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Opinion of the Court.

and held the title and rights which the mortgage gave, were the beneficiaries either in part or in whole. Here these six creditors, as well as the trustee, are entirely innocent of any knowledge of, or participancy in, the alleged fraud in regard to the other three.

The case of Morris v. Landauer, 6 U. S. App. 510, 513, 519, decided in this court, is, we think, a case in point upon this question. There the question was whether or not a chattel mortgage, which was made on the 19th day of April, three days prior to the making of a general deed of assignment, which was made on the 22d day of April, the chattel mortgage being in favor of the First National Bank of Manistee and several creditors of the mortgagors, was made in contemplation of the assignment, and was part of the scheme to unlawfully prefer these creditors; if so, it was within the provisions of the Michigan statute which prohibited preferences. Public Acts of 1889, p. 317, No. 215; 3 Howell's Annotated Statutes (Supplement, 1890), sec. 8739. The court approved the opinion of the court below, which said: "It is necessary, in order to invalidate the mortgage on this ground, that the mortgagee should have had notice of the mortgagor's intention. For the purpose of testing the question whether such notice was had, I think. that, under the circumstances of the case, the inquiry must be directed to the beneficiaries of the mortgage, and not to the nominal party [who was a trustee]. While I should not have much difficulty in regard to the other parties who were active in procuring the mortgage, it does not appear to me sufficiently proven that the bank, which is one of the parties secured thereby, had notice that an assignment was expected to follow, and, it being innocent of any intended fraud, I think the mortgage is valid in so far as the indebtedness to the bank is concerned."

The view here indicated is sustained by the rulings on analogous questions. Thus in the case of In re Kahley, 2 Bissell, 383, it is held that a chattel mortgage on a stock of goods, authorizing the mortgagor to sell and replace them in such manner as he might determine, and to use the proceeds as he sees fit, is void as to such goods as the power of sale relates

Opinion of the Court.

to, but, as the mortgage covered fixtures and other things over which no power of sale had been given, the mortgage as to those things was held valid.

Again, where it is held that a chattel mortgage is void if the mortgagor is not entitled to the property therein described, yet, if he has title to a part of the property described, the mortgage will be valid as to this property. Pettis v. Kellogg, 7 Cush. (Mass.) 456.

There is not and cannot be a question in this case as to the application of section 8739 of Howell's Annotated Statutes of the State of Michigan (Supplement, 1890), which prohibits preferences in general assignments. Warner v. Littlefield, 89 Michigan, 331; Clark's Appeal, 100 Michigan, 448. Nor can it be claimed that the fact that the amount of the debts which were set out in the chattel mortgage as due to Aaron Livingston, Resiel Livingston and Daniel Goldstein, was more than the amount actually due because of the goods which had been previously sold to them and that the surplus should have gone as a credit thereon, would make, of itself, the entire mortgage void. The reason for not entering these credits is attempted to be explained by the parties, but, even if unexplained, could not have the effect of making invalid the entire mortgage, although it might be a badge of fraud as against these three parties.

It is insisted that, although the mortgage is not invalid, the court was in error in not submitting the question of the fraudulent intention of the mortgagors and of these three creditors to the jury, because, if the security for those debts was declared invalid, the plaintiffs in error would get the benefit of the pro rata of these creditors, and subject the share coming to them to their judgment. It was shown that the expenses of the various litigations had been very large, and that, with the sum which had been paid to the Michigan National Bank, before the institution of the garnishee proceedings, there would only be left $5,300 in the hands of the trustee, which would be entirely insufficient to fully pay the six valid debts; therefore there was no error in not submitting the question, unless the plaintiffs in error were entitled under the writ of garnishment to

Opinion of the Court.

the pro rata which would be coming to the two Livingstons and Goldstein. We think that they are not entitled to this. By the terms of the mortgage the valid debts were entitled to be paid in full, if the estate was sufficient. The language is that "with the residue and remainder he shall next pay in full the following claims and demands hereinabove mentioned, if sufficient there shall be." This $5,300 is in fact entirely insufficient to pay these six valid debts. As between the secured creditors there was no obligation, direct or implied, that the respective creditors should only get such share of the estate as would come to them if all of the debts were as specified in the mortgage, or if all of them were valid. On the contrary, we suppose that, if there had been credits on any or all of the debts which had not been entered, or if it turned out that some of the debts had been paid, the other creditors would be entitled to the increased share which these credits or these paid debts would give them in the event that the estate should not be sufficient to pay in full.

