HODGSON v. BUTTS

E.J. Lee, for plaintiff in error.

The law of mortgages is the same both as to land and personal property.

The case is to be considered, first, upon common law principles; and second, upon the statute law of Virginia.

First point. That the mortgagee is the legal proprietor of the mortgaged subject; and as such, he is entitled to receive the rents and profits after notice of the mortgage, unless the contrary be stipulated.

The mortgagee of lands leased becomes entitled to the rent from the time of executing the conveyance; for the rents and profits, as well as the land, are liable for the debt.

As soon as the conveyance is executed, the estate is, in law, vested in the mortgagee, and his power to take actual possession exists from that moment. For these principles, see Powell on Mortgages, 79, 80, 81.

The mortgagee is the absolute proprietor and the true owner, 1 Vez. 361. Ryall v. Rowles.

If lands be mortgaged to one, the interest in them is in the mortgagee before forfeiture; for he has purchased the lands upon a valuable consideration, as the law will intend; and though the mortgagor may redeem by means of an agreement between the parties, if he does not, the estate, in law, is absolute, without any other act to be done, to pass the estate; although the mortgagor has in him the equity of redemption, 15 Viner, Abridg. 44.

A mortgage is defined to be the appropriation of a specific thing to certain purposes. It does not, in the case of a mortgage, require the delivery of the article, in order to transfer the right and title to it.

A mortgagee of real property may bring an ejectment to get possession against any person in possession; and may also bring an action for the mesne profits; so he may bring trover for personal property, and in the estimation of his damages, a charge for the intermediate produce or profits of the article converted would not be rejected, but would be taken into the account. So he may bring detinue, without any proof of possession in the mortgagee.

2d. Possession, upon common law principles, is not necessary in order to give title in the transference of property. It is true, that possession in the vendor, after the transfer, is prima facie evidence of fraud, and this is the only effect of such possession; but as to the proof of fraud, it is not conclusive. It may be rebutted by testimony showing the transaction bona fide.

The only use in delivering possession, is to prevent strangers being deceived by a false credit, which the possession in the vendor is calculated to produce. This reason cannot be applicable in this case to Butts. 1. Because Butts knew of the mortgage. 2. Because the debt due to him from the Hamiltons was an antecedent debt.

If the Hamiltons had been declared bankrupts, their assignees could not have claimed the vessel or the freight; because both were pledged as a security to Hodgson. See the bankrupt law of the United States.

Upon common law principles, the mortgagee must be considered as the legal proprietor of the vessel.

3d. But the act of the legislature of Virginia, places the question beyond a doubt, and proves that possession is not necessary to constitute the ownership. See Virginia laws, 157, revised code of 1802. 1 Washington, 177.

The legal owner of the vessel is entitled to receive the freight, Marshall on Insurance, 93.

The mortgagee of a vessel in a late case has been considered as the owner, and as such, liable for repairs done to her before he received actual possession. 7 Term Rep. 306. In this case the decision in Chinnery v. Blackburne, 1 H. Black. Rep. 117, is not considered as correct.

The two cases of Jackson v. Vernon, 1 H. Black. 114, and Chinnery v. Blackburne, which will be relied on by the defendant, will, upon examination, be found not to meet the question which arises in this case.

In the case of Jackson v. Vernon, the question was, whether the mortgagee was liable for the repairs to the ship; it was decided he was not, because, the mortgagor himself ordered the repairs; as the person who makes repairs on a ship, has a claim on the person ordering them, it was supposed the credit was given to him, and upon this ground it was held the mortgagee was not liable.

In the case of Chinnery v. Blackburne, Merryfield, acted as the owner; he navigated the vessel, and made all contracts about her, from London to Antigua. He was on board of her on the voyage, and at Antigua gave the command of the vessel to another captain; he also insured the vessel; and at Antigua, acted personally in command of the ship. This is not like the case at bar; for in this, Hamilton did not furnish the vessel, or man her after the mortgage, nor did he insure her; but Hodgson did the last act. But both cases are doubted in the case 7 Term, 306, and by Abbott, 16, who says, they do not furnish a case for the decision of the question, who is entitled to the freight, which a case of a contract made by the master in that character, will; which is our case.

There is a distinction in a court of equity and a court of law, where the mortgagor acts as the master of the vessel. In the court of equity, he is considered as owner; but not so in a court of law. Marsh. 452, 453. Hamilton never acted as master.

