But the

§ 428. Want of Delivery as a Badge of Fraud. want of a delivery and continuous change of possession in mortgaged chattels will usually, as respects third parties with lien claims, or those who bonâ fide purchase or advance upon the property, raise a presumption of fraud. Such a presumption may commonly be rebutted; and the issue of good faith and honest dealing on the part of mortgagor and mortgagee in any such case belongs rather to a jury than the court. Thus the modern English doctrine, and that more generally adopted by American courts, is that possession by either a vendor or a mortgagor is only primâ facie a badge of fraud, and does not exclude explanations to the contrary.1 Such possession by a mortgagor is an unfavorable circumstance; but irrespective of the registry laws it may be shown to be consistent with honesty in the transaction.2 And the fact that the mortgagor's possession is expressly provided for by the terms of the instrument, appears generally sufficient to overcome the presumption of fraud which might otherwise arise; subject, however, to registry statutes.3

1 Jones Chatt. Mort. § 320, and numerous cases cited.

2 Conard v. Atlantic Ins. Co., 1 Pet. 386; Jones Chatt. Mort. §§ 325, 326, and cases cited.

8 D'Wolf v. Harris, 4 Mason, 515; Barrow v. Paxton, 5 Jones, 258; Stix v. Sadler, 109 Ind. 254; Jones Chatt. Mort. § 323.

Other frauds under the statutes of Eliz. and at common law are often considered in connection with chattel mortgages and voluntary conveyances. See Jones Chatt. Mort. §§ 333-351. Fraudulent preferences under bankrupt and insolvent laws are likewise treated in this connection. Ib. §§ 356366.

Any arrangement between mortgagor and mortgagee which would leave the former in practical control of the property, with its beneficial enjoyment and the right of disposal, is highly objectionable; far more open to the suspicion of fraud than a mere

possession in the mortgagor; and where such arrangements can be sustained under any circumstances, they are most likely on the ground that the mortgagor was disposing of the property only as the mortgagee's agent, and for applying of the satisfaction of the security whatever might be realized. But the rule to be applied in cases of this sort is well stated as follows: Where a mortgage instrument contains illegal provisions, and such as are not reconcilable, on any possible hypothesis, with an honest or legal intent, the law declares it void upon its face, because no evidence could change its character. The cases in which this absolute and unchangeable presumption arises are not numerous. There are other cases in which, upon the face of the instrument, a statutory presumption arises which is only primâ facie evidence of fraud. And there are still more cases in which the whole illegality charged

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§ 429. Priority among Chattel Mortgages. Priority between unrecorded mortgages is generally determined by priority of execution.1 The effect of registry legislation, however, is to give a general preference to mortgages in the order of their filing for record.2

§ 430. Rights, etc., of Mortgagor and Mortgagee: Right of Possession. Fourthly, as to the rights and liabilities of the parties to a chattel mortgage. The general property in the chattels ordinarily passes to the mortgagee under the instrument, and he holds the legal title to them, which, if the writing be duly recorded, no stranger, according to the policy of most States, has the right to disturb. The instrument of mortgage and the uncancelled mortgage note prima facie establish his title in the property, even as against the mortgagor himself. He has a right of possession as incidental

must be made out by extrinsic evidence. In both of the classes last named, the jury must determine all the facts. Campbell, J., in Oliver v. Eaton, 7 Mich. 112. This whole subject of the validity of chattel mortgages without accompanying possession is somewhat in a state of conflict and uncertainty. But the ordinary doctrine concerning fraudulent transfers of property "made with the intent to hinder, delay, or defraud creditors" bears immediately upon the present question. See, in addition to foregoing cases, State v. Tasker, 31 Mo. 445; Gardner v. McEwen, 19 N. Y. 123; Wilhelmi v. Leonard, 13 Iowa, 330; Brown v. Webb, 20 Ohio, 389; Hickman v. Perrin, 6 Cold. 135; Weld v. Cutler, 2 Gray, 195; Bank of Leavenworth v. Hunt, 11 Wall. 391; Place v. Langworthy, 13 Wis. 629; Read v. Wilson, 22 Ill. 377; U. S. Dig. Mortgage, 49, 50; Suppl. ib. 424-426. In some States the rule against frauds is apparently more strict than in others, often because of the peculiar wording of the statute. See Ranlett v. Blodgett, 17 N. H. 298; Robinson v. Holt, 39 N. H. 557; Steinart v. Deuster, 23 Wis. 136. Whether a

mortgage of a trader's stock, which permits the mortgagor to sell in the usual course of trade, be essentially fraudulent, is a disputed question which occasions much controversy. See, at length, Jones Chatt. Mort. §§ 379-425, and cases cited.

