Lienau v. Moran

By the Oourt

The mortgage executed by Charles Lienau and wife to the Plaintiff on the 6th day of *485March, 1860, was governed by tbe old Statute of 1851 as to filing — tbe new act of 1860, approved on tbe same day tbe mortgage was executed, not taking effect until thirty days after its passage. Had tbe mortgagee filed bis mortgage under tbe old act (Comp. Stats., p. 348, sec. 3,) tbe mortgagor might have retained tbe possession of tbe chattels without tbe mortgage becoming thereby entirely vitiated. In such case tbe possession of the goods by tbe mortgagor made tbe mortgage prima facie fraudulent against creditors, and threw tbe onus of tbe proof upon tbe mortgagee to clear it up, and show that it was a iona fide security. If tbe mortgage or a copy was not filed, and tbe possession remained in tbe mortgagor, then, under tbe old act, tbe mortgage would be absolutely void as against creditors in any aspect that it might come in question. Tbe mortgagee however did not file under tbe old act at all, and. tbe mortgagor remained in tbe possession of tbe chattels, or rather tbe chattels remained in tbe store where they were at tbe time of tbe execution of tbe mortgage, tbe mortgagor and mortgagee continuing to sell tbe same as before, until tbe 5th day of July, 1860, when tbe mortgagee filed tbe mortgage under tbe new law of 1860, with tbe City Clerk of St. Paul, aud tbe mortgagor went through a form of delivering tbe goods to tbe mortgagee by pointing them out to him, and declaring that he gave him up possession of them.

Tbe mortgage could not be effected one way or tbe other by tbe law of 1860, as that law, by its terms, applies only to mortgages executed subsequent to its enactment. It must therefore stand or fall under tbe law of 1851, and under that law, where tbe mortgage is not filed, nothing will save it as against creditors except an immediate delivery of the chattels mortgaged to tbe mortgagee, and an actual and continued possession of them by him. It will not do to allow tbe goods to remain exactly as they were in tbe store of tbe partners, and tbe business to continue as if no change of proprietorship bad taken place until immediately before some creditor is about to levy upon them, and then to go through tbe form of a delivery. If tbe mortgage is concealed, as in this case, notice in an unmistakable form of tbe mortgagee’s claim must *486be given in some way, and that is best accomplished by an immediate and continued change of possession.

The only papers furnished to this Court are the pleadings and the decision of the District Judge, who tried the case, in the latter of which it is distinctly found as a fact, “ that it does not appear that said mortgage was executed in good faith, and not for the purpose of defrauding any creditors of said Charles Lienau.” As we have seen, jvhere a mortgage is filed properly under the old act the onus of establishing the bonajides of the transaction is upon the mortgagee, where the' property remains in the possession of the mortgagor. The failure to establish it in this case, where there was neither' a filing nor change of possession, must necessarily prove fatal to the validity of the mortgage.

The Judge was clearly right in his decision, and the judgment should be affirmed.