4th. The contract in words, binds and includes the freight. To which it is objected, that future freight is too remote an interest, to be transferred; freight, or a hope, or expectation, is such an interest as may be insured; and, if insurable, it may be granted.

Goods, as well as their expected produce, may be granted, Prec. Chancery, 285. It is not competent for Butts, who claims under Hamilton, to object that the freight it not included or passed by the deed. Cowp. 600.

5th. The objection, that Robert Hamilton exercised authority over the vessel, by giving instructions, is not of any weight, in the mouth of Butts; because Butts had a full knowledge of the lien of Hodgson, and also, because it does not appear that Hodgson authorised this interference.

The directions of James Hamilton, that Butts was to wait until the vessel earned enough to pay him, is also without weight; because James Hamilton was ignorant of the arrangement which his partner had made; and of which Butts might have informed him; but not having done so, he is the more culpable.

6th. Hamilton had no right to appropriate the freight to any other person, than that specified in his deed of mortgage. If he had not, Butts, his servant, had not.

Butts must be considered, either as the servant of Hamilton, or of Hodgson, if the servant of the former, and undertakes to act as such, he had no right to apply the money in the manner he did. If he undertook the command as Hodgson's servant, he had no right to apply the freight to the payment of a debt due from Hamilton.

7th. Butts having accepted of the command of the vessel, with a full knowledge of the lien upon her, and her future freight, he tacitly consented to apply the freight according to the agreement between Hamilton and Hodgson; if he intended otherwise at the time, he has been guilty of a fraud, which ought not to avail him in a court of law.

8th. The captain had no lien for his 800 dollars, due for his own wages on the vessel. The mate had no lien on this vessel, for 200 dollars, they being earned on board of a different vessel, and in a different voyage. The balance of the mate's wages, was only 184 dollars. The mate, by accepting an order on James Hamilton, for 384 dollars, the whole of the wages due him, agreed to accept payment in a different way from the usual one; which destroys the lien on the vessel, for the 184 dollars. Salk. 131.

Besides, for this 184 dollars, Butts, as the captain of the vessel when it was earned, was liable; and the moment he paid that sum, the mate's lien was gone. The captain has no lien on the vessel for the wages he pays the seamen, but has on the freight, for the wages of the voyage in which the freight was earned. The mate, by assigning the bill on James Hamilton, could not assign any lien he had on the vessel.

9th. As to the justice of the case. Hodgson has paid the seamen's wages for the voyage which earned the freight; and Butts is to receive the benefit.

Jones, contra. First, as to the validity of the deed, and

Second, as to its effect, if valid.

1st. The vessel was in port at the time of the deed, and, therefore, (possession not having been delivered) it is void as to creditors. The possession is dispensed with only when the vessel is at sea. 1 Cooke, B.L. 339, Stevens v. Cole. Id. 357, Hall v. Gurney. 1 Wilson, 260, Ryall v. Rolle, and the case of Russel v. Hamilton, in this court, ante, vol. 1, p. 309.

As to the act of assembly, if the deed would have been bad without recording, there is nothing in the act to make it good. From affirmative words a negative may sometimes be implied, but not e converso. The words of the act are, "all deeds of trust and mortgages whatsoever shall be void as to all creditors and subsequent purchasers, unless they shall be acknowledged or proved, and recorded according to the directions of this act." That is to say, a deed, although good in every other respect, yet, if not acknowledged or proved, and recorded, shall be void. It cannot possibly be construed to make good a deed which would have been before fraudulent.

2d. The deed is also void for want of containing the register according to the directions of the act of congress, vol. 2, p. 147, § 14. This act is mandatory, and if the construction of the act of assembly contended for is correct, the register is necessary; for the affirmative words of the act of congress imply a negative as strongly as the act of assembly implies an affirmative.

3d. The plaintiff waived this deed, by taking possession under a new and absolute deed of the same property, before the mortgage was forfeited, and before he had exercised any right of ownership. This new deed implies a new consideration, and that a new bargain was made, by which the old contract was waived.

4th. The consideration of the deed was, indemnity. A mere possibility of suffering is not a sufficient consideration against third persons. It is only good between the parties.

Second point. As to the effect of the deed, if valid.

The plaintiff, by the terms of the deed itself, could not meddle with the schooner, until days after her return from her then intended voyage to New-Orleans, and a failure on the part of the mortgagors to indemnify him; and his only authority then would be to sell the vessel and cargo, if not previously sold by the mortgagors.

