McKinster v. Babcock

By the Court,

The principal question involved in this case is, whether it was competent for the plaintiff to show that the object and purpose of the chattel mortgage was to secure him for his indorsements of the notes of Youngs, as stated in the report of the referee. The mortgage expressed no such purpose, and no one would conjecture, from its language, that such was its object or design. By the plain import of its terms, it was given to secure the payment of an existing absolute indebtedness of $1000, due *268at the time, from Youngs to the plaintiff. The evidence shows, and the referee finds, that at the time of the execution of the mortgage, Youngs owed the plaintiff six or seven hundred dollars, which the latter had paid upon drafts accepted for the accommodation of Youngs, but which indebtness was paid by. him a few days after the execution of the mortgage, and before the mortgaged property was taken by the plaintiff, under the mortgage.

The objection urged on the part of the defendant is, that the evidence of the purpose to secure the plaintiff for such indorsements was changing the legal effect of the mortgage from what it plainly imported on its face, which was to pay an existing absolute indebtedness to the plaintiff, and turning it into a security against the. plaintiff’s contingent'liability as an indorser, and contradicting the express terms of the instrument, which recited a present absolute indebtedness, and purported to secure its payment at a particular time and nothing else.

I have come to the conclusion, with some hesitation, that this cannot be done. If the condition of the mortgage had been to pay the indorsed notes, or any others to be indorsed by the plaintiff for the accommodation of Youngs, it would hardly be contended that it was competent to prove a paroi agreement between the parties to the mortgage, at the time it was made, that it was intended to secure a present absolute indebtedness of Youngs to the plaintiff. ( Walker v. Paine, 31 Barb. 213-227.) And if that could not be done, it is difficult to see upon what principle the mortgagee should be permitted to show, when the condition was for the payment of a specified sum of money absolutely at a particular time, and for nothing else, that the intention of the parties was to secure him for contingent liabilities on indorsements thereafter to be made.

The counsel for the respective parties have referred us to quite a number of adjudged cases, which are claimed to bear upon this question. I have examined them all carefully, and fail to find that harmony among them which is desirable. *269Some of them, and I think the largest number, relate to mortgages of real estate and judgments, given for the purpose of security for future indorsements and accommodation liabilities of the mortgagees and plaintiffs. Some of them have no application to the question, and there are scarcely any of them that may not be easily distinguished in principle from the case before us. I shall not spend time to consider them particularly, here. I think it may be truly said that the question is not a settled one, uj)on authority. Chattel mort- . gages belong to a class of securities which the law regards with suspicion, on account of the facility they afford for the perpetration of frauds; and the legislature has established guards about them, and stringent rules which the common law failed to provide, with a view to prevent resort being had to them for dishonest and fraudulent purposes. The statute requires them to be filed and registered, in order to be effectual against creditors and purchasers; declares that they shall be presumed fraudulent and void, against creditors and purchasers, unless accompanied by an immediate delivery and be followed by an actual and continued change of possession, &c.; and the omission in respect to the delivery to and continuance of the possession by the mortgagee is declared to be conclusive evidence of fraud, unless it is made to appear on the part of the person claiming under the mortgage that the same was made in good faith, and without any intent to defraud, &c.

In this case there was not an immediate delivery of the property to the plaintiff, and hence it was incumbent upon him to make it appear that the mortgage was made in good faith and without an intent to defraud. In doing so, he of course was under the necessity of showing 'what the mortgage was given for, or, in other words, what was the consideration for giving it. The evidence he gave showed an entirely different consideration from that which the mortgage itself declared to be the true one, and that what the parties had made it to say, was a falsehood. Creditors and subsequent *270purchasers are, hy the spirit of the statutes referred to, entitled to have the truth made public, in cases where possession of the goods is not immediately delivered, by the filing of the mortgage in the offices designated by the statute. They would be deceived by the filing of a mortgage purporting to secure an absolute specified indebtedness payable at a particular time, if the mortgagee is to be permitted to show that the mortgage had spoken falsely, and that a secret agreement had been made between him and the mortgagor, at the time it was given, as to its purpose and object, to which no allu-. sion whatever had been made in the instrument. It is fair to presume that the defendant prepared his defense upon the supposition that the mortgage which he had found on file expressed the object and purpose of its being, truly; and he was liable to be taken by surprise by evidence showing a purpose and object entirely different. To sanction such a practice would open the door to fraud and deception, and in my opinion it should not be allowed.

I think the judgment should be reversed, and a new trial ordered, with costs to abide the event.

Ordered accordingly.

Johnson, J. 0. Smith and Welles, Justices.]