Rall v. Cook

43 N.W. 1069, 77 Mich. 681, 1889 Mich. LEXIS 790

• Court: Michigan Supreme Court
• Decided: November 15, 1889
• Status: Published

Opinions

Champlin, J.

Plaintiff sued in trover to recover damages for the conversion of certain personal property which he claims defendant’s intestate took possession of under a bill of sale which the plaintiff claimed was procured by fraud.

At the time the bill of sale was executed by plaintiff he was indebted to defendant’s intestate in some considerable sums, to secure the payment of which indebtedness Rail had executed several chattel mortgages, covering the greater part, if not the entire, of the personal property described in tbe bill of sale. These mortgages authorized Addison P. Cook, the mortgagee, to take possession of the mortgaged 'property, and, at the time of taking the property in his possession under the bill of sale, were valid liens.

The question raised by the record is whether a party who holds valid liens upon personal property by way of mortgage, and who afterwards obtains a bill of sale of the same property by fraud, and under it, and before it is repudiated by the party defrauded, takes possession of the property, can, in an action of trover brought by the party defrauded, show the extent of his mortgage liens in reduction of damages.

I think he can. The action of trover has been called an “ equitable action.” 3 Suth. Dam. 526, 528. The damages awarded in such action should only be such as the party is entitled to under the circumstances of the case. In this case the bill of sale was not absolutely void, but voidable at the will of the party defrauded. When he is advised of the facts which constitute the fraud, he may ratify the contract, and then ‘it will be as binding upon both parties as if it had not been tainted with fraud. It was at least binding upon Cook until Ball repudiated it. And Ball, by repudiating the bill of sale, could not place Cook in a worse position than he would have occupied had the bill of sale not been made. Cook had not discharged his chattel mortgages, and the indebtness secured thereby had not been paid. To permit Ball to recover the full value of the property would deprive Cook of the lien voluntarily given by Ball upon the property. His lien cannot be destroyed because he took possession under the bill of sale which Ball afterwards refused to recognize as valid, because obtained from him by fraud. The question is settled by the authority of this Court in Brink v. Freoff, 40 Mich. 610, 44 Id. 69 (6 N. W. Rep. 94); Daggett v. McClintock, 56 Id. 51 (22 N. W. Rep. 105), where the rule, and reason of the rule, is laid down, which is to avoid circuity of action. If Rail is permitted to recover as damages the full value of the property, Cook may immediately sue. Rail, and recover as damages the amount of the indebtedness secured by the mortgages. Circuity of action should be avoided, if possible, and is unnecessary when the rights of parties can be fully adjusted in one suit.

The learned circuit judge held that if Cook did not seize the property in the first instance by virtue of his mortgages, or if, when request was made by Rail that he return the property to him, he did not inform Rail that he claimed possession under his mortgages, he was not entitled to have the amount secured by the mortgages deducted from the total value of the property converted. He based this ruling upon the supposition that Rail’s action would be affected by the fact whether Cook claimed the possession of the property under the bill of sale or under the mortgages, saying in one case he would be obliged to tender the amount due upon the mortgages before he could bring action, and in the other case he would not.

I do not think the duty of Rail depended at all upon the question as to whether Cook claimed under the bill of sale or under the chattel mortgages. Rail repudiated the bill of sale as fraudulent and void as to him. He knew then that the bill of sale afforded no protection to Cook, but he also knew that Cook had valid liens upon the property, placed thereon by his own act, and that Cook had the right to retain possession under them; and it was as much his duty to make a tender in one case as in the other. But I think the tender would be unimportant, as is pointed out in Brink v. Freoff, supra.

I am of opinion that the judgment should be reversed, and a new trial granted.

Morse and Lons, JJ., concurred with Champlin, J.