If, then, the defendant did know of the mortgage, he must be presumed to know the whole terms; and that the plaintiff could not interfere till long after his return. He also knew, that before a forfeiture of the mortgage, and while the mortgagor holds the possession, the latter is to be considered the owner. 1 H.B. 114, Jackson v. Vernon, and 1 H.B. 117, Chinnery v. Blackburne. Even in the case of lands, a mortgagor has been held to be a freeholder, and entitled to vote at elections. And the mortgagee of a leasehold estate, cannot be sued by the lessor as assignee of the lessee, until the mortgagee is in possession, although the mortgage be forfeited, and he has a right of possession. Doug. 455, Eaton v. Jacques. Doug. 22, Keech v. Hall.

The mortgagors had a right to receive the freight, and if so, they had a right to appropriate it. The freight is not like rent, which is said to grow out of the land. It depends upon a mere personal contract. If they had received the freight, their receipt would have been good against the plaintiff.

As to the payment of the expenses of the voyage by the plaintiff, it was voluntary. He had his reasons. He made a new contract, and paid the money after he had possession under his absolute purchase of the vessel.

The extrajudicial doubts of Lord Kenyon and Abbott, cannot controul the strong and decisive casès of Jackson v. Vernon, and Chinnery v. Blackburne.

As to the covenant respecting the freight, it is merely a personal contract, and the plaintiff trusted to the personal security of the mortgagors. Even if they had sold the inward cargo, the plaintiff could not recover against the vendees. But the freight was not even a chose in action. It was only a possibility. It was not in being, and, therefore, not capable of a legal assignment.

Swann, in reply. The vessel was of less value when she returned than when she was mortgaged, by at least the difference of the freight. Hodgson paid the expenses of the voyage. It is equitable, therefore, that he should receive the freight. The defendant had no lien on the vessel or freight.

Two questions seem to arise in this cause.

1. What relation does the mortgagor stand in to the mortgagee?

2. What relation does the defendant stand in to both?

1. By the English law, possession must accompany the deed, except as to vessels at sea. But here possession is not necessary, if the deed be proved and recorded in a certain manner. It is then as valid, to all intents and purposes, as if possession had been delivered with the deed.

The court said, he need not argue that point. It had been settled. Swann. What then are the rights which it conveys? As to mortgages of lands, the law is settled; but not so in the case of a mortgage of a ship. In England it is settled, that a mortgagee of a ship in possession, is entitled to all the rights of property. But if a vessel be mortgaged while at sea, some doubts have arisen. But here, by the statute, the deed has the same effect as if possession had been given. The mortgagee, therefore, has all the right of property; and if in the thing itself, he has it also in its profits.

Probably alluding to the case of Claiborne v. Hill, 1 Wash. 177.

But this is not a mere mortgage. It is also an assignment of the freight itself. It is said to be the general understanding, that the mortgagor shall enjoy the profits until forfeiture, or possession given to the mortgagee. But if the mortgagor covenants expressly, that the mortgagee should receive the profits, this destroys the tacit presumption that the mortgagor should receive them. At best, a mortgagor is only " like a tenant at will," and the mortgagee may put an end to his right of taking the profits whenever he pleases. He has the legal title to the rent. Doug. 282. Moss v. Gallimore. But it is said, that the freight was not in esse, and, therefore, could not be the subject of an assignment. But if the covenant does not operate as an assignment of the freight, it is sufficient to destroy the tacit understanding, that the mortgagors were to receive and might dispose of it as they pleased.

2. In what relation does the defendant stand to the other parties?

Here was no fraud on him. He had notice of the mortgage, and the appropriation of the freight to secure the plaintiff, before the vessel sailed. He took an order for his money on James Hamilton; which shows, that when he sailed, he did not depend upon the profits of this voyage, as to his claim of 800 dollars. If he had any lien on the freight, it was only for his wages arising during the same voyage. If there was any fraud, it was on his side. He never disclosed his claim to the plaintiff before he sailed, nor after his return, until the plaintiff had paid the expenses of the voyage. The record of the mortgage was notice to him, even if we had not proved actual knowledge on his part. The mortgagors and the defendant, as their agent, were trustees for the plaintiff.

If a mortgagee of lands chooses to lay by, and not demand the rents, and the tenants pay them to the mortgagor, they shall be protected. But why? Because they had not notice. But if they pay the rent to the mortgagor after notice from the mortgagee, they pay in their own wrong. This is the case of the defendant. He knew that the mortgagors had no right to appropriate the freight.

