William M. Lacy James Kent.

Commentaries on American law, Volume 2 online

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Rep. 115, it was decided to be essential to a pledge, as well as to a sale of
personal chattels, that it be accompanied with delivery of possession aa
against third persons; and that if the pawnee takes a delivery, and yet
Immediately redelivers the thing pledged to the former owner, or permits it
to go back into his possession, the sx>ecial property created by the bailment
is determined and gone. The same doctrine was followed out in Beat^e c
Robin, 2 Vermont Rep. 181, and it was declared, that unless a purchase be
followed by a visible change of possession, the property will continue liable
to the creditors of the vendor. Judd & Harris v. Langdon, 5 Vermont Rep,
231. Baylies, J., Ibid. 531, S. P. In Farnsworth v. Shepard, 6 Vermont
Rep. 521, the supreme court of Vermont adhered to their former decisions
with great resolution, and declared that a sale of personal property, unao*
companied with a change of possession, was per se fraudulent as against
the creditors of the vendor. ^' This still remains," said Mattock, J., *'the
settled law of the land; and although some learned gentleman of the law
have supposed that the court would eventually retrace their steps, as the
courts in some of the neighbouring states have done, that is, leave that as
a badge of fraud to a jury, yet we are not disposed to recede a jot, nor to
advance a whit, but to remain stationary upon this, in other governments,
vexed question, so as to give this branch of the law, at least, the qualify of
uniformity." I think this decision reflects the highest honour upon the
firmness of the court, and it is a consoling example of the triumph of the
conservative principle in our jurisprudence. How long the court will be
able to stand on that ground is another question,



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withia the operation of the statute of 13 Eliz. cb. 5, was a ques-
tion of fact, and not of law (a). The supreme court of that state,
in a more recent case (&), carried the relaxation of the English
rule to a great extent^' A bill of sale of a horse v^as absolute on
its face, but taken as a security for a debt, and possession was
left with the vendor. The property, after being kept by the debtor
for six years, was seized on execution by another creditor; and
the court decided, that such a transaction. was only presumptive
evidence of fraud for a jury; and as they had found no fraud in
the fact, the verdict was sustained (c).

In New York, the current language of the court originally

(a) Vick V. Kegs, 2 Hayioood's Rep. 126. Faulkner r. Perkins, Ibid. 224.
Smith V. Neil, 1 Hawks. Rep. 341. Trotter v. Howard, Ibid. 320.

(ft) Howell V. Elliott, 1826, 1 Badg. <fc Dev. 76.

(c) In 1830, provision was made by law, in North Carolina, for the registry
of deeds of trust or mortgages of chattels; and they were not to be valid in
law, as against creditors or purcha.sers for a valuable consideration, without
such registry. This will prevent the inconvenience of the antecedent doc-
trine. There were also statutes in 1784, 1801, and 1820, providing for the
registry of bills of sale of chattels. In Gregory v. Perkins, 4 Dev. N. C. Rep.
50, it was decided that a deed absolute on its face, but executed upon a parol
agreement for redemption, is, in law, fraudulent and void, as against the
creditors oi the vendor; and the registry of it under the statute did not add
to its validity. The object of the registry act was to give notice of the ex-
istence and extent of incumbrances, as mortgages^ deeds^ or conveyances in trual^
and the true character of the deed must appear on the record, to give it pro-
tection. In that case, Ch. J. Ruffin observed, that fraud was matter of law,
and a question for the court, but the actual intent was generally concealed,
and was within the province of a jury, and in that sense, fraud is a mixed
question. But when the facts are ascertained, the conclusion is exclusively
matter of law. The English rule for some time prevailed in North Carolina,
that possession retained by the vendor, was per se fraudulent. But it admit-
ted of so many exceptions proper for the juiy, as to the intents, that the rule
itself hardly remained; and the court finally resorted, as has been done in
New York, to the plain rule of leaving to the jury the possession, as a fact
and ground of presumption, under p 11 the circumstances, whether or not there
was a secret trust and a fraudulent intent, without, however, intending to
leave it to the jury to follow their own uncertain judgment, when the ascer-
tained facts would in judgment of law amount to a fraudulent intent. De-
cisions so guardedly and firmly expressed, are exceedingly consoling and
valuable. The c*we of Leadman v. Harris, 3 Dev. Rep. 146, contained the
same sound doctrine. The doctrine in Tennessee is, that on a sale of goods
by deed, absolute on its face, without possession accompanying the deed, it
is only prima facie evidence of fraud, and not fraudulent per se. Callen v,
Thompson, 3 Yerger^a Rep. 475. Darwin v. Handley, Ibid. 502. See, also,
the case of Maney v. Killough, supra, p. 522, note d. And in Kentucky, the
courts go so far as to hold, that possession of goods by a mortgagor is not only
not fraudulent per w, but in many, and perhaps in most cases, not even evi-
dence of fraud in fact. 2 Dana's Ken. Rep. 204.

