55 , 60, 62, 69 , 93, 108

and benefits grantor,4 , 37, 41 , 45 , 48, 60, 62, 63, 69 , 77

for one day, v it iat e s the transact ion 10

the fraud in, is a ques t ion of law , 34 , 39 , 40 , 4 1 ,

54 , 56, 59 , 62, 69 , 8 1

agreement for, is a que st ion of fact 145 , 146

for a jury in dispu te d case s . 56 , 72, 145, 146

mode or means of proof of, immate rial ,4 , 4 1 , 43, 52, 55 , 56 , 66 , 120, 147, 153

may be ascertained by impl icat ion,35 , 37 , 56 , 57, 67,

prove d by ev idence a l iunde,39 , 4 1 , 43 , 48 , 54 , 55,

int ent of part ie s immat e rial , 4 1 , 45 , 52, 53, 57 ,59 , 74 , 77 , 78 , 79 , 84 , 121 , 129 , 148 , 151

though the ir mot ive s are pure ,59 , 62, 77 , 84 , 109 , 148

int ent to defraud some t imes imput e d asa ne ce ssary feature of 4 , 39 , 51 , 151

importance of the que s t ion some t ime soverlooke d

286'

INDE X .

S E C T IONPrivi lege s, reservat ion of, under ass ignments for cred itors , a legal

fraud,immoraland dis

hone stProcedure , que st ions of, and those of substant ive law, dis t in

guished l , 2, 43 , 5 1 , 52, 56 , 135, 136, 146 , 154mode s of, immaterial , in cons idering rule s of sub

s tant ive law 2, 4 , 147, 154

mode of ascertaining fraudulent agreement is a quest ion of 2, 146

que s t ions of, as to fraudulent conveyanc es , class ified, 1

que st ions as t o evi dence m e que st ions of 2, 152, 153

Proof of fraudulent agre ement , mode or means of, immaterial ,4 , 43, 147, 153

S e e E VID E NC E .

Property , R ule of, in the U . S . C ourt , the ru le in the S tat e courtis a

,in M assachuse t t sin Georgiain M issourinot in I owa

Property, C onsumable . S e e C O NS UMABL E PR O PE R T Y .

Purchasers and creditors , power of revocat ion fraudu lentboth

Qual ificat ions, supposed, of the doctrine of R ob inson v . E l l iot t ,s tat ed 133, 137, 145, 152

cons idered 134 , 137, 138 , 145 , 152

R eal E s tate,re servat ions of int ere st in, are fraudulent

R egistrat ion doe s not val idat e a re servat ion o f a power of sale ,4 , 5 , 6 , 32, 50, 54 , 66 , 87, 123

doe s not re l ieve from fraud in conveyance s 32, 123

immat erial in cons idering que st ions of fraud 4 , 54 , 6 6, 87

t rue offi ce of 123

v i ews of o ffice of, by Lowe l l , J . 4

is by statut e e qu ivalent to actual de l ive ry,in Iowa 90, 1 14

not in M inne sota, 50

or N ew York , 50

or Nebraska, 87

of conveyance s of chat t e ls under E ngl ish s tatut e s 32

R e servat ions , fraudulent , forms of, other than power of sale 154- 162

general principle s as to 154

d i fferent forms of, stated 156

INDE X . 28 7

S E C T IONRe servat ions , fraudulent , compared w i th power of disposal ,

by debtor for his benefit are fraudu lent p er 8 6are incons ist ent w i th idea

of se curityof power of appo intment amount to assert ions of

ownersh iphe ld fraudulent

of power of revocat ion, fraudulent at common law ,

as t o both cred itors and

purchaserspo ison the t ransact ion

of use of land,fraudu lent

of intere st in land , fraudu lentof use of consumable property, fraudu lent ,

44 , 59 , 63, 95 , 102, 159

se cure benefits to

debtorfurn ish rule s for rese rve d power of

sale 44 , 159

of rights or privi lege s under ass ignments for creditors , are legal frauds

are immoral and dishone s tR evocat ion, power of, charact erist i cs of, cons idere d

a legal fraudfraudulent at common law

as t o both creditors and pur

chasersirre spe ct ive of int ent

po isons the transact ion throughoutre se rve d powe r of sale e qu ivalent toop inion of C hance l lorKent concerning

R hode I s land, the que st ion of re served power of sale not c onside re d in

R ight s , re servat ion of, under ass ignment s for creditors , a legalfraudimmoral and d ishone st

R ob inson v . E l l iot t . S e e D O C T R INE O F R . v . E .

Ryal l v . R owle s , sal ient feature s of

S ale . S ee AG E NT O F M O R T G A G E E ; C OND IT IONA L S A L E ; M O R T

G A G E E ; POWE R O F S A L E .

S ale s , mere agre ement t o account for, doe s not val idate a mortgage with re serve d power of sale

288 I N D E x .

S E C T IONS ale s , no real d ist inct ion be twe en absolute and condi t ional , as to

fraudulent re se rvat ionsmortgager make s , in Kansas , as quas i agent of the mortgage e

ass igne e or mortgage e must control proce eds ofS ecuritv, mortgage w ith power of sale re served is not a real ,

4 , 7 , 8 , 69 , 127

is de lus ive as a 7 , 8

is only a personal 34 , 47

not cons ist ent w ith the idea of,4 , 35 , 48 , 50, 59 , 60, 67, 69 , 74 , 84 , 127 , 131

act s of owne rship are incons istent w ith the idea of 77, 79

re servat ions of control are incons ist ent w ith the idea of, .162

S tare dec isis , importance of ru le of 91

S tat e C ourt . S e e PR O PE R T Y, R UL E O F .

S tatut e of 13 E l iz . is mere ly de claratory of the common lawre fe rs t o a legal

,not a moral intent

of 27 E l iz . is mere ly de claratory of the common law ,

of bankrup tcy , fraud in conveyance s is a que st ion independent of

providing that fraudu lent int ent shal l be a que st ion of factis not ne eded In order to makeit such 74 , 75, 151 , 153

is mere ly de claratory of the law , 74

is not a s tatut e as to construet ive frauddoe s not l imit powerof court asto fraud inherent in a con

veyanc e 74 , 75, 153

e xcept in M i ch igan, in case s ofre served power of sale

and not in other case s in thatS tate

cannot prevent al l fraudulentconduct . 92

of Iowa make s registrat ion e qu ivalent t o actual de l ivery, 90, 114

of M inne so ta doe s not 50

of N ew York doe s not 50

of Nebraska doe s not 87

of Iowa change s commonlaw rule 90

judicial explanat ion of 93

doe s not change common - law rule in other S tate s 50, 54, 66

of Georgia al lows mortgage s on s tocks of goods in trade , 7O, 1 11

taken as a rule of property in the U . S . court , 70

290 INDE X .

S E C T IO NT rust e e s under conveyance made security must not take a col

T wyne’s

orable posse ss ion

for grantor’s

b enefitnor col lude w ithgrantor

assumpt ionof posse ss ion by, w i l lbe val i d i f fre efrom fraudulentint ent

may make grantorthe iragent , 35 , 36 , 4 1 , 4346, 49 , 53, 57, 58 , 75 , 97,

but in Nebraskamust S how suchagency to be fre efrom fraudulentintent

mistaken v iews ofdid not t urn on the que st ion of mere posse ss ion,

5 , 17 , 21 , 22

did not pre sent construct ive fraud 5

exhib it ed actual fraud 5

fraudu lent t endency 5

reserved power of sale a prominent feature of, 5 , 6 , 7 , 16

was t e st e d by it s characterist ics 122

fraudulent intent not a ne ce ssary feature of

the doctrine of, v ital in Ameri ca 33

the origin of the Ameri can doctrine 5

doubt s as to 25, 26

Bul ler’s synops is of 21

Lord E ldon ’s v iews of 21 , 22

Burne t ’s v iews of 7

superse de d in E ngland 5 , 32

United S tat e s C ourt s , de cis ions indiss ent ing op inions inS e e PR O PE R T Y, R UL E O F .