February 28, 1804. MARSHALL, Ch. J. mentioned to the counsel, that the court had doubts whether the mortgage was not void, for want of three witnesses, under the act of assembly, Revised Code, p. 165, for regulating conveyances. They, therefore, continued the cause, to ascertain whether any, and what decisions, had been made in Virginia upon that point.

February 25, 1805. E.J. Lee, for plaintiff in error. The question now is, is it necessary that the mortgage should be proved by three witnesses?

By the second member of the second section of the statute to prevent frauds and perjuries, it is declared, "if a conveyance be of goods and chattels, and be not, on consideration, deemed valuable in law, it shall be taken to be fraudulent within that act, unless the same be by will duly proved and recorded, or by deed in writing acknowledged or proved; if the same deed include lands also, in such manner as conveyances for lands are directed to be proved and recorded, or if the conveyance be of goods and chattels only, then acknowledged or proved by two witnesses in the general court, or the court of the county in which one of the parties live, within eight months, or unless possession shall really and bona fide remain with the donee," c.

By this law, if the conveyance is of goods and chattels, for a consideration not deemed valuable in law, and is proved by two witnesses, or possession is with the donee, it gives a title.

From this part of the act, the natural and only inference is, that if a conveyance is for a consideration deemed valuable in law, that it must be valid, and transfer property as absolutely as a conveyance for a consideration not deemed valuable, proved by two witnesses.

The latter part of this section includes a mortgage, or any other conveyance with a condition or limitation.

The first branch of the second section declares all conveyances not made with a view to defraud creditors or purchasers, is good, and does not require its being recorded.

The third section of this act refers to the first branch of the second section, both being taken from the statute of Elizabeth.

The whole of the fourth section of the act regulating conveyances, relates to four different objects. 1st. An estate of freehold in lands.2d. An estate of inheritance in lands.3d. An estate for a term of years in lands. 4th. Deeds of settlement upon marriage, wherein lands, slaves, money, or other personal thing, shall be settled or covenanted to be left, or paid at the death of the party, or otherwise, and all deeds of trust or mortgages whatsoever, that is, the consideration of which is marriage, or which relate to lands. These general words are to be construed as referring to the previous subject matter of this section, and of the previous sections.

If the act against frauds and perjuries include not this deed, then we are to inquire what was necessary at common law to pass a title to property.

Personal property at the common law might be acquired, the books say, in twelve different ways. Among them, one is by grant or contract. A contract is an agreement, upon a sufficient consideration, to do or not to do a particular thing.

No particular form is prescribed as to making the contract, whether it must be in writing or otherwise; it is sufficient if the contract is proved.

And all persons who have notice of the contract are bound by it. If A sell to B verbally, in the presence of C, a horse, and C afterwards buy the same horse of A, will it be said C's title is good?

No; because the contract with B transfers the property. 2 Black. 447, 448.

The contract for the freight is good; the law does not require a contract to pay money out of a particular fund, to be recorded.

The whole tenor of the act for regulating conveyances, shows that it relates to real estate only, except in the single case of marriage settlements, which are specially provided for.

But there is another error apparent in the record.

The plaintiff paid to the defendant the seamen's wages, upon the faith of receiving the freight. If he was not entitled to receive it, he has paid those wages by mistake, and may recover them back in this action against the defendant, to whose orders they were paid.

Swann, on the same side. The fourth section of the act for regulating conveyances says, that all deeds of trust and mortgages whatsoever, shall be void, unless they shall be recorded according to the directions of that act; that is, in the county where the " land conveyed lieth." Where, then, is a deed of mere personal property to be recorded? This shows, that the legislature meant only deeds of trust and mortgages of land.

C. Lee, on the same side, contended, that there was no statute respecting conveyances of personal property on valuable consideration. The statute of frauds speaks only of conveyances made on consideration, not deemed valuable in law. The word good consideration in the 3d section, means valuable consideration, otherwise it would be repugnant.

Jones, contra. It is contended, now, that if the mortgage is void, and the plaintiff had no right to receive the freight, he has paid the expenses of the voyage by mistake, and can recover upon that ground. But there is no evidence that the expectation of the freight was his motive for paying those expenses. On the contrary, he did not pay them until after he had taken possession of the vessel, under a new contract, as an absolute purchaser. The record does not state how much he disbursed, and, therefore, we cannot say how much he is entitled to recover back, even if he is entitled to recover anything. But the defendant never received the money from the plaintiff for those disbursements. It is true he gave orders to the plaintiff to pay, but those orders were not for his own use, and he never actually received the money.

March 2, 1805.