"^ In North Carolina the ab.sence of possession is hSt conclusive evidence
of fraud, but is open to explanation although it may he prima fade evidence
of a fraudulent intent. Boome v, Hardie, 83 N. C. 470; Kea v. Alexander,
5 irf. 644.



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was (a), that the noii-deliver7 of goods at the time of the sale or
mortgage, was only prima facie evidence of fraud, and a circum-
stance which admitted of explanation. But in Stiirfe-
[ * 527] vant v. Ballard (6), the subject received a more * full
and deliberate consideration, and the English and Ameri-
can authorities were extensively reviewed; and it was decided^
that on a hill of sale of goods, partly for cash, and partly to satisfy
a debt, with an agreement in tho instrument, that the venddr was
to retain the use and occupation of the goods for the term of three
months, the goods were liable to the intervening execution of a
judgment creditor. It was considered to be a settled principle
of law, that if the vendor be permitted to retain possession in the
case of an absolute bill of sale of chattels, it was an act of fraud
in law as against creditors; and that though the agreement ap-
pear on the face of the deed, it would be equally so, unless some
good motive was at the same time showi). The rule applied
equally to conditional as well as absolute sales, unless the intent
of the parties in creating the condition was sound and legal.
Fraud was the judgment of law on facts and intents, and it was
a question of law when there was no dispute about the facts (c).
The result of the investigation was, that a voluntary sale of chat-
tels, with an agreement, either in or out of the deed, that the ven-
dor may keep possession, is, except in special cases, and for special
reasons, to be shown to and approved of by the court, fraudulent
and void as against creditors.

This decision was supposed to have established, on sound
foundations, the rule of law in New York, so far as that rule de-
pended upon the judgment of the supreme court. But though
the decision has been cited and approved of in other states (d),
it was doomed to have a very transient infuence on its own tri-
bunal. In Ludlow v. Hurd (c), the chief justice left it as a de-
batable point, whether the retaining possession of chattels by the
vendor, after an absolute sale of them, was ipso facto fraud-
ulent, or only a badge of fraud for the consideration of a jury;

(a) Barrow v. Paxton, 5 Johns. Rep, 258. Beal v. Guernsey, 8 Ibid. 452,
(6) 9 Johns. RfT>. 337.

(c) Fraud is a question of law on facts and intentvS. Lonl Coke, 2 Buiti.
226. Lord Mansfield, 1 Burr. 474. Buller, J., 2 Term. 59C. Lord Ellen-
borough, 9 East, 64.

(d) 5 Serg. <st Bawle, 285. 5 Conn. Hep. 200.
(c) 19 Johns. Rep. 221.



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and in Bissel v. Hopkins (a), * the doctrine of the case [ * 528 ]
of Sturfevant y. Ballard was entirely subverted, and it
was adjndged that possession continuing in the vendor was only
prima facie evidence of fraud, and might be explained. But in
Diwer v. McLaughlin (6), it was held, that a mortgage of goods,
in a case in which the mortgagor was suffered to continue in pos-
session, and to act as owner for two years and a half after the
mortgage had become absolute, was fraudulent in law, and void
as to creditors, however honest the intention of the parties might
have been. This was in some degree, reinstating the earlier doc-
trine, and a recognition of the principle declared in
Sturtevant v. Ballard^ * and the decision is deeemod to [ * 529 ]
be sound and salutary (c).^

{a) 3 Cowen's Rep. 166.

(h) 2 WendelVs Rep. 596. Collins v. Brush, 9 WendeWa Rep. 198, S. P.

