Robinson v. Elliott - 89 U.S. 513 (1874)
U.S. Supreme Court
Robinson v. Elliott, 89 U.S. 22 Wall. 513 513 (1874)
Robinson v. Elliott
89 U.S. (22 Wall.) 513
1. Under the Statute of Frauds in Indiana, which enacts in
"SECTION 111. That no assignment of goods by way of mortgage shall be valid against any other person than the parties thereto when such goods are not delivered to the mortgagee or assignee and retained by him unless such assignment or mortgage shall be duly recorded."
"SECTION 21. That the question of fraudulent intent in all cases shall be deemed a question of fact."
the mortgagor of chattels personal may, if the transaction be fair and the mortgage made by him be duly recorded, retain possession of personal chattels.
2. But the effect of the statute is not to make every recorded mortgage, which prior to the statute would have been held fraudulent in law, prima facie valid.
3. The recording of the mortgage contemplated by the statute was meant as a substitute for possession, but was not meant to protect a mortgage from all illegal stipulations contained in it.
4. Hence, where a trading firm in a city in Illinois owing money evidenced by a series of notes coming due from time to time for some months in advance made a mortgage of their stock of goods, the mortgage containing this clause:
"And it is hereby expressly agreed that until default shall he made in the payment of someone of said notes or some paper in renewal thereof, the parties of the first part may remain in possession of said goods, wares, and merchandise and may sell the same as heretofore and supply their places with other goods, and the goods substituted by purchase for those sold shall, upon being put into said store or any other store in said city where the same may be put for sale by said parties of the first part, be subjected to the lien of this mortgage. "
The instrument then concluding with powers to the mortgagee, upon any default, to have the right to enter into said store of the firm and take possession of a sufficient amount of goods to satisfy, pay, and discharge all the paper due, and have full power and authority, upon ten days' public notice, to sell at public auction such amounts of said goods as should be necessary to pay said paper.
1. That the court was the proper party to say whether on its face the
mortgage was void.
2. That it was so void.
On the 7th of July, 1871, John and Seth Coolidge, brothers, were partners in the retail dry goods trade in Evansville, Indiana, having been thus in business there since the year 1863. On the day just named, they owed to a Mrs. Sloan $3,174 for money previously borrowed of her to aid them in their business.
They also owed the First National Bank of Evansville $7,600, evidenced by seven promissory notes of the firm -- all maturing between the 25th of July and the 6th of October of the year 1871 -- on which one Robinson was then an accommodation endorser, and to secure to Mrs. Sloan the payment of what was due to her and to indemnify Robinson as endorser, they made to them a chattel mortgage upon their stock of goods then in their rented store, including also the furniture and fixtures connected with the same.
The mortgage, after reciting the liability of the firm to Robinson on the notes endorsed by him, stated that it was contemplated that in order to take up the notes or some of them, it might become necessary to renew the same or to discount other notes. The recital of the indebtedness to Mrs. Sloan, by note at four months, with interest, was also made with the statement that if not convenient to the firm to pay it at maturity, it might be renewed from time to time as the parties should agree.
After these recitals and that of the mutual understanding of the parties concerning the continuance of the debts, the property was conveyed, the mortgage proceeding thus:
"And it is hereby expressly agreed that until default shall be made in the payment of someone of said notes or some paper in renewal thereof, the parties of the first part may remain in possession of said goods, wares, and merchandise and may sell the same as heretofore and supply their places with other goods, and the goods substituted by purchase for those sold shall, upon being put into said store or any other store in said city where the same may be put for sale by said parties of the first part, be subjected to the lien of this mortgage."
The instrument concluded with separate powers to the mortgagees, Robinson and Mrs. Sloan, on default in payment of their respective claims, to seize and sell sufficient goods to satisfy the same.
All the debts owing by the firm at the date of the mortgage, other than those secured by it, have been paid, except $3,500 due to one Alfred Coolidge, father of the two partners Coolidge, for borrowed money.
The mortgagors remained in possession of the property and bought and sold as they had been accustomed to do from the date of the mortgage to August 7, 1873, when Seth Coolidge, one of the partners, died. During this interval of twenty-five months, the interest and less than $100 of the principal of Mrs. Sloan's debt was paid, and the interest and about one-third of the principal of the bank debt. The note of Mrs. Sloan's was not renewed, but was overdue about twenty-one months. Robinson continued to endorse for the firm. Immediately after the death of Seth Coolidge, the property of the firm, consisting of the old stock, goods subsequently purchased, and debts due the firm, was inventoried and appraised and found to be very little in excess of the debts owing by the firm. This inventory and appraisement was completed on September 15, and on the following day Robinson and Mrs. Sloan seized the goods and were about to sell them. However, on the 26th of September and before the ten days required by the terms of the mortgage for notice of sale had expired, proceedings in bankruptcy were begun against the surviving partner, Seth Coolidge, and an injunction was got to stay any sale.
Coolidge having been decreed a bankrupt, one Elliott, on the 15th of November, 1873, was appointed his assignee, and demanded the goods from Robinson and Mrs. Sloan. They refused to deliver them to him. Hereupon, Robinson and Mrs. Sloan filed a bill against Elliott, setting forth the facts as above given and praying that an account might be taken of what was due to them and that the goods might be sold to pay it. Elliott, the assignee, demurred, and the court below sustained the demurrer and rendered a decree dismissing the bill. Robinson and Mrs. Sloan then brought the case here.
The Statute of Frauds [Footnote 1] of Indiana makes the following provisions:
"SECTION 10. No assignment of goods by way of mortgage shall be valid against any other person than the parties thereto when such goods are not delivered to the mortgagee or assignee, and retained by him, unless such assignment or mortgage shall be acknowledged as provided in cases of deeds of conveyance and recorded in the recorder's office of the county where the mortgagor resides within ten days after the execution thereof."
"SECTION 21. The question of fraudulent intent in all cases arising under the provisions of this act shall be deemed a question of fact, nor shall any conveyance or charge be adjudged fraudulent as against creditors or purchasers solely upon the ground that it was not founded on a valuable consideration. "