U se only, of mort gaged chat te ls , not fraudu lent in i tse lf,

INDE X . 291

S E C T IONVende e . S e e T IT L E .

Verdict , court may dire ct , in some S tates , when a re ser ve d powerof sale appears 4 1 42

but not Where the fact of it s exist enceis disput ed

jury shou ld find, of fraud, when evidence warrants it ,

are urged to do so, in North C aro l inaVermont , the pe cul iar doctrine in, of construct ive fraud in c on

veyanc e s

a ru le of publ i c pol icythe que st ion of fraud aris ing from a re serve d power ofsale not a pract i cal one in

V irginia, de cis ions in, as to re served power of saleas to use of consumab le property, not harmonious

We st V irginia, de cis ions inW iscons in, de cis ions in

294 C A S E S C IT E D .

S E C T IO N S E CT IONBaldwin v. F lash, 58 M iss. 593 ; Batson, Lat imer v. , 4 B . C .

59 Id. 6 1. 64, 144 . 652. 27, 28, 79.

Baldwin v. Pee t , 22 T ex. 708. 103. Baxter v. Whee ler, 9 P ick . 21. 95.

Bal l v. S lafter, 26 H un,353. 42. Bayard, C hophard v. , 4 M inn.

Bal lard , S turtevant v. , 9 Johns337 ; 6 Am . D e c . 281.

Bam ford v. Baron, 2 T erm, 594 .

Bank v. Anderson, 24 M inn. 435.

Bank, C row v. , 52T ex. 362. 104 .

Bank v. Douglas,11 Smed. M .

4 69 .

Bank v. E bbert , 9 H eisk . 153.

60, 6 1, 84 , 122, 131, 147, 148 .

Bank v. Goodrich , 3 C ol . 139. 65, 147.

Bank v. Hampson, L . R . 5 Q .

B . D . 177 .

Bank, Hawkins v. , 1 Dill . 462.

70, 139 .

Bank v. Hunt , 11 Wal l . 2, 71 .

Bank v. I nloes, 7 M d. 380. 14 1 .

Bank v. Kent, 43 M ich . 292. 89 .

Bank, M cL ean v. ,3 M cL ean, 623. 68 .

Bank v. O’Brien, 6 H un, 231 42.

Bank , Perry v. , 27 Grat . 755.

Bank v. Smal l, 7 F ed. R ep . 837. 70.

Bank v. West, 46 M e . 15 . 142.

Bank v. We stbury, 16 H un, 458 . 42.

Banking 0 0 . v. C oleman, ,3 Giff.

11 .

Banks, Green v. , 24 T ex. 508.

Barker v. Hall, 13 N .

’ H . 298 .

Barker, Lipp incot t v. , 2 B inn.

174 ; 4 Am . D e c . 433. 160.

Barkow v. S anger, 47 W is. 500. 53.

Barnard v. E aton, 2 C ush . 294. 96.

Barne s, Janney v. , 11 Le igh, 100.

Barne t v. F ergus, 51 I ll . 352.

54 , 55, 147.

Barnum v. H empstead, 7 Paige ,568 . 160.

Baron, Bam ford v.,2 T erm , 594 . 9 .

Barron v. M orris, 14 N . B . R . 371 .

72, 73.

Bathurst , Pack v., 3 A tk. 269 . 161.

31, 142.

533. 50.

Bayly, E x parte , 15 C h. D . 223. 31.

Bavntun, D ewey v. ,6 E ast, 257. 23.

Beers v. Botsford , 13 C onn. 146.

79, 1 19 .

Bek ey, We lsh v 1 Penn. 57. 77, 148.

Be lford v. C rane , 16 N . J . E q265.

Be l l , Aust in v 20 Johns. 442; 11

Am . D e c . 297.

B enner, S outhard v. , 72 N . Y . 424 .

43, 122, 147.

Benton v. T hornhi ll , 7 T aunt . 149.

14 .

Bentz v. R ockey, 69 Penn. S t . 71. 77.

Be the l v. S tanhope , C ro. E l iz . 810

Bevan, R ose v. , 10 M d. 466.

B idwe l l , G ay v. , 7 M ich. 519.

4, 59, 88, 116, 125, 146.

B ige low v. S tringer, 40 M o. 195. 151.

B i ll ingsley v . Bunce,28 M o. 547. 56 .

B irchard, Dav id v. , 53W is. 492. 53.

B ishop, S charfenburg v. , 35 I owa,

60.

B ishop v. Warner, 19 C onn. 460.

79, 80, 148.

B isse l v. Hopkins, 3 C ow. 166 15

Am . D e c . 259 .

Blackstone , Lavender v. , 2 L ev.

146 ; 3Keb. 526.

Blades, R eed v. , 5 T aunt . 212.

B lake , M u ir v. , 57 I owa, 662.

B lakeslee v. R ossman, 43 W is.

116. 5 1, 52, 53, 122, 143, 148 .

B lodgett , R anl e t t v . , 17N . H . 298 ;

Am. D e c . 603. 45, 131, 147.

Bloom , I n re , 17 N . B. R . 425.

68 , 69 , 72, 131.

Boardman v. Hal l iday, 10 Paige ,223.

Bodwing, Garden v. , 9 W. Va.

121. 67, 147,

C A S E S C IT E D .

S E C T IO NBody, O wen v. , 5 A d. 85 E . 28 . 14 1.

Bol land, E x parte , 21 C h. D . 543. 30 .

Bonestee l v. F lack, 4 1 Barb. 435. 42.

Booe , Y oung v. , 11 I red. L. 347.

82, 84.

Book C o. v. S utherland, 10 Nch.

334 . 87, 139.

Boone v. Hardie , 83 N . C . 470.

84 , 150.

Booth, M art indale v 3 B . 87. Ad .498. 28, 79 .

Both , Phill ips v. , 58 I owa, 499 . 9 1.

Botsford, Beers v. , 13 C onn. 146.

79, 119 .

Bond v. Bronson, 80 Pa. S t . 360. 78 .

Bourne v. Dodson, 1 A tk . 157. 7.

Bowen v. C lark , 1 B iss. 128 ; 5

A . L. R eg. 203.

Boyd , S pie s v., 1 E . D . Smith445.

Bracke tt v. Harvey, 91 N . Y .

214 ; 17 C ent . L . J . 112; 25

H un, 502.

Bremer v. F leckenste in, 9 O re

266.

Bre tt v. C arter, 2 L ow. 4582

4,5, 54, 1 16 , 118, 123, 125, 130, 146.

Bridge , Je ssup v. ,11 I owa, 572. 90.

Briggs v. Parkman, 2 M e te . 258

37 Am . D e c . 89. 96 .

Briggs, Wi ll iams v.,11 R . I . 476 . 107.

Brinton v. Hook, 3M d. C h. 477. 158 .

Bristol , Peopl e v . , 35 M ich . 28. 89.

Brockenbrough v. Brockenbrough,31 Grat . 580. 159 .

Bronson,Boud v. , 80 Pa. S t . 360. 78.

Brooks v. Wimer, 20 M o. 503.

56 , 148.

Brown, E astw’

ood v.,1 R yan M .

312. 27, 28.

B rown v. P lat t , 8 Bosw. 324 . 144 .

Brown, S te e l v. , 1 T aunt . 381. 24 .

Brown v. T hompson, 59 M e . 372. 97.

Brown v. Webb , 20 O hio, 389. 49.

Bucknal l v. R oiston, Prec. in C h.

285. 15, 19, 108 .

Bul lock, S tanden v. , 3 C oke, 82. 157.