(c) The New York Revised StnhUea have put this vexatious question at rest
in this state, as to the ^flect of the non-delivery of goods on sale or assign-
ment, by way of mortgage, or upon condition, by declaring, that unless the
sale or assignment be accompanied by an immediate delivery, and be fol-
lowed by an actual and continued change of possession, it shall be pcnmmed
to be fraudulent and void, as against the creditors of the vendor, or person
making the assignment, and against subsequent purchasers in good faith; and
shall be mnclusive evidence of fraud, unless it shall be made to appear, on the
part of the persons claiming under such sale or assignment, that the same
was made in good faith, and without any intent to defraud. AW persons who
shall be creditors, while the goods remain in the possession or under the con-
trol of the vendor or assignor, are embraced in the provision ; but it does not
apply to contracts of bottomry or respondentia, nor to assignments or hypo-
thecations of vessels or goods at sea, or in foreign ports. N. Y. Revised Stat-
utes, vol. ii. p. 136, sec. 5, 6, 7. It is further de<:lared, that the question of
fraudulent intent, in all cases of fraudulent conveyances and contracts, re-
lative to real and personal property, shall be deemed a question of fact and
not of Jaw; and no conveyance or charge is to be adjudged fraudulent as
against creditors or purchasers sofely on the ground that it was not founded on
a valuable consideration. The title of a purchaser for a valuable consideration
is not to be affected or impaired by any of the provisions, unless he had pre-
vious notice of the fraudulent intent of the grantor, or of the fraud rendering
void the title of such grantor. Ibid, 137, sec. 4, 5. Though fraud in those
cases is declared to be a question of fact, and a court of equity is competent
to pronounce upon it, yet, if the case be brought to hearing upon bill and
answer, and the latter denies the fraudulent intent, the court will require
such facts as are per se conclusive evidence of fraud. It will overlook the
mere indicia of Iraud, for the complainant should have put the cause at issue,
and have given the defendant an opportunity to explain by proof the sus-
picious circumstances. Cunningham r. Freeborn, 11 WendeWs Rep. 240. The

» See 3 Rev. Stat. 7th ed. p. 2328, pt. 11, c. 7, tit. 2, § 5. The possession
of the vendor is presumed to be fraudulent, but may be explained away, by
showing the bona fides of the transaction which falls upon the person uphold-
ing the deed. Steele ». Benham, 84 N. Y, 634; Burnham v. Brennam, 74
N. Y. 597; Mitchell v. West, 65 N. Y. 107; Terry v. Butler, 43 Barb. 395;
Niagara Bank v. I^rd, 33 Hun. 557; Southard i?. Benner, 72 N. Y. 424;
Knight r. Forward, 63 Barb. 311.



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The supreme court of Massachusetts has in several cases (a),
laid down and established the doctrine, that possession of chat-
tels by the vendor or mortgagor, after a sale or mortgage of the

same, is not, as it regards creditors, fraud per se, but
[ * 530 ] only prima fade evidence of fraud, and which ♦ may be

explained by proof. A debtor may mortgage, or make
an absolute sale of goods bona fide, and for a valuable considera-
tion, but under an agreement to retain possession for a given
time, and it would only be presumptive evidence of fraud, sus-
ceptible of explanation, and good, except as against an interven-
ing attachment or sale before any actual delivery takes place/'
The supreme court of New Hampshire has also established the
same rules of law on this subject as those recently declared in

doctrine now established, is evidently as high-toned as anv that the courts
Qf justice in this country can, by a permanent practice, sustain; and it contains
this inherent and redeeming energy, that the fact of withholding possession
raises the presumption of |raud, and the burden of destroying that presump-
tion is thrown on the vendee or mortgagee, who suffered the possession to
remain unchanged.

Since the last edition of this work, the decisions in the conrts of New-
York, have given increased energy to the statute provisions against fraudu-
lent sales. Thus, in Doane v. Eddy, 16 Hf^endell, 523, and Kandall v. Cook,
17 Ibid. 53, it was considered that under the Revised Statutes, the distinc-
tion between an absolute sale and a mortgage of goods was abolished, and that
ou a sale or jnortgage of goods, actual and continued change of possession
was indispensable, unless the contrary be satisfactorily explained by some
good and sufficient reason, even though the conveyance was made in good
Siith, and without any intent to defraud. So, in Butler v. Stoddaid, 7 Paige,
163, the chancellor held, that if an insolvent debtor assigns his property in
trust for the benefit of creditors, and without any actual change of possession,
and the assignee leaves the goods in store, in the possession of the assignor
as his agent, to be sold in the ordinary course by retail, instead of disposing
of them at once without any unreasonable delay, and fairly at auction, and
distributing the proceeds, the assignment becomes fraudulent and void as to
creditors. The assignment ought to be accompanied with an actual and
continued change of jpossession, and not merely a nominal and constructive
change, for the latter is not a change within the meaning of the statute on
the subject. This decree was affirmed on appeal, 20 Wendell^ 507. So,
again, in Stevens v. Fisher, 19 WendelPa B. 181, the supi-eme court set
aside a verdict and awarded a new trial, when the jury disregarded the
charge of the judge, and supported a sale of goods unaccompanied by an
immediate delivery, and not followed by any actual and continued change
of possession, and when no satinfactory explanation was given^ why the require-
ments of the statute were not complied with. It was held to be a verdict against
both the law and the tact. These were infallible and legal indicia of fraud
on the face of the transaction. It was nakedly fraudulent, and the court
very prox)erly held, that they could not permit the law to be so disregarded.

