Heilbronner v. Lloyd , 17 Mont. 299 ( 1895 )

Hunt, J.

1. The defendant insisted upon the trial that there was no indebtedness from Max to Charles Heilbronner,but that the mortgage was fraudulent, and that there was no consideration therefor. We will not burden the record by stating the evidence upon this point. There was ample testimony to submit to the jury the question of the good faith of the transaction between the brothers, and upon this point defendant has not sufficient ground of complaint.

2. The court instructed the jury that if the plaintiff had a valid lien on the property of defendant by virtue of the chattel mortgage, and that the mortgage was made in good faith to secure a bona fide debt due by Max to Charles Heilbronner, then the plaintiff could recover; and that a chattel mortgage, regular on its face, properly made, executed, verified, acknowledged, delivered and filed, was prima facie valid, and the burden of proving that it was fraudulent was upon the defendant; and that if they believed that this mortgage of Max to Charles was made in good faith to secure a debt, and was duly executed, then the levy made by the defendant was wrongful and unlawful, and that they should find for the plaintiff. These instructions were applicable to the issues raised on the trial, and we think correctly stated the law.

But the court thereafter charged the ]ury in terms which so conflicted with the law as above stated that we think the jury must have been misled in their deliberations concerning the mortgage upon the stock of merchandise. For instance, they were told that all the goods in the possession of Max constituting his stock in trade, and which were held as merchandise, and offered for sale in the daily business, would not pass by the mortgage introduced in evidence in this case if it was understood that the merchandise should remain in the possession of Max, and be sold in the ordinary course of trade, unless it was found from the evidence that the plaintiff, as soon thereafter as could reasonably be expected, and before such stock had been diminished by sales therefrom, took possession of the said property so mortgaged, in which event of such possession, if by consent of said Max, such mortgage would pass all the goods constituting the stock in trade. The testimony of any understanding between mortgagee and* mortgagor being that the proceeds were to be applied to liquidate the mortgage debt, this instruction was very misleading.

And, again, the court, charged that if, upon the execution of the mortgage, it was agreed between the mortgagor and mortgagee that the mortgagor should remain in the possession of the stock of goods, which was held for sale in the ordinary course of trade, and if it was understood between the mortgagor and mortgagee that the mortgagor should continue to sell such goods in the ordinary course of trade, then the mortgage as to the merchandise and stock in trade was void as to the creditors of the mortgagor, unless the mortgagee, before the levy of the attachment, took possession. This instruction likewise omitted the point that possession with a right to sell and apply the proceeds to pay the mortgage debt would not invalidate the mortgage.

Two theories were thus laid before the jury by the instructions: First, where the jury were told that the mortgage was entirely good; and, another, where they were told that the mortgage was void as a matter of law as to the principal item, —the stock .of merchandise, — unless the mortgagee took possession, without regard to any agreement to apply the* proceeds of sales to pay the mortgage debt. The j ury found generally for the plaintiff, without designating in their verdict whether they found upon the theory that as to the stock the mortgage was valid, as charged, or whether it was void, as charged, but cured by virtue of possession. This conflict in the instructions, as to the stock of merchandise, was serious, for this reason: The court ought not to have told the jury that the mortgage was void on its face, unless possession was taken. On its face it prohibited the sale of any goods; therefore it was valid. The extrinsic evidence, howéver, tended to show that there was a verbal agreement entered into between the mortgagor and mortgagee about the time of the execution of the mortgage, to the effect that the mortgagor might remain in possession of the stock, and sell the same, accounting for the proceeds, and applying the same to liquidate the mortgage debt. This evidence in no way impaired its validity. It was still valid if such an agreement was made; and that it was, plaintiff properly assumed affirmatively to prove. The case is therefore controlled by the decision of Rocheleau v. Boyle, 11 Mont. 451, 28 Pac. 872, where it was held that a mortgage upon a stock of goods on hand at the time of the execution of the mortgage was, on its face, valid, provided the description of the stock was reasonably certain, so that third persons would be enabled to know what particular goods the mortgage applied to. And the court approvingly quoted from Etheridge v. Sperry 139 U. S. 266, 11 Sup. Ct. 565, recognizing that a chattel mortgage on a stock of goods, where it is recited, either in the mortgage or where a parol agreement has been entered into between the parties, that the mortgagor is to retain possession with the right to sell the goods at retail, is valid, if it appear that the sales were to be for the benefit of the mortgagee.