295

S E C T IO NBunce , B il l ingsley v.

,28 M o. 547. 56.

Bunce , S tanley v. , 27 M o. 269 .

56 , 147 .

Burd v. Smi th , 4 Dal l . 76 . 160.

Burge ss, T riebert v. , 1 1 M d. 452. 108.

Burley, M arsh v. , 13 N eb. 87.

Burne l l , Gale v.

, 7 Q . B . 850. 30.

Burnside , M aple v.,22 Ind. 139 . 74.

Burrows, I n re , 7 B iss. 526 ; 5 C .

L . J . 241 . 68 69 , 131.

But ler v. R ahm,46 M d. 54 l 108 .

But ler v. S toddard, 7 Paige , 163. 39.

But ler, S toddard v. , 20 Wend

507.

Bye rn, Donne l l v. , 69 M o. 468.

Byrne , Armstrong v. , 1 E dw. C h

79 .

C ade ll , M ace v. , 1 C owp. 232.

C adogan v. Kenne t t, 2 C owper,432.

C adwe l l v. Pray, 41 M ich . 307.

C agle , H i ll iard v 46 M iss. 309 .

C airns, M ackie v 5 C ow. 547 ; 15

Am. D e c . 4 77.

C alkins v. Lockwood, 16 C onn276 ; 4 1 Am . D e c . 143.

C ameron v. M arvin, 26 Kan. 612

C ampbe l l v. L eonard, 11 Iowa,

489.

C annon v. Pe eb les, 4 I red . L aw,

204 . 81, 157.

C antre l l , I n re , 6 Ben. 482. 68 .

C arlton v. Baldwin, 22T ex. 724. 103.

G am e s v. Plat t, 1 S we eney, 147. 42.

C arpenter v. M ayer, 5Wat ts, 483

C arpenter v. S immons, 1 Rob.

860. 42.

C arpe t C o. , Kendal l v. , 13 C onn

383.

C arter, Bre tt v. ,2L ow. 458.

4 , 5, 54 , 116, 1 18, 123, 125, 130, 146.

C atl in v. C urrier, 1 S aw. 7.

68, 143, 147.

296

S E C T IO NC ate r v. C ol l ins, 2 M o. A p . 225 . 57.

C handle r, M e lody v. ,12 M e. 282.

97 , 140.

C hapin v . C ram , 40 M e . 561 97.

C hapman, Graham v. , 12 C . B .

85. 30, 151.

C hapman, S le eper v., 121 M ass

404 .

C harlton v. L ay, 5 H um . 495.

C heatham v. Hawkins, 76 N . C .

335. 84, 104 , 132, 150.

C heatham v. Hawkins, 80 Id. 161.

84 , 150.

C hisolm v. C hittenden, 45 G a. 213

C hittenden, C hisolm v. , 45 G a.

213. 111.

C hophard v. Bayard,4 M inn. 533. 50.

C hri s t ie ,Keable s v.,47 M ich. 594 . 89 .

C igar C o. v. F oster, 36 M ich . 368 . 89 .

C lafiin, Adler v. , 17 Iowa, 89

C lark, Bowen v. , 1 B iss. 128 ; 5

A . L . R eg. 203.

C lark v. Hyman, 55 I owa, 14 ; 39Am . R ep . 160.

C larke , Hyslop v. , 14 Johns. 458

C lay, Walker v. , 42 L . T . (N . S . )369. 31, 142.

C leaves v. Herbert , 61 I l l . 126 . 55.

C lemence , F lood v. , 106 M ass

299 .

C lemence , F olsom v. , 111 M ass

273.

C l iver v. Applegate , 5 N . J . L aw,

479 .

C low v. Woods, 5 S . R . 275 ; 9

Am . D e c . 346 . 77, 78 , 148 .

C oate v. W i ll iams, 9 E ng. L.

E . 481 .

C obb , Deering v. , 74 M e . 33"

C obb v. F arr, 16 Gray, 597.

C oburn v. P ickering, 3 N . H. 415 ;

14 Am. D e c . 375. 44,48 .

C ochran v. Paris, 11 Grat. 348. 159

C odman v. F reeman, 3 C ush . 306 . 95 .


C ornwal l is, Lasse l ls v 2Vernon,4 65.

C orthe l l , C ook _v.

, 11 R . I . 482;

23 Am . R ep . 518 . 107, 144 .

C ory, Hughes v.,20 Iowa, 399.

4, 90, 91, 92, 93, 120, 130.

C otton v. M arsh , 3 W is. 53, 139 .

C ox v. Jackson, 1 H ay . 423. 81.

C ram , C hapin v. ,40 M e . 561. 97.

C rane , Be lford v.,16 N . J. E q

265.

S E C T IO NC odwise , S ands v., 4 Johns. 536 ;4 Am . D e c . 305.

C oleman, Banking C o. v .

, 3 Giff.11. 32.

C ol l ins, C ator v.,2M o. A p . 225. 57.

C ol l ins, M oore v. , 3 D ev . L aw,

126.

C ol l ins v. M yers, 16 O hio, 547.

47, 52, 63, 66, 84, 87, 111, 1 16, 122,

131, 147.

C ol lver, Le land v., 34 M ich. 4 18 . 89 .

C ol ter, R ose v. , 76 I nd. 590. 76 .

C ommonweal th v. Damon, 105M ass. 580.

C ommonwealth , S hannon v. , 8 S

R . 444 .

C ommonweal th v. S trangford,112M ass. 289 .

C onkling v. S he l ly, 28 N . Y . 360 .

4 1, 43.

C onkwrigh t, Smith v., 28 M inn.

23.

C onstant ine v. T we lve s, 29 A la607.

C ook v. C orthe l l , 11 R . I . 482 ; 23

Am . R ep . 518 . 107, 144 .

C ool idge v. M e lvin, 42N . H . 510.

44 , 158.

C ooper, Garman v. , 72Penn. S t.

32. 77, 151.

C ooper, Smi th v. , 27 H un, 565. 42.

C ope land, C utter v. , 18 M e . 127. 97.

C orbe tt , Hunter v., 7 Up . C an. QB . 75.

C ornish, F lower v. , 25 M inn. 473


S E C T I O N

Dunning, Donovan v. , 69 M o

436 .

Dunning v. M ead , 90 I l l . 376 .

Dust in, Pe tte e v. , 58 N . H . 309 .

88 , 144 .

Dutcher v. S wartwood, 15 H un,

31 . 4 2 143.

E arle , Hungerford v. , 2Vernon,261. 158 .

E arman, S i pe v 26 Grat . 563. 159 .

E astwood v. Brown, 1 R van M .

27, 28 .

E aton, Barnard v.,2 C ush . 294 . 96 .

E aton, O l iver v., 7 M ich . 108 . 88 .

E bbert , Bank v. , 9 H e isk . 153.

60, 61 , 84, 122, 131, 147, 148.

E dge l l v. Hart, 9 N .

‘

Y . 213 ; 13

Barb. 380. 4 1 , 43, 147.

E dmundson, Kissam v.

,1 I red .

E b. 180. 81 , 158 .

E dwards v. Harben, 2 T erm , 587.

9 , 17, 28, 29 , 34 , 131.

E dwards v. S t inson, 59 G a. 443. 1 11 .

E lam, M organ v. , 4 Y erg. 438. 119 .

E ldridge , I n re , 2 B iss. 362. 70 .

E ldridge , Passmore v. , 12 S erg6: R . 198 .

E l le t t, F rankhouser v. , 22Kan.

127 ; 31 A m . R ep . 171. 100, 132.

E ll iott , R obinson v. , 22Wal l . 513. 2,

4 , 28, 51, 66, 70, 72, 74 , 75, 99 , 103,

116, 119, 122, 144, 145.

E l l ison, T al lon v 3 N eb. 63. 87.

E lme s v. S utherland, 7 A la. 262.