(a) Bi-ooks r. Powers, 15 Mass. Rep. 244. Bartlett v. Williams, 1 Pick.
Rep. 288. Holmes v. Crane, 2 Ibid. 607. Wheeler r. Train, 3 Ibid. 255,
Waid V. Sumner, 5 Ibid. 59. Shumway v. Rutter, 7 Ibid. 56. 8 Ibid, 443.
S. C. Adams v. Wheeler 10 Ibid. 199.

" See, also, Sleeper©. Chapman, 121 Mass. 404; Hardy r. Potter, 10 Gray,
89j Towne v. Fisk, 127 Mass. 125; see, also, Gould v. Ward, 4 Pick. 104,



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Massachusetts and New York, and they have vindicated their
opinion in a neat and able manner (a). They insist that the
principle cases in England and this conntry, on the other side,
are borne down by the current of opposite authority. The posi-
tion that devolves the question of fraud upon the court, requires
the opinion to be formed on a single circumstance, and admits
no explanation. The other position, which refers the question
of fraud to a jury, looks to the whole transaction, and admits of
every honest apology and explanation. If the vendor or mort-
gagor retains possession, no person sufiPers, unless a new credit
be given, or an old one extended, under a mistaken belief that the
property remained unsold. The few cases of that kind which may
happen, ought not to introduce so stern a rule, as to make such
conveyances void against every description of creditors. In Cobum
V. Pickering {b) the subject was again thoroughly discussed; and it
was held, that if the vendor of chattels retained possession after
an absolute sale, it was always prima facie, and if unexplained
by the vendee, conclusive evidence of a secret trust, which was
fraudulent in respect to creditors. Whether there was such a
trust, was deemed a question of fact; but if admitted or proved,
the fraud was an inference of law. This was recurring back, in
a great degree, to the simplicity and energy of the old rule, re-
quiring delivery of possession in cases of sales of goods and mort-
gages of goods, as the natural order of dealing in such
cases, and the only * effectual security against secret [ * 531 ]
and fraudulent trusts (c).** In the State of Maine on

(a) Haven v. Low, 2 N, H. Rep. 13.

(ft) 3 Ihid. 415. But in Ash r. Savage, 5 N, H. Rep, 545, it wasadjndged,
that possession was not essential to the validity of a mortgage of goods^ and
that retaining possession by the mortgagor was not, of itself, evidence ot

(e) In 1832, the legislatures of Massachusetts and New Hampshire passed
acts, declaring that no mortgage of personal property thereafter made, should
be valid, except as to the parties, unless possession be delivered to, and re-
tained by the mortgagee, or unless the mortgage be recorded in the clerk's
office of the town where the mortgagor resides. See, also, Masaachuseiis Re-
vised Statutes, part 2, tit. 6, ch. 74, sec. 5. It is held, that the recording of
the mortgage is equivalent to an actual delivery of the property. Forbes v,
Parker, 16 Pick, 462. In New York, also, in 1833, (LamiV, Y, sess. 56, ch.
279,) provision was made by law, for tiling in the town clerk's office, as

" It is prima facie evidence that will avoid the sale. Parker v. Marvel,
60 N. H. 30, see, also, Parsons v. Hatch, 63 N. H. 343. If not thoroughly ex-
plained away and the transaction be otherwise suspicious it will be con-
clusive evidence of fraudulent intent. Crawford v. Forristall, 57 N. H. 102;
Shaw V, Thompson, 43 N. H. 130; Towne i'. Rice, 59 N. H. 412; Flagg ».
Pierce, 58 N. H. 348; Page v. Carpenter, 10 N. H. 77.



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the other hand, the Massaohnsetts doctrine is adopted and fol-
lowed (a)."

