Tennis v. Midkiff , 55 Ill. App. 642 ( 1894 )

Mr. Presiding Justice Wall

delivered the opinion of the Court.

These cases were beard together by the Circuit Court, a jury being waived. They were actions of replevin by the appellant for certain millinery goods which had been levied upon by virtue of a distress warrant and certain executions against E. L. Pettinger, who had previously executed a chattel mortgage under which the plaintiff claimed the goods. The court found the issues for the defendants and adjudged accordingly. By this appeal the correctness of such finding and judgment is questioned.

The mortgage was given upon a stock of goods from which sales were being made and to which additions were anticipated in the usual course of business, and covered all goods that the mortgagor should thereafter purchase and place in said stock; and it provided that until default, he might retain possession and have the use of said goods.

It was intended to secure the payment of thirty-one promissory notes, amounting in the aggregate to $1,213.93.

These notes matured at short intervals, and while some of them were paid as matured, there was default as to several others on the 5th of October, 1893, when the mortgagee took possession of the entire stock then on hand. The store was closed and the goods were advertised for sale. Subsequently the distress warrant and the executions came to the hands of the officer who seized the goods, which were then replevied by the mortgagee. It is urged in support of the judgment that the mortgage was invalid as to after-acquired goods "which were taken under the distress warrant and executions, and that whatever might have been the rights of the mortgagee in a court of equity as to such goods, he has no standing in a court of law as against the liens of execution and distraining creditors. This argument ignores the effect to be given to the act of taking possession under the provisions of the mortgage.

In Chase v. Denny, 130 Mass. 566, the contest was between the mortgagee and the assignee in insolvency. The mort. gage was upon certain stock then in the mills of the mortgagor, and upon all property of a similar character which he might afterward acquire and place in the mills. Default in payment having accrued, the mortgagee took possession in the absence of the mortgagor who had absconded, and who did not participate in the act of taking possession by the mortgagee.

It was conceded that a mortgage upon chattels thereafter to be acquired by the mortgagor, does not give title to those chattels when acquired by him, unless the mortgagee takes possession of them, but the court said: “ If, however, the after-acquired property is taken by the mortgagee into his possession before the intervention of any rights of third persons, he holds it under a valid lien by operation of the provision of the mortgage in regard to it.”

In McCaffrey v. Woodin, 65 N. Y. 459, the same doctrine was recognized and approved.

In Borden v. Croak, 131 Ill. 68, it was said:

“"At common law, a mortgage can operate only on property actually in existence at the time of giving the mortgage and then actually belonging to the mortgagor, or potentially belonging to him as an incident of other property in existence and belonging to him. Jones on Chattel Mortgages, section 138, and the authorities cited. Where the mortgage contains the power of seizure on default, and the right to distrain may be regarded as giving such power of seizure, the execution of such power may give effect to a mortgage of subsequently acquired property, not only as between the parties, but also as against third parties claiming under the mortgagor. Ib., Sec. 60 et seq.”

The court then states the rule in equity as to such after-acquired property, when the mortgagee has not taken possession, and when the mortgagor has done no new act to confirm the mortgage; that while such mortgage does not pass the title as to such property, it is operative as an executory agreement which attaches to the property when acquired, and in equity transfers the beneficial interest to the mortgagee, the mortgagor being regarded as a trustee for him in accordance with the familiar maxim that equity considers that as done which ought to be done, citing among others, the case of McCaffrey v. Woodin, supra.

In Holroyd v. Marshall, also cited, Lord Chilmsford pointed out the distinction between the rule in equity and at law thus : in the latter, there must be a new intervening act; a mere license is not sufficient unless acted upon; in equity, the estate attaches as soon as the property is acquired by the debtor. At law, property not existing, but to be acquired at a future time is not assignable; in equity it is transferable. At law, though a power is given in a deed of assignment to take possession of after-acquired property, no interest is transferred even as between the parties themselves unless possession is actually taken. When the property is acquired by the mortgagor equity will transfer it, and when, after such acquisition, it is taken into possession by the mortgagee pursuant to the terms and authority of the mortgage, it is good at law against all persons, creditors with liens attaching after such change of possession included. See, also, O’Neill v. Patterson, 52 Ill. App. 26,

In the view we take, it is not material to inquire whether the possession was taken by the mortgagee with the consent then given of the mortgagor. The mortgage contained all the authority required, so far as the parties were concerned, and if the authority was exercised and possession thereby, obtained before the rights of third persons intervened, the mortgagee will be protected.

It follows that, in our opinion, the finding should have been for the plaintiff.

The judgment will be reversed and the cause remanded.