102, 159 .

E ly, Smith v. , 10 N . B . R . 553.

E nsign, De laware v 21 Barb . 85.

E rsfe ild, Garth v., J . Bridgman,

22. 157.

E rvin, Jacobs v. , 9 O re . 52. 66 .

E st i l l , Vanme ter v., 78 Ky. 456 . 99 .

E theridge , Addington v. , 12Grat .436. 35 .

E vans v. S cott , 89 Penn. S t . 136. 78.

S E CT IONE vans, S packman v. , L. R . 3 E ng.

I . App . 171. 151.

E vans, W il l iams v. , 6 N eb. 216 . 87.

E x parte Al lard, 16 C h . D . 505. 81.

E x partc Bayly, 15 C h. D . 223. 31.

E x parte Bol land, 21 C h. D . 543. 30.

E x parte Games, L. R . 12 C h. D314 .

E x parte Popplewe l l , 21 C h. D73.

E x parte Symmons, 14 C h. D693.

E x parte WVil liams, 11 Ves. 3.

F armers’ Bank v. Douglas, 11 S .

M . 469 . 63, 131, 159.

F arnsworth v. S hepard, 6 Vt

521.

F arr, C obb v. ,16 Gray, 597.

F ergus, Barne t v. , 51 I ll . 352.

54 , 55, 147.

F ern, Payne v., L. R . 6 Q . B . D620.

F ie ld v. Baker, 12B latch. 438 .

F ie ld, Lyons v. , 17 B . M on. 543

F isher v. Henderson, 8 N . B . R

175.

F isk v. Harshaw, 45Wis. 665.

53, 55, 139 .

F lack, Boneste e l v. ,4 1 Barb. 435. 42.

F lash , Baldwin v., 58 M iss. 593 ;

59 Id. 6 1. 64 , 144.

F leckenste in, B remer v. , 9 O re

266.

F le tcher v. Powers, 131 M ass

333.

F lood v. C lemence, 106 M ass. 299.

96,

F lower v. C ornish , 25 M inn. 4 73. 51.

F lower, M ann v. ,25 M inn. 500. 51

F oe rste l , T hompson v.

, ,10 M o

A p . 290.

F ogg, Janvrin v. , 49 N . H. 340.

5 1, 143, 144

F olsom v. C lemence, 1 1 1 M ass

273.

C A SE S C IT E D .

S E C T IO NF orbes, In re , 5 B iss. 510.

F ord v. W i l l iams, 24 N . Y . 359 .

F oster, C igar C o. v.,36 M ich . 368

F oster v. M anufg. C c . , 12 P ick

F oster v. Wal lace , 2M o. 231.

F oster v. Woodfin, 11 I red. L aw,

339.

F oulke , Davenport v. , 68 I nd.

382 ; 34 Am . R ep . 265. 75, 76 , 147.

F ox v. Dav idson, 1 M ackey, 102 ;9 Wash . L . R ep . 263. 68, 147.

F rankhouser v. E lle t t , 22 Kan.

127 ; 31 Am . R ep. 171. 100, 132.

F ranklin, W il t v. , 1 B inn. 502 ; 2

Am . D e c . 474 . 78 , 151.

F re eborn, C unningham v. ,11

Wend. 240 . 74 , 151 .

F reeman, C odman v.,3 C ush . 306.

F reeman v. R awson, 5 O hio S t . 1 .

48, 74 .

F rost v. Warren, 42 N . Y . 204.

41, 43.

Gaither, S angston v. , 3 M d. 40

Gale v. Burne l l , 7 Q . B . 850.

Galt v. Dibre l l, 10Y erg. 145.

59 , 131, 148.

Game s, E x parte , L. R . 12 C h. D14 .

Garden v. Bodwing, 9 W. Va.

67, 147.

Gardner v. Johnston, 9 W. Va.

403. 67, 147.

Gardner v. M cE wen, 19 N . Y . 123.

4 1, 43.

Garman v. C ooper, 72 Penn. S t .

77, 151.

Garretson, Doane v.,24 I owa, 351

Garth v. E rsfeild, J. Bridgman, 22.

Gre en v. Banks,24 T ex. 508 .

Green v. T richer, 3 M d. 11.

Gre en, Wade v. ,3 H um . 546 .

Greenebaum v. Whe e ler, 90296 .

299

I l l .

55, 131.

S E C T IO NG ay v. B idwe l l , 7 M ich.

4 , 59 , 88, 1 16, 125, 146.

Geesaman, Hower v. ,17 S . R

251 .

George v. M i lbanke , 9 Ve s. Jr

190.

Gere v. M urray, 6 M inn. 305.

Gibbs v. T hompson, 7 H um . 179

Giles, Palmer v.,5 Jones E q. 75.

8 1, 158 .

Gill , H ase l inton v. , 3 T erm , 620. 29.

Gilmore , Googins v .

, 47 M e . 9 .

97, 150.

Goodenough v. Harris, 1 Disney53.

Goodheart v. Johnson, 88 I l l . 58 .

55,139.

Goodman, Woodward v. , 3 C ent .

L . J . 43. 60, 141.

Goodnow,Al len v. , 71 M e . 420. 97.

Goodrich , Bank v. , 3 C olo. 139 .

65 , 147.

Goodrich v. Downs, 6 H i ll , 438 .

74 , 151.

Goodrich v.Wil l iams, 50 G a. 425.

111, 132.

G oodtitl e v. O tway, 2Wi lson,6 . 161.

Goodwin, Abbott v. ,20 M e . 408 .

Googins v. Gilmore , 47 M e . 9 .

97, 150.

Gorham , M eyer v. , 5 C al . 322. 112.

Graham v. C hapman, 12 C . B . 85.

30,151.

Graham , M e tzner v. , 57 M o. 404 .

58 , 139.

Grant, M ining C o. v 17 C h. D122.

Graves, Whi te v.,68 M o. 218.

Gree ley v. R eading, 74 M o. 309.

57, 144 .

103.

160.

159.


S E C T IO NGregory v. Perkins, 4 D ev. L aw,

50. 8 1.

Gregory v. Whedon, 8 N eb. 373. 87.

Grimshaw v.Walke r, 12A la. 101. 160.

Griswold v. S he ldon, 4 N. Y . 581.

4 , 40, 84 , 116 .

Grove r v. Wakeman, l l Wend.1 87. 15 1

,160.

Grover,Wakeman v. ,4 Paige , 23.

160 .

G rubham , S tone v. , 2Bulst . 225. 18 .

Gui ld, M c C ombs v.

, 9 L e a, 8 1. 61.

Hafner v. I rwin, 1 I red. L aw, 490

Hal l, Barker v., 13 N . H. 298.

Hal l v. Webb, 28 M o . 408.

Hal l iday, Boardman v. , 10 Paige ,223. 160.

Hamilton v. R ogers, 8 M d. 301. 108.

Hampson, Bank v. , L . R . 5 Q.

B . D . 177. 31, 142.

Handley, Darwin v 3 Y erg. 502. 159 .

Hankins v. I ngol s, 4 Blackf. 35 . 74 .

Harben, E dwards v .,2 T erm , 587.

Hardie , Boone v. , 83 N . C . 470.

Harding, Lockwood v. , 79 Ind. 129 .

75 , 76, 139 .

Hardy v. S impson, 13 I red . L aw

132.

H ardy v. S kinner, 9 I red. L aw,

191 . 82, 83, 84 .

H arman v. Abbey, 7 O hio S t. 218 .

48, 147.

Harman v. Hoskins, 56 M iss. 142.

62, 63, 64 , 131, 144, 147, 148.

Harris, Goodenough v. , 1 D isney,53.

Harris, Leadman v. , 3 D ev. L aw,

144.

Harris v. S umner, 2P ick . 129 .