Suffering property covered by a chattel mortgage to remain in the hands of the mortgagor unreasonably long after default is often a circumstance imputing fraud. See Jones, §§ 369-378; Bullock v. Narrott, 49 Ill. 62. And the circumstance that the mortgagor is left in the possession and use of property which is necessarily consumed in the use is strongly unfavorable to the idea of a bona fide transaction as against creditors of the mortgagor. Robbins v. Parker, 3 Met. 117; Jones Bailm. §§ 367, 368.

1 Tiffany v. Warren, 37 Barb. 571. 2 See Jones Chatt. Mort. § 246. All this is largely a matter of local statute construction. See De Courcey v. Collins, 21 N. J. Eq. 357.

8 See Conner v. Carpenter, 28 Vt. 237; Moore v. Murdock, 26 Cal. 514; Fikes v. Manchester, 43 Ill. 379; U. S. Dig. Mortgage, 50; Suppl. ib. 425,

to such right of property, which right of property, however, is defeasible upon condition subsequent and not absolute.1 The title of the mortgagee thus gained is sufficient for maintaining an action at law against all persons not setting up any claim under the right to redeem; and he may sue for the conversion of the goods, although they are not in his actual possession, so long as he has the right of possession therein.2 The validity of the mortgage is not affected in the least by the fact that he holds other independent collateral security for the debt which his mortgage secures.3 And a mortgagee's immediate right of possession to the chattels, such as entitles him to sue for them, holds good in general, wherever there is no distinct agreement to the contrary, and even though the mortgage debt be not yet due.

But here, once more, we are confronted with the circumstance that mortgages of chattels often give the mortgagor the right, in express terms, to hold the chattels until maturity of the debt or breach of condition; and when this is the case, and the constructive possession is not in the mortgagee, the latter cannot sue for conversion of the property;5 nor is the mortgagor's possession under such a provision like that 427; Jones Chatt. Mort. § 426, and 23 Vt. 279; Landon v. Emmons, 97 cases cited. The rule varies some- Mass. 37. what according to local statute provisions concerning title and registry. See ante, § 425; Jones Chatt. Mort. § 427.

1 Jones Chatt. Mort. § 426; Coles v. Clark, 3 Cush. 399; Hall v. Sampson, 35 N. Y. 274; Miller v. Pancoast, 5 Dutch. 250.

2 Hotchkiss v. Hunt, 49 Me. 213; Fenn v. Bittleston, 7 Ex. 152; Freeman v. Freeman, 2 C. E. Green, 44; Harmon v. Short, 8 S. & M. 433. And where the mortgage is made to several, they may join in such suits. Wheeler v. Nichols, 32 Me. 233.

3 Ayres v. Wattson, 57 Penn. St. 360.

4 See supra, § 427; Brackett v. Bullard, 12 Met. 308; Welch v. Sackett, 12 Wis. 243; Ferguson v. Clifford, 37 N. H. 86; Skiff v. Solace,

5 See Curd v. Wunder, 5 Ohio St. 92; Goulet v. Asseler, 22 N. Y. 225. If the parties make an express stipulation in regard to possession before default, that determines their rights. Jones Chatt. Mort. § 430; McGuire v. Benoit, 33 Md. 181. A mortgagor cannot maintain trespass or trover against a mortgagee rightfully in possession of the property, nor maintain replevin. Jones Chatt. Mort. §§ 434, 435, 436; Holmes v. Bell, 3 Cush. 322; Leach v. Kimball, 34 N. H. 568. Nor can a junior mortgagee. Ib.; 4 Litt. 285; Landon v. Emmons, 97 Mass. 37. But where the mortgagor has, by express terms of the mortgage or otherwise, the right to remain in possession until default, the mortgagee becomes thus liable if he disturbs such possession. Jones, §§ 437,

of a mere bailee, but he is held to be owner as well as rightful possessor until default.1 For, to sustain trover or trespass, one must show that he had either the actual possession or the right of the possession at the time of the alleged taking or conversion. The title of a mortgagee of chattels, however, so long as the mortgagor has the right of possession, is of a reversionary nature; and, for damages to this reversionary interest, the mortgagee is permitted to sue to recover damage, according to the recognized practice of some States, although the right to immediate possession be not in him, but in the mortgagor.2 And courts of equity will interfere, on a bill properly filed for that purpose, to protect a mortgagee of personal as well as of real property against waste or destruction by the mortgagor in possession or the mortgagor's creditors.3 Legislative policy in a few States distinctly regards the chattel mortgage in the equitable light of a mere security, so that no legal title shall pass to the mortgagee until after foreclosure or something equivalent, and a clear default.4

est.

