Brinley v. Spring

7 Me. 241

• Court: Supreme Judicial Court of Maine
• Decided: April 15, 1831
• Status: Published

Opinion

Weston J.

delivered the opinion of the Court at the ensuing May term, in Kennebec.

The question presented for our consideration is, whether at the time of the alleged trespass, viz. on the sixth of May 1830, the plaintiffs were or were not the owners of the schooner Factor. As evidence of title in them they rely, first, upon a bill of sale of the schooner, executed to them by Robert Rogers, on t'he twenty fifth of February, 1830; secondly, upon an indenture, dated December sixteenth, 1829, executed by the Saco Manufacturing Company, purporting to convey all the property of the said company to the plaintiffs in trust. By the original enrolment of said vessel, dated June twenty ninth, 1827, it appeared that she was built and owned by the said Rogers. It was proved by the defendant that Rogers built the vessel as agent for the Saco Manufacturing Company, out of their funds; and her accounts of earnings, repairs and disbursements, were kept in their books; and it is insisted by the defendant that she was originally, and continued to be, up to the time of the attachment, their property. By a memorandum signed by Rogers, on the twentieth of June, 1827, an agreement on the part of the company is recited, that she was to be his property, upon his paj ing to them the amount of all her bills and expenditures ; otherwise he was to account to the company for her earnings, and to convey her on demand to whomsoever they might direct. It does not appear that he ever paid- to the company her bills and expenditures, but it does appear that they received her earnings; and his bill of sale to the plaintiffs, who claimed to he the assignees of the company, was probably made in pursuance of his agreement before mentioned. Notwithstanding these facts however, it is contended by the plaintiffs that she was to be regarded as Rogers’ property, they having acquiesced in the oath of ownership made by him, which, if untrue, operated a forfeiture of the vessel. And, secondly, if he held in trust for the company, his conveyance would nevertheless bind them. These positions are controverted on the part of the defendant. Without deciding definitively upon this point, it may be useful to examine the plaintiffs’ title, derived from the indenture; for if this is valid, although that derived from Rogers may be defective, by-reason of the interest of the company, if they took a legal transfer from the company, prior to the attachment, this objection is removed.

Upon inspecting the indenture, it is found broad enough in its terms to carry this property; and unless void by reason of fraud, apparent on the face of the instrument, or as evidence of a contract against the policy of the law, it must have that effect. The counsel for the defendant urges many objections against the validity of the instrument, upon both these grounds. That it is a sweeping conveyance by the company of every species of their property, existing or to be acquired, to the plaintiffs in trust. That the company however were to keep possession, so long as the trustees deemed it safe for them so to do, and to carry on their business as before. That this was secretly done. That the trustees thus became the owners of the property for protection, while the company continued to be so for use. That the law will not suffer this double ownership, by which property to a great amount is attempted to be put by insolvent debtors out of the reach of the ordinary process of law. He admits however that in case of a mortgage, possession may be retained by the mortgagor, although he combats this doctrine as un* safe and inconsistent with the old law, and insists that it should be regarded with jealousy and restricted by construction .within reasonable bounds. That in point of time its existence was unreasonable, as it might be extended to frop years; and that the use of much of the property, by which it might undergo many transmutations, was inconsistent with the nature of the contract, and the exigency to be provided for. That an assignment of all to pay all is valid, but that this was an assignment of all to pay part, with a reservation of the surplus for the benefit of the assignors. That it is at least fraudulent as a transaction tending to delay creditors; and, lastly, that there is no evidence of the existence of the debts of the cestui que trust, set forth and referred to in the indenture. Many of the objections taken by the learned counsel, will be found by a reference to the cases cited by him, to have been adjudged fatal to transfers absolute upon the face of them, and to be inapplicable to cases of mortgage. It is assumed by him that the company, when they executed the indenture, were insolvent. This does not appear in the ease reserved; and it is insisted that they were then possessed of a large amount of property beyond what was necessary for the payment of their debts, and that they afterwards became insolvent by the burning of their factories, and the consequent breaking up of their establishment. We must look at the facts as they existed at the time the indenture was made. It is obvious that what may be fraudulent in an insolvent debtor, may be fair and unexceptionable, when done by a solvent party..

Whether if the question were now open, it ought to be regarded as wise or expedient, that the mortgagor of personal property should be permitted, without vacating the security of the mortgagee, to keep possession of the property, and to use it as his own, might be a subject of grave consideration, from the frauds with which it may be attended. But the law has been otherwise settled; and we can no longer regard it as an open question. Haskell v. Greely, 3 Greenl. 425 ; Reed v. Jewett, 5 Greenl. 96 ; Holbrook v. Baker, ibid. 309 ; Badlam v. Tucker, 1 Pick. 389. But the law tolerates this course only for the security of the mortgagee, or if in trust, of those he represents. If there is mingled in the contract an intention to delay or defraud other creditors, or to protect the property from them beyond what may be necessary for the security of the mortgagee, the contract will be deemed to be fraudulent and void. If it be in writing, and sucfi unlawful intention be deducible from the instrument itself, it will be void upon the face of it. And it is open to be impeached upon this ground, by evidence aliunde. If by its terms it was to continue a great number of years, this might be deemed evidence of a fraudulent intention; but we do not think that a stipulation that it might be kept open for five years, in a concern of this magnitude, especially as it does not appear that the company was insolvent, is to be so regarded. If any attempt at concealment of the mortgage had appeared, it might have afforded evidence of fraud, but we hold it a sufficient answer to the objection of a want of publicity, that the attaching creditor was a stockholder in the company, and that the indenture was recorded.

