Brown v. . Dail

23 S.E. 45, 117 N.C. 41

• Court: Supreme Court of North Carolina
• Decided: September 5, 1895
• Status: Published

Opinion

Avery, J.:

Under the rigid rule of the common law contingent interests might be released to the particular tenant or devised, or might pass to the heir or executor, but, according to Blackstone, could not “be assigned to a stranger unless coupled with'some interest.” 2 BL, 290-But a different principle prevailed in Courts of Equity, and following the more liberal policy, which is better adapted to the state of society in this country, the Court has held that contingent rights are, as a rule, assignable in equity, and that a deed purporting to pass what one expects to inherit from a parent, and many other contingent rights, will, upon the happening of the contingency and the vesting of the interest, be enforced in equity as a contract to convey when it appears that the deed was executed fairly and for a sufficient-consideration. Foster v. Hackett, 112 N. C., 516; Watson v. Smith, 110 N. C., 6; Wright v. Brown, 116 N. C., 26 ; Taylor v. Smith, Ibid, 531; McDonald v. McDonald, 5 Jones Eq., 211; Mastin v. Marlow, 65 N. C., 695; Bodenhamer v. Welch, 89 N. C., 78. The ancient prohibitory rule which declared deeds for pretended titles and ' for interests .in lands adversely held, as well as conveyances of expectancies to strangers, inoperative and void, was founded upon the. idea that such contracts were in contravention of public policy. This Court was not governed, in Loftin v. Hines, 107 N. C., 361, by any such principle as was suggested on the argument, but justified the ruling upon the widely different and much mbre rational view of public policy, that in sustaining the validity of mortgages upon crops that might be made by the mortgagor for an indefinite future period, the courts would lend their sanction to contracts tending to “diminish production.” In this case the agreement, by virtue of which the property is claimed, vested in the plaintiff in consideration of his stipulation to make advancements to defray the necessary, expenses in the prosecution of the saw-milling business, the title to “all the logs cut, all the timber sawed, and every- product of the business” if it was neither illegal nor fraudulent. The defendant attempts to impeach the instrument upon two totally incongruous grounds. He contends first, that it should he held void as against public policy because it tends to oppress the defendants who were engaged in running the mill, and destroy production in the line in which they were engaged, and for the further reason that it is the duty of the Court to hold that the agreement is either upon its face void, because by its terms manifestly made for the ease and comfort of the men engaged in the milling business, or, if that is not true, that the terms of the instrument are such at least as to call for explanation and throw upon the plaintiff, claiming under it, the burden of rebutting the presumption that it is fraudulent. The six exceptions to the referee’s report, which were overruled by the Court, raise the question whether either of these contentions should be sustained.

As between the original contracting parties we think the agreement is neither void nor presumptively fraudulent. The authorities cited show that the agreement was not void because it purported to pass the equitable right to personal property, which at the time had no potential existence. There is no apparent danger of destroying the business of the mortgagors, if we hold that the paper must be constmed as creating a lien from its registration, since the plaintiff, as a security for the money advanced to buy, cut, deliver and saw logs, acquired a lien upon the logs and the product of the mill, with the power in the defendants to sell at the mill and pay over the proceeds of sale to the plaintiff Brown, or to ship to other markets in the name of Brown as consignor. A contract of this kind to operate indefinitely on the capital of another, conduct the sales of the product of the business and pay over the proceeds, but to hold both raw material and the finished or converted article in trust to secure the payment of the fund advanced, is not of the kind that either destroys industries or oppresses those conducting them. The parties engaged in the milling business were allowed to make an experiment on the most favorable terms to ascertain whether it is true that mathematical calculations may be relied on to ascertain in advance the probable profits of any other business but that figures will fail to bring correct results when applied to the prospective operation of a saw mill. From bad management or some other cause the business did not prosper, and thereupon a lot of logs which had been delivered unconditionally so as to vest the title to them first in the defendants and then subject them to the lien, if any was created by the agreement, were turned over to the brother of one of the defendants who had furnished them. The brother (E. E. Dail) had no longer any title to or lien upon the logs. If the agreement created a lien as between the parties to it upon all logs delivered at the mill, it would follow, upon the authority of adjudications in this Court and elsewhere, that the defendant E. E. Dail bad constructive notice of its terms and its legal effect, because upon a well established principle-be could have no better title than his vendor. Jones Oh. Mort», Section 156.

If the defendant by the terms of the agreement held the proceeds of sale of the lumber and logs in trust to secure the payment of the money advanced, it would seem manifest he is in the condition that a person always occupies who tabes property, which he knows is held in trust, in payment of a debt due him from the trustee in his individual capacity. If E. E. Dail had taken a horse which had been subjected to the lieu of a chattel mortgage by those who were operating the saw-mill, to secure a debt due to the plaintiff, clearly the title would not have passed in the face of the registered assignment. If the title to the logs passed by delivery to those operating the mill, as it unquestionably did by the delivery, and the mortgage was not void as contrary to public policy, then they became subject to the lien immediately on delivery. We think the agreement must be construed according to the manifest intent of the parties as a chattel mortgage. No particular form is essential, and the instrument has all of the constituents necessary to create a chattel mortgage. The intention of the parties that the property to be thereafter acquired should be held in trust for the benefit of the plaintiff and that the proceeds of sale of it should be paid over to him, is plainly expressed, and the instrument must therefore be construed as a chattel mortgage, subject to lien laws and other statutes subject to such contracts, Jones Chattel Mort., 275. If not coming within the particular rule applicable to crops, it falls within the general doctrine governing chattels having no potential existence or so subsequently acquired, Jones Chattel Mort., 270a, 40 Am. Dec., 717 note, 71 Am. Dec., p. 730.

The case at bar differs from Cheatham v. Hawkins, 76 N. C., 335, in that the advancements under the contract were made, not to help one who had become embarrassed to pay off pressing claims and weathei the storm, but to start a new business, as all of the parties to it doubtless thought with the prospect of profit to those operating the mill and of reimbursement of advancements with interest to the plaintiff. This case it seems to us falls within the reasons given by the Court for sustaining a mortgage upon a stock of goods made to secure the notes executed for the purchase price in Kreth v. Rogers, 101 N. C., 263. No presumption of fraud arises where a lien is created, as in this instance, to start a new industry by furnishing the necessary capital to operate the business. Men who lend financial aid to start such enterprises are often public benefactors, and should not be subjected to the suspicion that overhangs those who help to cover up and put beyond the reach of creditors the assets of a failing person or partnership business.

Eor the ieasons given we think there is no error.

No Error.