It is greatly to be regretted, that the rales of law in so material
a point, and one of such constant application, are so various and
BO flnctnating in this country. Since the remedy against the
property of the debtor is now almost entirely deprived of the
auxiliary coercion, intended by the arrest and imprisonment of
his person, the creditor's naked claim against the property ought
to receive the most effective support, and every rale calculated

matter of public record, mortgages of chattels and every such mortnaj^e. un-
less the same or a true copy thereof be filed, or be accompanied by immediate
delivery, and toUowed by an actual and continued change of possession, was
declared to be void, as against subsequent purchasers and mortgagees in
gcHKl faith. There was a statute of the general assembly of the colony of
New York, of April 3d, 1775, requiring the like registry of bills of sales of
chattels, not exceeding in value 1(XW., and given by way ot mortgage; and it
is a little singular that such an ordinary and pacific provision should hare
been one of the last acts ever passed by the colonial legislature of New York.
It was passed in the midst of the tumult of arms, for the general assembly ad-
journed on that same third day of Aprils never to meet again, as the revolution had
then commenced. In Kentucky* by statute, in 1831, no mortgage or deed of
trust of real or personal estate, is ^od against a purcAaser, for valuable con-
sideration without notice; nor against a creditor, unless within sixty days
it be deposited for recording, in the county clerk^s office. In Georgia* Ten-
nessee, Indiana, and Virginia, mortgages of personal property are to be
proved and recorded like mortgages of land,, in order to make them secure
against bona fide creditors and purchasers. Statute of Georgia, December 26,
1827. Statutes of Virginia, December, 1792, and February, 1819, and of In-
diana, R. S/atutC8, 18:38. p. 470. Statute of Tenne89ec, 1831. The statute of
Tennessee applies to all bills of sale as well as mortgages and deeds of trust
of real and personal property; all deeds of gift, all powers of attorney, con-
cerning the C4)nve3'«nce of real or personal property; all marriage contracts,
and all agi-eements for the conveyance of property. In Connecticut, there
may be a mortgage of manufacturing machinery, without the real estate to
which it is attached, and the mortgage is of course effectual, though the
mortgagor retain possession of the machinery. Such machinery may also
be attiic'hed, without being removed and sold on execution. Statutes of Con-
necticut. 18:J8, p. 72, 73.

In the case of Watson v. Williams, 4 Blackf. Ind. R. 26, the court after' a
clear and succinct review of the conflicting decisions in England and Ame-
rica, came to the conclusion, now so generally prevalent^ that the mortga-
gor's possession of the goods was not conclusive evidence ot fraud as to cred-
itors, though the mortgage was silent as to the point of possession. His pos-
session may be explained by parol proof, and shown to be fair and consistent
with the contract. The subsequent decision in that court in Caset?. Winshop,
lb, 425, rather controls the other, for it declared that the mortgagee of goods
was entitled to immediate possession, when there was nothing in the in-
strument to gainsay it, and that the silence of the mortgage on that pointy
could not be supplied by parol proof.

(a) Reed r. Jewett, 5 Greeneofs Rep. 96. Holhrook r. Baker, 5 Ibid. 309.
Brinley r. Spring, 7 Ibid. 241. Ulmeru. Hills, 8 Ibid. 326.

" In Maine it is pritna facie but not conclusive evidence of frand, and the
jury must determine its bona fides. Bartlett v. Blake, 37 Maine. 124; Bethel
Steam Mill Co. v. Brown, 57 Me. 9; Shaw v. Wilshire, 65 Me. 485; McKee v.
Gracelou, 60 Me. 165.



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to prevent the debtor from secreting or masking it, to be sus-
tained with fortitude and vigour. There is the same reason for
the inflexible stability of the rule of law, that a vendor of chat-
tels should not, at the expense of his creditors, sell them, and yet
retain the use of them, as there is for that greatly admired rule
of equity, that a trustee shall not be permitted to buy or specu-
late in the trust fund on his own account; or for that other salu-
tary and fixed principle, that the voluntary settlement of property
shall be void against existing creditors. Such rules are made to
destroy the very temptation to fraud, in cases and modes that are
calculated to invite it, and because such transactions may be
grossly fraudulent, and the aggrieved party not able to show it
from the character of private agreements, and the infirmity of
human testimony. However innocent such transactions may be
in the given case, they are dangerous as precedents, and poison-
ous in their consequences; and the wise policy of the law puts
the sting of disability into the temptation, and bars the door
against every species of imposition, which might be inaccessible
to the eye of the court. If a debtor can sell his personal prop-
erty, and yet, by agreement with the" vendee, continue to enjoy
it for six years, as in one state, or for sixteen months, as in an-
other, in defiance of his creditors, who can set bounds
to the term of ♦enjoyment, or know when and where to [ * 532 ]
bestow credit, or how he is to make out a case of actual
fraud ? Fraud, in fact, is reluctantly drawn by a jury, and their
sympathies must be overcome by strong and positive! proof, before
they will readily assent to the existence of a fraudulent intent,
which is so difficult to ascertain, and frequently so painful to

Online LibraryWilliam M. Lacy James KentCommentaries on American law, Volume 2 → online text (page 89 of 108)