Harshaw, F isk v. ,45 W is. 665 .

53, 55, 139 .

Hart , E dge l l v. , 9 N. Y . 213 ; 13

Barb . 380. 41, 43, 147 .

S E C T IO NHarvey, Bracke tt v. , 91 N . Y.

214 ; 17 C ent. L . Jour. 112; 25

H un, 502.

Harvey v. C rane , 2 B iss. 496 ; 5

N . B . R . 218. 70.

H ase l inton v . Gill, 3 T erm , 620. 29.

H asslock , M c C rasly v.,4 Bax. 1 . 60.

Hawkins v. Bank, 1 Dill . 462. 70, 139.

Hawkins, C heatham v. , 76 N . C .

335. 84 , 104 , 132, 150.

Hawkins, C heatham v., 80 Id.

161. 84 , 150.

Haworth , S hattuck v. , 9 1 PennS t . 449.

Hayden, T orbert v 11 I owa, 435.

90, 92, 132.

Hazen, Ludden v . , 31 Barb . 650. 42.

Hazzard, R ichards v. , 1 S tew.

P. 139 .

Hedman v. Anderson, 6 N eb. 392.

87, 126.

Hempstead, Barnum v. , 7 Paige ,568.

Henderson v. Downing, 24 M iss106.

Henderson, F isher v., 8 N . B . R

175.

Hendricks v. M ount, 5 N . J . L aw,

738. 109 .

Herbert, C leave s v.,61 I ll . 126. 55.

Hewson v. T oot le , 72M o . 632.

56, 58, 139.

H ickman v. Perrin, 6 C old. 135.

59, 125 .

H i l l, M arks v. ,

15 Grat. 400. 36, 139.

H il l,W inkley v. , 9 N . H. 31 ; 31

Am . D e c . 215.

H il l iard v. C agle , 46 M iss. 309.

63, 131, 148.

H inton v. T oye , 1 A tk . 465. 161 .

Hoffman v. P i tt, 5 E sp . 22. 23.

Holmes v. M arshal l, 78 N . C . 262.

84 , 150.

Hol t , Howerton v.,23 T ex. 51. 103.

Hombe ek v. Vanme tre , 9 O hio,153.

Hood, S ib ley v. ,3 M O . 290.

02 C A S E S c E D .

S E C T IO NKahley

,R e , 2 B iss. 383 ; 4 N . B .

R . 124, 378 . 68, 69, 147.

Katzenberger, Kle ine v. , 20 O hioS t . 110 ; 5 Am. R e p. 630 . 4 9

,139 .

Keable s v. C hrist ie , 47 M ich . 594 . 89.

Ke lly, M ittnacht v. , 3 Keye s, 407.

4 1, 131.

Kenan, King v. , 38 A la. 63. 101.

Kendal l v. C arpe t C o., 13 C onn

383.

Kenne tt , C adogan v. , 2 C owper,432.

Kenney, S mith v. , 1 M ackey, 129 Wash . L. R ep . 69 .

Kent , Bank v. , 43 M ich . 292.

Kerr, Quarles v., 14 Grat . 48 .

K idd v. R awl inson, 2Bos. Pul .

59 . 21, 22.

Ki l l ian, T urner v. , 12 Neb. 580. 87.

K ing v. Bai ley,6 M o . 575. 56 .

King v. Bai ley, 8 M o. 332. 56.

K ing v. Kenan, 38 A la. 63. 101 .

King v. Nott ingham,Lane , 42.

K irby v. Ingersol l , 1 Harr. C h.

172 ; 1 Doug. (M ich.) 477. 151.

K irkbride , R e , 5 Dillon, 116 . 68, 70.

K issam v. E dmundson, 1 I red. Eq.

180.

Kle ine v. Katzenberger, 20 O hioS t . 1 10 ; 5 Am . R ep . 630.

Knight, W i ley v. , 27 A la. 336.

102, 159 .

Kramer, Worman v. , 73 Penn. S t .

378 . 78 .

Kuhn v. M ack, 4W. Va. 186 . 67, 147.

Laing v. Perrot t , 48 M ich . 298. 89.

Lang v. L ee , 3 R and. 4 10.

Lang v. S tockwe l l, 55 N . H. 561.

44 , 160.

Langsdorf, Voorhis v., 31 M O . 451

Langworthy, P lace v., 13 W is.

629. 52, 147.

Lasse lls v. C ornwal l is, 2 Vernon465.

157.

81, 158.

49, 139.

S E C T I O N

Lat imer v. Batson, 4 B . C . 652.

27, 28, 79 .

Lavender v. Blackstone , 2 L ev.

146 ; 3Keb. 526. 157.

L ay, C harl ton v. , 5 H um. 495. 159 .

Leadman v. Harris, 3 D ev. L aw,

144.

Leavi tts, Smi th v. , 10 A la. 92.

L ee , Lang v., 3 R and. 4 10.

34, 67, 122, 131, 142, 147, 157.

Le ighton, Preston v.,6 M d. 88. 108 .

Le land v. C ol lyer, 34 M ich . 418 . 89.

Lendrum, Jordan v. , 55 Iowa, 478

L entilhon v. M ofl'

at, 1 E dw. C h

451.

Leonard, C ampbe l l v. , 11 Iowa,

489 .

Leonard, W i lhe lmi v., 13 I owa,

330 .

Le t ts, M ob ley v. , 61 Ind. 11 .

75, 76 , 147, 148.

Levi , Joseph v. , 58 M iss. 843. 64,144 .

Levy v . We lsh, 2 E dw. C h. 438.

39 , 40.

Lewis v. M c C abe , 49 C onn. 141

21 A. L . R eg. 217. 61, 79.

Lipp incot t v. Barker, 2Bin. 174

4 Am. D e c . 433.

Litt lejohn, Dewey v. , 2 I red. E q.

495. 82, 159.

Litt le ton, T yrer v 2 Brownlow,

187.

Lockwood, C alkins v. , 16 C onn

276 ; 41 Am. D e c . 143.

Lockwood v. Harding, 79 I nd.

129. 75, 76, 139.

Lockwood, M i l ler v. , 32N. Y . 293.

41 , 43, 139.

Lodge v. S amue ls, ‘

50 M o. 204 .

56, 147.

Lombe , S teward v. , 1 Brod . B506.

Looker v. Pe ckwel l , 38 N. J.

L aw, 253. 109 .

L outhain v. M i ller, 85 Ind. 161. 76.

CAS E S C IT E D .

S E C T IO NLowry, Wood v. , 17 Wend. 492.

4 1,50, 148.

Ludden v. Hazen, 31 Barb . 650. 42.

Lukins v. A ird, 6 Wal l . 78 . 93, 158 .

Lyman, Hubbard v. , 8 Al len, 520.

142.

Lyons v. F ie ld, 17 B. M on. 543. 98.

M acdona v. Swiney, 8 Irish L. R ep

73.

M ace v. C ade ll , 1 C owp . 232M ack, Kuhn v. , 4 W. Va. 186.

67, 147.

M ack, S parks v. , 31 Arks. 666 .

86 , 160.

M ackason’s Appeal , 42Penn. S t

330.

M ackie v. C airns, 5 C ow. 547 ; 15

Am . D e c . 477

M acomber v. Parker, 14 P ick. 497.

73, 95.

M acomber v. Peck, 39 Iowa, 351.93, 158 .

M addox, M art in v 24 M o. 575. 56.

M anly, In re , 2 Bond, 261 ; 3 N .

B. R . 75, 291. 68,143

,147.

M ann v. F lower, 25 M inn . 500. 51 .

M anning, D oe dem . O t ley v. , 9

E ast .'

64.

M anning, P ierson v., 2M ich . 445.

88 , 1 14 , 160.

M anufac tg. C o F oster v. , 12P ick.95 .

M aple v. Burnside , 22 I nd. 139 . 74 .