Whether or not the other beneficiaries under the mortgage are entitled to this pro rata cannot be determined in this proceeding, in which only the trustee is a party.

Besides this defect of parties the record shows that there was another judgment creditor whose writ of garnishment was executed on the trustee at the same time as that of the plaintiffs in error, and who, if they are entitled, would be equally entitled, to a portion of this pro rata.

The case of Heineman v. Schloss, 83 Michigan, 153, only goes to the extent of deciding that when a chattel mortgage is entirely void because of fraud the mortgagee or trustee holds the proceeds of the property taken and which has been sold by him subject to be reached by a writ of garnishment as assets belonging to the principal debtor, and that there was no need after the amendment of July 3, 1889 (Public Acts of Michigan of 1889, p. 365, No. 244), to go into equity to reach such assets; but this decision cannot apply when the chattel mortgage is not entirely void, or where there are conflicting claims to the assets.

We conclude that there was no error in the instruction of

Opinion of the Court.

the court and the finding of the jury, and the judgment as originally entered.

In regard to the costs and expenses allowed by the amended judgment, if the court had a discretion to allow these costs and expenses this court could not review the amount allowed. Canter's Administratrix v. The American and Ocean Insurance Company, 3 Pet. 307; Elastic Fabrics Company v. Smith, 100 U. S. 110. But it is insisted that section 8098 of Howell's Annotated Statutes of the State of Michigan (1882) did not give the court the right to allow any of the costs and expenses which were given under the amended judgment. That section is as follows: "If the garnishee shall appear and make disclosure, as before provided, he shall be allowed his costs for trial and attendance as in case of a witness, and such further sum as the court shall think reasonable for his counsel fees and other necessary expenses; and in case he shall be adjudged liable, the same may be taxed and deducted from the property or money in his hands, and he shall be chargeable only for the balance, and if the garnishee shall be discharged, whether by reason of his having no money or property, or because the plaintiff shall not recover judgment against the principal defendant, or for any cause, his said costs and charges shall be paid by the plaintiff, and the garnishee may have the same taxed, and judgment and execution therefor."

The Supreme Court of Michigan had the construction of this section under advisement in the recent case of Wolcott V. Lenawee, Circuit Judge, 65 N. W. Rep. 286, and there determined that section 8098, being construed with section 8073, did not include cases where there was an issue made between a creditor and a garnishee and a trial had thereon, but applied only when there was no issue framed and trial had. This decision has been rendered since the amended judgment was entered, but as it is a construction of a Michigan statute it is binding upon this court. It was error, therefore, to have entered the amended judgment.

It is ordered that if the defendant in error will, within thirty days after the entry of this order, file in the Circuit

Syllabus.

Court of the United States for the Southern Division of the Western District of Michigan a remittitur of so much of its judgment as by the amendment relates to special costs and expenses, and produce and file a certified copy thereof in this court, the original judgment will be affirmed; but if this is not done within the time aforesaid, then the judg ment below will be reversed, with directions to set aside the amended judgment for costs and expenses, and affirm the original judgment. The plaintiffs in error will recover costs in this cause.

STROBRIDGE LITHOGRAPHING COMPANY v. RANDALL.

ERROR TO THE CIRCUIT COURT OF THE UNITED STATES FOR THE EASTERN DISTRICT OF MICHIGAN.

No. 818. Argued October 10, 1895. — ) Decided April 14, 1896.

A valid contract may be made by correspondence, but care should always be taken not to construe as an agreement letters which the parties intended only as a preliminary negotiation.

An agreement to be finally settled must comprise all the terms which the parties intend to introduce into the agreement. An agreement to enter into an agreement upon terms to be afterward settled between the parties is a contradiction in terms.

Whether correspondence with the purpose of entering into a contract is merely preliminary negotiation or the contract itself must be determined by the language used and the circumstances known to both parties under which the communications in writing were had. If it is plain from the language used that some term, which either party desires should be in the contract, is not included or definitely expressed in the correspondence relied upon, no contract is made. If it is plain from the language that either party wishes or contemplates that another person, not a party to the correspondence, should be a party to the contract, a correspondence between two as to the terms of such a tripartite agreement cannot be a completed contract between the two. It is as essential that all the parties intended should be bound as it is that all the terms intended should be definitely agreed upon. While A can make a contract with B that C shall do something, or A can make a contract with B that C shall procure D to do something for B's benefit, such contracts or covenants of warranty are not usual,

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