Justin Jones vs. Henry H. Huggeford, 3 Met. 515

Dewey, J. The plaintiff derives his title to the property in controversy under a mortgage from Joseph S. Lane to Calvin Stevens, and an assignment from Stevens to him. The first question arising in the case is, as to the validity of this mortgage. The defendant contends, that upon the face of the conveyance, it is invalid and fraudulent in law.

It is alleged to be thus invalid and fraudulent, by reason of the provision therein contained, authorizing the mortgagor to trade with, sell and dispose of the mortgaged property, provided he forthwith purchase like goods, of like value, which shall be placed in Lane’s store to be kept, and the sales thereof to be applied to the payment of the debt for the security of which the mortgage was given.

It is quite obvious to any one familiar with the course of out judicial decisions, that this court have been disposed to deal with cases like the present, and other cases presenting similar grounds of defence, as questions of fraud in fact rather than fraud in law.

Cases may present themselves where the form of the conveyance and the stipulations of the contracting parties are of such obviously illegal character and purpose, that it may be the duty of the court to pronounce them fraudulent in law, and wholly ineffectual ; but in general, whenever the terms and stipulations of a contract are by possibility compatible with good faith, and have upon the face of them the essential elements of a legal contract, the question of fraudulent intent and want of good faith in a contract for the sale of property is to be submitted to the jury.

In all such cases, the party, who alleges the transfer to be fraudulent and merely colorable, may submit to the jury all the supposed badges of fraud, arising from the form of the conveyance and the stipulations in favor of the vendor, which tend to raise a presumption of fraud. But they will be open to explanation, and may be shown to be consistent with honesty of purpose, and good faith in the parties to the contract.

On looking at the present conveyance, although it is found to be somewhat unusual in its provisions, and to contain stipulations that might be very convenient to enable the vendor to exercise all the rights of ownership in the articles conveyed, uc 'der color of apparent legal title in another, and thus presenting strong badges of fraud ; yet it might also well be, that parties might enter into such a contract with no other than the honest purpose of securing a creditor.

Suppose the stock in trade, proposed to be mortgaged, much to exceed in value the amount of the debt for which security was required : The party taking such security might be willing to consent to the disposition of a part of the goods mortgaged, being satisfied that the goods remaining would probably furnish an adequate security for his debt.

If therefore the question in the present case were a new one, it seems to us that the objections taken to this mortgage should rather be urged as badges of fraud, than as fraud per se; that the circumstances would be proper to be submitted to the jury, but not to be treated as conclusive evidence of fraud. But the question here raised seems to have been substantially decided in Briggs v. Parkman, 2 Met. 258.

The objection was there taken, that the mortgage was fraudulent in law, it appearing that there was an oral agreement of the parties, made when the mortgage was executed, that the mortgagor might sell and dispose of any of the mortgaged property for his own use, he stipulating that if he made sales to a large amount, he would add to the mortgagee’s security, by other property.

But it was held, that such a contract was not fraudulent per se, that it might have been honestly made, and might well be supported as valid in law, unless, upon the whole circumstances of the case, the jury should find that the transaction was not bona fide. That case was liable to all the objections taken in this, and was also liable to the further objection, that the agreement that the mortgagee might dispose of .the property mortgaged was a secret one, and was therefore more objectionable than if recited on the face of the instrument. But it was held that this was not sufficient to defeat the mortgage.

And the same rule, it seems to us, must be applied in the present case. A further exception was also taken by the defendant as to the admission of Calvin Stevens as a witness. He is objected to as interested, and his interest is supposed to arise from his having been the original mortgagee, and having assigned the mortgage to the plaintiff.

From the facts stated in the bill of exceptions, it appears that Stevens received, as the consideration of the transfer to'the plaintiff, a note of hand for the sum of $250 ; and it is contended, that if the plaintiff fails to maintain this action, the judgment in this case will show that there was no consideration for the note, and thus Stevens may be defeated of his right to recover the same of the maker. Upon inspecting the assignment, it will be seen that the transfer of the mortgaged property was not the only consideration for the note given to Stevens.

There was also assigned, with the mortgage, the debt of Lane to Stevens ; and this might alone constitute a good consideration — certainly an adequate one — for the note which was given to Stevens. It is, however, further suggested, that there was, by the transfer of the mortgage, an implied warranty by Stevens of title in the property described in the mortgage.

Without entering into the consideration of the question as to the extent of the implied warranty of title, in ordinary cases of sale of personal property, and whether it be restricted to cases of property in the possession of the vendor at the time of the sale ; the court are of opinion that the written contract of Stevens, by which he assigned the mortgage to the plaintiff, clearly excludes, by its terms, any such implied warranty. It is a mere transfer to the plaintiff of his interest in the mortgage, whatever that interest may be.

The language of the assignment is, “ I have assigned to the said Justin all my interest in the within written instrument, and every clause, article, or thing therein contained.” Such a contract contains no express warranty, and excludes an implied one, and thus leaves the assignor, Stevens, without any legal interest that can be affected by the result of the present case. Without considering particularly the other grounds also relied on by the plaintiff, in answer to the objection taken to the competency of Stevens, we think that, for the reasons already assigned, he was a competent witness. Exceptions overruled.