M arbury, T arback v.,2Vernon,

510. 157.

M arks v. H il l , 15 Grat . 400. 36, 139 .

M arque z e , R ichardson v., 59 M iss80 ; 42Am . R ep. 353.

M arsh v. Burley, 13 N eb. 261 .

M arsh, C otton v. , 3 Wis. 221.

53, 139 .

M arshal l, Holme'

s v., 78 N . C . 262.

84, 150.

M arston v. Vul te e , 8 Bosw. 129 .

42, 148 .

M art in v. M addox, 24 M o. 575 . 56. M eyer v. Gorham, 5 C al . 322.

S E C T I O N

M art in, M cKibbinv.,64 Penn. S t .

352; 3 Am . R ep . 588. 78, 148.

M art in v. R ice , 24 M o. 581. 56.

M art indale v. Booth, 3 B . Ad .

498.

‘78 , 79.

M arvin, C ameron v. ,26 Kan. 6 12

100.

M asson v. Anderson, 3 Bax. 290. 159 .

M att ison v. Judd, 59 M iss. 99 . 141.

M ayer, C arpenter v. , 5Watts,483. 77.

M aynard, Pratt v. ,116 M ass. 388 . 96.

M azange , Price v 31 A l a. 701.

101,132.

M c C abe , Lewis v. , 49 C onn. 14 1 ;

21 Am . L. R eg. 217. 6 1 , 79

M c C al la, Al len v.,25 Iowa, 465 . 9 1.

M c C ombs v. Gu i ld, 9 L ea, 8 1. 6 1.

M cC rasly v. H asslock , 4 Baxt . 1 . 60.

M c Ewen, Gardner v. , 19 N . Y .

123. 4 1, 43.

M cF adden v. Hopkins, 8 1 I nd459.

M cKeand, T aylor v. , L. R . 5 C . PD iv. 358.

M cKibbin v. M art in, 64 Penn. S t .

352; 3 Am . R ep . 588. 78 , 148.

M cL achlan v. Wright, 3 Wend348.

M cL aughlin, D ivver v., 2 Wend.

596 ; 20 Am . D e c . 655. 38, 131.

M cL aughl in v. Ward, 77 I nd. 383.

75, 76.

M cL ean v. Bank , 3 M cL ean, 623. 68.

M cL e an, Smith v. , 10 N. B . R .

260. 68, 147.

M ead , Dunning v. , 90 I ll . 376 . 55.

M eade v. Smith, 16 C onn. 346. 79.

M eggot v. M i l ls, 1 L d. R ay. 286 . 19.

M e lody v. C handle r, 12 M e . 282.

97, 140.

M e lvin, C ool idge v. , 42N . H. 5 10.

44 , 158.

M ercer v. Pe terson, L . R . 2 Exch304.

M e tzner v. Graham ,57 M O . 404 .

58 , 139.

112.

304

S E C T IO NM i lbanke , George v. , 9 Ves. Jr.

190. 161.

M i lburn v. Waugh , 11 M o. 369. 56 .

M i lle r, C raver v. ,65 Penn. S t.

456. 78.

M i l ler v. Jone s, 15 N . B . R . 150 . 72.

M i llerv. Lockwood, 32 N . Y . 293.

M i l ler, L outhain v. , 85 Ind. 161. 76.

M il ler ads. Pancoast, 29 N . J. L aw,

250. 109, 142.

M il ls, Bai ley v., 27 T ex. 434. 103.

M i l ls, M eggot v., 1 L d. R ay. 286 . 19.

M ining C o. v. Grant, 17 C h. D . 122.

151.

M ining C o. v. Smith , L. R . 4 E ngI . A p . 64.

M itchel l, S impson v. , 8 Y er. 4 16 .

59, 159.

M itche l l v. S te tson, 64 G a. 442.

M itche l l v.Winslow, 2 S tory, 630.

47, 56 , 70, 73, 130.

M ittnacht v . Ke l ly, 3Keyes, 407.

4 1, 131.

M obley v. Le tts, 61 Ind. 11 .

M offat, L entilhon v. , 1 E dw. C h.

451 .

M onk, Peacock v. , 1 Ve s . sr. 127

M oore , Ayre s v 2 S tew. 386.

M oore v. C ol l ins, 3 D ev. L aw, 126 .

M oore v. Wood, 100 I l l . 451.

M organ v. E lam ,4 Y erg. 438.

M orri ll, I n re , 2 S aw. 356 ; 8 N .

B. R . 117.

M orris, Barron v., 14 N . B . R . 37I .

72, 73.

M orris v. Devon, 2 Disney, 218 . 48.

M orris v. S tern, 80 Ind. 227. 76 .

M orrison, Danie l v 6 Dana, 182.

99, 1 14.

M orrow v. R eed, 30 Wis. 81. 144 .

M orton, Vernon v. , 8 Dana, 247. 98.

M ount, Hendricks v. , 5 N . J . L aw,

738.

111 .

C A SE S C I T E D .

S E CT IO NM ue l ler, S tate v. , 10 M o. App . 87.

Nailer v. Young, 7 L ea, 735. 60, 147.

Nash v. Norment, 5 M o. A p . 545 .

57, 144.

Ne lson, Danie ls v. , 4 1 Vt. 161. 110.

Nico l v. C ri ttenden, 55 G a. 497. 111.

Niemann, Adams v., 46 M ich. 135

Norment , Nash v., 5 M o. A p . 545.

57, 144.

Nott ingham, T he King v. , Lane ,42.

O verman v. Quick, 8 B iss. 134.

70, 139.

O wen v. Body, 5 Ad. E . 28. 141.

Pack v. Bathurst , 3 A tk . 269 .

Page t v. Perchard, 1 E sp. 205.

10, 41, 122.

M u ir v. B lake , 57 Iowa, 662.

M unch, S te in v. ,24 M inn. 390.

5 1, 148, 147.

M urray, Ge re v. , 6 M inn. 305. 50.

M urray, Phe lps v. , 2 T enn. C h.

746. 6 1, 128, 131.

M urray, R iggs v. ,2 Johns. C h.

565. 121, 157, 160.

M urray v. R iggs, 15 Johns. 571. 157.

M yers, C ol l ins v. , 16 O hio, 547.

47, 52, 63, 66, 84, 87 , 111, 116,

O’Brien, Bank v. , 6 H un, 231 . 42.

O gden v. S tewart, 29 111. 122. 54, 142.

O l iver v. E aton, 7 M ich . 108 . 88.

O l iver v. T own, 28 Wis. 328. 52.

O lmsted, Y ate s v. , 56 N . Y . 632 ;

65 Barb. 43. 4 1,55.

O rton v. O rton, 7 O r. 478 . 66 , 147.

O sgood, Putnam v. , 51 N . H. 192 ;

52 N. H. 148. 45. 131, 147, 148, 159.

O tley, D oe dem ., v. M anning, 9E ast, 64.

O tway, G oodtitle v. , 2Wi lson, 6

306

S E C T IO NR ahm, Butler v. , 46 M d. 541. 108 .

Railroad, R obson v. , 37 M ich . 70. 89 .

Rale igh ’s (S irWal ter) C ase , Lane ,42.

R anle tt v . B lodge tt , 17 N . H. 298

43 A m. D e c . 603. 45 , 131, 147 .

R ansom , Davis v . ,18 I l l . 396. 54, 147.

Ravisies v. Alston, 5 A la. 297 .

102, 159 .

Rawl inson, K idd v. ,2BO S . Pul .

59 . 21, 22.

R awson, F reeman v. , 5 O hio S t . 1.

48, 74.

R e B loom, 17 N . B . R . 425 .

68,69 ,

R e Burrows, 7 B iss. 526 ; 5 C .

L . J. 241. 68, 69, 131 .

R e C antre ll , 6 Ben. 482.

