Hudson v. Warner & Vance

delivered the opinion of the Court. The ehan gellor has in this case decreed, that the funds in the hands of the general creditors of John and Thomas Vance, shall be appropriated in the first place to the discharge of the claim of William Warner and William Vance. Hudson, surviving partner of Hudson and Co, claims priority in the distribution of these funds in virtue of his bill of sale from Thomas Vance, of the firm of John and Thomas Vance, dated the 22d of May 1822; and as his claim has been postponed, he has prayed an appeal to this court.

The appellant relies on his legal title, which he contends overreaches any lien which Warner and Vance could have on the property.

The bill of sale made in 1820 to Warner and Vance was made upon a good consideration. It was made to indemnify them against suretyships entered into, and to bo entered into by them for J and T. Vance, and it cannot be questioned, but that it was perfectly available as between the immediate parties to the instrument, although it was not recorded. It might be void against creditors who were injured by it; yet, nevertheless, binding on them. The principle was settled by this court in the case of Dorsey v Smithson, 6 Harr. & Johns. 63.

If it be binding on J. and T. Vance, the next subject of Inquiry will be its effect upon the transfer made to Hudson, and whether it will overreach the claim of Hudson? And *428this will depend on the solution of several questions — whether the mortgage of J. and T Vance to (Varner and Vance covered'the property claimed by HudsO)i? If it did, whether Hudson had notice of the lien of Warner & Vance? And lastly, the.effects of such notice, if any such existed, upon the claim of Hudson.

The mortgage covered the stock of books and stationary ill the store of J. and T. Vance at its date, and the fund, now for the disposition of the court, arose from the sale of the books and stationary in the store in February 1823, a period of three years after the date of the mortgage. The ability of the instrument to cover the proceeds of the sales of the stock mortgaged,- which might remain m the hands of J. and T. Vance, or such additional stock as, with the proceeds of the sale, or by other means, might have been purchased by J. and T. Vance, and put in their store, to replace such sales as may have been maue bythem between the date of the. moitgage and the date of the sale by the trustees of the general creditors, need not be examined or determined in this case. There is no evidence to show that there was an entire sale of the old slock, and that it was replaced by new, between the date of the mortgage and the sale by the trustees; or that any books or stationary were-purchased in the intermediate time, and mingled with the old stock. There is evidence of sales, but no testimony to show that- the original stock was exhausted or' partially replaced; and in the absence of such testimony, we cannot but intend, that the sales, which took place under the superintendence of the trustees, were of the remnant of the stock of goods mortgaged. It. is certain that goods were received from Hudsonhy John and Thomas Vance, and were credited in their books; but whether they were brought to their store, and mingled in the general mass of their capital, is not in evidence.

The next subject for consideration will be, whether Hudson had notice of the pre-existing lien of Warner and Vqnce. Hudson must be supposed to be conusant of the facts stated in his own bill of sale, and the transfers therein made. Looking at this, we find a conveyance of all the books and stationary, and other property in the possession of Warner, in which J and T. Vance had an interest. Hudson, in his answer, en*429dcavours to limit the generality of those expressions, and intimates, that they had reference solely to the books of accounts and evidences of debt, of which Warner had taken possession. But if this were the object, and he had no reason to fear that Warner had taken possession of the books, stationary and other property, it would be difficult to divine a reason for the insertion of these general words in the instrument. When we examine the testimony in the cause, and look at the efforts of Warner 1o take and maintain possession of the store, these general words in the conveyance, strongly incline us to believe that Hudson could not have been unaware of the claim of Warner, and of the facts which actually occurred as springing out of that claim. But independent of the bill of sale, the answer distinctly admits the notice, before the execution of his bill of sale, that Warner and T’ance had received a conveyance. It is true he was, at the same time, apprized that nothing was due upon the conveyance; but from whom? from his creditor, who was then pressed to give him a security for his debt. Ought he to have confided iu such an interested representation from one whom, common sagacity might have admonished, would, very naturally, be inclined to rid himself of the pressing solicitations of importunate creditors, by the mos1 favourable representations, of the unincumbered and unshackled condition of his estate? He was not, in truth, so easily imposed upon. Ai least he was not willing to confide entirely in Vance’s statement; for we find, that notwithstanding he had been informed by Vance that his bill of sale to Warner was never placed upon the records, he examines into this fact for himself, and when he ascertained satisfactorily that nothing was on record legally binding the property, he resolves to take the title, and hazard the experiment, whether his title could not be made to override any unrecorded transfer to Warner and Vance. That such information, thus imparted to him, sufficiently affected him with notice, cannot be doubted, particularly when that information was accompanied with no equivocal indications, that the first conveyance was meant to reach the identical properly, of which he took the transfer. If Hudson could have supported by testimony what he has set up in avoidance of this notice, his claim would have been presented *430in a very different view before this court. Could he have established the tact that he had madethe inquiry of Warner, into the nature of his claim and lien, and had been led by Warner to believe that his incumbrances were removed, equity would never interpose to invalidate his claim. But these facts were necessary to have been established, as they constituted the only effective part of his defence, and it is scarcely necessary to say, that his answer can furnish no evidence of these facts.