§ 431. Sale, Transfer, etc., by Mortgagor; Mortgagor's InterSo far is the mortgagee favored where he has the legal title to the chattels and the right of immediate possession, that sales as of the entire property made by the mortgagor, or a subsequent pledge or mortgage, without notice given

442; Brink v. Feoff, 44 Mich. 69. Whether the mortgagee can be enjoined from taking possession, see Cline v. Libby, 46 Wis. 123.

As against third persons the mortgagor's possession may sometimes be considered the constructive possession of the mortgagee. See Jones, § 446; Jones v. Webster, 48 Ala. 109; 43 Miss. 456; Simmons v. Jenkins, 76 Ill. 479. On the death of the mortgagor, personal estate in his possession passes into the custody of the law for administration. Kater v. Steinruck, 40 Penn. St. 501.

A mortgage sometimes expressly provides that the mortgagee may take possession of the mortgaged

goods in case they are removed from the premises; or, more generally, whenever the mortgagee shall deem himself insecure; and such provisions are sustained to the fullest extent by the courts, as neither unconscionable nor hard. Jones, §§ 430 a, 431.

1 Jones, § 428; Fenn v. Bittleston, 8 E. L. & Eq. 483; Johnson v. Simpson, 77 Ind. 412.

2 Googins v. Gilmore, 47 Me. 9; Manning v. Monaghan, 23 N. Y. 539. 3 Long Dock Co. v. Mallery, 1 Beasl. 94; Parsons v. Hughes, 12 Md. 1; 12 N. J. Eq. 93; Curd v. Wunder, 5 Ohio St. 92.

4 Jones Bailm. § 427; Michigan, Minnesota, Oregon, etc.

of the existing incumbrance and with the design of defrauding him of his interest may be repudiated (subject to the usual exceptions), even where innocent participants must suffer loss thereby. But the mortgagor may have rights in the mortgaged property. And if, as against the mortgagee, he has the right to the possession of the property until default or for any definite period, a right which may be secured to him, as we have seen, by express stipulation, that interest may be attached and sold on execution, subject to the mortgage.2 Furthermore, while the mortgagor has no transmissible legal title after a total default, but only an equity of redemption, it is settled that he may before default sell the mortgaged property while in possession, subject in all strictness to the mortgage incumbrance;3 and in general his right to transfer his own interest to a third person is not impugned.

A mortgagor of chattels, however, has no right to pledge or mortgage the property to another person, or otherwise to create a lien incumbrance upon it, to the extent of prejudicing the mortgagee's rights. As to selling, absolutely and

1 Coles v. Clark, 3 Cush. 399. And as to intermixed goods, see Jones, §§ 481-483; Willard v. Rice, 11 Met. 493. A sale in exclusion of the mortgagee's rights justifies his action in trover for the property. Ib.; Jones Chatt. Mort. § 460.

Where the mortgage of a chattel passes only an equitable title to the mortgagee, by reason of the possession of the chattel being at that time in a third person with whom the mortgagor has a suit pending over the title, the benefit of any judgment rendered afterwards in favor of the mortgagor in such suit will pass to the mortgagee likewise. See Pindell v. Grooms, 18 B. Monr. 501.

2 Saxton v. Williams, 15 Wis. 292; 28 N. Y. 585; 1 Kern. 501; Rindskoff v. Lyman, 16 Iowa, 260; Curd v. Wunder, 5 Ohio St. 92; Hall v. Sampson, 35 N. Y. 274.

It is held that a mortgagor in possession of mortgaged property which is exempt from execution by law can maintain trespass against an officer who wrongfully levies upon it. Vaughan v. Thompson, 17 Ill. 78.

8 Cadwell v. Pray, 41 Mich. 307; Daly v. Proetz, 20 Minn. 411; Jones Chatt. Mort. § 454.

4 Bissell v. Pearce, 28 N. Y. 252; Sargent v. Usher, 55 N. H. 287. As, for instance, where one who has mortgaged animals by a deed to A., duly recorded, tries to give a paramount lien to B. for pasturing them, while the mortgage remains unimpeachable. But a lien given by force of lawas, e.g., that of a bailee hired to repair the thing- may take priority of a chattel mortgage. Beall v. White, 94 U. S. 382; Williams v. Allsup, 10 C. B. N. s. 417. See Jones, §§ 472-480.

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