Damm v. Mason , 1893 Mich. LEXIS 1040 ( 1893 )

McGrath, J.

Plaintiffs bring replevin under a chattel mortgage executed to them by one Partrick, dated December 3, 1892. The mortgaged property was in the possession of Partrick at the date of the mortgage. On January 16, 1893, the property was taken possession of by defendant upon a writ of replevin, under an instrument dated June 19, 1891, by the terms of which Mason agreed to advance to Partrick money, merchandise, and chattels, not to exceed $1,000, for the purpose of establishing a creamery, dairy, and commission business, to be known as the “Muskegon Creamery,” and to be operated by and under the name of H. L. Partrick. In consideration thereof, Partrick agreed to devote his entire time to the management and operation of said business; to assign to Mason a certain land contract; to insure the building then under course of constructi on, which was to be used as a store and business room for said business, and the contents thereof, for the benefit-of Mason; to attend to all the business matters connected with said business for the benefit of Mason; and to consult with Mason regarding all matters connected with said business, and to abide by Mason’s directions and instructions. The instrument concluded as follows:

“It is hereby strictly understood that the contract for the deed before mentioned, the buildings and improvements, on the foregoing described property, together with all apparatus, chattels, and merchandise used in connection with the before-mentioned business, is and shall remain the property of the said first party until the following-agreement shall have been fulfilled. The said second party hereby agrees to keep an accurate and legible account of all the transactions of said business, and to turn over to said first party all the money which shall accumulate in said business, after first paying all the necessary running expenses in said business, so often as said first party may require, until such time as the entire amount advanced by said first party for the establishment of said business, together with interest on the same at the rate of ten (10) per cent, per annum, shall be received by said first party, his heirs, executors, administrators, or assigns. On the fulfillment of the above contract, the said first party hereby agrees to relinquish unto the said second party all his rights, title, and interest in the above-mentioned property, chattels, apparatus, and business."

On April 1, 1892, Mason and Partrick entered' into a supplementary agreement, by the terms of which they mutually agreed—

“That the amount of interest mentioned in the said instrument shall be changed to 8 per cent., in consideration of the second party to pay the same monthly, the first party having advanced $500 more than the instrument calls for, making a total amount advanced $1,500."

Neither of said papers was filed in the clerk’s office, nor does it appear that plaintiffs had any knowledge of their existence when the chattel mortgage was given.

It appears from the record that, at the time of the execution of the instrument under which defendant claims to own the property, the title to said property was in Partrick; that Mason did not at that time part with the possession of any of the property covered thereby; that while Partrick had, some time in February preceding, received from Mason a horse, harness, and wagon, yet the testimony clearly shows that the same were purchased by Partrick at and for prices stipulated, and were delivered accordingly, and' there is no testimony tending. to show that the sale was not absolute and unconditional; that Partrick came to Muskegon in February, 1891, and was then indebted to Mason in the sum of about $312; that said sum was included in said writing as “advances;” that, since February, Partrick had been carrying on the dairy and commission business, and defendant and others had been supplying him with milk at prices agreed upon, and shipping him produce on commission; that Partrick was, on June 19, indebted to Mason on milk account, $232, on produce account, $123, for a horse, wagon, and harness, $180, and, for a loan made in the early part of June, $100; that these items made up the sum of the “advances;” that, since the execution of said instrument, Partrick had continued to carry on the business as before, and for a portion of the time with a partner; that' he had made all purchases in his own name, had added largely to the plant, bought a farm, stocked it with horses, cows, and hogs, and operated it in connection with the creamery; that in the course of said business he had given his individual notes, indorsed by persons other than Mason; that the indebtedness to plaintiffs grew out of indorsements for the accommodation of Partrick; that, since June 19, Partrick had made payments upon the land contract mentioned in the writing; and that Mason knew of these purchases, dealings, and indorsements.

In the light of these facts, it is clear that this instrument was intended, and must be treated, as a security, merely. Even as between the parties, the intention is to be gathered, not from the face of the instrument alone, but from the situation of the parties, the surrounding circumstances, and the subsequent conduct relative to the subject-matter. This is not, however, a controversy between the parties to the instrument. The transaction cannot be regarded as a conditional sale of chattels, the title .to which was in Mason at the time of the execution of the writing. It is in effect a conveyance .by Partrick, to be defeated by the payment of his indebtedness, and, that being its real purpose, the intentions or suppositions of the parties as to who should be regarded as holding the title cannot avail as against subsequent mortgagees in good faith, under the statute. How. Stat. § 6193. This statute does not permit a transaction which is in substance a mortgage to have the effect of a sale, however disguised, to the prejudice of parties dealing with the debtor, in the absence of the statutory notice to such parties. Nor does this record contain any evidence which tends to show that plaintiffs had any knowledge of the execution, delivery, or existence of this writing, or of any claim by Mason of the ownership of the business or property, or any concession by Partrick to the same effect, until Mason took the prop.erty' under the writ of replevin. There is no pretense that Mason held, himself out to the public as the proprietor of said business or as the owner of the property, or that Partrick so regarded or represented him. The fact that plaintiffs knew that Mason was delivering milk and produce to Partrick does not tend to show notice of any such claim as is now set up by defendant, as other parties were also delivering milk and produce, and both Mason and Partrick testify that the milk was furnished by Mason at stipulated prices, and the produce was to be sold on commission, and Mason charged both np to Partrick, and credited him with payments made from time to time. The court should have directed a verdict for plaintiffs.

The judgment for defendant is therefore reversed, and a new trial ordered.

The other Justices concurred.