Williams v. Chadwick

The only question presented by this appeal is, whether upon the facts found, the transfer of personal property by the defendant to the plaintiff was in effect a chattel mortgage, or an absolute sale. A chattel mortgage is a conditional sale of personal property to secure a debt or obligation of the mortgagor. The condition, upon the performance of which the transfer is to become void, should be contained in the instrument by which the property is conveyed. But a conveyance, absolute in form, will in equity be regarded as a mortgage, when the facts show that the real transaction is a transfer of property merely to secure the payment of a debt.French v. Burns, 35 Conn. 359; Carpenter v. Snelling,97 Mass. 452. A conveyance absolute in its terms, and a separate instrument of defeasance executed afterwards as a part of the same transaction, should be construed together in determining whether the transfer is to be treated as a mortgage.Mills v. Mills, 26 Conn. 213, 217; Taber v. Hamlin,97 Mass. 489, 491. Whether or not the parties intended a particular transfer of property, to be a mortgage, is to be determined by the character and language of the instruments intentionally executed by them, and by the surrounding facts, rather than by the belief of the parties as to the effect of their acts. "If the instrument is in its essence a mortgage, the parties cannot by any stipulations, however express and positive, render it anything but a mortgage, or deprive it of the essential attributes belonging to a mortgage." 3 Pomeroy's Eq. Jur. § 1193. A conveyance of real or of personal property may properly be held to be a mortgage, notwithstanding that, as in the present case, the person receiving it expressed at the time his unwillingness to accept a mortgage. Such was the fact in Mills v. Mills, 26 Conn. 213, and in Susman v. Whyard,149 N.Y. 127.

The true test to be applied to the facts in the present case to determine whether the transaction was a mortgage or an absolute sale, is, was the purpose of the transfer of the property in question to secure the payment of a sum of money by the defendant to the plaintiff?

If we consider only certain acts of the parties in the earlier part of the interview of December 27th, 1898, as we think the trial court erroneously did, namely, that the plaintiff agreed to purchase of the defendant certain property for $300, that a bill of sale describing the property was made, and that the plaintiff paid the purchase price, — we must necessarily conclude that the transfer was not a mortgage, for the reason, among others, that there was no debt to be secured by such sale. But if these acts are interpreted in the light of the other occurrences of this interview, and of the transaction of May, 1899, as they should be, we think it clear that an absolute sale of the property was not intended, but that the conveyance was made for the purpose of securing the repayment of $300 loaned by the plaintiff to the defendant.

The original purpose of the defendant in applying to the plaintiff in New York was not to sell to him his business of a storekeeper in Salem, but to borrow of him $300 and to give him security therefor. The plaintiff gave him the $300 and received the defendant's note for that amount. The defendant retained possession of the property described in the bill of sale of December 27th, and the plaintiff received no part of it until the July following. How much of the property embraced in the bills of sale the plaintiff has ever received, does not appear. He claims that its value is but a small part of $300. In May, 1899, the plaintiff demanded of the defendant "further security," and in answer to such demand the defendant gave him the bill of sale of the goods in the store, but retained possession of the goods and continued to sell them as he had before.

Although the parties may have supposed that the written instruments did not constitute a chattel mortgage, we think it evident from all the facts that they both understood that the plaintiff had loaned the defendant $300, for which the defendant had given his note to the plaintiff; that the bills of sale were given to secure the payment of such indebtedness so evidenced by the note; and that the plaintiff, by the terms of the instrument signed by him at the interview of December 27th, was, upon the payment of the note, to return such of the property described in the bill of sale as he might have in his possession, to the defendant, and relinquish all claim to all of said property.

These facts were sufficient to entitle the plaintiff to treat the transaction as a mortgage to secure the payment of the $300 note.

The court erred in not sustaining the plaintiff's claim.

The judgment of the Court of Common Pleas is set aside, and the case remanded to that court to be proceeded with according to law.

In this opinion the other judges concurred.