There is one part of this transaction which cannot escape the remark of the most superficial observer. And in adverting to it, we, by no means, intend to cast any eensure on Mr. Hudson, as he was in the pursuit of a just claim, and of the means of securing it. The ceremonies attending the execution of this bill of sale were peculiar. To give it validity they were wholly useless. Why was adopted the symbolical delivery of the goqds by the delivery of the key' of the warehouse? One would have thought this was sufficient, yet to this-was superadded, for greater security, the delivery of a book in the name of all the books, stationary and goods. If the transmission of the legal title was the. object, these proceedings were useless, as his bill of sale effected that object. On the other hand, if the goods were to be transferred by delivery, then the bill of sale was unnecessary to be recorded, and all the stipulations upon which the delivery was to. take place could have been effected by a'writing, neither demanding record, nor acknowledgment. These ceremonies, and' this formula, lead irresistibly to the conclusion, in connexion with the bill of sale, answer and evidence, that Hudson had such a notice as would affect his conscience, and that there existed some pre-existing equity, which this machinery was to destroy, and which when prostrate, would.permit his legal possession to rest in security.

As it appears conclusively to our minds that Hudson had notice, we are led t-o the examination of the effect of such no-, tice upon his title. The act of assembly oí 1729, c/¿. 8, had for its object the suppression of secret sales. By demanding that transfers should be recorded, it was intended-, that notice should be given, that no one might be injured or deluded by secret and unknown conveyances.

Its object then, being to protect creditors from prior secret *431conveyances, any such creditor, who had notice of such an incumbrance, could not be considered as falling in the class of those for whose benefit the act was passed. For when he had notice, how could he be considered as injured by the conveyance? We cannot give the act the narrow construction, which seems to be contended for, that no notice was sufficient to gratify the law, but such as was derived from the registry of the deed; for such a construction would invalidate transfers, which, it is obvious, from the general tenor of the act, it was not the purpose of its framers to disturb, or interfere with. Any other kind of notice of the transfer, which demonstrates the existence of a lien, or the transfer of a right, brought home to the party who seeks to avoid such lien or transfer, will be sufficient

But although the bill of sale to Warner and Vance was made upon a good consideration, Hudson’s bill of sale cannot be overreached by the previous bill ol sale, unless it appear that an incumbrance, as against him, was created by it, which was not condemned as fraudulent by the peculiar circumstances which attended it.

The consideration of the unrecorded mortgage to Warner and Vance was two-fold — to guard thorn against injury from farmer seeurityship, and for anticipated loans and endorsements of notes. But, it is said, the recital which explains the object and purposes of the deed, is not conformable to the facts. If this be so,.it would certainly subject the instrument to a very rigorous scrutiny, and a misrepresentation in this respect would subject it to strong suspicion. But it would not follow, that every variance in the statement of the real facts of the case, would defeat and destroy the instrument, where it appeared that the transaction was fair on'the whole, and indemnity was the real objects of the parties. Nor would the court be disposed to hear with a very favourable ear, the objections of one who had received no injury from the transaction.

But in truth, there is no suggestion of falsehood, as we apprehend, in the recitals of the bill of sale. The responsibility of Warner and Vance had .been undertaken for John and Thomas Vance, as was anticipated in the mortgage; and although there is no direct evidence that prior to the mortgage *432notes had been loaned, yet they may have been so loaned; and constituting now no part of their claim, we fairly presume from the course of business, that the earliest notes found in the record were, many of them at least, renewals of former ones loaned or endorsed by Warner and Vance.

In the retention of possession by John and Thomas Vance there will be found nothing to contaminate the transfer, for the possession was consistent with the deed; and although this Would not necessarily render it valid, yet by the agreement of the parties it was not to have its completion immediately, but Was prospective to a future event; that is, the default on the part of the mortgagors to pay the amount of the promissory notes whenever their payment should be demanded by Warner and Vance. And in such a special case it has been adjudged (Bucknal v Roisten, Prec. in Ch. 287,) that possession by the vendor till that future time, is entirely consistent with the deed. And if the deed is good at its commencement, it has been determined that it shall continue so, notwithstanding possession is retained at the time of the forfeiture. Lady Lambert’s case, Shep. Touch. 65. Stone v Grubham, 2 Bulst. 25. Roberts on Fraud. Conveyances, 561, (note f.)

Their failure then, to take possession of the property at the time of the forfeiture as stipulated in the mortgage, does not vitiate a.deed which in its inception was valid and effectual.

It appears then, from our view of this case, that the mortgage from J. and T. Vance to Warner and Vance was binding between the parties thereto; that it was valid at common law, notwithstanding the retention of possession, its completion looking to a prospective event; that being valid in its commencement, it was. not condemned by a failure on default to take possession of the property; that Hudson having notice of this conveyance, is bound by the prior lien which it created, and that he is not to be considered in the light of an injured creditor, having had such notice, and, therefore, notentifled within the meaning of the act of 1729, ch. 8, to set up his title against the prior deed, and by so doing to treat it as a nullity.

EECREE AFFIRMED.-