A part of the funds of the company consisted in notes given by stockholders. For this and other reasons, they found it convenient to take large loans of hanks, which were disposed to continue the accommodation, if made secure to their satisfaction. To effect this object principally, the indenture was made. The company were to continue their business. For this purpose the loans were procured, and all their arrangements were made to promote this end, which was the very object and design of their institution. To this, the plaintiffs, and the creditors for whom they were to hold the property in trust, were willing to accede. By the indenture therefore, the plaintiffs were to permit, so long as they deemed it safe, the company to sell their manufactured goods, to purchase the raw materials, and to make all necessary disbursements in the prosecution of their business, but the property in the transit, and in its various changes, was to be holden by the plaintiffs, subject to the same trust. We cannot pronounce a transaction of this kind fraudulent upon the face of it. The instrument being recorded, those who had occasion to deal with the company, may be presumed to have been made acquainted with the condition in which they had placed their property. The contract certainly lias no features indicating positive fraud, nor does it appear to us to amount to legal or constructive fraud.

In D’Wolf v. Harris. 4 Mason, 515, Justice Story decided that an assignment of goods at sea and their proceeds, if bona fide, is sufficient to transfer the legal title to the goods and also to the proceeds ; and that an assignment may, in point of law, be valid of goods and their proceeds, though given by way of mortgage, or as security for future advances. He further decided that the possession and management of vessels and cargoes by the mortgagors, if consistent with the deed, at least until condition broken, is perfectly fair and legal, and does not vitiate the security of the mortgagee.

In Conard v. The Atlantic Ins. Co. 1 Pet. 449, it is laid down by the court, that in cases where the sale is not absolute but conditional, the want of possession, if consistent with the stipulations of the parties, and a fortiori, if flowing directly from them, has never been held to he, per se, a badge of fraud. Justice Story, by whom the opinion of the court was delivered, speaks with approbation of the case of Bissell v. Hopkins, 3 Cowen, 166 ; and he adds that there is appended to this case a learned note by the reporter, “ which embodies, in an exact manner, the principal authorities, English as well as American, upon this subject.” In that case, and in the elaborate note subjoined, commended as it is by the high authority just cited,.will be found an answer to many of the objections made by the counsel for the defendant.

The indenture embraces the whole property of the company; but if made to secure the mortgagees, unless with the further intention also to cover the property, which does not appear, and which is not to be presumed, it is not illegal. As to a resulting trust in favor of the company, after the objects of the mortgage have been fulfilled, it would have been implied by law, if it had not been expressed, and flows necessarily from the nature of the contract. No evidence of fraud has been produced aliunde. It has been insisted that no adequate consideration has been proved. We are called upon to pronounce the indenture fraudulent upon the face of it; but it being evidence in the case,-we must take the consideration, upon which it purports to have been executed, to be true. It was open to be disproved by the defendant, impeaching the instrument upon the ground of fraud. This has not been done or attempted, and the question referred to us is, assuming the averments and recitals in the indenture to be true, is fraud apparent ? But if not at liberty to assume their truth, still less, without proof, can we assume their falsity, as the basis of our decision.

Regarding then the indenture as fair and legal, which we feel bound to do, as such it transferred the vessel in question then at sea to the plaintiffs, subject to be defeated by their negligence in not taking possession of her within a reasonable tinte, after her return to port. Putnam v. Dutch, 8 Mass. 287 ; Badlam v. Tucker, 1 Pick. 389; Conard v. Atlantic Ins. Co. 1 Pet. 449. What precise period is embraced under the term, 'reasonable time, and when that degree of negligence is imputable, by which a transfer of this kind is vacated, has not been distinctly settled, to a day or an hour. In Gardiner v. Howland, 2 Pick. 602, C. J. Parker states, that-the transfer of a ship at sea remains valid, unless there have been such negligence in taking possession, when the ship arrives, as will afford ground for the presumption of fraud. It was there deemed important that the assignees forwarded notice of the transfer to the captain. In Mair v. Glennie, 4 Maule & Selw. 240, it is deducible from the opinion of the court, that notice of the transfer of the ship, then in controversy, to the captain, would have been equivalent to the taking of possession. The letters, which form part of this case, of Robert Rogers, and of Jonathan King, one of the plaintiffs, dated April twenty fourth, 1830, to the captain, whether distinctly understood by him or not, were doubtless intended to apprize him of the fact that the vessel, of which he was master, had become the property of the plaintiffs. The vessel arrived at Saco, her home port, in the evening. Early the next morning the fact of the transfer of the vessel was communicated to the master by King in clear and distinct terms, accompanied with directions as to the part of the wharf, at which she should be placed. Before eleven o’clock on the same morning, King went on board of the vessel himself, and repeated the same directions. It does not appear to us that the case presents any such negligence on the part of the plaintiffs, as will justify the inference of fraud, or that possession was not taken within a reasonable time.

Judgment for the plaintiffs.