Goodheart v. Johnson

Illinois Supreme Court
Goodheart v. Johnson, 88 Ill. 58 (Ill. 1878)
Sheldon

Goodheart v. Johnson

Opinion of the Court

Mr. Justice Sheldon

delivered the opinion of the Court:

It is insisted that upon the state of facts appearing, the chattel mortgage was fraudulent and void as against creditors. The transaction was in fact somewhat different from what it appeared to be on its face. Still, if the mortgage, for the most part, was not to secure the payment of an absolute debt, as it purported, but was in truth, and in good faith, to secure against a contingent liability as surety, the latter would be a good consideration and sufficient to sustain the mortgage. And although appellee had ■ not in fact paid the debts for which he was surety, if he would have them to pay, as was the undisputed testimony, he might well hold the property or its proceeds to apply to the payment of such debts.

But the point more particularly relied on by the appellant, as avoiding the mortgage, was, permitting the mortgagor to make sale, to the extent which he did, of the mortgaged property. It is contended that this vitiated the mortgage, under the decision in the case of Barnet v. Fergus et al. 51 Ill. 352, where it was held that if the mortgagee permits the mortgagor to make sale of the mortgaged property in the ordinary course of trade, and in the same way after as before the mortgage was made, it would be such a perversion of the mortgage from its legitimate purpose as to render it fraudulent in law and void as to creditors. The mortgage there, among other property, covered certain books and blanks, which were held by the mortgagor for sale, and the evidence showed that he continued, with the knowledge of the mortgagee, to sell these books and blanks in the same way after as before the mortgage was made. In such a case as that, the mortgagor going on and selling the goods in the same way as before, for his own benefit, the mortgage does not serve the purpose of a security for the mortgagee’s debt, and is not being held for such purpose, but it is made to perform the office of a shield, to protect the property mortgaged from the reach of creditors. Quite different was the case here. The written permission to sell, given in evidence, and under which the bulk of the property was sold at public sale, was not for the benefit of the mortgagor in the way of receiving the avails of the sale, but was for the benefit and on the account of the mortgagee, he to receive the proceeds, as he did. This was nothing inconsistent with the position and rights of the latter as mortgagee, as was the dealing in the case referred to, and .for which reason it was there held to avoid the mortgage.

The three particular instances here testified to, in which the mortgagor was allowed to sell at private sale, and hold the proceeds for his own benefit and not in accordance with the mortgage, were exceptional cases, respected inconsiderable portions of the property, not to be held as characterizing the transaction between the parties, and we can not look upon them as enough to bring the present case within the rule of Barnet v. Fergus.

We can allow to them no greater weight than as circumstances which might rightfully be considered in determining the question whether the mortgage was originally made to hinder and delay creditors. It can not be truthfully asserted, with respect to the present case, that the mortgagor continued, with the knowledge of the mortgagee, to sell the mortgaged property in the same way after as before the mortgage was made.

We find, then, no case of fraud in law here, for which the mortgage should be pronounced void.

As to the question of fact, the intention of the parties in the making of the mortgage, whether honestly and in good faith to secure the payment of an indebtedness, and against liabilities as a surety, or to hinder and delay creditors, that was for the court below, upon which all the evidence we have considered would be pertinent; and the finding of the court thereon we do not perceive sufficient reason to disturb. The judgment will be affirmed.

Judgment affirmed.

Reference

Full Case Name
James Goodheart v. Caleb Johnson
Cited By
15 cases
Status
Published
Syllabus
1. Chattel moktgaoe—whether fraudulent in not showing real state of facts. Although a chattel mortgage on its face may appear to be given to secure an absolute debt, yet, if in good faith it is given in the most part to secure against a contingent liability as surety, the latter being a good consideration, it will not thereby be held fraudulent and void as to creditors of the mortgagor, and although the mortgagee has not in fact paid anything as surety, still, if he will have to pay debts as such, he may hold the property or its proceeds to apply upon the debts for which he is surety. 2. Same—allowing mortgagor to sell, as showing fraud. If a mortgagee permits the mortgagor to sell the mortgaged chattels in the ordinary course of trade, in the same way after as before the mortgage was made, this will be such a perversion of the mortgage from its legitimate purpose as a security as to render it fraudulent in law, and void as to Creditors of the mortgagor. 3. But when the mortgagee gives written permission to the mortgagor to sell the mortgaged chattels at public sale, taking the notes given to himself, and also taking the cash paid, this, not being inconsistent with the rights of the mortgagee, will not render the mortgage void as to creditors. 4. When a chattel mortgage embraces a large amount of property, the mortgagee, by allowing in several instances the sale of a few articles, being inconsiderable in value as compared with that of the whole property, this can not be held to characterize the mortgage as fraudulent. It can be allowed no greater weight than as a circumstance to be considered in determining whether the mortgage was originally made to hinder and delay creditors.