Whether or not the mortgage was made in good faith was a question of fact, and whether or not it was agreed between the mortgagor and mortgagee that the mortgagor might sell the goods at retail, and apply the proceeds to liquidate the debt, and such agreement was a condition entered into in good faith between the parties, was likewise a question of fact. But, under the late decisions of this court, for no reason was the mortgage in this suit void on its face as a matter of law. It was sufficient in every respect prima facie under Rocheleau v. Boyle, supra. ‘ ‘Conflicting instructions must nearly always mislead the jury, and are always good ground for reversal where they have done so. The instructions asked by the different parties to an action generally proceed upon entirely different theories of law applicable to the case, and they should be so modified and harmonized as to present the law in its proper light, or altogether disregarded, and the case given to the jury on the general charge of the court alone. (Kelly v. Cable Co., 7 Mont. 77, 14 Pac. 633; Flick v. Mining Co., 8 Mont. 298, 20 Pac. 807.)

The question of fraud in the debt was the main issue. This went to the validity of the transaction itself. So regarding it, in our opinion, the evidence concerning the attempted possession may have had a proper bearing upon the good faith of the mortgage entered into between Max and Charles Heilbronner; but we do not think that, if the mortgage in question was made in good faith, the possession under it was material to the case, for, if the mortgage was made in good faith, possession was unnecessary, because on its face it was valid; while, if the mortgage was made with a fraudulent intent to cover up the stock, it gave the mortgagee no lien at all upon the stock, and possession thereof could not avail him as against Iona, fide creditors.

Upon this point, we are also of opinion that there is no substantial evidence of any actual and continued change of possession, accompanied by delivery, in this case. The mere fact that Charles went down to the store with Max is not enough. He did not even notify the bookkeeper or the other employes, posted no signs in the window, changed no signs, and did nothing, in fact, to indicate that there had been any change of possession at all of the property just previously mortgaged to him. (Comp. St. 1887, p. 653, § 226; Cobbey Chat. Mortg. § 494.) It would have been no error to have so charged the jury.

3. The court refused to permit the defendant to introduce some testimony tending to show partnership between the mortgagor and mortgagee prior to the date of the execution of the mortgage. The evidence, however, managed to get before the jury, so that the appellant was not injured thereby. Whether a partnership existed or not was collateral to the main issues, and, aside from the bearing it may have had upon the question of whether or not Max really owed Charles the money claimed by Charles, it was immaterial. Upon that point we think it was competent. So were the original mortgages to Mebus competent on that point. As we can find no way by which to reconcile the material conflict in the instructions referring to the stock of merchandise, and cannot tell upon which theory the jury proceeded, we are constrained to grant a new trial upon that issue.

4. So far as the mortgage specified chattels other than those embraced within the definition of ‘ ‘stock on hand, ’ ’ the jury must have predicated their verdict solely upon the theory that the mortgage was valid as to such items, and was made in good faith between the parties. They were not charged to the contrary.

The order will therefore be made modifying the judgment so that the plaintiff may recover those chattels, or the value thereof, included within the mortgage, except those included in the stock on hand (and those, of course, which were held by the original mortgagor upon conditional sales, and for the value of which the plaintiff herein has filed his remittitur). The district court can properly determine from the evidence in this reccord what would be a fair value for these articles in case return cannot be had, and remit the amount of the judgment accordingly; but whether the mortgage upon the stock of merchandise was a bona fide transaction will have to be tried anew. The cause is therefore remanded, with instructions to proceed according to the views herein expressed.

Remanded.

Pemberton, C. J., and De Witt, J., concur.