R e E ldridge , 2B iss . 362.

R e F orbes, 5 B iss. 510. 68 , 143, 147.

R e Kahley, 2B iss. 383 ; 4 N . B . R .

124 , 378. 68, 69, 147.

R e K irkbride, 5 Dillon, 116 . 68, 70.

R e M anly , 2 Bond, 261 ; 3 N . B .

R . 75,291. 68, 143, 147.

R e M orri ll, 2 S aw. 356 ; 8 N . B .

R . 1 17. 68, 143, 147.

R e Perrin, 7 N. B . R . 283.

R ea v. Alexander, 5 I red. L aw,

644. 81 , 119 .

R ead v. W i lson, 22 111. 377.

R eading, Gree ley v. , 74 M o. 309 .

57, 144 .

R eed v. B lade s, 5 T aunt . 212 12.

R eed, M orrow v.,30W is. 81. 144 .

R e ed v. Pe l le t ie r, 28 M O . 173. 56 .

R eynolds v. We lch , 47 A la. 200.

R ice v. Jerenson, 54 Wis. 248. 53.

R ice , M art in v. ,24 M o . 581.

R ice , R owley v. ,1 1 M e t. 333. 96 , 144 .

R ichards v. Hazzard, 1 S tew. P139.

R ichardson v. M arque z e , 59 M iss80 ; 42Am . R ep . 353.

R ichmond, Bainbridge v.,17 H un,

39 1.

C AS E S C IT E D .

R yal l v. R owles, 1 Ve s. sr. 348 ;

1 A tk . 165 ; 1 W i ls. 260.

7, 15, 19, 34. 77, 131.

S al te r, C rawc our v. ,18 C h. D . 30. 31.

S amue ls, Lodge v. , 50 M o. 204 .

56 147.

S ands v. C odwise , 4 Johns. 536

4 Am . D ec . 305.

S E JT I O N

R ichmond v. C rudup, M e igs, 581 ;33 Am . D e c . 164. 159.

R iggs, M urray v. , 15 Johns. 571. 157.

R iggs v. M urray, 2 Johns. C h.

’

565.

121, 157, 160.

R obb ins v. Parker, 3 M e te . 117 .

95, 124 , 159.

R ob inson v. E l l iott, 22Wal l. 513. 2,

4 , 28, 51, 66, 70, 72, 74, 75, 99, 103,

116, 119, 122, 143, 144 , 145.

R obson v. R ai lroad, 37 M ich . 70. 89.

R oc heblave v. Pot ter, 1 M o. 56 1

14 Am. D e c . 305.

Rock v. Dade , M ay F r. C onv. 520.

157.

R ockey, Bentz v., 69 Penn. S t . 71. 77.

togers, Hamil ton v. ,8 M d. 301. 108.

R oiston, Bucknal l v. , Prec. in C h.

285. 15, 19, 108.

R ol le , Ryal l v., 1W i ls. 260.

7, 15, 19, 34, 77, 131.

R oos, S ummers v . , 42M iss. 749 ; 2Am. R ep . 653.

R ose v. B evan, 10 M d. 466 .

R ose v. C ol ter, 76 Ind. 590.

R oss v. C ruts inger, 7 M O . 245.

R oss v. W i lson, 7 Bush , 29 .

R oss v. Y oung, 5 S ne ed, 627.

R ossman, B lakesle e v. , 43 W is.

116 . 51,52, 53, 122, 143, 148 .

R owles, Ryal l v. , 1 Ves. sr. 348 ;

1 A tk . 165 ; 1 W i ls. 260.

7, 15, 19, 34, 77, 131.

R owley v. R ice , 11 M e t . 333. 96, 144.

R usse l l v. W inne , 37 N . Y . 591 .

4 1, 43, 122, 131, 148 .

R usse l l v.Woodward, 10 Pi ck. 408


S E C T IO NSanger, Barkow v. , 47W is. 500. 53.

S angston v. Gaither, 3 M d. 40. 160.

S aunders v. T urbevi l le , 2 H um .

272.

S awyer v. Penne l l , 19 M e . 167.

S awyer v. T urpin, 9 1 U. S . 114 .

S charfenburg v. B ishop , 35 Iowa,60.

S cott v. Alford, 53 T ex. 82.

105, 106, 150.

S cot t, E vans v. , 89 Penn. S t . 136 . 78 .

S cott, Whal lon v. , 10 Wat ts

237.

S hannon v. C ommonwealth, 8 SR . 444 .

S hattuck v. Haworth , 91 Penn.

S t . 449. 78 .

S hearer v. Babson, 1 Al len, 486. 142.

S he ldon, Griswold v. , 4 N. Y .

581. 4,40, 84, 116.

S he lly, C onkl ing v. , 28 N . Y .

360. 4 1, 43.

S hepard, F arnsworth v. , 6 V t .

521 .

S hepherd v. T rigg, 7 M o. 151.

S heppards v. T urpin, 3 Grat . 357.

35,131, 147 .

S hurtl efi'

v. W i l lard, 19 P ick.202.

S ib ley v. Hood, 3 M o. 290. 56 .

S ibley, W ingler v. , 35 M ich . 231. 89 .

161.S il l , T allmadge v 21 Barb . 34 .

S immons, C arpenter v. , 1 R ob.

360. 42.

S immons v. Jenkins, 76 I I!. 479 . 55.

S impson, Hardy v. ,13 I red. L aw,

132.

S impson v. M itche l l, 8 Y er. 416.

59, 159 .

S ipe v. E arman,26 Grat . 563. 159 .

S kinner, Hardy v. , 9 I red. L aw,

191. 82, 83, 84 .

S latter, Bal l v. , 26 H un, 353. 42.

S later, S pencer v. , L. R . 4 Q . BD . 13.

S leepe r v. C hapman, 121 M ass

404.

95, 159 .

307

S E C T IO NSmal l, Bank v 7 F ed. R ep . 837. 70.

Smith v. Acker, 28 Wend. 653.

39, 50.

95.

160.

Smith, Al len v. , 10 M ass. 308 .

Smith, Burd v. , 4 Dall . 76 .

Smi th v. C onkwright, 28 M inn23.

Smith v. C ooper, 27 H un, 565,

Smith, Doyle v. , 1 C old. 15.

59, 60, 141.

Smith v. E ly, 10 N . B . R . 553. 68,143.

Smith v. Hurst, 10 Hare , 30. 157

Smith v. K enney, 1 M ackey, 129 Wash. L aw R ep . 69 .

Smi th v. L eavitts, .l O A la. 92.

101, 132.

Smith v. M cL ean, 10 N . B . R .

260. 68, 147.

Smi th, M eade v. , 16 C onn. 346 . 79.

S m i th , M ining C O . v. ,L. R . 4

E ng. dz 1. A p . 64 .

Smith, Wordal l v 1 C amp. 332.

l l , 27.

S nodgrass, West v. , 17 A la. 549. 157.

S ole , S tephens v. , 1 A tk . 157. 7.

S ommervi l le v. Horton, 4 Y er.

540 ; 26 Am . D e c . 242.

‘

59 , 95, 159.

S ou thard v. Benner, 72 N . Y .

424 . 43, 122, 147.

S outhard v. P inckney, 6 N . Y

W. D . 328.

S packman v. E vans, L . R . 3 E ng.

I . A p . 171. 151.

S parks v. M ack, 31 Arks. 666.

S pence v. Bagwe l l , 6 Grat . 444 . 35.

S pence v. Dunlap,6 L ea, 457. 151.

S pencer v. S later, L. R . 4 Q . BD . 13.

S pie s v. Boyd, 1 E . D. Smi th445.

S tafl‘

, Atty. Genl . v. ,2 C romp .

M e es. 124 .

S tafford v. Whi tcomb, 8 Al len,5 18 . 142.

S tanden v. Bul lock, 3 C oke , 82. 157.

S tanhope , Be the l v. , C ro. E l iz8 10.

C A S E S C IT E D

S E C T IO NS tanley v. Bunce , 27 M o. 269 . 56, 147.

S tate v. D’O enc h, 31 M o . 453. 57, 58 .

S tate v. Jacob, _2 M o . A p . 183. 57.

S tate v. M ue l ler, 10 M O . App . 87. 75.

S tate v. T asker, 31 M o. 445.

56, 57, 148 .

S tedman v. V ickery, 42M e . 132. 97.

S te e l v. Brown, 1 T aunt . 381 . 24.

S te in v. M unch, 24 M inn. 390.

51, 143, 147 .

S te inart v. Beuster, 23Wis. 136 .

52, 147.

S tephens v. Pence , 56 Iowa, 257. 91 .

S tephens v. S ole , 1 A tk . 157.

S tern, M orris v.,80 Ind. 227. 76 .

S te tson, M itche ll v. , 64 G a. 442. 111.

S tevens, Pe tt ibone v. , 15 C onn.

19 ; 38 Am . D e c . 57. 79, 80, 119 .

S teward v. Lombe , 1 Brod. B .

506 .

S tewart, O gden v. ,29 I l l . 122.

S t inson, E dwards v. ,59 G a. 443. 111 .

S tockwe l l , Lang v. ,55 N . H . 561.

44 , 160.

S toddard v. But ler, 20 Wend.507.

S toddard, But ler v. , 7 Paige , 163. 39 .

S tone v. G rubham ,2 Bulst . 225. 18 .

S trangford, C ommonwealth v. ,

112M ass . 289 .

S tringer, B ige low v., 40 M o. 195. 151.

S tuart, C rooks v . ,2 M c C ra. 13

7 F ed. R ep . 800. 68, 70.

S turtevant v. Bal lard, 9 Johns.337 ; 6 Am . D ec . 281.

S ul l ivan, W i lson v., 58 N. H .

260. 46, 139.

S ummers v. R0 0 8 , 42M iss. 749 ;2Am . R ep . 653.

S umner, Harris v.,2 P ick . 129. 95.

S utherland, Book C o. v. , 10 Neh.

334 . 87, 139.

S utherland, E lme s v. , 7 A la. 262.

102, 159 .

Swartwood, Dutcher v. , 15 H un,

31. 42, 143.

S E C T IONS winey, M acdona v.

, 8 I rish LR ep . 73.

S ymmons, E x parte , 14 C h. D693.

T ailbois, W imb ish v. , P lowden,38. 121, 149 .

T al lmadge v. S i l l, 21 Barb. 34 . 16 1.

T al lon v. E l l ison, 3 N eb. 63. 87.

T arbaek v. M arbury, 2 Ve rnon,510.

T asker, S tate v., 31 M o. 445.

56, 57, 148.

T aylor v. M cKeand, L. R . 5 C . P.

D iv . 358. 31.

T erry, D arvil l v 6 H. N . 812. 32.

T hompson, Brown v. , 59 M e

372.

T hompson v. Dol l iver, 132M ass.

103. 96, 141.

T hompson v. F oerste l , 10 M o

A p . 290.

T hompson, Gibbs v., 7 H um

179 .

T hompson v. T owne , 2Vernon,

319.

T hornhi ll, Benton v. , 7 T aunt

149.

T hweatt, Johnson v. , 18 A la. 741.

101, 150.

T ickner v. W iswal l, 9 A la. 305. 101.

T ickne r,Wiswal l v. , 6 A la. 178. 101.

T ompkins, Pe acock v. , M e igs,317.

T oot le , Hewson v., 72M o. 632.

56, 58, 139.

T orbert v. Hayden, 11 I owa, 435.

90, 92, 132.

T own, O l iver v. , 28 Wis. 328. 52.

T owne, T hompson v. , 2Vernon,319.

T ownshend v. W indham, 2Ves.

Br. 1 . 161.

T oye , H inton v 1 A tk . 465. 161.

T rieber, Gre en v. , 3 M d. 11. 160.

T riebert v. Burge ss, 11 M d. 452. 108.

T rigg, S hepherd v. , 7 M o. 151. 56.

310

S E C T IONW i ley v. Knight , 27 A la. 336.

102, 159.

W i lhe lmi v. Leonard, 13 Iowa,330 .

W i llard, S hurtleff v. , 19 P ick. 202.

95, 159.

Wil l iams v. Briggs, 11 R . I . 476

W ill iams, C oate v. , 9 E ng. L.

E . 481. 140.

W i l l iams v. E vans, 6 N eb. 216. 87.

W il l iams, E x parte , 11 Ve s. 3. 22.

W i ll iams, F ord v. , 24 N . Y . 359.

W i l l iams, Goodrich v., 50 G a. 425.

111, 132.

Wi l l iams, Horton v 21 M inn. 187.

W i l l iams, Watson v. , 4 Black f.

26 ; 28 Am . D ec . 36. 74 .

W i l l iams v. W insor, 12 R . I . 9 . 107.

Wi l l ison v. De senberg, 41 M ich156.

W i lson, R ead v. , 22 I l l . 377.

W i lson, R oss v. , 7 Bush, 29 .

W i lson v. S ul l ivan, 58 N. H. 260.

46 , 139 .

Wi lson, Wheelden v. , 44 M e .

97, 151 .

W i lson Wormal’s C ase , G od

bolt, 161.

W i l t v. F rankl in, 1 B inn. 502 ; 2

Am . D e c . 474 .

W imb ish v. T ailbois, Plowden,38 .

W imer, Brooks v.,20 M o. 503 .

W imer, Walter v. , 24 M o. 63. 56 .

Windham, T ownshend v 2 Ve s

sr. 1.

W indsor, D e lop v. ,26 L a. A n. 185.

113.

Wingler v. S ibley, 35 M ich . 231. 89 .

78, 151

CA SE S C IT E D .

Yates v. O lmsted, 56 N . Y . 632

65 Barb. 43. 4 1, 55.

Y oung v. Booe , 11 Ired. L aw, 347.

82, 84 .

Y oung, Nai ler v. , 7 L ea, 735. 60, 147.

Y oung, R oss v. , 5 S need, 627. 159.

S E C T I O N

Winkley v. H i ll, 9 N . H. 31 ; 31

Am . D ec . 215.

Winne , R usse l l v. , 37 N . Y . 591.

4 1, 43, 122,

Winslow, M itche l l v. ,2S tory, 630.

47, 56, 70, 73, 130.

W insor, W i l l iams v. , 12R . I . 9 . 107.

W iswal l , T icknor v. , 9 A la. 305. 101.

Wiswal l v. T icknor, 6 A la. 178. 101.

Wolfe v. Dorr, 24 M e . 104 . 97.

Wood v. Lowry, 17 Wend. 492.

39 , 40, 41, 50, 71, 87, 148.

Wood, M oore v. , 100 I l l . 451. 151.

Wood v. We imar, 104 U . S . 786. 71.

Wooderman v. Baldock, 8 T au'

nt

676 .

Woodfin, F oster v. , 11 I red. L aw,

339 .

Woodrow v. Davis, 2B . M on. 298

woads, C low v. , 5 S . a R . 275 9

Am . D e c . 346 . 77,48 , 148.

Woodward v. Goodman, 3 C ent .L . Jour. 43. 60, 141.

Woodward, R usse l l v. , 10 P ick408.

Wool loton, Jarman v., 3 T erm618 .

Wordal l v. Smith , 1 C amp. 832.

11, 27.

Worman v. Kramer, 73 Penn. S t .

378 .

Worse ley v. D e M attos, 1 Burr.

467. 8 , 1 19 , 122, 131.

fWright , M cL achlan v. , 3 Wend348.

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